22nd Mar 2017
The Supreme Court has given judgment in AIG Europe Limited v Woodman  UKSC 18, in an expedited appeal from the Court of Appeal  EWCA Civ 367. The judgment concerns the true construction of the aggregation provision contained in clause 2.5 of the Minimum Terms and Conditions (“MTC”) annexed to the Solicitors Indemnity Insurance Rules 2013, which must be incorporated into all solicitors’ indemnity policies.
Until these proceedings, the aggregation wording in Clause 2.5 of the MTC had never previously been considered by the Courts. Its meaning is a matter of importance to the solicitors profession and their clients, to the insurance industry and to the Law Society.
The Law Society (acting in its regulatory capacity as the Solicitors Regulatory Authority) intervened in the Supreme Court by way of written and oral submissions, presented by David Edwards QC and Tim Jenns.
The Court of Appeal had concluded, endorsing the submissions of the Law Society (but rejecting the submissions of both the Appellants and the Respondents on the true construction of the wording), that the true construction of the words “in a series of matters or transactions” is that the matters or transactions must have an intrinsic relationship with each other, not an extrinsic relationship with a third factor.
Lord Toulson delivered the unanimous judgment of the Supreme Court (Lords Mance, Clarke, Sumption and Reed concurring). The Supreme Court held that the Court of Appeal’s formulation was not necessary or satisfactory but concluded that there “must be some inter-connection between the matters or transactions, or in other words that they must in some way fit together”. The starting point was to identify the relevant matters or transactions and then to analyse the factors connecting them. The fact that the alleged acts or omissions were similar or even strikingly similar was not enough to engage the clause.
On the assumed facts, the Supreme Court held that the claims brought by one set of investors in a property development in Turkey aggregated and the claims brought by another set of investors in a property development in Marrakech aggregated. However, the insurers had no right to aggregate the claims of the Turkish investors with those of the Marrakech investors.
The full text of the judgment can be found here.