AMI Insurance – Exclusion clause application

In AMI Insurance Ltd v Legg & ors [2017] 321 the Court of Appeal upheld AMI’s appeal that it was liable to indemnify the Leggs for damage/costs from a rubbish heap fire on their Selwyn property in January 2013.  Some of the material in the heap came from the Leggs’ lifestyle block and some from a separate landscaping business run by their company Evolving Landscapes Ltd.  Legg insured the lifestyle block with AMI and ELL insured the business with Lumley.  In the High Court Nation J held both insurers liable.  Contrary to Nation J’s findings the Court of Appeal held that there was an effective causal connection between the ELL material on the heap and the resultant fire.  The Court applied the principle from Wayne Tank & Pump Co Ltd v Employers Liability Assurance Corporation Ltd [1974] 1 QB 57 that states where a loss has two effective and interdependent causes one within the policy and one excluded by it, the exclusion prevails.  The AMI policy excluded liability in connection with any business.  The ELL was an effective and interdependent cause of the fire so AMI was not liable to the Leggs.