Court of Appeal Brian Leighton (Garages) Limited vs Allianz Insurance PLC January 2023
The Court of Appeal has overturned the High Court's decision and concluded that a material damage policy provided by Allianz to a garage business, BLG, did not exclude contamination of the forecourt and shop building of the garage by fuel.
The facts presumed (but disputed by Allianz) were that the fuel leak in June 2014 had been caused by a sharp object, such as a stone, fracturing a pipe connected to a fuel tank, due to movement of concrete slabs above the tank. BLG was forced to close as a business due to the associated fire and explosion risk.
Allianz relied on the policy exclusion (clause 9) which excluded “damage caused by pollution or contamination”. The material damage claim would be covered by the policy, unless excluded by clause 9.
The majority of the Court accepted BLG’s argument that to determine whether the damage was “caused by” the fuel pollution/contamination involved the application of an established presumption of insurance law, namely determining the proximate cause of the damage (this being the dominant, effective or efficient cause).
The proximate cause was the puncturing of the fuel pipe by the sharp stone. The fuel leak was part of the chain of causation of events leading to damage. Without the fuel leak the damage would not have occurred, but it was not the proximate cause.
It was important to BLG to have cover in place in respect of this obvious risk to their business. The Court was not persuaded that the parties’ intention was to exclude from cover damage to the forecourt and buildings from leaking fuel.
When considering the contract and intentions of the parties as a whole, there was no good reason to depart from the usual principle that the interpretation of “caused by” meant identification of the proximate cause of material damage. Allianz’s interpretation faced “the insuperable difficulty that it does not give effect to the language they have used.”
The decision was a 2 to 1 majority and meant Allianz’s summary judgement application was unsuccessful. Allianz could have broadened the scope of the exclusion with wider language such as “directly or indirectly caused by”.
The case is a reminder for insurers of the need to use clear policy wording. It is a useful example of how the courts will approach identifying the proximate cause of damage, when interpreting the expression "caused by" in a property damage policy.