Principle of Proximate Cause

The Principle of Proximate Cause is one of the fundamental Principles of Insurance. It determines whether a loss is covered under an insurance policy. According to this principle, when an insured event occurs, the insurance company will assess the cause of the loss and determine whether it falls within the scope of coverage provided by the policy.

In essence, the proximate cause is the primary cause that sets a chain of events in motion, leading to the loss or damage. Insurance policies typically specify the types of perils or events that are covered, such as fire, theft, or natural disasters. If the proximate cause of the loss is a covered peril, the insurance company will usually be liable to compensate the insured for the resulting damage or loss.