Lloyds TSB General Insurance Holdings v Lloyds Bank Group Insurance Co Ltd [2003] UKHL 48 remains the classic authority on the difference between aggregating by "event" and aggregating by "originating cause". The two wordings look similar but operate very differently, and this decision explains why.
The insured faced a large number of claims arising from the mis-selling of pension products. Many different advisers had sold to many different customers over a period of years. The aggregation wording in the relevant layer allowed claims to be treated as one where they arose from "any one event". The insured argued that the common failure — an inadequate system of training and compliance — was the single event that unified the claims.
The House of Lords held that the claims did not aggregate. An "event" is something that happens at a particular time, at a particular place, in a particular way. A continuing state of affairs — such as a defective sales culture or a failure to train advisers properly — is not an event. Each individual act of mis-selling was a separate event, so the claims could not be collapsed into one.
The decision shows that the aggregating trigger is not a formality. A firm insured under an "event" wording and a firm insured under an "originating cause" wording can face very different outcomes on identical facts. For a professional exposed to a systemic error repeated across many clients, an "event" wording tends to multiply excesses; an "originating cause" wording tends to consolidate the loss against a single limit.
This case arose from financial mis-selling, so it speaks directly to the exposures faced under independent financial advisers' PI insurance, where the same advice model can be repeated across a client bank. It is equally relevant to accountants who apply a single flawed treatment across multiple client files. Understanding which aggregating word your policy uses — and what the courts have made of it — is part of understanding your true exposure. Apex reviews these wordings with professional firms as part of arranging cover.
The Lloyds TSB line makes the aggregating word decisive. When reviewing cover, look for:
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 724952. This entry is general information, not advice on any particular policy.