AMI INSURANCE LTD v LEGG & OTHERS [2017] NZCA 321

AMI INSURANCE LTD v LEGG & OTHERS [2017] NZCA 321 [26 July 2017]IN THE COURT OF APPEAL OF NEW ZEALANDCA371/2016[2017] NZCA 321BETWEEN AMI INSURANCE LIMITEDAppellantAND ROSS JOHN LEGG AND ANNETTEJILL LEGGFirst RespondentsNEW ZEALAND FIRE SERVICECOMMISSIONSecond RespondentSELWYN DISTRICT COUNCILThird RespondentEVOLVING LANDSCAPES LIMITEDFourth RespondentLUMLEY GENERAL INSURANCE (NZ)LIMITEDFifth RespondentHearing: 13 June 2017Court: Miller, Cooper and Clifford JJCounsel: M G Ring QC, I J Thain and S R Merkin for AppellantA N Riches and T E Hutchinson for First RespondentsNo appearance for Second to Fifth RespondentsJudgment: 26 July 2017 at 3.00 pmJUDGMENT OF THE COURTA The appeal is allowed. Judgment is entered for AMI.B The first respondents must pay the appellant costs for a standard appeal on a band A basis and usual disbursements.C Costs in the High Court are to be determined in that Court in light of this judgment.____________________________________________________________________REASONS OF THE COURT(Given by Miller J)TABLE OF CONTENTSBackground [5]The policies [14]The AMI policy [15]The Lumley policy [18]The appeal [21]Connection between legal liability and excluded business activity [22]Does "arising from" qualify "in connection with"? [23]"In connection with" [25]"In connection with", in context [32]Was the necessary connection between legal liability and excluded activity established on the facts? [39]Does it matter that the fire commingled insured and excluded activities? [45]Decision [55][1] The phrase "in connection with" occurred twice in the Leggs' policy of insurance for their lifestyle block: once to extend cover to damage "arising from or in connection with" farming activities, and once to exclude it for damage "arising out of or in connection with" any other business.[2] The Leggs built and burned a fire heap on the property. Some of the material in the heap came from farming activity on the lifestyle block and some from a separate landscaping business run by their company, Evolving Landscapes Ltd (ELL).[3] Several weeks after the fire appeared to have gone out the remains of the heap unexpectedly reignited in very dry conditions, causing extensive damage toneighbouring properties. Under rural fire legislation the Leggs were strictly liable to the New Zealand Fire Service Commission and Selwyn District Council for the costs of putting out the fire.1 The Leggs seek indemnity from their insurer for the lifestyle block, AMI.[4] The Leggs and AMI agree that the policy extended to legal liability for burning green waste and rubbish from farming activities on the lifestyle block. They part company over the exclusion. AMI says the exclusion applies because some ofthe green waste came from ELL's business and there exists a sufficient connectionbetween that business activity and the damage. It argues that causation isunnecessary; rather, it suffices if the one thing "has to do with" the other. In theHigh Court Nation J rejected this argument, reasoning that AMI must prove the excluded business activity was the proximate cause of the legal liability and finding that it could not establish causation on the facts.2Background[5] A full account of the facts is found in the judgment under appeal. Most of theJudge's careful findings are not controversial for our purposes, and a short narrative will suffice.[6] The Leggs' lifestyle block is at Selwyn, in Canterbury. They insuredstructures and farming activity with AMI under the lifestyle block policy. They also own ELL, which is run from the property but does its work on the properties of its clients. Its activities were insured under a policy with another insurer, Lumley.[7] It was the Leggs' practice to use a fire heap to burn green waste and rubbishfrom the property and some, but not all, of the green waste generated by ELL. On 16 December 2012 the heap comprised vegetation, paper and other rubbish. Nation J found that most of the vegetation was ELL green waste but a substantial part of it would have come from the lifestyle block.31 We were given to understand that other claims from neighbouring owners are pending. Weexpress no view about them.2 New Zealand Fire Service Commission v Legg [2016] NZHC 1492, [2016] 3 NZLR 685 at [131]–[135].3 At [5] and [134](b).