Spire Healthcare Ltd v Royal & Sun Alliance Insurance Plc

Insurance policy limits must be construed by reading the schedule with the operative wording and giving effect to all provisions bearing on the issue. The reasonable reader is a sophisticated assured advised professionally and is not confined to the schedule. Aggregation clauses should not be approached with a predisposition towards a broad or narrow meaning. Wording linking claims to one source or original cause may cap the total for those linked claims even if it does not expressly deem them to be one claim. Here, the policy created a £10 million limit for a single claim, a £10 million limit for claims linked to one source or original cause, and a £20 million limit for all claims during the insurance period. Contra proferentem applies only where a real doubt remains.

Spire operated private hospitals where Mr Ian Paterson practised as a consultant breast surgeon. More than 700 former patients brought claims, which were settled through a £37 million fund to which Spire agreed to contribute £26,950,000.

Spire claimed indemnity under a combined liability policy issued by Royal & Sun Alliance for the period 31 August 2011 to 30 August 2012. The Commercial Court, in [2016] EWHC 3278 (Comm), held that proviso 5A aggregated claims attributable to one source or original cause and applied the £10 million limit. The appeal concerned whether each claim retained a separate £10 million limit, or whether linked claims were subject to an aggregate £10 million limit.

Appeal dismissed. Simon LJ gave the judgment of the court, with which Sir Geoffrey Vos, Chancellor of the High Court, agreed.

1. The policy had to be construed by considering the combined effect of the schedule and the general provisions. The reasonable reader was assumed to be a sophisticated assured assisted by professional advice and was not confined to the limits stated in the schedule. All words bearing on the issue had to be given effect. This approach was consistent with Standard Life Assurance Ltd v Oak Dedicated Ltd and ors [2008] Lloyd’s Law Rep 552.
2. Proviso 5A used plainly aggregating language. The words linking claims to one source or original cause supplied the unifying factor. The absence of express wording deeming linked claims to be one claim did not prevent the clause from limiting the total payable for those claims. Aggregation clauses were not to be approached with a predisposition towards either a broad or narrow construction: AIG Europe Ltd v Woodman and others [2017] 1 WLR 1168. Their purpose was to treat separate linked losses as one for relevant limit purposes, as explained in Lloyds TSB General Insurance Holdings Ltd and ors v Lloyds Bank Group Insurance Co Ltd [2003] UKHL 48.
3. Reading the schedule with provisos 5A and 5B produced a coherent three-part scheme: £10 million for a single claim; £10 million for claims attributable to one source or original cause; and £20 million for all claims during the insurance period, irrespective of their sources or causes. The lower court had therefore construed the policy correctly.
4. Contra proferentem had no role because the policy disclosed no real doubt or uncertainty. The principle is used to resolve genuine doubt, not to create or magnify ambiguity. The court applied the approach stated in Impact Funding Solutions Ltd v Barrington Services Ltd [2017] AC 73, together with the principle stated in Cornish v Accident Insurance Co Ltd (1889) 23 QBD 453.

1. Court of Appeal (Civil Division): [2018] EWCA Civ 317. Appeal dismissed.
2. Queen’s Bench Division, Commercial Court: [2016] EWHC 3278 (Comm). HH Judge Waksman QC held that proviso 5A aggregated linked claims and capped the indemnity at £10 million.