Commercial Court Rules Again On 'Series Of Related Events' Language

Beazley Underwriting Ltd & Anor v. The Travelers Companies Incorporated [2011]1

Commercial Court, 17 June 2011

In May 1997 the Defendant (Travelers) sold the Minet Group of broking companies to Aon. Under the terms of the deed of sale, Travelers agreed to indemnify Aon against any loss, liability, claim or cost relating to the conduct or business of the Minet Group and arising out of any event or matter occurring on or before the date of completion.

The deed also provided that where there was a continuing series of related events, occurrences or matters which otherwise amounted to an indemnified claim then all such events etc. occurring during the period of 12 months following completion would be deemed to have arisen or occurred prior to completion.

Travelers procured PI insurance to cover the liabilities assumed by them under the deed, on a claims made basis. The particular policies issued by the Claimants covered the period between the sixth and seventh anniversaries of the deed, and were the last in a series of three such contracts bought by Travelers.

The Minet book of business transferred to Aon included the Standard Life Assurance account, which Minet had itself acquired with its purchase of SRS Insurance Services in 1995. In particular, Minet/SRS had for some years been responsible for broking Standard Life's own PI insurance, and each year the cover was renewed on the same terms. After the transfer in May 1997, Aon continued to renew Standard Life's PI insurance on its predecessor's expiring terms.

As it turned out, so the court found2, those terms were inappropriate for Standard Life's requirements, because the excess provision (referring to each "claim and/or claimant") meant it was impossible for Standard Life to aggregate like claims from multiple consumers. The impact was felt acutely in the 1998-2001 policy period, broked by Aon, during which time Standard Life faced 97,000 claims for endowment mortgage mis-selling, generating an aggregate liability of more than £100m. Accordingly, Aon was held liable to Standard Life in negligence for failing to procure suitable insurance cover, for which Aon in turn looked to Travelers under the indemnity.

The present litigation was concerned with Travelers' corresponding claim against its own PI insurers. The latter denied liability on two grounds:

that Travelers were not themselves liable to Aon under the deed; and that even if Travelers were liable to Aon there was no claim under the PI...