Aggregation clauses are always worth the “agg” for somebody – depending on who is trying to aggregate and what it is they are trying to aggregate. Fortunately for insurers and their policyholders, this type of “agg” is resolved in the calm confines of the courtroom and not (usually) in bars or nightclubs.

In Spire Healthcare Limited v RSA the court was required to consider whether:

  • the clause in question (copied at the foot of this post) aggregated linked claims for the purpose of the limit of indemnity;
  • if so, which policy limit was to be applied to those linked claims (£10 million or £20 million).

At first instance, it was held that the clause in question was unquestionably one of aggregation and that the £10 million limit applied.

The policy language invited various (often complex) arguments as to interpretation, but the recent decision of the Court of Appeal can be stated quite simply:

  • The Court of Appeal agreed that the clause in question was unquestionably one of aggregation.
  • It reached that decision having given no greater weight either to the “aggregation” clause in question, or the limit of indemnity found in the schedule.
  • Interestingly, the Court of Appeal assumed that the reader of this particular policy had the characteristic of a “sophisticated assured” assisted by professional advice. Whether or not this was the case is unknown, but is perhaps a warning for unwary insureds!
  • The Court construed the policy by giving effect to all the words relevant to the issue. It recognised that the wording could have been clearer but that did not affect its decision.
  • Both the first instance judge and the Court of Appeal considered the principle of contra proferentem (whereby a clause will be construed against the drafter – usually the insurer – where it is genuinely ambiguous). Here the Court of Appeal found that there was no real doubt or uncertainly in the operation of the relevant clause and thus the principle didn’t apply.

The Court suggested that there were two lessons to be learnt:

  • if the word “claim” had been defined somewhere in the policy then the problem of what was being aggregated would not have been in issue; and
  • if the aggregation clause had made absolutely clear as to whether the £10 million or £20 million limit of indemnity applied, then there could have been no dispute about it.

There is of course an alternative view that the insurer deliberately chose not to define “claim”, in order to differentiate between aggregation for the purposes of the limit and aggregation for any other purpose (e.g. a policy deductible). It is understandable why an underwriter may wish to do so: to allow multiple deductibles to apply, but only one limit.

The full aggregation clause and the limit of indemnity wording is copied below.

“The total amount payable by the Company 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… consequent on or attributable to that one source or original cause shall not exceed the Limit of Indemnity stated in the schedule…”

Schedule…

£10,000,000 Limit of Indemnity Any one claim and £20,000,000 in respect of all damages costs and expenses arising out of all claims during the period of insurance.