Category Legal Affairs

Concurrent causes in light of the judgement of M&F v Ingram No and others

17 May 2010 Heather Wilmot, Director, Deneys Reitz Inc.

The Eastern Cape High Court recently found itself between a rock and a hard place in a policy dispute between car dealership owed by Ingram and its insurers, Mutual and Federal.[1]

Ingram had sustained a significant loss when a portion of the wall of the dealership collapsed inwards onto the roof, plummeting through the ceiling and damaging a number of motor vehicles on display in the showroom. Through its broker, Ingram lodged a claim against a policy issued to it by Mutual and Federal, whose rejection the court upheld. Why? Because of a little thing called concurrent causes…

The basic structure of a policy of insurance, such as the one issued in this case, is an over-all covering clause, with specific exclusions in the cover. The exclusions may be phrased with reference to uses, categories of person, geographic location or causes of the loss. The clause in question excluded loss caused by certain perils, including weather conditions.

The structural experts appointed by each of the parties reached consensus that the combined effect of the prior deterioration of the wall coupled with the prevailing winds on the day in question, caused the instability of the wall resulting in its collapse. Had the loss been caused only by the existing deteriorated state of the wall, the claim for indemnity would have been good. Had the loss been caused only by the prevailing winds of friendly city of Port Elizabeth, it would have fallen squarely within the exclusion.

But what now that the loss was proximately caused by two equal or nearly equal perils operating simultaneously, one being wholly excluded and the other falling within the risk as described?

The Eastern Cape High Court took guidance from the English Queen’s Bench who in 1974 uttered what if “there was not one dominant cause, but two causes which were equal or nearly equal in the efficiency in bringing about the damage. One of them is within the general words… the other is within the exception. In such a case it would seem that the insurers can rely on the exception clause.” [2]

When urged by counsel for the insured not to follow the approach of the Queen’s Bench, the Eastern Cape’s Justice Chetty found that the reasoning of the Queen’s Bench was jurisprudentially sound, and that there was no reason why the approach of a South African court should be any different. In doing so, judgment was found in favour of Mutual and Federal for the exclusion of the entire claim.

In insurance claims it is often not the consequence (loss or occurrence) that is the most important determination, but rather whether the loss was the result of a covered cause. In general terms an insurer will only be liable if the loss for which a claim is brought is the result of a proximate cause included in the perils insured against. An insurer’s liability will be excluded if the proximate cause of a loss was an excluded peril.[3] The question thus frequently asked is whether it is the peril insured against or the excluded cause that is the cause of the loss within the meaning of the policy. So how does one determine the cause of a loss?

In the scene of loss or damage, circumstances and conditions form the stage set into which new active forces, the causes, are interjected.[4] It is necessary to separate causes from conditions, in order to draw up a short list of candidates for the title of proximate cause. Wherever there is a succession of causes which must have existed in order to produce the loss[5], or which have, in fact, contributed[6], or may have contributed[7] to produce it, the doctrine of proximate causes has to be applied for the purpose of ascertaining which of the successive causes is the proximate cause of the loss.[8] It is frequently the case that a loss arises from a series of events, some of which are insured perils and others which are either uninsured or excluded perils, and here the task is to determine which of those perils was the actual proximate cause of the loss.

A cause has been held to be proximate if it can be described by terms such as dominant, direct, actual, effective, determining, operative, predominant or efficient.[9] Whilst the cause must be proximate in efficiency, it need not be the latest in time[10], which is clearly demonstrated by the deteriorated condition of the wall of the P.E. car dealership. The proximate cause need also not be the sole or exclusive cause but may be one of several co-operating causes.[11] The requirement of a proximate cause thus seems to mean no more than that, in order to found a claim, a cause and its consequence must be sufficiently or reasonably closely or directly linked.[12] The proximate cause is thus the event, whether insured peril or exception, which, in all the circumstances prevailing at the time, lead inevitably to the kind of loss in question.

Parties may exclude the operation of the proximate cause rule by limiting the range of consequences for which the insurer’s liability will be excluded, or indeed by extending it. The exclusion of the rule is often accompanied by words such as “directly or indirectly”.[13] Another common phrase operating to limit or exclude the proximate cause rule is “wholly or partly”. In these instances the scope of the peril is widened so that the peril becomes operative if it has played any part in the loss. That being said, Justice Chetty in the Ingram judgment did incorporate the precondition that the concurrent causes be “of equal or nearly equal efficiency in bringing about the damage” in order for an insurer to exclude the entire loss.