[8] On that day the Leggs lit the heap, having first ascertained that there was no fire ban and conditions were suitable. It seems to have been lit at that time because the Leggs anticipated a summer fire ban and they were in the process of leasing or selling that part of the property to a neighbour.[9] The fire burned without incident. It was tended by Mr Legg from time to time, using a tractor to push material from the periphery into the heart of the fire. The Judge found that he last did this by 22 December, at which time the fire appeared to be out.4 The Judge also found that some branches, a stump and some household rubbish had not been burned completely.5[10] The fire reignited on 10 January 2013, by which time fire restrictions were in place and conditions were hot and dry. The Judge found that strong nor'west windscaused embers deep within the heap to reignite.6 Material from the heap then blew onto nearby vegetation and fire spread rapidly onto nearby properties, causing extensive damage.[11] Pine stumps had been added to the pile by a contractor to ELL before it was lit on 16 December, and the Judge accepted that the heap also contained olive tree stumps from the lifestyle block.7 Before us counsel agreed that the evidence established that:(a) The larger portion of the waste material on the heap when the fire was lit was ELL waste, and that portion included several pine stumps.(b) Heavier material — meaning, more than 100 mm thick, such as remnants of larger branches, or stumps — is more likely than lighter material to retain heat and smoulder.(c) Embers from the fire on 16 December caused the heap to reignite on 10 January.4 At [11].5 At [8].6 At [14].7 At [5].(d) However, it is not possible to say what material left those embers, meaning that it cannot be known whether the material that reignited on 10 January came from ELL. The source could have been olive tree stumps or branches from the lifestyle block, for example.[12] There was also evidence, which the Judge appeared to accept, that the material from ELL would have resulted in a larger pile of ashes and unburnt material than would have been left had the lifestyle block material been burned alone, and that the size of that residual pile contributed to embers deep within it retaining their heat.8[13] The Judge found that the Leggs were not careless.9 But liability under s 43 of the Forest and Rural Fires Act 1977 is strict.10 Accordingly, the Leggs and ELL both admitted liability to reimburse the plaintiffs, the Fire Service and Selwyn District Council, for extinguishing the fire, and judgment was entered accordingly. Neither plaintiff has taken part in this appeal.The policies[14] As noted, the Leggs insured the lifestyle block with AMI and ELL insured its business with Lumley. Both policies extended to legal liability from accidental damage, including fire, to third parties, and Nation J held both insurers liable.11Lumley has not appealed the judgment against it, but the Judge's findings about ELL's claim supply context for AMI's appeal, so we will note the provisions of bothpolicies.The AMI policy[15] The insureds were the Leggs and the policy was described as a lifestyle block policy. It covered primarily farm buildings and structures, farm plant and supplies and produce, and livestock. It also extended to legal liability; and specifically, to8 At [32]–[33].9 At [18].10 Tucker v New Zealand Fire Service Commission [2003] NZAR 270 (HC) at [42]–[43] [Tucker].11 New Zealand Fire Service Commission v Legg, above n 2, at [62] and [135]. For reasons weneed not go into, the Lumley policy may not cover all of the liabilities resulting from the fire.liability under the Forests and Rural Fires Act. The relevant insuring clause, cl 16, stated that:We will cover, unless excluded by this policy, your legal liability, arising from or in connection with your farming operation, for accidental damage toother people's property occurring anywhere in New Zealand.[16] The cover for legal liability was subject to an exclusion for any business notdirectly connected with the Leggs' farming operation:There is no cover for legal liability arising out of or in connection with any retail shop, (except a shop on your farm property selling your farm produce), café, restaurant, tourist operation or any profession, business or trade notdirectly connected with your farming [17] As noted, Nation J found the exclusion inapplicable, reasoning that "inconnection with" required causation and AMI, which carried the onus of establishing it, had not proved that the Leggs' legal liability was caused by burning ELL's wasteon their fire heap.12The Lumley policy[18] The Lumley policy extended cover to legal liability for property damagecaused by an occurrence in connection with the insured's business. Lumley agreedto: indemnify the Insured for all amounts the Insured shall become legally liable to pay for compensation in respect of Property Damage that occurswithin the Territorial Limits and that:(a) happens during the Period of Insurance; and(b) is caused by an Occurrence in connection with the Insured'sBusiness.