High Court holds insurer is unable to aggregate claims related to theft under PI insurance policy
In the recent decision of Baines v Dixon Coles and Gill (A Firm) and others  EWHC 2809, the High Court held that claims against a firm of solicitors regarding the theft of client funds by a former partner, could not be aggregated by the professional indemnity (PI) insurer.
Separate claims were brought by a number of claimants against the partners of a firm, Dixon Coles and Gill, in relation to the misappropriation of over £4 million of client funds by a former partner.
The firm had PI insurance which complied with the Solicitors Regulation Authority (SRA) Minimum Terms and Conditions of PI Insurance (MTCs), and included a policy limit of £2 million. The aggregation clause in the MTCs says that claims can be aggregated where they arise from, among other things, “one act or omission” or “one series of related acts or omissions”.
The claimants sought a declaration, by way of summary judgment, that the PI insurer could not aggregate all of the claims as one claim under the PI insurance policy.
The Court granted the declaration sought by the claimants.
One act or omission
In reaching its conclusion, the Court held that the definition of claim under the SRA Glossary (“an obligation on an insured to remedy a breach and the obligation to remedy such breach”, (emphasis added)) suggested that each misappropriation should be considered a separate breach, and so multiple misappropriations should constitute multiple breaches i.e. not one act or omission.
One series of related acts or omissions
The Court also considered what was meant by “related”, relying on AIG Europe Ltd v Woodman and others  UKSC 18 to conclude that the term implies some level of interconnection between the acts. Further, the Court agreed with the claimants’ argument that in order to determine that interconnection, the “acid test” was “whether any one client can plead a complete claim against the firm without referring to another act, matter or transaction from which a different claim arises”.
The Court held that the thefts themselves had to be related in order for them to be aggregated under the PI insurance policy. Whilst the thefts were all motivated by dishonesty, “dishonesty is not an act, it is a state of mind” and therefore could not unify all of the thefts for the purposes of aggregation. Each claimant suffered separate losses caused by individual thefts, and therefore the claims were not related and could not be aggregated.
Insurers should note the implications of this judgment – as dishonesty is not an act or omission, it is not a unifying factor which enables the aggregation of claims under a policy. It is also notable that the Court confirmed that the test for whether acts or omissions are related was whether any one client could plead a complete claim against the firm, without referring to another matter from which a different claim arises.