Proximate and intervening causes of loss

It is crucial for intermediaries to understand the insured’s risk of exposure, the perils to be indemnified against and the causal implications of the policy’s operative clause and exclusions.

Any successful claim requires proof of a causal link between the peril insured against and the loss described in the policy. In the absence of any indication to the contrary, the test for causation is that applied in other areas of our law – whether a cause and effect link exists and if so, whether or not the link is too remote.

Traditionally, the remoteness test of an insurer’s liability is whether the insured event is a result of a proximate cause included in the perils. Liability is excluded if the proximate cause of the insured event is an excluded peril. The policy wording may sometimes make express reference to the proximate cause requirement. The Courts tend to hold for instance that the use of the phrase “in consequence of” requires a proximate cause. In the absence of a clear indication to the contrary in the policy, the requirement of a proximate cause is usually inferred.

Proximate in efficiency

If the relationship between the cause and the effect is indirect and fortuitous, then the cause is not proximate. The cause must be proximate in efficiency. It need not be proximate in time nor the sole or exclusive cause. It may be one of several co-operating causes.

Intermediaries advising their clients need to consider, having regard to the risks and needs of the insured whether proximate cause should be expressly excluded or incorporated in the policy. The exclusion of proximate cause is usually achieved by use of the phrase “directly or indirectly”. Remember, however, that the proximate cause exclusion does not negate the need to prove that a causal link exists.

Concurrent operating causes

Problems do arise when there are two independent but concurrent operating causes. That problem may be avoided where the policy provides that it responds only where a particular peril is the sole and exclusive cause of the loss or it must have caused the loss independently of any other cause.

Where a loss is caused by two perils operating simultaneously at the time of the loss, the one cause being excluded by the policy and the other falling within the risk, then the English authorities have held that the insurer is not liable.

The Eastern Cape Division of the High Court in a 2008 judgment of Mutual & Federal Insurance Company Limited v G M Ingram N.O & Others followed the English courts finding that where damages are brought about by two equal or nearly equal causes the insurer is exempted from liability if one of the causes falls within the specific exceptions in the policy.

Where there are concurrent causes, one of which is covered and another which is not specifically and expressly excluded, then the insured is entitled to an indemnity under the policy.

Intervening cause

Where there is an intervening cause subsequent to the original cause, it may completely neutralise the original cause. The question is always whether the subsequent occurrence severs the original causal link. If the original cause is an excluded cause and the subsequent peril is not, and the subsequent event completely severs the original causal link, then the policy will respond.

Intermediaries must understand the insured’s risk of exposure, the perils to be indemnified against and the causal implications of the policy’s operative clause and exclusions. Where appropriate, amendments to the policy wording and exclusions may be needed.