Court of Appeal Considers Insurance Exclusions for WWII Bomb Damage: Key Issue of Causation Explored

Introduction

The Court of Appeal’s judgment in The University of Exeter v Allianz Insurance PLC considers the application of insurance exclusions for events “occasioned by war” and the specific legal principles of causation within an insurance context. This analysis focuses on the legal reasoning and the principles the court applied in reaching its decision to dismiss the appeal by The University of Exeter, who sought indemnity for damage caused by the detonation of a World War II bomb.

Key Facts

The case revolves around a bomb dropped during World War II, which did not explode upon impact and was discovered nearly 80 years later during construction activities near the appellant’s property. Upon discovery, a decision was made to carry out a controlled detonation, which unfortunately resulted in damage to the appellant’s nearby property. The appellant made a claim under their insurance policy, which was denied by Allianz on the basis that the damage fell within the scope of a ‘War exclusion’ clause. The central question the court had to determine was whether the damage was proximately caused by the act of the bomb being dropped during World War II and fell within the exemption of the policy clause.

Legal Principals

The analysis pivoted on the principles of proximate cause and concurrent causes in insurance law. Proximate cause is defined as what is proximate in efficiency rather than in time, which in insurance law refers to the dominant, effective, or efficient cause of loss. The judgment heavily relied on the Supreme Court’s guidance in the Financial Conduct Authority v Arch Insurance (UK) Ltd case, which clarified that causation is not based on an ‘unguided gut feeling’ but rather on interpreting the policy and considering evidence to identify whether an insured peril was the proximate cause of loss.

The court further discussed the principle of concurrency in causation, emanating from the cases such as JJ Lloyd Instruments Ltd v Northern Star Insurance Co. Ltd (The Miss Jay Jay). The principle acknowledges the possibility of two causes being “equal, or at least nearly equal, in their efficiency” in causing the loss. The presence of concurrent causes where one cause is covered and the other is excluded generally results in the exclusion prevailing, as stated in Wayne Tank & Pump Co. Ltd v Employers Liability Incorporation Ltd.

Outcomes

Applying these principles to the facts, the court held that there were two concurrent causes for the damage suffered – the WWII bomb being dropped and its controlled detonation. Both causes were considered to be of approximately equal efficacy. Consequently, as one of these causes, the dropping of the bomb, was an act of war excluded under the insurance policy, the exclusion prevailed and the claim failed.

The court also discussed whether notions of ‘inevitability’ and ‘agency of change’ as elucidated in Arch could affect this finding. Ultimately, it was decided that neither the 79-year gap between the dropping of the bomb and its explosion nor the decision to carry out a controlled detonation could negate the causal link between the initial act of war and the subsequent damage inflicted.

Conclusion

The Court of Appeal’s decision in The University of Exeter v Allianz Insurance PLC reaffirms established legal principles regarding causation in insurance law, particularly in situations involving proximate cause and concurrent causes. It emphasizes that the presence of a war exclusion in an insurance policy can apply to events far removed, temporally, from the original act of war if the damage results from two concurrent causes of equal efficacy. The judgment seeks to provide clarity for legal practitioners in interpreting and applying these principles in similar insurance disputes.