Failure to take reasonable precautions to safeguard the vehicle from loss or damage

The following is a case study published in OFS Annual report:

Alex was driving an insured vehicle when he suddenly hit an unknown object on the road. The accident occurred at night; the rain made the road slippery. The collision caused damages to the frontal portion and the undercarriage/engine parts of the vehicle. Alex submitted an OD claim to his insurer.

The insurer’s independent loss adjuster assessed the damages and approved the repair cost for the damaged parts related to the accident, except for the engine parts, which were repudiated because Alex failed to take reasonable precautions to safeguard the vehicle from further loss.

The loss adjuster’s investigation revealed that the engine was damaged because the vehicle was driven without engine lubricant continuously after the collision. Thus, the loss falls under General Exception No. 7 of Section D of the private car policy.

The relevant policy provision states as follows:
Section D: General Exceptions – these apply to the whole Policy 7. Failure to take Precaution
We will not pay for any additional damages if after an Incident or breakdown You: 
a. left Your Car unattended or failed to take proper precautions to prevent further loss or damage; or
b. continue to drive Your Car in an unroadworthy condition before any repair is done.”

The test for reasonable precaution, as affirmed by the judicial authorities, is whether the driver of the vehicle had acted recklessly or deliberately courted a danger, resulting in additional damages to the insured vehicle (Sinnaiyah & Sons Sdn Bhd v Damai Setia Sdn Bhd [2015] 7 CLJ 584). To exclude the coverage under the abovementioned policy exception, the insurer must prove on a balance of probabilities that Alex was reckless, i.e., whether he recognised a severe risk but deliberately did not take steps to prevent it.

We also refer to the English Court of Appeal case of Fraser v BN Furman (Productions) Ltd; Miller, Smith & Partners (Third Party) [1967] Vol.2 LLR 1, where Lord Diplock held:
“What in my view is ‘reasonable’ as between the insured and the insurer, without being repugnant to the commercial object of the contract, is that the insured should not deliberately court a danger, the existence of which he recognises, by refraining from taking any measures to avert it.”

In the present case, the loss adjuster’s inspection revealed the following:
– The engine assembly of the vehicle had been completely drained of engine lubricant.
– The engine oil filter had been punctured, and the lubricant had completely leaked via the damaged oil filter.
– They felt that it was safe for Alex to stop to check his vehicle and arrange for a breakdown service as the accident occurred at 9.00 pm in
the middle of the town.

Alex contended that he had taken reasonable precaution by driving the vehicle to a safer place, i.e., by the roadside when he heard a slight noise from the front bonnet and when warning lights appeared at the car speedometer.

We found that Alex stopping the vehicle by the roadside to inspect the car at night in heavy rain and low visibility could be risky.

We believe Alex’s act was not intentional or reckless, and he took reasonable precautions to safeguard the vehicle from further loss. Following the case manager’s findings, the insurer reviewed their decision and approved the claim for the engine parts.