In Spire Healthcare v Royal & Sun Alliance Insurance Ltd [2022] EWCA Civ 17, the Court of Appeal reversed the first instance decision of Judge Pelling QC holding that the two sets of claims in question had in common a unifying factor, such that they should be aggregated for the purposes of the aggregation clause in the policy. The net effect of this decision was that the insured’s claim was limited to the £10m per claim limit of the policy (rather than the £20m aggregate limit).

The case concerned claims made against Spire Healthcare in respect of the conduct of a consultant breast surgeon, Ian Paterson. The claims were categorised into two groups: individuals on whom Dr Paterson had performed incomplete total mastectomies and individuals on whom Dr Paterson had carried out unnecessary surgeries. Dr Paterson was convicted of criminal offences, and Spire Healthcare settled the claims made against it for approximately £27 million. It was accepted by Royal & Sun Alliance Ltd (RSA) that Spire was liable in respect of the settlement. The issue between the parties concerned the aggregation clause in the policy and whether the underlying claims should be aggregated and treated as one claim or treated as two.

At first instance, Judge Pelling QC held that the claims should be treated as two claims, such that RSA was liable for the full £20m aggregate limit of the policy. RSA appealed.

The Court of Appeal first set out the relevant principles relating to the aggregation clause in the policy (which allowed for aggregation in respect of all claims “consequent on or attributable to one source or original cause”, in relation to which there was little dispute between the parties. The starting point was that the language used in the clause in issue was a well-know formulation intended to have the widest possible aggregating effect (with reference to AIG Europe Ltd v OC320301 LLP [2017] 1 All ER 143; reference was also made to the well-known comments of Lord Mustill in Axa Reinsurance (UK) plc v Field [1996] 1 WLR 1026 – “A cause is to my mind something altogether less constricted. It can be a continuing state of affairs; it can be the absence of something happening. Equally, the word ‘originating’ was in my view consciously chosen to open up the widest possible search for a unifying factor in the history of the losses which it is sought to aggregate”). The Court of Appeal also noted that past authority made it plain that in considering whether losses could be aggregated, one should consider whether there was a single “unifying factor” common to the claims in question (Countrywide Assured Group plc v Marshall [2003] 1 All ER (Comm) 237); in this context, “original cause” did not mean proximate cause (a “considerably looser causal connection” was permissible: Beazley Underwriting Ltd v Travelers Companies Inc [2012] 1 All ER (Comm) 1241), but there must be some causative link and there had to be some limit to the degree of remoteness that is acceptable in order for losses to be aggregated (see American Centennial Insurance Co v INSCO Ltd 1996] LRLR 407 and Cultural Foundation v Beazley Furlonge Ltd [2018] Bus LR 2174).

Applying these principles to the facts, the Court of Appeal held that it was appropriate to aggregate the two groups of claims for the purposes of the aggregation clause in the policy. The first instance judge had erred in that he failed to undertake a wide search for a unifying factor in the history of the claims, as he was required to do by the authorities referred to above. The correct approach was summarised in the Court of Appeal judgment as follows: “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).”

Ultimately, this case was a fairly straightforward application of the relevant, well established, principles which are applied to cause-based aggregation wordings. However, the case does emphasise the fact that issues which arise in this context are often very fact-dependent, which can sometimes lead to difficulties in the proper interpretation of the law as it applies to aggregation.

Article authored by Mark Everiss and Sam Tacey

Posted by Sam Tacey