Update on Aggregation Clauses in Insurance Contracts
12 November 2020
The wording of an aggregation clause within a solicitor’s Policy of Professional Indemnity Insurance was recently considered by the High Court in England & Wales in the case of Lord Bishop of Leeds –v- Dickson Coles & Gill (A Firm), Linda Box and HDI Global Speciality SE  EWHC 2809 (Ch).
Linda Box, one of three equity partners in the firm of Dickson Coles & Gill, Solicitors, pleaded guilty to 12 offences of dishonesty in March 2017, comprising theft, fraud and forgery, involving the misappropriation of client monies in region of £4 million. Mrs Box was sentenced to a term of imprisonment of 7 years.
The firm held Professional Indemnity Insurance where the sum insured for any one claim was £2 million. Mr Gill and Mrs Wilding, the remaining two equity partners, claimed under their policy of Professional Indemnity Insurance to recover the sum of £4 million to make good the deficiency in the client account caused by Mrs Box’s theft, and for indemnity in respect of any liability that they may have to those adversely financially affected by her conduct.
The Court was required to consider, notwithstanding the fact that Mrs Box misappropriated funds from different parties, whether this was all one claim and thus the Insurers’ liability should be confined to £2 million or, whether the claims by each party were separate claims and that each claim attracted its own £2 million indemnity limit. In those circumstances, the personal exposure of Mr Gill and Mrs Wilding would be considerably reduced.
The Relevant Clause
The wording of the clause was as below:-
“All claims against any one or more Insured arising from: one act or omission; one series of related acts or omissions; the same act or omission in a series of related matters or transactions; similar acts or omissions in a series of related matters or transactions and all claims against one or more Insured arising from one matter or transaction will be regarded as one claim.”
The Court’s Findings
The firm’s Professional Indemnity Insurers contended that the claims arose from one act or omission and thus fell within the definition of being “one claim”. Alternatively, that they were a series of related acts or omissions and thus deemed to be one claim.
The firm’s Professional Indemnity Insurers argued that all client losses were caused by the various thefts by Mrs Box, either from the client account, or money which ought to have gone into the client account, but was diverted by her. The firm was under an obligation under the Solicitors Regulation Authority Account Rules to reconstitute the client account promptly on discovery and that this was a single, indivisible, obligation.
Mr Gill and Mrs Wilding argued that the claims involved separate clients and were therefore separate claims, each of which had the benefit of indemnity cover of £2 million.
It was argued that Mrs Box’s dishonesty was not an act or omission, but rather a state of mind and whilst that might have been the motivation for an act or omission, it was not an act or omission itself. The acts were the thefts from the clients. There was not one theft from the clients, but numerous thefts for separate clients. In those circumstances, they could not be treated as one claim.
The Court relied upon Lord Toulson’s comments in the Supreme Court decision of AIG –v- Woodman  UKSC18 where he stated that:
“The answer is that the application of the clause is to be judged, not by looking at transactions exclusively from the viewpoint of one party or another, but objectively taking the transactions in the round.”
The Court did not accept that the claims faced by the firm arose from one act or omission. The Court found it difficult to accept how the actions of Mrs Box, perpetrated over a number of years, could be seen to be one act. It was noted that Mrs Box may have had the single intention of stealing as much money as possible, but that each theft must be a different act, although they may have been taken with a view to accomplishing one ultimate objective.
When considering whether the claims arose from one series of related acts or omissions, the Court did not consider that a unifying factor which was sufficient to unite the various series of acts of theft for aggregation purposes, was present. The Court did not see that there was sufficient inter connection between the acts so that the thefts did not fit together, save they were all committed by the same person and perhaps concealed by the same process, factors which the Judge did not feel were sufficient.
The application of aggregation clauses is highly fact sensitive and will depend upon relevant facts and transactions being viewed in the round. As noted in AIG –v- Woodman, and emphasized in this Judgment, a touchstone for whether matters or transactions are related is simply whether there is a real connection between them, or in other words “whether they fit together”.