Practical aspects of use of the property insurance causation rules in case law

Erikas Saukalas

Abstract


The issue of causation is a cornerstone of the property insurance contract. Any coverage provided by the policy relates to existence of a causal connection between the loss and the peril covered. Frequently cases of loss of property involve more than one peril that may be considered legally significant. If one of the causes (perils) falls within the coverage grant, disputes over coverage can arise. The Lithuanian law and doctrine is silent regarding the question which causation rules could be applicable in multiple causation cases. Therefore, the study examines Lithuanian case law of in order to determine how this issue is solved by the courts. The author also analyses the most significant foreign cases that represent different approaches to causation issues in property insurance cases.
The author argues that the concept of causation under tort law should be distinguished from the concept of causation applied in insurance property contracts. In tort law causation establishes tortfeasor’s liability for damages, assigning the guilt to the parties that are responsible for creation of the harmful conditions. In the field of property insurance, the insurers and the insured are not concerned with the question whether the insured are liable for the damages to others; their only concern lies with the nature of the damage and how it was inflicted. The article reveals that Lithuanian judges do not always understand this difference.
The examination of the court cases shows that the courts apply different property insurance causation rules, which could be attributed to immediate cause, “but for” cause, and efficient proximate cause doctrines. Such practice of applying different rules contradicts with the concept of legitimate interests and is detrimental to the interests of both the insurer and the insured.
The author suggests that in cases when the loss is caused by the concurrence of two or more perils the proximate cause rule is the most appropriate and thus should be applied. The proximate cause is attributed to the peril, which is determined to be efficient proximate cause of losses, i.e. it is the peril that sets subsequent perils in motion. Following this doctrine, the courts should determine all relevant causes and then identify the most important cause of loss and attribute the loss to that cause.
Article also explores the possibility of establishing legal conditions which would allow releasing an insurer from payment of the insurance benefit or giving him the right to reduce the benefit not only under the provisions of the Law on Insurance and Insurance Policy Conditions but also taking into account particular circumstances of the insured event.

Keywords


causation; property insurance contract; proximate cause; efficient cause; insurance contract

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"Societal studies" ISSN online 2029-2244 / ISSN print 2029-2236