Asbestos liabilities
In January 2002, Royal & Sun Alliance became involved in litigation over claims for injury arising from asbestosis among workers in Clyde shipyards. The workers alleged that between 1972 and 1977 RSA had issued insurance certificates to asbestos manufacturer Turner & Newall but excluded cover for asbestosis, in breach of the Employers' Liability (Compulsory Insurance) Act 1969. RSA responded that asbestos-related injury was excluded from the policy because it was a risk the company was not willing to underwrite, that Turner & Newall was instead self-insured against asbestosis and should therefore be responsible for any compensation.[25]
In February 2002, RSA set aside £384 million to double its reserves available for asbestos claims which, combined with claims of £215 million arising from the 11 September attacks, wiped out its 2001 profits.[26][27] RSA put up seven of its subsidiaries for sale in an attempt to raise a further £800 million to cover liabilities for asbestos insurance claims in the United States.[28] Friends Ivory & Sime subsequently acquired RSA's UK asset management subsidiary in May 2002 for £240 million.[28] The situation was further compounded by RSA having to reserve £1.2 billion against liabilities for guaranteed annuities, the product which caused the collapse of Equitable Life, and was also facing a fine from the Financial Services Authority for failure to meet the deadline in the pension mis-selling review.[29] Two months later, Friends Provident acquired RSA's offshore life unit International Financial Services Limited, based on the Isle of Man, for £133 million.[30] In July 2002, RSA sold its group risk business to Canada Life for £60 million.[31] RSA was forced to close its life business, with the loss of 1,200 jobs, in August 2002.[32]
In November 2002, Turner & Newall launched a suit against RSA on behalf of former employees who had suffered asbestos-related disease, claiming that the insurer was liable because it provided employer liability policies to the engineering firm.[33] In an effort to reduce costs, RSA chairman Sir Patrick Gillam said it would sell its US business RSUI and "float most of its Asia Pacific operations", bringing total job losses in the UK to 4000.[34] The case was heard at the High Court of Justice in January 2003.[35] RSA argued that a policy clause which excluded cover for pneumoconiosis also excluded other asbestos-related disease such as asbestosis and peritoneal mesothelioma. Colin Edelman QC, representing T&N, told Mr Justice Lawrence Collins that the defence which RSA had the "temerity" to put forward was "just ridiculous" and that the insurer was trying to "wriggle out of its liability".[36] On 9 May 2003, the court ruled that RSA was liable for the compensation claims.[37] In September 2003, RSA cut 1,000 jobs in the UK and asked shareholders for £960 million to cover further asbestos claims.[38]
Hillsborough disaster
A fatal event at an English FA Cup match, widely known as the Hillsborough disaster, implicated RSA. A human crush resulted in 97 fatalities and 766 injured persons. The Royal Sun Alliance Insurance Company (which, as Sun Alliance, was the insurer for Sheffield Wednesday Football Club in 1989) refused to waive its entitlement to privilege, thus denying the Hillsborough Independent Panel access to its material. Strenuous efforts were made to persuade the company to allow the Panel confidential access to the material, but it maintained its refusal. RSA were entitled to do this as they are under no obligation to release information relating to the amount of compensation paid out to victims and families; in any case the release of that information would not have affected the result on who was to blame for the Hillsborough disaster.[43]
