Brian Leighton (Garages) Limited v Allianz Insurance plc

In an insurance policy, the unqualified expression “caused by” is presumed to require proximate causation. The proximate cause is the dominant, effective or efficient cause, rather than necessarily the cause latest in time. That presumption may be displaced where the policy, properly interpreted, requires another causal connection.

An exclusion for damage “caused by pollution or contamination” therefore applies only where pollution or contamination is a proximate cause, unless the remaining wording demonstrates a contrary intention. A write-back for specified events does not displace that presumption where it can operate consistently with proximate causation. Exclusions which define the scope of cover attract no presumption of narrow construction or application of the contra proferentem principle.

The claimant operated a garage and petrol filling station insured under an all-risks motor trade policy issued by the defendant. A sharp object punctured an underground fuel pipe. Escaped fuel contaminated the forecourt and adjoining shop, creating an immediate risk of fire or explosion and forcing the business to close.

On a summary judgment application, the deputy High Court judge held that the physical damage was excluded as damage “caused by pollution or contamination” under Exclusion 9: [2022] EWHC 1150 (Comm). The assumed facts established that the pipe's puncture was the proximate cause, while contamination or pollution formed an intermediate part of the causal chain.

The central issue was whether Exclusion 9 applied only when pollution or contamination was a proximate cause, or whenever it formed any part of the chain of causation.

1. Appeal allowed by a majority. Popplewell LJ gave the leading judgment. Nugee LJ agreed with the result and its essential reasoning. Males LJ dissented.

2. An insurance policy is interpreted objectively by asking what a reasonable person, possessing the background knowledge reasonably available to the parties, would understand its language to mean. An SME policyholder may be taken to have the benefit of a broker familiar with basic insurance principles and established insurance terminology.

3. The general rule, reflected in section 55 of the Marine Insurance Act 1906 and equally applicable to non-marine insurance, is that an insurer is liable only for loss proximately caused by an insured peril. The proximate cause is the dominant, effective or efficient cause. It is not necessarily the last event in the chain. There may be multiple concurrent proximate causes, and an applicable exclusion ordinarily prevails where one concurrent proximate cause is insured and another excluded.

4. The proximate-cause rule rests on the parties' presumed intention. It may therefore be displaced where the policy, properly interpreted, requires a different causal connection. Language such as “directly or indirectly” can achieve that result. By contrast, the simple expression “caused by” has consistently been understood in this context as requiring proximate causation.

5. Exclusion 9 formed part of the definition of the policy's scope of cover. It was not an exemption from a liability which would otherwise arise. It therefore attracted neither a presumption of narrow construction nor the relevant form of the contra proferentem principle.

6. The exclusionary words, “Damage caused by pollution or contamination”, referred only to damage proximately caused by pollution or contamination. The write-back provisions did not displace that meaning. Paragraph (a) could preserve cover where pollution or contamination was a proximate cause but resulted from a more remote specified event. Paragraph (b) could preserve cover where pollution or contamination and a specified event were concurrent proximate causes.

7. On the assumed facts, the puncturing of the fuel pipe by the sharp object was the proximate cause. Pollution or contamination was only an intermediate process. Exclusion 9 did not apply.

8. Males LJ would have dismissed the appeal. In his view, Exclusion 9 as a whole displaced the ordinary proximate-cause rule because its write-back provisions indicated that pollution or contamination need only form part of the causal chain.

1. Court of Appeal (Civil Division): By a majority, allowed the appeal and reversed the determination that Exclusion 9 excluded the claimed damage: [2023] EWCA Civ 8.

2. High Court, London Circuit Commercial Court: On the insurer's summary judgment application, Ms Clare Ambrose, sitting as a deputy High Court judge, held that the damage to the forecourt and shop was damage caused by pollution or contamination within Exclusion 9: [2022] EWHC 1150 (Comm).