Spire and RSA contest aggregation again
In Spire Healthcare Limited v Royal & Sun Alliance Insurance Limited [2022] EWCA Civ 17, the Court of Appeal overturned the High Court’s decision and held that two groups of claims based on the negligent practice of the same surgeon should be aggregated. Irrespective of which group the claims fell into, the unifying factor between them was the surgeon’s dishonest improper conduct.
Background
The Claimant (Spire) claimed against the Defendant insurer (RSA) under a policy (the Policy) providing cover for liabilities arising from the acts and omissions of employees and those providing medical or surgical service at its hospitals.
The underlying claims arose from the much-publicised activities of Consultant breast surgeon, Ian Paterson, who was sentenced in 2017 for carrying out unnecessary surgery on patients between 2004 and 2011. A large number of claims were brought against Spire by former patients of Mr Paterson in respect of surgeries performed at two of its hospitals.
There were two groups of claimant patients. One group of patients had required surgery but Mr Paterson had performed sub-total mastectomies, a negligent procedure where some breast tissue was left behind (Group 1). The other group of patients were the victims of entirely unnecessary surgery (Group 2).
The relevant aggregation provision in the Policy provided as follows:
“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” (emphasis added).
Spire argued the cause for the Group 1 claims was Mr Paterson performing a negligent procedure where a mastectomy was clinically indicated, and the cause of Group 2 claims was Mr Paterson carrying out surgery where none was necessary. Spire therefore argued there were two separate causes so two separate limits of indemnity should be applied. This would allow Spire to claim £20 million in cover (the maximum cover available) as opposed to a single limit of £10 million (which was available “any one claim”) if the cause was the same.
RSA argued there was “one source or original cause” of the claims; namely Mr Paterson and his conduct, and therefore Spire could only claim a single limit of £10 million.
First instance decision
The High Court agreed with the Spire and accepted the aggregation language was broad, necessitating the widest possible search for a unifying factor in the history of the losses. Nonetheless it held that there must be a causative link between what is contended to be the originating cause and the loss and there must be a limit to the degree of remoteness. The High Court rejected the argument that Mr Paterson’s negligence could be the initial cause. It held there were clear causative differences between Group 1 and Group 2 cases. In the Group 1 cases, the negligent procedure was the result of careless surgery. Conversely, Group 2 claimants were subjected to unnecessary surgery for Mr Paterson’s financial gain. The dishonesty of Mr Paterson was different between the cases, as were his mis-appreciations.
It also held the management issues within Spire that caused the two different strands of misconduct were also different in nature. Group 1 cases involved a failure to apply controls to prevent the development or continuation of the negligent procedure. The management failure in relation to Group 2 cases consisted of the failure to challenge the need for the unnecessary surgery.
Court of Appeal decision
In giving the leading judgment, Lady Justice Andrews upheld RSA’s appeal. With regard to the wording “consequent on or attributable to one source or original cause“, she reiterated that a wide search should be conducted for a unifying factor. In searching for a unifying factor, one must not go so far back in the causal chain that one enters the realm of coincidental/remote causes that provide no meaningful explanation for what has happened.
Andrews LJ noted the observations of Mr Justice Phillips in Cox v Bankside [1995] 2 Lloyd’s Rep 437 (which considered the negligence of Lloyd’s underwriters) that the negligence of one individual can be an originating cause for the purpose of an aggregation clause of this type, even though his negligence may take different or multiple forms. She criticised the High Court’s decision that an individual’s reason for acting in a particular way is capable of being an originating cause if there were different mis-appreciations resulting in one individual concerned committing the negligent acts or omissions. The claims were not based on mis-appreciations; they were based on deliberate and dishonest conduct with a cavalier disregard for welfare. There may be cases in which, on the facts, the behaviour of one individual would be too remote or too vague a concept to provide a meaningful explanation for the claims, but this was not one of them given the deliberate and dishonest conduct.
She also agreed with RSA’s argument that because Spire’s liability to patients for an indemnity was the same across both Groups, a distinction should not be drawn between the two Groups. The question of whether the patient did or did not require surgery should have no bearing on Spire’s liability for the claims.
These factors led to a conclusion that any or all of (i) Mr Paterson, (ii) his dishonesty, (iii) his practice of operating on patients without their informed consent, and (iv) his disregard for his patients’ welfare could be identified either singly or collectively as a unifying factor in the history of the claims for which Spire was liable in negligence, irrespective of whether the patients concerned fell into Group 1 or Group 2 (or both).
As such, it was held there was one source and originating cause for each of the Groups of Claims identified by Spire and so the Claims were aggregated. Therefore Spire could recover only one £10 million limit.
Comment
Spire has attempted to access a £20 million aggregate limit under its policy with RSA more than once. It had previously argued that the aggregation clause did not apply to unify the claims for the purposes of the limit of indemnity. That argument failed before the High Court and later the Court of Appeal: both courts held the language was unquestionably aggregation language that unified claims for the purposes of the limit of indemnity. Spire then argued that there were two different sets of claims: an argument which ultimately failed.
The decision provides a helpful illustration of the approach to aggregation provisions where the conduct of an individual takes a range of forms. If policyholders wish to ensure such claims are aggregated by cause, type or category rather than original cause, that will need to be communicated and reflected in the choice of aggregation language in the policy in question.
