In Spire Healthcare-v-Royal & Sun Alliance the insurer succeeded in establishing a lower aggregate limit on its liability for “linked” claims without suffering the consequences of a corresponding limit on the insured’s deductibles (or “contributions”). The decision is largely specific to the policy in question, but it raises some interesting arguments regarding construction and the interplay between aggregation of limits and deductibles.
Spire claimed indemnity under the medical negligence section of its combined liability policy, in respect of hundreds of clinical negligence claims made against a consultant breast surgeon who had worked at Spire’s hospitals between 2004 and 2011. The issue was whether Spire had total cover available of either £10 million or £20 million for “linked” claims and, if the former, whether Spire’s total contribution by way of deductibles would be limited to £25,000 for all linked claims or to £750,000.
The Medical Negligence section provided claims-made cover with a Scheduled costs-inclusive Limit of £10 million for “any one claim” and £20 million in respect of all damages costs and expenses “arising out of all claims” during the period of Insurance.
The policy provided: “[5(a)] The total amount payable...in respect of....all claims.....consequent on or attributable to one source or original cause.... shall not exceed the Limit....[5(b)] the total amount payable...in respect of all damages arising out of all claims ...shall not exceed the appropriate Limit.”
The first question, therefore, was whether the Limit referred to in 5(a) was intended to mean the £10 million per claim limit, or the £20 million “all claims” limit.
Although the Judge found some of the policy wording to be inelegant or cumbersome, he applied the usual canons of construction (enunciated most recently in Arnold-v-Britton2) and found the relevant provisions to be certain and clear in their effect. He held that clause 5(a) was clearly an aggregation clause. He noted Spire’s argument that the Schedule which contained the limits did not contain a discrete limit for “linked” claims which arose out of one cause, and that such a limit should not be introduced by the Court, and that the contra proferentem rule meant that the larger limit (£20 million) should therefore be applied. However, he ruled that there were three categories of claim: a single claim, a number of claims not falling within 5(a) (“non-linked claims”) and those which do (“linked claims”), and 5(a) meant that that the linked claims were to be treated as a single claim for the purpose of applying the cover limit. He held there was no real difficulty in deciding which limit should apply in these circumstances i.e. the lower one, since the purpose of aggregation is to reduce cover in the case of linked claims and here the lower amount was specifically referenced to “one claim”.
The policy defined Spire’s Contribution as £25,000 “each and every claim”, with a total Aggregate Insured’s Contribution during the policy period of £750,000. Since “claim” was not defined for this purpose (i.e. there was no equivalent of 5(a) for deductibles), the Judge found it was not possible to say that £25,000 was to be the total contribution in respect of all linked claims. Spire had argued that it would be illogical if 5(a) operated as an aggregation clause in respect of cover limits but there was to be no equivalent aggregation for the insured’s contribution. However, agreeing with Morison J. in Countrywide-v-Marshall3, the Judge said that normally polices are worded so that aggregation of claims will involve aggregating the excesses so that claims are aggregated for both excess and limit, but that everything depended on the policy language: in this case there was no reason to depart from the plain and ordinary meaning of the words used.
Accordingly, the limit of RSA’s policy liability would be £10 million for linked claims i.e. those which were consequent on or attributable to one source or original cause, but Spire would have to bear a deductible of £25,000 in respect of each such claim, whether linked or not, subject only to an overall maximum contribution of £750,000. A further trial would be necessary to decide which claims were linked in the necessary way, and which were not.