Court Of Appeal Applies Wayne Tank Principle: If There Are Two Concurrent Causes Of Loss And One Is Excluded, Then No Cover

• Published date: 10 January 2024
• Subject Matter: Insurance, Litigation, Mediation & Arbitration, Insurance Laws and Products, Trials & Appeals & Compensation
• Law Firm: Herbert Smith Freehills
• Author: Mr Alexander Oddy, Max Eshraghi and Sarah Irons

The Court of Appeal has dismissed an appeal by the University of Exeter (the insured) against a High Court ruling in March 2023 regarding a denied insurance claim for damage caused by the detonation of a WW2 bomb: The University of Exeter v Allianz Insurance PLC [2023] EWCA Civ 1484.

The Court of Appeal agreed with the High Court's findings at first instance that the proximate cause of damage to the insured's buildings was the dropping of the bomb itself rather than the controlled detonation in 2021. The resulting loss was therefore excluded by the war exclusion clause (the Exclusion) in the Policy as it stemmed from an action committed as part of WW2.

Lord Justice Coulson referred to this as a classic case of there being two concurrent causes of the loss of approximately equal efficacy and one is excluded from cover, resulting in a relevant policy exclusion applying - as per Wayne Tank & Pump Co. Ltd v Employers Liability Incorporation Ltd [1974] QB 57 (Wayne Tank). In this case the act of war in 1942 and the controlled detonation of the bomb in 2021 were the concurrent causes and the former was excluded under the Exclusion.

BACKGROUND

In 2021, an unexploded German WW2 bomb was discovered during construction works on the insured's campus. A controlled detonation of the bomb caused damage to buildings owned by the insured and it made a claim under its insurance policy in respect of physical damage to the buildings and business interruption.

The insurer, Allianz, asserted that the Exclusion, which excluded loss and damage "occasioned by war", applied. 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 the insurer, concluding that the proximate cause of the damage was the dropping of the bomb during WW2, 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 such that the Exclusion applied. For a full analysis of this first instance decision see our insurance blog post: When is a cause a proximate cause?

The insured appealed on 4 grounds:

• Policy interpretation: the judge failed to have regard to "the likely intent of the parties" in interpreting the Exclusion,
• Inevitability: although the judge correctly identified the need to consider whether the loss was made inevitable in the ordinary course of events by the dropping of the...