[19] The policy specifically extended to liability under the Forests and Rural Fires Act, subject to a sub-limit (which may explain why the Leggs are pursuing AMI).[20] Lumley initially denied cover, pleading that the occurrence did not occur in connection with the business of ELL, but Nation J recorded that in closing submissions its counsel accepted that because ELL waste had been burnt in the fire,12 At [132].cover extended to liability for resulting property damage.13 Lumley continued to resist liability, relying on defences, including lack of reasonable care, that do not concern us. Nation J found Lumley liable for all sums for which the plaintiffs had obtained judgment against ELL.14The appeal[21] The questions we must decide are:(a) What sort of connection did the exclusion clause require between thelegal liability and ELL's business activity?(b) Was that connection established on the facts?(c) Does it matter that the fire commingled insured and excluded activities?Connection between legal liability and excluded business activity[22] The argument before us turned on the phrase "in connection with". Wepreface what we have to say by remarking that the authorities do not assist us much. The phrase is one of intrinsically indefinite meaning, incapable of close definition in the abstract. It always takes its meaning from the context supplied by a given policy and set of circumstances.15 It is necessary to discuss the authorities, however, because of the use the Judge made of them.Does "arising from" qualify "in connection with"?[23] The phrase "in connection with" appeared in the AMI policy after the compound noun it qualified ("legal liability") and the words "arising from" or "arising out of". Mr Riches, appearing for the Leggs, argued that proximity to wordsimporting causation confirmed that "in connection with" is also concerned with13 At [43].14 At [62].15 See Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR 432 at [60]–[62] per McGrath, Glazebrook and Arnold JJ; and Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5, [2010] 2 NZLR 444 at [19] and [22] per Tipping J.causation. For this proposition he cited the judgment of the District Court of South Australia in Intrend Pty v O'Halloran (Intrend), in which it was said of the same wording in an exclusion clause that "arising" must qualify "in connection with".16The clause in that case excluded cover for claims arising out of or in connection withthe insured's occupation.[24] We prefer Mr Ring QC's submission, for AMI, that "arising from" plainlysignifies causation, but "in connection with" may have a different and less direct meaning. This view is consistent with the authorities, which characterise "in connection with" as the phrase of widest ambit typically found in the insuring clauseor exclusion. Mr Ring cited RAA-GIO Insurance Ltd v O'Halloran, an appeal from the judgment in Intrend.17 There the Supreme Court of South Australia accepted thatthe connection required by "in connection with" is "less demanding" than "arising out of".18 We observe, however, that the case illustrates the point that general wordstake meaning from context, for the Court rejected an argument that "in connection with" required no causal connection in the circumstances and held that the necessarynexus was not established on the facts. The insured was at his place of work when the loss happened, so there was some connection to the excluded activity, but he was there for a social purpose completely unrelated to his occupation.19"In connection with"[25] In holding "in connection with" requires causation, Nation J followed the judgment of this Court in IAG New Zealand Limited v Jackson (Jackson), in which this Court said:20[29] In this case IAG must establish a nexus or relationship between dishonest conduct and civil liability if it is to exclude cover for liability incurred when delivering professional services. The dishonest act need not be the direct or proximate cause of the civil liability, and it need not precede the liability in time. But we accept, following Industrial Steel and Plant Ltd v Swanson & Sons Ltd, that "in connection with" does demand some causal or consequential relationship between the two things in this setting 16 Intrend Pty Ltd v O'Halloran [2006] SADC 95 at [147].17 RAA-GIO Insurance Ltd v O'Halloran [2007] SASC 245, (2007) 98 SASR 123.18 At [28] per Duggan J.19 At [30] per Duggan J.20 IAG New Zealand Limited v Jackson [2013] NZCA 302, (2013) 17 ANZ Insurances Cases 61–982 [Jackson] (footnote omitted).