A twist in the tale!: - the Court of Appeal throws up some surprises in the “At the Premises” judgment
The long-awaited judgment in the “At the Premises” (“ATP”) judgment has now been handed down, and the expected policyholder-friendly outcome marks another welcome milestone in the journey towards bringing these cases to a conclusion, even if the route by which the Court of Appeal got there took some less expected twists and turns.
While there were a number of other issues on appeal, this article focuses on causation, which continues to be a key battleground for insurers and their policyholders.
Background
By way of a brief recap, policies with clauses providing cover for cases of Covid-19 “at the premises” were not considered by the Divisional and Supreme Court in the FCA Test Case, which instead considered a range of policies including those which provided cover for a disease occurring within a specified radius of an insured premises.
In the FCA Test Case, the Supreme Court considered causation at some length, finding that “[212]…in order to show that loss from interruption of the insured business was proximately caused by one or more occurrences of illness resulting from COVID-19, it is sufficient to prove that the interruption was a result of Government action taken in response to cases of disease which included at least one case of COVID-19 within the geographical area covered by the clause.”
However, insurers resisted the application of that analysis to ATP policy wordings, leading to this litigation considering “the critical question” as to whether the Supreme Court’s reasoning in respect of causation could properly be applied to such wordings. At first instance, the answer was a decisive yes (and some further background can be found in our previous article). Insurers appealed, and this judgment is from that appeal which was heard earlier this year.
Insurers’ Causation Arguments
Despite a number of common causation issues to all of the appeals, the primary case advanced differed between the insurers, as follows:
- ExCeL & Kaizen Insurers – their position was that there would be cover only when an occurrence of disease at the premises was a “distinct effective cause” of the closure of the premises (i.e. it must be a known occurrence of the disease at the premises to which the government or local authority was responding);
- Hairlab & Why Not Insurers – they took the position that only a stricter “but for” test applied (requiring the occurrence of a disease at the premises to be a necessary and sufficient cause of the subsequent restrictions - the court recognised this test would seldom be satisfied); and
- Mayfair Insurers – whose position was that the authority had to know about the suffering of disease at the particular premises and had to take it into account in reaching its decision (although it need only contribute to that decision).
The Court of Appeal’s Decision
In setting out their positions, the insurers argued that the correct approach was to begin with the interpretation of the policies in issue, having regard to their language and context, rather than asking whether those clauses differ materially from the radius clauses considered by the Supreme Court in the FCA Test Case. The Court of Appeal agreed there was some force in that.
However, ultimately that change of approach proved to make very little difference to the outcome, with the Court of Appeal finding that:
- The nature of the insured peril informs the causation test agreed between the parties, which is not derived from other perils mentioned in the insuring clause (such as vermin infestation), but instead focuses on the particular peril in question.
- In that regard, notifiable diseases spread rapidly and widely, with the potential to cause interruption over a wide area. The circumstances that would lead to a closure of an insured premises are unlikely to be in response to an isolated incident: instead, it must have been contemplated that a closure or restrictions imposed by a relevant authority would be in response to an outbreak as a whole over a particular area, whether that be local or national. Furthermore, the worse and more widespread the outbreak of the disease, the more likely it would be that such restrictions would be imposed.
- Accordingly, a “but for” test could not have been the intended approach to causation, as the parties must have intended for the causation requirement to be satisfied if the occurrence at the premises was one of a number of causes of the closure.
- It would be unrealistic to suppose that the authority would apply its mind to identifying a particular case of a disease at a particular premises. In the case of a serious outbreak, a relevant authority would know that there had been a number of occurrences of a disease (perhaps over a certain area, or affecting a particular kind of premises within an area) and it would simply react to those occurrences by imposing restrictions accordingly.
- The finding of fact by both the Divisional and Supreme Court in the FCA Test Case (that “each of the individual cases of illness resulting from Covid-19 which had occurred by the date of any Government action was a separate and equally effective cause of that action”), applies equally to the ATP claims, both in respect of the cases which were known about, and those which were “known unknowns”.
Comment
This appeal judgment is a welcome development for policyholders and confirms that despite the differences between radius and ATP clauses, it may not materially affect the nature of the casual link that must be established, which is a matter of policy interpretation and intention.
Policyholders with the benefit of ATP cover can now expect a recovery from their insurers, although notably a lack of clarity remains about the evidence required to demonstrate the presence of a case of Covid-19 at the premises, and it is to be hoped that insurers take a pragmatic approach that avoids this issue becoming the next battleground.
