Boardroom Briefing April 2019
There was no doubt that the Professional Indemnity Policy responded to the class action by 192 disgruntled group members, arising from various unauthorized withdrawals made from money market deposit accounts to fund a Ponzi scheme. The claim against the bank settled at mediation for $6M but the bank’s insurer argued that each of the 192 members had brought a separate claim and so the bank was liable to pay 192 deductibles. As the Policy also said that the insurer was only liable for the amount of loss and costs arising from a claim in excess of $2M, the bank was effectively left with no insurance cover for the settlement or its defence costs.
The bank looked to the aggregation clause for help which said, “all claims arising out of, based upon or attributable to one or a series of related Wrongful Acts shall be considered to be a single Claim”. The Court held, however, that the Wrongful Acts were the 192 withdrawals from the accounts, which were not related, and could not be aggregated. The transactions did not have the necessary ‘causal’ or ‘logical’ interconnection to be a ‘series of related Wrongful Acts’.
A very tough decision on the bank or any entity which when faced with a class action wants its applicable policy to respond with only one deductible payable. At Lockton Companies Australia, we have been watching with concern judicial interpretations on aggregation clauses for some time (in the earlier case of Morgan, Re Brighton Hall Securities (in liq)  FCA 970 the Federal Court found that multiple excesses applied because “the whole essence of the representative claim is that there are multiple claims before the court.”) Each policy wording around what is a Claim and how the aggregation clause works is different and needs to be looked at individually for the most effective policy response.
In brief: now is a good time to revisit the aggregation wording in your policies. The Supreme Court’s decision means that aggregation clauses should be worded broadly as to what is the applicable unifying factor. Wider aggregation wording such as “originating cause or source’ is preferable to narrower wording such as “wrongful acts”. We hope that this one will go on appeal. In the meantime, let’s talk aggregation clause wording to ensure the best possible policy response in our robust class action environment.
See: Bank of Queensland Ltd v AIG Australia Ltd  NSWSC 1689