Commercial Court provides guidance on interaction between aggregation and excess clauses

In Spire Healthcare v Royal Sun Alliance Insurance plc [2016] EWHC 3278, the claimant sought declarations to the effect that an insurance policy it held with the defendant insurer contained no operative aggregation clause such that the total cover available to it would be £20m (the aggregate limit of the policy). The claimant also contended that if it was wrong, and an aggregation clause did exist (such that the maximum cover available would be £10m (the per claim limit of the policy)), then there should also be aggregation in respect of the excess payable in relation to each claim, so that a single excess of £25,000  should be payable in respect of a group of aggregated claims. The defendant took the opposite position, contending that there should be aggregation in relation to the limits of cover, but none in relation to the excess. The claimant (an operator of a number of hospitals) sought the declarations due to the large number of negligence claims it faced arising from the conduct of a single consultant surgeon.

His honour Judge Waksman QC (sitting as a Judge of the High Court) held that as a matter of construction, the policy did contain an aggregation clause; it did not matter that the relevant clause, when read together with the schedule, did not expressly state that a discrete limit should apply to claims arising out of one cause, as it was obvious that the lower of the two limits (£10m rather than £20m) must apply to the aggregation of claims, “since the purpose of aggregation is to reduce cover in the case of linked claims…”. As such, it was held that any claims falling within the aggregation clause would be subject to the lower limit of £10m.

Judge Waksman also held that due to the manner in which the policy was drafted, there was nothing to suggest that the aggregating wording should also apply to the per claim excess of £25,000. The effect of this was that the claimant would be required to make a contribution of £25,000 per claim (up to a maximum of £750,000, the aggregate excess) regardless of whether such individual claims could be aggregated for the purposes of the limit of insurance. This finding was reached notwithstanding the fact that Judge Waksman accepted that there was force in the submission that such a result was illogical. He commented that to find in favour of the claimant on this issue “would simply amount to rewriting this part of the Policy in a way which does too much violence to the language.”.

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