Scott v Copenhagen Reinsurance Co (UK) Ltd [2003] EWCA Civ 688 is a helpful illustration of the difference between a single "event" and a broader state of affairs or originating cause. It reinforces the line the courts have consistently drawn when interpreting aggregation wordings.
The losses arose from the destruction of a number of aircraft that were on the ground at an airport during a period of armed invasion and occupation. The aircraft were lost over a period as the situation unfolded. The reinsurance in question aggregated losses "arising out of one event", and the question was whether the destruction of all the aircraft could be treated as arising out of a single event.
The Court held that the losses did not all arise out of one event. The invasion and occupation were better described as a state of affairs, or an originating cause, than as a single event. The aircraft were lost at different times and in different circumstances as events unfolded, so the unities of time and manner were absent. The wider concept of an "originating cause" might have gathered the losses together, but the narrower "event" wording did not.
The reasoning transfers directly to professional indemnity. A firm-wide failing that produces losses over months or years resembles a state of affairs rather than a single event. Under an "event" wording, the individual errors are likely to stand as separate events; only a wider "originating cause" wording is likely to draw them together. The choice of word therefore determines the shape of the recovery.
Firms arranging cover as insurance brokers should recognise when an "event" wording will fail to aggregate a long-running problem, and engineers whose designs are repeated across multiple projects should understand how a recurring design error would be characterised. Apex reads aggregation wordings against the case law when arranging professional indemnity cover.
Scott v Copenhagen Re separates a single event from a prolonged state of affairs. Consider:
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