University of Exeter v Allianz Insurance plc

Insurance policy – Exclusion – Proximate cause of damage – Respondent issuing insurance policy to appellant university covering damage to property unless excluded – War exclusion clause excluding damage occasioned by war – Appellant’s property suffering damage following controlled explosion of Second World War bomb – Appellant claiming under policy – Respondent declining claim in reliance on war exclusion clause – High Court upholding decision – Appellant appealing – Whether loss within scope of exclusion clause – Appeal dismissed The respondent company issued an insurance policy to the appellant university which covered damage to property unless excluded. A war exclusion clause excluded damage occasioned by war. In February 2021, contractors working on what was by then a construction site unearthed a 1000kg/2,200lb thin-cased high-explosive bomb dropped by German forces during the Second World War on land adjacent to the appellant’s campus. A safety cordon was promptly established around it and the appellant’s halls of residence were evacuated. An explosive ordinance disposal team determined that the condition of the bomb (due to ageing and rusting), the uncertainty as to whether it was booby trapped and the impracticality of moving it through built-up areas to a disposal site meant that it had to be dealt with on site by a controlled explosion. When it detonated, damage was caused to some buildings in the immediate vicinity of the site, including the halls of residence. The appellant made a claim under the insurance policy relating to the physical damage to the halls of residence and the business interruption caused by the need to temporarily rehouse the students. The respondent declined the claim on the basis that the loss fell within the scope of the war exclusion clause in the policy, being loss and damage occasioned by war. The respondent issued proceedings seeking declarations that it was entitled to decline the claim. The High Court concluded that the dropping of the bomb (which was accepted as an act of war) was the sole proximate cause of the damage so that the exclusion clause applied: [2023] EWHC 630 (TCC). The appellant appealed. Held: The appeal was dismissed. (1) The starting point was the proper interpretation of the insurance policy in issue. The question for the court was whether the initial event led inexorably to the loss through an ordinary series of events, or whether there was a subsequent abnormal event that negatived the causal connection between the original event and the loss. The usual rule was that an insurer was only liable for loss proximately caused by a peril covered by the policy. The policy was to be interpreted objectively, as it would reasonably be understood by an ordinary policy-holder, in this case an educational establishment owning purpose-built residential blocks for its students. Although that principle was based on the presumed intention of the contracting parties, and could therefore be subject to contrary agreement, it was not suggested that such contrary agreement existed here. In the vast majority of cases, for an event to be a cause or a proximate cause, it was likely that the “but for” test would be satisfied: asking whether the accident would have happened but for event X. However, there was nothing in principle that precluded an insured peril, which, combined with many other similar uninsured events, had brought about a loss with a sufficient degree of inevitability, from being regarded as a proximate cause of the loss. That was so even if the occurrence of the insured peril was neither necessary nor sufficient to bring about the loss by itself: Financial Conduct Authority v Arch Insurance (UK) Ltd [2021] UKSC 1; [2021] EGLR 18; [2021] AC 649 and Brian Leighton (Garages) Ltd v Allianz Insurance plc [2023] EWCA Civ 8; [2023] PLSCS 8 applied. The proximate cause of the loss was not the last cause of the loss, but that which was proximate in efficiency, being the dominant, effective or efficient cause. There might be more than one proximate cause of a loss. Where there were concurrent causes of approximately equal efficiency, and one was an insured peril and the other was excluded by the policy, although it was always a question of interpretation, the exclusion would usually prevail: Wayne Tank & Pump Co Ltd v Employers Liability Incorporation Ltd [1974] QB 57 applied. (2) The loss and damage in February 2021 resulted from two concurrent causes of approximately equal efficacy. One was the dropping of the bomb in 1942. The other was its controlled detonation almost 80 years later. It was the combination of those two causes which made the loss inevitable, or at least in the ordinary course of events. Neither would have caused the loss without the other. The effluxion of time did nothing to reduce the potency of the bomb. At the point of the explosion, the bomb did what it was always meant to do. Inevitably, the discovery of a large, unexploded bomb would involve a number of individual decisions as to the best way in which to neutralise it. From a causation perspective, that network of individual decisions could not have any relevance to causation unless something was done which broke the chain of causation (such as an act of negligence). That was not the case here. This was a classic case where there were two concurrent causes of the loss and damage: the act of war in 1942 and the detonation of the bomb as a result of the attempted detonation in 2021. They were of approximately equal efficacy. One of those concurrent causes was expressly excluded from cover under the policy. In those circumstances, the rule in Wayne Tank was that the exclusion would generally prevail. (3) Each of the arguments which sought to exclude the dropping of the bomb as a concurrent cause of the loss and damage was artificial: each sought to exclude or minimise the causative effect of a critical event which ultimately led to the explosion, namely the dropping of a large high-explosive bomb in 1942. The judge was right to conclude that there were two concurrent causes of the loss and damage: the dropping of the bomb and its detonation. Those two causes were of approximately equal efficacy. The former was excluded, the latter was not; the rule in Wayne Tank therefore dictated that the claim failed: Leyland Shipping Co v Norwich Union Fire and Insurance Society [1918] AC 350, Reischer v Borwick [1984] 2QB 548 and Financial Conduct Authority v Arch Insurance (UK) Ltd considered. David Pliener KC (instructed by Fenchurch Law Ltd) appeared for the appellant; Isabel Hitching KC (instructed by DAC Beachcroft LLP) appeared for the respondent. Eileen O’Grady, barrister Click here to read a transcript of University of Exeter v Allianz Insurance plc