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6/2 W01/March 2017 Award in General Insurance

Introduction

In this chapter, we look at the causes of loss and how these relate to the cover provided under a policy.
We also look at the application of the principles to straightforward claims situations.
When a loss occurs and a policyholder makes a claim for loss or damage, the insurer decides whether to
meet the claim by asking the following questions:
• Is the insurance contract in force?
• Was the loss caused by an insured peril?
Answers to both these questions can usually be found by checking policy records and the claim form.
Sometimes it is not
clear what caused the Sometimes, however, it is not clear what actually caused the loss. In these circumstances insurers look
loss at the loss, at all the possible causes and at the relationship between them, before deciding whether the
claim is valid and so making a payment.

Key terms
This chapter introduces the following terms and concepts:
Excepted/excluded perils Exception clause Exclusions Insured perils
Policy wordings Uninsured/unnamed perils

A Meaning of proximate cause

Often the cause of a loss is straightforward and there is no need for a long investigation. A fire caused by
an electrical fault is easy to establish. If a policy covers the peril of ‘fire’ the claim will be paid.
However, there are occasions when the cause of loss is not so easily defined, either because there is a
chain of events or there is more than a single cause. In such cases insurers apply the doctrine of
6 proximate cause.
Chapter Proximate cause was defined in the case of Pawsey v. Scottish Union and National (1907): Reference copy for CII Face to Face Training

Proximate cause Proximate cause means the active, efficient cause that sets in motion a train of events which brings
means the active, about a result, without the intervention of any force started and working actively from a new and
efficient cause independent source.

The proximate cause of an occurrence is always the dominant cause and there is a direct link between it
and the resulting loss. A single event is not always the direct cause of a loss: a loss sometimes occurs
following a train of events.
A good way to picture the relationship between cause and effect is to imagine a row of dominoes, all
standing. Imagine the first domino is pushed over, knocking the second which in turn knocks over the
third and so on until they have all fallen down. The push of the first domino sets in motion the train of
events which brings about the fall of the last domino. If we take the fall of this last domino to represent a
loss, then the push of the first domino is, therefore, the proximate cause of the loss.
Imagine, however, that one of the dominoes does not fall as a result of the first domino falling. Instead it
is pushed by an onlooker. In this case the train of events stops and the intervention of a new force,
independent from the original train of events, becomes the cause of the last domino falling. It is,
therefore, the new proximate cause of the loss.

Sample examination question 1
The proximate cause of a loss will always be the:
a. dominant cause. F
b. first cause. F
c. last cause. F
d. only cause. F

Question 6.1 applies the rule to a more complicated example of a chain of events shown in figure 6.1.