When is a cause a proximate cause?

A recent case has considered whether property damage caused by the controlled detonation of a World War II bomb was "occasioned by war". If it was, the damage would be excluded from cover by the operation of a war exclusion clause under a property damage and business interruption policy (the Policy).

In Allianz Insurance Plc v The University of Exeter [2023] EWHC 630 (TCC), the High Court held that the insurer was entitled to a declaration that the insured's claim for damage and other losses was not covered by the Policy due to the fact that the proximate cause of the damage was the dropping of the bomb around 80 years ago, not the controlled detonation in 2021. The case is a useful illustration of how the Courts approach the identification of a proximate cause.

This is the second case this year to consider the issue of proximate cause in the context of a policy exclusion. See our article on Brian Leighton (Garages) Limited v Allianz Insurance Plc [2023] EWCA Civ 8 where (unlike in the case here) the parties were agreed as to the proximate cause but were in dispute as to whether a policy exclusion displaced the proximate cause presumption, namely that an insurer is only liable for losses proximately caused by a peril covered by the policy.

BACKGROUND

An unexploded German bomb dropped in Exeter in 1942 was unearthed during building works in February 2021. Bomb disposal experts were called in and determined that it could not be safely removed but needed to be disposed of by controlled detonation. Despite the adoption of safety measures, the detonation of the bomb caused damage to some of the insured's buildings in the immediate vicinity.

The insured notified a claim under the Policy in respect of physical damage to student halls of residence and business interruption in connection with the temporary re-housing of students. The insurer declined the claim on the basis that any loss or damage suffered fell within the scope of the war exclusion clause, being loss and damage "occasioned by war". The war exclusion (the Exclusion) read:

“War... Loss, destruction, damage, death, injury, disablement or liability or any consequential loss occasioned by war, invasion, acts of foreign enemy, hostilities (whether war be declared or not), civil war, rebellion, revolution, insurrection or military or usurped power.”

The only issue to be determined was whether the loss and damage claimed by the insured was “occasioned by war”. If it was, the claim was excluded. If it was not, the claim would fall for cover within the terms of the Policy. The central question for the Court was to establish the "proximate cause" of the loss.

Allianz's primary case was that the proximate cause of the loss was the dropping of the bomb. That act was accepted to be an act of war and so, on their case, there was no cover. Alternatively, Allianz submitted that if the dropping of the bomb was "a" not "the" proximate cause of the loss, then even if there were other proximate causes, the Exclusion would still apply by operation of the concurrent causes rule. This states that where there are concurrent proximate causes, one insured against, the other excluded, the exclusion applies (as per Wayne Tank and Pump v Employers Liability Assurance Corp. [1974] QB 57).

In contrast, the insured argued that the proximate cause of the loss was the deliberate act of the bomb disposal team in detonating the bomb, not the dropping of the bomb 80 years earlier. This submission relied on the language used in the Policy, an argument that the parties could not have intended that the Exclusion would apply to historic wars and the relevance and purpose of the Exclusion. The insured also denied that this was a concurrent causes case but that if it was, the concurrent causes rule was ousted by the terms of the Policy. The insured also sought to rely on the contra proferentem rule.

DECISION

Applying the guidance set out in FCA v Arch [2021] UKSC 1, Bird J re-affirmed that the test of "proximate cause" is a matter of judgment based on common sense rather than over-analysis. It was open to him to conclude that either one or other of the dropping of the bomb and the detonation of the bomb was "the" sole proximate cause or each was "a" proximate cause. No other potential "proximate cause" was proposed.

Proximate cause

In seeking to identify the proximate cause in this case, Bird J considered various authorities including the Court of Appeal's decision in Reischer v Borwick [1894] and the well known House of Lords decision in Leyland Shipping v Norwich Union [1918]. These authorities make clear that the proximate cause need not be the cause which stands closest in time to the loss and that, when undertaking a causal analysis, human actions are effectively ignored provided they are not unreasonable or erratic.

Bird J concluded that if the reasonable human act of detonating the bomb was ignored in this case, the dropping of the bomb was the proximate cause of the loss. He also analysed the position in a different way – as Lord Shaw had suggested in Leyland – as a "net of causation" and looked at the "influences, forces and events" which converged at the point of loss. His conclusion on this analysis was the same – the dropping of the bomb was the proximate (meaning dominant or efficient) cause of the loss.

Concurrent causes

Bird J was satisfied that if the dropping of the bomb was not "the" proximate cause, it was "a" proximate cause. It followed that by operation of the concurrent proximate causes rule the Exclusion applied.

The judge did not accept the insured's further argument that, as some exclusion clauses in the Policy expressly referred to the concurrent clauses rule but the Exclusion did not, the parties must have intended the rule not to apply to the Exclusion.

The insured sought to rely on the following wording as being express reference to the concurrent causes rule:

"…regardless of any other cause or event contributing concurrently or in any other sequence to [such act of Terrorism/the loss of damage]"

The judge disagreed that this wording was an expression of the concurrent causes rule. In his view, these words clarified the position if the loss and damage had more than one cause and one cause was indirect (or non-proximate) whilst the other was direct (or proximate).

Contra proferentem

Finally, the insured argued that the contra proferentem principle of construction meant that any ambiguity in the construction of the Exclusion should be resolved against the insurer. Bird J rejected this for two reasons.

First, there was no obvious ambiguity in the construction of the Exclusion. The lack of certainty arose from deciding how the Exclusion should be applied, not from the interpretation of the clause itself. In fact, the parties had agreed on the proper interpretation of the Exclusion clause.  Secondly, the contra proferentem rule applied only to contractual terms which exempt a party from liability which absent the exclusion would arise. Here, as in Brian Leighton v Allianz Insurance no liability arose if the Exclusion applied. The structure of the general insuring clause in the Policy made the exclusions part of the definition of the scope of cover, not exemptions from cover which would otherwise exist.

COMMENT

The judgment is a practical example of the application of the guidance laid down in Arch when assessing the proximate cause of a loss. It affirms that time is not the most relevant factor and the chronological order of events is not determinative in establishing the proximate cause.

The case also reaffirms that the proximate cause analysis remains a matter of judgment based on common sense rather than over-analysis. In this case, the presence of the bomb led to both the need for the detonation and the inevitability of the damage and so, as a matter of common sense, the dropping of the bomb and its consequent presence at the site, was the proximate cause of the damage.

The judge has subsequently denied the insured's appeal but has invited the insured to apply directly to the Court of Appeal for permission to challenge his decision.