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The IRA article called it “a 1600s-style colonial-era vestigial ‘debt’ indenture.”
Lloyd’s literally, with the consent of the U.K. courts, pushed in a unilateral manner a number of new requirements that would mean bankruptcy to many down the throats of investors.
For example, the investors, also called “Names,” had to pay a reinsurance, the amount of which was determined by Lloyd’s without due recourse, although investors could contest it if they could prove outright fraud.
Having been denied due process and any recourse against Lloyd’s in U.K. courts, Tropp and others are turning to the U.S. court, but so far have not made any headway. For litigation to be successful in the United States, the plaintiff must demonstrate that the U.K. courts are biased and unable to provide a fair and impartial process for an aggrieved Lloyd’s investor.
The authors of the IRA article censure the U.K. legal system and state that the “Lloyd’s litigation suggests that American courts need to question whether the judiciary in England and Wales is comprised of tribunals of competent jurisdiction.”
Using strong language, the IRA team condemns the U.K. courts, arguing that “an investor in Lloyd’s would be better off seeking redress in a kangaroo court sitting in, say, Caracas or Mogadishu that in a UK courtroom.”
To bypass the U.K. legal quagmire, the authors of the IRA article recommend that the U.S. Congress, Securities and Exchange Commission, and other relevant federal agencies address the Lloyd’s issue.
Politics Interfere with Due Process
An Internet search uncovered a wealth of information about people who had lost all their wealth because of Lloyd’s of London’s machinations and the inability to find redress either in English or U.S. courts.
The Lloyd’s of London Litigation Database is a most comprehensive database and provides a wealth of information. Much information has been archived since the real issues are no longer actively addressed, with the latest issues centering on enforceability.
“The most startling conclusion … is the politicization. … The failure of most Lloyd’s investors to have their cases heard on the merits in the United States is an accident of history and politics. Defendant-friendly judges, judicial appointees of the Reagan-Bush era … have made the federal courts more friendly to Lloyd’s and other corporate interests: this is a political choice,” according to an archived 2005 entry on the Litigation Database.
The archived commentary also concluded that “the failure of the ‘System’ to offer any remedy to more than 20,000 others [investors] is the inevitable result of the lobbyist spoils system of American and British politics today.”
Getting the Hang of the Lloyd’s Insurance Market
“Lloyd’s Corporation organizes and regulates insurance underwriting in London. … Lloyd’s does not itself issue insurance,” explains a section in the recent petition for a writ of certiorari, filed by Richard Tropp with the United States Supreme Court.
Lloyd’s actually is a market place where corporations and individuals (called Names) pool and insure risks in one of Lloyd’s 85 syndicates. The syndicate underwrites the cases, while the Names provide the funds in case of a claim.
Lloyd’s institutes the standards, lobbies governments and regulators, sets capital requirements, monitors compliance to its standards, and manages the licenses.
One or more syndicates are run by a managing agent for the members who provide the funds. That agent “is responsible for overseeing the syndicate’s underwriting, employing the underwriters and handling the day-to-day running of the syndicate’s infrastructure and operations,” according to Lloyd’s 2010 annual report.
Until 1994, wealthy individuals called “Names” invested their wealth in the insurance policies underwritten by syndicates and had to agree to unlimited liability in case of losses. After dramatic losses, bankrupting many of the Names, Lloyd’s advanced Names with limited liabilities. Names with unlimited liabilities have not been stopped, but no new such Names are allowed to enter.
