Application of the Proximacause Principle in Loss Insurance According

to the Book of Trade Law and Regulation Number 40 of 2014

Selvi Harvia Santri, Syafriadi and Erlina

Department of business law, Universitas Islam Riau, Pekanbaru, Riau, Indonesia

Keywords:

Insurance, Policy, Proxima cause, Evenement, Compensation.

Abstract:

Companies that accept risk transfer from the insured are insurance companies. Losses suffered by the insured

due to an event must be stated in the policy. Policies that are approved by the insured and insurance companies

must explain the principles of insurance law, one of the important principles in insurance law is Proximacause.

Proximacause is used to measure or assess the liability of an insurance company to provide compensation to the

insured, caused by events experienced by the insured. If the cause or event that causes the loss is not guaranteed

in the policy, compensation costs cannot be paid by the insurer to the insured. Payment of compensation made

by the guarantor is limited only to events that are guaranteed in the policy, if excluded in the policy. policy,

compensation cannot be paid by the guarantor. This paper aims to ﬁnd out what are the regulations governing

Proximacause and how to apply the Proximacause principle for loss insurance in accordance with Trade Law

and regulation No. 40 of 2014. This paper is based on empirical juridical methods. analyze regulations and

observations in the ﬁeld.

1 INTRODUCTION

Risk is a danger that threatens humans that can cause

harm (Purba, 1992; Saleh, 1992). Risks can occur due

to human activity factors themselves, can also occur

due to natural disasters, such as ﬂoods due to earth-

quakes. According to Prof. Subekti, risk is the obli-

gation to bear losses (Simanjuntak, 1999; Pagliari,

2012).

There are several ways that humans can do to

overcome risk, namely avoiding risk, preventing risk,

transferring risk to insurance companies. Transferring

risk to insurance companies is the best way to manage

risk. The insurance company is the ﬁrst party to guar-

antee the risk of the insured. The insured has hope

for economic certainty and stability if at any time

something unexpected happens (Suparman, 2003; Li-

akopoulos, 2019).

The second party called the insured, is an individ-

ual, group, institution, legal entity, company or some-

one who follows insurance. The transfer of risk from

the insured to the guarantor can only occur because

of an insurance agreement. The insurance agreement

is stated in a written deed called a policy. The policy

is called an insurance contract between the guarantor

and the insured.

The loss earned by the insured is caused by the

event or event stated in the policy, if the event or event

is not stated in the policy, then the loss cannot be paid

to the insured according to the principle of insurance

law, namely proximacause or the main cause of risk.

The Proximacause principle that is applied to in-

surance can be seen when the insured submits an in-

surance claim (Arquilla, 1993). The insured can claim

the loss suffered by the guarantor by ﬁrst determin-

ing the cause of the loss. This means that the Insured

can only claim if the loss suffered is caused by a risk

guaranteed by the policy. Guaranteed causes must be

”direct causes”.

2 DISCUSSION

2.1 Regulations Governing the

Proximacause of Loss Insurance

According to the provisions, insurance law regula-

tions are regulated in accordance with Commercial

Law and Number regulation. 40 of 2014. An insur-

ance agreement was made between the Insurer and the

insured. In the Commercial Law Act, the type of in-

surance regulated is the object loss insurance objects

such as ﬁre insurance, motor vehicle insurance, while

Santri, S., Syaﬁadi, . and Erlina, .

Application of the Proximacause Principle in Loss Insurance According to the Book of Trade Law and Regulation Number 40 of 2014.

DOI: 10.5220/0009128502910294

In Proceedings of the Second International Conference on Social, Economy, Education and Humanity (ICoSEEH 2019) - Sustainable Development in Developing Country for Facing Industrial

Revolution 4.0, pages 291-294

ISBN: 978-989-758-464-0

291

in Law No. 40 of 2014

the type of regulated insur-

ance is insurance for a number of human life object

money.

In addition to regulating the type of insurance,

the Commercial Law Act also regulates insurance

principles, including the Insurable Interest Principle,

the Principle of Compensation, the Most Good Good

Principle, Contributing Principle, Subrogation Princi-

ple, Proximacause Principle. The main direct cause is

the active main cause. (stand-alone).

The direct cause is not the ﬁrst or last cause, but

the dominant cause or efﬁcient cause, if there is a di-

rect relationship between cause and effect.The rules

governing proximacause are Article 246 of the com-

mercial law code

2.2 Application of the Proximacause

Principle to Loss Insurance

The principle of proximal cause in insurance is called

the proximate cause. the application of the principle

of proximate causes Often causes disputes due to er-

rors in the interpretation of the cause of the loss. In

insurance policies always listed what causes are guar-

anteed. This statement implies that the company will

pay compensation for the loss of the insured object if

the loss arises due to one of the guaranteed reasons.

