The Court of Appeal has overturned the High Court’s interpretation of an aggregation clause allowing two separate indemnity limits of £10m for two separate groups of claims. In Spire Healthcare Limited v Royal & Sun Alliance Insurance Limited  EWCA Civ 17, the Court of Appeal held that the negligent and dishonest conduct of the surgeon Mr Paterson constituted a single unifying factor, and therefore the two groups of claims should be aggregated.
Over a period of 14 years, Mr Paterson, a consultant breast surgeon for the Heart of England NHS Foundation Trust, had been performing non-consensual operations on patients in hospitals owned by Spire Healthcare Limited (Spire). In 2017, Mr Paterson was convicted of 20 offences under the Offences Against the Person Act 1861, and he received a 20-year prison sentence for producing false pathology test results leading to unnecessary surgical procedures which he carried out, and for performing unnecessary mastectomies. Mr Paterson’s victims subsequently brought around 750 claims against Spire. Upon settlement, Spire contributed £27m to the compensation fund, owing approximately a further £10m in costs.
The court at first instance
We previously wrote about the High Court decision. Spire contented that pursuant to Clause 5(a) of the insurance policy relating to aggregation, it was entitled to two indemnity limits attributable to two separate groups of claims, as covered by their Insurance Contract with Royal Sun Alliance Insurance Limited (RSA). RSA rejected this claim, maintaining that Spire was entitled to just a single indemnity limit of £10m.
“The total amount payable by the Company in respect of all damages costs and expenses arising out of all claims during any Period of Insurance consequent on or attributable to one source or original cause irrespective of the number of Persons Entitled to Indemnity having a claim under this Policy consequent on or attributable to that one source or original cause shall not exceed the Limit of Indemnity stated in the Schedule.”
Spire maintained that the patients could be split into two groups: firstly, those who endured inadequate mastectomies carried out by Mr Paterson (Group 1), and secondly, were those with false cancer reports produced by Mr Paterson, leading to unnecessary mastectomies for his financial gain (Group 2). On this basis, Spire claimed it was entitled to at least two limits of indemnity of £10m for each set of claims, as per the agreement.
RSA disagreed, contending that the distinction between the two groups and their differing “original causes” as per Clause 5(a) was incorrectly applied. They argued that, collectively, all the claims were a result of Mr Paterson and his conduct, and were therefore attributable to “one source or original cause”, and aggregable under one indemnity limit.
The High Court rejected RSA’s argument, highlighting the necessity of a causative link existing between the originating cause and the loss, with a limit on the extent of remoteness. Therefore, it disallowed the argument that Mr Paterson’s negligent conduct was the original cause for all the claims. In support of Spire, the court held that the two groups were different: in Group 1, the negligent procedure was the result of careless surgery, and in Group 2, the reason for the unnecessary procedures was Mr Paterson’s financial gain. Therefore, there were two different strands of dishonesty and misconduct which constituted two separate causes.
The Court of Appeal unanimously allowed the appeal.
Lady Justice Andrews delivered the leading judgment. She maintained that the judge at first instance had mistakenly applied the aggregation clause, and upheld RSA’s appeal. The differences between the groups were inconsequential, and when examining the original cause, it was clear that all the claims were a result of Mr Paterson’s conduct in performing procedures without informed consent, and without any regard for his patients’ welfare.
Concerning the construction of the aggregation clause in RSA’s favour, Lady Justice Andrews referred to the points made in the following cases:
- Countrywide Assured Group Plc & Others v Marshall and others  – there is no difference between an originating cause and an original cause, and both provoke a search for a unifying factor within the claims with which the claimants were faced.
- American Centennial Insurance Co v INSCO Ltd  – it is important for there to be a causative link between the originating cause and the loss, and there must be some limit to the degree of remoteness.
- Cox v Bankside  – various instances of negligence by individuals were not accepted as separate originating causes. The single unifying factor was the negligent approach to underwriting the risks for the Lloyd’s syndicate.
- Lloyds TSB General Insurance Holdings v Lloyds Bank Group Insurance Co Ltd – aggregation clauses should be applied in a “balanced fashion”, without prescribing either a “narrow or broad interpretation.”
Lady Justice Andrews, in reaching her decision, rejected the notion that there was a differentiation between “source” and “original cause”. Lady Justice Andrews held that, taken either individually or collectively, the following factors could be construed as a unifying factor in the claims for which Spire was liable, irrespective of which Group they fell under:
- The pattern of Mr Paterson’s behaviour.
- His dishonesty.
- His disregard for the patients’ welfare.
- His practice of operating without consent.
The Court of Appeal’s decision in this case provides fresh guidance on the appropriate approach to be taken in respect of aggregation clauses in insurance contracts and emphasises that application of an aggregation clause should not be overly and unnecessarily complicated. The “original cause” will usually be the obvious cause.
Where an individual is at fault on separate occasions, that individual’s negligence alone may be an originating cause for aggregation clauses such as Clause 5(a), despite the fact that the negligence takes varying forms. This will depend on the circumstances of the case and the Court of Appeal did point out that there may be circumstances where the actions of the individual are too remote or too vague a concept to provide a meaningful explanation for the claims.