UK Legal - A question of aggregation.

(From Reinsurance)

Byline: John Butler.

The question before the House of Lords in Lloyds TSB General Insurance Holdings v Lloyds Bank Group Insurance Co. Ltd [2003] UKHL 48, as a preliminary issue, was whether various companies in the TSB group could aggregate losses in order to recover under a bankers composite insurance policy in respect of payments made by the TSB companies to settle claims brought against them for breaches of the Financial Services Act 1986.

The breaches complained of were that investors had been persuaded, by the TSB companies' sales representatives, to transfer from their employer's occupational pension schemes to personal pension schemes without adequate advice about the risks, advantages and disadvantages of doing so.

The main reasons for this mis-selling appears to have been the inadequacy of the training and monitoring of the representatives by the companies employing them. These failures themselves also constituted breaches of the obligation to provide training schemes for representatives and to make arrangements for monitoring their performance to ensure that they complied with the required code of conduct.

Mis-selling claims covered

About 22,000 claims for mis-selling had been settled by the TSB companies for more than GBP125m ($200m) in total. There was no doubt that each claim fell within the cover given by the policy for financial loss caused by a breach on the part of the assured of the provisions of the 1986 Act and, as was the case in this instance, rules and regulations made by any regulatory authority or self-regulatory organisation pursuant to the provisions of the act.