Equitable facing wave of writs

EQUITABLE Life is facing a damaging wave of writs from policyholders who have lost patience waiting for the beleaguered mutual to deal with their complaints. The first writ was served on Equitable last week and demanded ' damages for misrepresentation and breach of statutory duty'.

The cost of the legal battles will hurt the financially-weak life office. Equitable has been battered by stock market falls and the bill for putting a lid on the guaranteed annuity crisis, forcing it to raise exit charges and cut policy values.

Stuart Bayliss, founder of the Equitable Life Action Group, says: 'It is understandable that policyholders are losing patience and taking matters into their own hands.'

He does not believe the cost of fighting these legal wrangles will push Equitable into insolvency, but fears policy values could be cut further to foot the bill.

In April, Equitable said it was not paying with-profits policyholders annual bonuses this year and that maturing policy values were being slashed by 4%. The penalty for transferring a policy from Equitable to another provider was raised from 10% to 14% of policy value.

Equitable, under the stewardship of chairman and top City lawyer Vanni Treves, said it would stand firm against any legal challenges. A spokesman said: 'We have to be fair to our policyholders who would have to fund any compensation. Therefore, we will fight claims that we believe are invalid.'

In January, Equitable bosses overwhelmingly won a vote to put a cap on a £2.6bn black hole created by the guaranteed annuity crisis.

About 90,000 guaranteed annuity policyholders received an average boost of 17.5% to their policy values and 400,000 non-guaranteed annuity policyholders received a 2.5% injection. In exchange, all policyholders had to relinquish rights to sue the life office for mis-selling. Equitable later cut the value of maturing policies and axed future bonuses.

Equitable is suing the life office's one-time auditor Ernst & Young and former directors, including ex-chief executives Alan Nash and Chris Headdon, for £5.6bn. However, the legal process is likely to drag on for years. Even if Equitable succeeded, the cash settlements would be likely to be less than the amount sought and would not affect policy values.