[26] In a dissenting judgment in JCS Cost Management v QBE Insurance (International) Ltd (JCS) Miller J explained the reference in Jackson to "causal or consequential":21 I observe that, as this Court held in IAG New Zealand Ltd v Jackson, thephrase "in connection with" requires a nexus between one thing and anotherbut the nature and closeness of the required connection always depends on context and purpose. Writing the judgment of the Court in Jackson, I went on to say that the connection must be causal or consequential. On reflection,"consequential" may mislead. The term is apt if it is taken to mean, as we did, a connection that need not be causal but which the court decides is of sufficient consequence or significance in the circumstances of the case. Not every temporal or other connection will do. Derrington and Ashton describe the necessary connection as a "discernible and rational link", and greater precision may not be possible in the abstract.[27] Nation J discounted this passage, reasoning that the majority in JCS requireda causal connection between the insured's liability and his professional activities and pointing out that Jackson bound him while the dissent just quoted did not.22 He cited the following passage from the majority judgment in JCS:23[58] It is a fundamental principle of insurance law that an insurer is liable only for loss proximately caused by an insured peril, though parties can agree that a causal connection less than proximate cause will suffice. The causal link is typically identified by the use of prepositions or prepositional phrases that carry recognised meanings in the context of insurance policies. The subject matter of the cover, the insured peril and the nature of the causal link required between them are ordinarily identified in the insuring clause.[28] We observe that the majority was not there addressing the meaning of theprepositional phrase "in connection with". The paragraph introduced discussion of a different point, namely whether "by" in the policy language required a causal connection between the insured peril and the insured's business. It is this point, not "in connection with", that divided the Court.24 As Nation J recognised,25 the21 JCS Cost Management Ltd v QBE Insurance (International) Ltd [2015] NZCA 524 at [37] per Miller J (dissenting) [JCS] (footnote omitted).22 New Zealand Fire Service Commission v Legg, above n 2, at [89].23 JCS, above n 21, at [58] per Courtney and Clifford JJ.24 At [57]–[60] per Courtney and Clifford JJ. The Court also divided on the associated question of whether the case was properly decided summarily. See at [29] per Miller J (dissenting) and [52] per Courtney and Clifford JJ.25 New Zealand Fire Service Commission v Legg, above n 2, at [90].majority also cited Rian Lane v Dive Two Pty Ltd,26 in which it was held that "in connection with" merely requires a relationship between one thing and another.27[29] Accordingly, we respectfully consider that the Judge read too much into the majority judgment in JCS. So far as "in connection with" is concerned, the majorityjudgment was consistent with the dissent.[30] However, it does not follow that the Judge was wrong to find that causation was required in this policy and in the circumstances of this case. As this Court said in Jackson:28The phrase "in connection with" plainly requires a nexus between one thingand another, but the nature and closeness of the required connection always depends on context and purpose.