Now that the ATP appeal has concluded, and with the tide very much in favour of the policyholders, the Court of Appeal will be considering similar causation arguments along with furlough in the upcoming appeals arising out of the Gatwick Investment Ltd & Ors v Liberty Mutual Insurance Europe SE group of cases.
Watch this space.
Anthony McGeough is a Senior Associate at Fenchurch Law
MS Amlin v King Trader & Ors: “Fox in the henhouse?” – a cautionary tale
MS Amlin v King Trader & Ors: “Fox in the henhouse?” – a cautionary tale
MS Amlin Marine NV on behalf of MS Amlin Syndicate AML/2001 -v- King Trader Ltd & others (Solomon Trader) [2024] EWHC 1813 (Comm) is the latest in a string of recent cases that confirm the court’s reluctance to interfere with the wording of an insurance contract where the wording is clear. In this case, the wording was no ‘fox in the henhouse’, hidden away in the ‘thickets of the policy’ but front and centre.
Background
King Trader was the owner of a ship, Solomon Trader, which was chartered to Bintan Mining Corporation (“BMC”). MS Amlin issued a charterers’ liability policy to BMC (“the Policy”). In a run of bad luck, the ship became grounded in the Solomon Islands in 2019, BMC became insolvent in 2021, and an arbitration award in excess of US$47m (including interest) was made against BMC in 2023.
As BMC was no longer in the picture, King Trader and its P&I Club sought to recover under the Policy via the Third Parties (Rights Against Insurers) Act 2010.
You would be forgiven for thinking that is the end of the tale - a clear liability had been established, the policyholder had a liability policy, presumably the policy would respond? Sadly not, the wording contained a "pay first" clause, and MS Amlin therefore issued proceedings against King Trader and its P&I Club, seeking a declaration that there could be no indemnity in circumstances where the policyholder had not first discharged their legal liability.
The terms of the Policy
The relevant terms of the Policy for the purposes of this case were set out across various sections of a policy wording that was sub-divided into five parts, and accompanied the insurance certificate, as follows:
Part 1 provided that "The Company shall indemnify the Assured against the Legal Liabilities, costs and expenses under this Class of Insurance which are incurred in respect of the operation of the Vessel, arising from Events occurring during the Period of Insurance as set out in sections 1 to 17 below".
"Legal Liability" was defined as "Liability arising out of a final unappealable judgment or award from a competent Court, arbitral tribunal or other judicial body".
Section 25 of Part 5 stated "It is a condition precedent to the Assured's right of recovery under this policy with regard to any claim by the Assured in respect of any loss, expense or liability, that the Assured shall first have discharged any loss, expense or liability."
And finally, Section 30 of Part 5 contained the all-important “pay first” clause- “It is a condition precedent to the Assured's right of recovery under this policy with regard to any claim by the Assured in respect of any loss, expense or liability, that the Assured shall first have discharged any loss, expense or liability.”
Third Parties (Rights against Insurers) Act 2010
It is worth noting that in most circumstances the usual position under section 9(5) of the Act is that transferred rights are not subject to a condition requiring the prior discharge by the policyholder of its liability to the third party (i.e. a “pay first” clause). However, there is a significant caveat to the usual position, which applies in most circumstance except where the policy is a “contract of marine insurance”, as set out in section 9(6) of the Act.
The Issues for the Court
Without the protection of the Act, the third party’s only hope was to persuade the court that the “pay first” clause either (i) did not form part of the Policy; or (ii) as a matter of construction does not apply where a third party seeks to enforce the Policy, or (iii) is inoperative where the insured is unable to discharge the liability or is insolvent.
The court summarised the relevant considerations as being:
- Where there is inconsistency between a clause specifically agreed for the contract vs. a provision in an incorporated set of pre-existing printed terms, the court may find that the second clause is either not incorporated at all, or if it is, the court may read it down.
- Where there is inconsistency between two clauses that appear in the same document, the court may conclude that the clauses co-exist.
- When considering if two clauses can co-exist, attention will be paid to whether giving effect to the “repugnant” clause leaves the more substantive clause with a real and sensible content, and, if the subsidiary clause is to be read down, whether it will be left with a meaningful and sensible content.
- The court may be more willing to read down or read out a subsidiary clause which is inconsistent with a provision that forms part of the main purpose of the contract, or which is inapposite to the main contract.
The Judgment
In respect of arguments on inconsistency / repugnancy, the court held that it was not possible to establish any inconsistency between the “pay first” clause and the terms of the insurance certificate on the basis that the certificate clearly incorporated and attached the entirety of the wording.
