Subject to the provisions of the policy, the fact that a loss or occurrence insured against is caused by the insured’s negligence is irrelevant. This applies to all negligent acts, even those that are grossly negligent. It also holds true for so-called reckless conduct, if the recklessness involved is nothing other than gross negligence.
The March 2016 Briefcase from the Ombud for Short-Term Insurance refers to an interesting case study, where a Ms S reported a claim to her insurer for theft of her vehicle. The insurer rejected the claim on the ground that the nominated driver had, immediately prior to the theft, been grossly negligent. The policy excluded cover under circumstances where there was gross negligence on the part of the insured or the nominated driver.
On the evening of the incident, the nominated driver of the insured vehicle, Mr J, had driven to the shops to purchase small items. Upon arriving at the shops, Mr J had left the vehicle unlocked with the keys in the ignition while he went into a shop. He did this because he was of the view that, as he only needed to purchase two items, he would not leave the vehicle at risk for a material length of time and it would thus be safe to leave the vehicle exposed in this manner. The vehicle was stolen whilst Mr J was inside the shop.
The insurer was of the view that Mr J was grossly negligent in leaving the vehicle exposed and provided photographs showing that it would not have been possible for Mr J to see the vehicle from the shop. Relying on the exclusion against loss resulting from gross negligence, the insurer rejected the claim. The rejection was upheld by the Ombud.
The ruling of the Ombud reinforces the importance of clearly and properly setting out losses which will not be covered under a particular policy in the policy wording. If the parties wish to exempt the insurer from liability for the consequences of the insured’s grossly negligent conduct, that must be done in clear terms. Provisions in an insurance contract imposing an obligation on the insured to take reasonable precautions as far as the insured’s risk-related conduct is concerned have frequently come before the courts. These provisions require the insured, for instance, ‘to take all reasonable precautions for the maintenance and safety of the insured property or to avoid loss’, the so-called ‘reasonable precautions clause’.
The interpretation of provisions that require the insured to take reasonable precautions was considered in Santam Limited v CC Designing CC. That court concluded that a clause of this nature should not be construed as an exclusion of liability where the loss was caused merely by the negligence of the insured. Proof of recklessness is required.
The law relating to interpreting a ‘reasonable precautions clause’ remains as set forth in the Santam case. Terms excluding the insurer’s liability on account of the insured’s conduct will, in line with general principles, be interpreted restrictively and liability will be excluded only on clear and possibly only on express terms. Clauses may impose a more specific duty on the insured which, if broken, will relieve the insurer of liability, even if the insured was only negligent. Thus, the insured may be required to perform specific risk-related obligations, for instance, by not leaving the insured goods or premises unattended, in which case the breach may not be dependent on the nature of the insured’s conduct, gross negligence or failing to take reasonable precautions, but the failure to perform the specified acts.