[31] We turn to consider the AMI policy."In connection with", in context[32] Mr Ring submitted that "in connection with" must be symmetrical, in that itmust mean the same thing in the insuring clause and the associated exclusion. That need not always be so. As Mr Riches argued, words need not always have the same meaning throughout a policy and the contra proferentum rule may apply where thereis ambiguity. A court may be guided by evidence of the parties' bargain. Not everyexclusion clause operates by excluding a defined activity; some may be concerned with time, place, or nature of loss (for example exemplary damages may be excluded).29[33] In this case, however, the insuring clause and the exclusion deal with the same activity-related risk (legal liability), and they appear in the same section of the policy. The policy extended cover to one general activity, farming, and excluded it26 JCS, above n 21, at [56] per Courtney and Clifford JJ.27 Rian Lane v Dive Two Pty Ltd [2012] NSWSC 104, (2012) 17 ANZ Insurance Cases 61-924 at [68].28 Jackson, above n 20, at [24].29 For a more detailed discussion of these points, see D K Derrington and R K Ashton The Law of Liability Insurance (3rd ed, LexisNexis, Chatswood, 2013) at ch 10.for other specified activities. In these circumstances, we accept that the nature of the connection required is the same.[34] In reaching this conclusion we part company with Nation J, who found it significant that the burning rubbish was an included risk and the heap was of a size and composition consistent with farming activity.30 As we see it, to exclude liability from rubbish brought from other properties onto the lifestyle block as part of aseparate business is not to undo the parties' bargain. We note that the Judgesubsequently accepted, when dealing with an argument about the application of s 11 Insurance Law Reform Act 1977, that the introduction of ELL material would have caused an increased risk of loss.31[35] However, we do not find that symmetry of meaning assists AMI's contention that in this policy "in connection with" means "having to do with", a phrase which may in some circumstances permit only a loose connection. The insuring clauseextended cover for legal liability to activities in connection with "your farming enterprise". As the Court pointed out during argument, this language requires a real and substantial connection between the legal liability and the insured activity. The same quality of connection must be required by the exclusion.[36] The point that a mere circumstantial connection will not do is illustrated byIndustrial Steel and Plant Ltd v A V Swanson and Sons Ltd,32 a 1982 judgment ofO'Regan J which this Court followed in Jackson.33 In that case Industrial Steel sold to Swanson a Liebherr tower crane under one contract, and agreed to erect it under another. Industrial Steel subcontracted Titan Plant Services to erect the Liebherr using another crane. During erection the Titan crane toppled over, damaging the two cranes and other property. The damage was attributable to the negligence of employees of Industrial Steel and Titan. Industrial Steel sought indemnity from its insurer under a public liability policy. Cover extended to accidental damage "caused30 New Zealand Fire Service Commission v Legg, above n 2, at [75], [120] and [134(c)].31 At [151]. This finding is not easy to reconcile with the Judge's finding, at [102], that the connection with the "non-farming business was not in any way causative of [the Legg's] liability".32 Industrial Steel and Plant Ltd v A V Swanson & Sons Ltd (1982) 2 ANZ Insurance Cases 60-489 (HC) [Industrial Steel].33 Jackson, above n 20, at [29].by or in connection with" goods sold or supplied by Industrial Steel; in this case, the Liebherr crane. O'Regan J held that cover under this provision required arelationship of cause and effect, or a causal element of sense of consequencebetween the Liebherr crane as a "mere item of goods" and the legal liability.34 To ask the question with what did the damage have to do was to receive the answer thatit was the negligent erection. It would be "nonsense" to say that the damage was "in connection with" the Liebherr crane itself as an item of goods sold.35[37] In our opinion, a real and substantial connection between the particular excluded activity in this case and the legal liability must almost inevitably entail a causal relationship of some kind. Counsel could not identify any non-causal connection that would be sufficiently real and substantial to exclude cover.[38] Accordingly, we agree with Nation J, although for somewhat different reasons, that in context the connection between the liability and the excluded activity required a causal relationship.36 We turn to consider the connection in this case.Was the necessary connection between legal liability and excluded activity established on the facts?