Furthermore, there was not an inherent inconsistency between MS Amlin’s promise to provide liability cover and a clause making enforcement of the obligation to pay the indemnity conditional on prior discharge of that liability by the insured.
Nor was there a conflict between sections of the Policy that allowed MS Amlin to terminate the Policy on BMC's insolvency but preserve BMC's rights to indemnity in respect of incidents occurring prior to termination, and the “pay first” clause, which would require an insolvent insured to discharge its liability as a condition precedent to an indemnity.
Finally, the court considered that the “pay first” clause was not “hidden away in the thickets of the Policy”, as it was clear from the insurance certificate and the index of the wording that it included general provisions effecting the scope of rights under the Policy. Furthermore, the “pay first” clause appeared in a section which imposed a number of obligations, which left the judge unpersuaded that the clause “in this context is in the nature of a fox in the henhouse (or a wolf in the flock)”.
As for the arguments on construction and implied terms, the court held that there was no legitimate process of contractual construction that could subject the clear language of the “pay first” clause to restrictions such as only being applicable in circumstances where the insured has the means to pay a claim or in the event that a third party must pursue a claim under the Act, nor could it be argued that necessity or business efficacy required the implication of words limiting the operation of the clause.
Comments
Perhaps not a surprising outcome, especially in the context of a number of recent commercial court and appellate level decisions such as Bellini v Brit and Project Angel Bidco v Axis, that have reinforced that the courts generally will be reluctant to interfere with clear wording in an insurance contract.
In this case, and in circumstances where there is an absence of statutory control for “contracts of marine insurance”, there was little support at common law that would assist these third parties under this particular wording.
That being said, the judge’s parting remarks certainly leave the reader with the impression that this can be seen as a particularly ugly outcome for parties involved, “The state of English law on this issue in the light of the 2010 Act is not particularly satisfactory… Prudent operators seek to insure against those liabilities, and a range of third parties who suffer loss and damage as a result of accidents at sea will look to insurances of this kind to be made whole. "Pay first" clauses reduce the efficacy of that protection when it is most needed”.
Anthony McGeough is a Senior Associate at Fenchurch Law.
Various Eateries -v- Allianz – Court of Appeal prevents access to a different outcome
Background
The Court of Appeal has handed down judgment in Various Eateries v Allianz, one of the trio of cases along with Stonegate Pub Co v MS Amlin & Ors and Greggs v Zurich heard before Mr Justice Butcher in June 2022. This group of cases, which considered issues arising out of the Marsh Resilience wording found by the FCA Test Case to respond in principle, proceeded by way of a determination of certain preliminary issues that included: (i) Trigger; (ii) Aggregation; (iii) Causation: additional Increased Costs of Working (“AICW”); and (iv) Government Support (“Stage 1”).
Following judgment in Stage 1 (our summary of the Stonegate proceedings can be found here), the policyholders and insurers in each action appealed various points on their respective judgments.
Grounds of appeal on key issues such as furlough and AICW ultimately did not end up before the Court of Appeal as the parties in Stonegate and Greggs settled their actions prior to the appeal hearing. The remaining grounds of appeal in dispute between Various Eateries and Allianz included certain aggregation issues and a short point of construction on the scope of the prevention of access and enforced closure clauses.
Following a two-day combined appeal hearing, the Court of Appeal dismissed all grounds of appeal, essentially leaving the parties in the position they were in following Mr Justice Butcher’s judgments in the underlying proceedings.
The key findings in Various Eateries at first instance
In the underlying proceedings Allianz argued that all BI losses suffered by Various Eateries should be aggregated to single sub-limit by reference to a “single occurrence” to which all losses connected. Allianz put forward a number of potential “single occurrence” candidates, including an emergence event in Wuhan, and the arrival of Covid-19 in the UK. Various Eateries sought to persuade the court that there should be no aggregation, or that aggregation should only be applied on a per premises basis (i.e. there would be a separate sub-limit for each premises).
Ultimately the lower court rejected the parties’ primary cases, and found instead that BI losses should aggregate by reference to various Government actions, which meant that there were multiple sub-limits that applied to the business as a whole (not on a per premises basis). The judge also rejected Various Eateries’ argument that the various reviews and renewals of certain Government actions should be separate aggregating occurrences (and therefore attract additional sub-limits).
