Cover Blown: The Unconventional War of Insurance vs. Bombs!

In a surprising turn of events, the recent legal battle between the University of Exeter and Allianz Insurance PLC has shed light on the intricate (albeit unique) nuances of insurance policies and the unexpected implications of war-related exclusions. The case related to the damage inflicted upon university-owned halls of residence due to the stronger-than-intended controlled explosion of a bomb which had been dropped during World War II.

The University sought coverage for the damages it sustained through its buildings insurance policy. However, as is common, damages “occasioned by war” stood as an excluded risk within the policy’s terms. This exclusion prompted the insurers to reject the claim, raising the pivotal question: Was the damage primarily caused by the war itself or by the controlled detonation of a long-dormant bomb from that era?

The High Court determined the “proximate cause or causes” of the loss. It deemed the dropping of the bomb (the ‘act of war’), was a proximate cause, leading to the denial of the claim. Even if the detonation was considered a contributing factor, the judge maintained that the initial bombing was still one of the primary causes.

The subsequent ruling by the Court of Appeal upheld the High Court judge’s approach, emphasising that in cases where multiple “proximate causes” exist which are of approximately equal effect, where one is an insured peril and the other is excluded, the exclusion typically takes precedence. The damage to the University was attributed to the combined effect of the bomb drop in 1942 AND its controlled detonation, making the loss inevitable or, at least, foreseeable in the ordinary course of events.

Whilst the circumstances of this case are rather unique, it’s another reminder to building owners of the importance of recognising any policy exclusions and situations in which a risk may be uninsured. This flows through to what responsibilities for damage repair may then end up with a tenant, and highlights the potential importance of uninsured risk provisions within commercial leases.

If you need advice or help with your property or commercial lease, please get in contact with our Real Estate team.