In this July 2023 appeal judgment discussed here [Meaning of ‘Defect in an Item’ Homeowner’s Insurance (Australia)], the policy in question provided “you must take reasonable precautions to prevent anything which could result in the claim under this policy”.
It was agreed that compliance with the clause was a condition precedent to cover.
The court referred to and the parties accepted the general applicability of authorities, both Australian and English including Fraser v BN Furman (Productions) Ltd which considered similarly worded if not identical reasonable precautions clauses in policies and which had held that the requirement for reasonable precautions to be taken cannot require an insured to take measures to avert dangers which the insured does not foresee:
“What in my judgment is reasonable as between the insured and the insurer, without being repugnant to the commercial purpose of the contract, is that the insured, where he does recognise a danger, should not deliberately court it by taking measures which he himself knows are inadequate to avert it. In other words, it is not enough that the employer’s omission to take any particular precautions to avoid accidents should be negligent; it must be at least reckless, i.e., made with actual recognition by the insured himself that a danger exists, not caring whether or not it is averted.”
The court referred with approval to Legal & General Insurance Australia Ltd v Eather.
“The greater the value of the property at risk of loss, the greater will be the obligation to take stringent precautions. The greater the foreseeable risk of a loss occurring in the circumstances, the greater will be the obligation to take precautions. The greater the possibility of precautions being taken, the more readily will a court infer that they ought to have been taken.”
and also to Vero Insurance Ltd v Power Technologies Pty Ltd:
“Otherwise, the prerequisite for the operation of the exclusion that, with actual knowledge of the danger, the insured failed to take adequate measures or knowing that a danger existed, did not care whether the danger was averted, does not exist.”
The insured argued that on the evidence she had not acted recklessly. She believed there was no problem with the leaving the pool empty, did not know of the risk of the pool lifting if it was left empty and if the hydrostatic valves were not letting water in, and did not flagrantly court that risk or simply ignore it. The insured submitted that while she had been warned that the danger of the pool cracking or lifting out of the ground due to the absence of ground water, the damage was in fact caused by a relative excess of ground water and associated hydrostatic pressure. That danger, she alleged, was not the risk of the pool popping up due to the ground beneath it drying out, but rather the risk of the pool popping up because of the hydrostatic pressure beneath it.
The appeal court agreed with the lower court that the pool was emptied because of a leak. In circumstances where the insured did not investigate that cause and instead left the pool empty, inconsistently with the only advice she received, the insured courted the risk of which she was aware of the pool popping up. Had she made appropriate enquiries, she would have been told that the pool could only be left empty if the valves were functioning correctly.
Based on past history, and the fact of a pool leak, the valves could not have been relied upon for any of the functions they were required to perform absent investigation.
The appeal court was satisfied that the insured had failed to take reasonable precautions and was accordingly in breach of the condition precedent.
On those facts the outcome would be no different in South African law, bearing in mind that there is no final South African appeal decision on whether the test relevant to breach of a reasonable precautions clause is one of recklessness, negligence or something else. There are different approaches by the provincial courts.
Flanagan v Bernasconi [2023] NSWCA 150 (4 July 2023) (austlii.edu.au)