Understanding Insurance Principles: Loss Minimization And Causa Proxima (Part 3)

In the advent of any occurrence of uncertain event, it is the utmost duty of the insured to make sure that if controlled, minimality of loss on the damaged insured property should be taken into account. The attitude of negligence to such event is not tolerable to the insurer, given such in the contract created in the insurance policy, for the very reason of security that a compensation will be given. That is the very essence of the principle of loss minimization.

The Principle of Loss Minimization

According to the principle of loss minimization, the insured must act upon his very best to minimize the loss of his insured property in the wake of fire outbreak, blasts, and etc. During such scenario, it is the duty and responsibility of the insured take necessary steps and measures in order to control and if possible to stop the incurring damage. On the other hand, the insurer must not neglect and display a behavior of irresponsibility just because his property is insured. Hence, during such event, it is the responsibility of the insured to protect his insured property by all means possible.

In the event of a mishap to the uncertain event, if the insured does not take all responsibility to mitigate the loss, the insurer can avoid the payment of loss which is directly attributable to the insured’s imprudent action of negligence. As according to the case British and Foreign Marine Insurance Co. vs. Grant (1921), the ‘person must act as an uninsured prudent person would act under similar circumstances in his own case.’

The Principle of Proxima Causa (Nearest Cause)

In the event of an occurrence of damage of an insured property caused by more than one in succession to another, there is a great probability that the property may be insured by some of the causes and not all of the causes. In such an instance, the proximate cause or the nearest cause must be identified. if the proximate cause is the one that is insured against, then the insurer is obligated to pay for the compensation of loss.

The principle of Proxima Causa or Nearest Cause in English, states the whether the insurer is liable for the cause or not, the nearest (proximate) cause and not the farthest (remote) cause should be looked upon.

For instance, if a ship’s haul is punctured by a metal rod and because of this infliction, water entered the ship’s cabin sections and annexes and the cargo was damaged. In this example, there are two causes for the damage of the ship, first is the damage inflicted by the metal rod and second is the gush of water that entered the puncture. The risk taken by the water is considered the proximate cause, which is insured by the way, and therefore is in the obligations of the insurer for payment on compensation.

However, the principle of proxima causa is not applicable to life insurance. Whatever the cause of death might be (whether from natural or unnatural means) the insurer is always liable to pay for the insurance.

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