[39] Nation J accepted that there was a connection between the liability and ELL:37 [S]ignificant material from the business, which the Leggs had chosen toinsure with Lumley, was brought onto the lifestyle block and set alight. In that sense, the introduction and setting alight of that material was part of what happened on 10 January 2013. The embers left from the burning of that material could have been what re-ignited the debris which remained on top of the heap or that in the high winds was blown onto surrounding vegetation setting it alight.[40] However, the Judge reasoned, this connection was not sufficient. We have recorded some of his findings at [9] and [10] above. In addition, he found that:3834 Industrial Steel, above n 32, at 77,787.35 At 77,787.36 New Zealand Fire Service Commission v Legg, above n 2, at [107].37 At [134](f).38 At [134].The heap that was set alight on 16 December 2012 was of a size and nature that could have resulted entirely from normal use of the lifestyle block The material from [ELL] placed on the heap before 16 December 2012was not such as to, of itself, create a risk of an accidental fire or accidental re-ignition The evidence did not establish that without the material from [ELL] there would have been no re-ignition With material on the heap from [ELL], the risk of fire spreading and of liability arising for property damage was no greater than could have been reasonably anticipated with AMI providing cover as set out in the policy for damage arising from operations in connection with the lifestyle block. [I]t has not been established that it was embers from the [ELL] materialwhich reignited on 10 January 2013. The re-ignition and the spread of the fire could have occurred without material from the business having been introduced to the heap.[41] The Judge's conclusion was that:39AMI has thus not proved, on the balance of probabilities, that the introduction of the pine stumps or other vegetation from [ELL] caused the re-ignition of the fire on 10 January 2013 or the Leggs' liability for whichthey otherwise had cover under the policy.[42] We have reached a different view. We preface our conclusions by noting that AMI need not prove that the specific embers that reignited on 10 January came fromELL's business. Causation involves inductive reasoning, in which conclusions arederived as a matter of probability and may rest on common sense.40 It does notnecessitate a "minute" or "microscopic" analysis.41[43] We agree with the Judge that there was a connection between ELL's businessand the liability. We respectfully differ from him in that we consider it was both causal in nature and substantial. The salient points are that:39 At [134(g)].40 Groves v AMP Fire & General Insurance Co (NZ) Ltd [1990] 2 NZLR 408 (CA) at 412 per Hardie Boys J. See also Environment Agency v Empress Car Co (Abertilly) Ltd [1999] 2 AC 22 (HL) at 29 per Lord Hoffmann. William Young J adopted this latter approach in Tucker whenconsidering whether the defendant in that case "caused" the relevant fire: Tucker, above n 10, at [49].41 Clan Line Steamers Ltd v Board of Trade [1929] AC 514 (HL) at 530 per Viscount Sumner.(a) Material from ELL comprised the greater part of the heap, and included stumps capable of forming large embers and smouldering for a considerable time in the right conditions.(b) The size of the heap contributed to the size of the residual pile of ash and unburnt material, so increasing the risk that embers deep within it would continue to smoulder.[44] We accept that, as the Judge found, the heap might have stayed hot had there been no ELL material in it.42 However, this is only to confirm that the Court cannot be satisfied that ELL material was the proximate or dominant cause. It remains thecase, in our opinion, that there was an effective causal connection between ELL'smaterial and re-ignition and resultant damage on 10 January.Does it matter that the fire commingled insured and excluded activities?[45] Generally speaking, where an insurance policy speaks of loss 'caused by' aninsured or excluded event, a court must identify a single proximate cause of loss if it can.43 The proximate cause is not necessarily the last in time; rather, it is the cause adjudged efficient or dominant.44 Where an insured cause is found to be the proximate cause, cover applies. Where an excluded cause is the proximate cause, the exclusion applies. The insurer carries the onus of proving that an exclusion removes cover for a risk otherwise within the policy.