Proximate cause
Rule of construction identifying, in a chain of events, the decisive cause of the loss to decide whether an excluded or covered peril governs the indemnity.
Section 55 of the UK Marine Insurance Act 1906 makes the insurer liable only for loss proximately caused by a peril insured against. In 1918, in Leyland Shipping v Norwich Union, the House of Lords held that the proximate cause is the dominant and effective cause, which need not be the last in time. It stands opposed to remote causes, which one could trace back indefinitely. The whole difficulty of insurance law lies in this balancing act. Go too far back in the chain and you exclude almost everything, because every loss has a remote cause; stop too soon and you cover almost everything, because every loss has an immediate one. When an excluded peril triggers a covered one, the position of that cursor alone decides the fate of the parties, and loose drafting becomes a risk in itself. A clause that leaves doubt over the sequence of causes ends in a lawsuit, and the lawsuit almost always costs more than the imprecision was meant to save.
In San Francisco in 1906, two percent of buildings were destroyed by the excluded shock and ninety-eight percent by the covered fire, so the fate of dozens of companies turned on which cause was retained.
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