Page 86 - DCOM309_INSURANCE_LAWS_AND_PRACTICES

Unit 5: Principles of Insurance

However if reverse were the case and the chain was started by an excepted or Notes
excluded peril then the claim would not be payable.

Example: A person suffers a stroke and falls down the steps resulting in his death. He
will not be entitled to any claim under his personal accident policy as the chain was started by
a stroke which is an excepted peril.
3. In case of the broken sequence or interrupted chain of events if the chain of events is
started by an Insured peril but interrupted by an excepted or excluded peril then the
claim is paid after deducting the damage caused by the excluded peril. For example,
the burglars enter the house and leave the gas stove on leading to a fire and the
house is damaged in the fire. The “burglary Insurance” will only pay for the loss due
to theft but exclude loss due to fire, which is accepted peril under the burglary
policy.
In case the sequence of events started by an excluded peril is broken by an Insured
peril, as a new and independent cause then there is a valid claim for even the
damage caused by exempted peril. The burglars enter the house and after carrying
out thefts put the house on fire. The fire policy will pay for the damages due to theft
as well (which is an excluded peril).
4. In the case of loss due to concurrent causes or two or more causes occurring
simultaneously then all the causes will have to be Insured perils only then the claim
would be payable but even if one of the causes is an excluded peril the claim will not
be payable.

Example: A house collapses due to an earthquake, which results in fire. Under the fire
policy, earthquake is not a covered risk, hence the claim will not be payable.
To really understand the complexities of proximate cause and its proper identification
one must go through the case studies and a few are being given hereunder.

Caselet Cold Storage

n an incident where stocks of potatoes kept in a cold storage got damaged due to
leakage of ammonia gas. The stock was insured against contamination/Deterioration/
Iputrefaction due to rise in temperature in the refrigeration chamber caused by any
loss or damage due to an accident. The Insurance Company did not pay the claim saying
that the leakage of gas was not accidental and hence the risk was not covered. The aggrieved
approached the consumer forum which held that the leakage of gas was not foreseen or
premeditated or anticipated and loosening of the nuts and bolts of the flanges. The
consequential escape of gas was within the meaning of the word accident and hence
ordered the Insurance Co. to pay the claim.

Self Assessment

Fill in the blanks:
11. The doctrine of proximate cause is based on the principle of …………………………………
12. The “………………………… insurance” will only pay for the loss due to theft but exclude
loss due to fire, which is accepted peril under the burglary policy.

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