Proximate Cause

The Principle of Proximate Cause is a core legal principle in international trade and marine insurance, used to determine the causal relationship between a loss and a risk. It means that when multiple causes act successively to produce a loss, the most direct, effective, and decisive cause—the proximate cause—must be identified. If the proximate cause is a covered risk, the insurer compensates; if it is an excluded risk, no compensation is paid. Application scenarios include cargo transport insurance claims, letter of credit disputes, and force majeure determination. Note: the proximate cause is not necessarily the cause closest in time, but the most dominant in effect; it is necessary to distinguish proximate cause from remote cause and avoid mistaking an indirect cause for the proximate cause. Difference from other terms: the principle of proximate cause differs from the general concept of 'causation' in that it emphasizes dominance and effectiveness; it also differs from the principle of 'insurable interest,' which concerns the insured's stake in the subject matter. Foreign trade practitioners should accurately understand proximate cause in order to protect their rights in claims, settlements, and contract disputes.