Baines & Anor v Dixon Coles & Gill (a firm) & Ors  EWHC Civ 1211
The Court of Appeal has recently handed down an important judgment on the issue of whether claims brought against a firm of solicitors should be aggregated for the purposes of the limit of indemnity under the terms of the firm’s professional indemnity insurance policy.
The factual background to this claim involves a series of thefts of clients’ money carried out over a long period of time by one of the partners of the firm Dixon Coles & Gill (DCG), a Mrs Linda Box. Mrs Box was outwardly respectable and a pillar of the local community, holding senior offices in the Church of England. All the while, unbeknownst to her partners, she was engaged in defrauding DCG’s clients on an epic scale. The frauds eventually came to light, the firm was dissolved and Mrs Box was subsequently imprisoned.
A number of the defrauded clients brought claims against the firm, which were covered by the firms’ PI insurer HDI Global Specialty SE (HDI). The terms of the relevant policy complied with the Minimum Terms and Conditions (MTC) mandated by the SRA Indemnity Insurance Rules 2013, which require solicitors to take out insurance that complies with the MTC.
The limit of indemnity under the relevant policy was £2m for any one claim. However, the value of the claims made by the defrauded clients far exceeded this amount. The policy contained an aggregation clause, which provided as follows:
The insurance may provide that, when considering what may be regarded as one claim for the purposes of the limits contemplated by clauses 2.1 and 2.3:
(a) all claims against any one or more insured arising from:
(i) one act or omission;
(ii) one series of related acts or omissions;
(iii) the same act or omission in a series of related matters or transactions;
(iv) similar acts or omissions in a series of related matters or transactions
(b) all claims against one or more insured arising from one matter or transaction
will be regarded as one claim.”
By the time the appeal was heard, HDI had already paid out the £2m limit of indemnity by paying various former clients of the firm. HDI sought to argue that the claims should be aggregated so that they were to be treated as a single claim under the terms of the policy, with the effect that HDI would not be liable to make any further payments under the policy, notwithstanding that a number of claims remained outstanding, leaving the former clients with no option other than to pursue the innocent former partners personally to recoup their losses.
The Court of Appeal found in favour of the defrauded parties, ruling that the effect of limbs 1 and 2 of the aggregation clause is that the claims had to result from either one act or omission or from a series of related acts or omissions. In this instance, the acts or omissions were the individual thefts. The question that fell to be determined was whether these acts or omissions were sufficiently related to be a series for the purposes of the clause, which requires a unifying factor. The Court of Appeal (at 72) held that “[t]hey are not the very same act, repeated a number of times. They are no doubt similar acts, all flowing from her dishonesty; but this is not enough to make them a series of related acts for the purposes of aggregation.” The court therefore held that the claims could not be aggregated in this instance.
Interestingly, the court considered that had the insurer advanced a novel argument based upon the unifying factor being the fact that the client monies were stolen from a mixed client account, the decision may have been different.
This is a positive decision for the defrauded clients, Mrs Box’s innocent partners and for claimants in professional negligence claims against solicitors generally insofar as it provides welcome clarity regarding the circumstances in which claims may be aggregated. Insurers are likely to be vexed by this judgment, which makes aggregation more difficult and may well lead to higher premiums for solicitors’ PI insurance.
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Edwin Coe LLP is a Limited Liability Partnership, registered in England & Wales (No.OC326366). The Firm is authorised and regulated by the Solicitors Regulation Authority. A list of members of the LLP is available for inspection at our registered office address: 2 Stone Buildings, Lincoln’s Inn, London, WC2A 3TH. “Partner” denotes a member of the LLP or an employee or consultant with the equivalent standing.