South Carolina Personal Lines Practice Exam

What term is defined as the exact and direct cause of a loss?

1. Direct cause

2. Proximate cause

3. Collateral cause

4. Indirect cause

The correct answer is: Proximate cause

The term that defines the exact and direct cause of a loss is proximate cause. In the context of insurance and risk management, proximate cause refers to the primary event that sets off a chain of events leading to a loss, making it essential in determining liability and assessing claims. For example, if a fire in a factory leads to destruction of property, the fire is considered the proximate cause of the loss. Insurers need to establish proximate cause to determine whether the loss is covered under the policy, as it directly links the insured event to the resulting damage. Other terms like direct cause or indirect cause do not encompass the concept of chain reactions and residual effects that proximate cause includes, while collateral cause is often associated with secondary or additional factors that contribute to the loss but do not serve as the main trigger. Understanding the concept of proximate cause is crucial for making accurate assessments regarding insurance claims and coverage.