Blog: Aggregation of PI claims, a question of interpretation

Judges occasionally lighten their judgments with literary references. The quote from Through the Looking-Glass, and What Alice Found There that a word "means just what I choose it to mean" is a favourite in cases involving the interpretation of contracts, and Shakespeare appears fairly regularly.

In AIG Europe v OC320301 LLP, the Court of Appeal, tasked with construing an aggregation clause, decided to pray in aid Jane Austen's description (in Emma) of the mortified Mr Elton leaving Highbury "after a series of what appeared to him strong encouragement" to explain that "series" usually implies some connection between the events or concepts which constitute the series.

The Court was looking at clause 2.5 of the Minimum Terms and Conditions in a solicitors' PI policy, which provides that all claims against one insured arising from "one series of related acts or omissions... will be regarded as one claim".

Investors had brought claims with a potential value of £10m against a firm of solicitors. The firm's insurer, AIG, wanted these claims to be aggregated so as to limit its liability under the policy to £3m.

The underlying allegation was of negligence in releasing funds held in an escrow account for the development of holiday homes in Turkey and Morocco. At first instance, the Commercial Court found that the claims were not aggregated because the words pointed to transactions which were dependent on each other, and the case concerned a number of separate transactions by individual investors.

The Court of Appeal disagreed. While a "relationship of some kind between the transactions relied on" is sufficient to aggregate the claims, it said, "there must be some restriction on the concept of relatedness and the most satisfactory approach is that the relation must be an intrinsic relationship not an extrinsic one."

The Court declined however to decide the preliminary issue but remitted it to the Commercial Court for trial.

It is not unusual for small or medium-sized firms with a low level of PI cover to act for many separate investors in relation to transactions such as the ones in this case.

I know of one sole practitioner who acted for more than 40 investors in claims relating to investment in Spanish property where the developer went bust, leaving the clients with nothing. In that case, the insurer's decision to aggregate the claims leaving its maximum exposure at £1m was not challenged. A similar result may be expected here, I suggest.

John de Waal QC
Barrister, Hardwicke Chambers