In this recent Australian judgment dealing with broker liability, in which the broker ultimately conceded a breach of a duty of care of the insured to draw to their client’s attention a policy exclusion relevant to the insured’s pool for which the claim was made when the empty pool lifted, the court held that despite breach that the claim against the broker failed. Even if the insured had cover under another policy without the pool exclusion, that policy contained a term requiring the insured to take reasonable precautions. And it would not have been established that the insured did take such precautions in order to prevent the particular risk materialising.
The relevant clause read: “You must take reasonable precautions to prevent anything which could result in a claim under this policy”.
The court followed previous Australian and English judgments holding that the purpose of the requirement to take reasonable precautions is to “ensure that the insured will not refrain from taking precautions which they knows ought to be taken because they are covered against loss by the policy.”
The relevant policy was a home and a contents policy. The court said there was no reason to think that an obligation to take reasonable precautions could not extend to investigating the cause of a leak in a swimming pool.
The court also said that determining the scope of the obligation requires consideration to be given to the purpose of the particular policy and whether the risk has been courted by recklessness.
The court said that the more valuable the property the greater the obligation to take precautions. The greater the foreseeable risk of loss, the greater the obligation to take precautions. The greater the possibility of taking them, the more readily will it be inferred that they ought to have been taken.
The claim involved an unusually large pool and pool enclosure for a home built at considerable cost. The pool was also used on the property as a resource for fire-fighting. The court accepted that in the circumstances having decided not to identify the cause of the leak and not to have the relevant pool repaired or the pool refilled, it would have at least been reasonable for the insured to have taken the precaution of obtaining advice about whether the pool could still be safely left empty for an extended period.
The evidence was that in conducting suitable enquiries the insured would have been advised either to establish the cause of the leak or to have the relevant valve repaired if it had a defect, or to half fill the pool given the risk of lifting if the valve was not functioning properly. That precaution would have been simple to take. There was no suggestion that taking further advice about leaving the pool empty for an extended period without establishing the cause of the leak would have been difficult or costly. There was no evidence that the steps taken would be expensive or beyond the insured’s means.
Given the considerable leak revealed by the insured’s increased water bill, and had she taken the precaution of seeking advice about leaving the pool empty for an extended period, it was accepted that on the evidence the insured would have met that expense as well as that involved in its repair.
The court was satisfied that, on the balance of the probabilities, had the insured had cover which contained the term requiring the taking of reasonable precautions (as her previous replaced policy did), it would not have been established that she did take such precautions in order to prevent the risk of the pool lifting while it was empty from materialising. So the claim failed.
Successful reliance on breach of a reasonable precautions clause is rare. It is fact dependant.
