Court of Appeal decision
Overturning the first instance decision, the Court of Appeal noted that the aggregation wording - “consequent on or attributable to one source or original cause” - was very widely drawn. When addressing previous cases of relevance, it reminded itself that:
- Such clauses are to be construed in a balanced fashion without a predisposition towards a narrow or broad interpretation.
- There is no distinction between aggregation wordings referring to an “originating cause” and those which refer to an “original cause”.
- Neither is there a distinction between the terms “cause” and “source”.
- “Original cause”, in context of the Policy’s aggregation wording, did not mean “proximate cause” and permitted a considerably looser causal connection.
- The “original cause” need not be the sole cause of Spire’s liability. However, it was still necessary for there to be some causal link between the originating cause and the loss.
- When identifying the relevant unifying factor, one must not, though, consider remote or coincidental causes, which provide no meaningful explanation for what has happened.
Adopting these principles, the Court of Appeal held that all the claims within both sets were consequent on or attributable to one source or original cause; namely, Mr Paterson, his dishonesty, his practice of operating on patients without their informed consent and his disregard for his patients’ welfare.
In support of its conclusion, the Court of Appeal gave an example of an orthopaedic surgeon who negligently fails to diagnose an incomplete fracture in Patient A, then negligently performs an operation on Patient B, and finally gives the wrong aftercare instructions to the physiotherapist in respect of Patient C. In all three cases the reason why the operator of the private hospital would be liable to those patients is because it engaged (or failed to take adequate steps to supervise or manage) an incompetent orthopaedic surgeon, notwithstanding that their incompetence manifested itself in different ways.
HHJ Pelling, it was held, had failed to conduct the wide search for a unifying factor in the history of the claims that was required. Instead, having noted the factors that were common to all the claims, he then disregarded them, in the course of searching for what he termed a “single effective cause”. This was not, the Court of Appeal said, the correct test.
As a result, both sets of claims aggregated and Spire was entitled to only a single £10m limit of indemnity.
Comment
Whilst it does not make new law, the Court of Appeal’s decision gives a welcome re-statement of the correct approach to the application of aggregation clauses in insurance contracts and discourages the introduction of unnecessary complication to the exercise. It provides further clarity on the appropriate approach to the interpretation and operation of ‘originating cause’ aggregation wordings.
No general rule concerning claims arising from one individual’s conduct was established by this case. However, applying the Court of Appeal approach is likely to lead to a similar outcome in cases involving the conduct of a specific individual when the aggregation clause provides for an ‘originating cause’.
The decision emphasises the importance of the aggregation wording chosen. Had this aggregation provision been the subject of the Court of Appeal’s deliberations in Baines v Dixon Coles & Gill [2021], it is far more likely that the appellant insurer would have succeeded in aggregating all of the claims arising from Ms Gill’s thefts – on the basis that her dishonestly was the ‘originating cause’ of the subsequent claims against the firm. However, the insurer was constrained by the operation of the SRA Minimum Terms, which contains narrower aggregation provisions.
Where not bound by an approved wording (such as the SRA Minimum Terms), insurers would be well advised to consider carefully the types and values of multiple claims which might be made against their insured to see what type of aggregation might best serve them. While negotiating different wordings with each insured is perhaps unrealistic, the exercise is certainly worthy of consideration across the range of individual professions in respect of which they offer cover.
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