Your insurance cover may be broader than your insurer says it is

By Andrew Hooker*

When we insure our assets, the idea is that we are shifting the risk of loss or damage to the insurance company. 

So if the asset like a house or car is damaged or stolen, the insurance company will pay.  The important thing is that the policy is meant to cover you even if the loss or damage is your fault. 

In other words, even if a car accident is your fault or something is damaged or lost because of a silly oversight or mistake, your insurance company should pay.  Like leaving the pot of oil on the stove, and falling asleep, or driving too fast and crashing the car.  Your insurance company will still cover you, right?

Not always. 

In some cases the insurance company may decline to pay if it believes you have not taken enough care of your property.

Insurance companies usually contain what is known as a “due care” condition.  The exact wording of the clause may vary, but the effect is usually the same.  If the insurance company thinks you’ve been too careless then it may decline cover.

The million dollar question is - how much care is not enough care?

It seems that every insurance company (and maybe every claims officer!) has a different idea of when an insurance company can decline.  In some cases, insurance companies have tried to decline just because the customer has been negligent.  In other words, just because the customer has been a bit careless the insurance company may try to decline.  You left your car unlocked in the driveway and so the insurance company says you failed to take “due care”.  Or you left a door unlocked when you went out and so you are not covered for the burglary.

However the Courts have been very strict in reining in over enthusiastic insurers. 

The Courts have held that (subject to the exact wording of the clause) mere negligence will never be enough to decline.  That’s what insurance is meant to cover you for. 

There usually needs to be a deliberate courting of the risk or conduct approaching recklessness for a Court to accept cover doesn't apply. 

In a leading case, leaving the keys in the ignition of an expensive car when parked for a short period in a work car park was not enough to decline, and in another case even leaving the car idling whilst popping into the diary for a minute was not enough to decline.  It needs to be almost “I don’t care, I’m insured” to decline.  And that’s a pretty high threshold.

Another point to note is that inadvertence or oversight will never be enough. 

In the absence of a specific clause in a policy, the insurance company can’t decline because you “forgot” to lock the house.  There needs to be deliberate decision to leave it unlocked, and even then that will often be insufficient if you genuinely thought it would be safe.  No one recommends leaving your house unlocked when you go out.  But an isolated incident is unlikely to invalidate your cover.

Insurance companies are becoming wise to the Court’s antipathy to these “due care” clauses and have started to include specific clauses excluding cover where, for example, property is left unattended in a public place or a car is left unlocked when unattended.  However there are still cases where insurance companies decline because customers have been a bit careless or overlooked locking up the house or car. 

And judges are still holding insurers to account for declining claims for exactly what their customers pay to be covered for.

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*Andrew Hooker is a partner in the North Shore law firm Turner Hopkins and a director of Claims Information Specialists Ltd, running an insurance information web site www.claimsinformationspecialists.co.nz