Professional Indemnity Insurance and aggregation of claims (UK)

Donald Dinnie, Norton Rose Fulbright

This UK court of appeal judgment Lord Bishop of Leeds v Dixon Coles & Gill [2021] EWCA Civ 1211 considered whether claims arising from one series of related acts or omissions could be aggregated.  The insured, an attorney’s practice, held a professional indemnity policy with a limit of indemnity for one claim of £2 million.

The aggregation clause provided that:

• all claims against any one or more insured arising from:

1. one act or omission;
2. one series of related acts or omissions;
3. the same act or omission in a series of related matters or transactions;
4. 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.”

A claim was defined as a “demand for or an assertion of a right to, civil compensation or civil damages or an intimation of an intention to seek such compensation or damages”.

One of the insured’s equity partners had acted dishonestly in making authorised payments from clients’ accounts for her own credit card liabilities. She pleaded guilty to 13 counts of theft, fraud by abuse of position, and forgery.

Two different claimants brought claims, one for a claim of about £2.5 million and four charities representing an estate  for about £450 000.00.

The question arose whether the sums claimed in the two actions were to be aggregated with a single limit of indemnity of £2 million.

The trial court held that the sums were not to be aggregated.

The appeal court agreed and said that the claims did not arise out of one series of related acts or omissions.

Before a series of acts or omissions can be said to be related it is necessary to find a unifying factor identified expressly or impliedly in the wording of the clause.  If there were a series of acts, A, B and C it was not enough that act A caused claim A, act B caused claim B, and act C caused Claim C.  What is required is that claim A was caused by a series of acts A, B and C; claim B was also caused by the same series of acts and claim C too.  That requirement would only be satisfied if each claim of the relevant claimants arose from the combination of both thefts.

But that was obviously not the case.

The one claim arose from the theft from the client’s particular fund and had nothing to do with the quite separate theft of the estate of the other claimant.  And conversely with the other claimant’s claim.

Accordingly neither claim could arise from a related series of acts.

There was not just “one claim” based on the duty to restore missing funds. The partner’s thefts gave rise both to the right of the innocent partners to claim the amount needed to remedy the shortfall in the clients’ accounts and to a separate claim to indemnify them against them against liability to each third party client.

First published by: Financial Institutions Legal Snapshot