What is reasonable care?

Ruapehu Bulletin, Volume 10, Issue 470, 26 January 1993, Page 2

What is reasonable care?

Consumer Column

By

AM

Waaka

When Julia's motorbike was stolen from outside her house one night, she felt pleased that she had just remembered to renew her insurance policy. She made her claim to the insurance company as required and received a letter stating that her claim had been turned down because she had 'failed to take all reasonable care to safeguard the vehicle insured by the policy*. Julia was surprised by this reply as her motorbike was always securely

locked when parked. So she went to the company and asked for an explanation of why the claim had been turned down. The response was that the motorbike was parked on the road when there was an area behind Julia's house that she could have pushed the bike to. Julia was outraged at this reply as she had told the insurance company when she insured the bike that she would be parking it on the road and there had been no question of her being required to push the 600cc machine up the steps to her house.

After seeking advice from the Ministry of Consumer Affairs' Advice Service, Julia took the matter up with the head office of the insurance company. Their response was no better. Julia was told that because the insured property was 'portable' she was failing in her duty to 'take all reasonable care' by leaving it on the road. The company also used the fact that the motorbike's rain cover had recently been stolen to indicate that Julia should have taken more care to safeguard the vehicle.

After months of arguing with the insurance company, Julia took the matter to the Disputes Tribunal, claiming that the company was obliged under the insurance policy to pay out the value of her motorbike. The Tribunal made an order in Julia's favour. The Tribunal' s decision was that Julia had taken all reasonable care to safeguard the motorbike and that the company should not have rejected her claim. The requirement that consumers take all reasonable care to safeguard the property that they insure is a very common clause in insurance contracts today. And while most consumers will agree to that term when taking out a policy, very few will be aware of what it actually means. Courts in New Zealand have looked at this problem and have decided that the test to apply when deciding if a consumer has failed to take reasonable care is; whether a reasonable person knowing the same facts as the insured person would have described the consumer's actions as extremely careless or reckless.

Take Julia s case again. If a reasonable person was to look at the facts of that problem, would they have decided that she acted in a way that was very careless or reckless? What about the recent theft of her motorbike cover? The insurance company argued that this theft should have warned Julia about the possibility of her bike being stolen. But is it really fair to compare the theft of a lightweight cover that is usually tied to a vehicle to a securely locked 600cc motorbike? A reasonable person would probably conclude. that at the most this incident would only warn Julia of possible danger to accessories to the bike, not the whole bike itself. If a term of your insurance policy requires that you must take 'reasonable care to safeguard the property', remember that it is a duty to not be extremely careless or reckless. It is not a requirement that you try to forsee and prevent every possible danger tc your property before youi insurance company will honour your policy.