The Cause of Loss. Dr Nicholas G. Berketis. ATHENS UNIVERSITY OF ECONOMICS AND BUSINESS, MSc in International Shipping, Finance and Management

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1 The Cause of Loss Dr Nicholas G. Berketis

2 Proximate Cause Subject to the provisions of this Act, and unless the policy otherwise provides, the insurer is liable for any loss proximately caused by a peril insured against, but, as subject as foresaid, he is not liable for any loss which is not proximately caused by a peril insured against Marine Insurance Act (S.55(1))

3 Leyland Shipping Co Ltd v. Norwich Union Fire Insurance Society Ltd. [1918] AC 350, HL (1 / 3) The plaintiffs were the Owners of the steamship Ikaria, which was insured with the defendant Underwriters. The Policy of insurance covered, inter alia, loss by perils of the seas but contained a provision, which stated: warranted free of capture, seizure and detention and the consequences thereof or any attempt thereat piracy excepted, and also from all consequences of hostilities or warlike operations before or after declaration of war.

4 Leyland Shipping Co Ltd v. Norwich Union Fire Insurance Society Ltd. [1918] AC 350, HL (2 / 3) After a voyage from South America, Ikaria was awaiting a pilot outside Le Havre, when she was struck forward by a torpedo and No. 1 hatch filled with water. The crew brought the badly damaged vessel into Le Havre and she would have been saved if she had been allowed to remain there. However, a gale sprang up, which caused Ikaria to range and bump against the quay to such an extent that the port authorities, fearing she would sink and block the quay, ordered her to be taken out and anchored in the outer harbour, near the breakwater. Whilst anchored there, because of the weather conditions and the fact that Ikaria was down by the head as a result of the torpedo damage, she grounded at each low tide and, eventually, foundered and was lost. The shipowners claimed that the loss was caused by perils of the seas, but the Insurers refused payment.

5 Leyland Shipping Co Ltd v. Norwich Union Fire Insurance Society Ltd. [1918] AC 350, HL (3 / 3) It was held that the proximate cause was the torpedoing, as the vessel was never out of imminent danger by reason of it until she eventually was lost, that the train of causation from the act of torpedoing was unbroken, and that the loss was therefore a consequence of hostilities, for which there was no right of recovery under the Policy. Lord Shaw in his judgment said that the doctrine of causa proxima must be applied to existences rather than to occurrences, and added that to treat proxima causa as the cause which is nearest in time is out of the question.

6 Causa Proxima (1 / 4) One cause of loss: There can be no problem when only one cause is identifiable to have occasioned a loss. The only question to be determined in such a case is whether such a cause of loss is covered by the policy.

7 Causa Proxima (2 / 4) More than one cause of loss When two or more causes are seen to operate to occasion a loss, controversies and differences in opinion often arise as to how one cause is to be singled out, in preference to another cause (or causes), as the cause of the loss Meaning of proximately Two proximate causes Equal or nearly equal efficiency One included loss and one expressly excluded

8 Causa Proxima (3 / 4) In Wayne Tank and Pump Co Ltd v Employers Liability Assurance Corporation Ltd (1974 QB 57) the issue was similar to Leyland Shipping that the court had to determine the dominant cause from the two possible alternative causes. Wayne Tank and Pump Co Ltd (Waynes) installed new equipment into a mill that was owned by Harbutt s Plasticine Ltd (Harbutts). Waynes were found liable for the loss Harbutts suffered as a result of a fire that was caused by Waynes negligence in installing the equipment. Waynes claimed from its public liability insurer who relied on a policy exception that The company will not indemnify the insured in respect of liability consequent upon... (5) death injury or damage caused by the nature or conditions of any goods or the containers thereof sold or supplied by or on behalf of the insured.

9 Causa Proxima (4 / 4) There were two separate causes discussed for the loss in question. One cause was the conduct of the assured in supplying the useless and dangerous material called durapipe coupled with a useless thermostat. The installation was completely unsuitable for the purpose. It was an extreme danger, because, when heated up, the durapipe would sag, the wax would escape, and, the whole thing would go up in flames. The second cause was the conduct of a servant of the assured in switching on the heating tape and leaving it unattended throughout the night and at a time when the installation had not been tested. The dangerous nature of the installation, the first cause, was plainly within the exception clause. Taking that cause alone, the insurance company would be exempt, by reason of the exception clause. The second cause, namely, the conduct of the man in switching on the heating tank and leaving it unattended all night, was not within the exception clause. Taking that cause alone, the insurance company would be liable under the general words and would not be exempted by the exceptions. It was necessary for the court to decide which of the two causes was the effective or dominant cause. Applying the rule of causa proxima established in Leyland Shipping the court found that the first cause, the dangerous nature of the installation was the dominant cause so the insurers were not liable.

10 Sources 1. Gurses, Ozlem, (2015), Marine Insurance Law, Routledge 2. Hodges, Susan, (2004), Cases and Materials on Marine Insurance Law, Cavendish Publishing Limited 3. Hodges, Susan, (2004), Law of Marine Insurance, Cavendish Publishing Limited 4. Templeman, Frederick and Greenacre, C.T. (1948) Marine Insurance: Its Principles & Practice, Macdonald & Evans