The interpretation of aggregation clauses as it applies to professional indemnity insurance claims against solicitors was addressed in the UK Supreme Court’s decision handed down this week in AIG Europe Limited v Woodman and others  UKSC 18.
ILP, a law firm and first respondent in the proceedings, held investor funds in an escrow account for a property development in Morocco and Turkey. ILP was initially engaged by a property development company, and when the developments failed, the investors alleged that the solicitors had, in contravention of various purchase and loan agreements, released investor money to the company. Two separate claims alleging breach of duty and negligence were brought against ILP claiming losses in excess of £10 million.
AIG was the provider of ILP’s professional indemnity insurance with a limit of liability of £3 million per claim. The insurance also incorporated an aggregation provision from the Minimum Terms and Conditions of Professional Indemnity Insurance. A declaration was sought by AIG from the Commercial Court that the claims by the investors against ILP should be considered as one claim according to this provision.
The Commercial Court dismissed the claim of AIG and held that they were all separate property transactions and thus were not in a series of related transactions. This meant that each claim was subject to a separate limit of indemnity. The Court of Appeal held that this approach was too narrow and agreed with the Law Society’s submission that some intrinsic connection between the transactions was necessary for aggregation to occur. It dismissed AIG’s construction of the clause as being ‘impossibly wide’ and remitted the case to the Commercial Court for determination.
Permission was obtained by AIG to appeal to the Supreme Court, and the question put to it essentially related to identifying the true construction of the words “in a series of related matters or transactions” within the aggregation clause.
The Supreme Court allowed the appeal, and was unimpressed with the word ‘intrinsic’ as used by the Court of Appeal. The Supreme Court held that the word ‘related’ did not inherently require a corresponding intrinsic relationship. While the transactions were connected in various ways, there were two separate developments in Morocco and Turkey, and thus all the transactions could not be aggregated into one, but they could be aggregated into two claims. The Court did not however believe aggregating the two claims into one was appropriate, given the different resorts, and deeds but the matter is to be remitted to the Commercial Court for further submissions on these points.
The Supreme Court held that the test for aggregation will always be dependent on the wording of the policy and such interpretation will rely heavily on the facts of the matter. As there are very few decisions on this issue, this UK decision will be pivotal in determining how professional indemnity claims are aggregated in the future.