Aggregation
On appeal Allianz sought to revive an argument that there was a single occurrence in Wuhan to which all BI losses should aggregate on the basis that the judge found in Stonegate and Greggs that the initial animal to human infection(s) could constitute a single occurrence, but was then wrong to decide that it was too remote. Allianz also submitted that if the “initial outbreak” in Wuhan was something more widespread than the initial animal to human infection(s) there were still events in Wuhan that qualified as a single occurrence.
Allianz also maintained an alternative argument that the introduction of Covid-19 into the UK also qualified as a single occurrence, even if it could not be specifically identified, and that this single occurrence was “in connection with” the BI losses within the meaning of the relatively loose causal language of the policy wording.
The Court of Appeal held that the trial judge was entitled to reach the conclusions that he reached at trial following detailed and fully considered arguments on the events in Wuhan, and accordingly there was no error principle or other comparable error that would entitle the Court of Appeal to interfere.
In respect of the introduction of Covid-19 into the UK, the Court of Appeal departed from the trial judge’s findings and considered that there was a sufficient causal connection between the arrival of Covid-19 in the UK and the BI losses suffered by Various Eateries that would satisfy the weak causal link required by the wording. However, the Court of Appeal also found that the judge was entitled to have reached the conclusion that the introduction of Covid-19 in the UK was too remote on the basis that the first introduction was temporarily too remote from the losses, and the losses depended on the spread of the disease within the UK which was by no means certain.
Various Eateries sought to revive its case that if the BI losses fall to be aggregated, then it should be on a per premises basis, as the triggers for cover under the wording were expressed by reference to an “Insured Location”.
The Court of Appeal found that the Judge was right to have dismissed the per premises argument for the reasons given in the underlying proceedings. There was nothing within the wording that suggested that aggregation was intended to operate on a per “Insured Location” basis, which was further confirmed by (i) the definition of the “Insured’s Business”, which was defined as “Operating a chain of Italian restaurants” i.e. the business as a whole; and (ii) the Retention provision, which made clear that a Single Business Interruption Loss may affect multiple Insured Locations. Notably, the Court of Appeal distinguished Corbin & King & Ors v Axa from the present proceedings.
The Court of Appeal refused permission to appeal Various Eateries’ alternative argument that a decision to renew, change or relax a Government measure should also count as a single occurrence and therefore attract a separate sub-limit. However, the Court of Appeal did note that its analysis of the March 2020 regulations, which applied for 6 months unless revoked, may well have been different had the regulations applied for a specified period after which they were renewed by a positive decision to do so.
The Construction Point
Allianz also challenged the trial judge’s decision on the scope of cover under the Prevention of Access and Enforced Closure clauses. In summary, Allianz argued that the effect of the words (during the Period of Insurance” meant that it is only losses suffered during the policy period which would be covered, and losses which fell outside the policy period would not be.
The Court of Appeal agreed with the judge in the underlying proceedings, finding that VE was “entitled to recover the Business Interruption Loss proximately caused by that Covered Event, even if that loss extends beyond the Period of Insurance” subject to the longstop of the maximum indemnity period, based on an analysis of the definitions of “Indemnity Period” and “Reduction in Turnover” – “Reading these definitions together with the Insuring Clauses, Allianz agrees to pay the Business Interruption Loss proximately caused by a Covered Event which occurs during the Period of Insurance. The Business Insurance Loss which it agrees to pay is the Reduction in Turnover caused by the Covered Event, beginning on the date of the Covered Event and continuing for a maximum of 12 (or 24) months. Necessarily, therefore, the losses which VE is entitled to recover may continue beyond the end of the Period of Insurance”.
Comment
The Court of Appeal’s judgment, despite leaving matters as they were on the Marsh Resilience wording following the first instance decisions in Stonegate, Various Eateries and Greggs, is a positive outcome for policyholders. Had Allianz been successful on its primary arguments, it would have left policyholders on this wording with a single sub-limit in circumstances where most have claims significantly in excess.
The key points to take away for those with ongoing claims on the Marsh Resilience wording are:
- Policyholders are still able to claim multiple sub-limits by reference to various Government action.
The full range of the relevant Government actions that attract a separate sub-limit under the Marsh Resilience wording is yet to be tested by the court, and will be fact dependent on the industry in question.
- Policyholders with “composite” policies may still argue that there are separate sub-limits per separate company;
- The attribution of losses to specific occurrences has yet to be tested, and is likely to be a time consuming forensic exercise;
- Similarly, in respect of AICW, the question of what qualifies as economic or uneconomic remains unanswered;
- Furlough remains to be accounted for in the adjustment process.
