British Waterways v Royal and Sun Alliance Insurance Plc [2012] EWHC 460 (Comm)
Courts cannot seem to agree on how the words "arising out of" are to be read, particularly in relation to policies of insurance.
Background
In December 2004, two contractors (a father and son) drowned when the tractor they were operating plunged into a canal in southern England. As they were reversing up the towpath to exit the site, the tractor travelled too close to the edge of the canal when the bank gave way causing the tractor to topple into the canal.
The contractors were retained by British Waterways (BW) to trim the hedges along the towpath of the Kennet and Avon Canal. The Health and Safety Executive (HSE) took the view that BW had committed an offence as the practices adopted for the use of tractors on canal towpaths had not been suitably assessed and were unsafe. BW pleaded guilty to the offence and was fined. In addition to the HSE prosecution, the families and estates of the deceased sued BW, and the claims were settled for a total of £184,204 plus costs (Settlement Figure).
BW lodged a claim for this amount under its policy with Royal & Sun Alliance (RSA). RSA rejected the claim stating that it was not covered. BW, insisting that the settlement was covered by the policy, sued RSA for the Settlement Figure.
Policy
The relevant sections of the policy were as follows:
A. Cover
The Insurers will indemnify the Policyholder in respect of legal liability incurred for damages and claimant's costs and expenses in respect of accidental
- death or bodily injury to any person
in connection with the use of the Insured Vehicle including loading and unloading.
B. Exceptions
The Insurer shall not be liable
- for liability arising out of
-
- the operation as a tool of the Insured Vehicle or attached plant
except as required by any road traffic legislation.
Issues
Breaking down the elements of the policy, the issues before the court were:
- Was BW legally liable in respect of the deceased's claims?
- If there is such liability, is it covered under the policy (in other words was the liability in respect of accidental death of any person in connection with the use of the Insured Vehicle)?
- If there is such cover, is it excluded because the liability arose out of the operation of the Insured Vehicle or attached plant as a tool? (Tool Exclusion)
- If the liability is excluded, is that exclusion ineffective because the insurance was required by the Road Traffic Act 1968 (RTA)? (RTA Exception)
Liability
Determining liability involved a detailed analysis of UK workplace health and safety laws, which are not within the scope of this article. In short, the court held that BW was liable for the deceased's claims because, in not suitably assessing the practices for the use of tractors on canal towpaths and ensuring that they were safe, BW had exposed the deceased to increased risks to their health and safety.
Cover
The sub-issues at play were whether, as a result of the policy being a policy of vehicle cover, it ought to be interpreted within the confines of UK road traffic legislation whereby the term "any person" excludes the driver of the vehicle. Noting a number of inconsistencies between the legislation and the policy, the Court took the view that the policy should not be interpreted with reference to the road traffic legislation, and that the deaths of both men were caught by the clause.
RTA Exception
The Court first addressed the simpler question of whether the RTA Exception applied to both deceased. The RTA requires that policies for vehicle insurance must include cover for passengers of the vehicle, but not the driver of the vehicle. The issue therefore was whether both deceased were drivers of the tractor, or whether one of them was a passenger. On this point the Court decided that during the operation of the tractor on the towpath, the person who was not actually in control of the machine was acting as a lookout and was therefore not merely a passenger. Accordingly, the RTA Exception was not established and the only question remaining was whether RSA can rely on the Tool Exclusion.
Tool Exclusion and "arising out of"
While RSA argued that, as a matter of fact, the tractor was engaged in hedge-cutting at the time of the accident, it had little evidence to support this contention. As there were no witnesses to the accident itself, the court looked at the totality of the circumstances and, based on the physical evidence that the tractor was reversing up the tow path to exit the site, it is unlikely that it was still in the process of cutting hedges.
RSA contended that the words "arising out of the operation" required a wide interpretation, and therefore maintained that it was entitled to rely on the Tool Exclusion, even though the Court found that the tractor was not actually cutting hedges at the time of the accident. The Court therefore had to consider how wide an interpretation to read into the words "arising out of".
This issue has arisen many times previously in English and Australian courts, and the judgments are conflicting. As a matter of precedent, the Court in this instance suggested it may be bound by the 1999 English Court of Appeal decision in Dunthorne v Bentley1 (Dunthorne), which found that the words "arising out of" contemplates more remote consequences than those envisaged by the words "caused by". The test laid down in Dunthorne was that a liability will "arise out of" an act if it is "causally concomitant but not causally connected with the act".
The Court then considered the 2011 English High Court of Justice decision in Beazley Underwriting Ltd v The Travelers Companies Incorporated (Beazley)2 which, in apparent conflict with Dunthorne, held that while the words "arising out of" allows for a weaker causal connection than a proximate cause test, a "relatively strong degree of causal connection is required".
The Court found on the facts, regardless of whether it followed Dunthorne or Beazley, the causal connection between the accident and the operation of the tractor as a hedge cutter was not strong enough to trigger the Tool Exclusion contained in the policy. Accordingly, RSA was ordered to accept BW's claim and pay the Settlement Figure.
Conclusion
The decision in Dunthorne followed the High Court of Australia decision in Government Insurance Office of New South Wales v Green & Lloyd (Green & Lloyd).3 In Australia, Green & Lloyd remains good law and while the decisions in Beazley and British Waterways are not binding in Australia, they tend to suggest the law (at least in England) is shifting towards a requirement for higher degree of causal connection.
Footnotes
1Dunthorn v Bentley [1999] Lloyd's Rep I & R 560
2Beazley Underwriting Ltd v The Travelers Companies Incorporated [2011] EWHC 1520 (Comm)
3Government Insurance Office of New South Wales v Green & Lloyd [1965] 114 CLR 437
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