Spire Healthcare Ltd v Royal & Sun Alliance Insurance plc  EWHC 3299 (Comm)
Medical negligence claims were consequent on or attributable to two distinct sources or original causes: the Commercial Court reiterates the principles applicable to “original cause” aggregation wording and applies those principles to the conduct of a disgraced surgeon. Daniel Shapiro QC and David Myhill acted for the successful Claimant, Spire Healthcare Ltd.
Judgment in Spire Healthcare Ltd v Royal & Sun Alliance Insurance plc  EWHC 3299 (Comm) was handed down today by HHJ Pelling QC (sitting as a judge of the High Court) following a remote trial in November 2020.
HHJ Pelling QC reaffirmed the principles relating to the interpretation of an aggregation clause in an insurance policy which aggregates claims “consequent upon or attributable to one source or original cause” and applied them in the context of a combined liability policy under which RSA promised an indemnity to Spire for Spire’s legal liability for medical negligence (“the Policy”).
The insurance indemnity arose out of claims brought against Spire and other defendants by patients injured by the disgraced breast surgeon Mr Ian Paterson. Spire contributed a substantial sum to a compensation fund for the patients and sought indemnity from RSA.
Applying the established legal principles to the facts, the Court agreed with Spire that claims brought by patients of Mr Paterson arose out of two distinct sources or original causes. Spire was therefore entitled to an indemnity subject to two any one claim limits, so that the total indemnity under the Policy was £20 million rather than £10 million as contended for by RSA.
The factual background
Mr Paterson practised in the NHS at the Heart of England NHS Foundation Trust (“HEFT”) and from two hospitals for which Spire was responsible between around 1993 and 2011. He had a practice, both in the NHS and private sector, of undertaking procedures which he termed “cleavage sparing mastectomies” – an unrecognised form of sub-total mastectomy (“STM”) – on patients who properly required a mastectomy. Where a mastectomy is clinically indicated, all breast tissue should be removed to eliminate or reduce the risk of a recurrence of cancer in remaining breast tissue. To leave breast tissue behind is negligent. He had been asked to stop performing this form of procedure, and had agreed to do so. During 2011 it became apparent that, contrary to his agreement, Mr Paterson had not ceased to carry out STMs. His reasons for performing such procedures remain unclear. He was sanctioned by the GMC and suspended by Spire.
Following his suspension, through its investigations into STMs, Spire discovered that Mr Paterson had also engaged in a separate, abhorrent form of conduct. Mr Paterson had falsely reported pathology or imaging to patients as indicating they had a cancerous or pre-cancerous condition, when in fact the pathology or imaging was benign. He then falsely advised them they required surgery, when they did not. He then carried out surgical procedures on patients where there was no clinical indication for that surgery. It appears that he did so for financial gain. That strand of conduct gave rise to Mr Paterson’s conviction for offences under sections 18 and 20 of the Offences against the Person Act 1861 for which he received a sentence of, following its increase by the Court of Appeal, 20 years’ imprisonment.
Those two strands of conduct gave rise to claims brought by patients of Mr Paterson against Mr Paterson, Spire, and HEFT (“the Underlying Litigation”). Spire settled the Underlying Litigation by way of a confidential settlement so that the patients received compensation and sought an indemnity from RSA under the Policy.
The Policy wording and the parties’ contentions
The relevant clause in the Policy reads:
“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…”
The Limit of Indemnity was £10 million and the Policy was further subject to an aggregate limit of indemnity £20 million. RSA admitted that it was liable to indemnify Spire under the Policy but only to the extent of £10 million, rather than the full aggregate limit of £20 million. RSA contended that all of the Claims all arose out of one source or original cause, specifically either “Mr Paterson” or “Mr Paterson and his conduct”.
Spire contended that it was entitled to an indemnity of £20 million as there were two distinct groups of claims each consequent on or attributable to a distinct source or original cause:
- Claims consequent on or attributable to Mr Paterson’s negligent conduct, whereby he carried out a cleavage sparing mastectomy where a mastectomy was clinically required.
- Claims consequent on or attributable to Mr Paterson’s deliberate conduct, where he dishonestly reported false pathology to Patients as to the existence or risk of cancerous tissue, and then assaulted Patients by performing unnecessary surgery where there was no clinical indication for such surgery.
The Court’s decision
HHJ Pelling QC conveniently and correctly summarised the principles in relation to the interpretation of the words “consequent on or attributable to one source or original cause” in his judgment:
- Following AXA Reinsurance (UK) Ltd v Field  1 WLR 1026 and Municipal Mutual Insurance Limited v. Sea Insurance Company Limited and others  Lloyds Rep I & R 421, this form of wording requires the widest possible search for a unifying factor in the history of the losses it is sought to aggregate. Further, reflecting the decision of Eder J in ACE and Beazley Underwriting Limited v The Travelers Companies Incorporated  EWHC 1520 (Comm) losses should be traced back to wherever a common origin can reasonably be found, and the doctrine of proximate cause does not apply.
