Boardroom Briefing September 2019

Boardroom Briefing
Only one Deductible for Multiple Claims in a Class Action – Court of Appeal

Multiple claims made against the Bank of Queensland in a class action have been found by the Court of Appeal to arise from related Wrongful Acts under the aggregation clause meaning only one deductible payable. In our inaugural Boardroom Briefings (April) we reported on the serious impact of this case at first instance in which the application of multiple deductibles effectively rendered useless the Bank’s insurance policy.

Recap: The Bank held a PI policy, with a deductible of $2M for each Claim, which the Bank argued responded to a representative action by over 190 investors who said they had suffered loss as a result of the Bank failing to protect them from a major fraud. The class action settled for $6M but the Bank’s Insurers argued that the Bank’s loss arose out of multiple claims with multiple deductibles which could not be aggregated under the Policy’s aggregation clause.  The first instance Judge agreed with the Insurers so the Bank and its aggregation clause (“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”) headed to the NSW Court of Appeal.

Reassessment: The multiple claims, said the Court of Appeal, arose out of a series of ‘related’ Wrongful Acts and therefore the claims should be aggregated so that only one deductible applied for all the claims against the Bank.
Reasoning: The three judges were broadly in agreement in overturning the earlier decision and the majority held that the class action involved a Claim by each of the group investor members meaning there were multiple claims.   The Court then considered what was required to make the Wrongful Acts ‘related’ under the aggregation clause. A reasonable businessperson, understanding the matters in the class action, would conclude that the Wrongful Acts alleged against the Bank were ‘related’ with significant common questions arising from each of the investors’ claims. The Bank’s acts were wrongful because the Bank acted with “knowledge of fraud’ which made them ‘related’ for the operation of the aggregation clause. Each of the ‘Wrongful Acts’, said the Court of Appeal, was the same breach by the Bank acting with that knowledge and this was enough to constitute a “series of related Wrongful Acts”. 

In brief: This is a sensible and reassuring outcome for an Insured facing a class action but the Court of Appeal judgment is not a get out of  jail card because the wording of each particular aggregation clause, and the policy more generally,  will always be taken into account by a court. Although the class action regime itself is an indicator that the claims of group members are ‘related’ each aggregation clause must be considered on its own wording, as well as the factual context of the claims. Your Lockton broker is skilled at reviewing your PI and D&O policy wording paying particular attention to the aggregation clause and class action exposures.  
Bank of Queensland Ltd v AIG Australia Ltd [2019] NSWCA 190


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