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Client got a flat tyre on his farm while fetching wood in his ute. Changed the tyre on his ute and went back home. He replaced the two front tyres of the ute, as he had a spare set in his garage. Client didn't realise that the tyres were a different size. After returning from picking up a second load of wood on the farm, he realised that there was oil coming out from the front of the vehicle. The transmission is damaged and quoted repair costs are $15,000. 

The Insurer is considering declining the claim under the reasonable care and unsafe condition: "The insured must take all reasonable steps to protect the insured vehicle from loss and to avoid liability. Any insured vehicle while it is being driven in an unsafe condition which contributes to an accident. This includes any condition: 

(a) which is contrary to any recommendation by the manufacturer of the insured vehicle; or 

(b) as a result of which the insured vehicle is not fit to deal with any peril likely to be encountered during the course of its operation. 

However, this exclusion only applies if insured or the person in charge of the insured vehicle was aware, or with reasonable diligence ought to have been aware, of the unsafe condition." 

I think it is very difficult to decline a claim under the reasonable care condition and unsafe condition. 

To decline a claim under this policy condition it is up to the insurer to prove the insured’s conduct was reckless, grossly careless, or grossly negligent. Proof of mere negligence or carelessness is not sufficient. This is because insurance, by its nature, protects the insured against his/her negligence and mere inadvertence. 

New Zealand courts consider what a reasonable person would have done in the circumstances of each particular case. As such, it is recognised that an insured has breached his/her duty of reasonable care if he/she disregarded, or failed to recognise, a significant risk that would have been obvious to a reasonable person (who would not have taken such a risk). 

Note that on the claim form the insured has put that he did not realise the tyres were a slightly different size, so the insurer cannot prove that the insured was aware of the risk and disregarded it, because he wasn’t even aware of the issue. 

I think all we are looking at is negligence on the part of the insured which, as outlined above, is specifically what the policy is there to cover. 

Has anyone had a similar claim or some advice about the above claim and the likelihood of overturning the Insurers decision to decline? 



The threshold for recklessness is very high because it is the intention of these policies to cover (mere) negligence. So recklessness requires something more than just negligence. 

I believe the insured's error in this scenario is negligent but well below the high threshold for recklessness. 

Dec 2019

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