AIG Europe Ltd v OC320301 LLP & Ors

An aggregation clause must be construed by reference to its language, context and commercial purpose. The court should adopt a neutral construction and should not favour either the insured public or the insurer. Claims arising from similar acts or omissions require a real and substantial, rather than fanciful or insubstantial, degree of similarity. However, aggregation under a clause referring to a series of related matters or transactions requires more than similarity or a common business model. The transactions must be connected in a meaningful way, ordinarily because their terms are conditional or dependent upon one another. Independent transactions involving the same development or operating under the same security structure do not necessarily constitute one series.

AIG sought a declaration concerning the aggregation of claims under a solicitors’ professional indemnity policy issued to the International Law Partnership LLP. The underlying claims were brought by 214 investors represented by trustees and concerned failed property developments in Turkey and Morocco. The investors alleged failures to establish effective security and to apply a contractual cover test before releasing escrow funds.

The policy incorporated the Minimum Terms and Conditions of Professional Indemnity Insurance for Solicitors and Registered European Lawyers in England and Wales. Clause 2.5 treated claims as one claim where they arose from similar acts or omissions in a series of related matters or transactions. The central issue was whether the investors’ claims satisfied that requirement.

1. Construction of the clause. Clause 2.5 had to be construed according to the meaning reasonably understood from its language and context. Although the court could have regard to the public-protection policy underlying the statutory insurance scheme, it was wrong to prefer the construction offering the greatest protection. The construction had to be neutral.
2. Similar acts or omissions. The relevant acts or omissions need not be identical. They must display a real and substantial degree of similarity. The alleged failures to provide effective security and to apply the cover test properly met that threshold across both developments.
3. Series of related matters or transactions. That phrase limits the otherwise broad aggregation provision. It requires a unifying relationship between the matters or transactions. In context, the natural meaning was a series of transactions whose terms were in some way interconnected, conditional or dependent upon one another. A test based merely on transactions being sufficiently similar or connected was vague and uncertain.
4. Application. The individual investment transactions were separate and independent. They were not conditional or dependent upon each other. The fact that they concerned the same development, or used the same security structure with the development company as a common hub, did not satisfy clause 2.5.
5. AIG’s proposed declaration was therefore refused. The underlying claims were not to be aggregated as one claim.

Not stated in the judgment.