This interesting judgment dealt with a bomb which was dropped by hostile German forces in Exeter in 1942. The bomb did not explode and lay undiscovered until 2021 when it was unearthed during building works. Bomb disposal experts were called in.

They decided that the bomb could not safely be diffused nor moved and detonated elsewhere. A controlled explosion was effected resulting in the complete destruction of the bomb and release of its full explosive load. That caused damage to buildings in the immediate vicinity of the site including that of the insured who claimed under its policy.

The insurer declined cover relying on the war exclusion in respect of loss or damage “occasioned by war”.  The insurer argued that the proximate cause of the loss was the dropping of the bomb which act was accepted as an act of war.

The insured argued that the proximate cause of the loss was the deliberate act of the bomb disposal team in detonating the bomb not the dropping of the bomb. The insured also argued that the contra proferentem principle of construction could be relied on so that any ambiguity in the construction of the war exclusion should be resolved against the insurer.

The general insuring clause read:

“Indemnify or otherwise compensate the insured against loss, destruction, damage, injury or liability (as described in and subject to the terms, conditions, limits and exclusions of this policy or any section of this policy) occurring or arising in connection with

the business during the period of insurance or any subsequent period for which the insurer agrees to accept a renewal premium.”

The War exclusion read:

“War (Not applicable to the Computer, Engineering Machinery Damage, Engineering-Business Interruption, Employers’ Liability, Personal Accident, Business Travel, Terrorism, Fidelity Guarantee, Cyber and Directors and Officers Sections) Loss, destruction, damage, death, injury, disablement or liability or any consequential loss occasioned by war, invasion, acts of foreign enemy, hostilities (whether war be declared or not), civil war, rebellion, revolution, insurrection or military or usurped power.”

The court said that there was no obvious ambiguity in the construction of the exemption.  Any lack of certainty arose not from the interpretation of the clause but in deciding how the exception properly applies to the facts of the case.

So the rule had no application in those circumstances. In fact there was an agreement on interpretation so the rule had no application.

The court also said that the rule only applies to contractual provisions which exempt a party from liability which, absent the exclusion, would arise. That was not the case on the facts. 

The structure of the general insuring clause was such that no liability to indemnify in respect of loss occasioned by war ever arose. The exclusions were part of the definition of the scope of cover, not exemptions from liability for cover which would otherwise exist.

The court said that no liability arises if the “exclusion” applied. The exclusion was an exclusion from cover, not from liability. This finding on the wording is questionable. The exclusion does not define the benefit simply by including a reference to the exclusions in the insuring clause. But the principle is worth remembering.

The court cited an earlier judgment:

“There is therefore no room for the application of the relevant aspect of the contra proferentem principle, which applies to a clause exempting a party from a liability which would otherwise arise by operation of law or under a contractual term which defines the benefit which it appears it was the purpose of the contract to provide.”

Both these points are often forgotten (or ignored) in considering the application of the contra proferentem principle.