Professional Indemnity Insurance: related matters and transactions
The current Solicitors’ Minimum Terms and Conditions of Professional Indemnity Insurance stipulate that, all claims against any one or more insured arising from similar acts or omissions in a series of related matters or transactions will be regarded as one claim.
The benefit of this clause for the insured (the law firm) is that, if there are a string of claims, which together are less than the policy limit, the insured may state that they should be aggregated because they are related matters or transactions.
The result being that the insured will only have to pay one policy excess. Conversely, if the claims, once aggregated, exceed the policy limit then the insurer may argue for aggregation so it would leave the insured with an uninsured loss if the claims were successful rather than the insurer paying out for each successful claim.
However, for either the insured or the insurer to be able to argue that claims should be aggregated, they need to be able to answer the question, how related do they have to be?
The Court of Appeal tried to answer this question recently in the case of AIG Europe v OC320301 LLP  EWCA Civ 367.
The court said, “In our view it must, as Mr Edwards submitted, be an intrinsic rather than a remote relationship. That means that there must be a relationship of some kind between the transactions relied on rather than a relationship with some outside connecting factor, even if that extrinsic relationship is common to the transactions”.
Now, does anybody wish to comment on what amounts to an intrinsic relationship? It is a point we think will be litigated extensively moving forward.
Paul Bennett, Partner
Aaron & Partners LLP
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