- However, the search is not to be undertaken at such a level of abstraction so as not to be useful in the search for an effective original cause: The Cultural Foundation and another v. Beazeley Furlonge Limited and others  EWHC 1083 (Comm). That principle is also seen in ACE where Eder J referred to tracing back to where a common origin can reasonably be found.
- Indeed, the search for a unifying factor is a search for why something happened: see Countrywide Assured Group plc & Others v Marshall and others  EWHC 2082. There is a need for a causal link between the originating cause and the loss, and there must be a limit to the degree of remoteness: American Centennial Insurance Co. v. INSCO Ltd L.R.I.R 407.
- There is no distinction to be drawn between an “original cause” on the one hand and an “originating cause” on the other: see Countrywide Assured Group plc & Others v Marshall and others EWHC 2082 (Comm).
- An individual’s reason for acting in a particular way is capable of being an originating cause if a mis-appreciation or deliberate decision leads that individual concerned to commit the negligent acts or omissions leading to the claims that an insurer seeks to aggregate – see Cox v Bankside Members Agency Ltd 2 Lloyds Rep 437. However, HHJ Pelling QC concluded at  that where a single individual operates under two separate mis-appreciations or decisions, each resulting in negligent acts or omissions leading to multiple claims, there could be separate originating causes (being each of the separate mis-appreciations or decisions) even though only one individual was involved.
Application to the facts
HHJ Pelling QC then applied those principles to the facts. He found that much of the background was uncontroversial and that it was common ground that there were the two distinct aspects to Mr Paterson’s conduct on which Spire relied, namely that Mr Paterson negligently performed STMs on Patients where a mastectomy was clinically indicated and/or justified (“Group 1”) and carried out unnecessary surgical procedures where there was no clinical indication for the surgical procedure undertaken (“Group 2”).
RSA’s case as to the original source or cause evolved during trial; by closing RSA sought to argue that the claims aggregated because they all arose from the deliberate misconduct of Mr Paterson whereas at the time of opening RSA was contending they all arose from Mr Paterson’s negligent clinical care.
HHJ Pelling QC’s considered there were clear differences between the two groups of case, which were also apparent from the way in which the claim was pleaded in the Underlying Litigation. In relation to the Group 1 claims, the surgery exposed such patients to the risk of recurrence of breast cancer, the consequent risk that it would metastasise to form tumours elsewhere, and there was no evidence of any financial gain to Mr Paterson. In contradistinction, in the Group 2 claims the surgery was carried out almost entirely in the private sector and, as the judge found, was largely for financial gain. The conduct did not expose the patients to any increased risk of cancer – as they did not have a cancerous tumour in the first place. The Court found that Mr Paterson’s motivation in relation to Group 1 cases, which appeared to be either that he rushed surgery or was keen to offer patients a better cosmetic outcome, was different from his motivation in relation to Group 2 cases, which was financial.
Although Mr Paterson had been dishonest with patients in both groups, the dishonesty involved in each group was of an entirely different character. The dishonesty in failing to tell the patient of the need for a mastectomy and the risks inherent in performing a cleavage sparing mastectomy was of an utterly different character to that involved in dishonestly telling a patient that diagnostic tests suggested they had cancer so as to induce them to undergo entirely unnecessary surgery when in fact those tests were benign.
Finally, the Judge held that the management issues on the part of Spire which led to the continuation of the two strands of conduct were different in nature: the Group 1 claims involved a failure was largely one of a failure by other clinicians to notice or comment on Mr Paterson’s practice, which ought to have been apparent to them after surgery had been performed. Conversely the management failure in the Group 2 was a failure to challenge the need for surgery before it was carried out.
As to RSA’s contention that the claims were each characterised as claims in negligence in the underlying litigation, the Court found that the relevant issue was not the legal classification of the claims but rather the factual basis of the claims.
The Court found that the two groups of claims were consequent on or attributable to two distinct sources or original causes. HHJ Pelling QC rejected RSA’s contention that the claims should aggregate on the basis of “Mr Paterson” or “Mr Paterson and his conduct” because although he was a single individual, he operated under two separate mis-appreciations or motivations, each resulting in multiple claims, such that there were separate originating causes.
At  HHJ Pelling QC explained:
“…the fundamental difference was that in the Group 1 cases the procedures were carried out on patients that required mastectomies in order to remove the breast tissue from a breast that had cancerous tumours within it whereas in the Group 2 cases the patients concerned were not suffering from any medical condition that necessitated the treatment undertaken. Whether the cause of action available to patients in each group is legally characterised as negligence or assault is immaterial. What matters is essentially a factual question – what factually was the original cause of each of the claims? As I have said, when analysed at that level, the original cause of the group 1 cases was not the original cause of the Group 2 cases.”
The Court also determined a number of subsidiary facts relating to the nature of the settlement in the Underlying Litigation in Spire’s favour, having heard evidence at trial.