Equitable Life has lost all five "lead cases" at the Financial Ombudsman, in decisions which could potentially affect thousands of policyholders, BBC News Online learns.

In all five cases, the ombudsman said Equitable was liable for losses - and should compensate customers.

The cases refer to GAR-polices that were removed from the firm's with-profits fund before 8 February 2002, so the policies are not bound by the terms of Equitable Life's compromise scheme.

The publication of the adjudications by the ombudsman is particularly significant as this is effectively the first official "inquiry" to establish any question of liability.

The rulings' significance could have wider consequences and will be another worry for hard-pressed policyholders.

Equitable can still challenge the adjudications. If it chooses to do so, it is to give further representations, and a formal decision will then be taken by the ombudsman.

Mixed blessing

In four out of five cases Equitable were found to have misrepresented to the consumer the possible impact of meeting all its liabilities to GAR investors.

In one case a representative of the Equitable, acting under advice from bosses, estimated the cost of meeting GAR claims to be only �50m.

However, the Equitable's own lawyers had put the potential liability at closer to �1.5bn.

The adjudications published only refer to GAR-related claims and to people who left the society before the compromise agreement.

Liz Kwantes, of the Equitable Life Members Help Group, welcomed the rulings against Equitable, but said it was a "mixed blessing".

"It's a problem for the actual policyholders, because the people affected are non-policyholders, who have left."

"Annuitants and existing policyholders will have to pay for it."

In March, Equitable announced it would review its plans to compensate GAR customers, who had left before February 2002.

Equitable Life policyholders now face further worries that a flood of compensation claims resulting from the Ombudsman ruling, could drain the company of precious resources.

Ms Kwantas said: "Despite the fact that Equitable says it has reserves for this, it is another worrying prospect for policyholders," she said.

It is currently creating a new case-by-case compromise agreement.

"We will need to review them and consider what the next steps will be, that's all we are saying at the moment. We have just literally got them," an Equitable spokesman told BBC News Online.

So far the Financial Ombudsman Service has about 2,500 complaints about Equitable Life.