What goes around
Comes around
Willie Nelson
Efficient proximate cause is a legal doctrine in California. It refers to the primary cause of loss in an insurance setting. Here’s more information.
Basic Insurance Law
You and your insurance company have a contract, the insurance policy. Under the terms of that contract, you agree to pay your insurance company money, and the insurance company agrees to pay you for damage to your property. Your insurance company will only pay you, however, if the damage is covered by the policy.
Generally, “perils” in an insurance policy are causes of loss. The causes of loss can be natural (wind, fire) or human (theft, liability).
Insurance policies cover certain “perils,” not all.
Efficient Proximate Cause And California Insurance Law
Sometimes causes of loss can have more than one cause. For example, an electrical fire causes fire in your home. The fire department comes to your home and uses water to put out the fire. Your home is damaged by both the fire and the water. Fire is a covered peril in your insurance policy. Water is not. You’d argue the efficient proximate cause (the primary cause) was the fire, a covered peril, and the water damage (although excluded) is covered because it resulted directly from putting out the fire.
Insurance Code § 530 incorporates the doctrine into California law. It says an insurance company must cover a loss if a covered peril was the “proximate cause” of the loss.
This doctrine is the preferred method for resolving insurance disputes involving losses caused by multiple causes of loss. It usually comes into play in deciding whether coverage exists when both covered and excluded causes of loss interact to cause property damage.
If an excluded cause of loss caused property damage, the damage should not be covered.
Anti-Concurrent Causation Clauses In California
Sometimes insurance companies insert “anti-concurrent clauses” in their policies. Here is a anti-concurrent clause found in ISO Causes of Loss-Basic Form (CP 10 10 06 95):
We will not pay for loss or damage caused directly or indirectly by any of the following [noncovered perils]. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.
The clause lets an insurance company narrowly restrict coverage to covered perils only; if a loss was caused by multiple perils, some covered and some not, there would be no coverage. Anti-concurrent clauses are a strident reversal of the doctrine of concurrent causation.
Here’s a blog I wrote with more info.
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