Practice and Implication of Principle of Proximate Cause by the Insurance Companies of Bangladesh

IMPLICATIONS OF PRINCIPLE OF PROXIMATE CAUSE

Prepared for:
Ms. Pallabi Siddiqua
Assistant Professor
Department of Finance
University of Dhaka
Prepared by:
Group 1
Date of Submission- November 22, 2016
Member‟s Name ID No Remarks
Suborna Ghosh 21-06
Saiful Islam 21-39
Md. Istiaq Hasan 21-99
Hadia Jahin 21-189
Taj-E-Nur 21-225
A TERM PAPER ON
IMPLICATIONS OF PRINCIPLE OF PROXIMATE CAUSE BY
INSURANCE COMPANIES OF BANGLADESH

ii
Letter of Transmittal
November 22, 2016
Ms. Pallabi Siddiqua
Assistant Professor,
Department of Finance,
University of Dhaka
Subject: Submission of the term paper on “Implications of Principle of Proximate Cause by
Insurance Companies of Bangladesh”.
Dear Madam,
It is an honor and immense pleasure for us to present our report on „Implications of Principle of
Proximate Cause by Insurance Companies of Bangladesh‟. This report was assigned to our
group as a partial requirement of the course named „F-210: Insurance and Risk Management‟
of B.B.A program under the department of Finance of the Faculty of Business Studies,
University of Dhaka. This study has given the opportunity to gain knowledge about the
implications Principle of Proximate Cause and practical use of this principle in our countries‟
insurance business. This study will help us in our real life and in future carrier, indeed.
We would like to convey our special thanks and gratitude to you for patronizing our effort & for
giving us proper guidance and valuable advice throughout the semester. We earnestly request
you to call us if you think any further work should be done on the topic.
Sincerely,
Saiful Islam
On behalf of the Group-1
21st
Batch, Department of Finance
University of Dhaka

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Table of Contents
Contents……………………………................................................................................................iii
Executive Summary…………………………………………….……………………....................iv
Acknowledgement…………..……………………………………………………………………..v
Chapter Topic Page
1 Introduction: 1
Introduction 2
Origin of the report 3
Objective of the report 4
Methodology 5
Limitation 6
2 Theoretical Overview 7
What is proximate cause 8-9
Determining causes of loss 10
Types of loss 11-16
Burden of proof 16
3 Company Profile 17
Agrani Insurance Company Limited 18-19
National Life Insurance Company Limited 20-21
4 Implication of the Principles 22
Implications by Agrani Insurance Company Limited 23-32
Implications by National Life Insurance Company Limited 33-37
Conclusion 38
Bibliography 39

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Executive Summary
We were assigned to study and prepare a report on implications of principle of proximate cause
by the insurance companies in Bangladesh. In the introductory part, we briefly discussed the
immense importance of causation in insurance business and thus how the law of proximate cause
originated along with our core and secondary objectives of preparing the report. We also
included the method by which we prepared the report and some limitations that we had to face.
In the second chapter, theoretical overview of the law is covered. We explained the definition,
explanation, how the loss is determined and the types of loss that occurs. The second chapter
ended with explaining which party bears the burden of proof in what circumstances.
In the next chapter we provided the company profile of the insurance companies we visited,
which are Agrani Insurance Company Limited and National Life Insurance Company Limited.
The objectives, vision and mission of the companies are thus understood.
In the last and final chapter, we related the implications of the law in the respective companies
where we provided real life cases collected from the companies and concluded the report
thereby.

v
Acknowledgement
At first we would like to thank the mightiest and our parents. Without their blessing, we could
not be successful in completing the study. We would like to thank our honorable course teacher
of Department of Finance, Ms. Pallabi Siddiqua for providing us such an opportunity to prepare
the report on „Implications of Principle of Proximate Cause by Insurance Companies of
Bangladesh‟. Without her helpful guidance, the completion of this report was unthinkable.
During our preparation of the report work, we have come to very supportive touch of different
individuals & friends and professionals who lent their ideas, time & caring guidance to amplify
the report‟s contents. We want to convey our heartiest gratitude to them for their valuable
responses.

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Chapter-1
Introduction

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Introduction
Causation is a fundamental component of insurance and insurance law. Assureds desire
indemnity against the risk of certain types of losses; underwriters issue policies which provide
such indemnity in the event of certain perils, often with other perils being specifically excluded.
Any coverage provided by the policy is contingent upon there being a causal connection between
the loss, and a covered peril.
In insurance law, as in tort law, it is recognized that loss or damage may be the product of
multiple causes. A particular action or state of affairs may serially or sequentially give rise to
other factors, which may ultimately produce a loss; also, independent factors, neither of which is
sufficient in itself to cause a loss, may do so when combined.
Now, in Insurance law, for the insurance company to be made liable first of all the cause of loss
should be looked upon. All the causes will not be a proximate cause. Proximate cause is that
cause which is direct cause of loss; exists if there is no unbroken chain of events leading from
one act to a resulting injury or loss.
The above statement is not exhaustive. There are various exceptions and other rules on proximate
causes in various jurisdictions. In this report here, we will look upon the various meaning and
ways proximate cause has been described and specifically looks into proximate cause and its use
in different types of insurance policies practiced by our country‟s insurance companies.
The area of different insurances seems old but the concept of proximate cause in these areas,
especially in Bangladesh, is a very new and upcoming concept.
In this report, we deal the application of Doctrine of Causa Proxima by Agrani Insurance
Company Limited and National Life Insurance Company Limited to have a precise understanding
about how Bangladeshi insurance companies imply this principle in their insurance business.

