Aggregation authority: What is “one claim” under solicitors’ PI policy?Print publication
The High Court has provided the first authority on the meaning of the aggregation clause in the SRA’s Minimum Terms and Conditions (MTC) for solicitors PI insurance. Walker Morris’ Andrew Beck explains.
Good news for insureds… for now
Giving the first judicial authority on the meaning of clause 2.5 of the SRA’s MTC, Mr Justice Teare has decided that insurers cannot aggregate multiple claims in a series of related matters or transactions to limit their liability unless:
- the claims arise from acts or omissions with a level of similarity between them that is real and substantial; and
- the series of matters or transactions are related by reason of being conditional or dependent on each other.
AIG Europe Ltd v OC320301 LLP (formerly The International Law Partnership LLP) and Ors  arose following the bringing of multiple solicitors’ negligence actions against AIG’s insured, a now-defunct law firm. The claims were issued by investors who had lost money under a trust covering two property schemes in Morocco and Turkey which had been developed by one of the firm’s clients. AIG argued that all of the claims were founded on the fact that the solicitors released monies too early or at all in respect of the two developments and therefore that they met the test, set out in clause 2.5 MTC, for claims arising from “similar acts or omissions in a series or related matters or transactions”.
The High Court disagreed. It found, without authority but considering the natural meaning of the policy wording in its context as solicitors’ PI cover, that the claims could not be aggregated because the terms of the transactions in question were not conditional or dependent on each other and they were not therefore sufficiently related.
This decision, which is not binding but is persuasive to other High Court judges, suggests a requirement of inter-dependence or conditionality before an insurer will be able to rely on the MTC aggregation clause to limit its liability. This will no doubt be good news for insured solicitors. Any wider test may have rendered aggregation clauses vague and uncertain and may have placed law firms at financial risk if insurers had refused to cover multiple claims with high aggregate values.
The decision is also good news for lenders who have multiple claims against a firm of solicitors, usually arising from the fraudulent activity of one employee. Whereas insurers have often argued that all the claims should be aggregated, this decision makes it clear that such an approach is incorrect. Instead there should be sufficient insurance cover to meet all the claims being brought. Lenders need to be alert to this important decision and how it affects their dealings with insurers in the future.
A final note is that Mr Justice Teare has given leave to appeal, such is the importance of this case. We will continue to report on developments.
  EWHC 2398 (Comm)