Principals of Marine Insurance by Capt.S.Mondal

Introduction

The law on the subject of causation in marine insurance as stated in section 55 (1) of the Marine Insurance Act 1906 states that:

Subject to the provisions of this Act, and unless the policy otherwise provides, the insurer is liable for any loss proximately caused by a peril insured against, but, subject as aforesaid, he is not liable for any loss which is not proximately caused by a peril insured against.

The above was easy enough to apply when only one cause is attributable for a loss, as all that had to be determined is whether the cause of the loss is covered by the policy, in which case the claim is payable, and if excepted, claim is not payable.

However for situations with multiple causes, the statement did not offer much clarity, and it was left to individual interpretations which caused different schools of thought to develop.

Schools of thought for causa proxima

One school of thought ( favored by earlier judges) for causa proxima was, that only the last cause was to be applied and an any other were to be disallowed, although the result would not have been produced without them.

For example - A man suffers an accident and breaks his legs, for which he is being taken to hospital in an ambulance. The ambulance is involved in a head on collision due to which the man dies.

In the above scenario, basis this school of thought, the proximate cause of death would be the collision and not the accident. (Though one could argue that the man would not have been in the ambulance if he had not broken his legs in the first instance).

The above as explained by Lord Justice Lindley stated that (01): It has long been the settled rule of English law with regards to marine insurance that only the cause proxima or immediate cause of the loss must be regarded. Rejecting all preceding links, the last link in the chain of causation was regarded as the cause of loss.

The second school of thought however had a more pragmatic approach, and basis them causa proxima was the cause which was most efficient and dominant, and not the last cause.

For example - A man suffers a car accident in winter at a remote location, due to which he remains unconscious and exposed to the cold. He is found by some people the next day and taken to the hospital, however due to the exposure to the cold he contracts pneumonia and dies.

In the above scenario, basis this school of thought, the proximate cause of death would be the accident itself taking into account that all the events after the accident are natural events.

The final determination/clarification of the causa proxima was succinctly explained in the Bottom of Formruling of Leyland Shipping Co v Norwich Union Insurance Co (02), which clarified the meaning, and provided authority: proximate cause is that which is proximate in efficiency.

-       Vessel was insured under a policy covering loss by perils of the sea but with a clause excluding “all consequences of hostilities or warlike operations”.

-       The vessel, Ikaria, was heading to Le Havre when a German submarine torpedoed her. The torpedo caused severe damage but with the assistance of tugs she could reach Le Havre and moored at a quay.

01 – Ibid at p 398.

02 - [1918] AC 355

-       When Ikaria was still at the quay due to a gale she made contact against the quay making the harbour authority worried that she might sink and therein block the quay.

-       The harbour authority ordered Ikaria to either be beached outside the harbour or moor inside the breakwater since the quay was needed for military purposes. This was a reasonable measure by the harbour authority considering the circumstances and Ikaria had to obey even if it might have been possible for her to be saved if she stayed at the quay.

-       Ikaria moored inside the breakwater where she remained for two days. Because of the damage caused by the torpedo she went aground with every ebb tie and refloat with the flood which weakened her. Hence she broke her back and the ship owners claimed compensation for loss by perils of the sea.

The underwriters contested the claim and claimed that the loss was due to a war risk which fell under the exception.

The House of Lord held that the proximate cause was the torpedo and not the repeated groundings as claimed by the assured. Consequently, the underwriters were not held liable to pay compensation since they were protected by the exclusion.

Lord Shaw Dunfermline explained his understanding of the law of proximate cause with the following comment:

To speak of proxima causa as the cause which is nearest in time is out of the question. Causes are spoken of as if they were as distinct from one another as beads in a row or links in a chain, but—if this metaphysical topic has to be referred to—it is not wholly so. The chain of causation is a handy expression, but the figure is inadequate. Causation is not a chain, but a net. At each point, influences, forces, events, precedent and simultaneous, meet; and the radiation from each point extends infinitely. At the point where these various influences meet, it is for the judgment as upon a matter of fact to declare which of the causes thus joined at the point of effect was the proximate and which was the remote cause.

