Court of Appeal finds an historic act of war was “a” cause of damage

In University of Exeter v Allianz Insurance PLC (Rev1) [2023] EWCA Civ 1484 the Court of Appeal dismissed the insured’s appeal and held that loss and damage to buildings caused by a controlled detonation of a World War II bomb were excluded under a war exclusion clause in an insurance policy. The decision contains an interesting analysis of proximate causation of loss.

Background

Construction workers discovered an unexploded bomb in February 2021, which had been dropped on Exeter in 1942 by German forces. A controlled detonation was carried out, which caused some physical damage to halls of residence owned by the University of Exeter (the University). The University made a claim under its property insurance policy for business interruption losses (caused by the temporary re-housing of students) and property damage. Allianz Insurance plc (Allianz) issued Part 8 proceedings in early 2022, seeking a declaration that it was entitled to decline the University’s insurance claim.

The decisions

The issue for the courts to decide was whether the loss and damage were “occasioned by war”, in which case the insurers would not be liable to meet the claim. Allianz argued in the court at first instance that the loss and damage were caused by the dropping of the bomb during World War II. Failing that, Allianz argued that the dropping of the bomb was “a”, if not “the”, proximate cause of the loss and damage. Applying the rule in Wayne Tank & Pump Co. Ltd v Employers Liability Incorporation Ltd [1974] QB 57 (Wayne Tank), this analysis would also entitle Allianz to decline the claim, as where there are concurrent causes of approximately equal efficiency, and one is an insured peril and the other is excluded by the policy, the exclusion will prevail. The University countered that the cause of the loss and damage was the controlled detonation of the bomb in 2021.

The High Court agreed that the loss and damage were “occasioned by war” and were therefore excluded by the policy. In the alternative, the High Court further found that the dropping of the bomb was at least “a” proximate cause of the loss and damage, along with the controlled detonation.

The Court of Appeal agreed with the High Court’s alternative analysis, and applying the rule in Wayne Tank, dismissed the University’s appeal.

Key takeaways on causation of loss

• Time: the passage of time does not necessarily affect proximate causation. The “potency of the explosive load of the bomb” had not diminished over time and a proximate cause of loss need not be the one occurring closest in time to the loss or damage.
• “Unguided gut feeling”: Citing the Financial Conduct Authority v Arch Insurance (UK) Ltd [2021] UKSC 1 (Arch), the Court of Appeal confirmed the High Court’s view that instinct alone is insufficient when determining proximate causation (in which case, the University’s argument could have prevailed). Determining proximate causation is rather, “capable of some analysis” (Arch).
• Complementary to Arch in its approach to causation: Arch held that an insured peril (a case of COVID-19 within a geographical area defined in a particular policy) was a proximate cause even though it failed the ‘but for’ test because the same measures would have been imposed by the UK government even if that case had not occurred due to the numerous other cases of COVID-19 outside the geographical area. By contrast, in this case, the Court of Appeal considered whether consecutive events that all satisfied the ‘but for’ test should be excluded as proximate causes, eventually taking a broad approach to causation that included both events.

With thanks to Kirsty Bailey for her assistance in preparing this post.