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Origin of the Report
The report is prepared for the requirement of course „F-210: Insurance and Risk Management‟
under the academic supervision of our course teacher, Ms. Pallabi Siddiqua, Assistant Professor,
Department of Finance, University of Dhaka. The topic we worked with is “Implications of
Principle of Proximate Cause by Insurance Companies in Bangladesh”. While preparing the
report, we gave our best effort collecting data about insurance industry of Bangladesh. For the
purpose of preparing this report we have visited Agrani Insurance Company Limited and
National Life Insurance Company Limited. The report contains the information on the assigned
topic collected from various sources like websites, annual reports, policy papers and two day
conversation with Head of Claim Departments of the mentioned companies.

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Objective of the Report
The main objective of this report is to understand and show the implications of Principle of
Proximate Cause by insurance companies in Bangladesh.
Primary Objective:
 The primary objective of the report is the completion of our course F-206: Insurance and
Risk Management and to submit the term paper to complete our course.
Specific Objectives:
 Clear understanding on the theoretical concept of Doctrine of Causa Proxima.
 Relating theoretical concept with real life cases.
 Understanding the implementation of the mentioned principle by insurance companies of
Bangladesh.

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Methodology
The methodology of this report is collective and the report was prepared through a lengthy
process. The process of preparing the report is given bellow:
 At first we, the members of Group-1, held a discussion about the process we should
follow to prepare the report and decided to collect secondary data.
 Then we have divided the case among our group members.
 Then we collected secondary data from our recommended course curriculum conducted
by our course teacher Ms. Pallabi Siddiqua.
 We also collected some data from the company websites of Agrani Insurance Company
Limited and National Life Insurance Company Limited.
 We also collected necessary data from the annual reports of the two companies and
conducted personal interview with officers of claim departments of the mentioned
companies.
 Then we summarized collected data and showed necessary analysis.
 We checked formatting of the report and checked for mistakes for several times and at
last, we succeeded to prepare the report.

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Limitations
While preparing this report, we have faced some problems. The main problem was to co-
ordination all the group members. Moreover, during data collection we faced several problems.
Budgeted time limitation:
It was one of the main constraints that hindered to cover all aspects of the study.
Validity and Reliability:
Validity and reliability of the obtained information depends on the responses from the
respondents.
Inappropriateness and Scarcity of Evidence:
Actually, inappropriateness and scarcity of evidence lacked our proper representation of the study
and implications of Causa Proxima.
In spite of many limitations, we have become successful in preparing the report with sufficient
adornment of flawlessness.

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Chapter-2
Theoretical Overview

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In assessing the liability of the insurer, it is essential to ascertain whether the loss or damage that
occurred was, in fact, a result of the specific risk or risks covered in the policy. Thus, in order for
a claim against an insurance company to be valid, there must be a proximate cause between the
loss incurred and the risk insured against. An insurer will not be liable for risks that are not
included in the insurance policy. While this might seem like a simple principle of insurance law,
there are certain complex cases in which it is not easy to ascertain the nature of the event that
caused the loss, or where multiple forces may each cause loss to the insured.
What Is Proximate Cause
Proximate cause was defined in Pawsey v. Scottish Union and National Ins. Co. (1907) as "the
active, effective cause that sets in motion a train of events which brings about a result without the
intervention of any force started and working actively from a new and independent source." It is
dominant and effective cause even though it is not the nearest in time. It is therefore necessary
when a loss occurs to investigate and ascertain what the proximate cause of the loss is in order to
determine whether the insurer is liable for the loss. In order to determine the liability of the
insurer, the law has created the principle of causa proxima non remota spectator – it is the
proximate and not the remote cause that shall be regarded as the cause of the loss.
Therefore, proximate cause can be defined as “The active and efficient cause that sets in motion a
train of events which brings about a result, without the intervention of any force started and
working actively from a new and independent source, is called the proximate cause. It is the
immediate cause and not the remote cause. Based on the proximate cause of a loss, insurer fulfills
or rejects a claim from insured.”
If the loss is caused merely by one event, it would be no problem to decide the question of
liability. But there are many cases where the loss may be the result of two or more causes,
operating simultaneously or one after the other. In such cases, it becomes necessary to choose the
most important cause which has brought about the loss and disregarding the other causes as
remote.
So, in order to determine if certain loss is to be covered by the insurer or not there are three things
that needs to be looked upon. First of all, the root cause of the loss needs to be known. After that

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root cause is known, it should be seen if it is excluded from the policy or not. Then, the
circumstances created by the root cause should be looked upon to determine if there was
proximate cause or not.
Now, we need to know that sometimes the root cause of the loss may be straightforward. For
example, two cars may have an accident on the road. Here, the root cause can easily be identified.
However, suppose a fire breaks out in a building containing a library but is swiftly brought under
control by firemen. However, the water used by the firemen to control the fire damages the
books. In this case it is critical to determine the cause of the damage. It could be fire or water. It
is not that simple to find out what the root cause is as there are two or more forces acting one
after the other. In such cases, it becomes necessary to identify the root cause, which is also called
the "Proximate Cause”. If the loss is caused by a peril not specified in the policy, it is clear that it
is not payable; if the loss is caused by a peril which is specifically excluded under the policy, the
loss is not payable. It is thus necessary to determine the cause of the loss to decide whether the
loss is payable under the policy or not.
In the previous example, we saw that while the immediate cause of damage was water, the root
cause of damage was fire. This is so because the water would not have been sprayed on the books
if the fire had not broken out. Therefore, proximate cause means the direct, the most dominant
and the most effective cause of the loss. It is the cause that is most closely and directly connected
with the loss.
The time-lag between cause and effect may be long or short but this does not affect the issue, so
long as the relationship of cause and effect is established. We know for sure that damage by the
use of water was caused because of the fire that started in the first place. The cause that is
considered truly proximate is that which is proximate in efficiency not in time. Therefore, it is not
the latest, but the most direct, dominant, operative and efficient cause that is regarded as
proximate.1

