Principle of Causa Proxima
The term causa proxima means nearest or proximate or immediate cause. In other words the rule of causa proxima means that the cause of the loss must be proximate or immediate and not remote. If the proximate cause of the loss is a peril insured against, the Insured can recover, if the real cause of the loss is insured, the insurer Is liable to pay compensation. Otherwise the insurer Is not liable to pay compensation. Proximate cause means the active efficient cause that sets in a motion of events which brings about a result. When a loss has been brought about by two or more causes, the question arises as to which is the causa proxima, although the result could not have happened without the remote cause. But if the loss is brought about by any cause attributable to the misconduct of the insured, the insurer is not liable.
It is mainly applicable in the case marine insurance. According to section 55 of the Marine insurance Act 1963, the insurance company is liable to indemnify only those losses which has been caused by proximate or nearest cause covered under the policy and not for other remote causes. Proximate cause has been defined in a well known case of Pawsey Vs Scottish Union and National Insurance Company. According to this case, proximate cause is the effective efficient cause that sets in motion a train of events which brings about a result, without the intervention of any force started and working actively from a new independent source”.
AS per this definition the causa proxima means the direct, the most dominant and most effective or efficient cause which results in to a definite loss. For example an insured suffered injuries in an accident. He was admitted to the hospital. He contracted an infectious decease while undergoing the treatment. He dies due to this infectious decease. The court held that the proximate cause of his death was infectious decease and not the injury. The original accident was not the remote cause. So the claim cannot be payable under personal accident insurance.
Determination of proximate cause
If there is single cause then there is no problem of determining the cause. If there are concurrent causes (causes occurring simultaneously), then the causes are to be segregated into insured perils and exempted perils. When there is a chain of events causing the loss to the subject matter insured, the insurer’s liability would arise if the original cause event is the insured peril. In case the chain of events is broken by the intervention of a new and independent cause, the insurer’s liability depends upon whether the new peril, cause or event is an insured peril or an exempted peril. It is the duty of the insured to prove that the loss is proximately caused by the insured peril.
Principle of Mitigation of Loss
In the event of some mishap to the insured property, the insured must take all necessary steps to mitigate or minimize the loss, just as any prudent person would do in those circumstances. If he does not do so, the insurer can avoid the payment of loss attributable to his negligence. But it must be remembered that though the insured is bound to do his best for his insurer, he is, not bound to do so at the risk of his life. Mitigation of loss means to minimize or reduce the severity of loss.
Principle of contribution
Principle of contribution is another outcome of the principle of indemnity. Where there are two or more insurance own one risk, the principle of contribution comes into play. The aim of contribution is to distribute the actual amount of loss among the different insurers who are liable for the same risk under different policies in respect of the same subject matter. Any one insurer may pay to the insured the full amount of the loss covered by the policy and then become entitled to contribution from his co-insurers in proportion to the amount which each has undertaken to pay in case of loss of the same subject-matter. Contribution is the right of the insurer, who has paid under a policy, to call upon other insurers or otherwise liable for the same loss to contribute the payment. The doctrine ensures equitable distribution of losses between different insurers.
In other words, the right of contribution arises when..
- there are different policies which relate to the same subject-matter
- the policies cover the same peril which caused the loss, and
- all the policies are in force at the time of the loss, and
- one of the insurers has paid to the insured more than his share of the loss.