Analysis: RSA taken aback at record €1.25m tribunal award

The noise you heard on Monday was jaws dropping around town at the news that Philip Smith had been awarded €1.25 million by the Employment Appeals Tribunal (EAT) in his constructive dismissal case against RSA Insurance Ireland.

It is thought to be the largest such award in the history of the tribunal and few observers could have predicted such a comprehensive decision in his favour.

Certainly not RSA, which said it was “extremely disappointed” by the tribunal’s decision and “fundamentally” disagreed with it. “We are considering our options but intend to appeal the judgment,” said the insurer.

This indicates that the matter could be headed for the Circuit Court, possibly dragging this out for another couple of years.

Mr Smith has offered no comment to the ruling.

To recap, Mr Smith tendered his resignation to RSA on November 27th, 2013, on the basis that his fate was already “pre-decided”. Issues had earlier emerged around large loss claims reserving, motor claims and other issues with the net result that RSA pumped €200 million into its Irish business and three of the most senior executives in Dublin, including Mr Smith, left the business.

Mr Smith claimed that he was made the fall guy for the problems at the Irish insurer, which his counsel argued was well known to the parent company in Britain and were in effect a group issue.

Mr Smith cited three reasons for his constructive dismissal: the public nature of his suspension on RTÉ's Six-One television news bulletin on November 8th; the content of a draft report sent by RSA to the Central Bank, which he claimed was outside the terms of reference of an internal investigation by the insurer and a personal assassination of his reputation; and the coupling of motor claims with the issue of large claims reserving.

He argued that his dismissal meant he could never again work in the insurance industry here. Mr Smith had a total remuneration package of €635,000, including a basic salary of €405,000.

RSA countered that Mr Smith had concealed issues around claims from the parent company, that he ignored group protocols, that he was a bully who had intimidated staff and forced them to bend to his ways, and that he failed to co-operate with an internal investigation into the various financial issues.

The nature of the suspension was central to the judgement in Mr Smith’s favour. Niamh O’Carroll Kelly, who chaired the tribunal, said that suspending Mr Smith on national television was the equivalent of taking a “sledge hammer to his reputation” and to his prospects of “ever securing employment” in the industry again in Ireland or abroad.

“It sealed his fate with the respondent,” she said. “There was no going back from that point.”

Even if the investigation by RSA had “turned up nothing” there was no way in which Mr Smith could have been kept on in his employment.

The tribunal was satisfied that by suspending Mr Smith in this public and damaging way, it was a “dismissal, disguised as a suspension”.

The tribunal found that Mr Smith’s fate was determined from a “very early stage” and that the company then went on a fact-finding mission – including a probe of his expenses – to “justify” its decision, adding that this was probably to “appease” shareholders and the Central Bank.

It found fault with other aspects of how RSA dealt with this case and it smacks of a British company not fully understanding how such matters should be handled in Ireland.

RSA is believed to have spent about €300,000 on legal fees to date, and the tab will go higher if it appeals to the courts.

The events at the heart of this case are under investigation by the Central Bank, which is widely expected to issue a maximum fine of €5 million to RSA, albeit probably reduced to €3.5 million for co-operation.

And Rory O’Connor, who was sacked by RSA as chief financial officer of its Irish subsidiary at the beginning of 2014, has also lodged a case against the insurer at the EAT.

The after shocks of this sorry saga will continue to be felt for some time.