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Proximate Cause: Determining Cause of Loss
Insurance policies provide compensation for loss. It is extremely important that insurers are able
to control what level of risk they will and will not accept. If the loss is caused merely by one
event, it would be no problem to decide the question of liability. But there are many cases where
the loss may be the result of two or more causes, operating simultaneously or one after the other.
In such cases, it becomes necessary to choose the most important cause which has brought about
the loss and disregarding the other causes as remote. There must be a clear understanding by
insurer and insured of exactly which of these things, or causes of loss, the policy will cover. It is
not always so simple, that the insurer pays the claim, when it is determined whether the loss was
caused by one of the insured perils. There may have been several causes operating at the same
time, or, a chain of causes, perhaps an unbroken chain, perhaps one broken by another, new type
of cause. The policy (insurance contract) therefore, usually lists two kinds of perils:
1. Insured Perils: These perils are those against which the insurer is willing to provide
cover.
2. Excepted Perils: Excepted perils are those specially named causes of loss which the
policy (and therefore the insurer) definitely rejects for the cover.
There is a third type of perils which is,
3. Uninsured or Other Perils: These are perils that are not stated in either inclusion clause
or exclusion. For example, smoke and water may not be excluded or mentioned as insured
in a fire policy.
When a loss occurs and a claim is made, it is necessary for the insurer to determine whether the
loss was caused by one of the insured perils. If it was, then the insurer pays the claim. Let‟s take
an example: A man throws down a lighted match. It is blown by wind onto a dry tree which
catches alight. The fire spreads to a nearby house. Fire-fighters arrive and break a window as they
fight the fire.
It is to determine what caused the broken window- the man, the match, the fire, the wind or the
fire-fighters or all of these together. Obviously the immediate cause was the action of the fire-
fighters. Yet that action was caused by the fire which was blown by the wind etc. There are rules
which may be used to determine whether the causes of a loss are one which the policy covers.

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Proximate Cause: Types of Loss
Losses may be incurred due to a single cause or by a sequence of causes. There are numerous
situations where the test of proximate cause is required, most (if not all) such situations stem
from the existence of multiple causes for the same event. When understanding how to approach
the question of proximate cause, it is wise to first determine whether the causes operate
consecutively or concurrently. Depending on which category the situation fits into, the approach
taken to determine proximate cause shall differ.
To determine whether the loss is payable under the insurance, causes are classified into three
categories as below:
1. Single Cause
If there is a single cause which is an insured peril, this is the proximate cause of the loss and the
insurer will pay the claim.
2. Consecutive Causation
There are further two categories under Consecutive Causation.
a. Unbroken Chain of Causes
E.R Hardy Ivamy said that, „each cause in the sequence is the reasonable or probable
consequence, directly and naturally resulting in the ordinary course of events from the cause
which precedes it‟. This basically means that, if there is a peril and this chain of causation
continues without any break in between then, this form of causation is known to be unbroken
sequence. In this form of causation, a chain of causation is formed, where different causes are of
different nature, and this difference is to be looked upon when there is a claim by a party.
If the insured peril is one link in an unbroken chain which started from a cause not specifically
excluded and there is no excluded peril between the insured peril and the loss, then the insurer
will pay the claim. There will be no question remaining if last of the perils is the peril that the
insurer has insured against, since, the cause of loss will be obvious and further investigation as to
chain of causation is not required.

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However, if there is some peril under exception in the policy and if this peril precedes the
happening of an insured peril then the case is different. In such a case, the cause and effect
relation between the excepted peril and insured peril should be looked upon and if the insured
peril can be said to be reasonable consequence of the excepted peril then the insurer need not pay
the claim to the policy holder. We can take the example of a warehouse which is insured against
fire, but war and associated perils are excluded. If warehouse is destroyed due to a fire caused by
an incendiary bomb dropped by an enemy aircraft, then no claim is payable because the
proximate cause war is an excluded peril.
Now, if the excepted and insured perils are independent in their operation and the effects of each
can be separated and distinguished, then the Court may content itself with considering the loss
caused due to the insured peril only.
b. Broken Sequence
If a new and independent cause arises so that it breaks a chain of sequence, claim would be
payable as the new cause is an insured peril. If new cause is an excepted peril in the policy, claim
would be payable only to the extent of the damage caused by the insured peril.
We can take an example: Suppose a fire breaks out in a building which is insured against fire but
not against earthquake. About 50% of the building is destroyed in a fire. Further suppose that
there is an earthquake later in the day and the entire building is reduced to rubble. In this case, the
second cause (earthquake) is new and independent. Therefore, the claim is payable only to the
extent of damage caused by the first cause (fire).
To clarify these rules, we consider another example: A building insured only against fire is
damaged by falling tiles from the building next door which is on fire. The insurer would have to
pay the claim for the damage caused by the falling tiles, because although the tiles were the
immediate cause of the damage, fire was the insured peril which triggered the chain of natural
consequences, making fire the proximate cause of the damage to the insured building.

