Proximate Cause Principle of Insurance
Proximate cause is concerned with how the actual loss or damage happened to the insured party and whether it is a result of an insured peril.
It looks for what is the reason behind the loss, is that is an insured peril or not.
The doctrine of proximate cause is one of the six principles of insurance.
The principle of proximate cause virtually revolves around the claims administration and, more precisely, diagnosing the playability or otherwise of a claim on the question of perils covered by a policy.
A policy may cover certain perils mentioned specifically therein (known as insured perils), whilst some perils may be specifically excluded (known as excepted perils) and some may still be neither included nor excluded (known as uninsured perils).
It is not always that much straightforward that a loss would be caused by a singular insured or uninsured or an excepted peril so that a claim would be either payable or not payable.
Difficult situations do occur where numbers of perils get involved simultaneously, some insured, some uninsured and some still accepted.
More so, the position gets further complicated when an insured peril is followed up by an excepted peril or an excepted peril is followed up by an insured peril, simultaneously getting mixed up by uninsured perils.
The principle of proximate cause has been established to solve such a cumbersome situation and to enable a claims manager to decide whether a claim is at all payable or not and if payable, then to what extent.
What is this proximate cause then? (Definition of Proximate Cause)
Proximate cause means the active, efficient cause that sets in motion a train of events which brings about a result, without the intervention of any force started and working actively from a new and independent source.
For example, a man falls from a ladder at a low height and scratches his leg a little. He is taken to a hospital and in the hospital; he contacts cholera from the next bed patient and dies.
The proximate cause of his death is cholera and not falling from the ladder, or for that matter scratches on his leg, even though it can be wrongly argued that has he not had scratches on his leg he would not have gone to the hospital and contacted cholera as such. In this case, scratches may be a remote cause.
Let us take another example. A man scratches his leg falling from a ladder. He is being taken to the hospital by an ambulance.
On way to the hospital, the ambulance meets a head-on collision with a lorry and all persons onboard the ambulance die including our man.
The proximate cause of our man’s death is the collision and certainly not scratches. Collision being the cause of death is very efficient here whilst scratch is inefficient and remote.
Proximate Cause Examples
It is only by considering some propositions and examples that the doctrine of proximate cause can best be understood.
A man goes to a late-night cinema and whilst returning home from the show he is attacked by a group of vandals, stabbed and killed.
The proximate cause of his death is stabbing and certainly not going to the cinema, although it may be wrongly argued that has he not had gone to cinema he would not have met the vandals and got killed in this way.
Here, going to the cinema may be simply a remote cause without proximately causing his death.
To take another example, a man riding a horse in a lonely hilly place falls from the horseback, gets an injury and remains unconscious the whole night under exposure to severe cold. The following morning he is discovered by some persons.
In the meantime, due to the severe exposure, the contracts pneumonia and dies.
Here the proximate cause of his death is accident or falling from the horseback, the reason being that injury leading to unconsciousness, exposure to severe cold and then pneumonia are all-natural events developing gradually one after another without really being intervened by a new or independent source
For finding out the proximate cause we shall have to watch closely the chain of events, leading ultimately to a result, and out of such events whether in a broken or unbroken sequence, interrupted or uninterrupted, the cause proximate to the result must be established.
So long the first cause retains its identity and efficiency until the result we may say that it is the proximate cause.
If, however, the chain of causation is broken so that the first cause loses its identity, and a new cause develops bringing about the result actively and efficiently then we may tag the result to have been proximately caused by the new intervening cause.
To give an example, let us take 10 bricks arranged in a lined standing order one after another keeping a gap of say 6 Inches in between. Somebody gives a kick on the first brick and gradually the last brick in the line also falls.
Here the proximate cause of falling off the last brick is certainly the kick because the strength of the kick was such that it could effectively make the last brick fall without the intervention of any new force started.
Let us, however, assume that as a result of the kick only 6 bricks fall but suddenly a man throws a stone on the 7th brick and gradually falls the 7th, 8th, 9th, and 10th brick.
In this case, the proximate cause of falling the last brick is throwing the stone and not the kick because the kick was not efficient enough to cause the last brick to fall.
On the other hand, a new and intervening force developed (throwing of the stone) which was active, efficient and potent enough to cause the result, i. e., falling off the last brick. Let us take another example.
A policy covers- accidental fire but specifically excludes earthquake fire. There is an earthquake fire somewhere near the insured building. Due to the prevailing wind, the fire spreads gradually to neighboring buildings one after another and ultimately sets the insured building into the fire.
