Is the Sky Blue? Fire, Smoke and Soot Damage Proximate Cause

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1 2017 KZN Educational Workshop & Lunch Stefan Terblanche 6 July 2017 Is the Sky Blue? Fire, Smoke and Soot Damage Proximate Cause

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6 ACID RAIN Covered?

7 ACID RAIN Covered?

8 ACID RAIN Covered? Background: 24 March 2017 Bayhead fire, Durban (Transnet Warehouse) Estimated losses R1,2 billion Tenants contents included (100t?) of Sodium hydrosulphide, polyethylene and polypropylene products, raw materials etc. Smoke pushed inland, over built-up residential areas of Durban Subsequent rain now Chemical fall-out Smoke and soot damage acid rain

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10 ACID RAIN Covered? Questions: Will the smoke and soot damage be covered? Will the acid rain damage be covered? Answer: 1) Doctrine of in iure non remota causa sed proxima spectator [Proximate Cause]; 2) Policy

11 PROXIMATE CAUSE Definition: Pawsey v Scottish Union and National 1907 Proximate cause means the active, efficient cause that sets in motion a train of events which brings about a result without the intervention of any force started and working actively from a new and independent source. Leyland Shipping v Norwich Union 1918, P Samuel & Company v Dunmar 1924 the proximate cause is not the first cause nor the last cause, it is the dominant cause or the efficient or operative cause it need not be the cause which is latest in time

12 PROXIMATE CAUSE Examples: Gaskarth v Law Union Insurance Company 1876: Fire, gable wall, subsequent gale damage not fire. Roth v South Easthope Former 1918: Lightning damage to building, further damage by high wind held all caused by lightning. Crucial factor whether the original peril was still operating and was dominant cause. Also Johnston v West of Scotland Insurance Company 1828: building in dangerous state after fire, being demolished, part fell onto Insured s building held to be fire damage, held dangerous state from fire, fire risk operates until danger removed.

13 Concurrent Causes: Examples PROXIMATE CAUSE More than one cause operating at the time: 1) If extent of damage from each cause determinable loss from Insured Peril only is covered; 2) Damage cannot be separated, one peril insured and other not (but not excluded), all losses covered. See JJ Lloyd Instruments v Northern Star Insurance Co Ltd 1987 ; 3) Damage cannot be separated, one peril excluded, loss not covered. See Wayne Tank & Pump v Employers Liability Assurance Co 1974

14 PROXIMATE CAUSE Concurrent Causes Examples: Rabinowitz v Ned-Equity Insurance Company 1980: Hang-glider accident, post mortem cause of death multiple injuries/coronary thrombosis; Whole Life Policy and Aviation Accident Policy; Court held crash inexplicable unless supervening incapability i.e. heart attack; Aviation exceptions Insurer must prove flight was cause cannot prove this was any greater risk; Whole Life Policy to pay.

15 PROXIMATE CAUSE Concurrent Causes Examples: Nelspruit Combined Butcheries v Santam 1974 Burglary Policy with limited meaning theft of property accompanied by visible/forceable means; Thief broke through wall, damaged pipe to refrigeration plant meat/stock to be dumped; Damage was not the result of theft theft occurred after the damage; Court held Policy did not cover putrification of meat and consequential damage. Burden of proof Insured must show Operation of Peril, Insurer must show Operation of Exception.

16 PROXIMATE CAUSE Concurrent Causes Examples: Cover for Storm/Water/Flood subsidence excluded.

17 PROXIMATE CAUSE Concurrent Causes Examples: Typical Breede River 2009 floods as well as Vaal River floods Is the prior flooding the proximate cause without which there would be no subsidence? Ivamy (General Principles of Insurance Law): If there is a causal connection between the peril and the loss, the excepted cause being merely a link in the chain of causation, being a reasonable consequence of the peril, the peril is the cause of the loss within the meaning of the Policy.