What does ‘proximate’ here mean? To treat proximate cause as if it was the cause which is proximate in time is, as I have said, out of the question. The cause which is truly proximate is that which is proximate in efficiency.

…In my opinion, accordingly, proximate cause is an expression referring to the efficiency as an operating factor upon the result. Where various factors or causes are concurrent, and one has to be selected, the matter is determined as one of fact, and the choice falls upon the one to which may be variously ascribed the qualities of reality, predominance, efficiency. Fortunately, this much would appear to be in accordance with the principles of plain business transaction, and is not at all foreign to the law.

…To apply this to the present case. In my opinion, the real efficient cause of the sinking of this vessel was that she was torpedoed. Where an injury is received by a vessel, it may be fatal or it may be cured: it has to be dealt with. In so dealing with it there may, it is true, be attendant circumstances which may aggravate or possibly precipitate the result, but which are incidents flowing from the injury, or receive from it an operative and disastrous power. The vessel, in short, is all the time in the grip of the casualty. The true efficient cause never loses its hold. The result is produced, a result attributable in common language to the casualty as a cause, and this result, proximate as well as continuous in its efficiency, properly meets, whether under contract or under the statute, the language of the expression ‘proximately caused’.

The principle laid down in the Leyland case, that the term ‘proximate cause’ should be construed to mean ‘predominant or efficient cause’, has been applied in a number of more recent cases, namely, Board of Trade v Hain SS Co Ltd [1929] AC 534, HL; Yorkshire Dale SS Co Ltd v Minister of War Transport, The Coxwold (1942) 73 LlL Rep 1, HL; Ashworth v General Accident Fire and Life Assurance Corporation [1955] IR 268; and Gray and Another v Barr [1971] 2 Lloyd’s Rep 1, CA.

Applying the concept of causa proxima when there is more than one proximate cause

Situation 1: Two concurrent interdependent proximate causes of the loss, one of which is an insured peril, and one is not, there will be cover.

For example - A man goes mountain climbing (unaware that he has defective gear) and gets stuck in a storm. He suffers a fall due to the defective gear, but survives same. However due to the storm, rescue services cannot access his location in time and he dies.

In the above scenario, provided that using defective gear was not specifically excluded, insurers will be liable.

This was based on the ruling of the Lloyds (JJ) Instruments Ltd v Northern Star Insurance Co Ltd, ‘Miss Jay Jay [1987] 1 Lloyd’s Rep 32 CA.

-       The yacht Jay Jay made a round trip from France to Hamble, and on her return trip her hull was found damaged due to adverse weather experience on the trip.

-       Owners claimed for the hull damages under the time insurance policy.

-       Underwriters refused payment on the grounds that due to a defective design the yacht was unseaworthy, and Owners should pursue the manufacturers of the yacht instead.

-       Court of appeal ruled that the damage was a combination of design and adverse weather (concurrent causes).

-       As the adverse weather was an insured peril, and unseaworthiness was not specifically excluded, insures were found liable, and L.J Lawton stated:

It now seems to be settled law, at least as far as this court is concerned, that, if there are two concurrent and effective causes of a marine loss, and one comes within the terms of the policy and the other does not, the insurers must pay

From above - the insurers and the assured agreed specifically to the insured perils and exceptions both being fully aware of the consequences, and as long no exception is triggered then the insurers are liable. 

Situation 2: Two concurrent interdependent proximate causes of the loss, one of which is expressly excluded, there will be no cover.

Taking the same example as Situation 1, however in this case if the insurer has specifically stated in the  exclusions that gear of a particular make (known to be defective) is not to be used, and if the gear in use at the time of the incident is from that defective make, then in the same scenario insurers will not be liable.