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3. Concurrent Causes
Whenever courts are faced with questions of proximate causation associated with the idea of
concurrent causation, they usually approach them in one of three ways: liberal approach,
conservative approach and the dominant cause approach.
According to the conservative approach if the chain of causation that led to the damage there
exists a causal link that is barred from coverage then the chain of causation is broken and the
damage caused is irrecoverable from the insurance company. Hence, the excluding link is given
precedence in contradistinction to all other links. This approach is based on principles of freedom
of contract, where an insurance policy is a contract between the two parties and hence, if a cause
is specifically excluded then it circumscribes the scope of the policy and not really a conventional
risk for the parties. For instance, in Wayne Tank the insurer was covered for negligence of his
workmen. However, when a fire occurred it was as a result of two factors, mistake in the
construction of the facility and the negligence of the workmen. As a result, the court held the
damage was irrecoverable as the first cause was an excluded clause in the insurance policy.
An issue before the conservative approach is differentiating between an excluded cause and a
clause that is not included. In cases of a non-included clause, multiple approaches can be taken.
First, it can be presumed that a cause that is not included is the same as an excluded clause and
hence, should not be covered. This is an implied exclusion. Second, the loss is apportioned so as
to not include that portion of the damage caused by that factor. Third, the loss can be completely
covered by the policy in spite of the presence of a non-included cause.
Borrowing from the rationale given for excluding a loss caused by a covered cause and an
excluded cause, it would seem sensible to exclude the loss caused in the instant case as well. The
nature of the insurance contract in its entirety does not mutate because of the fact that one of the
causes is a non-covered one. The fact that the cause is neither covered or excluded hints at the
fact that there was intention on the part of the insurer to accept liability for any loss accruing on
account of such cause, and the contours of the insurance contract will remain the same.
However, in some jurisdictions like Britain, the Courts tend to take a pro-coverage stance in such
cases. This situation, however, is challenging as the Court looks into the fact that such cause was
not expressly excluded into the contract, but turns a blind eye towards the fact that the Insurer
had not expressly accepted liability for the same.

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The other approach here is a liberal approach. The liberal meanders away from the conservative
one, leaning towards the predicament of the insured as opposed to providing the benefit of the
doubt to the insurer. This approach mandates that any link in the chain of causation, if covered by
the insurance policy, would bring the total loss under the umbrella of the insurance policy.
Interestingly, the simplicity of the approach has not lead to it being followed in a lot of
jurisdictions, thus throwing it open to question.
This approach can be exemplified in Partridge, where the insured‟s own action resulted in
injuring a third party. The claim which was contested by third party liability insurers saw the
Judge embracing the Liberal Approach and while examining the chain of causation, concluded
that there was negligence on the part of the truck driver (third party in this case), and since that
was present, held that the loss was required to be covered by the third party insurers. The
Jurisprudence on this, however, has developed since Partridge, where the Court imposed a greater
threshold, and only in cases of third party liability insurance where there are situations of
concurrent causation, would they follow the approach. The rationale behind the restrictive
application of this approach to third party insurance springs from the limited control that the
insurer and insured possess in terms of the coverage of the policy. This coupled with the fact that
chiseling out the dominant cause when examining the concurrent causation of losses in the instant
case is a daunting and close to an impossible task, the Courts have chosen to apply a liberal
approach in such cases and give the insured the benefit. However, California is one of the few
jurisdictions which follow this approach. Most other claims are decided in accordance with the
conservative or the dominant cause approach.
Another approach which is center to this paper is the Dominant Cause approach. It is also known
as the proximate cause approach and is the central focus of this paper. While this approach is the
most commonly used approach to settle insurance claims involving concurrent causation, the
jurisprudence surrounding this approach is not as settled as that surrounding the conservative
approach, causing it to be very unpredictable.
The Dominant Cause, also more commonly addressed as the proximate cause approach is the
most commonly used approach in settling insurance claims involving concurrent causation.
However, this approach is also rather unpredictable in its applicability considering that the
jurisprudence around this approach is not settled.

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While following this approach, the Court is required to examine parallel causes and determine the
most prominent and dominant cause. The characteristic of the cause will determine whether the
insurer covers the loss occurred. It must be noted that the dominant cause need not always be the
last cause in the chain of causation but is rather the more efficient cause, i.e. the one which had
the greatest role to play in causing the loss.
Thus, in the example aforementioned, the insurer could be said to be liable to cover the loss for
the sinking of the ship. Even though the damage to the ship was caused by the torpedo, the event
that led to the sinking of the ship was it being shifted from its original berth to a place that was
not conducive to safe anchorage. Such a peril was covered under the insurance policy and hence
the loss must also be covered under the same and the insurer is liable.
The proximate cause approach does away with some of the problems under the conservative
approach and the liability is placed on the insurer. The question of what constitutes the dominant
approach is based on the facts and circumstances of every case and no binding guidelines can be
laid down with respect to the same.
Another approach developed via academic writings involves apportioning responsibility to each
of the causes which brought about the damage resulting in the loss. The apportionment approach
is a practical solution to resolving disputes of concurrent causation. It divides the damage which
may be attributed to each cause and the court can then decide on the base of each cause
individually the damages which a particular individual may be entitled to. While this approach is
ideal in cases where the court is required to determine which insurer must pay how much
compensation to each individual for the loss, applying the same in the initial stages could bring
up some practical difficulties. Such an approach would be ideal in a situation where the causes
are clearly demarcated but in most real-life situations, individual causes and their contribution to
the damage cannot be plainly determined.
So, in summary we can say that:
 If an insured peril and a peril not specifically excluded together cause the loss, the insurer
will pay the claim.

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 If an insured peril and an excluded peril together cause the loss, the insurer will not pay
the claim unless it is possible to separate the loss caused by the insured peril from the loss
caused by the excluded peril.
Burden of Proof
In the event of loss, the burden of proof is on the insured. He has to prove that the proximate
cause of loss was an insured peril. If the insurance company argues that the loss was caused by an
excepted peril, the onus of proof shifts to them.

