Proximate cause. This may not be a “principle” of marine insurance but section 55 (1) of the U.K. Marine Insurance Act 1906 elevates it to a condition which must be fulfilled before the underwriter becomes liable to pay a claim.
A claim becomes payable only if the insured risk was a “direct” or “dominant” or “effective” cause of the loss of the subject-matter. The cause need not be the nearest cause in time. If the damage or loss is not “proximately caused” by a peril insured against, i.e., if the cause of the loss or damage is “remote” from the actual risk or “peril” insured against, the claim against the insurer will fail. The section states:
“…the insurer is liable for any loss proximately caused by peril insured against, but he is not liable for any loss which is not proximately caused by a peril insured against”.
The section seems curiously worded but means that the insurer is liable to a claimant if the claimant can prove that the loss was directly caused by some event or situation that was insured against. It is up to the insurer, when a claim is made, to show that the actual or direct cause of the loss was an event or circumstance against the happening of which the assured was not protected by insurance.
It is sometimes difficult to identify which event or circumstance or incident causes the loss or damage, if a number of possible causes exists. If any of the causes is not a peril insured against, the insurer may be able to avoid paying a claim. For example, in Thames and Mersey Marine Insurance Company v. Hamilton, 1887, a vessel and her machinery were insured against “perils of the sea” and other named “perils”. Owing to an engineer’s negligence a pump on board was damaged. It was held that the insurer was not liable for the loss because it was not caused by a peril of the sea or by a peril named in the policy document.
It may be interesting to explore some cases to identify whether or not there was “proximate cause” and the consequential remedy for the assured. In Pink v. Fleming, 1890, a cargo of oranges and lemons was insured against loss “consequent upon collision” of the carrying vessel. The vessel did suffer a collision and had to be repaired in a port. During repairs, the cargo had to be discharged and reloaded after repairs. When the cargo arrived at the destination it was damaged because of the handling at the repair port and the delay. The direct loss was not the collision but the perishable character of the cargo. The assured failed in his claim. The proximate cause does not need to be the most recent in time. In Leyland Shjpping v. Norwich Union,. 1918, the insured vessel was torpedoed by a German submarine during the First Word War. The vessel was taken to a port for repairs and berthed in the inner harbour. During the shifting the vessel grounded and eventually sank. The question arose as to what was the proximate cause of the loss. If the loss was a “marine loss” (grounding is a “peril of the sea”) the assured would have been covered. If the reason for the loss was the war risk, this was excluded in the contract and the assured would not be covered. It was decided by the court that the dominant reason or cause of the loss was the torpedoing because the vessel was never out of imminent danger from this cause until she sank. Accordingly, the assured’s claim failed.
Therefore the “immediate cause” of the loss is not necessarily relevant. This was confirmed in Noten BV v. Harding, 1990, where leather gloves carried in a container were damaged by water, which had condensed on the roof of the container and dripped on to the gloves. The immediate cause was the dripping water from an external source. The court had to enquire into what was the real or dominant cause of the damage. The judge decided that the real or dominant cause was that the gloves, when shipped, had excessive moisture. Owing to “cargo sweat” because of temperature differences between the gloves and the container shell, this moisture was released and condensed on the container. The condensed water damaged the gloves. If the moisture from the gloves themselves damaged them this was from the nature of the goods or “inherent vice” and this is an exception to the insurer’s liability to pay a claim. The real cause in the gloves case was the moisture.
It is sometimes difficult to decide what the real cause is. In a Canadian case, The La Pointer, 1991, this problem arose. The vessel was built in 1906. After a long service she was laid up in Vancouver harbour in April 1981. In early July 1982, the vessel suddenly developed a list and sank quickly. The proximate cause of the loss was in question. The owners alleged that the sinking was the sudden flooding of water into the vessel because the pipeline below the water level contained flanges which were connected by carbon steel bolts. These became corroded by sea water in the pipeline because the sea suction and discharge valves had not been closed when the vessel was laid up. The flanges had separated and water entered the vessel. Stainless steel, brass or copper bolts would not have become corroded and given way.
The insurers, on the other hand, declared that the loss was caused by ordinary wear and tear and the flange deterioration was also ordinary corrosion which may also be ordinary wear and tear. Wear and tear on the insured subject-matter is excluded from insurance cover. After appeal, the final court in Canada, the Supreme Court, decided that the vessel owner’s argument was correct. It appears that the Supreme Court did not concern itself with the “proximate cause” but focused on “perils of the sea”. The loss was accidental (“fortuitous”) and not inevitable. Wear and tear would have been inevitable and not insurable. The use of the steel bolts joining the flanges on the pipeline was negligent in 1906. Although corrosion may be ordinary, inevitable wear and tear, corrosion because of the negligent use of the wrong materials is not inevitable. Therefore the insurer was liable to indemnify the vessel owner. The judge said:
“It is my view that in determining whether loss falls within the policy, the cause of the loss should be determined by looking-at all the events which gave rise to it and asking whether it is fortuitous … This approach is preferable … to the artificial exercise of segregating the causes of the loss with a view to labeling one as proximate and the others as remote, an exercise on which the best of minds may differ.”