By Tarran Dookie
Reprinted with the kind permission of ReCover Magazine, a publication of Risk Management Services Limited, Trinidad
Most general insurance policies contain a ‘reasonable precautions’ condition. This condition imposes a requirement that the insured takes all reasonable steps to prevent loss, damage or liability occurring and to mitigate the loss if it does take place. It is an implied condition that the insured should act as if uninsured.
The ‘reasonable precautions’ condition strengthens this implied condition. Should there be a blatant breach of the ‘reasonable precautions’ condition an insurer may deny an ensuing claim. Let us explore the implications of this condition in various insurance policy types.
Household, fire and special perils and property all risks policies.
“You and any person seeking the benefit of this Policy must take all reasonable steps to
- Protect the property
- Prevent accidents, injury, illness, loss or damage
- Maintain the property in sound condition and good repair.”
The above wording is found in property policies and similar wordings are used in fire and special perils and condominium and property all risks policies. In effect this means that the insured must use all reasonable diligence and care to keep the property insured in a proper state of repair. The insured must correct defects and take precautions to prevent loss or damage from such defects. It also means that if defects are not remedied, insurers may not be liable for resulting damage. Let us consider a practical example. A retaining wall is affected by erosion from water flowing from a river or drain and is on the verge of collapsing. The insured is required to take some action to remedy this defect and failure to do so may not only cause the wall to collapse but the building itself may suffer damage as a consequence. Depending on the circumstances and length of time the wall has been in this state insurers may deny claims related to this defect.
Other types or property policies such as electronic equipment all risks, machinery all risks, contractors all risks and goods in transit would all have similarly worded conditions requiring the insured to take due care to secure the property insured and prevent loss or damage.
Crime insurances: burglary, money and fidelity guarantee guarantee policies
The insured must take all reasonable precautions for the safety of the property insured as if it were not insured, securing all doors and windows and other means of entrance and not permitting anything to be done whereby the risk of loss or damage is increased;
Reasonable care must be taken in the selection and supervision of all employees;
The above conditions may appear in a burglary policy and a similar wording may appears in a money policy. The insured must take steps to secure the building and not permit anything to be done to increase the risk. Therefore, the insured should not leave doors and windows open after business hours, keys should not be left where they can be found by burglars, alarms should be operational and so on. Some policies also stipulate that there must be reasonable care in the selection and supervision of employees as failure to do so can result in theft or collusion by a dishonest employee. Fidelity guarantee policies may also stipulate the precautions and checks stated by the Insured Employer in the proposal form are operated and maintained.
Where the insured fails to take these precautionary measures there can be a denial of a claim if the loss is caused by breach of the condition. The position of the insurers is even stronger if the policy is subject to a warranty in respect of the insured taking measures to prevent loss or damage and the warranty is breached.
Liability policies: Public and products liability, Workmen’s Compensation/Employers Liability
The insured shall exercise reasonable care that only competent employees are employed and shall take all reasonable steps to prevent accidents and comply with all statutory or other obligations and regulations imposed by any authority and shall maintain the premises and all ways, works, machinery and plant in sound condition. In the event of the discovery of any defect or danger the Insured shall forthwith cause such defect or damage to be made good or remedied and in the meantime shall cause such additional precautions to be taken as the circumstances may require.
The insured shall exercise reasonable care that only competent employees are employed and shall take all reasonable steps to prevent accidents and to comply with all statutory or other obligations and regulations imposed by any authority and shall maintain the premises and the ways, works, machinery and plant in sound condition.
The first condition above appears on a public liability policy and the second can appear on a workmen’s compensation/employers’ liability policy. One notices the similarity. Competent employees should be employed and reasonable steps should be taken to prevent accident. This would include having employees wear and use appropriate safety gear and keep premises safe for visitors. Statutory obligations such as OSH regulations should be complied with. Blatant failure to take reasonable steps to prevent accidents could result in denial of claims under these types of policies.
Motor insurance policies
The Insured shall take all reasonable steps to safeguard the Motor Vehicle from loss or damage and to maintain the Motor Vehicle in efficient conditions and the Insurer shall have at all times free and full access to examine the Motor Vehicle or any part thereof or any driver or employee of the Insured. In the event of any accident or breakdown the Motor Vehicle shall not be left unattended without proper precautions being taken to prevent further loss or damage and if the Motor Vehicle be driven before the necessary repairs are effected any extension of the damage or any further damage to the Motor Vehicle shall be excluded from the scope of the indemnity granted by this Policy.
Where this condition or a similarly worded condition is detailed on the Motor Policy, it requires that a vehicle be kept in a roadworthy condition. A vehicle that is defective may cause accidents. A good example is a defective braking system. If a vehicle suffers damage the necessary repairs should be effected before the vehicle is driven as to do otherwise may worsen the damage and the insurers would not be obligated to pay for any further damage resulting.
Reasonable steps must also be taken to safeguard the vehicle. There have been instances of vehicles stolen while ignition keys have been left in the vehicle, sometimes with the engine running. Whether or not this constitutes a breach of this condition depends on the exact circumstances but some of these claims have been denied by insurers. If there is an alarm warranty on the policy or the insured receives the benefit of a discount on the premium, and the alarm is non-operational, a theft claim may be denied by insurers.