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Chapter-3
Company Profile

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Company Profile: Agrani Insurance Company Limited
Agrani Insurance Company Ltd., was incorporated as a Public Limited
Company under the Company Act, 1994 and obtained registration from the
Chief Controller of Insurance, Government of Bangladesh on 3 April
2000with a paid up capital of Tk. 60 million. The present Authorized
Capital of the company is Tk. 500 million while paid up capital has increased to Tk. 253.65
million. The company was listed with Dhaka Stock Exchange Ltd., on 5 March 2005.
The board of Agrani Insurance Company Ltd. has been constituted with 15 Directors.
Composition of the Board is- 11 Sponsor Directors, 2 Directors from Public Shareholding and 2
Independent Directors.
Agrani Insurance is one the General Insurance Company of Bangladesh having a network of 35
branches in all important places throughout the country employing a full time workforce of 421
persons. It underwrites all classes of General Insurance and enjoys reputation second to none.
Apart from the tradition covers such as, Fire, Accident, Motor, Marine (Imports & Exports),
Marine Hull, Personal Accident, Group Hospitalization, Workmen‟s Compensation, Burglary,
Cash-in-safe or in Transit etc., it also transacts non-traditional covers such as Machinery
Breakdown and Loss of Profits following Machinery Breakdown, Contractors All Risks, Erection
All Risks and Bankers Blanket Bond Policy.
Over a period of decades, Agrani Insurance Company Ltd. has been holding the strong position in
terms of premium collection. M/s Alpha Credit Rating Ltd. has assigned “A+” based on the
audited financial statements of 2014 and other qualitative and quantitative information
considering its good operating performance, claim paying ability (CPA), excellent liquidity
position and experienced & qualified management team.
Efficient and timely settlement of claim is Agrani‟s commitment and they follow a structured
policy for settlement of the claim. Upon receipt of intimation of claim from the clients, they
immediately inspect the affected properties and file “The First Hand Report” to the Claim
Department. They also immediately depute an independent licensed survey firms for assessing
the quantum of loss for prompt settlement of the claim within the stipulated time.

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Their portfolio is fully protected under the Reinsurance arrangements made with Sadharan Bima
Corporation− a state-owned organization and little other renowned Reinsurance operating abroad.
Agrani is National Life Insurance Company Limited with almost all of the leading private/public
sector banks operating in the country for acceptance of its policies and cover notes.
Objectives:
 To be market leader for innovative business products
 To be the best efficient insurance company in Bangladesh
 Share the losses with the clients
 To maximize shareholders‟ wealth through a sustained return on the investment
 Strengthening the corporate governance practices
 Educate the general people about the important of insurance
Vision:
To be recognized as a professional and dependable business entity committed to pay a
meaningful role in the development of insurance industry in Bangladesh and to safeguard the
legitimate interests of all shareholders, namely policyholders, shareholders, reinsurers, employees
and all other business associates/ partners.
Mission:
To provide quality service and protection to its clients aiming at achieving a respectable volume
of business and become a prominent player through good governance and sound professionalism
focusing to become a well-known and respected Corporate entity in the eyes of Society and
Government.

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Company Profile: National Life Insurance Company Limited
The era of privatized insurers started in Bangladesh with the establishment of
National Life Insurance Company, the first ever private life insurance company
introduced in the People‟s Republic of Bangladesh. It started functioning on
23rd April, 1985 as a result of sheer perseverance, endeavor and supervision of
the founder chairman Mr. Alhaj M. Haider Chowdhury. The motto of the company is to ensure a
guarantee for a planned future. Three visions of the company are-
 To encourage & induce saving of the high/mid income population and especially of the
low income & marginal group.
 To create & provide employment opportunity for the illiterate/half literate/literate youth
of the country.
 Capital formation at national level for investment to develop dynamism at macro-
economy
The members of the Board of Directors are resourceful people imbued with the spirit of social
service, which the company stands for and are leaders in other professions & businesses, such as
finance, marketing and private enterprise. They are equipped with their specialized knowledge to
run the company skillfully & maintain an unparalleled position in the insurance arena.
As a service industry, the company is committed to personalized service to its valued customers
and will justify their confidence by prudent and viable economic management and offering
absolute security and favorable returns.
This company began operation with 11 staffs with a head office covering few hundred sq. ft. of
area at Segunbagicha, Dhaka; but today manpower enrollment has reached more than 100,000
staffs and field forces covering about 1200 zonal, regional, branch and block offices all over the
country. The head office of the company is at the National Life Insurance Company Limited
Tower'- own high rise building at Kawranbazar, at a significant artery point of Dhaka
metropolitan. The company has also purchased plots & lands at different Divisional & District
headquarters. National Life Insurance Company Limited a set as the sponsor director of Venture
Investment Partners Bangladesh Ltd., National Housing and Investment Ltd. and Industrial and

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Infrastructure Development Finance Co. Ltd. Moreover, National Life Insurance Securities
Limited is a subsidiary of National Life Insurance Company Limited.
National Life Insurance Company Limited delivered the success in business achievements,
competency in management and befitting growth judged by any standard. The company has
grown & developed massively & substantially over a period of about 28 years. It has earned
name & fame along with premium for the services it provides to the policy holders. Since
beginning, it has focused on policy holders' satisfaction for the type, quality & promptness of the
services. The company has diversified its products to match customers' needs & preferences.
Currently it provides multifarious life assurance products to cater the aspirations & needs as well
as religious beliefs of the clients. Benefits to the policyholder of National Life Insurance
Company Limited are high as they are now enjoying high level rate of policy bonus compared to
other competent companies.

