Proximate cause means the active efficient cause that sets in motion a train of events that bring about a result without the intervention of any force started and working actively from a new and independent source.

Where an insured peril and an excepted peril operate independently on the subject matter, and the consequences of each peril are separable, then the rule is that insurers will pay for:

Where the insured peril is preceded in an unbroken chain of events, by an excepted peril, then there is no claim as the loss is proximately caused by the exception.

Where the happening of the insured peril is the last of a series of causes (and an excepted peril is not involved), there is a valid claim.

Where the happening of the insured peril is the last of a series of causes and an excepted peril is a preceding cause, there is a valid claim.

To constitute a loss within the meaning of a fire policy, it is not necessary to show that the subject matter of the insurance has been actually burned; it is enough that the loss has been proximately caused by fire.

In the case of McMahons Tavern Pty Ltd v Suncorp Metway Insurance Ltd (2004), the Insured operated a tavern. In the early hours of the morning on 21 February 1999, a group of customers who had been asked to leave, returned and confronted customers and staff. Some damage was occasioned to windows and parked cars during the incident. The damage was quickly repaired (in around 2 hours) and the business reopened. However, the Insured claimed that a drop in turnover resulted in a loss of gross profit. The insurer argued that the drop in turnover and gross profit was due to the disturbance and not to the resulting damage. Anderson J provided the leading judgment of the Court of Appeal, and found in favour of:

When a claim for an interruption insurance policy is paid, there is a requirement for the Insured to rebuild or repair the premises and plant etc (including the relevant increased costs) and to restore the business to the position that would have existed if the damage had not occurred.

There is a common law duty for an Insured to minimise the loss under an insurance policy.

The proximate cause is not necessarily the one closest to the loss.

Where there is no direct evidence of the cause of a loss, proximate cause may be determined by inference from other evidence.

An Insured is not entitled to indemnity if the loss is caused by two perils acting concurrently, and one of the causes of the loss is an excluded peril.

If the initial damage is caused by an excluded peril and this leads to subsequent damage, which itself is not excluded: