Allianz Insurance PLC v The University of Exeter

In construing an insurance policy, proximate cause is identified by a practical judgment applying common sense. The relevant cause need not be the event closest in time. Reasonable human intervention will not generally destroy the causal potency of an earlier event. Where an excluded peril is one of concurrent proximate causes, the exclusion ordinarily prevails unless the policy clearly provides otherwise. A war exclusion defining the scope of cover is not subject to contra proferentem merely because its application to the facts is uncertain.

The insurer sought declarations that it was entitled to decline a claim for physical damage to university buildings and related business interruption losses. The damage followed the controlled detonation in 2021 of an unexploded German bomb dropped during the Second World War.

The parties agreed that the central issue was whether the loss was “occasioned by war” under the policy’s general war exclusion. The court also considered whether the detonation was the sole or a concurrent proximate cause, whether the concurrent causes rule had been ousted by the policy, and whether contra proferentem applied.

1. Disposition. The claimant was entitled to the declarations sought. The loss was excluded from cover.
2. Proximate cause. Following the guidance in FCA v Arch [2021] UKSC 1, proximate cause was a matter of judgment based on common sense rather than microscopic analysis. The court had to select the real or efficient cause from the whole causal net. Chronological proximity was not determinative, and reasonable human action would not generally negate an earlier cause.
3. Application. The dropping of the bomb was the sole proximate cause of the damage. The bomb supplied both the explosive payload and the necessity for the detonation. The reasonable and necessary decision to detonate it did not displace the causal potency of the bomb’s presence. The passage of almost 80 years did not alter that conclusion because there was no evidence that the explosive load had materially deteriorated.
4. Alternative concurrent causes. If the dropping of the bomb was not the sole proximate cause, it was at least a concurrent proximate cause with the detonation. Under the concurrent causes rule, an exclusion prevails where one concurrent proximate cause is excluded and another is covered. The rule was not ousted by the policy. Clear words would have been required to disapply it.
5. Policy wording and construction. The terrorism and cyber wording did not necessarily constitute simple restatements of the concurrent causes rule, since they used wider causal language. That conclusion did not assist the defendant. Contra proferentem did not apply: there was no ambiguity in the interpretation of the war exclusion, and the exclusion defined the scope of cover rather than exempting the insurer from liability that otherwise arose.

Part 8 proceedings were issued in the High Court on 26 January 2022. The parties agreed to proceed on the basis that the claim was a Part 8 claim, and the court determined the substantive issue at first instance.