Page | 22
Chapter-4
Implications of the Principle

Page | 23
Implication of Principle of Proximate Cause:
Agrani Insurance Company Limited
Agrani Insurance Company Ltd. uses Principle of Proximate Cause in the settlement of claims. Agrani is
committed to settle claims efficiently and timely and for this, they follow a structured policy for
settlement of the claim. Upon receipt of intimation of claim from the clients, they immediately
inspect the affected properties and file “The First Hand Report” to the Claim Department. They
also immediately depute an independent licensed survey firms for assessing the quantum of loss
for prompt settlement of the claim within the stipulated time if it is valid and relevant to the
Causa Proxima.
To ascertain their implication of the principle, we here discussed some real cases collected from
the claim department of Agrani Insurance Company Ltd and tried to relate the settlement of the
cases according to the Principle of Proximate Cause.
In an insurance policy Agrani uses three Institute Cargo Clauses. This are-
 ICCA
 ICCB
 ICCC
Which perils are insured and which are excepted under which clause is specified in these three
clauses. The widest cover is provided under Institute Cargo Clauses A and a more restrictive
cover under Institute Cargo Clauses B and Institute Cargo Clauses C.
Institute Cargo Clauses A
 Insured Clause: The insurance covers all risks of loss of or damage to the subject matter
insured except those excluded.
 General Average Clause: This insurance covers general average and salvage charges
incurred to avoid loss from any cause except those excluded.
 „Both to Blame Collision‟ Clause: This insurance is extended to indemnify the Insured
against such proportion of liability under the contract of affreightment “Both to Blame
Collision” Clause as in respect of a loss recoverable hereunder.

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Institute Cargo Clauses B
The insurance covers, except those excluded,
 Loss of or damage to the subject matter insured reasonably attributable to
− Fire or explosive
− Vessel or craft being stranded, grounded, sunk or capsized
− Overturning or derailment of land conveyance
− Collision or contact of vessel, craft or conveyance with any external object other than
water
− Discharge of cargo at a port of distress
− Earthquake, volcanic eruption or lightning
 Loss of or damage to the subject matter insured caused by
− General average sacrifice
− Jettison or washing overboard
− Entry of sea, lake or river water into vessel, craft, hold, conveyance, container, lift van
or place of storage
 Total loss of any package lost overboard or dropped whilst loading on to, or unloading
from, vessel or craft

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Institute Cargo Clauses C
The insurance covers, except those excluded,
 Loss of or damage to the subject matter insured reasonably attributable to
− Fire or explosive
− Vessel or craft being stranded, grounded, sunk or capsized
− Overturning or derailment of land conveyance
− Collision or contact of vessel, craft or conveyance with any external object other
than water
− Discharge of cargo at a port of distress
 Loss of or damage to the subject matter insured caused by
− General average sacrifice
− Jettison

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Major Exclusion
The Company will not indemnify the Insured in respect of loss, damage or expense
 Attributable to willful misconduct of the Insured
 Of ordinary leakage, ordinary loss in weight or volume or ordinary wear and tear of the
subject matter insured
 Caused by insufficiency or unsuitability of packing or preparation of the subject matter
insured
Summary of Institute Cargo Clauses Coverage
Loss or Damage Caused by: Clause A Clause B Clause C
General Average √ √ √
Both to Blame Collision √ √ √
Fire or explosion √ √ √
Vessel or craft being stranded √ √ √
Overturning or derailment of land conveyance √ √ √
Collision or contact of vessel, craft or conveyance with any
external object other than water
√ √ √
Discharge of cargo at a port of distress √ √ √
General average sacrifice √ √ √
Jettison √ √ √
Earthquake, volcanic eruption or lightning √ √
Washing overboard √ √
Entry of sea, lake or river water into vessel, craft, hold,
conveyance, container, liftman or place of storage
√ √
Total Loss of any package lost overboard or dropped whilst
loading on to, or unloading from, vessel of craft
√ √
Theft or Pilferage √
Contamination (own damage) √
Rain &/or fresh water damage √

Page | 27
 Arising from unseaworthiness of vessel or craft
 Caused by war, civil war, revolution, rebellion, insurrection, or civil strife arising
therefrom, or any hostile act by or against a belligerent power
 Resulting from strikes, lockouts, labor disturbances, riots or civil commotions
 Caused by any terrorist or any person acting from a political motive
Premium
The premium is mainly determined according to nature of subject matter, conveyance used,
packaging of subject matter, route of transportation and operating condition of point of departure
and destination, etc.
*The information stated herein is only a summary of the policy. Exact terms and conditions
should be referred to the actual policy.
Case-1
Expomotion Company Limited is a garment company, situated at Kazipara, Begum Rokeya
Sarani, Mirpur. The company insured a 6 storied building against loss of fire, earthquake and
RSD (Riot and Strike Damage) with sum insured worth Tk. 2.5 crore. An earthquake measuring
6.9 in the Richter scale took place on April 13, 2016 in which the building was damaged. The
insured claimed damages worth Tk. 1.5 crore. Agrani Insurance Company Ltd. went on an
investigation and upon seeing several cracks on the building, appointed some surveyors. The
surveyors checked the documents of the building which showed severe faults in the construction.
The building lacked the construction suitable for heavy garments and the column strength to
carry heavy machineries. Moreover, the building was not sanctioned by the government and the
Department of Inspection for Factories and Establishment had warned the company and had
given a report for faulty construction. On asking the laborers, the surveyors got to know that most
of the cracks had already been there prior to the earthquake, which became more prominent after
the earthquake. So Agrani, the insurer, asserted that the loss was incurred due to the faulty
construction of the building and justified earthquake as a remote cause to the loss. Therefore, they
declined to settle the claim.

Page | 28
Policy Implication:
Insured: Expomotion Company Limited
Insurer: Agrani Insurance Company Limited.
Sum Insured: 2.5 crore.
Insured perils:
 Earthquake
 Riot and Strike Damage
 Fire
 Volcanic eruption or lightning
Excepted Perils:
 Faulty Construction
 Willful misconduct of the Insured
 Caused by insufficiency or unsuitability of preparation of the subject matter insured
Rule of Proximate Cause:
 Broken Sequence
At first Expomotion Company broke the Principle of Utmost good faith. Whenever the insurance
company asked about the building fitness, the firm replied that it was absolutely fine. But after
the claim, the insurance company appointed a surveyor team which found out that the building
was of faulty structure; not legally approved. Again, it was found that the damages were existed
from years. Earthquake might add to the injury but the faulty construction and precious damages
lead to the result. Although there was a broken sequence, nut the proximate cause of the loss was
faulty construction. Thus the insurance firm reject the claim.

