Aggregation of professional indemnity claims
14 June 2017
An aggregation clause acts to combine two or more claims for the purposes of the limit of indemnity and the number of deductibles that apply, and can significantly impact the level of insurance cover available to a policyholder for a claim. In this bulletin, we review the Supreme Court’s judgement on the minimum terms and conditions (MTC) aggregation clause following a recent case.
The Supreme Court has handed down its judgment in AIG Europe Limited v Woodman  UKSC 18. The case, and its wider importance, arises from the interpretation of the aggregation clause in the Solicitor Regulation Authority’s (SRA) minimum terms and conditions for solicitors’ professional indemnity insurance (the minimum terms and conditions aggregation clause).
The reasoning in this case is also relevant for policyholders with insurance policies containing other forms of aggregation wording.
FACTS OF THE CASE
AIG were the insurers for the law firm known at the time as International Law Partnership LLP (ILP). ILP acted for property developers in relation to two property development schemes abroad: one in Turkey and the other in Morocco. They also acted as trustees of an escrow account into which investors paid sums. Amounts were not to be released from the escrow account until assets held by the trust were sufficient to cover the investment to be protected.
Ultimately the scheme failed and the development company was liquidated. The security established over the developments was inadequate to protect investors. 214 investors launched an action against ILP alleging that its errors had allowed investor funds to be released from escrow without adequate security being in place.
In March 2014 AIG sought a declaration that all 214 claims against ILP should be aggregated, and therefore, that its liability should be capped at the claim limit of GBP 3 million. The clause in question allowed aggregation of claims arising from ‘similar acts or omissions in a series of related matters’.
The issue was whether the 214 separate claims by investors arose out of ‘related matters or transactions’.
At first instance, the Commercial Court found that the claims were not related as the transactions were not ‘conditional or dependent’ on each other. The Court of Appeal preferred a different test, namely that claims should have an ‘intrinsic relationship with each other’, and thought the Commercial Court should determine the issue based on that guidance.