Principle Of Nearest Cause

Principle Of Nearest Cause

Principles Of Causa Proxima

Principles Of Insurance

• The loss of insured property can be caused by more than one cause in succession to another.

• The property may be insured against some causes and not against all causes.

• In such an instance, the proximate cause or nearest cause of loss is to be found out.

• If the proximate cause is the one which is insured against, the insurance company is bound to pay the compensation and vice versa.

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Principle of Causa Proxima (a Latin phrase), or in simple English words, the Principle of Proximate (i.e Nearest) Cause, means when a loss is caused by more than one causes, the proximate or the nearest or the closest cause should be taken into consideration to decide the liability of the insurer.

The principle states that to find out whether the insurer is liable for the loss or not, the proximate (closest) and not the remote (farest) must be looked into.

For example: A cargo ship's base was punctured due to rats and so sea water entered and cargo was damaged. Here there are two causes for the damage of the cargo ship -

(i) The cargo ship getting punctured beacuse of rats, and

(ii) The sea water entering ship through puncture. The risk of sea water is insured but the first cause is not. The nearest cause of damage is sea water which is insured and therefore the insurer must pay the compensation.

However, in case of life insurance, the principle of Causa Proxima does not apply. Whatever may be the reason of death (whether a natural death or an unnatural death) the insurer is liable to pay the amount of insurance.

Insurance Law And Practice - ICSI