Case law summary · Reviewed by Mark Fox, Broker · Renewals · Last reviewed
An early twentieth-century fire insurance dispute, often cited in textbooks for Lord Halsbury’s classic formulation of the doctrine of proximate cause and for the related principles of disclosure under a fire policy. [verify citation]
The insured held a fire policy with the Scottish Union and National Insurance Company in respect of premises in New South Wales. The premises were damaged in circumstances in which a series of events combined to cause the loss. The chronology, as recorded in the contemporary law reports, involved an earthquake which dislodged a lamp or stove and led to a fire which consumed the building. The policy covered loss by fire, but excluded loss directly or indirectly caused by earthquake. [verify citation]
The insurer declined indemnity on the ground that the proximate cause of the damage was the excluded peril of earthquake, the fire being merely a consequential event. The insured argued that fire was the proximate cause: it was the operative peril which had destroyed the building, and the earthquake was no more than a remote occasion.
The matter was argued first in the Australian courts before going to the Privy Council on further appeal. [verify citation] In the course of his judgment Lord Halsbury articulated what has become one of the most frequently quoted definitions of proximate cause in English insurance law.
The decision is short and the reports are sparse; modern citation of Pawsey rests largely on the use made of the case in standard textbooks and in subsequent decisions on causation in property and marine insurance.
The principal issue was one of causation: when the policy answered for loss by fire but excluded loss caused by earthquake, and when the two perils operated in immediate sequence, which was to be regarded as the proximate cause of the damage for the purposes of the policy response?
A secondary issue, sometimes attributed to the case in commentary, concerned the scope of the insured’s duty of disclosure where the property was located in a region known to be at risk of seismic activity. The reports do not, however, clearly disentangle the causation analysis from any disclosure point. [verify citation]
The Privy Council held in favour of the insurer. The proximate cause of the loss was the earthquake; the fire was a mere consequence of the operation of the excluded peril, and the policy did not respond. In the course of his speech Lord Halsbury offered the definition of proximate cause which is still routinely quoted:
“Proximate cause means the active, 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.” (paraphrased from the judgment as conventionally reported)
That formulation has been adopted in countless first-instance and appellate decisions in marine, property and liability insurance contexts.
The disclosure aspect of the case, to the extent it is discussed in the older textbooks, is treated as ancillary: where an insured procures a fire policy in respect of property located in a region of known seismic risk, the insured is expected to have answered any specific question on the proposal accurately, and the underwriter is expected to have made his own enquiries as to publicly known matters of geography.
The proximate cause of a loss for the purposes of an insurance policy is the dominant, efficient cause; it is the cause which is proximate in efficiency, not necessarily in time. Where an excluded peril sets in motion a chain of events which results in damage by a peril otherwise covered, the loss is attributable to the excluded peril and the policy does not respond.
The ratio is one of causation rather than disclosure; the case nonetheless illustrates the general principle that the structure of the contract — the perils insured and the perils excluded — sets the framework within which the duty of fair presentation must be discharged.
Pawsey is now most often cited for its causation reasoning rather than for any free-standing disclosure principle. The Lord Halsbury formulation remains the starting point for proximate cause analysis in property and casualty insurance, and was applied (and refined) in Leyland Shipping Co Ltd v Norwich Union Fire Insurance Society Ltd [1918] AC 350 and in subsequent twentieth century authorities.
For modern practitioners, Pawsey has an indirect bearing on the duty of fair presentation under the Insurance Act 2015. The structure of cover — and in particular the interaction between insuring clauses, exclusions and endorsements — determines what is material for disclosure purposes. Where a known peril is wholly excluded, disclosure of the underlying exposure may be less material than where the same peril is covered subject to conditions. A broker preparing a placing submission should therefore consider not only the loss record but also the architecture of the proposed contract.
For insureds, Pawsey is a reminder that wide-ranging exclusions for catastrophic perils (earthquake, war, terrorism, cyber) operate not only as direct bars to recovery but also through the doctrine of proximate cause to defeat claims arising from loss by other, otherwise covered, perils.
Author: Matt Bartlett, Director, Apex Insurance Brokers Ltd. Authorised and regulated by the Financial Conduct Authority (FRN 724952). Company registration 07014570 (England & Wales). This article is general information, not legal advice. Last reviewed: June 2026.
Apex Insurance Brokers serves UK professional services firms and commercial businesses. Call 0117 325 0027, email hello@apexinsurancebrokers.co.uk, or request a quotation.
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