Update on Aggregation Clauses in Insurance Contracts

Update on Aggregation Clauses in Insurance Contracts

In the recent case of Spire Healthcare Limited –v- Royal & Sun Alliance Insurance Limited [2022] EWCA17 the Court of Appeal in England & Wales provided guidance on aggregation clauses in insurance contracts, particularly when there are a number of claims which arise out of the conduct of one individual.

The Court of Appeal held that two groups of claims based on the negligent practice of the same surgeon should be aggregated, regardless of which group the claims fell into, and that the unifying factor between the claims was the surgeon’s dishonest improper conduct.

Facts

Spire Healthcare Limited (“Spire”) sought an indemnity from its Insurer, RSA, for the liabilities which arose from the acts and omissions of its employees and those providing medical or surgical services at its hospitals.Spire faced a large number of claims from former patients of Mr Ian Patterson (“Patterson”), a consultant breast surgeon, in respect of surgeries he performed at two of Spire’s hospitals.

There were two groups of claimant patients:

Group 1 -patients who required surgery, but where Patterson had performed a negligent procedure where some breast tissue was left behind;

Group 2 - patients where the surgery performed by Patterson was entirely unnecessary.

The policy contained a limit of indemnity for each claim of £10 million with an overall limit of £20 million. Spire sought an indemnity of £20 million.RSA accepted that it was liable to provide an indemnity to Spire, however, it sought to rely on the aggregation clause and aggregate the claims so that the £10 million limit of indemnity would apply.

The Relevant Clause

The wording of the aggregation clause was as below:-

“The total amount payable by the company in respect of all damages, costs and expenses arising out of all claims during any period of insurance consequent on or attributable to one source or original cause irrespective of the number of persons entitled to indemnity having a claim under this policy consequent on or attributable to that one source or original cause shall not exceed the limit of indemnity stated in the schedule.”

The Court’s Findings

RSA argued that there was “one source or original cause” of the various claims, that being the conduct of Patterson. Spire however argued that the cause for the group 1 claims was Patterson performing a negligent procedure, in circumstances where the procedure itself was required, and the cause for the group 2 claims was Patterson carrying out a procedure which was not necessary at all. They, therefore, argued that there were two separate causes, and therefore two separate limits of indemnity should apply.

The High Court did not accept RSA’s argument that Patterson’s conduct was the original cause. They considered there to be two clear differences between group 1 and group 2 claims.

The Court of Appeal however agreed with RSA and, in particular, noted the wording “consequent on or attributable to one source or original cause”, which it concluded should result in a wide search for a unifying factor in the claims.The Court concluded that Patterson’s conduct did amount to “one source or original cause”.The question to ask was whether there was a single factor behind all the claims, and the answer to that was Patterson’s conduct.The Court felt that factors such as Patterson’s motivation for his conduct should not be relevant to Spire’s liability and therefore, the application of the aggregation clause.

Commentary

In many cases, the “original cause” will be obvious. The Court of Appeal did also decline to set a general rule regarding claims arising from the conduct of one individual by stating:

“there may be cases in which, on the facts, the behaviour of one individual would be too remote or too vague a concept to provide a meaningful explanation for the claims, but this is not one of them.”

The case does however provide some useful guidance in circumstances where actions of one particular individual take many forms and result in numerous claims being brought.

If you would like further information on the issues discussed in this article, please contact Timothy Cockram or another member of the Litigation and Dispute Resolution team.