Spire Healthcare Ltd v Royal & Sun Alliance Insurance Plc
| Jurisdiction | England & Wales |
| Judge | Lord Justice Simon,Sir Geoffrey Vos |
| Judgment Date | 02 March 2018 |
| Neutral Citation | [2018] EWCA Civ 317 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2017/0061 |
| Date | 02 March 2018 |
[2018] EWCA Civ 317
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
COMMERCIAL COURT
(His Honour Judge Waksman QC)
Royal Courts of Justice
Strand, London, WC2A 2LL
Sir Geoffrey Vos, CHANCELLOR OF THE HIGH COURT
and
Lord Justice Simon
Case No: A3/2017/0061
Michael Harvey QC and Daniel Shapiro (instructed by CMS Cameron McKenna Nabarro Olswang LLP) for the Appellant
Graham Eklund QC (instructed by DWF LLP) for the Respondent
Hearing date: 8 February 2018
Judgment Approved
Introduction
This appeal raises a short point of construction in relation to the provisions of a combined liability insurance policy (‘the policy’) issued by Royal & Sun Alliance Insurance Plc (‘the insurer’) to the appellant (‘Spire’) in respect of a period of insurance from 31 August 2011 to 30 August 2012. The issue turns primarily on the wording of two parts of the policy: the limits of liability set out in the schedule (section 4 dealing with medical negligence) and the general provisions dealing with medical negligence (section 4) and, in particular, proviso 5.
The material part of the schedule provided, in relation to medical negligence:
| £10,000,000 | Limit of Indemnity | Any one claim and £20,000,000 in respect of all damages costs and expenses arising out of all claims during the period of insurance. |
The material part of proviso 5 provided:
5 A. The total amount payable by the Company in respect of all damages costs and expenses arising out of all claims during any Period of Insurance consequent on or attributable to one source or original cause irrespective of the number of Persons Entitled to Indemnity having a claim under this Policy consequent on or attributable to that one source or original cause shall not exceed the Limit of Indemnity stated in the Schedule
B. the total amount payable by the Company in respect of all damages (costs and expense) arising out of all claims during any Period of Insurance irrespective of the number of sources or original causes of such claims and irrespective of the number of Persons Entitled to Indemnity having claims under this Policy in respect of those sources or original causes shall not exceed the appropriate Limit of Indemnity stated in the Schedule
The letters A and B do not appear in proviso 5, but have been added for convenience so as to identify two of the three parts of the clause. The words in parenthesis in proviso 5B are not in the original but are agreed between the parties to be added. These and some of the other provisions of the policy, which were referred to by the parties in the course of argument, are set out as an appendix to this judgment.
Spire contended on this appeal, as it did in the court below, that the limits of the indemnity were set out in the schedule and that proviso 5A did not qualify the limit of £10 million for any one claim in respect of damages costs and expenses arising during the insurance period. The insurer repeated the submission that found favour with HH Judge Waksman QC (‘the Judge’) that, where there were a number of claims consequent on or attributable to one source or original cause, proviso 5A fixed the level of indemnity at £10 million in respect of all such claims.
The significance of this dispute lay in the background to Spire's claim under the policy.
Spire operated a number of private hospitals where Mr Ian Paterson, a Consultant Breast Surgeon, carried out his private practice between 2004 and the end of August 2011. Over 700 of his former patients brought claims alleging that Mr Paterson carried out operations which were unnecessary, inappropriate and negligent. Those claims have been settled by an agreement to set up a £37 million settlement fund for distribution among the claimants, with Spire agreeing to pay £26,950,000 into this fund. The settlement was approved by the High Court on 27 September 2017. The question of the level of the indemnity in the case of multiple claims attributable to one source or original cause is therefore highly material to Spire's ability to recover under the policy.
In his judgment reported at [2016] EWHC 3278 (Comm) the Judge concluded that the language of proviso 5A was clear. Its effect was to aggregate linked claims. His reasons, set out at [20] of the judgment, can be summarised. He identified three types of claim: (i) a single claim, (ii) a number of linked claims, (iii) a number of unlinked claims. He acknowledged that proviso 5A did not expressly state that linked claims were to be treated as a single claim but he found that this was the effect of an aggregating clause. Nor was there any difficulty in identifying which financial limit applied. It was the lower one that would otherwise apply: £10 million which was referenced to ‘one claim.’ Since there was no ambiguity about the effect of proviso 5A, the question of applying the contra proferentem rule did not arise.
The argument
Mr Harvey QC submitted that the starting point for construing the policy was section 4 of the General Provisions — medical negligence. The insurance was on a claims-made basis. Proviso 1 made clear that the amount payable was not to exceed the amount stated in the schedule. The schedule itself gave two limits to the indemnity: £10 million in respect of any one claim and an overall limit of £20 million in respect of all claims during the period of the cover. The limit to the indemnity in respect of medical negligence was in the same clearly expressed form as was, for example, the limits to the indemnity in respect of employers' liability (section 1).
He submitted that the Judge was wrong to construe proviso 5A inconsistently with the express words of the schedule and to give it distinct effect.
First, he drew attention to the well-known observations of Lord Neuberger of Abbotsbury PSC in Arnold v. Britton [2015] AC 1619 at [15] and [17]:
15. When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to ‘what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean’, … And it does so by focussing on the meaning of the relevant words, … in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the lease, (iii) the overall purpose of the clause and the lease, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party's intentions …
…
17. … The exercise of interpreting a provision involves identifying what the parties meant through the eyes of a reasonable reader, and, save perhaps in a very unusual case, that meaning is most obviously to be gleaned from the language of the provision. Unlike commercial common sense and the surrounding circumstances, the parties have control over the language they use in a contract. And, again save perhaps in a very unusual case, the parties must have been specifically focussing on the issue covered by the provision when agreeing the wording of that provision.
He submitted that the reasonable reader of the policy would focus on the schedule with its provision for ‘Limits of Liability’ and a ‘Limit of Indemnity.’ The significance and importance of the ‘Limit of Indemnity’ was emphasised throughout the policy with repeated reference to it, for example provisos 1, 3 and 4. The Limit of Indemnity was clear in its terms: the indemnity was £10 million any one claim with an overall limit of £20 million. In these circumstances the reasonable reader of the policy should not be expected to search through 69 pages of wording in the policy, much of it containing wording that was ambiguous or superfluous, in order to see if there might be a qualification to the clear wording as to the limit of the indemnity in respect of single claims.
Second, Mr Harvey submitted that, although the Judge had rightly acknowledged that proviso 5A did not expressly say that linked claims were to be treated as a single claim, he was wrong to assume that the consequence...
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