Boom Goes the Dynamite! Understanding Proximate Causation When Interpreting Property Insurance Policies

Many losses are a result of a chain of events. Some claims have one or two causes, others have many more. The important question to determine whether a loss is covered by a particular policy is what set the chain of events in motion. When analyzing a chain of events fact pattern, courts look at whether the initial event that started the chain is covered under the policy.

In Renshaw v. Missouri State Mutual Fire & Marine Insurance Company, a fire, which was a covered cause of loss, started in the insured’s basement grocery store where he stored 40 gallons of gasoline. The fire caused an explosion that resulted in substantial damage to the structure.

The insurance company decided the loss was not covered under the policy’s extra-hazardous exclusion because the insured stored more than twenty-five gallons of gasoline on the insured premises. The insurance company argued the storage of the gasoline (the excluded event) was the cause of the loss, not the fire. The Missouri Supreme Court disagreed and found the fire was the proximate cause of the loss.

Citing the Massachusetts Supreme Court case Scripture v. Insurance Company, the Supreme Court of Missouri explained:

[W]here the effects produced are the immediate results of the action of a burning substance in contact with a building, it is immaterial whether these results manifest themselves in the form of combustion, or of explosion, or of both combined. In either case, the damage occurring is by the action of fire, and covered by the ordinary terms of a policy against loss by fire.

Under this analysis, the fire, a covered peril, was the initial event in the chain of causation that lead to the loss. In other words, “but for” the fire, the loss would not have occurred. As long as the initial event in the chain of events is a covered peril, it is likely the loss is covered. 

It is important to remember that each case is different and jurisdictions differ in their application of the proximate causation doctrine. If you experience a loss, you need to consult an experience professional that specializes in insurance matters.