This was based on the ruling of Wayne Tank and Pump Co Ltd v Employer’s Liability Insurance Corporation Ltd [1973] QB 57, CA.

-       Wayne Tank designed and installed equipment for storing and conveying liquid wax in a factory.

-       The installation was left switched on overnight without being properly tested, due to which it caught fire and destroyed the factory.

-       Wayne Tank claimed from its public liability insurer basis the negligence of a the servant of the assured, however the insurers refused payment on a policy exception ‘the company will not indemnify the insured in respect of liability consequent upon ….(5) death , injury or damage caused by the nature or conditions of any goods or the containers thereof sold or supplied on behalf of the insured’.

-       Court of appeal ruled that dominant cause of the loss was the dangerously defective nature of the installation, and as the same was excluded, insurers were not liable.

It was said by Lord Denning that when there are two proximate causes and one is excluded by an exception the underwriters can rely on the exception. He continued by arguing that the particular exception takes priority over the general words since “general works always have to give way to particular provisions.”

From above - when the insurer and assured agreed to the contractual terms of the insurance contract, the insurer made specific exclusions for which he will not be liable. Therefore if any of their excluded stipulations are triggered, they are not liable to pay.

Situation 3: More than two proximate causes.

The courts have not yet had the reason to consider if more than two causes can be the proximate cause. However, the opinion is that if the situation does arise then the courts would apply the Wayne Tank principle.

Situation 4: Succession of proximate causes.

In such cases the chain of the sequence of events leading to the result has to be studied very carefully to determine if in broken or unbroken sequence occurred to determine the proximate cause.

For example - If you consider a set of 10 dominoes set up an in straight line with a gap of say 1 inch between them. If now you push the first domino due to which the last/tenth domino also falls over, the proximate cause of the falling over of the last/tenth domino can be attributed to the strength of the push given to the first domino.

However if in the above example, if upon pushing the first domino only the first six dominoes collapse, and a second push is required to collapse the balance four dominoes then proximate cause of the falling of the last/tenth domino is not the first push but the second push i.e., there was a second more dominant cause.

a)    Unbroken Sequence – One peril is caused by and follows from another peril.

If an excepted peril is followed by an insured peril, the insurer is not liable.

For example - If an earthquake fire (an excepted peril) spreads by natural means and burns the insured premises, the insurer will not be liable as the loss is proximately caused by an insured peril.

If on the other hand an insured peril is followed by an excepted peril there is a claim for the loss caused by the insured peril. When several events occur in an unbroken sequence then provided there is no excepted peril involved, the whole claim is payable only if an insured peril is involved.

b)    Broken Sequence – Each peril is independent of the other.

If an excepted peril is followed by an insured peril as a new and independent cause then there is a liability for the loss caused by the insured peril.

For example -The glass of a jewelry shop is insured for breakages from any risk except fire. There is a fire in the proximity of the shop because of a riot, and a mob takes advantage of the same to break the glass, the insurers will be liable.

Conclusion

The law of causation as stated in the Marine Insurance Act was clear in cases in which only one cause is responsible for the loss, however it did not offer clarity for situations in which multiple causes for a loss were applicable.

However over the years, based on the various cases and their respective judgments there has been a sense of clarity on how the law must be applied noting that proximate cause must be, dominant and efficient, regardless of whether the cause is the last cause in time or whether other causes compete or intervene.

Simply put one has to apply common sense and logic in determining the proximate cause and as said in Yorkshire Dals S.S. Co. vs. Minister Of War Transport (1942), the statement made was, “Choice of the real or efficient cause from out of the whole complex of the facts must be made by applying commonsense standards. Causation is to be understood as the man in the street, and not as either scientist or the metaphysician would understand it”.

Bibliography

-       Marine Insurance Law by Ozlem Gurses

-       Law of Marine Insurance by Susan Hodges

-       Cases and Materials on Marine Insurance Law by Susan Hodges