Spire Healthcare Limited v Royal & Sun Alliance Insurance Limited

An aggregation clause referring to claims consequent on or attributable to one source or original cause requires a broad search for a meaningful unifying factor in the history of the claims. The words have a wide effect. An original cause is not confined to a proximate cause, but it must have a real causal connection with the losses and cannot be merely remote or coincidental.

Different manifestations of negligent or dishonest conduct by one individual do not necessarily create separate original causes. Where the insured’s liability arises from that individual’s continuing pattern of operating without informed consent and disregarding patients’ welfare, all resulting claims may aggregate despite differences in the clinical indication for particular procedures.

Spire operated two private hospitals at which Mr Ian Paterson, a consultant breast surgeon, treated patients over many years. Former patients brought claims arising from operations performed without informed consent. The claims included patients whose surgery was clinically indicated but inadequately performed, and patients who underwent unnecessary surgery following false reports of pathology results.

Spire settled the group litigation and sought an indemnity under a combined liability policy. The policy had an overall aggregate limit of £20 million and a £10 million limit for claims consequent on or attributable to one source or original cause. The Commercial Court held that the two groups of patient claims did not aggregate with each other and that Spire could recover £20 million: [2020] EWHC 3299 (Comm).

The insurer appealed. The central issue was whether all claims arose from a single source or original cause, so that the £10 million limit applied.

1. Appeal allowed. All claims in both patient groups arose out of one source or original cause. The applicable limit of indemnity was therefore £10 million, rather than £20 million.

2. The clause used a traditional formula intended to have the widest effect. The usual principles of contractual construction applied without a predisposition towards either a narrow or broad outcome. Because the policy used standard wording, materially similar wording in earlier authorities should ordinarily be construed consistently unless context supplied a strong reason to depart.

3. An original cause is not a proximate cause. It may be a continuing state of affairs or an omission, but it must bear a meaningful causal connection to the losses. A merely remote, coincidental or bare “but for” cause will not suffice. “Source” and “original cause” were interchangeable expressions in this context; the inclusion of “source” reinforced the exclusion of a proximate-cause requirement.

4. The judge had wrongly searched for a “single effective cause” and concentrated on differences between the two groups, including Mr Paterson’s motivations. The required inquiry was instead a broad search for a unifying factor in the history of all claims. Cox v Bankside, [1995] 2 Lloyd’s Rep 437, showed that different forms of negligence by one person may have a single originating cause.

5. Mr Paterson’s continuing conduct supplied that factor. His identity, dishonesty, practice of operating without informed consent, and disregard of patients’ welfare could each, singly or together, explain the claims. Those matters were neither vague nor remote. It was immaterial that surgery was clinically indicated for many Group 1 patients but unnecessary for Group 2 patients.

• Court of Appeal (Civil Division) — allowed the insurer’s appeal and held that all claims aggregated under the £10 million limit: [2022] EWCA Civ 17.

• High Court, Commercial Court — held that the two groups of claims did not aggregate with each other and that the available indemnity was £20 million: [2020] EWHC 3299 (Comm).