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Interpretation of Insurance Limits of Liability

In a recent High Court Judgment, a decision was made which affects the interpretation of Legal Liability Insurance Limits. The judgement considers the policy language around ‘original cause`, which can affect claims settlements within Aggregate and Any One Claim limits.

The case in question was Spire Healthcare Ltd v Royal & Sun Alliance Insurance plc [2020] EWHC 3299 (Comm) which reaffirmed the principles relating to the interpretation of an aggregation clause in an insurance policy.

The judgement clarified that losses caused by one individual under separate mis-appreciations or decisions can give rise to separate original causes or sources for aggregation.

HHJ Pelling QC reaffirmed the principles relating to the interpretation of an aggregation clause in an insurance policy which aggregates claims “consequent upon or attributable to one source or original cause” and applied them in the context of a combined liability policy under which RSA promised an indemnity to Spire for its legal liability for medical negligence (“the Policy”).

The insurance indemnity arose out of claims brought against Spire and other defendants by around 750 patients injured by the disgraced breast surgeon Mr Ian Paterson.  Spire aggregated its losses into two groups of cases when submitting the claim on the basis that the claims were attributable to two separate original causes, However, RSA considered the losses should be aggregated into one group as the claims were attributable to one single originating cause.

On Spire’s assertions, it was entitled to recover up to £20m; on RSA’s assertions, it was liable to pay GBP10m. HHJ Pelling QC agreed with Spire’s aggregation and concluded that the claims arose out of two different sources or original causes so that the total indemnity under the Policy was GBP20 million rather than GBP10 million.

HHJ Pelling QC said that “Once it is accepted that where a single individual operates under two separate mis-appreciations decisions or motivations, each resulting in multiple claims, there would be separate originating causes (being each of the separate mis-appreciations decisions or motivations) even though only one individual was involved. To attempt in those circumstances to attribute all losses to the conduct of an individual simply ignores the requirement for a causal link”.

This case has relevance not just to Medical Malpractice, but to other forms of insurance including Professional Indemnity, Management Liability, General Liability, Product Recall and Environmental Liability.

W Denis Insurance Brokers has dedicated teams of specialists across all of these areas of insurance . To discuss this further with an expert at W Denis, please make arrangements with daniel.moss@wdenis.co.uk and on 0044 (0)113 2439812

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