Proximate cause

What is proximate cause?

Proximate cause, or causa proxima, is the principle used to decide whether a loss is covered when more than one event contributed to it. The insurer looks for the dominant and effective cause, the one that set the chain of events in motion and led to the loss without being broken by a new, independent cause. If that cause is an insured peril, the claim is payable. If it is excluded, or not covered at all, the claim fails, even when an insured peril played some part.

"Proximate" refers to effectiveness, not to time. The cause closest in time to the loss is not automatically the proximate cause.

How proximate cause works in India

Section 55 of the Marine Insurance Act, 1963 states the rule: unless the policy says otherwise, the insurer is "liable for any loss proximately caused by a peril insured against" and not liable for loss not proximately caused by one. The section also excludes wilful misconduct of the assured, ordinary wear and tear, and inherent vice. Indian courts and consumer commissions apply the same test to fire, motor, health and personal accident claims, and the IRDAI (Insurance Products) Regulations, 2024 list proximate cause among the basic principles insurers must follow in product design.

The Supreme Court applied it in Alka Shukla v. Life Insurance Corporation of India (2019). The insured felt chest pain while riding a motorcycle, fell, and died of a heart attack. The accident benefit rider required death from bodily injury caused "solely and directly" by an accident through outward, violent and visible means. The Court held that there had to be "a proximate causal relationship" between the accident and the injury, and between the injury and the death. Since the evidence showed the heart attack, not the fall, caused the death, the accident benefit was not payable.

How insurers apply the test

Policy wording can change the default position. Phrases such as "directly or indirectly caused by" in an exclusion widen it, and that is why exact wording matters so much in claims.

Examples

• Fire after an earthquake. Under the Standard Fire and Special Perils policy, earthquake is an add-on. If a quake causes a fire and the insured has not bought earthquake cover, whether the fire damage is paid depends on how the policy wording treats fire following an excluded peril.
• Theft after a flood. If goods are stolen from a warehouse while the owner was evacuated during a flood, the proximate cause is theft, not flood, so the claim depends on whether theft is covered.
• Accident leading to illness. If an accident causes injury, and the injury causes an infection that leads to death within the policy's time window, the accident is generally treated as the proximate cause. If an illness causes the fall, the illness is the proximate cause.

What proximate cause means for distribution

Proximate cause decides many of the claims that customers feel were "unfairly" rejected. Distribution teams can reduce those disputes at the point of sale.

• Explain named perils versus all risks. On a named perils policy, the loss must be caused by a listed peril. Customers buying fire or home cover should know which perils are included and which, such as earthquake or terrorism, need add-ons.
• Accident riders are narrow. Accidental death benefit and personal accident covers pay only when the accident itself causes the injury and the injury causes the death. Sales scripts that describe these riders as general life cover set up repudiations.
• Document the sequence after a loss. Encourage customers to record how the loss happened, keep photographs and file police or fire brigade reports. The surveyor and the claims team rebuild the chain of causation from this evidence.
• Read exclusions with the customer. Wording such as "directly or indirectly" or "arising out of" changes outcomes. Partners selling commercial cover should flag these clauses to the buyer.
• Escalate wisely. Where a repudiation turns on causation, the customer can seek review through the insurer's grievance process and then the Insurance Ombudsman.