Allianz Insurance plc v University of Exeter - Court holds that damage from controlled explosion of a WWII bomb was not covered by property policy

Allianz Insurance plc v University of Exeter - Court holds that damage from controlled explosion of a WWII bomb was not covered by property policy

Published 23 March 2023

The Technology and Construction Court has handed down judgment in the case of Allianz Insurance plc -v- The University of Exeter[2023] EWHC 630 (TCC). The Court was asked to consider the application of a war exclusion clause in a property insurance policy relating to an incident in 2021, when a WWII bomb discovered during construction works was destroyed in a controlled detonation.

The Court held that Allianz was entitled to a declaration that the University's claim for damage and other losses caused by the controlled detonation was not covered by the Policy due to the application of the war exclusion.

Background

In February 2021 contractors working on land adjacent to the University's campus discovered an unexploded WWII bomb believed to have been dropped by German forces in 1942. The Army was called and a 400-meter safety radius was imposed (which covered the University's campus as well as other buildings). Due to the degraded state of the bomb a decision was made to detonate it onsite in a controlled explosion. Steps were taken to mitigate the impact of the explosion but, despite the mitigation steps, damage was caused to surrounding buildings, including the University's halls of residence.

The University made a claim under its insurance policy with Allianz for the damage and loss of rent due to the temporary evacuation of students from the halls. Allianz declined cover on the basis of an exclusion in the Policy for loss or damage "occasioned by war". The relevant exclusion states that there was no cover for:

"Loss, destruction, damage, death, injury, disablement or liability or any consequential loss occasioned by war, invasion, acts of foreign enemy, ......." (the "War Exclusion")

The only issue for the Court was whether the damage caused was "occasioned by war", which would mean the claim was caught by the War Exclusion. It was common ground between the parties that the phrase "occasioned by war" imported a proximate cause test. The Supreme Court in FCA v Arch[1] affirmed that a proximate cause is the "effective" or "efficient" cause. It did not have to be the cause that was nearest in time to the loss.

Allianz's primary argument was that the damage was proximately caused by the dropping of the bomb during WWII, which was an act of war. Neither the passage of time between the dropping of the bomb in 1942 and its explosion, nor the intervention of the Army in detonating the bomb, altered that position. Alternatively, even if the dropping of the bomb was not the proximate cause, it was at least a proximate cause of the damage. In other words, if there are other proximate causes, such as the controlled detonation by the Army, then the claim remains excluded by operation of the 'concurrent causes rule', i.e. where there are concurrent proximate causes where one is insured and the other excluded, the exclusion applies[2].

The University argued that the proximate cause was the deliberate act of the Army in detonating the bomb. The bomb lay undisturbed for nearly 80 years and posed no danger until its discovery/detonation, and the damage only occurred because of the controlled detonation. Furthermore, this case was not a concurrent cause test but, if it is (i.e. both the dropping of the bomb and the detonation were proximate causes), then the concurrent causes rule did not apply because it was ousted by the express terms of the Policy.

Judgment

Applying the guidance in FCA v Arch, the Judge noted that the proximate cause test is a matter of common sense judgment rather than over-analysis. FCA v Arch makes clear that reasonable human intervention would not generally be considered as breaking a chain of causation. If the reasonable human act of detonating the bomb was ignored, then the dropping of the bomb was the only proximate cause of the loss. However, even if the controlled detonation of the bomb by the Army is considered, the dropping of the bomb was still the proximate cause of the loss. The Judge stated:

"The common sense analysis is this: the loss was caused by an explosion. The explosion was triggered by the reasonable (and indeed obviously correct) decision to detonate the bomb. That decision was necessitated by the presence of the bomb. If there had been no bomb, there would have been no explosion. The bomb provided both the explosive payload and the absolute need for the detonation. In my view, the drooping of the bomb was the obvious proximate cause of the damage.

If the bomb had exploded when it landed (and if the damaged buildings had been there) the conclusion that the bomb was the proximate cause of the damage would have been inevitable. Does the reasonable and necessary human act of detonating the bomb change that analysis? In my view it does not. It is the presence of the bomb that leads to both the need for the detonation and the inevitability of the damage. As a matter of common sense, the dropping of the bomb and its consequent presence at the site, was the proximate cause of the damage."

Consequently, the Court held that Allianz was entitled to a declaration that the claim was not covered by the Policy.

Olu Dansu, Partner at DAC Beachcroft acted for Allianz, instructing Isabel Hitching KC of Crown Office Chambers.

The full text version of the judgment can be found here

[1]FCA v Arch Insurance UK Ltd. and Others [2021] UKSC 1

[2]Wayne Tank and Pump v Employers Liability Assurance Corp. [1974]

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