Introduction
Insurance Policies only provide cover for loss or damage if it is as a result of one of the Perils listed in the Policy. Determining the actual cause of loss or damage is therefore a Fundamental step in the consideration of any claim. Proximate cause is a key principle of insurance and is concerned with how the loss or Damage actually occurred and whether it is indeed as a result of an insured peril.
What is the meaning of proximate cause
Proximate cause has been defined as “The active efficient cause that sets in motion a train of events which bring about a result without the intervention of any force started and working actively from a new and independent source”.
(This definition comes from the ruling given in the case Pawsey v/s Scottish Union and National Insurance Co. (1907). The law provided the rule “Cause Proxmia non Remote spectator”. The immediate cause and not the remote one should be taken into consideration.
It is important to note that the proximate cause need not be the cause immediately before the loss or damage occurs. The last cause could simply be a link in the chain connecting the event with the proximate cause. For example, a fire might cause a water pipe to Burst. Despite the resultant loss being water damage, the fire would still be the proximate Cause of the incident.
There are three types of perils related to a claim under an Insurance policy
(1) Insured Perils: These are the perils mentioned in the policy as being insured e.g. Fire, lightening, storm etc. in the case of a fire policy
(2) Excepted Perils: These are the perils mentioned in the policy as being excepted perils or excluded perils e.g. Riot strike, flood etc. which may have been excluded and
Discount in premium availed.
(3) Uninsured Perils: Those not mentioned in the policy at all either in Insured or excepted perils e.g. snow, smoke or water as perils may not be mentioned in the policy.
The burden of proof in relation to proximate cause
There is a general rule that applies to the burden of proof. The Policyholder must demonstrate that an insured peril has caused the loss or damage and, having done so, it is then for the Insurer to demonstrate the operation of any exclusion (if they wish to deny policy liability). The situation is slightly different with an All Risks Policy. In this instance, the Policyholder need only demonstrate that damage has occurred to the insured property during the period of insurance. If an Insurer wishes to apply an exclusion, the Insurer must then prove that the cause was one of the excluded events.
Examples
A surveyor on surveying a factory damaged in a fire came to the conclusion after detailed investigation that the fire was caused by negligence as well as defective design and both these causes worked together to cause the damage. While the Insurance policy covered negligence it did not cover Defective Design and hence claim was denied.
A house collapses due to an earthquake, which results in fire. Under the fire policy earthquake is not a covered risk, hence the claim will not be payable.
In case of the broken sequence or Interrupted chain of events if the chain of events is started by an Insured peril but interrupted by an excepted or excluded peril then the claim is paid after deducting the damage caused by the excluded peril. For example, the burglars enter the house and leave the gas stove on leading to a fire and the house is damaged in the fire. The “burglary Insurance” will only pay for the loss due to theft but exclude loss due to fire, which is accepted peril under the burglary policy. In case the sequence of events started by an excluded peril is broken by an Insured peril, as a new and independent cause then there is a valid claim for even the damage caused by exempted peril. The burglar’s enter the house and after carrying out thefts put the house on fire. The fire policy will pay for the damages due to theft as well (which is an excluded peril).
Conclusion
You must establish proximate cause in order to decide whether a claim is covered by the Policy. Insurers are liable to pay claims arising out of losses caused by Insured Perils and not those losses caused by excepted or Uninsured perils.
By Abdulkadir Muhammad
Law student
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