Aggregation: a £10m question
27 January 2021
Spire Healthcare Limited v Royal & Sun Alliance Insurance Plc  EWHC 3299 (Comm)
HHJ Pelling QC handed down his judgment in December in relation to a dispute on aggregation in a combined liability policy underwritten by Royal & Sun Alliance Insurance Plc (RSA). Spire Healthcare Ltd (Spire) paid out substantial sums for medical negligence claims, and sought an indemnity from RSA under the insurance policy. Spire aggregated its losses into two groups of cases when submitting the claim on the basis that the claims were attributable to two separate original causes, however RSA considered the losses should be aggregated into one group as the claims were attributable to one single originating cause.
On Spire’s assertions, it was entitled to recover up to £20m; on RSA’s assertions, it was liable to pay £10m. HHJ Pelling QC agreed with Spire’s aggregation and concluded that the claims arose out of two different sources or original causes.
A Consultant Breast Surgeon operating out of two hospitals managed by Spire Healthcare Ltd (Spire) failed to obtain informed consent from patients, negligently performed procedures and carried out unnecessary procedures. The surgeon treated NHS and private patients. Where patients had breast cancer, rather than applying the universally accepted practice of removing all of the breast tissue, the surgeon performed “cleavage sparing” mastectomies, which involved leaving some breast tissue behind. This was negligent. With other patients, the surgeon falsely reported pathology test results as indicating the presence of (or risk of presence of) cancer, and then went onto perform unnecessary surgery and follow up treatment, when actually there had been no clinical indication for the surgical procedure from the outset.
The surgeon was sentenced to 20 years imprisonment after being convicted of 17 counts under section 18 of the Offences Against the Person Act 1861 and 3 counts under section 20 of that Act. Approximately 750 former patients of the surgeon commenced civil proceedings. Spire was one of three defendants. The claims against Spire were from patients who had undergone unnecessary surgery or suffered negligently performed surgeries, or both. Spire estimated that its total outlay was £37,239,007.81.
Spire submitted a claim under its insurance policy with RSA for up to £20m, on the basis of two groups of claims. RSA contended that one limit applied and Spire was entitled to an indemnity of £10m accordingly.
The aggregation clause
The insurance policy wording on aggregation was “… all claims during any Period of Insurance consequent on or attributable to one source or original cause …”.
Spire maintained that it was entitled to at least two Limits of Indemnity of £10m because there were two separate groups of claims, each group of claims being attributable to a different source of original cause. These groups were:
- claims arising out of the surgeon negligently performing surgeries, the ‘Group 1’ claims
- claims resulting from the conduct where the surgeon had deliberately misrepresented results, exaggerated risks, and advised and carried out unnecessary surgeries, the ‘Group 2’ claims.
RSA maintained that this was a false distinction and that all of the claims should be aggregated once, because they were all consequent on or attributable to one source or original cause: the surgeon’s negligence. All claims were brought on the basis of the surgeon’s negligence. Further, some claimants had undergone both unnecessary and negligent surgeries.
Referring to Cox v Bankside Members Agency Ltd  2 Lloyds Rep 437 at 455, HHJ Pelling QC considered aggregation in the context of when a person has acted under a particular mis-appreciation or decision, which has resulted in that individual committing negligent acts or omissions leading to multiple claims, and how this differs when a single individual is involved or multiple individuals. HHJ Pelling QC held that:
- where a single individual repeats the same decision or particular conduct multiple times, this can be a single originating cause
- where multiple individuals are acting independently, each decision or act of conduct is likely to be a separate originating cause
- where a single individual conducts separate decisions or mis-appreciations, there could be separate originating causes (being each of the separate decisions, motivations or mis-appreciations) even though only one individual was involved.
HHJ Pelling QC said that “… consequent on or attributable to…” imported a clear and express causal requirement. There had to be a causative link between what was contended to be the originating cause and the loss in each case that was to be aggregated, and the originating cause should provide an explanation as to why the negligent act or omission leading to the claims had occurred. If an individual conducted separate decisions or mis-appreciations, which are not related, for example mis-appreciations relating to two different medical procedures (an orthopaedic surgeon performing negligent hip replacements and negligent knee replacements), then these would each constitute a separate originating cause. The exception to this was where the reason for the decisions or mis-appreciations was the employer’s failure properly to train the relevant individual. HHJ Pelling QC said that “Once it is accepted that where a single individual operates under two separate mis-appreciations decisions or motivations, each resulting in multiple claims, there would be separate originating causes (being each of the separate mis-appreciations decisions or motivations) even though only one individual was involved. To attempt in those circumstances to attribute all losses to the conduct of an individual simply ignores the requirement for a causal link”.
In regards to the claimants who were operated on unnecessarily and then the procedure was performed negligently, and therefore who fell into both groups, HHJ Pelling QC held that this did not mean that the first mis-appreciation or decision caused the other. The claimants had two separate actionable losses in respect of the unnecessary procedure and the negligent mastectomy. HHJ Pelling QC held that what has to be identified is the single source of or originating cause of all the negligent acts and their consequences. How the cause of action available to claimants in each group is legally characterised is immaterial. What matters is a factual question – what factually was the original cause of each of the claims?
So, what did HHJ Pelling QC find was the original cause of each of the claims? The surgeon’s motivations and conduct in the Group 1 cases did not cause the losses in the Group 2 cases and vice versa – they were different originating causes of action. The Group 1 cases were either the result of a mis-appreciation by the surgeon, specifically a desire to preserve some cosmetic advantage, or an error because the procedure was carried out too hurriedly and not all tissue was removed. These surgeries were carried out on patients who had medical need, and the surgeon had carried out these procedures on both NHS and private patients. Whereas the Group 2 cases were motivated by financial greed, as the surgeon performed unnecessary procedures without any clinical need for the procedures, and the vast majority of Group 2 cases were private patients.
HHJ Pelling QC also found that the management failures within Spire were “entirely different in nature”. In regards to the Group 1 cases, there was failure to prevent the surgeon from continuing to perform these negligent procedures, in particular failure of other clinicians to notice or comment on the surgeon’s practice even though this should have been obvious from follow up treatment. The management failure that contributed to the Group 2 cases was the failure to challenge the need for unnecessary surgery before it was carried out, when it would have been evident that the surgery was unnecessary on proper analysis of the diagnostic information.
HHJ Pelling QC therefore concluded that the losses should be aggregated under each of the two groups Spire had identified: there were different originating sources and causes for each group. Spire was entitled to claim indemnity of up to £20m.
This case clarifies that losses caused by one individual under separate mis-appreciations or decisions can give rise to separate original causes or sources for aggregation. Rather than focussing on the individual, it is important to focus on their motivations and conduct. Further, what matters is the factual original cause of the claims, rather than the legal characterisation.
Each and every case will be considered on the individual facts and the specific policy wording. The Court affirmed the requirement for a causative link, imposed by the words “consequent upon or attributable to one source or original cause”. The original cause of the Group 1 cases was not the original cause of the Group 2 cases and vice versa, and hence Spire’s aggregation of the claims into two separate groups was correct.
We do not yet know whether RSA will appeal.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at January 2021.