Proximate Cause

Indemnity is provided when the cause of loss falls within the scope of the policy coverage. There is no liability in an insurance policy when the loss is caused by an uninsured or excluded peril.Sometimes , loss can be caused by more than one cause acting simultaneously or one after another. Is becomes necessary to find out the most important and effective cause of loss. This cause is called the 'proximate cause'.

For example, There was damage to stock in a godown caused by fire. Losses by fire is covered under a Fire insurance policy. Later on, it was found out that the fire was caused due to the negligence of an employee . Damage due to negligence is not covered under the fire policy. But since the proximate - cause has now been identified as damage caused due to negligence, the claim does not fall under the scope of policy and is not payable.