AIG decision

The Supreme Court has this morning handed down judgment in AIG v Woodgate, a case concerning the scope of aggregation under the Minimum Terms and Conditions applicable to solicitors’ professional indemnity insurance, and in particular aggregation of claims which arise from “similar acts or omissions in a series of related matters or transactions”. The claims in question were by individual investors in two development projects, one in Turkey and one in Marrakech. The investments were to be held by a trust, of which the defendant solicitors were trustees, and released from an escrow account to the developer pursuant to a cover test to be applied by the solicitors. The developments failed and the claimants sued the solicitors for negligence. AIG argued that the individual investors’ claims aggregated so as to attract only one £3m limit of indemnity; the solicitors/trustees that they did not.

The Supreme Court has disagreed with the Court of Appeal that the phrase “related matters or transactions” requires that there be some “intrinsic” relationship between the transactions. No further wording or circumscription should be applied to the phrase; but the exercise of deciding whether matters or transactions are related in any given case is an “acutely fact sensitive exercise.” In this case, the Supreme Court has held that the investors’ claims in relation to each development aggregate, being “connected in significant ways”: “The members of each group were investing in a common development, for which the monies advanced by them were intended, in combination, to provide the developers with the necessary capital. Notwithstanding individual variations, they were all participants in a what was in overall terms a standard scheme. They were co-beneficiaries under a common trust.” However, the two developments did not have the requisite degree of connection. Thus, on that analysis, the £3m limit of indemnity would apply twice, one in relation to each development.