[46] The Wayne Tank principle — it is an aid to contract interpretation, rather than a rule of law — states that where a loss has two effective and interdependent causes, one within the policy and one excluded by it, the exclusion prevails.45 The rationale is that where an insuring clause and an exclusion are found together, one arrives atthe parties' intent by subtracting the latter from the former. As it was put in Wayne42 New Zealand Fire Service Commission v Legg, above n 2, at [134](g).43 McCarthy v St Paul Insurance Co Ltd [2007] FCAFC 28, (2007) 157 FCR 402 at [91] per Alsop J.44 Leyland Shipping Co v Norwich Union Fire Insurance Society [1918] at 369 per Lord Shaw.See also Martin Davies "Proximate Cause in Insurance Law" (1996) 7 Insurance Law Journal284 at 294.45 Wayne Tank and Pump Co Ltd v Employers Liability Assurance Corporation Ltd [1974] 1 QB 57 (CA) [Wayne Tank] at 67–68 per Lord Denning MR, 69 per Cairns LJ and 74–75 per Roskill LJ.Tank itself, "[s]eeing that [the underwriters] have stipulated for freedom, the onlyway of giving effect to it is by exempting them altogether".46 In McCarthy v St Paul Insurance Co Ltd, Alsop J explained it more elaborately: "Given that the two causesare interdependent and the loss would not have occurred without the operative effect of the excluded cause, the non-response of the policy can be comfortably andlogically accepted as the intended result of the revealed agreement of the parties".47AMI invokes the Wayne Tank principle here.[47] In this case proximate cause is not the policy standard; the AMI policy is notconfined to loss "caused by" an event. We have held that "in connection with"required a causal relationship in the circumstances, but it is a lesser standard than"caused by".48 This does not affect the Wayne Tank principle, so long as a) theparties intended to exclude loss suffered in connection with ELL's business; b) the excluded cause was an effective cause of the loss; and c) the included and excluded causes were interdependent, in that the included cause would not have caused the loss in any event.49[48] Nation J declined to apply Wayne Tank.50 He cited Derksen v 539938 Ontario Ltd (Derksen), in which the Supreme Court of Canada held that coverage clauses must be interpreted broadly, and exclusion clauses narrowly, and excluded"the presumption that where there are concurrent causes, all coverage is ousted if one of the concurrent causes is an excluded peril".51 On this approach, if an insurer means to exclude cover in such circumstances, it must say so expressly in the policy.52 Absent such express language, it appears that the insurer must show the excluded cause was proximate or dominant.[49] The Judge found that AMI had failed to prove "the fire was caused in aneffective way" by the excluded activity.53 He did not use the term "proximate", but46 At 67 per Lord Denning. See also at 75 per Roskill LJ.47 McCarthy v St Paul Insurance Co Ltd, above n 43, at [103].48 Compare Davies, above n 44, at 287–289.49 Malcolm Clarke "Insurance: The Proximate Cause in English Law" (1981) 20 CLJ 284 at 298.50 New Zealand Fire Service Commission v Legg, above n 2, at [119].51 At [122] and [127], citing Derksen v 539938 Ontario Ltd [2001] 3 SCR 398 at [48]–[49] [Derksen].52 Derksen, above n 51, at [46]–[47].53 New Zealand Fire Service Commission v Legg, above n 2, at [132]–[133].we infer that proximate cause is the standard to which he held AMI. That is so because the substance of his decision is that the exclusion clause did not apply where two effective causes, one included and the other excluded, operated interdependently, and it follows that AMI must prove the excluded cause was proximate.