All together now? Indemnity insurers, aggregation clauses and access to justice Image

All together now? Indemnity insurers, aggregation clauses and access to justice

Posted: 11/06/2014

Professional negligence claims are an unfortunate fact of professional life: unfortunate for the professional and client alike. Professional indemnity insurance exists, in theory at least, to protect those unfortunate clients and to ensure that they recover the losses which they have suffered as a result of negligent advice or service. In practice, many claimants find themselves fighting a second and/or simultaneous battle with the PI insurers. This article focuses on professional negligence claims against solicitors.

Fully covered?

The first stumbling block for a claimant is that neither the defendants nor their insurers are required to confirm that the claim will be covered by the PI policy, nor to disclose the terms of indemnity under the policy, until the defendant solicitors have gone into insolvent liquidation. At that point, and having proven their claim, claimants can pursue the insurers directly under the Third Party (Rights Against Insurers) Act 1930.

There is therefore a very real risk that a claimant can incur substantial costs bringing a claim to trial, only to find that the claim is not covered by the defendant's PI insurance. In order to make an informed decision as to whether to run this risk, claimants should assess the likelihood of coverage by referring to the SRA’s Minimum Terms and Conditions of Professional Indemnity Insurance (the 'Minimum Terms’).

If the Minimum Terms indicate that a compliant insurance policy should indemnify that particular claim, a claimant can be reasonably confident that, if he is successful, his damages should be recoverable from the PI insurer (assuming the insurer is worth “powder and shot” and the value of the claim is within the limit of indemnity). Difficulties arise when it is unclear (as is often the case) whether or not a particular claim would be indemnified under the Minimum Terms.


Another obstacle which claimants may face is that of aggregation. Where multiple claims are made against a single firm/individual involving similar or the same facts or circumstances, insurers often seek to aggregate those claims and treat them as a single claim.

Aggregation can be of benefit to the insurer because policies often cap the level of cover available in respect of a single claim. Good news for insurers, whose liability may be dramatically diminished; bad news for claimants, whose claims may not be met in full, and also for defendants who will be liable to meet the balance.

In the absence of disclosure of the relevant policy, the Minimum Terms provide claimants with limited guidance on aggregation.  In essence, a policy can aggregate all claims against any one or more insured arising from one act or omission, one series of related acts or omissions, or the same or similar acts or omissions in a series of related matters or transactions.  Equally all claims against any one or more insured arising from one matter or transaction can be treated as one claim. But how does this work in reality?

Unifying Factors

Aggregation clauses are intended to allow two or more separate losses covered by a policy to be treated as a single loss for deductible or other purposes when they are linked by a unifying factor of some kind. In Lloyds TSB General Insurance Holdings Ltd and others v Lloyds Bank Group Insurance Co Ltd [2003] UKHL 48, the House of Lords considered aggregation where a number of claims had arisen from widespread 'mis-selling' of financial products.

Their Lordships held that the fact that a series of acts or omissions each resulted from a common cause (in this case, inadequate training and monitoring of representatives) was not sufficient for the resulting claims to aggregate. When considering whether the claims resulted from a “related series of acts or omissions” under the policy the relevant unifying factor would be that the claims were all caused by the same related series of acts or omissions, and not merely that the acts or omissions comprising the series themselves had a common cause.

The Lloyds case resolved how the policy wording in question was to be construed in that case. However, there is still plenty of room for argument as to if and how aggregation clauses are to be applied on a case by case basis, the terms of aggregation clauses varying from policy to policy and no two cases having exactly the same set of facts.


The procedure as it currently stands is weighted firmly in the insurers' favour. Claimants are required to take on both their former adviser and their insurers, who are increasingly resorting to technical aggregation arguments to prolong litigation and/or force a settlement. Simple measures would assist: a requirement to disclose the relevant terms of cover at the outset regardless of the defendant’s solvency would seem both appropriate and proportionate. Clearer regulation of aggregation clauses in solicitors’ PI insurance would help all parties understand the extent of their potential liabilities.

Change is necessary: the status quo arguably defeats the purpose of regulated PI insurance and presents real access to justice issues for some vulnerable people. The provisions of the Third Parties (Rights Against Insurers) Act 2010 will improve the position for claimants to an extent, but it remains to be seen if and when it will finally be brought into force.

This article was published in New Law Journal in May 2014.

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Penningtons Manches Cooper LLP

Penningtons Manches Cooper LLP is a limited liability partnership registered in England and Wales with registered number OC311575 and is authorised and regulated by the Solicitors Regulation Authority under number 419867.

Penningtons Manches Cooper LLP