The High Court has supplied the first judicial determination on the claims aggregation clause (clause 2.5) of the solicitors’ professional indemnity insurance Minimum Terms and Conditions, namely:
“The insurance may provide that, when considering what may be regarded as one claim for the purposes of the limits contemplated....
(a) all claims against any one or more insured arising from:
i. one act or omission;
ii. one series of related acts or omissions;
iii. the same act or omission in a series of related matters or transactions;
iv. similar acts or omissions in a series of related matters or transactions
(b) all claims against one or more insured arising from one matter or transaction will be regarded as one claim.”
The case concerned claims made by over 200 investors who had lost money as a consequence of failed holiday property schemes abroad. They alleged negligence on the part of a now defunct firm of solicitors for having paid funds out of an escrow account without adequately checking that sufficient security was in place. The insurer argued that the claims should be regarded as one claim, with a single limit of indemnity payable, aggregated in accordance with 2.5 (a)(iv) above on the basis that they arose from “similar acts or omissions in a series of related matters or transactions”. This was opposed by the trustees representing the investors, who submitted that:
- Since the land purchases failed for diverse reasons, the relevant acts or omissions were not “similar”.
- Each person’s investment was separate and independent, rather than part of a “series of related matters or transactions”.
The judge held that the claims did arise out of similar acts or omissions, namely the failure to provide effective security which meant that the funds were improperly paid out. As regards what was meant by similar, the court held, “the requisite degree of similarity must be a real or substantial degree of similarity as opposed to a fanciful or insubstantial degree of similarity”.
However, the arguments in favour of aggregation failed because those acts or omissions were not in “a series of related transactions” for the purposes of the insurance since the terms of the transactions were not “conditional” or “dependent” on one another.
In construing what was meant by the term “series of related matters or transactions”, the court held that to consider that independent transactions might be related simply because they were of a similar kind would render the scope of the aggregation clause “very wide with no clear limit” and “vague, uncertain and soft-edged”.
Leave to appeal has been granted.