In 2011 and 2012, LBI initiated three court cases before the District Court of Reykjavik (cases no. E- 3826/2011, E-3827/2011 (the Grettir case), and E-991/2012) against four former employees of LBI, four former directors of the Company (case no. E-991/2012 only) and 26 insurers of directors' and officers' liability insurance policies which were purchased by LBI in 2008.

In November 2018, LBI reached a settlement agreement with 24 of the 26 insurers, which represented 47,8% of the amount underwritten under the above directors' and officers' liability insurance policies. The 24 insurers which were part of the settlement were discharged from the three ongoing court cases. The terms of the settlement are confidential.

As part of the proceedings of the case, but unrelated to the above settlement, LBI withdrew its claims against four former directors of LBI in case no. 991/2012.

All three court cases continued against four former employees of LBI and the two remaining insurers. The main hearing started on 29 October 2018 and concluded on 3 December 2018.

On 28 December 2018, the Reykjavik District Court handed down decisions in the three above referenced D&O-cases. In two of the cases, E-3826/2011 and E-991/2012, the court dismissed LBI’s claims due to uncertainty around whether the loss incurred by LBI had already been compensated by a settlement of a court case that LBI had initiated against its former auditors.

In the third case, E-3827/2011 (the Grettir case) the Reykjavik District Court handed down a judgement by which the individual defendants, the two former CEOs and a former managing director were acquitted. The judgement was based on the conclusion that legitimate premises are insufficient to hold the employees liable for damages suffered by their employer. The insurers were acquitted on the grounds that the former two CEOs and a former managing director were not considered liable for LBI’s losses.

The Board of LBI decided to abide by the Reykjavik District Court rulings in cases no. E-3826/2011 and no. E-991/2012. However, at an extraordinary general meeting (EGM) held on 17 May 2019, LBI’s shareholders decided to bring new legal action in which that part of the claims in the aforementioned cases pertaining to lending to Straumur-Burðarás Investment Bank hf. in October 2008 will be directed once more against the former CEOs of Landsbanki Íslands hf. and those insurers with whom a settlement has not already been reached. As explained above, claims for the same events were previously brought in cases that were dismissed by the Reykjavik District Court at the end of 2018. The formal court proceedings in the New Straumur case started in late May 2019 when the summons was served. At a procedural hearing held in June 2020, the Reykjavik District Court decided that the main hearing on the insurer’s dismissal claim will be postponed until a final court decision in the Grettir case is obtained.

LBI appealed the judgement in case E-3827/2011 (the Grettir) case to the Landsrettur Court of Appeal.   Main hearing before the Landsréttur Court of Appeal was held on 15 and 16 April 2021. 

On 28 May 2021, the Landsréttur Court of Appeal handed down a judgement in the Grettir case, by which the D&O Insurers, the former CEO, Halldor J. Kristjansson, and the former Head of corporate finance, Sigridur Elin Sigfusdóttir were acquitted. The individuals were acquitted on same grounds as in the first instance.

The acquittal of the D&O Insurers is based on the grounds that in the beginning of 2008, when the insurance was renewed, the company was negligent when giving information on the status of the company. The Court specifically addresses incorrect information on holding of own shares in the company, insufficient reporting of need for impairment of loans to large groups and insufficient information on large exposures. The Court also refers to market manipulation being conducted within the bank at the time of renewal the D&O policy.   

The Court found that the former CEO, Sigurjon Þ. Arnason, is obliged to pay LBI ISK 50.000.000 with default interest from the day the case was filed before the Reykjavik District Court in November 2011. The Court found that Arnason was liable due negligence in relation to not securing that a valid bank guarantee, securing a large loan exposure, was called when the loan was not paid back. The Court lowered the amount payable by Arnason at its discretion based on law on limited liability companies.    

Finally, the Court awarded legal cost to the D&O Insurers, the former CEO, Halldor J. Kristjansson, and the former Head of corporate finance of total ISK 36.000.000 payable by LBI.

LBI is currently reviewing the judgement with it’s legal team and considering next steps, including whether to request for appeal of the decision to the Supreme Court.

Back to News Archive