The rule is that immediate and not the remote cause is to be regarded. The max is sed causa prosima non-remota spectature, i.e., see the proximate cause and not the distant cause.
The real cause must be seen while payment of the loss. If the real cause is insured, the insurer is liable to compensate the loss; otherwise the insurer may not be responsible for loss.
But, proximate cause is not a device to avoid the trouble of discovering the real cause or the common sense cause. Proximate cause means the active efficient cause that sets in motion a train of events which brings about a result, without intervention of any force started and working actively from a new and independent source.
The determination of real cause depends upon the working and practice of insurance and circumstances to losses. A loss may not be occasioned merely by one event. There may be concurrent causes or chain of causes. They may occur in a sequence or in broken chain. Sometimes, certain causes are excepted by the insurance contract and the insurer is not liable for the accepted peril.
The efficient cause of a loss is called the proximate cause of the loss. For the policy to cover the loss must have an insured peril as the proximate cause of the loss or also the insured peril must occur in the chain of causation that links the proximate cause with the loss.
The proximate cause is not necessarily, the cause that was nearest to the damage either in tune or in place, but it is rather the cause that was actually responsible for loss.
Determination of Proximate Cause
(i) If there is a single cause of the loss, the cause will be the proximate cause and further if the peril (cause of loss) was insured, insurer will have to indemnify the loss.
(ii) If there are concurrent causes, the insured perils and excepted perils have to be segregated. The concurrent causes may be first, separable and second, inseparable.
Separable causes are those which can be separated from each other. The loss occurred due to a particular cause may be distinguishably known. In such a case if any cause, is excepted peril, insurer will have to pay up to the extent of loss which occurred due to insured perils.
If the circumstances are such that the perils are inseparable, then the insurers are not liable at all when there exists any excepted peril.
(iii) If the causes occurred in form of chain, they have to be observed seriously.
(a) If there is unbroken chain the excepted and insured perils have to be separated. If an excepted peril precedes the operation of the insured peril , there is no liability.
If the insured peril is followed by an excepted peril there is valid liability.
(b) If there is a broken chain of events with no excepted peril involved, it is possible to separate the losses. The insurer is liable only for that loss which was caused by an insured peril; where there is an excepted peril, the subsequent loss caused by an insured peril will be a new and direct cause because of the interruption in the chain of events.
The insurer will be liable for the loss caused of insured peril which can be easily segregated.
Similarly, if the loss occurs by an insured peril and there is, subsequent loss by an excepted peril, the insurer will be liable for loss occurred due to the insured peril.
In brief, if the happening of an excepted peril is followed by the occurrence of an insured peril, as a new and independent cause there is a valid claim. If an insured peril is followed by the happening of an excepted peril, as a new and independent cause, there is a claim excluding loss or damage , caused by the excepted peril.