Page | 29
Case-2
Jamuna Group took a marine insurance policy with ICCA coverage and sum insured worth Tk.
10 lacs. The insured cargo was travelling with fly ash from India. Near the Channar Port, Khulna,
the floor of the vessel cracked and it sank. Jamuna Group claimed full damage as it took ICCA
coverage. The appointed surveyors started investigation and found out that the fitness documents
of the vessel were not updated and there were rust on the vessel which eventually led the vessel
sunk. Agrani, therefore, declined to settle the claim and recommended the insured to sue against
the carrier.
Policy Implication:
Insured: Jamuna Group
Sum Insured: 10 lacs.
Insured Perils:
 Both to Blame Collision
 Fire or explosion
 Vessel or craft being stranded
 Overturning or derailment of land conveyance
 Collision or contact of vessel, craft or conveyance with any external object other than
water
 Discharge of cargo at a port of distress
 Jettison
 Earthquake, volcanic eruption or lightning
 Washing overboard
Excepted:
 Recessions
 Loss through delay
 Losses caused by the assured having entered into a contract with unusual conditions

Page | 30
 Illegal undertaking
 Foreseeable loss
 Defected vessel
 Single Cause
According to company policy, insured must send updated information about the matter that
contains additional risk. The cargo was not in a proper condition for a trip; thus bearing
additional risk. But this information is not provided to insurer by insured. Here, Cargo vessel
cracked and Jamuna Group faced a loss. Although the proximate cause may relate with perils of
sea which is insured perils (sinking), Jamuna Group did not receive any payment from Agrani
Insurance Company Limited because fitness documents of the vessel were not updated and the
proximate cause that worked behind the sinking of the vessel was the rust on the vessel. So,
Agrani Insurance Company Limited asserted the sinking of the vessel is remote cause of the loss.
Thus, the cargo company is responsible for the loss and insured should sue against them.
Case-3
GlaxoSmithKline (GSK) is the world leading research-based pharmaceutical company. A few
months ago they imported 20 cartons of pharmaceutical raw material from Singapore by air. They
came with an agreement for 20 cartons with Agrani Insurance Company. These 20 cartons were
insured for Tk. 15 lacs with ICCC coverage. After having reached in Bangladesh airport due to
rain water 8 cartons of raw material was damaged and the rest 12 cartons were safe and sound.
GSK claimed for Tk. 6 lacs from Agrani upon which they appointed an independent surveyor.
After survey Agrani declined to pay the claim.
Policy Implication
Insured: GlaxoSmithKline (GSK)

Page | 31
Sum Insured: 15 lacs.
Insured Perils:
 General Average
 Both to Blame Collision
 Fire or explosion
 Vessel or craft being stranded
 Overturning or derailment of land conveyance
 Collision or contact of vessel, craft or conveyance with any external object other than
water
 General average sacrifice
 Jettison
 Discharge of cargo at a port of distress
Excepted:
 Earthquake, volcanic eruption or lightning
 Washing overboard
 Entry of sea, lake or river water into vessel, craft, hold, conveyance, container, liftman or
place of storage
 Total Loss of any package lost overboard or dropped whilst loading on to, or unloading
from, vessel of craft
 Theft or Pilferage
 Contamination (own damage)
Rain &/or fresh water damage

Page | 32
 Single Cause
After reaching the airport, the insured property damaged due to rain waiter. It is clearly stated in
ICCC that no claim will be fulfilled if insured property is damaged due to rain water. Here, the
proximate cause of loss is rain and other causes are remote in this case. Thus, GlaxoSmithKline
(GSK) did not receive any payment. If GlaxoSmithKline (GSK) took only ICCA coverage, it
would receive the payment.

Page | 33
Implication of Principle of Proximate Cause:
National Life Insurance Company Limited
If we look at proximity cause in case of life and health insurance, the rule and its application by
the court is very limited. It is so limited that few of the authors have come to a conclusion that
there is no proximity cause rule when it comes to basic life insurance. However, lately few cases
have come forward but generally the law in Bangladesh also follows the law set down by English
common law. National Life Insurance Company also follows these laws-
 Accidental Injury - Cooperating Causes: A problem arises when an insured under an
accident policy is killed or suffers in injury, which has an immediate cause and a remote
cause. In accident benefit policy, double of the policy amount is paid. Therefore, the
cause of death in this policy is of paramount importance.
 War-Risk: Where policy is issued on exclusion of War and aviation risks, the proximate
cause of death is important because the insurer waives its liability‟ if death occurred, in
this case, while the insured was in field or is engaged in operation of war and aviation.
Only premium paid or surrender value whichever is higher is payable and the total policy
amount is not payable.
 Suicide: If suicide occurs within one year of the policy, or there was intention to commit
suicide arid the payment of policy would be restricted, only up to the interest of the third
party in the policy provided the interest was expressed at least one month before the
suicide.
DIAB
DIAB stands for Double Indemnity and Accident Benefit. In the case of the accidental death of
the insured, the insurance company will pay the beneficiary of the policy twice its face value.
Such a provision is usually financed through the payment of higher premiums than those paid for
a policy that entitles a beneficiary to recover only the face amount of the policy, regardless of
how the insured died.

