Midland Mainline Ltd. & Ors v Commercial Union Assurance Company Ltd. & Ors

Under a denial-of-access extension, the insured peril was the insured being hindered in using the railway infrastructure, where the hindrance was caused by a competent authority. Each emergency speed restriction was a separate occurrence because the restrictions concerned different locations and times and arose from individual assessments of track defects. A general decision or programme was not itself an event. Wear and tear exclusions applied to the extension, and rolling contact fatigue was wear and tear, but it was not the proximate cause of the business interruption losses. The proximate cause was the imposition of the restrictions. For aggregation, however, the original causative event could unify a series of insured losses, so the Hatfield derailment was a qualifying event.

The claimants were train-operating companies seeking indemnity for lost revenue and increased working costs following the Hatfield rail derailment. Railtrack responded by imposing emergency speed restrictions and undertaking inspections and remedial works across the network. The claims arose under two business interruption policies containing denial-of-access or prevention-of-access extensions.

The court considered the construction of the insured peril, whether the restrictions constituted one occurrence or many, the application of wear-and-tear exclusions, special conditions in the St Paul policy, and whether losses could be aggregated by reference to the derailment.

The court held that the denial-of-access extension covered losses caused by the insured being hindered in the use of track, where the hindrance was caused by action of a competent authority. The relevant occurrence was therefore the prevention or hindrance, not merely the authority’s decision or action.

1. Occurrences. A decision or plan could not itself constitute an event. Each emergency speed restriction related to a particular incidence of gauge corner cracking, a specific length of track and a specific period. No restriction was the natural or necessary consequence of another. The restrictions were imposed over different periods and at hundreds or thousands of locations. They were therefore separate occurrences, and only losses resulting from restrictions imposed before the policies expired were covered.
2. Unity. Whether losses arise from one event depends on sufficient unity of time, locality, cause and motive, assessed from the perspective of an informed observer in the position of the assured, both analytically and by common sense.
3. Exclusion. The wear-and-tear exclusion applied to the extension. Rolling contact fatigue was a paradigm example of wear and tear. However, it was not the proximate cause of the losses. The effective cause was the imposition of the restrictions, with the rail deterioration merely providing the occasion for that action.
4. St Paul policy. Special condition 2(ii) applied because the restrictions were not proximately caused by the Hatfield derailment. Special condition 2(iii), properly construed, excluded restrictions first imposed after reinstatement of the relevant damaged infrastructure, not all restrictions continuing thereafter.
5. Aggregation. The aggregation clause permitted reference to a wider original causative event. The derailment provided the unifying occasion for the review of gauge corner cracking, so the series of insured losses could be aggregated.

First-instance decision in the High Court (Commercial Court). The judgment determined construction and coverage issues arising in two conjoined actions.