Court Reviews Common Exclusion Clauses in Motor Vehicle Policies
In Hammersley v National Transport Insurance1, the Supreme Court of Tasmania provided a timely reminder that when dealing with exclusions in Motor Vehicle Policies, the state of mind of the insured may be the deciding factor in determining whether liability can be excluded. In this case, the Court was required to consider whether the loss or damage was accidental, whether the vehicle was unsafe and unroadworthy, and whether the driver was reckless in causing the loss and damage.
Accidental Loss or Damage
In order to avoid an exclusion in the policy, the insured (Hammersley) was required to prove that any overloading of the vehicle was accidental. The specific clause in relation to accidental loss or damage stated:
“ACCIDENTAL OVERLOAD
Notwithstanding exclusion 4(c)2 [exclusion for loss caused by conveying a load in excess of that permitted by law], Your policy is extended to include accidental overloading, but You must prove that such overloading was accidental." 2
In determining whether any overloading was accidental, the Court considered previous judgments dealing with the definition of “accident” or “accidental” in the context of insurance policies and accepted that accidental means something that is neither intended, foreseen, looked for, expected, nor brought about by design. Importantly, the Court stated that in determining whether any overloading was accidental, the state of mind of Hammersley had to be considered. It was found that Hammmersley had paid no attention at all to the height of the load, set off on the journey without thinking about the height of the load, and as such, the overloading of the vehicle to an excessive height must have been an accident.
Unsafe and Unroadworthy
It was also argued that the vehicle was unsafe and unroadworthy, not because of the vehicle itself, but because it was overloaded i.e. the load was too high. The relevant exclusion stated that the insurer would not pay for:
"Loss, damage liability and or compensation for damage caused to or by Your Motor Vehicle whilst Your Motor Vehicle is;
…
(d) being used in an unsafe or unroadworthy condition, unless such condition could not be readily detected by You."
It was found that the clause related to the driver’s ability to safely control the vehicle. As the loss and damage occurred due to Hammersley attempting to drive the vehicle under a bridge that was too low, not because the high load affected Hammersley’s ability to control the vehicle, the exclusion did not apply3.
Recklessness
Finally, it was argued that, in the circumstances, Hammersley was reckless in seeking to drive an overloaded vehicle under the bridge. The relevant exclusion clause stated that the insurer would not pay for loss and damage caused by:
"recklessness by You or any person acting on Your part or by reckless failure to comply with any statutory obligations and by-laws or regulations imposed by any public authority, for the safety of the Motor Vehicle/s and, for the carriage of goods and merchandise."
As with the definition of accident and accidental, the Court accepted the orthodox definition of recklessness in the context of insurance as being a recognition that a danger exists and indifference as to whether or not it is averted. Notwithstanding that Hammersley (a) was not aware of the relevant road regulations, (b) was not familiar with the requirements for transporting the load, and (c) did not check the permit; the Court found that it was a case of appalling inadvertence, but not recklessness4.
It is clear from the judgment that despite the facts proving the vehicle was overloaded, in breach of the relevant road rules and regulations, and the loss and damage was caused by Hammersley’s attempt to drive the overloaded vehicle under a bridge that was too low; the relevant exclusions focused on the state of mind of Hammersley, his ability to control the overloaded vehicle, and whether he was aware of the circumstances of the overloaded vehicle. Unfortunately for the insurer, despite the evident shortcomings in the loading of the vehicle, the insurer was unable to exclude payment under the policy.
1 [2015] TASFC 5
2 Interestingly, this was a policy which expressly required the insured to prove that the insured event was an "accident".
3 at [24]
4 at [34]