Sunday 23 October 2016

RSA says it will appeal €1.25m tribunal award to former boss

Published 23/06/2015 | 02:30

Former RSA chief executive Philip Smith and his wife Shirley leave the Employments Appeal Tribunal, Dublin
Former RSA chief executive Philip Smith and his wife Shirley leave the Employments Appeal Tribunal, Dublin

The country's largest insurer of homes and cars said it plans to appeal a huge award won by its former chief executive in an employment tribunal.

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Philip Smith, who was chief executive of RSA, has been awarded €1.25m by an Employment Appeals Tribunal.

An RSA spokesperson said it was extremely disappointed by the tribunal's decision and "fundamentally disagrees with it", and plans to appeal it.

"We are considering our options but intend to appeal the judgement."

Mr Smith took a case for constructive dismissal.

The award is understood to be the highest ever made by an Employment Appeals Tribunal. Mr Smith had been paid €620,000-a-year when he headed up the company.

In November 2013, Mr Smith and two other senior managers were suspended for what RSA described as issues around claims and the level of reserves in the company.

The overall reserving position of the company was found to be inadequate, the company said at the time.

The hole in the reserves of the Irish division forced its London-headquartered parent to bail it out - in a move that eventually cost close to €400m.

When the financial issues first emerged, Mr Smith resigned and claimed that he had been made the "fall guy" for RSA's problems in this country.

RSA and other motor insurers are currently increasing premiums for drivers in a bid to boost their reserves.

Mr Smith argued he had been treated unfairly when the reserving issues emerged, and he took a constructive dismissal case against his employer.

He claimed before the tribunal that he had been suspended by an RSA senior executive in a television interview, without being told in advance.

He argued that a draft investigation into him had been sent to the Central Bank without giving him any chance to refute the allegations in it.

However, RSA argued that Mr Smith resigned when he realised that the company's financial irregularities were about to be exposed.

It also claimed he had presided over a culture of fear that was such that even senior subordinates would have been afraid to blow the whistle on their concerns about reserving issues.

RSA had also alleged that expenses irregularities, uncovered by the company, contributed to Mr Smith's decision to resign before going through a disciplinary process.

Mr Smith presided over a practice of fixing reserves for some large insurance claims below levels recommended by staff, Rory O'Connor, the company's former chief financial officer, told the tribunal in March. Mr Smith denied this.

In the tribunal's ruling, barrister Niamh O'Carroll Kelly said the tribunal was satisfied that from an early stage in the investigation into Mr Smith's conduct and performance, or perhaps even before it, his fate had been determined by RSA.

She found that RSA then went on a "fact-finding exercise" to justify its predetermined decision, according to State broadcaster RTÉ, which saw the ruling.

The tribunal found that suspending Mr Smith on television was the equivalent of "taking a sledgehammer to his reputation". The decision to dismiss him was probably made to appease the concerns of third parties, including shareholders and the Central Bank.

The ruling noted there was no doubt that not only the Irish operation, but the RSA Group as a whole, ran into capital problems in 2013. Ms O'Carroll Kelly was satisfied that, apart from Mr Smith, at least two dozen other employees in Ireland and the UK were aware of the practices at the company.

Mr Smith will have to pay his own legal costs, which are understood to be substantial, as these are not awarded in Employment Appeals Tribunal cases.

Irish Independent

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