British Waterways v Royal & Sun Alliance Insurance Plc [07.03.12]
Insurer could not rely on a tool exclusion when a tractor and its drivers fell victim to a collapsing bankside.
Independent contractors supplied services to British Waterways, including the maintenance of the hedges along the towpaths of a canal, using British Waterway’s tractor and hedge-cutter. The contractors were reversing the tractor along the towpath when the bank of the canal collapsed and the two men driving the tractor died.
British Waterways did not assess the risks associated with the work despite knowledge of previous collapses, which had also led to equipment falling into the canal. It also failed to ensure that supervision and control was exercised in accordance with its own safety guidelines. Accordingly, British Waterways pleaded guilty to an offence under the Health and Safety at Work Act 1974 and were fined £100,000.
British Waterways subsequently settled claims made by the estates and families of the two men for a total of £185,204 plus costs, which they sought to recover under their insurance policy. However, RSA declined cover.
The key questions arising from the policy were:
- Whether British Waterways were legally liable for these claims?
- Whether the policy provided cover under the wording: “… in respect of accidental death of any person in connection with the use of the Insured Vehicle”?
- Whether RSA could rely on an exclusion for “liability arising out of … the operation as a tool of the Insured Vehicle or attached plant ...”?
- If the exclusion applied, whether an exception to the exclusion applied, namely: “… except as required by any road traffic legislation”?
The Commercial Court held as follows:
- According to Hunter v Chief Constable of the West Midlands Police and s.11 of the Civil Evidence Act 1968, there is a presumption that a conviction amounts to legal liability, unless it can be proved otherwise. RSA failed to prove otherwise and British Waterways were, therefore, held to be legally liable.
- The policy did provide cover. “Any person” did not exclude the drivers of the vehicles.
- At the time the tractor was reversing, it was being used as a vehicle, not a tool. The exclusion did not, therefore, apply.
- Insurance against injury to the driver is not required by road traffic legislation. The exception did not apply (although the issue was not relevant following the decision that the exclusion also did not apply).
The judgment provides useful guidance on how to interpret the term “arising out of” in insurance policies. There has previously been conflicting case law, with some cases holding it to be akin to “proximate cause”, and others interpreting it more widely, with a weaker causal connection.
In this case, the Judge adopted a strict “proximate cause” test, drawing a distinction between the use of the term in determining whether there is cover for an event, and where an insurer seeks to rely on an exclusion containing it. The differing approach to identical wording, dependent on its context, is something that insurers will need to consider carefully when reviewing their wordings.