Bombshell ruling for University of Exeter

Stuart Pemble considers the difficulties caused for the University of Exeter by an unexploded Second World War bomb. Key points The dropping of a Second World War bomb, rather than its subsequent explosion in 2021, has been held to be the proximate cause of loss caused by the explosion As such, the insurance claim failed because it was caught by the war exclusion clause in the policy I am not aware of many cases where a judge refers to Aristotle, Sir Francis Bacon and Hermann Göring when deciding the issues in question, but Judge Bird, in Allianz Insurance plc v The University of Exeter [2023] EWHC 630 (TCC), does just that. Aristotle’s writing on the “doctrine of cause” and Bacon’s analysis of legal causation from his 1596 text Maxims of Law are both used to decide whether the losses suffered by the university as the result of a controlled explosion of a Second World War bomb (nicknamed a “Hermann” after the notorious Nazi) were covered by the university’s buildings insurance policy issued by Allianz, the claimant insurer. The facts In February 2021, contractors working on a construction site adjacent to the university’s campus discovered an unexploded 1000k SC1000 thin-cased bomb dating back to 1942. Halls of residence were evacuated and the Royal Logistics Corps’ bomb disposal experts were called in. The bomb’s fuze was severely degraded and the bomb could not be moved safely for a controlled explosion elsewhere. It was therefore detonated on site. Despite all appropriate precautions being taken, the nearby halls of residence were damaged. The university claimed under its insurance policy to repair that damage and to compensate it for the cost of rehousing the students who had been evacuated. Allianz rejected the claim. The problem for the university was that many insurance policies – including the one in issue – contain what is known as a war exclusion clause. In this instance, there was no cover for “loss, destruction, damage, death, injury, disablement or liability or any consequential loss occasioned by war…” The parties accepted that, if the war exclusion clause applied, then Allianz was right to reject the claim and that, if it did not, the university was entitled to compensation. Judge Bird therefore had to decide whether or not the losses suffered by the university counted as loss, destruction or damage occasioned by war. The law In order to answer that question, the judge focused on the proximate (or efficient) cause of the university’s loss. In doing so, he considered a wide range of sources: Aristotle and Sir Francis Bacon, as well as authorities including Reischer v Borwick [1894] QB 548, Leyland Shipping Company v Norwich Union Fire Insurance Society Ltd [1918] AC 350, Yorkshire Dale Steamship Co Ltd v Minister of War Transport [1942] AC 691 and Financial Conduct Authority v Arch Insurance Ltd and others [2021] UKSC 1; [2021] EGLR 12. He stressed that proximate cause has “a particular meaning” in insurance cases. The key point – as held by the Supreme Court in Arch (citing Yorkshire Dale with approval) – was that the test is “a matter of judgment based on common sense rather than over-analysis”. In this case, there were two possible proximate causes – the dropping of the bomb and its subsequent detonation. If the dropping of the bomb was the cause, then the war exclusion clause would apply. If the detonation was the cause, then Allianz would have to meet the claim. Although not relevant to the ultimate ratio of the judgment, the judge also explained the position where (1) there are two causes of such equal or nearly equal efficacy that they can be considered as concurrent proximate causes and (2) one cause is excluded from cover and the other is included. In that scenario, the general rule is that the exclusion will prevail (unless, as argued by the university in this instance, it is disapplied by the terms of the policy in question). The decision Judge Bird was particularly influenced by the decision in Arch about adopting a common-sense approach to proximate cause: “The question whether the occurrence… was the proximate (or “efficient”) cause of the loss involves making a judgment as to whether it made the loss inevitable… in the ordinary course of events. For this purpose, human actions are not generally regarded as negativing causal connection, provided at least that the actions taken were not wholly unreasonable or erratic.” The judge accepted that there was no option but to explode the bomb on site. Because of that, detonating the bomb was a “reasonable human act”, and he had to conclude that the dropping of the bomb was the proximate cause. It was the only remaining option available. The fact that almost 80 years had passed between the bomb being dropped and the damage being caused did not alter that conclusion. The judge relied on the judgment of Lord Shaw in Leyland Shipping where he stressed “to treat [the proximate cause] as the cause which is nearest in time is out of the question”. Time is not an answer to the question of what is (and is not) proximate. Nor was there any evidence to show that time had lessened the potency of the bomb or that the explosive load had become less potent: “The passage of time had no relevant or material impact on the danger posed by the bomb.” The university also argued that it could rely on the contra proferentem principle, so that any ambiguity in the construction of the war exclusion would be construed in its favour. That argument failed: there was no ambiguity and the principle only applies to provisions exempting a party from liability. The clause did not exclude liability. It excluded cover for potential liability. Ultimately, the case rested on one fact: if the bomb had never been dropped, there would have been nothing to detonate. The bomb was the proximate cause.   Stuart Pemble is a partner at Mills & Reeve Image by Shutterstock