Insurers' Liability in Respect of Rogue Surgeon's Crimes Limited to £10 Million

The activities of rogue surgeon Ian Paterson, who subjected hundreds of women to incomplete or entirely unnecessary mastectomies, gave rise to a Court of Appeal ruling of great significance to the insurance industry.

Over a period of about 14 years, Paterson, who is currently serving a 20-year prison sentence, routinely operated without the informed consent of patients. In many cases his apparent motive was financial gain. After damages claims were lodged by about 750 of his former patients, the operator of two private hospitals where he practised agreed to contribute around £27 million to a compensation fund. The operator's overall outlay, including legal costs, came to over £37 million.

The operator's insurance policy was subject to an overall limit of indemnity of £20 million and a separate limit of £10 million in respect of all claims that were consequent on or attributable to a single source or original cause. On that basis, the insurers argued that their liability was capped at £10 million. However, after the operator launched proceedings, a judge found that they were obliged to pay £20 million.

Paterson's victims fell into two groups. The first was made up of those who were subjected to incomplete mastectomies, thus exposing them to a risk of breast cancer spreading or recurring. The second comprised patients whose mastectomies were unnecessary in that Paterson had falsely reported pathology test results as indicative of the presence, or the risk of the presence, of cancer. The judge accepted the operator's case that the insurers were obliged to pay £10 million in respect of each of those groups.

Upholding the insurers' appeal against that outcome, the Court found that their overall liability was limited to £10 million. On the correct application of the aggregation clause in the insurance policy, all of the patients' claims arose out of the same source or original cause, namely Paterson's conduct in disregarding their welfare and performing operations on them without their informed consent. It was immaterial that for the first group of patients a mastectomy was clinically indicated, whereas for the second group it was not.