Insurance And Reinsurance Weekly Update - 13 March 2012

British Waterways v RSA

Whether loss fell within the terms of a motor insurance policy and the meaning of "arising out of" in the context of a policy exclusion

http://www.bailii.org/ew/cases/EWHC/Comm/2012/460. Html

A father and son were killed when the tractor which they were reversing along a towpath toppled into a canal. They were independent contractors retained by the claimant to carry out hedge-cutting services. The tractor belonged to the claimant. The claimant pleaded guilty to an offence under the Health and Safety at Work Act 1974 and thereafter reached a settlement with the the deceased men's estates. They sought to recover the amount of that settlement (and other amounts) from the defendant insurers. Burton J held as follows:

(1) On the facts, the claimant had been liable to the deceased both under common law and statute (the Provision and Use of work Equipment Regulations 1998).

(2) The policy provided cover for "legal liability incurred for damages...in respect of accidental death of...any person...in connection with the use of the Insured Vehicle". The judge rejected the argument that the policy, like the Road Traffic Act 1988, should be construed as excluding the driver or user of the vehicle. Furthermore the clause should not be construed so that cover was for "legal liability...in connection with the use" of the vehicle. Instead it meant that liability had to have been incurred for damages in respect of the accidental deaths of the two men in connection with such use.

(3) The judge then considered the scope of the following policy exclusion: "The insurers shall not be liable for liability arising out of... the operation as a tool of the insured vehicle". On the facts, the judge was not satisfied that the tractor was being used to cut hedges at the time of the accident. The key issue, though, was whether the deaths (rather than the liability) "arose out of" the operation of the tractor as a tool.

Burton J conducted a review of the meaning of "arising out of" in an insurance context. He found that there have been a series of conflicting decisions, with some cases interpreting "arising out of" as meaning the proximate cause and some applying a wider test which contemplates more remote consequences than those envisaged by the words "caused by". Does a stricter test apply in the context of a policy exclusion? Burton J concluded that it does: "I have the inevitable feeling that a court may in fact have a different approach to concluding whether there is cover for an event from where the court is being asked to conclude that an insurer can exclude cover, even though the words the court is considering may be identical". He concluded that in this case, the exclusion did not apply because the proximate cause of the tractor toppling into the canal was its being reversed too close to the bank and not the use of the tractor to cut hedges.

COMMENT: Weekly Update 23/11 referred to the case of Beazley v Travelers, in which Clarke J found that, in the context of the policy in that case, "arising out of" did not dictate a proximate cause test and instead allowed "a somewhat weaker causal connection". This case, involving an exclusion rather than an...