Roderic McLauchlan and Avraham Sharabi of Clyde & Co discuss a recent Canadian case laying down a test for aggregation.
Questions of aggregation arise frequently in professional liability matters, but surprisingly there are few Canadian authorities on this issue. However, the Ontario Court of Appeal recently provided guidance on the proper analysis in Simpson Wigle Law LLP v Lawyers' Professional Indemnity Company (2014), a case which has ramifications for professional indemnity and liability contracts generally.
The defendant lawyers (Simpson) faced a claim by the trustees of the estate of a deceased client. The proceedings arose from estate planning and executory legal services provided in respect of two brothers: Angelo and Frank Agro.
Simpson prepared powers of attorney in case of incapacity for Angelo and a will in respect of Frank. A few years later, in 1993, the firm was instructed to bring an application by a local bank to have Angelo declared incompetent and partners of Simpson and the bank were appointed substitute decision-makers. In so doing, the firm omitted to advise the court of the existing powers of attorney, which named Frank or alternatively his nephew Richard Agro attorneys. Frank died in 1996 and the firm was appointed to act as executor of his estate. At the direction of the firm, six properties jointly owned by the two brothers were allegedly sold improvidently.
Following Angelo's death in 2000, his estate began an action against the firm, seeking damages for the costs, fees and expenses arising from the allegedly wrongful appointment of Simpson as Angelo's attorney and for the diminution of Angelo's estate as a result of the improvident or unnecessary sales of the properties.
Faced with claims exceeding the single claim limit, Simpson brought an application for a declaration the lawsuit brought against it consisted of more than one claim. Its objective was to invoke the aggregate limits of its insurance policy.
The policy wording read as follows: "All claims ... which arise from a single or related error(s), omission(s), or negligent act(s), shall be considered a single claim..." The policy did not define the crucial term "related".
Although certain US authorities interpret "related" to be a loose connecting factor that aggregates claims if they arise from a general "course of conduct", the Ontario Court of Appeal considered a more granular analysis was required, focusing on the underlying acts. In particular, the court found the plain wording of the policy called for a consideration of the specific allegations underlying each claim, looking behind the general labels and causes of action.
The court held it must enquire whether there was "sufficient association or connection" between the claims, having regard to the nature and kind of alleged misconduct underlying each claim, as well as the kind and character of thelosses alleged in each claim. This is a narrower test, especially in the context of an ongoing professional relationship for a period of time. The court concluded the two claims were sufficiently different in kind and character that the aggregate limits under the policy applied.
This aggregation wording is very common in Canadian commercial and professional policies and this guidance is helpful for future cases. However, aggregation remains a very fact-sensitive analysis, which is dependent on the court's impression of individual cases.
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