In the past fortnight, three of the largest Names' action groups have rejected the Lloyd's settlement offer.

This was an attempt by Lloyd's to defuse legal action by its members.

In the case of the Gooda Walker action group, the rejection was by a five to one majority.

This was significant as with over 3000 litigating members, the association represents the largest action group of Names suing Lloyd's underwriting agents over their losses.The Gooda Walker action will be the first to come to trial, with a 12 to 16-week hearing set to start on 26 April.

To date, there have been visits to the High Court and to the Court of Appeal on two preliminary issues.

In the first of these, both courts found the wording of the 'pay now, sue later' clause in the agency agreement did not preclude Names from suing in negligence, even though outstanding cash calls were unpaid.

In the second preliminary issue, the Court of Appeal reviewed the cases of the Merrett, Gooda Walker and Feltrim syndicates.

It found that prior to the introduction of the current contractual structure at Lloyd's in 1990, members' agents were contractually responsible for the proper conduct of their clients' underwriting, notwithstanding that this duty was delegated to managing agents.

In turn, the latter owed a duty in tort to Names to exercise reasonable care and skill in the handling of their underwriting.As a result of the preliminary issues, the action groups have successfully established the Names' legal position with respect to their agents.

At trial, their task will be to substantiate the factual allegations of negligence.Lloyd's own legal panel, chaired by Sir Michael Kerr, has already reviewed many Names' claims and categorised them as strong, upper medium, lower medium, weak and hopeless.

The Gooda Walker action group is suing for £553 million and an indemnity against future losses.

The vast majority of these claims (£489 million) were ranked as 'strong'.Lloyd's has made a global offer of £900 million, with the errors and omissions (E&O) insurers of the members and managing agents contributing £400 million.

This seems surprisingly low as they have admitted a potential exposure of over £1 billion.

Nevertheless, the offer is clearly a substantial one.

Some £223 million of the total offer would go to Gooda Walker action group Names to compensate them for the Gooda Walker losses.

This represents just over 40% of their present claim.

Unfortunately, however, it has been estimated that the losses of Gooda Walker Names could deteriorate by up to 30% in the coming years.

Lloyd's has not proposed any form of cap to protect against this, so the real value of the offer to Names is substantially reduced.It would be wrong, however, to believe that it is simply the size of the offer and the absence of a cap that has led to the rejection.

The terms on which it is made have proved a real stumbling block as well.

One Gooda Walker Name observed that the Lloyd's settlement document had so many strings attached that it resembled a parachute, but that unfortunately it did not have the same life-saving qualities.One of the problems is that the offer is in the form of a credit.

This credit will be used to support the Names' future underwriting.

Where the Name has ceased underwriting, the credit will be retained until the completion of the 1993 year-end solvency test.

After this, to provide Lloyd's with security against future cash calls, substantial deductions will be made from the credit before it is paid over.

As a result, most Names will not receive cash.

Even if cash is due to them, it is impossible to quantify the amount they will receive.For the offer to succeed, Lloyd's has set a target of 70% acceptance by 14 February.

As this is highly unlikely, the company insists that it will withdraw the offer.

Unless an alternative offer is proposed, the action groupsU cases will proceed to court.

It is a great pity that the offer was put together in such haste and that Lloyd's did not allow itself enough time to assess the likely reaction of the Names.

It wanted to bring an end to the storm of damaging litigation that is raging around it.

Instead, the 'take it or leave it' nature of the offer has only added impetus to the headlong rush to the Commercial Court.