Proximate cause and Insurance

Proximate cause refers to an action that leads to an unbroken chain of events; events that end with someone suffering a loss.  Proximate cause is used to examine how a loss occurred and how many may have played a role in causing the loss.  The final act before an event is easy to see, but proximate cause can be what started the loss long before the final or direct cause is established.

Proximate cause defined

Proximate cause refers to the action in a chain of events, usually the initial action that caused a loss.  The proximate cause is often considered the starting point in the chain of events that led to a loss.

Compare this to the term direct cause in an insurance policy.  Direct cause is the final event before the loss occurred.  Sometimes the direct cause is easy to determine; someone throws a ball through a window and breaks a window.  In this case, the direct cause is the act of throwing and it is easy to make the connection between the cause and the loss. 

In this example it would be unlikely but entirely possible that a single event or series of events occurred that directly resulted in the ball being thrown through the window.  If a reasonable understanding of the events can be proved beyond doubt to have caused the broken window, responsibility would need to be determined as to whether the proximate cause had on the outcome.

Classic firecracker example

The most common example insurance professionals encounter early in their careers when learning about the principles of insurance is the firecracker scenario.  A child lights a firecracker, then fearing that the firecracker will explode in his or her hands, tosses the firecracker to a second child.  The second child also fears the impending explosion and proceeds to toss the firecracker to a third child.  This third child is the unlucky recipient of the firecracker at the precise moment of explosion; a loss occurs as the child is injured.

The question of proximate cause becomes important in determining who is responsible for the injuries to the third child.  The direct cause is very easy to connect to the loss.  The second child tossed the firecracker to the third child knowing that there would be an explosion.  This act demonstrates either malicious intent or at least a degree of wanton disregard for another’s safety.  The second child is then directly responsible for the third child’s injuries; the direct cause of loss is clear.

The legal outcome regarding responsibility may extend to additional parties, in this case the first child.  The first child began the chain of events by lighting the firecracker and then throwing it to the second child.  The first child knew that this act would endanger someone else if they received the firecracker.  It may not matter that the first child tries to argue that they had no way of knowing that the second child would throw the firecracker and injure someone else.  The first child’s action began a direct series of events that resulted in the loss; the proximate cause has been determined.

Proximate cause and insurance

Putting the entire matter of minors aside, this classic example is still used to establish the basics of proximate cause in the insurance industry.  The simplicity of this scenario still lends itself well to the more complicated matters of loss.  Any time a loss occurs, the insurance company investigates how the loss happened.  In some cases there is only one event to consider while others become more complicated.  Similar to the children and the firecracker, consider a multi-vehicle accident. 

When two or more vehicles are involved in an accident there may be a proximate cause that began a series of events to cause the final pile up.  One car may have hit a second car, then subsequently triggered the second car to hit a third.  In this case the second car would be directly responsible for hitting the third car while the first car would be found to be the proximate cause and share in the responsibility for the final outcome.

Insurance policies are in place to help policy holders when they suffer an unforeseen loss.  Direct cause and proximate cause are used to determine the extent of the responsibility of any and all parties involved.  Being the furthest from the action is not a guaranteed excuse.  The first action directly related to the series of events, the proximate cause, is one of the fundamentals of assigning responsibility and settling insurance claims.