Industrial services group Cape PLC (LON:CIU) has reached a settlement deal with a group of litigant insurers over product liability claims relating to its historical asbestos activities.
The settlement agreement provides for an upfront payment of £18mln, inclusive of substantial legal costs, which will be paid to the PL Insurer Litigants immediately.
In addition a deferred payment of up to £34.5mln will be payable to the insurer litigants over the period from 2018 to 2023.
The group said the maximum amount payable under the agreement has been included in its overall industrial disease claims (IDC) provisions as at December 31 2016 and will be paid out of its existing cash resources.
Cape said “the settlement of the Insurer PL Litigation does not imply any acceptance of liability on Cape's behalf.”
In early trading, Cape share were 2%, or 3.5p higher at 178.5p.
Best interests ...
The group said, following the end of a trial bought by the insurer litigants on February 23 2017, it “received an updated opinion from Leading Counsel which reinforced the board's view that the merits of the Group's defence are persuasive and that there are substantial evidential burdens upon the Insurer Litigants.”
Nonetheless, Cape added, it remained “mindful that there remains a risk that the Insurer PL Litigation could have a material adverse impact” upon the group and its shareholders.
The firm said its board, therefore, concluded that it was in the best interests to settle at the agreed level “thus removing a significant risk to the business, removing the distraction of a likely protracted appeals process and enabling management to focus on the development of the core business.”
Cape added that the settlement agreement is separate from the litigation relating to the employer liability claims brought by Aviva PLC (LON:AV.)
The group is seeking leave to appeal a number of aspects of that judgment and has increased the provision held against industrial disease claims by £9.7mln as a result.
Cape said, after the latest triennial valuation, the total IDC provision as at December 31 2016 had increased to £172.5mln.
The group will announce its full-year 2016 results on March 15.