LONDON, April 15 (Reuters) – Policyholders of British insurer Equitable Life are taking the government to court over its failure to provide full compensation to them after the company’s near collapse in 2000, they said on Wednesday.
The Equitable Members Action Group (EMAG) said it was challenging the government’s decision in January to award only discretionary payouts to policyholders. [ID:nLF741414]
Equitable Life [EQL.UL], Britain’s oldest insurer with 1.5 million policyholders at its peak, almost collapsed after being forced to honour unsustainable guarantees stretching back 30 years.
It eventually closed to new business in one of Britain’s biggest financial scandals, affecting more than a million people who had each invested thousands of pounds for their retirement.
“The government’s continued intransigence has forced us to take legal action,” said EMAG General Secretary Paul Braithwaite in a statement.
“The proposed hardship scheme is totally inadequate, will take years to implement and looks like leaving 90 percent of victims out in the cold,” Braithwaite said.
An investigation by Parliamentary Ombudsman Ann Abraham in 2008 found evidence of maladministration by regulators and the government between 1988 and 2001.
She said the government should set up an independent tribunal to calculate compensation for all policyholders, but this was rejected by the Treasury.
Payouts under the proposed government scheme could cost the public purse hundreds of millions of pounds, well short of the 5 billion pounds ($7.4 billion) called for by policyholders.
EMAG’s lawyers said they had found serious flaws in the government’s response to the Ombudsman’s Equitable Life report.
“We are asking the court to quash the response, forcing ministers to think again,” said Stephen Grosz, head of public law at solicitors Bindman.
EMAG said its main challenge related to a “lack of cogent reasons” the Treasury had given for its refusal to accept several of the ombudsman’s findings.
The group is also challenging the narrow remit and the lawfulness of the terms given to Sir John Chadwick, who is advising the government on what payments should be made.
The group wants the High Court to set an early date for the hearing, as it says around 15 people who lost money through the problems at Equitable are dying every day. (Editing by David Holmes)