The claim is not payable because the proximate cause of loss is earthquake fire and not ordinary fire even though the earthquake had nothing to do with the insured building.
This is so because throughout the spread and travel, with the help of natural wind, the fire retains its identity as an earthquake fire. The situation would have been different had the spread of fire been interrupted by a new and independent cause.
If, in the same example, it so happens that from mid-journey of the fire someone lights a candlestick, carries this fire and sets the property of somebody under fire then that resultant fire shall be accidental fire or malicious fire and certainly not earthquake fire as the chain of events has been broken by a new and independent force, which is active, efficient and potent enough to bring about the result.
From all the examples explained herein, the readers would possibly appreciate that it is indeed the Common Sense that is required most to find out the proximate cause of a result. We should not try to find out the cause of causes thereby getting mixed up and complicating the issue.
A learned judge, therefore, rightfully commented with confidence, “if you want to find out the proximate cause, do not ask a scientist or a lawyer, ask a man from the street. Probably his answer will be the correct one”.
This comment certainly conveys the feeling of the learned judge as to how he feels the importance of common sense in finding out the proximate cause.
Rules of Proximate Cause
Concerning pay-ability or otherwise of a claim, keeping in view the perils insured, uninsured and excepted, certain rules of proximate cause should be noted carefully.
(i) Single Cause: When a single cause gives rise to a claim the issue is simple. If the cause is an insured one the claim is payable if the cause is uninsured or excepted the claim is not payable.
(ii) Concurrent Causes: It becomes a difficult proposition when a loss is caused by the operation of many perils, some insured, some uninsured and some excepted. If no excepted peril is involved, then provided that there is at least one insured peril involved, the claim becomes payable by disregarding others. However, if excepted peril is involved with insured peril then if the effects of excepted peril can be separated from that of the insured peril there is a liability for the loss caused by the insured peril. If it cannot be so separated then there is no liability whatsoever.
(iii) Unbroken Sequence: If excepted peril is followed by an insured peril, there is no claim. If on the other hand an insured peril is followed by an excepted peril there is a claim for the loss caused by the insured peril. When several events occur in an unbroken sequence than provided there is no excepted peril involved, the whole claim is payable only if an insured peril is involved.
(iv) Broken Sequence: If excepted peril is followed by an insured peril as a new and independent cause then there is a liability for the loss caused by the insured peril. If on the other hand, an insured peril is followed by an excepted peril as a new and independent cause, here also there is a liability for the loss caused by the insured peril.
Waiver of Proximate Cause
Sometimes the application of the rule of proximate cause may be waived by insurers through policy conditions. The best example here is probably the standard fire policy. The policy does not cover loss due to “spontaneous fermentation”, but any resultant fire damage is covered.
This is because the insurers have used the word “it’s own” before “spontaneous fermentation” which means that only the property subjected to spontaneous fermentation is excluded but any resultant fire damage is covered.
Had the words “its own” not been there the resultant fire damage would not have been covered under the rule of proximate cause.
By using these two words, the insurers have intentionally waived the application of the rule of proximate cause.
Proximate Cause in Life Insurance
The efficient or effective, cause which causes the loss is called proximate cause, it is the actual cause of loss.
If the cause of loss (peril) is insured, the insurer will pay, otherwise, the insurer will not compensate.
In life insurance, the doctrine of Causa Proximo (Proximate Cause) is not applied because the insurer is bound to pay the amount of insurance whatever may be the reason of death. It may be natural or unnatural.
So, this principle is not of much practical importance in connection with life assurance, but in the following cases, the proximate causes arc observed in the life insurance, too.
Where the policy is issued on the exclusion of War and aviation risks, the proximate cause of death is important because the insurer waives its liability if death occurred, in this case, while the insured was in the field or is engaged in the operation of war and aviation.
Only premium paid or surrender value whichever is higher is payable and the total policy amount is not payable.
Life Insurance and Suicide
If a suicide occurs within one year of the policy, or there was an intention to commit suicide arid the payment of policy would be restricted, only up to the interest of the third party in the policy provided the interest was expressed at least one month before the suicide.
A problem arises when an insured under an accident policy is killed or suffers an injury, which has an immediate cause and a remote cause.
In accident benefits policy, double of the policy amount is paid. Therefore, the cause of death in this policy is of paramount importance.
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