The last Canadian holdouts in an international insurance market disaster of the 1980s have lost their bid to avoid paying the British-based Society of Lloyd's millions of dollars in liability.
The Ontario Court of Appeal ruled yesterday that 88 people who risked an average of $450,000 each to underwrite insurance policies must pay their share of the $19-billion the Lloyd's syndicate lost between 1988 and 1992.
"There will be a lot of people going bankrupt from this decision," said Gerhard Meinzer, one of the Ontario residents named in the case.
Mr. Meinzer, a veteran investor in technology companies, said he settled his own case with Lloyd's before the appeals court judgment came down, and the six-figure payment he had to make was "a fraction" of what some others will face.
"I held my nose and gulped a few times and wrote a cheque," Mr. Meinzer said.
Lawyer George Benchetrit, who acted for Lloyd's in the case, described the ruling as "a resounding victory."
"It enables Lloyd's to commence enforcement proceedings in the other provinces" as well as Ontario, where the majority of the investors live, Mr. Meinzer said.
While the Ontario investors argued that Lloyd's did not properly inform them of the risks they faced, Mr. Benchetrit said that "the up side and the down side were made abundantly clear to these people at the time."
Lawyers for the four Canadians named in the case -- Mr. Meinzer, Paul F. Saunders, Allan Smart and Donald Stringer -- were unavailable for comment. Mr. Benchetrit said they still have the right to appeal to the Supreme Court of Canada.
London-based Lloyd's is a collection of insurance syndicates that underwrites insurance on all classes of business from more than 100 countries.
The Canadian investors were among tens of thousands worldwide who found themselves on the hook after entering agreements to put up cash and lines of credit to finance insurance policies in the 1980s in the expectation of making profit of 25 per cent a year.
Instead, the insurance market was devastated by huge losses resulting from oil spills including the Exxon Valdez, hurricanes and U.S. asbestos claims.
"No one contemplated the environmental litigation that would occur," Mr. Meinzer said. "It seemed like a good investment -- it had worked for 300 years -- but I got caught."
In 1996, most of the 34,000 investors worldwide agreed to a settlement with Lloyd's that involved a reinsurance scheme and some cash payments, but 5 per cent did not, including almost 200 Canadians. In 1998, a British court ruled that Lloyd's could go after the Canadians' money anyway.
The number of Canadian holdouts dwindled over the next few years, but 88 people took their cause to the Ontario Superior Court, where they argued that the British court decision was not binding in Canada and that Lloyd's had treated them fraudulently by failing to provide a true picture of the risk they were taking.
In March, 2000, Madam Justice Katherine Swinton rejected their arguments.
They appealed, and lost again in a 34-page judgment released yesterday by judges Kathryn Feldman, John Laskin and Stephen Goudge of the Ontario Court of Appeal.