In the majority of cases is will be possible to isolate a proximate cause from the chain of circumstances leading up to the loss, and where there are two or more causes the court will strive to identify one proximate cause.[14] However, as in Ingram it is possible that one cannot identify which of the two or more causes is more effective that the other, so that the causes are equally strong. In this instance, they will be regarded as concurrent promixate causes.[15] As is clear from the judgment of Justice Chetty, there can however, be concurrent causes only if the two causes are of equal efficiency.[16] Where one of these concurrent proximate causes is excluded in the policy, the entire loss is excluded.

The reaction of the general public to this recent judgment is likely to be one of some unhappiness with grumblings of notions of fairness and the like. The more lenient approach adopted by the American and Canadian Courts allowing for an apportionment of a loss based on the respective percentages of the insured and excluded causes was proffered as an alternatively to the “all of nothing” approach of the Queen’s Bench. However, for the Eastern Cape High Court to have adopted this more indulgent approach would have been at odds with the principles of insurance law in this country and the development and growth thereof. The sound jurisprudential reasoning of Lord Denning summarized it best “seeing that [exclusions] have stipulated for freedom [from liability], the only way of giving effect to it is by exempting them altogether.” If an exemption does not operate when it is a proximate cause, it is deprived of its contractual effect. This is certainly one for the insurers.  

[1] Mutual and Federal insurance Co Ltd v Ingram NO and Others 2009 (6) SA 53 (E)[2] Wayne Tank and Pump Co Ltd v The Employers’ Liability Assurance Corporation Ltd [1974] QB 57 (CA) at 67c
[3] Rabinowitz v Ned-Equity Insurance Co Ltd 1980 (1) SA 403 (W); Incorporated General Insurances Ltd v Shooter t/a Shooter’s Fisheries 1987 (1) SA 842 (A); Concord Insurance Co Ltd v Oelofsen 1992 (4) SA 669 (A)
[4] M Clarke et al (2006) The Law of Insurance Contracts (5th ed), London, Informa at 786
[5] Pink v Fleming (1890) QBD CA; Reynolds Accidental Insurance Co (1870) 22 LT 820
[6] Winspear v Accident Insurance Co (1880) 5 QBD 42 CA
[7] Isitt v Railway Passengers Assurance Co (1889) 22 QBD 504
[8] Leyland Shipping Co Ltd v Norwich Union Fire Insurance Society Ltd 1918 AC 350 (HL)
[9] Incorporated General Insurances Ltd v Shooter t/a Shooter’s Fisheries supra; Leyland Shipping Co Ltd v Norwich Union Fire Insurance Society Ltd supra
[10] Leyland Shipping Co Ltd v Norwich Union Fire Insurance Society supra; Incorporated General Insurances Ltd v Shooter t/a Shooter’s Fisheries supra; Commercial Union Assurance Co of SA Ltd v KwaZulu Finance & Investment Corporation 1995 (2) SA 575 (W); K&S Dry Cleaning Equipment (Pty) Ltd v SA Eagle Insurance Co Ltd 2001 (2) SA 652 (W)
[11] Reischer v Borwick 1894 2 QB 548; Wayne Tank & Pump Co Ltd v Employers’ Liability Assurance Corporation Ltd supra; Oelofsen v Cigna Insurance Co of SA Ltd 1991 (1) SA 74 (T)
[12] Minister of Police v Skosana 1977 (!) SA 31 (A); Wells v Shield Insurance Co Ltd 1965 (2) SA 865 (C)
[13] Agiakatsikas v Rotterdam Insurance Co Ltd 1959 (4) SA 726 (C); Rabinowitz v Ned-Equity Insurance Co Ltd supra; Taylor v National Mutual Life Association of Australasia Ltd 1988 (4) SA 341 (E); Coxa v Employers’ Liability Assurance Corp Ltd [1916] 2 KB 629
[14] Incorporated General Insurances Ltd v Shooter t/a Shooter’s Fisheries supra
[15] Reischer v Borwick supra; Hagedorn v Whitmore 1(1816) 1 Stark; Ocean SS Co v Liverpool & London War Risks Association [1946] KB 561; West, Wake, Price & Co v Ching [19560 3 All ER 821; Heskell v Continental Express [1950] 1 All ER 1033
[16] Kaster Navigation Co Ltd v Axa Global Risks (UK) Ltd [2003] Lloyd’s Rep IR 262; Svenska Handelsbanken v Dandridge [2003] Lloyd’s Rep IR 10; Tekrol Ltd v International Insurance Co of Hanover Ltd [2006] Lloyd’s Rep 38

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