INSURANCE 1.5B RISK AND CAUSATION
Risk is ordinarily defined as the chance of something going wrong. Here, risk means the hazard of loss to the insured. It is important to ascertain risk and causation so as to determine the liability of the insurer and the extent of the insured’s cover. The insured risk must have occurred- Syminton V Union Insurance Co of Gaton. Once the insured risk occurs, we determine the rights and liability of the parties.
In doing this, the following are excluded:
- Wilful misconduct of the insured: Beresford V Royal Insurance Co where public policy was against the payment of the life insured who committed suicide
- Normal wear and tear: like depreciation, rusting, corrosion, and so on.
- Inherent Vice: The natural reaction of the subject matter to its environment. E.g. an inflammable material will explode if exposed to heat.
- Unlawful risk: Illegal or wrongful operations and their outcome cannot be insured against. E.g. Robbery, defamation, etc. A publisher of a material known to be libellous cannot insure against lawsuits on the libel-H. Smith V Clinton.
- Consequential Loss: The cover extends only to direct loss rather than consequential.
Risk caused by the negligence of the insured or third parties can be covered-Harris V Poland, where the insured damaged her jewelleries after placing them behind a fireplace. Although public policy may intervene as was seen in Gray V Barr where the insured carried a loaded gun to frighten the deceased but it went off.
Proximate Cause: is defined as the immediate cause. That is dominant and effective cause of the loss notwithstanding that it is not nearest in time. Novus actus means a new intervening act while death blow connotes no break in the causation.
The insured should prove loss. The insurer may then discountenance this by proving that the loss was caused by an excepted peril.