According to this 2022 Australian case, an insured person will not be in breach of a reasonable precautions condition if it shows that it did not recognise that a danger existed or that, perceiving the existence of a danger, it took action that it considered to be adequate to avoid it and was not indifferent as to whether the danger was averted.

The clause read:

“The insured shall

(a) exercise reasonable care that only competent employees are employed and take reasonable measures to maintain all premises, fittings and plant in sound condition

(b) take all reasonable precautions to (i) prevent bodily injury and damage to property and

…”

The claim arose from an allegation of sexual harassment by a teacher of a pupil in 1988 causing psychiatric injury.

The court, in considering the insurer’s reliance under a liability policy of the reasonable cautions condition, said:

“It is important to appreciate that the notion of reasonable precautions applies between insurer and insured, not between the insured and the person to whom liability is said to arise. In the context of a liability insurance policy, were reasonable precautions to be construed as requiring what is, in the eyes of the law, the exercise of reasonable care, the reasonable precautions condition would denude the insuring clause under the public liability limb of the policy of any content. That is so in this case, as the scope of the reasonable precautions clause – reasonable precautions to avoid personal injury and damage to property – precisely mirrors the scope of the insuring clause in respect of liability – for bodily injury and damage to property.”

And the court went on to say

“Understood in this context, the obligation to take reasonable precautions requires the person on whom the obligation is imposed to take such precautions to prevent personal injury as that person considers reasonable, having regard to the dangers which that person recognises. That is, the obligation of an insured to take reasonable precautions requires the insured, where it recognises a danger of personal injury, not to take measures which it knows to be an inadequate response to the recognised danger, or where it does not care whether its response is inadequate, and requires it not to deliberately fail to act when it knows that the taking of some measures is required.”

The court found on the evidence that the educational institution had investigated allegations against the teacher and had not found enough evidence to dismiss the employee. The insurer was liable.

While the highest court in South Africa hasn’t found and authoritatively determined the approach to interpretation of reasonable precaution clauses and policies, many of the lower South African courts seized with reasonable precaution clauses have held that recklessness, indifference to the normal precautions that would be taken, and the other test enunciated above in the current matter is the test.

Whether recklessness, and not simply negligence, is required for reliance on a reasonable precautions condition in dealing with a property policy, remains to be determined.

Seeing motor policies, for instance, insure negligence, namely the failure to take reasonable precautions in the circumstances, a reasonable precautions clause cannot denude the insuring clause of any purpose.

QBE INSURANCE (AUSTRALIA) LIMITED -v- BB [2022] WASCA 61 (8 June 2022) (austlii.edu.au)