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The Supreme Court of New South Wales recently had to examine whether a class action constituted 192 separate claims or only one under the aggregation clause of civil liability insurance policy and, therefore, whether an excess should apply to each claim or the whole as a group.

The Bank of Queensland Ltd v AIG Australia Ltd [2018] NSWSC 1689 decision is a reminder to insurers and insureds to consider the importance of insurance policy wordings and aggregation clauses where there is exposure to multiple claims or class actions.

Background

Between March 2004 and January 2013, Bank of Queensland Limited offered a financial product to customers known as a Money Market Deposit Account (MMDA), which was operated by the bank’s agent (a company known as DDH).

Customers who invested in MMDAs usually appointed the financial planner (through whom the MMDA was purchased) as their authorised signatory. 

One of those financial planners was Sherwin Financial Planners Pty Ltd (SFP). SFP acted as the financial planner to 192 clients who had invested in MMDAs and made substantial losses.

The result was a class action brought against the Bank on behalf of the 192 SFP clients. The main allegations in the representative proceedings were that:

  • SFP was operating a Ponzi scheme, which included making unauthorised transactions from the MMDAs
  • the Bank’s agent DDH had a contractual duty, either expressly or by implication, not to carry out suspicious instructions or instructions for withdrawals from SFP without question and it failed in this duty, and
  • the Bank was ultimately responsible for the actions of DDH.

The Bank settled the group proceedings for a substantial sum and sought indemnity from its insurers for the settlement amount, which exceeded the policy excess. The amount of the settlement due to each group member was relatively small—and the total amount payable under the policy would have been quite small if the excess applied separately to each group member.

The Bank’s insurers argued that the Bank’s liability to the group members arose from multiple claims and that each of these claims was subject to a separate excess. 

The Bank argued that the claims should be aggregated, so that only one excess was payable for the whole settlement.

The question before the Court was whether the loss for which the bank sought indemnity arose from a single claim attracting only one excess or from multiple claims attracting 192 excesses.

The decision 

The Court rejected the insurers’ contention that the multiple claims set out in the pleadings constituted multiple claims for the purposes of the policy.

Instead, the Court found that the class registration forms that were completed by each member of the group constituted a separate claim for the purposes of the Policy.

Each of these claims arose from a separate act, made on a different occasion, from a different MMDA, causing loss to different parties and in response to different and separate purported instructions. 

Therefore, the wrongful acts that gave rise to the claims lacked sufficient commonality and relatedness to be considered as “a series of related wrongful acts” as is required by the Policy’s aggregation clause. The result was that, despite having their principal argument rejected, the insurers were successful in applying multiple excesses.

The future for aggregation clauses in representative proceedings

This decision impacts insurers and insureds as multiple excesses may be applied to claims for representative proceedings in circumstances where:

  • the members of the group or class are clearly identifiable as individual claimants
  • the losses suffered by each member of the group or class arise from clearly defined and distinguishable events, and
  • these events occur at different times, create different losses and come about for different reasons.
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