The Wayne Tank principle concerns the issue of whether a policy responds when there are two proximate causes which give rise to a loss, when one of the proximate causes falls within the cover afforded by the policy and the other falls within an exclusion.
As Cairns LJ explained, the principle is as follows:
If one cause is within the words of the policy and the other comes within an exception in the policy, it must be taken that the loss cannot be recovered under the policy. The effect of an exception is to save the insurer from liability for a loss which but for the exception would be covered. The effect of the cover is not to impose on the insurer liability for something which is within the exception.
That principle has not been universally approved. In the case of Derksen v.539938 Ontario Ltd [2001] SCC 72 the Supreme Court of Canada decided not to follow the Wayne Tank principle, on the basis that there is no compelling reason to favour the exclusion of coverage where there are two or more concurrent causes. The court went on to say, if the insurer wished to oust coverage in cases where covered perils operate concurrently with excluded perils, they simply need to do so expressly in the policy wording.
At this point, it is important to note that concurrent causes of loss can be divided into independent causes of loss and serial or interdependent causes of loss. Independent causes are unrelated. The fact that they operate simultaneously to produce the loss is a mere coincidence of time and situation. There is no causal connection between independent concurrent causes; the causal connection exists only between each of those causes and the loss. Derksen was concerned with two concurrent independent causes of loss.
Serial or interdependent causes are those where each is a consequence of the one preceding it; where, there is a causal connection not only between each cause and the loss, but also among the various causes.
The distinction between independent concurrent causes and serial or interdependent concurrent causes is an important distinction to make. The Wayne Tank principle can be understood in the context of serial or interdependent causes. As Alsop J explained in McCarthy v St Paul Insurance Co Ltd [2007] FCAFC 28; 157 FCR 402; 239 ALR 527 : "Given that the two causes are 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 and logically accepted as the intended result of the revealed agreement of the parties". However in the context of concurrent causes, a court's application of the Wayne Tank principle is more difficult to understand.
The Wayne Tank principle and Derksen was considered by the Court of Appeal of New Zealand in AMI Insurance Ltd v Ross John Legg and others [2017] NZCA 321. In their judgment the Court said:
"New Zealand courts have applied the Wayne Tank principle in several first instance judgments. Further, as Wayne Tank and other cases make clear, the principles are the same at common law as they are in marine insurance law, which is governed by legislation. Where policy decisions fall to be made at common law, courts may find guidance in legislation in the same general field. The Marine Insurance 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 ... he is not liable for any loss which is not proximately caused by a peril insured against". The Marine Insurance Act 1908 (NZ) is in materially identical terms. The Wayne Tank principle is also consistent with New Zealand courts' usual approach 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. Exclusion clauses are construed narrowly, but not in a strained or artificial way that deviates from this general approach. To follow Derksen, then, would be to effect a change of policy toward insurance contracts, going further than the contra preferential rule permits."
AMI Insurance concerned interdependent causes and as such it is more readily understandable why the Court of Appeal wished to follow the Wayne Tank principle. It is however disappointing that the New Zealand Court of Appeal did not take time to consider whether different approaches should be taken depending whether the proximate causes of loss were independent or interdependent.
Derksen is not inconsistent with the Marine Insurance Act 1906 (UK) or Marine Insurance Act 1908. (NZ) or the Marine Insurance Act 1909 (Australia). If a concurrent cause of loss triggers policy response, why should indemnity be denied because another independent concurrent cause of loss falls within an exclusion clause.
It is hoped that at some point the New Zealand High Court or an appellate Australian Court will properly consider Derksen and consider whether different approaches should be taken depending on whether the proximate cause of the loss are interdependent or independent.
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