Before the insured can claim the loss suffered

from the insurer must ﬁrst be determined what the

cause of the loss. This means that the Insured can

claim only if the losses suffered are caused by a risk

guaranteed by the policy. The guaranteed cause must

be a ”proximate cause”. Causation that brings an ef-

fect without intervention is something else that works

actively and that comes from a new and independent

source.

In the practice of insurance, it is sometimes very

difﬁcult to establish an event that is considered as the

most dominant or most efﬁcient cause of loss, be-

cause frequent events are not single events, but are

a series of events that are interrelated so that there is

often controversy and debate in determining the main

events that cause losses.

For example, the occurrence of hurricanes with

ﬁres, which are not related, but there are two types of

losses, due to ﬁres and due to hurricanes. For exam-

ple, other events or event ﬁres that occur when there

are riots, each of which is not related as a solution:

1. If two losses cannot be separated, and both are not

excluded in the policy, guaranteed.

The Commercial Law Act Law No 40 of 2014 concern-

ing Business Asuransian

2. If one is excluded and the loss cannot be sepa-

rated, it is not guaranteed. If it can be separated,

only those who are not excluded are guaranteed

insurance.

2.3 Principle of Principles in Insurance

Law

2.3.1 Principles of Proximacause

Events that cause guaranteed losses in the policy can-

not be disturbed. the guaranteed loss is only the loss

suffered until the cause has just begun to work. Losses

suffered after unsafe risks cannot be claimed.

Solving problems in applying the principle of di-

rect causes in special circumstances, often requires

the help of determination by experts or related pro-

fessionals, such as professional surveyors and other

insurance law experts.

Insurance provides guarantees for losses caused

by certain risks insured or in other words the existence

of an insurance agreement raises the obligation for

insurance companies to provide compensation if the

insured suffers losses. However, in reality we often

have difﬁculty in determining the cause that causes

this loss, because we often encounter causes for more

than one loss, which may be a series of events that

occur together.

This principle is related to a causal relationship, to

determine what causes this loss and what causes it to

be guaranteed by an insurance policy. The purpose of

the Proximacause principle is that the insurance com-

pany will be responsible for the loss suffered by the

insured if the loss is indeed the responsibility of the

insurance company. If not, then the insurance com-

pany can be exempt from the obligation to pay com-

pensation. Accordingly, based on this reason, the loss

borne by the guarantor arises, but not all causes are

borne by the guarantor. Although the policy with the

All Risk clause, that is, the policy, bears all risks, it

does not mean that all risks are guaranteed because

there are always exceptions.

2.3.2 Insurable Interest

Insured interests give a person the right to insure be-

cause of the ﬁnancial relationship recognized by law

between that person and the insured object. Insur-

able Interest Deﬁnition: ”Legal rights for insurance

of ﬁnancial relationships recognized by law, between

the insured and the subject of insurance” means that

a person’s right to insure arises from a ﬁnancial rela-

tionship that is recognized by law between that person

and the object of insurance.

ICoSEEH 2019 - The Second International Conference on Social, Economy, Education, and Humanity

292

Furthermore, in the Criminal Procedure Code

there are provisions governing insured interests ”If a

person is responsible for himself, or someone insured

by a third party, at the time the insured does not have

an interest in the insured object, the guarantor is not

required to pay compensation. With so, the insured

must be able to prove that he has an insurable interest

because if he does not have an interest in the insured

object, there will be no compensation.

2.3.3 Principle of Utmost Good Faith

The principle of honesty is to provide information by

the insured to the insurance company regarding all in-

formation when negotiating the making of an insur-

ance agreement. Liability of the insured must be done

from the beginning of the application or during the in-

surance period. If the insured party intentionally or

unintentionally hides information that is relevant to

the object insured, then the insurance company can

cancel the insurance agreement.

The best and honest intention must also be with

the guarantor, that is, when the insurance is done, the

insurance company must inform and explain the ex-

tent of the guarantee and the rights of the insured be-

cause the insured is the guarantor. The deﬁnition of

utmosgoodfaith in Article 251 (Santri, 2019) of the

Indonesian Criminal Code is as follows: Any infor-

mation that is false or incorrect, or everything that

does not tell the things that are known by the guar-

antor, no matter what his intentions are, that way, so

that if the insurer already knows the actual situation,

the agreement will not be closed with the same condi-

tions, resulting in the cancellation of the agreement.

2.3.4 Principles of Indemnity

The function of insurance is to divert or share the

risks that are likely to be suffered or faced by the

insured because there is an uncertain event. There-

fore, the amount of compensation received by the in-

sured must be balanced with the loss he suffered, this

is the essence of the principle of indemnity From the

deﬁnition of Article 246 KUHD, the insurance agree-

ment (loss) is a compensation agreement or indemnity

agreement. Insurance in this case is a loss insurance

that only replaces the losses actually suffered by the

insured, the principle of compensation (indemnity) is

a mechanism for paying compensation with money,

which in a sense includes several things:

1. Financial changes

2. Place the insured’s ﬁnancial position the same as

its ﬁnancial position just before the loss occurs

(Riau, ).

