German Bombs and Allianz
You will no doubt have seen the recent judgement handed out by the Technology & Construction Court in the UK in the case of Allianz Insurance Plc -v- The University of Exeter (2023) EWHC630 (TCC). The Technology and Construction Court is a specialist group of Courts part of the Business & Property Court of the High Court of Justice in the UK and includes both the High Court and the County Court. There is a right of appeal to the Court of Appeal.
The issue at debate was the application of a war exclusion clause in the context of the discovery of an unexploded World War II bomb on land adjacent to Exeter’s University Campus. The bomb had been dropped by the Germans in 1942 and when contractors discovered it in February 2021 the army was called and a 400m safety radius was imposed which covered the University’s Campus as well as other buildings. A decision was made to detonate the bomb on site in a controlled explosion. Despite mitigation efforts the explosion caused damage to surrounding buildings including the University’s Halls of Residence.
Insurance Position:
The University made a claim under its insurance Policy with Allianz for the explosion damage and loss of rent due to the temporary evacuation of students.
Allianz subsequently declined cover relying on an exclusion in the Policy for loss or damage “occasioned by war”. The exclusion stated that the Policy did not apply for: “loss, destruction, damage, death, injury, disablement or liability or any consequential loss occasioned by war, invasion, act or foreign enemy”. It was accepted by the parties that the phrase “occasioned by war” was the test in the context of proximate cause. It was accepted that proximate cause is the “effective” or “efficient” cause and it did not have to be the cause that was nearest in time to the loss i.e. proximate in time.
Allianz therefore argued that the damage was proximately caused by the dropping of the bomb 80 years previously and then its explosion and the intervention of the army in detonating the bomb was not relevant and did not alter the position.
Allianz argued that if there were other proximate causes i.e. the controlled detonation by the army then the claim remains excluded by the operation of the “concurrent causes rule” i.e. where there are concurrent proximate causes and one is insured and the other is excluded, the exclusion takes prevalence.
Decision/Judgement:
The Judge indicated that the issue of proximate cause is a matter of common sense rather than over analysis. Reasonable human intervention would not generally be considered as breaking a chain of causation and regardless of the controlled detonation the dropping of the bomb was still the proximate cause of the loss. The decision to detonate the bomb was a necessity by its discovery and presence and if there had been no bomb there would have been no explosion! And as such the dropping of the bomb was the obvious proximate cause of the damage.
If the bomb had exploded when it landed 80 years previous the conclusion would be clearly that it was due to an act of war and as such the “War Exclusion” clause would apply.
The Court therefore concluded that the proximate cause was the dropping and presence of the bomb leading to the need for detonation and inevitable damage and therefore that “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 Court therefore upheld Allianz’s declaration that the loss was not covered by the Policy due to the application of the “War Exclusion” clause.
Overview/Comment:
The case is interesting in the context of the Court’s interpretation of proximate cause and in particular:-
- The dictating factor is whether the cause is the active or “effective” or “efficient” cause regardless of its proximity in time. In this particular case it was 80 years!
- If there are a number of concurrent proximate causes where one is insured and the other is excluded then the exclusion takes precedence.
The Court found that not only was the proximate cause of the loss the dropping of the bomb but that if there was a concurrent cause i.e. detonation 80 years later then the “concurrent causes rule means that the exclusion applies” and as one of the two proximate causes is excluded (“War Exclusion”) then Allianz are correct in their position.
The Judgement states that the issues that arose for determination in the case can be simply stated as follows:
“Was the damage in respect of which the claim is made “occasioned by war”? If it was, the claim and damage are excluded. If it was not, the claim and damage fall within the terms of the insurance cover and the claim (subject to working the relevant detail) must be met”.
The Court was therefore suggesting that the claim were it not for the “War Exclusion” would have been covered notwithstanding that the event which triggered the loss was occasioned circa 80 years prior to the loss/damage. Lawyers for the University argued that the detonation was a new event and was the proximate cause but the Court clearly felt there were concurrent events if not two proximate causes and one of which was excluded.
Whilst the interpretation is in relation to a “First Party” Policy the judgement is in my view significant in the context of reference to proximity in time etc and could have influence in the context of such contingencies as storm or indeed defective workmanship causing failure a number of years later and interpretation whether the matter should be dealt with under a “claims made” or “losses occurring” basis.
To differentiate, third party/liability (property damage) claims can be occurrence based (when loss occurred) or a claims made (when claim made) basis. However, first party material damage claims are on a contingency/losses occurring basis but the Courts interpretation in the Allianz -v- University of Exeter case would suggest it doesn’t matter when the event that triggered the loss occurred (80 years ago) provided the loss (explosion) occurred during the currency of the Policy. The premise or
assumption being that Allianz would have dealt with the claim on a “losses occurring” basis had the “War Exclusion” clause not been in place.
As in all these situations the case was decided on its own particular merits and the subject matter i.e. the bomb was something that was inherently dangerous and indeed “active” in that it became more dangerous as it deteriorated over time. This clearly influenced the judgement in terms of proximity from the point that the bomb was dropped and the deliberately triggered explosion 80 years later but again as stated the judgement is interesting in terms of its reference to concurrent proximate causes and indeed proximity in time.
The foregoing are my personal views in the interpretation of the decision and how it may be potentially interpreted in the context of other cases.