Causation or correlation: the chimera in section 11 of the Insurance Act 2015

Abstract

Abstract Prior to the Insurance Act 2015, an insurer could refuse payment by relying on terms unrelated to the manner in which the loss occurred, or with the assured's default. Section 11 of the Insurance Act 2015 reverses that and requires ‘the punishment to fit the crime’ by introducing a ‘could have increased the risk’ test, which is said to be a requirement for correlation between an assured's non-compliance with a risk clause and the actual occurrence of the loss. The new test effectively raises more profound causation issues from a practical point of view as regards insurance recoveries and also from a theoretical point of view of causation in the law. It is submitted that the test ‘could have increased the risk’ introduced by section 11 of the Insurance Act 2015 should be interpreted by an approach to recognising a nexus – a general causal relevance (general causation) – and adopting interpretation as a restricting tool, to achieve alignment with the legislative intent. In presenting this argument, this paper explores the difference between correlation and causation in the law, expounding a wider understanding of legal causation than causa proxima in the insurance context.