RSA mounts bid to claw back €1.25m from Smith

RSA has launched a legal bid to claw back the €1.25m (£898,000) awarded by an employment tribunal to Philip Smith (pictured), the former chief executive officer of its Irish business.

The insurer confirmed today that it is appealing the decision of the Irish Employment Appeals Tribunal, which found in Smith’s favour last month in an unfair dismissal case against his ex-employer.

RSA will also seek redress through the courts for the €1.25m compensation awarded to Smith by the tribunal.

Smith claimed he had been made a scapegoat following an investigation by RSA Group into accounting practices at its Irish subsidiary, in the course of which problems in the claims and financing functions were uncovered.

Smith left RSA on 28 November 2013 amid the investigation, which triggered a £244m pre-tax loss at the insurer.

Lodging its appeal, RSA said the tribunal had failed to take into account three key factors:

• The critical role of reserving for claims in an insurance company and the fundamental importance of setting accurate case reserves in accordance with the company’s legal and accounting responsibilities;

•RSA’s obligations as a regulated financial institution, including its duty to provide any information reasonably requested by the Central Bank of Ireland and to do so without delay; and

• RSA Ireland’s obligation, as part of a publicly listed group, to immediately announce to its shareholders any material changes to the business or its performance.

Derek Walsh, RSA Group General Counsel, said: “We believe the tribunal has reached conclusions which were not supported by the evidence and which demonstrate a serious misunderstanding of and a failure to grasp the key issues.

“It did not recognise the enormity of its finding that Mr Smith was aware of the reserving practices within RSA Ireland which involved ‘a potential breach of Central Bank regulations’. We are astonished by the amount of the award made by the tribunal which RSA believes is utterly inconsistent with that crucial finding and creates a dangerous precedent.

“Contrary to the impression given by the Tribunal decision, no one at RSA Group level had any prior knowledge of the inappropriate large loss reserving practices which emerged in RSA Ireland. RSA Group would never have condoned such practices.

“We conducted an appropriate investigation into what were very serious issues and deny that any outcome in relation to Philip Smith was in any way pre-determined.

We also refute any suggestion that the evidence which emerged from numerous employees in Ireland concerning Mr Smith’s management style and behaviours was not given on a voluntary basis.

“We continue to believe that Mr Smith’s case is without merit and in the circumstances have no option but to appeal the judgement.”