2.3.5 Subrogation Principle

Article 1365

of the Civil Code states as follows:

”Every act violates the law, which requires the per-

son who caused the wrong to issue the loss, compen-

sates for the loss”. In the implementation of insurance

agreements, the possibility of a loss occurring can be

caused by a third party. Literally based on Article

1365 of the Civil Code above, then if the insured has

received compensation from the insurer, it is also per-

missible to claim compensation to the party causing

the loss, meaning the insured can receive compen-

sation that exceeds the loss suffered. But the prob-

lem is different in the insurance agreement because it

must be remembered that the insurance agreement is

not like a normal or general agreement, and to avoid

this in the insurance agreement the subrograsi princi-

ple applies where this principle is an integral part of

the principle of indemnity which is essentially that the

insured cannot obtain compensation in excess of the

losses suffered.

2.3.6 Principle of Contribution

This principle actually supports the principle of sub-

rogation, the principle of this contribution arises when

over an object is insured more than from an insur-

ance company, then if a guaranteed loss occurs and

one insurance company has paid the full loss then the

right to claim compensation to another company is

transferred to the company insurance that has paid the

full compensation. The principle of this contribution

is also only valid in the insurance of losses (scadev-

erzekering) and does not apply to insurance amounts

(sommenverzekering) The principle of this contribu-

tion applies or arises when fulﬁlled the following con-

ditions:

1. There are 2 (two) or more indemnity policies

2. The policies guarantee the same subject matter

3. The policies guarantee the same subject matter

4. The policies cover the same interest

5. The policies cover the same object

6. The policies are valid at the same time, that is,

when the loss occurs

3 CONCLUSIONS

Regulations governing the loss insurance proximate-

cause contained in Law No. 40 of 2014 concern-

The Commercial Law Act Law No 40 of 2014 concern-

ing Business Asuransian

Application of the Proximacause Principle in Loss Insurance According to the Book of Trade Law and Regulation Number 40 of 2014

293

ing Insurance and Commercial Law Law Article 246

which states that the guarantor will only pay compen-

sation to the insured if the loss and damage caused by

an event or event is contained in an insurance policy.

The rules governing Proximatecause in the regula-

tions have not been explicitly regulated regarding the

obligations of the parties. Because it is needed, new

regulations speciﬁcally regulate Proximatecause. The

application of the Proximatecause principle to loss

insurance starts with an agreement between the in-

sured and the insurance company and is written in an

agreement called a policy. Which guarantees losses

in accordance with the agreed events. The application

of the Proximatecause principle in insurance experi-

ences constraints, sometimes it is very difﬁcult to es-

tablish an event that is considered to be a proximate-

cause which is the most dominant or most efﬁcient

cause of loss, because events often occur that are not a

single event, but a series of interrelated events so that

there is often controversy and debate in determining

the main events that cause harm. So expertise in sur-

vey theory is needed to determine the main causes of

events that cause harm. If the event that caused the

loss is not listed in the policy, the claim is not paid by

the guarantor.

REFERENCES

Arquilla, J. (1993). A decision modeling perspective on

us-cuba relations. Technical report, RAND CORP

SANTA MONICA CA.

Liakopoulos, D. (2019). Jurisprudential approach of the

aircraft liability according to international and eu

rules. Acta Universitatis Danubius. Relationes Inter-

nationales, 12(1).

Pagliari, N. (2012). Why are we running? Political economy

of bank runs and an analysis on the 2007-09 banking

crisis in the United Kingdom. PhD thesis, The London

School of Economics and Political Science (LSE).

Purba, R. (1992). Memahami asuransi di Indonesia. Num-

ber 10. Pustaka Binaman Pressindo.

Riau, S. H. S. U. I. Pelaksanaan prinsip subrogasi pada

asuransi kendaraan bermotor menurut kitab undang-

undang hukum dagang.

Saleh, N. (1992). Are the validity and construction of legal

acts affected by cause (sabab)-(a comparative study

under islamic and arab laws). Arab LQ, 7:116.

Santri, S. (2019). Penerapan prinsip indemnitas pada asur-

ansi kendaraan bermotor. UIR Law Review, 3(01):31–

37.

Simanjuntak, P. N. H. (1999). Pokok-Pokok Hukum Perdata

Indonesia. Djambatan.

Suparman, M. (2003). Aspek-aspek hukum asuransi dan

surat berharga. Bandung: PT. ALUMNI.

ICoSEEH 2019 - The Second International Conference on Social, Economy, Education, and Humanity

294