The different causality lessons

March 2022

2021 was an important year in insurance law. The Supreme Court delivered no less than three judgments in 2021 regarding causation. Moreover, also three opinions of two Advocates General who advise the Supreme Court[1] were published.

In this article, Robert de Haan will summarise the consequences of the Supreme Court's decisions for practitioners in the insurance industry. The question of which causality doctrine should be applied can be decisive when assessing whether insurers should provide coverage.

The different causality lessons

To refresh your memory, I will briefly outline the various insurance law causation doctrines:

The conditio sine qua non (csqn) doctrine: any event without which the damage would not have occurred is deemed to be a cause of damage.
The adequacy doctrine: any event with an adequate connection to the damage is deemed to be the cause of the damage.
The causa proxima doctrine: the event closest in time to the damage is regarded as the cause of the DAMAGE.
The dominant cause doctrine: The event that actually caused the damage is regarded as the cause of the damage. This is based on common sense. When applying this doctrine, only one or a few events are deemed to be considered to be the cause of the damage. The dominant cause doctrine is the prevailing one in England.
The doctrine of reasonable attribution: This doctrine that is known from liability law does justice to the protection of the insured party.

The views of the A-Gs and the Supreme Court

Questions of causation play a role both in disputes with consumers and corporates. The question the Supreme Court had to answer was which causation doctrine should be applied under Dutch insurance law. Most legal writers favour the dominant cause doctrine as advocated in England. However, both Advocates General took a different view. Following the opinion of the Advocates General, the Supreme Court takes a nuanced view. In its judgment of 4 June 2021, the Supreme Court considered the following: "In answering the question of which criterion of causation should be used to determine whether the causal connection required in an insurance contract is present, what matters in the first place is what the parties have agreed in this respect. If the agreement does not state which criterion of causation is to be applied, the court is in principle not obliged to examine the presence of that causal link on the basis of the so-called 'dominant cause' doctrine."
In other words, application of the dominant cause doctrine is not required, but one of the options in the absence of a causal criterion in the policy.

Implications for practice

What does this mean in practice? If insured parties and insurers want certainty on this subject, the criterion that needs to be applied should be included in the policy conditions. The wording of the policy is leading in that case. An example can be found in a recent decision of the Rotterdam District Court of 24 November 2021.[2] In that case the policy provided the following: "This insurance also covers damage (...) to the insured property caused by a total or partial failure of the refrigeration system, as a direct result of: ..." The policy therefore requires a direct connection between the event and the damage.

In the absence of a causation criterion in the policy, the A-G's have argued that it depends on the nature of the insurance which criterion of should be applied. In liability insurance, the doctrine of reasonable attribution known from liability law could be applied according to these opinions, because that does justice to the protection of the injured party. In commercial transactions, on the other hand, there is a greater need for legal certainty and the dominant cause criterion still seems to be the leading and also desirable doctrine.

Conclusion

Despite the three judgments and the extensive opinions of the A-G's, unfortunately, no clarity has been created. The Supreme Court has said no more than that the court is not obliged to examine the presence of the causal connection on the basis of the dominant cause doctrine. There is room for other causation doctrines and maybe also for the doctrine of reasonable attribution, on the understanding that the nature of the insurance must be examined carefully. In any event, this is not desirable in commercial transactions. If parties wish to avoid uncertainty, they should include a criterion in the policy. [3]

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[1] ECLI:NL:HR:2021:538, ECLI:NL:PHR:2020:1078, ECLI:NL:HR:2021:815, ECLI:NL:PHR:2020:986, ECLI:NL:HR:2021:1523, ECLI:NL:PHR:2021:284
[2] ECLI:NL:RBROT:2021:13131
[3] On this subject, see also the contribution of Harmke Brouwer VAST 2021/W/005, 16 December 2021