RSA sued over asbestos claims

Royal & SunAlliance, the embattled insurer, today said it was being sued over asbestos claims that could lead to payments and bigger liabilities.

Britain's second biggest insurance company said Turner & Newall, once Britain's biggest manufacturer of asbestos, had brought forward the suit on behalf of former employees who had suffered asbestos-related diseases. The claim is also being brought against a Lloyd's of London syndicate that provided similar cover until 1995.

Turner claims that RSA was liable because it provided employer liability policies for the engineering firm. RSA said it could not put a number on how many claims it was facing. Turner froze all compensation claims when its US parent company, Federal Mogul, filed for bankruptcy last year in the face of worldwide asbestos claims of £1bn.

Much of the case is expected to focus on what policy exclusions were in force and the extent to which these covered any or all asbestos-related cases.

"Our contention is that those asbestos cases were excluded," said an RSA official.

Turner's lawsuit is the latest blow in a dismal year for RSA, which is trying to raise at least £750m to repair its finances. RSA has been hit by large claims from the collapse of the World Trade Centre, asbestos and floods, pushing down its share price. RSA shares were down 11.2% at 102.95p in morning trade.

RSA's precarious predicament forced Bob Mendelsohn to resign in September. Following Mr Mendelsohn's departure, RSA ordered external actuaries to conduct an urgent investigation into potential claims against it from victims of asbestosis.

The company told the external firm to check whether it has set aside sufficient reserves to cover payouts on life assurance contracts, particularly those that offer policyholders guaranteed annuities. It was a shortfall on guaranteed annuities that triggered last year's financial crisis at Equitable Life.

At the time RSA played down the importance of the review, saying the exercise was "purely to provide additional comfort for our institutional investors."