The University of Exeter v Allianz Insurance Plc [2023] EWCA Civ 1484: Court of Appeal considers proximate cause and concurrent causes of loss

The Court of Appeal has handed down judgment in the case of The University of Exeter v Allianz Insurance Plc [2023] EWCA Civ 1484, finding in favour of insurers and unanimously dismissing the insured’s appeal.

Background 

During construction works adjacent to the insured’s buildings in 2021, an unexploded World War II bomb was discovered. A controlled detonation took place which caused damage to the insured’s buildings. The insured made a claim under its insurance policy in respect of physical damage to the buildings and business interruption. Insurers asserted that the policy’s war exclusion clause applied, which excluded loss and damage “occasioned by war”. It was agreed by the parties that “occasioned by” gave rise to the proximate cause test.

At first instance, the High Court found in favour of insurers, concluding that the proximate cause of the damage was the dropping of the bomb during World War II, such that the exclusion applied. The High Court made an alternative finding that even if the dropping of the bomb was not “the” proximate cause, it was “a” concurrent proximate cause of the loss. The insured appealed. 

The Court of Appeal’s decision – key findings

The Court of Appeal agreed with the High Court’s alternative finding that, even if the dropping of the bomb was not “the” proximate cause, it was “a” concurrent proximate cause of the loss and damage. On that basis, the loss was excluded, in accordance with the principle in Wayne Tank & Pump Co. Ltd v Employers Liability Incorporation Ltd [1974] QB 57, and as reiterated in Financial Conduct Authority v Arch Insurance (UK) Ltd [2021] UK SC 1 (“FCA v Arch”), that 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 usually prevail. 

The Court found that “… this is a classic case where there were two concurrent causes of the loss and damage: the act of war in 1942 and the detonation of the bomb as a result of the attempted [Low Order Technique] in 2021. They were of approximately equal efficacy. One of those concurrent causes was expressly excluded from cover under the policy. In those circumstances, the rule in Wayne Tank is that the exclusion will generally prevail… For that straightforward reason…I would dismiss this appeal.”

The Court rejected the insured’s arguments that the detonation was a much more potent cause of the damage to the buildings than the dropping of the bomb, for reasons including the passage of time between the two events. The difficulty with that argument was that “the proximate cause is not necessarily the last in time: on the contrary, it can often be the first in time. In a case of potentially concurrent causes, the fact that the first concurrent cause was so much earlier in time then the second does not, of itself, provide any sort of answer.” Moreover, as the High Court found in this case, the passage of time had no effect on the potency of the bomb. 

The insured also argued that the High Court failed to apply the “inevitability” approach derived in FCA v Arch in considering whether the loss was made inevitable in the ordinary course of events by the dropping of the bomb. The insured argued that, applying this approach, the damage cannot be said to have flowed inexorably and in the ordinary course of events from the dropping of the bomb alone. However, the Court found that the insured’s analysis on this point failed as it focused only on the High Court’s finding that the dropping of the bomb was the sole proximate cause; it did not address the alternative finding that there were two concurrent proximate causes. The Court reiterated that there were two concurrent proximate causes of the loss, the dropping of the bomb in 1942 and its detonation in 2021 and that, “Neither would have caused the loss without the other. It was the combination that made the damage inevitable, or at least in the ordinary course of events.”

The insured also argued that there was “a settled status quo” for almost 80 years and that the decision to attempt a controlled detonation was the “agent of change”, not the dropping of the bomb. The Court rejected this again on the basis that the insured failed to address the High Court’s alternative finding that the dropping of the bomb was a concurrent cause of the loss. The Court noted (which the insured accepted) that the “agency of change” phraseology derived from FCA v Arch, while it may be a useful way to look at causation, “should not be elevated into a principle or slavishly followed as some sort of freestanding causation test.”

Accordingly, the Court of Appeal found in favour of insurers and unanimously dismissed the insured’s appeal.

Comment 

The decision provides a useful reminder of the principles around proximate cause and concurrent causes of loss. As the Court summarised at the outset of its judgment: ““Unguided gut feeling” (as it is called in one of the authorities) may suggest that the damage caused by a controlled detonation 79 years after the bomb was dropped, and 76 years after the war ended, was not “occasioned by war”. But those same authorities make clear that the approach to legal causation is more nuanced than that, and subject to specific rules and principles.”

The judgment is available here.