Aggregation – a broad view of ‘original cause’

In this recent Court of Appeal decision, the Court emphasised and applied the broad effect of the standard wording in aggregation clauses, “original cause” and “originating cause”, by conducting a wide search in the history of the claims for a unifying factor. The Court decided that all claims under this policy, relating to various acts of misconduct by a surgeon amounted to one original cause.

The facts

In brief summary, Royal & Sun Alliance Insurance Ltd (RSA) wrote a combined liability insurance policy in favour of Spire Healthcare Ltd (Spire), a company responsible for the operation of a number of private hospitals. This policy covered, amongst other things, Spire's legal liability for accidental injuries arising out of medical negligence. The limit of indemnity for claims arising from the same “original cause” was GBP10 million, and the overall aggregate limit was GBP20 million.

The aggregation clause in this policy read as follows:

“The total amount payable by [the Insurer] 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 the Policy consequent on or attributable to that one source or original cause shall not exceed the Limit of Indemnity stated in the Schedule.” (Emphasis as added by the Court).

The surgeon was convicted in 2017 and sentenced to 20 years in prison in criminal proceedings, and civil proceedings were settled later that year with Spire contributing GBP27 million to a compensation fund for the victims. Spire's total outlay was around GBP37 million (including defence costs), so in any event the aggregate limit would be exceeded. RSA accepted its liability under the policy, the sole point of appeal was regarding aggregation.

The decision

The Court held that the misconduct of this surgeon amounted to one original cause of "performing operations on [patients] without their informed consent", even though this conduct took place over around 14 years, at two different hospitals and concerned two types of misconduct. Therefore, the Court granted the appeal in favour of RSA and stated that the relevant limit was GBP10 million.

This misconduct involved: i) performing sub-total mastectomies on patients where total mastectomy was indicated; ii) falsely reporting pathology test results as indicating cancer or risk of cancer, then performing unnecessary surgical procedures (for financial gain).

In overturning the decision of the first instance judge, the Court explained that the judge had failed to conduct a wide search for a unifying factor in the history of the claims, as was required by the legal authorities.

The legal authorities

The Court referred to a number of relevant principles in coming to its decision, which we summarise as follows:

• Aggregation clauses should be construed in a balanced fashion, without predisposition to narrow or broad interpretation. (Lloyds TSB General Insurance Holdings v Lloyds Bank Group Insurance Co Ltd [2003] UKHL 48; AIG Europe Ltd v Woodman [2017] UKSC 18).
• But, where a wording is a standard wording in an insurance policy, the construction of identical / materially similar provisions in earlier cases should be followed unless there is a strong reason not to. (Hooley Hill Rubber & Chemical Company Ltd v Royal Insurance Company [1920] 1 KB 257).
• The wording “consequent on or attributable to one source or original cause” uses a well-known formula to achieve the widest possible effect. (AIG Europe Ltd v OC320301 LLP [2016] EWCA Civ 367; Axa Reinsurance UK Ltd v Field [1996] 1 WLR 1026; Municipal Mutual Insurance Ltd v Sea Insurance Company Ltd and others [1998] Lloyd's Rep IR 421).
• In this context there is no distinction between “original cause”, “originating cause” and “source”, all are interchangeable and require a unifying factor in the history of the claims. (See: Countrywide Assured Group Plc & Others v Marshall and others [2002] EWHC 2082 (Comm); and Standard Life Assurance Ltd v ACE European Group [2012] EWHC 104 (Comm)).
• The negligence of one individual can be an originating cause in this context even though his negligence may take different forms. (Cox v Bankside [1995] 2 Lloyd's Rep 437).
• There must be some causative link (American Centennial Insurance Co v INSCO Ltd [1996] LRLR 407) not a remote or coincidental cause which provides no meaningful explanation.

On the basis of these principles, the Court held that there must be a wide search for a unifying factor in the history of the claims. However, the Court acknowledged that there was a limit to the breadth of this search.

The Court gives the example of the decision in Cultural Foundation v Beazley Furlonge [2018] EWHC 1083 (Comm) as illustrating a situation where there was not a unifying factor. In this case it was held that “original cause” could not encompass all claims relating to "poor initial design" as an original cause by an insured architect as this would give the words “original cause” too vague a meaning. Notably, the judge in this case highlighted that this was a decision on the facts and not intended to set a principle.

If you have any questions please contact the authors who would be happy to help.

Andrew Symons is a Partner and Charlotte Marks is an Associate in the Insurance and Reinsurance department at DLA Piper based in the UK. The department forms part of DLA Piper's pre-eminent, multi-disciplinary insurance network, consisting of over 400 lawyers representing major insurance and reinsurance companies globally on all aspects of contentious, transactional and regulatory matters.

This publication is intended as a general overview and discussion of the case and does not create a lawyer-client relationship. It is not intended to be, and should not be used as, a substitute for taking legal advice in any specific situation.