(see also our post on the subsequent Supreme Court decision announced 22nd March 2017)

AIG insured a firm who advised on investment schemes that failed - resulting in over 200 investors making claims against the firm.  AIG had sought to rely on the aggregation clause in MTC policy wording ("similar acts or omissions in a series of related matters or transactions...") which would have limited them to making one payout under the primary policy, of up to £3m.

Court of Appeal decision

AIG had appealed the High Court ruling at first instance, that while there were 'similar acts or omissions' they were 'not part of a series of related matters or transactions' because, in Mr Justice Teare's judgement, that required a degree of dependency between the transactions. 

The Court of Appeal considered this test to be too wide, but only upheld AIG's appeal in part, as "the transactions have to be "related" and that can only mean related to one another" in some intrinsic way.  Importantly, this means that the transactions themselves must have some internal relation. 

While this provides significant additional clarity - and doubtless concern for insurers who may now consider the MTC wording to provide them with even less comfort than they had previously thought, the Court of Appeal ruling proves that the circumstances that constitute 'aggregation' remain something of a grey area that depend on the circumstances of the individual case.

In this particular case, the matter has been returned to the court of first instance (Queens Bench Division, Commercial Court) to consider the specific facts, and we will have to wait for that decision before we are sure whether in this particular case, aggregation will be held to apply or not.

Implications for you, as an insured Practice

Where you are advising on a series of transactions that are linked in some meaningful way, you will need to consider carefully what the potential quantum of liability is.  If you think that there could be a possibility of aggregation applying, speak to your Lockton broker, as you are obliged by the SRA to ensure that you have adequate PII cover in place. 

Even if you do have additional cover above the minimum £2m/3m currently required, the impact of a claim going above your primary limit can be very significant in terms of impact on cost and availability of cover in future.