Page | 34
In cases where the cause of death is unclear, the insurance company need not pay the proceeds
until the accidental nature of death is sufficiently established by a Preponderance of Evidence. A
beneficiary of such a policy may sue an insurance company for breach of contract to enforce his
or her right to the proceeds, whenever necessary.
Case-1
Mrs. Sayma Shikder, a 24 years old woman has taken a life insurance policy from National Life
Insurance Company Limited on 16 April, 2015 with DIAB (Double Indemnity Accident Benefit)
clause. She paid extra premium, as per company rule, for this extra coverage. The policy was
taken for 15 years and sum insured was 2 lacs taka. Mrs. Sayma got pregnant in 2015 and she
was being taken to Chittagong Patient Care Hospital on 2June2016.Unfortunately, she was died
when she was having a Caesar delivery. Her husband, Mr. Morshedul Alam, applied for double
indemnity claiming that Sayma‟s death was an accident. He also filed a case against Chittagong
Patient Care Hospital alleging that Sayma was killed by wrong treatment. After analyzing the
case National Life Insurance Company Limited declined to pay double indemnity as the company
did not take the proximate cause of her death was an accident. They gave Mr. Morshed the sum
insured amount of taka 2 lacs.
Policy Implication:
Insurer: National Life Insurance Company Limited
Insured: Mrs. Sayma Shikder
Sum-insured: 2 Lacs
Insured Perils:
 Normal death
 Accident (with double indemnity)
 Fatal diseases
 Sudden identification of refractory diseases
 Lightning/Thundering

Page | 35
Excepted Perils:
 Suicide
 Murdered/Killed by other
Proximate cause:
 Single cause
The insured, Mrs. Sayma Shikder took insurance policy from National Life Insurance Company
Limited where DIAB clause was also added. Unfortunately when she died her husband claimed
for double indemnity. At this, National Life Insurance Company Limited appointed an
independent surveyor. The surveyor, after investigation, concluded that the proximate cause of
her death was wrong treatment not an accident or her being pregnant. So the insurer, National
Life Insurance Company Limited, gave her husband the amount of sum insured not the double
indemnity.
Case-2
Mr. Sujon Mahmud, a 28 years old man had taken a life insurance policy from National Life
Insurance Company Limited on 15 June, 2014.The policy was taken for 20 years and sum insured
was 5 lacs taka. Unfortunately, Mr. Sujon had a heart attack in 12 November, 2015 and he was
being taken to hospital but died. Her wife Mrs. Asma Khatun applied for the Coverage to National
Life Insurance Company Limited. After analyzing the case National Life Insurance Company Limited
decline to pay the coverage though it was an accident. While analyzing the case National Life
Insurance Company Limited was found out that it was his third times heart attack but he did not
disclose the material fact while he took the policy.
Policy Implication

Page | 36
Insured: Mr. Sujon Mahmud
Sum Insured: 5 lacs
Rule of proximate cause:
 Single cause
Basically a life insurance does not follow Principle of Indemnity. Thus, as the loss occurred
(death of Mr. Sujon Mahmud by heart-attack) is very relevant to life insurance, the insurer must
fulfill the claim and the insurer firm always wants so. But as the Principle of Utmost Good Faith
is not followed by the insured (hide the information about previous heart-attack), it‟s insurer
choice to fulfill or reject the claim. According to insurer choice, insurer firm took it as breach of
contract and rejected the claim.
Case-3
Mr. Sagor Islam, a 30 years old man had taken a life insurance policy from National Life
Insurance Company Limited on 20th
March, 2010 with PDAB (Permanent Disability and
Accident Benefit).The policy was taken for 15 years with the sum insured of 3 lacs taka. In the
professional life Mr. Sagor Islam was a private car driver. On 15th
June, 2012 he had an accident
while driving the car and was being taken to the nearest hospital. But unfortunately Mr. Sagor
Islam had lost one of his limbs in that accident. Mr. Sagor Islam applied for Permanent Disability
and Accident Benefit coverage. After analyzing the case National Life Insurance Company Limited
had taken the accident as the proximate case of his losing the limb and they gave Mr. Sagor Islam
the 50% of the sum insured of taka 3 lacs (1.5 lacs was given to Mr. Sagor Islam).
Policy Implication
Insured: Mr. Sagor Islam
Sum Insured: 3 lacs

Page | 37
Rule of proximate cause:
 Single cause
Coverage of life insurance policy:
Death Sum-insured
Loss of two limbs or two eyes Sum-insured
Loss of one limb or one eye 50% of the sum insured
Permanent total disability Sum-insured
Permanent partial disability A percentage of the sum-insured
Temporary total disability Weekly benefit at a rate percent of the sum
insured
Temporary partial disability Weekly benefit at a reduced rate percent of the
sum insured than in above.
While driving the car, Mr. Sagor Islam had an accident and lost a limb. Here the proximate cause
of losing the limb was accident. According to policy, National Life Insurance Company Limited
paid him 50% of the sum-insured as Mr. Sagor Islam loss one limb.

Page | 38
Conclusion
The whole discussion leads us to the concluding statement that the significance of the law of
proximate cause is immense in present day insurance business. Many real life cases with multiple
or linked causes of losses are solved with this law. It is not very long that a law was enacted to
address these confusing situations. But, upon facing such situations, the law of proximate cause
took its present day form.

Page | 39
Bibliography
1. Risk & Insurance by Azizul Haque Chowdhury, 2nd
Edition.
2. www.agraniins.com
3. www.National Life Insurance Company Limitedbd.com
4. Interviews:
i. Tahzib Ul Islam
Assistant Vice President
Reinsurance & Claim Department
Agrani Insurance Company Limited
ii. Md. Ibrahim Khalil Lebu
District Coordinator
Claim Department
National Life Insurance Company Limited
5. Annual Reports of Agrani Insurance Company Limited (2014-2015)
6. Annual Reports of National Life Insurance Company Limited (2014-2015)

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