The TCC has recently handed down judgment in relation to a dispute between Allianz and its insured as to the meaning and effect of a war exclusion in a commercial insurance policy.
The judgment follows soon after Brian Leighton (Garages) Limited v Allianz Insurance plc  EWCA Civ 8 (a judgment we reported on here), where the Court of Appeal considered the meaning of “proximate cause” in the context of a dispute concerning a pollution exclusion.
The recent TCC judgment is of interest as the issue of proximate causation is revisited in the somewhat unusual context of the damage being caused by the controlled detonation of an unexploded bomb, which had been dropped by the Luftwaffe in 1942, nearly 80 years before the damage occurred.
The unexploded WWII bomb (nicknamed “the Hermann” after Hermann Göring) had lain undiscovered until 2021 when it was unearthed during building works. Bomb disposal experts determined that the bomb could not be safely transported away or defused. This meant that the only realistic course open to the team was to detonate the bomb on site in a controlled explosion, meaning that some damage to the University of Exeter’s buildings was inevitable.
The university claimed an indemnity under its insurance policy. Allianz declined to pay the claim and relied upon a war exclusion which excluded liability for damage “occasioned by war”. The TCC was, therefore, required to determine the narrow issue of whether the war exclusion excluded cover.
The parties agreed that the case turned upon identification of the “proximate” cause (i.e. the dominant, effective or efficient cause) of the damage. Allianz submitted that the proximate cause was the dropping of the bomb during WWII. In the alternative, if the dropping of the bomb and the detonation of the bomb were to be regarded as concurrent proximate causes, the exclusion prevailed.
The university 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. It was also submitted that the parties cannot have intended that the exclusion would apply to historic wars.
In his judgment, His Honour Judge Bird analysed the principles of proximate causation before applying them to the facts of the case. Perhaps fittingly for a case involving damage caused by a historic WWII bomb, the judge revisited some of the older authorities.
In particular, there was detailed consideration of Leyland Shipping Company v Norwich Union Fire Insurance Society  AC 350, a case in which a ship had been torpedoed by a German submarine during the First World War. The ship was towed to the nearest port but had to anchor in an outer harbour exposed to the wind and waves, and after three days she sank. It was held that the loss was proximately caused by the torpedo, which was a consequence of hostilities and, therefore, excluded from cover. This is because the proximate cause is that which is the efficient cause, rather than the last event in a causal chain.
HHJ Bird considered the more recent authorities, including the Supreme Court decision in Financial Conduct Authority v Arch Insurance & Others  UKSC 1. He confirmed that the modern approach to identifying proximate cause remains a practical exercise which entails the application of common sense standards. However, as explained at paragraph 168 of Arch:
“The common sense principles or standards to be applied in selecting the efficient cause of the loss are, however, capable of some analysis. It is not a matter of choosing a cause as proximate on the basis of an unguided gut feeling… The question whether the occurrence of [an event] was the proximate (or “efficient”) cause of the loss involves making a judgment as to whether it made the loss inevitable – if not, which could seldom if ever be said, in all conceivable circumstances – then 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.”
HHJ Bird explained that the question of inevitability is to be examined on the basis of the facts known at trial. For example, in Leyland Shipping the proximate cause of being torpedoed would not, in the ordinary course of events, inevitably have led to the loss. By the time of trial, however, the full range of influences, forces and events was available for the court, so identification of the proximate cause became clear.
The judge went on to explain that the general rule that subsequent human actions are effectively ignored in the causal analysis, reflects the underlying principle that the chronological order of events is not determinative. The key consideration is the nature of each event. The judge again referred to Leyland Shipping noting that the later human intervention by the crew was reasonable.
HHJ Bird then applied these principles to the facts of the case. To determine whether the general rule of discounting the later human intervention should be applied, he considered what part the detonation played in the “causal net”. This involved an analysis of the influences, forces and events which converged at the point of loss, with a focus on the character of those events rather than the chronological order in which they occurred.
He held that the detonation of the bomb was a reasonable and obviously correct course of action. That decision was necessitated by the presence of the bomb. As a matter of common sense, the dropping of the bomb and its consequent presence on site was the dominant cause of the damage.
The judge rejected the university’s argument that the passage of some 80 years since the bomb was dropped changed the analysis. Interestingly he considered that an “unguided gut feeling” would strongly lean towards the conclusion that the detonation was the dominant cause. However, given his earlier analysis, such an approach would be wrong. The exclusion was, therefore, engaged and Allianz was not liable under the policy.
The judge also stated, obiter, that even if he was wrong in finding that the dropping of the bomb was “the” proximate cause, it was “a” proximate cause. This would lead to the same outcome given that where there are concurrent proximate causes, one of which is excluded, the exclusion prevails (as explained in Wayne Tank & Pump v Employers Liability Assurance Corp  QB 57, and more recently in FCA v Arch and Brian Leighton Garages).
The judgment provides a particularly vivid illustration of the long-established principle that what is paramount in the assessment of proximate causation is the nature of the event rather than its chronological proximity to the loss. That principle was confirmed in Leyland Shipping, but in that case the sequence of events unfolded in a matter of days (rather than a period of nearly 80 years).
The identification of the proximate cause of a loss is obviously highly fact-sensitive and dependent to a certain degree on the subjective view of the particular judge. In this case, the fact that the actions of the bomb disposal team were reasonable and the damage effectively inevitable clearly weighed heavily in the judge’s analysis. The outcome might have been different if say the bomb had been exploded as a result of later accidental or negligent human intervention. In this scenario, an insured might be able to show that the later actions amounted to a proximate cause. However, to succeed in establishing cover, due to the Wayne Tank principle, it would be necessary for the court to find that the later action was the sole proximate cause, and the dropping of the bomb no more than a remote thread in the causal web.
Fortunately damage caused by WWII bombs is very rare, and it is obviously hoped that a hypothetical scenario such as this does not arise in the future. But, as this case and Brian Leighton Garages demonstrate, disputes as to the meaning and effect of exclusions in commercial policies are far more common. It is, therefore, surely only a matter of time before the courtroom again becomes the battleground in a dispute concerning the true proximate cause of a loss.
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