The principle of proximate cause is the most fundamental for deciding payment of compensation

to the insured. Insurance is taken against risk of happening one or more events. The insurer pays

compensation to insured only if the insured shows that the cause of loss was insured. Proximate

cause means that active and efficient cause that sets in motion a train of events which brings

about a result without the intervention of any force.

If loss is caused by one event then it is easy to say whether it is insured or not, compensation is

paid if the cause is insured against and if the loss is produced by more than one cause it is

difficult to say which one of them produced the loss. The event may be complementary or

dependent upon one another and come one after another also some must happen first and others

next consequently all or only some of these events may be insured. In these situations the cause

of loss is found out by applying the principle of causa proxima which directs the parties to look

at the most proximate (the nearest) but not at the remote (distance or indirect) cause of loss. In

order that compensation to be paid first is to pick up the proximate cause and to be verified if

included in the insurance, if so then one is indemnified.

Proximate cause is the cause which is the nearest in efficient to produce the loss. The cause need

not to be the nearest to loss in time of occurrence, the principle looks at the result producing

capacity of the cause which may come early or late in time. In the case of Leyland Shipping

Company v Norwich Union Fire Insurance, Lord Shaw says that efficiency may have been

preserved although other causes may mean time have sprang up which have yet not destroyed it

or truly impaired it and it may culminate in a result of which it still remains the real and efficient

cause to which the event can be ascribed meaning that the event may happen in the way to

increase the efficiency or decrease it.

The insurer excluded loss by rats but insured against sea perils, the rates made holes in the

bottom of ship resulting an entry of water and sinking the ship. It was held that rates were the

remote but sea perils were the proximate cause should be the immediate cause, immediate does

not mean the nearest to the loss in point of time but the one most effective or efficient causa

proxima non remota spectator ( the immediate cause and note the remote one). The insurer is

only liable for any loss proximately caused by a peril insured against and is the direct, dominant,

operative and efficient cause. For example a house collapsed 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.