It is worth noting for those on different wordings that furlough is still a live issue for the insurance market. It was considered in the recent group of cases before Mr Justice Jacobs in the commercial court as one of a number of preliminary issues arising out of disputes with Liberty Mutual and Allianz, Fenchurch Law represents Hollywood Bowl and International Entertainment Holdings in those proceedings. Judgment is currently awaited.
The full judgment from the Court of Appeal can be found here.
Anthony McGeough is a Senior Associate at Fenchurch Law.
Better late than never: the first reported case on damages for late payment
Quadra Commodities S.A v XL Insurance Co SE and Others
Ever since the Enterprise Act 2016 ushered in the ability of insureds to claim damages against their insurers for the late payment of insurance claims, the sector has been waiting to see how this legislation would play out in practice, and in particular what would constitute a ‘reasonable’ time for paying claims.
That wait is finally over.
Background
The policyholder, Quadra Commodities, specialised in the trade of agricultural commodities including grains, oil seeds and vegetable oils. In 2019, a fraud now known as the ‘Agroinvestgroup Fraud’ unravelled and revealed that Agroinvestgroup, a loosely associated group of companies involved in the production, storage and processing of agricultural products, had defrauded the policyholder.
A claim was notified under the policyholder’s marine cargo open cover insurance policy in February 2019. The insurer denied all liability for a variety of reasons, including that the policyholder had no insurable interest, and that the loss was purely financial with no loss of physical property (for which the insurer maintained the policyholder was not insured).
Section 13A of the Insurance Act 2015 (“the Act”)
While the details of this claim are well worth a read (see here for the full judgment) interest in the case has focused on the claim for damages pursuant to s.13A of the Act (a copy of the wording of s.13A can be found here).
As a primary point the Court was clear that the issue of what was a “reasonable time” in which the claim should have been paid must be considered separately to the Defendants’ case as to whether there were reasonable grounds for disputing the claim.
The onus is on the insured to show payment was made after the “reasonable time” within which the insurer should have paid sums due in respect of the claim: whereas the insurer carries the burden of proof for showing that there were reasonable grounds for disputing the claim.
In considering the question of what was a “reasonable time”, the Court considered that the fact that the Defendants’ actual conduct of the claims handling could be said to have been too slow or lethargic, was not of itself an answer. The Court looked to the non-exhaustive list of factors referred to in s. 13A (3) of the Act and the accompanying Explanatory Notes (all the while attempting to keep separate the question of whether or not there were reasonable grounds for disputing the claim).
The Court concluded that, given the nature and complicating circumstances of the claim, including the origins of the claim in the Agroinvestgroup Fraud and the destruction of documents, the reasonable time in which the claim should have been paid was not more than about a year from the notice of loss.
The one-year period would have been a reasonable time for the insurer to investigate and evaluate the claim, and then pay it. However, this was predicated on the assumption that there were no reasonable grounds for disputing the claim or part of it.
Turning then to whether or not there were reasonable grounds for disputing the claim the fact that the Court may ultimately find that those grounds were wrong did not automatically infer that those grounds were unreasonable. On the facts, the Court agreed that in the circumstances there were reasonable grounds for reaching that conclusion.
Ultimately, while it could be said that the way in which the Defendants conducted their investigations was too slow, as this aspect of their conduct occurred within a period throughout which there were reasonable grounds for disputing the claim there was no breach of the s.13A implied term.
Conclusion
While the policyholder was successful in its claim for an indemnity, it was not successful in its argument relating to s.13A of the Act.
Any s.13A claim will be highly fact specific, but in circumstances where there are fairly significant complicating factors, a “reasonable time” of no more than a year to investigate, evaluate and pay a claim (which is not a lot of time in the grand scheme of a complex loss) appears to be a positive decision for policyholders. Large losses can be unpalatable for insurers, but they may now think twice before delaying investigations in order to test a policyholder’s resolve, especially in circumstances where ultimately there are no reasonable grounds to dispute the claim.
Anthony McGeough is a Senior Associate at Fenchurch Law
Original cause? It’s all the same: Spire Healthcare Ltd v RSA
Background
Spire Healthcare Limited (“Spire”) operated two private hospitals at which Mr Paterson, a consultant breast surgeon employed by the Heart of England NHS Foundation Trust ("HEFT"), carried out unnecessary and inadequate procedures from around 1993 to 2011.
