U.K.’s Equitable Life Names Law Firm To Investigate Possible Negligence

April 16, 2001

The new management of Britain’s troubled Equitable Life named the London-based law firm Herbert Smith to investigate the actions of former directors, officers and advisors, including auditors Ernst & Young, to examine possible negligent conduct that might constitute grounds for compensation, and would trigger insurance coverage on D & O and E & O policies.

A report in London’s Financial Times indicated that policyholders felt the action was long overdue, and welcomed it as a step towards possible the recovery of some of Equitable’s estimated $1.5 billion ($2.2 billion) in liabilities on guaranteed annuity policies.

Spokesmen for policyholders also indicated that they wanted representatives appointed to Equitable’s board of directors in addition to the six new independent directors named last week to oversee any litigation and to protect their interests.

Equitable, which reached agreement to sell its sales force, information technology systems and fund management policies to mortgage lender Halifax Group plc last February, is currently trying to reach a compromise settlement with policyholders to enable the second stage of the transaction to proceed. Halifax initially paid £250 ($362.5 million), and has agreed to pay up to £1 billion ($1.45 billion) providing the liabilities can be estimated and a cap put on them.

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