Reed Smith Client Alerts

The UK Supreme Court has handed down its decision in AIG Europe Limited v Woodman and others [2017] UKSC 18. In doing so, the Supreme Court reversed the decision of the Court of Appeal.

It found, broadly, for the insurer (AIG) in its interpretation of the meaning of the words “a series of related matters or transactions” in the relevant aggregation clause, but in practice this should not mean that policyholders should fear the worst.

While this dispute concerns a clause in a solicitors’ professional indemnity policy (the Policy), it has wider implications for other liability insurance contracts.


The insurance dispute arose out of two sets of claims brought against two now-defunct firms of solicitors in relation to separate holiday-resort development schemes in Turkey and Morocco.

The underlying claimants were investors in the schemes, as part of which their investment funds were to be held in escrow by the solicitors. The solicitors acted as trustees of two trusts that had been established to own (or hold a charge over) the development property as security for the investors. The idea was that the solicitors would hold the funds until such time as certain ‘cover tests’ (relating to the value of the trust assets) were met. The funds could then be released to the scheme developers.

The developers were subsequently wound up, however, following an FSA prohibition on them receiving further investments in relation to the developments. Unfortunately, it became apparent that the money held in escrow had been paid out prematurely.

The investors therefore sued the solicitors, alleging breaches of contract, trust and fiduciary duty, misrepresentation and negligence. The total claims were for over £10 million.