Mr Paterson had been performing sub-total mastectomies ("STMs") which involved leaving some breast tissue behind - a practice that that went against the universally accepted practice of removing all tissue in the event that a mastectomy was clinically indicated. Mr Paterson had carried out this procedure in both his NHS and private practice.
His negligent methods had been discovered by NHS officials at HEFT in 2007, who sought assurances from Mr Paterson that he would cease carrying out STMs. Despite giving those assurances, Mr Paterson continued to carry out STMs. He was subsequently suspended from practice in 2011 by the General Medical Council ("GMC").
Following Mr Paterson’s suspension, Spire discovered that he had also carried out unnecessary surgical procedures – typically, wide local excisions ("WLEs") - in circumstances where there was no clinical indication for the surgical procedure to be undertaken.
High Court Proceedings
Around 750 former patients commenced proceedings against Mr Paterson, Spire and HEFT. Spire settled the proceedings by way of a confidential settlement and sought an indemnity from its insurer, RSA.
The policy had a Limit of Indemnity of £10m and was subject to an aggregate limit of indemnity of £20m. The policy also contained the following wording of relevance:
“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”
RSA had accepted that it would indemnify Spire under the policy, but only to the Limit of Liability of £10m. RSA asserted that all of the claims arose out of one source or original cause, i.e. Mr Paterson or Mr Paterson’s conduct.
Spire’s position was that it should be entitled to the aggregate limit of £20m as there had been two distinct groups in the underlying claim:
- Those attributable to his negligent conduct by carrying out STMs where a full mastectomy was clinically required; and
- Those attributable to his deliberate conduct by carrying out unnecessary surgery.
Ultimately the High Court decided that Spire was entitled to the full £20m from RSA on the basis that there had been a different source and/or original cause between the two groups of patients.
The Court of Appeal Decision
The Court of Appeal considered the previous case law in relation to aggregation wording where loss was consequent on or attributable to one source or original cause, and confirmed the following principles:
- In general, an aggregation clause should be approached neutrally, as opposed to with a predisposition towards either a narrow or broad construction;
- However, the wording in this case requires the widest possible search for a unifying factor in the history of the losses it is sought to aggregate;
- There is no distinction between an "original cause" on the one hand and an "originating cause" on the other, and nor is there a distinction between “cause” and “source”.
- The doctrine of proximate cause does not apply, since “original cause” connotes a considerably looser causal connection; and
- There must still be a causative link between what is contended to be the originating cause and the loss and there must also be some limit to the degree of remoteness that is acceptable.
The Court of Appeal allowed the appeal as it considered the High Court had erred in its consideration of a single effective cause of all the claims, which was not the correct test. Instead, the High Court should have searched for a unifying factor to the claims. Had the High Court done so, it would have identified the unifying factor as a single "rogue consultant" who habitually acted in breach of his duties to his patients.
Furthermore, all the patients' claims were based on Mr Paterson's improper and dishonest conduct. That conduct, in all cases, involved operating on the patients without their informed consent and with disregard for their welfare. Any analysis of Mr Paterson’s motivation was both unnecessary and inappropriate.
The High Court had relied heavily on Cox v Bankside, but the passages relied upon provided no justification for the High Court’s approach. Instead, it had introduced unnecessary complication into what the Court of Appeal considered should have been a relatively simple and straightforward exercise. The claims were not based on a negligent misunderstanding; they were based on a pattern of deliberate and dishonest behaviour by one individual.
The Court of Appeal concluded that:
“As a matter of ordinary language, and applying the principles applicable to aggregation clauses expressed in these wide terms, it seems to me to be plain that any or all of (i) Mr Paterson, (ii) his dishonesty, (iii) his practice of operating on patients without their informed consent, and (iv) his disregard for his patients' welfare can be identified either singly or collectively as a unifying factor in the history of the claims for which Spire were liable in negligence, irrespective of whether the patients concerned fell into Group 1 or Group 2 (or both)”.
Comment
While disappointing for policyholders with similar aggregation wording, the decision does serve as useful reminder on the test to be applied for “original cause” wording.
It should be noted that the Court of Appeal deliberately stepped back from creating a general rule for claims arising from the actions of an individual, and acknowledged that there will still be cases in which the behaviour of an individual will be too remote or vague a concept to provide a meaningful explanation for the claims.
Aggregation disputes will remain highly fact-specific, and policyholders should bear in mind that separate negligent acts with their own individual context may still avoid the sting of “original cause” aggregation wording.
Anthony McGeough is an Associate at Fenchurch Law