Causation

Brian Leighton (Garages) Ltd v Allianz Insurance plc [2023] EWCA Civ 8

- London 15th May 2023

The recent majority Court of Appeal decision in Brian Leighton (Garages) Ltd v Allianz Insurance plc ([2023] EWCA Civ 8) held that an exclusion clause removing cover for loss “caused by pollution or contamination” was not applicable.

Brian Leighton (Garages) Ltd ran a business that included a 24-hour filing station. A fuel leak developed from a section of pipe connecting one of the underground fuel tanks to the forecourt fuel pumps. The leak was caused by the pressure of a sharp object on the pipe (possibly a sharp stone) and movement from the weight of the concrete slab under the forecourt.

The leaking fuel contaminated the forecourt, yard, paved area and the lower parts of the floors, walls and skirtings of the adjacent shop. The contamination reached the electrical conduits connecting the pumps to the building, giving rise to an immediate risk of fire or explosion.

The insurance contract was in sections, including material damage (section 1) and business interruption (section 8). An extension of the material damage section provided as follows.

“In the event of Damage in consequence of escape of water or fuel oil from any tank, apparatus or pipe, or leakage of fuel from any fixed oil heating installation, We will pay costs necessarily and reasonably incurred by You in locating the source of such Damage, and in the subsequent making good of Damage caused as a consequence of locating such source, up to an amount of £10,000 any one claim.”

Cover was subject to numerous exclusions, most importantly Exclusion 9 which stated that the policy did not cover:

“Damage caused by pollution or contamination, but We will pay for Damage to the Property Insured not otherwise excluded, caused by…

a. pollution or contamination which itself results from a Specified Event

b. any Specified Event which itself results from pollution or contamination.”

Specified Events were defined as:

“Fire, lightning, explosion, aircraft or other aerial devices or articles dropped from them, riot, civil commotion, strikers, locked-out workers, persons taking part in labour disturbances, malicious persons other than thieves, earthquake, storm, flood, escape of water from any tank apparatus or pipe or impact by any road vehicle or animal.”

Allianz denied coverage on the basis of the exclusion of “Damage caused by pollution or contamination”.

In the High Court, Allianz’s position was supported and the claim under the policy was dismissed. The claimant appealed stating that the judge in the High Court had wrongly treated the cause of the damage as pollution or contamination. The claimant’s position being that the cause of the damage was the sharp object movement that punctured the pipe, and that was accidental damage within the scope of the policy.

Lord Justice Popplewell and Lord Justice Nugee agreed that the appeal should be allowed and that there was coverage under the policy. Popplewell LJ noted that the proximate cause principle was one based on the presumed intention of the contracting parties but could be excluded if the policy provided for some other connection between the loss and the occurrence of the insured peril. Popplewell LJ noted that with regards to the above detailed Exclusion 9 there were three possible meanings:

1. the damage to property;

2. the process by which the damage was caused; and

3. the state of affairs giving rise to that process.

It was common ground that the wording of the exclusion was not used to describe damage that was excluded (1). The words of the exclusion were concerned with the cause of the damage. The choice between whether (2) or (3) dictated the interpretation of the exclusion depended upon whether the exclusion was concerned with the proximate cause of the pollution or contamination.

Popplewell LJ was satisfied that Exclusion 9 was to be construed as referring to circumstances when pollution and contamination was the proximate cause of the loss (3). In the claim under consideration, the proximate cause of the damage was the puncturing of the pipe. The chain of causation leading to the loss included the process of pollution or contamination, but that was not the proximate cause of the loss.

Popplewell LJ was of the view that there was nothing in the write-back that was inconsistent with his interpretation of Exclusion 9. In his opinion, the write-back was also based on a causation test. The effect of the first part of the write-back (“pollution or contamination which itself results from a Specified Event”) was to write-back cover where pollution or contamination was the proximate cause but there was a remote Specified Event in the chain of causation. The effect of the second part of the write-back (“any Specified Event which itself results from pollution or contamination”) was to deal with the possibility of concurrent proximate causes.

Nugee LJ agreed that Exclusion 9 was based upon proximate cause and agreed also with Popplewell LJ’s interpretation of the write-back.

Lord Justice Males reached the opposite conclusion. In his view, Exclusion 9 did not apply a proximate cause test to pollution or contamination damage. Whilst he noted that the opening sentence of Exclusion 9 (“Damage caused by pollution or contamination…”) applied a proximate cause test, in his opinion the write-back terminology that followed led to a different interpretation. Males LJ was of the opinion that Popplewell LJ’s (and Nugee LJ’s) interpretation of the write-back gave it a very limited scope.

With regards to the first part of the write-back, in the opinion of Males LJ it would be a very rare case in which pollution or contamination damage could arise from a Specified Event that was not the proximate cause In his opinion, in most cases the Specified Event, by its very nature, would be the proximate cause. With regards to the second part of the write-back, in Males LJ’s opinion, an interpretation that confined the terminology to circumstances where the pollution / contamination and the Specified Event were concurrent proximate causes would be of limited scope. In the case under consideration, Males LJ concluded that as a matter of ordinary language it made perfect sense to say that the damage was “caused by pollution or contamination”.