Aggregation Of Losses Under English, Cayman Islands, And Bermuda Law: A COVID-19 Reminder For Insurers And Reinsurers

• Published date: 14 January 2021
• Subject Matter: Insurance, Coronavirus (COVID-19), Insurance Laws and Products, Reinsurance, Insurance Claims
• Law Firm: Conyers
• Author: Mr Alex Potts QC and Jonathon Milne

The longer and further that COVID-19 spreads, the more likely it is that there will be disputes as to whether or not COVID19 related losses can be aggregated by (re)insureds for the purpose of (re)insurance claims.

Many individual COVID-19 related claims will be too small on their own to reach the attachment point of most excess of loss or catastrophe reinsurance treaties. If aggregated, however, they might well be within the scope of the excess layer or the reinsurance cover.

The aggregation question is not only of interest in the context of Property and Business Interruption Claims. It will also arise in other lines of business underwritten in Bermuda and the Cayman Islands, including, Workers' Compensation, Accident, Health, Travel, Event Cancellation, D&O Liability, Professional Liability, Medical Malpractice Liability, and Employment Liability.

The most common type of aggregation clause is one that groups losses or claims by reference to a single "event" or "occurrence"; or, in the context of liability insurance, by reference to "similar" or "related" acts or omissions.

A standard form aggregation clause in a reinsurance contract, for example, might be as follows:

• "The term "Loss Occurrence" shall mean the sum of all individual losses directly occasioned by any one disaster, accident or loss or series of disasters, accidents or losses arising out of one event which occurs anywhere in the world"; or
• All Claims arising from similar acts or omissions in a series of related matters or transactions will be regarded as one Claim".

For COVID-19 related losses, which may have been spread across a large geographical area, and over a relatively long period of time, can it be said that they have been caused by "one disaster, accident, or loss", or by one "series of disasters" arising out of one "event"?

In the case of COVID-19 related liabilities, can it be said that they have all arisen from similar acts or omissions in a series of related matters or transactions?

On the one hand, it might be argued that relevant COVID-19 related losses or liabilities have been caused by one continuous disaster (whether that is the virus itself, or Governmental responses to it). On the other hand, it might be argued that COVID-19 related losses or liabilities have been caused by many separate or unrelated events or occurrences.

In resolving these questions, there is some limited guidance to be found in the English law reports¹ : at least in the context of reinsurance...