Page 308 - IC38 GENERAL INSURANCE

b) Time when insurable interest should be present

In case of fire and accident insurance, insurable interest should be present
both at the time of taking the policy and at the time of loss.

In case of health and personal accident insurance apart from self, family can
also be insured by the proposer since he / she stands to incur financial losses
if the family meets with an accident or undergoes hospitalisation. However,
in marine cargo insurance, insurable interest is required only at the time of
loss.

4. Proximate cause

The last of the legal principles, which applies only to non-life insurance, is the
principle of proximate cause.

Non-life Insurance contracts provide indemnity only if losses that occur are
caused by insured perils, which are covered the policy. Determining the actual
cause of loss or damage is 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.

Under this rule, insurer looks for the predominant cause which sets into motion
the chain of events producing the loss, which may not necessarily be the last
event that immediately preceded the loss i.e. it is an event which is closest to,
or immediately responsible for causing the loss.

Unfortunately when a loss occurs there will often be a series of events leading
up to the incident and so it is sometimes difficult to determine the nearest or
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 considered the proximate cause of
the incident.

Definition

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

To understand the principle of proximate cause, consider the following
situation:

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