I notice that Gaige the Mechromancer's Close Enough skill doesn't penalize splash damage. So, which are all of the weapons that deal splash damage?
Borderlands – Which weapons deal splash damage
borderlands-2
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Best Answer
From http://borderlands.wikia.com/wiki/Elemental_Damage:
Additionally damage over time can spread from one enemy to another nearby, e.g. if a bandit gets close to another bandit who's on fire, there's a chance that he'll catch on fire too.
Explosive damage behaves slightly differently as it has an instant area of effect. I don't think other elements on area of effect weapons such as grenades and launchers cause additional splash damage on top of the AoE, but the DoT effects certainly can spread.