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:

1. Those attributable to his negligent conduct by carrying out STMs where a full mastectomy was clinically required; and
2. 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:

1. In general, an aggregation clause should be approached neutrally, as opposed to with a predisposition towards either a narrow or broad construction;
2. 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;
3. 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”.
4. The doctrine of proximate cause does not apply, since “original cause” connotes a considerably looser causal connection; and
5. 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