First published November 2001
"This is a very short point of construction upon which a very large sum of money depends."
The Court of Appeal judgment in Lloyds TSB General Insurance Holdings Limited v Lloyds Bank Group Insurance Company Limited and Abbey National plc v Lee 1 held that Lloyds Bank and Abbey National could treat all their Pensions Review claims as a single claim subject to only a single excess. As a result Lloyds Bank became entitled to indemnity stated in the judgments to be in the region of 100-125m.
The policy analysed by the court appears to be standard bankers professional indemnity insurance wording 2 . In particular, the policy provided:
"If a series of third party claims shall result from any single act or omission (or related series of acts or omissions) then, irrespective of the total number of claims, all such third party claims shall be considered to be a single third party claim for the purposes of the application of the deductible."
In the first instance judgment Mr Justice Moore-Bick had said that he did not consider "close attention to the particular words used is likely to give one much insight into the true meaning of this clause". This approach was firmly rejected by the Court of Appeal which closely analysed the relationship between the various clauses of the policy. Lady Justice Hale said that the wording construed was different to that in any other reported cases and those precedents were therefore of limited assistance.
In coming to their conclusions, the court of Appeal had to answer three questions:
Did the claims result from a single act or omission or series of related series of acts or omissions?
The Court of Appeal held that "result from" means exactly the same as "caused by" and required an investigation into what was the proximate cause of the relevant claims. It was necessary for the assured to establish that the proximate cause of the claims was either a single act or related series of acts. However, the question of causation:
"involves application of the notion of proximate cause, applied with good sense, so as to give effect to and not defeat the intention of the parties."
Was there one single act or omission?
The court held that there was not a single act, error or omission. A state of affairs or underlying cause could not be described as a single act, error or omission. In coming to this conclusion, the court followed Caudle v Sharpe 3 in which it was held that a series of 32...