In November 2014, FOS issued three determinations regarding a financial service provider (FSP)’s reliance on a policy exclusion relating to a driver’s failure to take reasonable precautions.
The test for reasonable precautions
A general exclusion for failing to take reasonable precautions does not apply to negligence. The commercial purpose of car insurance is to cover loss or damage, for among other things, negligence by the driver.
For a reasonable precautions exclusion to apply, the FSP must demonstrate both that:
- the driver had an actual recognition of the existence of a danger, and
- the driver then courted the danger that they recognised, or was recklessly indifferent to the recognised danger.
This is a subjective test, taking into account the Applicant’s mental state and actions in the circumstances.
The three determinations
Two of the three determinations concerned drivers who proceeded through flooded roads.
In the first determination (356934), the driver knew the road well and had passed the relevant section of road a few hours beforehand. It was night time, in a rural area with no lighting. It was raining heavily when the driver returned, coming out of a bend in the road and finding himself in water that proceeded to sweep the car sideways. A driver coming from the opposite direction also found himself in the same predicament. Both vehicles had to be towed to safety. The Ombudsman found the driver had not had the opportunity to recognise the danger, let alone court it.
In the second determination (352729), the driver chose to proceed through a flooded section of road, believing it was not very deep. There were cars on the other side of the water about 50-70 metres away and the driver proceeded after putting the car in second gear in four wheel drive. The tow truck driver supported the driver’s statement that if a person didn’t know the road they would not know what was under the water. The Ombudsman found the driver had not recognised the danger and took precautions he believed were appropriate.
In the third determination (361170), there was an unsavoury interaction between the insured driver (Applicant) and a third party driver such that the Applicant recognised the third party driver was unpredictable, unreliable and potentially dangerous. This was admitted by the Applicant in an interview. Nevertheless, the Applicant chose to continue to drive sufficiently close to the rear of the third party vehicle, such that the Applicant was unable to stop in time to avoid a collision when the third party vehicle braked. The Applicant was issued an infringement notice in this regard. The Ombudsman found the Applicant was aware of the danger and courted the danger. The exclusion for failing to take reasonable precautions therefore applied.