Supreme Court construes aggregation provision in minimum terms and conditions of professional indemnity insurance

The Supreme Court has today handed down its judgment in AIG Europe Limited v Woodman and others [2017] UKSC 18. The Supreme Court allowed the appeal, and remitted the case back to the High Court. It held that determining the meaning of "a series of related matters or transactions” in the aggregation clause contained in the Minimum Terms and Conditions for solicitors' professional indemnity insurance necessitated a fact sensitive inquiry to be carried out. The relevant transactions or matters are to be viewed objectively and in the round. Lord Toulson, who gave the judgment of the Court, dismissed as not "necessary or satisfactory" the Court of Appeal's formulation that there must be an “intrinsic relationship” between the transactions or matters.

Tom Leech QC, of Herbert Smith Freehills’ Advocacy Unit, appeared on behalf of the trustees.

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High Court construes wording as aggregating language to give effect to limit of liability

In Spire Healthcare Limited v Royal & Sun Alliance Insurance Plc [2016] EWHC 3278 (Comm), the High Court considered the wording of a clause in an insurance policy and was prepared to interpret the clause as an aggregating clause. Although aggregating provisions are normally worded so as to aggregate claims both for the purposes of the insured's excess and the insurer's limit of indemnity, the Court was not prepared to "rewrite" the policy to achieve this effect here. The aggregating provision applied only to the limit of indemnity.

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WTC and aggregation: the meaning of “arising from one event”

In MIC Simmonds (Lloyd's Syndicate 994) v AJ Gammell (Lloyd's Syndicate 102) [2016] EWHC 2515 (Comm), Mr Justice Cooke considered an appeal against the decision of an arbitral panel on whether certain reinsurance claims following the World Trade Center attacks on 11 September 2001 (the "WTC attacks") could be aggregated.  The arbitrators had decided by a majority that the claims could be aggregated as losses "arising from one event".  The Judge dismissed the appeal, concluding that there was no error of law by the arbitrators in reaching their decision, nor was the arbitrators' conclusion one which no reasonable arbitrator, properly directed, could reach.

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Court of Appeal construes aggregation provision in minimum terms and conditions of professional indemnity insurance

The Court of Appeal has varied the decision of the High Court in AIG Europe Limited v OC320301 LLP and Others [2015] EWHC 2398 (Comm) and provided further guidance on the construction of the aggregation clause contained in the Minimum Terms and Conditions of Professional Indemnity Insurance (as published by the Solicitors' Regulation Authority) required to be incorporated into compulsory liability insurance for solicitors. At the first instance decision, Teare J held that, in order to form a "series of related matters or transactions", the relevant transactions had to be dependent on each other. The Court of Appeal held that the appropriate test was whether the transactions had an intrinsic relationship with each other, not an extrinsic relationship with a third factor. The case has been remitted to the Commercial Court to be determined on the facts in accordance with the guidance given by the Court of Appeal.

Tom Leech QC, of the Herbert Smith Freehills advocacy unit, appeared for the Trustees.

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