Cause and Loss

Question 1

Occurrence

Answer 1

An event, incident, or condition that causes damage.

• Ex.: Lightning striking a house and damaging the roof; car veering off the road and hitting a tree; The weight of ice tearing off rain gutters; A poorly-installed pipe leaking and causing water damage to a basement.
• Occurrence must be accidental to be covered, but it is NOT the same thing as the term “accident”.

Question 2

Proximate Cause

Answer 2

When there is an unbroken chain of events between an occurrence and a loss, then that occurrence is the proximate cause of loss.

Question 3

Direct loss

Answer 3

physical harm to tangible property
-ex.: structural damage to house; kitchen walls and cabinets burned by fire; flooring damaged by water used to put out fire.

Question 4

Indirect loss

Answer 4

An economic loss that results from a direct loss.

• added expenses or lost income because of physical damage.
• Ex.: Renting a hotel room until home is repaired; Lost rental income if damages cause a tenant to move out.

Question 5

Direct loss VS indirect loss

Answer 5

If a fire destroys a bakery’s fleet of delivery trucks:

• the physical destruction of the trucks is a direct loss.
• the cost of renting new trucks in order to keep business going in an indirect loss.

Question 6

Occurrence

Answer 6

An event circumstance that causes a loss

Question 7

Proximate cause

Answer 7

The original occurrence in an unbroken chain of events that results in a loss

Question 8

Direct loss

Answer 8

Physical harm to tangible property

Question 9

Indirect loss

Answer 9

economic loss resulting from a direct loss