Professional Liability Guide

PROFESSIONAL LIABILITY GUIDE

In the absence of any provision to the contrary, where a policy states that an insurer will indemnify the insured for losses ‘ caused by ’ stated perils, the peril must be the proximate cause of the loss. 436 The proximate cause is not the first, last or sole cause of the loss – instead, it is the direct, real, effective, dominant or operative cause. 437 In this respect, the concept supposes a causal connection closer than a mere unbroken chain of causation between cause and effect. 438 Although the proximate cause need not be the sole cause of the loss, its causal contribution must be predominant among the operative causes. 439

There is no single test for determining whether one event is a proximate cause or another. However, the ‘ but for ’ test is a useful starting point in determining factual causation.

The ‘ but for ’ test was described (in respect of an injury in tort) by Deane J in March v E & MH Stramere Pty Ltd as requiring:

‘a negative answer … to the question of whether the plaintiff’s injuries would have been sustained but for the negligence of the defendant.’ 440

The ‘ but for ’ test is not bulletproof nor the exclusive test of causation. 441 According to the High Court in March v Stramere , common sense and public policy should also be used when analysing causation. The majority of the Court used the example of a superseding cause or causes ( novus actus interveniens ) as an explanation for the potential deficiencies in the exclusive usage of the ‘ but for ’ test in determining causation. According to Toohey J: ‘In particular, I share the Chief Justice’s view that the “but for” or “causa sine qua non” test is not and should not be a definitive test of causation where negligence is alleged. The limitations of the test, particularly where there are two or more acts or events, each of which would be sufficient to bring about the plaintiff’s injury, or where a defendant seeks to rely upon a “supervening cause” or “novus actus interveniens”, are apparent. Where negligence is in issue, causation is essentially a question of fact, in the sense explained by the Chief Justice, into which considerations of policy and value judgments necessarily enter.’ 442 The principles adopted in March v Stramere for determining causation in cases of negligence have been relied upon in contractual cases 443 and, more usefully for the purposes of this chapter, in insurance contract cases. 444 436 Government Insurance Office (NSW) v R J Green & Lloyd Pty Ltd (1966) 114 CLR 437 . 437 State Government Insurance Commission v Sinfein Pty Ltd (1996) 15 WAR 434 ; Lasermax Engineering Pty Ltd v QBE Insurance (Australia) Ltd [2005] NSWCA 66; National & General Insurance Co Ltd v Chick [1984] 2 NSWLR 86. 438 Malcom Clarke , ‘ Insurance: The Proximate Cause in English Law’ (1981) 40 Cambridge Law Journal 284. 439 Martin Davies, ‘Proximate Cause in Insurance Law’ (1996) 7 Insurance Law Journal 135. 440 (1991) 171 CLR 506, 522. 441 Ibid; Lumley General Insurance Ltd v Vintix Pty Ltd (1991) 24 NSWLR 652. 442 March v E & MH Stramere Pty Ltd (1991) 171 CLR 506, 524. 443 Alexander & Ors v Cambridge Credit Corporation Ltd & Anor (1987) 9 NSWLR 310 – which predated March v E & MH Stramare Pty Ltd (1991) 171 CLR 506 but shared the common denominator of McHugh, J. 444 Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603; Lumley General Insurance Ltd v Vintix Pty Ltd (1991) 24 NSWLR 652.

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