Proximate Cause’ is defined as “The active, efficient cause that sets in motion a chain of events, which brings about a result, without the intervention of any new or independent force” Life itself is full of events, sometimes occurring independently of each other or as a result of another. The principle, proximate cause identifies for insurance purposes, which event is the probable cause of a particular event, leading to a loss and whether this event is insured.
Usually, the first and last events can be easily indentified but it is any intermediate events and causes, which happen, that may be more tricky to determine.
The event chain must be carefully considered at each stage, questions as to whether that particular chain was broken by a new and intervening cause, using logic.
Remote Causes
These are when an original event has occurred and started the motion towards loss, when another new and independent cause occurs and the loss happens. Usually a period of time elapses between the original cause and the remote cause. The following two cases illustrate whether a remote cause can be considered as the proximate cause of a loss:
In Roth v South Easthope Farmers' Mutual Insurance Co. (1918) lightning damaged a building and weakened a wall. Shortly afterwards, the weakened wall was blown down by high winds. Lightning was considered to be the proximate cause.
In Gasgarth v Law Union Insurance Co. (1876) fire damaged a wall and weakened it. Several days later a gale blew down the weakened wall. It was held that fire was NOT the proximate cause.
The point to note here between the two cases is the length of time passed before the remote cause occurs, which makes the difference.
Perils Relevant to Proximate Cause
There are 3 types of relevant perils, which are as follows: * Insured Perils
Those which are stated in the policy as insured, such as fire and lightning * Excepted or Excluded Perils
Those stated in the policy as excluded either as causes of insured perils, such as riot or earthquake or as a result of insured perils * Uninsured or Other Perils
Those not mentioned in the policy at all. Storm, smoke and water are not excluded nor mentioned as insured in a fire policy. It is possible for a water damage claim to be covered under a fire policy, if for example, a fire occurs and the fire brigade extinguishes it with water.
Indirect Causes
Some policies sometimes exclude a peril if it is caused directly or indirectly by another one.
Concurrent Causes
There are losses whereby it is clear that more than one event has occurred at the same time, contributing to the loss. If there is no excepted peril involved and the causes cannot be identified or the parts of the loss seperated, then ALL the damage will be insured. If the losses can be filtered, then the appropriate settlements will be made, if insured.
If an excepted peril is involved in loss involving concurrent causes and the damage cannot be seperated then NONE of the loss is insured. If it can, then only the insured part of the damage is covered.
Illustrations:
As one is aware, every policy has a set of perils that are covered and another longer list of perils that are excluded. In fact, while deciding to opt for an Insurance policy, what you actually decide is to protect yourself against is the financial losses you may suffer due to a set of certain perils.
Take, for example, a home owner choosing a Fire policy and skipping a Machinery Breakdown policy (which would have covered his electrical equipment). He has chosen to take cover for fire and allied perils and ignore Breakdown-related perils.
There happens to be a fire in his building, following which there are frequent electrical fluctuations and his refrigerator breaks down after a few days. He would naturally expect that the claim will be paid through the fire policy! Alas ! He would be in for a disappointment.
The fire policy does not include “breakdown-related” perils and since the proximate cause was ascertained to be “breakdown” and not the fire directly.
Consider this too: Firemen remove undamaged stock from a burning building to protect it from fire. It is stacked in the open yard and subsequently damaged by rain. Was the proximate cause of the damage – the fire or the rain?
If the rain damage occurred before the insured has an opportunity to protect it, then the proximate cause of the damage would be fire, which is covered under the fire insurance policy. However, if the stocks were left unprotected for an unreasonably long period, the rain would be a new and independent cause of damage that is normally not covered under the policy.
There are many examples of such claims, which at first sight suggest that the proximate cause is obvious, but on more detailed enquiry, different conclusions are reached.
Understanding proximate cause in the context of a loss can be a daunting task. But the facts are usually complicated – given the different potential causes of loss involved and exclusions in play. Case Laws:
The below are some U.S. cases that will help you in better understanding. In Home Ins. Co. v. American Ins. Co., 147 A.D.2d 353, 537 N.Y.S.2d 516 (App. Div. 1st Dep’t 1989). In that case steam rising from an open drain line permeated a room with electrical equipment. The moisture from the steam deteriorated the insulation between copper bus bars in a circuit breaker. That allowed an electrical arc to develop between the copper bus bars, which damaged an electrical transformer. Under these facts, the court held that (1) “the efficient or dominant cause of the loss was the short circuit in the electrical system”, and (2) the steam merely set the stage for that later event, and therefore, the escape of steam was not the proximate cause of the loss.

In Quadrangle Dev. Corp. v. Hartford Ins. Co., 645 A.2d 1074 (D.C. 1994), an electrical arc developed in a switchboard at the insured hotel. Simultaneously, a circuit breaker failed to trip. The insured argued that the malfunction of the circuit breaker was the proximate cause of the damage to the switchboard, but the court disagreed, saying "the arcing was, under the circumstances of the case, the efficient and dominant cause of the [loss].”

In St. Paul Fire & Marine Ins. v. Protection Mut. Ins., 664 F. Supp. 328 (N.D. Ill. 1987), an electrical disturbance of some sort developed inside a capacitor powering an induction furnace at the insured's manufacturing plant. The capacitor caught fire. The fire spread to other parts of the plant and damaged 75 other capacitors. The property policy contained an exclusion saying "This policy does not insure against loss or damage caused by or resulting from ... Electrical injury or disturbance to electrical appliances, devices, or wiring caused by electrical currents artificially generated unless loss or damage from a peril insured herein ensues and then only for ensuing loss or damage." The court held that the electrical damage to the initial capacitor where the short circuit developed was excluded (because the electrical arcing was the most important cause of the damage to that particular capacitor), but that the fire damage to the other 75 capacitors was covered under the "ensuing loss" provision.