Concept:The principle of proximate cause decides whether the actual cause of a loss is a risk covered by the insurance policy.
Explanation:The house was insured only against damage by flood.
The house was burnt down, so the actual loss was caused by fire.
Fire is a separate and different peril from flood.
In insurance, proximate cause means the direct, active, and efficient cause that sets in motion an unbroken chain of events leading to the loss.
Here, the proximate cause of the destruction was fire, not flood.
Since the policy covered only flood damage, the loss was not caused by an insured peril.
Therefore, the insurance company is not liable to pay compensation.
The owner cannot make a claim because the nearest or effective cause of the loss was fire, which was not the risk insured.
Answer:D. proximate cause