[50] New Zealand courts have applied the Wayne Tank principle in several first instance judgments.54 Further, as Wayne Tank and other cases make clear,55 the principles are the same at common law as they are in marine insurance law, which is governed by legislation.56 Where policy decisions fall to be made at common law, courts may find guidance in legislation in the same general field. The MarineInsurance Act 1906 (UK) provides that unless the policy otherwise provides, "the insurer is liable for any loss proximately caused by a peril insured against, but heis not liable for any loss which is not proximately caused by a peril insuredagainst".57 The Marine Insurance Act 1908 (NZ) is in materially identical terms.58[51] The Wayne Tank principle is also consistent with New Zealand courts' usualapproach to insurance contracts, which are interpreted in the same way as any other, the overall objective being to ascertain the mutual intention of the parties.59Exclusion clauses are construed narrowly, but not in a strained or artificial way that deviates from this general approach.60 To follow Derksen, then, would be to effect a54 State Insurance Office Manager v Bettany (1990) 6 ANZ Insurances Cases 76,818 (HC) at 76,821; Countryside Finance Ltd v State Insurance Ltd [1993] 3 NZLR 745 (HC) at 756; andBody Corporate 326421 v Auckland Council [2015] NZHC 862 at [340].55 Wayne Tank, above n 45, at 72 per Roskill LJ; and Leyland Shipping Company Limited v Norwich Union Fire Insurance Society Ltd [1918] AC 350 (HL) at 370–371 per Lord Shaw of Dunfermline.56 Techni-Chemicals Products Co Ltd v South British Insurance Co Ltd [1977] 1 NZLR 311 (SC) at 319; and Becker, Gray and Company v London Assurance Corporation [1918] AC 101 (HL) at 113–114 per Lord Sumner. See also Robert Merkin and Chris Nicoll Colinvaux's Law ofInsurance in New Zealand (Thomson Reuters, Wellington, 2014) at 100.57 Marine Insurance Act 1906 (UK), s 55(1).58 Marine Insurance Act 1908, s 55(1).59 D A Constable Syndicate 386 v Auckland District Law Society [2010] NZCA 237, [2010] 3 NZLR 23 at [23]; and QBE Insurance (International) Ltd v Wild South Holdings Ltd [2014] NZCA 447, [2015] 2 NZLR 24 at [18]. It bears emphasis that Firm PI, above n 15, was an insurance case.60 Lumley General Insurance (NZ) Ltd v Body Corporate No 205963 [2010] NZCA 316, (2010) 16 ANZ Insurance Cases 61-853 at [27].change of policy toward insurance contracts, going further than the contra proferentum rule permits.61[52] This is a case of two interdependent causes, neither of which can be isolated as the cause of the fire on 10 January 2013. On the facts, AMI proved on the balance of probabilities that the excluded cause — ELL material — was effective. It also excluded farming activities as an independent cause, effective without the ELL material. We have mentioned at [10]–[11] and [43] above the facts that lead us tothat conclusion. In summary: the greater part of the material on the heap was ELL's;the ELL material included stumps capable of smouldering for a long time deep within a pile of ashes; and the embers were blanketed by an ash pile the size of which owed something to the ELL material. The conclusion that ELL material was an effective and interdependent cause is inescapable.[53] Mr Riches did not invoke the contra proferentum rule, but we record that for reasons given at [34] above it would not avail the Leggs.[54] Our conclusion that the exclusion applies entails no substantial departurefrom the Judge's factual findings. In particular, he did not find that the lifestyleblock material would have caused the fire in any event. His findings about s 11 of the Insurance Law Reform Act are consistent with this conclusion.62 As noted at [44] above, he did find that the heap might have stayed hot had there been no ELL material in it, but that falls well short of a finding that the lifestyle block material was an effective and independent cause of the 10 January fire. The point on which we depart from the Judge, and upon which the case ultimately turns, is whether theWayne Tank principle applies. We hold that it does.Decision[55] AMI proved that the Leggs' legal liability to the authorities for costs ofextinguishing the fire on 10 January 2013 was incurred in connection with anexcluded activity, ELL's business. To realise the parties' agreement we must give61 Compare Derksen, above n 51, at [46]; and Lumley General Insurance (NZ) Ltd v Body Corporate No 205963, above n 59, at [27]. See also Trustees Executors Ltd v QBE Insurance (International) Ltd [2010] NZCA 608, (2010) 16 ANZ Insurances Cases 61-874 at [40].62 New Zealand Fire Service Commission v Legg, above n 2, at [151] and [155].effect to the exclusion. Accordingly, AMI is not liable to indemnify the Leggs for those costs.[56] The appeal is allowed accordingly. Judgment is entered for AMI. The Leggs are liable to pay costs for a standard appeal on a band A basis and usual disbursements. Costs in the High Court are to be determined in that Court in light of this judgment.Solicitors:DLA Piper, Auckland for AppellantSaunders & Co, Christchurch for First Respondents