Mobile Menu
Articles

Aggregation of Losses under English, Cayman Islands, and Bermuda law: A COVID-19 reminder for Insurers and Reinsurers

The longer and further that COVID-19 spreads, the more likely it is that there will be disputes as to whether or not COVID-19 related losses can be aggregated by (re)insureds for the purpose of (re)insurance claims.

Many individual COVID-19 related claims will be too small on their own to reach the attachment point of most excess of loss or catastrophe reinsurance treaties. If aggregated, however, they might well be within the scope of the excess layer or the reinsurance cover.

The aggregation question is not only of interest in the context of Property and Business Interruption Claims. It will also arise in other lines of business underwritten in Bermuda and the Cayman Islands, including, Workers’ Compensation, Accident, Health, Travel, Event Cancellation, D&O Liability, Professional Liability, Medical Malpractice Liability, and Employment Liability.

The most common type of aggregation clause is one that groups losses or claims by reference to a single “event” or “occurrence“; or, in the context of liability insurance, by reference to “similar” or “related” acts or omissions.

A standard form aggregation clause in a reinsurance contract, for example, might be as follows:


  • The term “Loss Occurrence” shall mean the sum of all individual losses directly occasioned by any one disaster, accident or loss or series of disasters, accidents or losses arising out of one event which occurs anywhere in the world”; or

  • All Claims arising from similar acts or omissions in a series of related matters or transactions will be regarded as one Claim”.


For COVID-19 related losses, which may have been spread across a large geographical area, and over a relatively long period of time, can it be said that they have been caused by “one disaster, accident, or loss”, or by one “series of disasters” arising out of one “event”?

In the case of COVID-19 related liabilities, can it be said that they have all arisen from similar acts or omissions in a series of related matters or transactions?

 

To continue reading full articles in PDF format:
Aggregation of Losses under English, Cayman Islands, and Bermuda law: A COVID-19 reminder for Insurers and Reinsurers

 


Alex Potts QC
Partner, Head of Cayman Islands Litigation & Restructuring

Cayman Islands   +1 345 814 7394


Jonathon Milne
Partner

Cayman Islands   +1 345 814 7797
Mobile  +1 345 925 2952


Accolades
_

"They understood the urgency and demanding nature of the deals that we were working on - they were very responsive and commercial, and worked with us to make it happen."
- Chambers Global