Causation in Insurance Contract Law
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CHAPTER 6 Defining and interpreting the cause of loss
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Introduction
Many more arguments arising from the question of the insured coverage are effectively about defining and interpreting risks as described in the insurance clauses. As a general rule, the more specifically and narrowly the policy is worded, the more restricted the recovery will be. If one of the insured perils responds to the test of causation, a prima facie liability for indemnity is established – subject to the insurer's defences. Almost all insuring clauses are prefaced by opening words to the effect that “the insurance covers loss of or damage to the subject-matter insured caused by …” The coverage of the policy and the legal definition of the perils are inextricably linked with the issue of causation, and the two matters are easily and frequently conflated.1