Insurance & Reinsurance analysis: This week the court found that an unexploded WWII bomb was the proximate cause of damage that occurred 79 years after it had been dropped. Allianz v The University of Exeter is the latest in a string of recent decisions that demonstrate the continued centrality of the causation issue to insurance disputes, as well as the difficulties of determining proximate cause in practice. Strikingly in this case (which may yet be subject to appeal), the passage of almost 80 years between the occurrence of the posited proximate cause and the damage did not rob the event of its causal potency, even though the damaged property did not even exist at the time the causal event occurred. Written by James Breese, senior associate, and Aaron Le Marquer, partner and head of Policyholder Disputes, at Stewarts Law LLP.

Allianz Insurance plc v University of Exeter [2023] EWHC 630 (TCC)

What are the practical implications of this case?

The case highlights the difficulties that can arise with establishing the proximate cause of loss for the purpose of applying the terms of an insurance policy. Convincing arguments can often be put forward for any one of a number of candidates for proximate cause, and the basis for the court’s conclusion is not always easy to understand.

In this case, the court affirmed various existing authorities that:

• a ‘common sense approach’ is to be adopted to establishing proximate cause, not an ‘unguided gut feeling’ (FCA v Arch)
• the passage of time does not of itself provide an answer to the question of ‘proximity’ (Leyland Shipping v Norwich Union), and
• for multiple causes to be concurrent proximate causes, they must be of approximately equal efficacy (The Miss Jay Jay)

It was also notable that the court found that the Wayne Tank rule applies to concurrent causes of loss where one is excluded, even where the drafting of the exclusion may be regarded as a delineation of the scope of cover, rather than an exemption from liability where cover would otherwise have attached.

What was the background?

In 1942 German forces dropped a bomb in Exeter. It did not explode and lay undiscovered until February 2021.

During construction works adjacent to The University of Exeter campus the bomb was discovered. Bomb disposal experts were called in. They determined that the fuse to the bomb was very degraded, and that the condition of the bomb was such that a controlled explosion was required. The detonation caused damage to the University of Exeter’s property and required the short-term rehousing of thousands of students.

The University of Exeter claimed for property damage and business interruption losses under an insurance policy underwritten by Allianz. The policy was subject to a war exclusion clause which provided that Allianz would not be liable for any loss or damage ‘…occasioned by war…’.

It was common ground that the dropping of the bomb was an act of war, and the issue before the court was (i) whether the dropping of the bomb was the, or a, proximate cause of loss; and (ii) whether the claim was therefore excluded by virtue of the war exclusion.

Allianz argued that the dropping of the bomb was the sole proximate cause of loss, or alternatively that it was a concurrent proximate cause. In the latter case, the Wayne Tank rule would apply to exclude the loss.

In response, the University submitted that the proximate cause of loss was the deliberate act of the bomb disposal team in detonating the bomb some 80 years later, not the dropping of the bomb, which had never exploded by itself. Alternatively, if the dropping of the bomb and the detonation were concurrent causes of loss, the Wayne Tank rule was ousted by the express terms of the insurance contract.

What did the court decide?

The court found first that the dropping of the bomb in 1942 was the sole proximate cause of the loss in 2021. Second, even if that analysis was wrong, the dropping of the bomb was a concurrent proximate cause of the loss, together with the controlled detonation some 80 years later. In that case, pursuant to Wayne Tank and Pump v Employers Liability Assurance Corp [1974] QB 57, where there are concurrent proximate causes of loss and one is insured and the other excluded, the exclusion would prevail.

Taking into account the guidance found in the previous cases, HHJ Bird found that ‘it is natural that an “unguided gut feeling” would strongly lean towards the conclusion that the detonation was the relevant, dominant or proximate cause’. However, relying on the Supreme Court’s comments in Arch, the judge found that the ‘common sense’ approach led instead to a conclusion that the dropping the bomb was the proximate cause, despite the fact that it had self-evidently not made the loss inevitable in the ordinary course of events. The passage of time was found to be irrelevant, even after 80 years (in contrast to the much shorter causal chains generally considered in earlier cases).

Alternatively, if he was wrong that dropping the bomb was the sole proximate cause, then it was ‘a’ proximate cause and, rejecting the University’s arguments that the Wayne Tank rule was ousted by the express terms of the agreement, the war exclusion therefore applied.

Case details:

• Court: King’s Bench Division (Technology and Construction Court)
• Judge: His Honour Judge Bird (sitting as a High Court judge)
• Date of judgment: 22 March 2023

This analysis was first published on Lexis®PSL on 29 March 2023 and can be found here (subscription required).

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