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 It is not the
latest, but the direct, dominant, operative and efficient cause that must be
regarded as proximate. When an insurance policy is bought it is issued with
respect to some peril, which may result in loss to the policyholder. No policy
covers all types of risks. The insurance company is liable to indemnify only
against the insured perils. The term “Proximate cause“ literally means the
nearest cause or direct cause. In insurance parlance it relates to the immediate
cause of the mishap, which resulted in the loss. In general insurance there are
numerous policies on vehicle insurance, property insurance, fire insurance,
burglary insurance, etc. Each policy offers protection from the risks that are
mentioned in the policy. If a person has bought fire insurance for his house
the protection will be from the loss caused by fire, which may have resulted
from the sources mentioned in the policy. In case the fire occurs from any
source other than that mentioned in the policy the insurer is not liable to
compensate the insured. For example if the person is insured to be protected
against fire occurring due to electric short circuit and the fire occurs due to
leakage of LPG cylinder then the insurance company is not liable to pay for the
losses. In this case only if the fire were caused by short circuit would the
loss be covered.
All the details related to proximate cause have to be
clearly mentioned at the time of entering into the contract. Sometimes the
causes not covered by the policy have to be expressly mentioned and though it
is impossible to mention the whole range of causes that are to be avoided they
are usually assumed by implication. The replenishment of compensation proceeds
strictly depend upon the causes agreed upon.
 Determination of proximate cause
Where the mishap occurs as a single event the
determination of Proximate Cause is simple and that particular event can be
attributed for the loss. In case where the loss occurs as a chain of events in
succession with one event setting off the other it may be difficult to
determine the exact cause of the damage. In such an eventuality the parties
have to carefully examine and find out the correct reason for the loss, the
extent to which the loss has been caused by the proximate cause and the amount
of compensation to be paid based upon it. It may happen that the actual peril,
which has caused the loss in turn, is caused by another peril. It has to be
noted that while determining ‘proximate cause’ the sequence of events according
to their time of occurrence is irrelevant. The deciding factor is the correct
cause of loss. Many court judgments act as precedents in arriving at decisions
while making settlements. They have been set out below:
The insurer is liable:
 a. When the peril
is a single event and it is insured.
b. Where the insured peril (the event for which the
policy has been taken for protection) occurs first and it is followed by an
excluded peril (the event which has not been covered by the policy, i.e., which
is not insured). Here the insurer has to pay for the loss, which had occurred
up to the happening of the excluded peril only if the two perils can be distinguished
from each other.
c.  Where the excluded
peril causes the insured peril and the events occur in a broken sequence the
insurer has to pay for the loss caused by the insured peril.
d. Where both the perils are occurring concurrently and
both the events are independent of each other.
The insurer is not liable:
a.Where the excluded peril is the cause of the insured
peril and they act consecutively
b.Where the insured peril is followed by the excepted
peril and both cannot be distinguished from each other.
 c. Where both the
perils are occurring concurrently
1. In
the case of Tootal Broadhurst Lee &
Co vs. London & Lancashire Fire Insurance Co
. the fire was caused by an
earthquake. Here earthquake was not part of covered risk hence the insurer was
not liable as the loss was proximate to an excepted peril.
 2. In case where fire causes
an explosion (an excepted peril), the insurer will be liable for fire damage up
to the time of explosion.
3. In
the case of Marsden vs City and Country
Assurance Co
., Marsden had insured his plate glass from any risk except
fire. Eventually a fire occurred in the neighbouring premises and in the
commotion that followed some miscreants broke into the premises by smashing the
insured plate glass to commit theft. As per the verdict the proximate cause of
the loss was mob ambush and not the fire. Hence the insurer was liable for the

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