18 PROXIMATE CAUSE Concurrent Causes Examples: Typical Breede River 2009 floods as well as Vaal River floods Is the prior flooding the proximate cause without which there would be no subsidence? Ivamy (General Principles of Insurance Law): If there is a causal connection between the peril and the loss, the excepted cause being merely a link in the chain of causation, being a reasonable consequence of the peril, the peril is the cause of the loss within the meaning of the Policy.

19 PROXIMATE CAUSE Concurrent Causes Examples: Typical Breede River 2009 floods as well as Vaal River floods Is the prior flooding the proximate cause without which there would be no subsidence? Ivamy (General Principles of Insurance Law): If there is a causal connection between the peril and the loss, the excepted cause being merely a link in the chain of causation, being a reasonable consequence of the peril, the peril is the cause of the loss within the meaning of the Policy.

20 PROXIMATE CAUSE Concurrent Causes Examples: Typical Breede River 2009 floods as well as Vaal River floods Is the prior flooding the proximate cause without which there would be no subsidence? Ivamy (General Principles of Insurance Law): If there is a causal connection between the

21 PROXIMATE CAUSE

22 PROXIMATE CAUSE Concurrent Causes Examples: Typical Breede River 2009 floods as well as Vaal River floods Is the prior flooding the proximate cause without which there would be no subsidence? Ivamy (General Principles of Insurance Law): If there is a causal connection between the peril and the loss, the excepted cause being merely a link in the chain of causation, being a reasonable consequence of the peril, the peril is the cause of the loss within the meaning of the Policy.

23 PROXIMATE CAUSE Prior flooding, exclusion of Subsidence: Peverett (Fire Insurance Law and Claims): Some Policies exclude subsidence from the peril of storm it is important because storm waters can easily undermine the foundations of buildings and cause extensive damage for beyond that to be expected from a violent storm. Walmsley (Fire Insurance Law & Claims) points out that where Fire Cover operates, but explosion excluded, even if fire causes explosion, the concussion/explosion damage excluded.

24 PROXIMATE CAUSE Prior flooding, exclusion of Subsidence: Ameen v SA Eagle Insurance Company 1997 D: Storm damage to duplex flats; Perils include Storm, Wind, Water; Perils exclude Subsidence; Subsidence versus settlement Court held as same; Court held that when storm resulted in subsidence/landslip, latter causes damage excluded.

25 PROXIMATE CAUSE Concurrent Causes Alizia Glacial (2002) EWCA Civ Court held where two or more causes are operating concurrently, they do not have to be exactly coextensive in time; thus a later cause may join with a previous and continuing cause so as to become concurrent, only if the court concludes that there was not one dominant cause, but two causes which were equal or nearly equal in their efficiency in bringing about the damage, one being a peril and the other an exception, that the exception prevails.

26 PROXIMATE CAUSE Intervening Cause (novus actus interveniens) In most cases possible to isolate a proximate cause from chain of circumstances. Two or more causes, Court will strive to identify proximate cause Raiser v Warwick (1984) 2 QB Mafisa v Parity Insurance Co (1968) 2 SA (O) -An independent, unrelated intervening cause which occur subsequent to an original cause, neutralises the latter as a factual cause or at least diminishes its effect. Whether a particular supervening cause is actually a novus actus interveniens, depends on the factual matrix of every matter

27 PROXIMATE CAUSE Intervening Cause (novus actus interveniens) Was the acid rain an independent/unrelated event to the fire? our view:- that this is not the case the acid smoke was as a direct result of the fire and the subsequent rain cannot be seen as a new cause of damage it is not the rain which caused the damage, the rain merely assisted in the deposit of the acid smoke onto the properties below. that the proximate cause of the damage caused by the acid rain is still the insured event/peril, being fire.

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29 POLICY COVER Type of Policy in place? 1. Named Perils Verify an Insured Peril operated; Verify no Exclusion in place or operated. 2. All Risk No named insured perils, instead cover is extended to all damage; Verify that the specific peril or operating cause has not been excluded.

