Professional Liability Guide

CHAPTER 11 – AGGREGATION CLAUSES

CHAPTER 11 – AGGREGATION CLAUSES

Aggregation clauses define the number of ‘ claims ’ that have beenmade under an insurance policy. Triggering a policy’s aggregation clause to aggregate multiple claims can affect the respective financial exposure of the insured or insurer. Aggregation clauses apply to both the limit of indemnity an insurer is liable to pay and the number of deductibles payable by an insured. If an insured is faced with many small claims that, individually, would not exceed the amount of the deductible payment, whether they are to be treated as one claim to calculate the deductible or multiple single claims will determine whether the insured will reap any benefit from its insurance contract. Likewise, an insurer may seek to aggregate several large claims to only be liable to pay the limit of cover specified in the policy for any one claim, potentially leaving the insured to personally pay any amount of the claims exceeding the indemnity limit. General principles When considering the number of policy claims that may arise out of notified circumstances, the courts will consider the specific policy wording and the circumstances of the claim, with the factual relationship between the circumstances being the most relevant consideration. In McCarthy v St Paul International Insurance Co Ltd , Allsop J expressly noted that it is the underlying facts and not the legal form in which the matter is constructed or pleaded that is relevant when assessing what constitutes a claim under an insurance policy. 559 In Thorman v New Hampshire Insurance Co Ltd , 560 the English Court of Appeal considered how many claims under an insurance policy arose in relation to work performed by an architect in a residential development. Donaldson MR explained the issue and its association with the underlying facts in this way: ‘Let me take some examples. An architect has separate contracts with separate building owners. The architect makes the same negligent mistake in relation to each. The claims have a factor in common, namely the same negligent mistake, and to this extent are related, but clearly they are separate claims. Bringing the claims a little closer together, let us suppose that the architect has a single contract in relation to two separate houses to be built on quite separate sites in different parts of the country. If one claim is in respect of a failure to specify windows of the requisite quality and the other is in respect of the failure to supervise the laying of the foundations, I think that once again the claims would be separate. But it would be otherwise if that complaint was the same in relation to both houses. Then take the present example of a single contract for professional services in relation to a number of houses in a single development. A single complaint that they suffered from a wide range of unrelated defects and a demand for compensation would, I think, be regarded as a single claim. But if the defects manifested themselves seriatim and each gave rise to a separate claim, what then? They might be regarded as separate claim … It would, I think, very much depend on the facts.’ 561 In Thorman , Donaldson MR identified relevant considerations as including the relationship of the claimant with the insured, the nature of the alleged mistake and the timing of the defects and complaints. Lord Justice Stocker also emphasised the importance of the particular facts and the context when considering the number of claims that arise from any factual matrix.

559 (2007) 157 FCR 402, 426. 560 [1988] 1 Lloyds’ Rep 7. 561 Ibid 11–12.

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