UK: Commercial Court Rules Again On "Series Of Related Events" Language

Last Updated: 28 June 2011
Article by Anthony Menzies, James Crabtree and Susannah Wakefield

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

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 Ł100m.  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:

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

The Defendant insurers were successful on both counts. 

Matters occurring after completion were subject to the indemnity in the deed only if they formed part of a continuing series of related events or matters existing before the completion date. That was not the position, on the facts of this case, so the court found. The particular instance of negligent broking that gave rise to Standard Life's claim was that committed by Aon in 1998.  Even if that act of negligence took place within 12 months of the completion date (a point about which there was also a factual dispute), and even if it took an identical form to the prior acts of negligence committed by its predecessor, it was nevertheless a separate event or matter, rather than merely forming part of an earlier related series.  Upon the 1998 renewal, Aon was subject to a distinct duty to Standard Life to procure a policy suitable for its needs.  Accordingly, Travelers owed no liability to Aon under the deed.

Moreover, even if the position were otherwise, the court held that the Defendant insurers would have no liability to indemnify Travelers under the latter's PI policy. That policy responded only to Wrongful Acts committed by the insured (Minet) and its employees, not those of Aon.  While the policy did extend to cover events during the 12 months after the completion date, but which related to Wrongful Acts committed before it, it remained a requirement that the said Wrongful acts were those of Minet.  In this case, the negligence was committed by Aon, and so fell outside the policy coverage.

Result:  Judgment for the insurers


1. [2011] EWHC 1520 (Comm)

2. In Standard Life Assurance v Aon [2008] Lloyd's Rep IR552

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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