Midland Mainline v. Eagle Star Insurance
This appeal arose out of the Hatfield rail disaster of 17 October 2000 and the judgment of Mr Justice David Steel on 17 July 2003 ( 1 Lloyd's Rep IR 22). The Court of Appeal found that the judge had been wrong to hold that wear and tear was not a proximate clause of the loss. Although the emergency speed restrictions were the immediate cause of each loss, that did not mean wear and tear could not be a (if not the only) proximate cause. Consequently, insurers could rely on the wear and tear exclusion in the policy.
DMC Category Rating: Confirmed
This case note is based on an Article in the August 2004 Edition of the ‘Bulletin’, published by the Marine and Insurance teams at the international firm of lawyers, DLA. DLA is an International Contributor to this website
The polices in question provided cover against losses resulting from "the Insured being prevented from or hindered in the use of or access to any station depot or track or other part of the rail network… caused by (a) the action of the Insured or other competent authority for reasons of public safety other than disease, hygiene or sanitation …"
One policy (the CGNU policy) also included a general exclusion, which excluded cover for damage or consequential loss caused by or consisting of "inherent vice, latent defect, gradual deterioration, wear and tear, frost, change in water table level, its own faulty or defective design or materials".
At first instance, one of the main issues had been whether the various speed restrictions introduced after 17 October were separate occurrences. Insurers argued that they were, so that restrictions that came into effect prior to the policy expiring at midnight on 31 October 2000 fell within the policy period, but any after that time would be recoverable (if at all) under any successor policy. The train operators argued that there had been only one occurrence - Railtrack's decision to implement a programme of works, alternatively, the communication or implementation of that programme. The judge held that each emergency speed restriction was a separate occurrence separately caused. There was no appeal against that finding.
For the wear and tear exclusion to apply, the rolling contact fatigue had to be shown to be a proximate cause of the loss. At first instance, the judge held that the exclusion did not apply. Although rolling contact fatigue was "a paradigm example" of wear and tear, it had not been a proximate or an effective cause of the claimants' losses. It was a known feature of the network and was dealt with as part of routine maintenance with little, if any, disruption to services. These losses had been brought about by the myriad of emergency speed restrictions imposed after the crash. The rolling contact fatigue was the underlying state of affairs that provided the occasion for action, but it was not the event that triggered the cover.
Eagle Star, which had a 25% line on the CGNU policy, appealed.
In this case, there were two causes; the rolling contact fatigue and the emergency speed restrictions. The first caused the second to be imposed. Although each speed restriction was the immediate cause of each loss, wear and tear was the proximate cause. Alternatively, they were both proximate causes, in which case it is established law that, where there is more than one proximate cause and one of them is excluded from cover, the exclusion applies (Wayne Tank & Pump Co Limited v Employers Liability Assurance Corporation Limited  1 QB 57).
The judge had been wrong to categorise wear and tear as no more than the underlying state of affairs providing the occasion for action. The fact that it was not the event that triggered the cover did not mean that it was not a proximate cause of the loss. The emergency speed restrictions, though precipitating the loss, never prevented the defective nature of the track from being the proximate cause.
It was also clear that the derailment at Hatfield was not the proximate cause of all the losses. The derailment caused the closure of only a section of the East Coast main line, but, even in respect of that section, it did not prevent wear and tear from being a proximate cause of the loss.
The Court of Appeal was also not persuaded by the argument that, because the "denial of access" cover was an extension to the main policy, the wear and tear exclusion (which was in the main body of the policy) did not apply. The wording of the extension made it very clear that it was subject to the terms, conditions and exclusions of the main policy.
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