Aggregation Rides Again: AIG V Woodman And The Requirement Of A 'Real Connection'

On 22 March 2017, the Supreme Court of England and Wales handed down the eagerly anticipated judgment in AIG Europe Limited v Woodman and others1 (AIG v Woodman). The Supreme Court's decision provides useful guidance on the meaning of the phrase of "a series of related matters or transactions" when used in an aggregation clause.

THE FACTS

AIG v Woodman concerned developments of two holiday resorts, one in Turkey and one in Marrakech, Morocco that were financed by private investors (the investors). The investors' funds were collected for each development and held in an escrow account by the developers' solicitors. The funds were not to be released to the developer unless the value of the assets held by the trust was sufficient to cover the investment to be protected. This was the "cover test" set out in the trust deed.

The developers entered into two purchase agreements, for the development site in Turkey and for shares in a local company which owned the site in Morocco. The solicitors released tranches of money to the developers for each development. Following a prohibition restricting the developers receiving any further investments, the respective purchases of the development sites could not be completed. The developers were subsequently wound up.

THE INSURANCE CLAIM

The investors brought two claims against the solicitors relating to each development. They alleged that the solicitors had failed to properly apply the "cover test" before releasing the funds to the developers, resulting in the funds being released without adequate security.

The solicitors had professional indemnity insurance with AIG, whose liability was limited to GBP 3 million in respect of each claim. The investors' claims totalled over GBP 10 million. AIG brought proceedings seeking a declaration that the investors' claims should be aggregated under the aggregation provision in its policy. AIG deemed the claims arose from "similar acts or omissions in a series of related matters or transactions" because all claims flowed from the improper releases of money held in escrow.

THE INSURANCE POLICY

The Law Society of England and Wales' rules require solicitors to maintain professional indemnity insurance. The Rules specify certain Minimum Terms and Conditions for that insurance cover. The prescribed aggregation clause relevantly provides:

all Claims against any one or more Insured arising from: similar acts or omissions in a series of related matters or transactions; and all...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT