Aggregation clauses in insurance policies - recent judicial consideration

Aggregation clauses play a vital role in all forms of insurance, although they have been discussed most commonly in the context of liability insurance. Aggregation fixes the amount recoverable by the assured where the assured's liability arises out of a number of separate acts of negligence. The policy may fix the maximum sum recoverable on a "per claim" basis, or it may require the assured by way of deductible to bear the first part of the amount of any claim.

Where there is a large number of small claims that cannot be aggregated, and none of the claims exceeds the deductible, the assured will recover nothing. By contrast, where there is a small number of large claims that cannot be aggregated, the assured will recover the sum insured in respect of each claim.

It follows from this that the effect of an aggregation clause will depend upon the number and size of claims, and whether the aggregation relates to deductibles or policy limits. It equally follows that there has to be a consistent interpretation of aggregation wording by the courts, because it will not be known in advance of any one case which party will benefit from aggregation.

Bank of Queensland v AIG

The recent decision of Stevenson J in the Supreme Court of New South Wales in Bank of Queensland Ltd v AIG Australia Ltd [2018] NSWSC 1689 demonstrates just how minor variations in wording can affect the outcome as between otherwise similar cases.

In this case the Bank, through an intermediary, DDH Graham Ltd (DDH), operated Money Market Deposit Accounts (MMDAs) for its clients. Some 192 clients had appointed Sherwin Financial Planners Pty Ltd (SFP) as their financial planner, and SFP had through DDH arranged MMDAs for those clients. Unfortunately, SFP appears to have been a fraudulent enterprise. Between March 2004 to January 2013 funds were withdrawn from the MMDAs by SFP without client authorisation. In February 2013 SFP went into liquidation, having misappropriated the funds in question.

The 192 account holders sought to recover their losses from the Bank. They alleged that the Bank had released funds on the strength of emails, had failed to investigate suspicious activity on the part of SPF and had knowingly assisted SFP in its dishonest conduct.

The account holders formed a Group for the purposes of representative proceedings brought in the name of one of their number. Each member of the Group signed a "Class Member Registration Form" setting out the various transgressions of...