30 POLICY COVER Nedbank Homeowners Policy (Specified Perils type Policy) In exchange for the premium, Nedgroup Insurance Co agrees to insure you for the insured events defined in the applicable section, subject to the terms and conditions of your policy. SECTION 3 INSURED EVENTS This section covers the insured events listed below: 1 Loss of or damage to the insured property at the risk address stated in the policy schedule, caused by the following: 1.1 Fire, lightning or explosion. 1.2

31 POLICY COVER Nedbank Homeowners Policy Policy requires causal link between the insured peril (insured event) as described in the contract (in this instance fire ) and the resultant loss/damage; Do not note any exclusions relating to smoke/soot deposit from the insured peril fire in Policy. Therefore damage covered in terms of the Policy has not been restricted to direct fire damage only will include the normal direct resultant damage from such a peril, which would include the smoke and soot damage

32 POLICY COVER Nedbank Homeowners Policy Question - whether this cover requires that the insured peril/event of fire must occur at the risk/insured premises. Our view that this is not a requirement. The Nedbank Policy refers to Loss of or damage to the insured property at the risk address stated in the policy schedule, caused by the fire, lightning or explosion. Clear that the damage must obviously occur at the risk address, but there is no requirement that the insured peril/event should also have occurred at the risk address. Example adjacent building, no spread, only smoke/soot or some distance away??

33 POLICY COVER Nedbank Homeowners Policy Summary: (Our view) Insured peril operated (although not at risk address not required); Damage was occasioned at risk address; The proximate cause of the damage is fire Neither smoke and soot damage; nor acid rain specifically excluded. Therefore as smoke, soot and acid rain damage was proximate to the insured peril fire damage and loss emanating from these causes fall within ambit of Policy cover

34 POLICY COVER Priceless Policy (All Risk type Policy) SECTION 1 - BUILDINGS This Section describes the cover we give for your buildings. The buildings/the premises - this means the buildings at the address shown on the Policy Schedule, DETAILS OF COVER WE PROVIDE Primary Cover When any loss or damage occurs to the insured buildings, we will compensate you by payment, or by reinstatement, or by repair (at our choice).

35 POLICY COVER Priceless Policy (All Risk type Policy) GENERAL EXCLUSIONS 3 Seepage and Pollution This policy does NOT cover loss or damage caused by seepage and/or pollution and/or contamination. This exclusion does NOT apply to such cause if it follows directly from physical damage to the insured property that is not otherwise excluded. Trigger to Policy = actual damage at risk premises proximate cause was fire, not an excluded peril onus now on Insurer to show damage being claimed for was caused by an excluded peril

36 POLICY COVER Priceless Policy (All Risk type Policy) GENERAL EXCLUSIONS ( Pollution Contamination) Is the acid rain pollution/contamination? Free Dictionary - Pollution :- The presence in or introduction into the environment of a substance which has harmful or poisonous effects. Oxford Dictionary Pollution :- The presence in or the introduction into the environment of a substance which has harmful or poisonous effects Free Dictionary - Contamination :- The action or state of making or being made impure by polluting or poisoning. Marriam Webster Dictionary Contaminated, contaminating :- To soil, stain, corrupt, or infect by contact

37 POLICY COVER Priceless Policy (All Risk type Policy) GENERAL EXCLUSIONS ( Pollution Contamination) Is the acid rain pollution/contamination? Seems like requirement is harmful or soil, stain Smoke and soot (and definitely acid rain ) must be considered harmful! will definitely soil, stain etc. Therefore even if caused by a peril fire which is not excluded the damage caused by the smoke, soot and acid rain must be considered as pollution/contamination and is then excluded Question Was there damage caused at risk address by pollution/contamination? If answer is Yes then the Exclusion applies

38 POLICY COVER Priceless Policy (All Risk type Policy) GENERAL EXCLUSIONS ( Pollution Contamination) Is the acid rain pollution/contamination? Question Was there damage caused at risk address by pollution/contamination? If answer is Yes then the Exclusion applies This exclusion does NOT apply to such cause if it follows directly from physical damage to the insured property that is not otherwise excluded. Over-rider to Exclusion was there fire damage at risk address?? Policy Intention to be revisited

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