Page last updated at 14:10 GMT, Friday, 2 December 2005

Equitable drops directors claim

Equitable Life
The Equitable has dropped its case against its former directors

Troubled mutual insurer Equitable Life has abandoned its attempt to sue its former directors.

Its case against nine former directors has been withdrawn, and the Equitable told BBC News it will be contributing 10m to their legal costs.

Recently, it abandoned its claim against six other directors. It had previously given up a similar case against auditors Ernst & Young.

The Equitable had claimed negligence on the part of its former directors.

"Having settled our claim against our former auditors, Ernst & Young, the cost effectiveness of carrying on against the former directors alone was reviewed," Vanni Treves, chairman of Equitable Life, said.

"Following further consideration with our legal team, our conclusion was that we should end the litigation on the best terms available," he added.

Collapse

The legal actions have been part of an attempt by the Equitable's current management to recoup some of the losses it suffered when it lost a High Court case in 2000.

The court decided the insurer had wrongly reneged on its obligation to pay a guaranteed level of income to 90,000 holders of special policies called Guaranteed Annuity Policies.

The High Court decision meant the cost of meeting the promise to these policyholders could only be financed from money set aside for all the other savers with the society.

This shortfall of about 1.5bn caused the society to close to new business and pushed it to the brink of collapse.

Behind the scenes, the Equitable had been negotiating with its former directors, offering to drop its action if both sides can walk away and pay their own legal costs.

But it was thought that some of the directors had been unwilling to do this, partly because they wanted the Equitable to pay their legal costs.

The deal struck will see the Equitable pay 10m to the directors to cover their legal expenses.



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