Insured peril- is an event that can cause damage or loss to a property but is covered by an insurance policy that pays for the loss or damage if it occurs. Insured perils - these are the perils that are covered by the policy as insured. Property insurance can either be named or comprehensive. In a named perils policy, only the perils specified in the contract are covered. In the more comprehensive insurance (also known as an all perils policy), the coverage is broader but there are still events that are considered exclusions.
An insurance company might deny coverage for a particular peril because of its high likelihood of occurring. For instance, in a flood-prone area, flood coverage may be considered an exclusion. Insured peril to operate is no defense to a claim for a loss proximately caused by that insured peril. Losses which are a consequence of negligence caused by someone other than the insured but not proximately caused by a specifically insured peril may be insured comprehensively under negligence as an insured peril. Insured peril will frequently be an act of negligence. The situation will be different if negligence is the peril insured against or is an excepted peril, in which case negligence is of course relevant. When causes operate concurrently, one cause being an insured peril and none of the other causes being excepted perils, the cause of the loss is the peril insured against and the other concurrent causes are ignored.
Proceeding with the occurrence of insurance peril
Once the proximate cause is identified, the next step is to determine if the causative peril is covered by the insurance policy or not.
- Excepted or Excluded Perils - these are perils that are specifically stated as excluded.
- Uninsured or Other Perils - these are perils that are not stated in either inclusion cause or exclusion.
Application in practice- in practice, losses caused only by insured perils are payable under the policy. Losses where the proximate cause is an excluded or uninsured peril are not payable. To entitle an insured to recover, the train of events leading from the insured peril to the actual financial loss suffered by the insured must be unbroken. If the sequence of events from an insured event is broken by a train of events from an excepted or uninsured peril, then only the loss up to the break is covered.
Types of Causes
Losses may be incurred due to a single cause or by a sequence of causes. To determine whether the loss is payable under the insurance, causes are classified into four categories:
- Single Cause- where the happening of the insured peril is a single cause or the last in a series of causes, then the claim is payable under the insurance policy.
- Concurrent Causes- if there are concurrent causes, but there is no excluded peril involved, the claim is payable. If an insured and an excluded peril operate together to produce the loss, the claim is not payable.
- Unbroken Sequence- where several events occur in unbroken sequence and no excepted peril is involved, the claim is payable.If an excepted peril proceeds the happening of an insured peril, and the insured peril can be said to be a reasonable consequence of the excepted peril, no claim is payable.
- Broken Sequence - if a new and independent cause arises, so that it breaks a chain of sequence, the claim would be payable if the new cause is an insured peril. If the new cause is an excepted peril, the claim would be payable only to the extent of the damage caused by the insured peril.
- F.Rose 2013,p.74-78
- IMS.Proschool 2012,p.60
- IMS.Proschool 2012,p.61-62
- Haar R.,Laney A.,Levine M., (2016). CRC Press , "Construction Insurance and UK Construction Contracts".
- Proschool IMS., (2012). Tata McGraw-Hill Education , "Risk Management and Insurance Planning".
- Rose F., (2013). CRC Press,"Marine Insurance: Law and Practice ".
Author: Patrycja Bajda