Breaches of licence conditions give insurers cause to reject claims

Thursday, 24 August 2017

Parents have argued that their insurance companies were wrong to reject their kids' claims, because their illegal passengers were not the cause of their accidents.

New Zealand drivers are being left out-of-pocket when breaches of the road rules, or of their licence conditions, give their insurance companies reason to turn down accident claims.

Michael Burke, executive manager of motor claims at Vero, said drivers needed to understand that they had obligations to meet if they wanted insurance cover.

If your licence says you should be wearing glasses, and you're not, you may not be able to claim on your insurance policy.

'For car insurance, that includes things like locking your car, keeping it well maintained, and following the laws that New Zealand has in place to keep us safe on the road,' he said.

'If you're breaching those laws and you have an accident, you may need to prove that your collision would have happened regardless – or your claim might be declined.'

He said accidents were often not covered when they happened when restricted licence-holders were driving after 10pm or with passengers. People driving without their glasses, when their licence required them, or people carrying fare-paying passengers on their private insurance policy would also have trouble making a claim.

'It is important to remember that driving without a valid licence or outside your licence terms doesn't just affect your insurance. It's also illegal and it can be dangerous.'

Insurance and Financial Services OMbudsman Karen Stevens said it was a common source of complaint to her office.

'We hear from many parents who have had to pay for the damage, not only to their own car, but to another car, because their son or daughter was driving outside the conditions of their licence when an accident occurred.

'All drivers should drive safely and lawfully, and that includes complying with the conditions of your licence. Parents should be aware, and ensure their children are aware, of the risks of breaching their licence conditions – including no insurance.'

In one case dealt with by the Insurance and Financial Services Ombudsman last year, a man complained when his daughter was in a crash and the insurance company would not pay out.

She was driving when the vehicle in front stopped suddenly and she collided with it.

The insurer declined the claim because she was in breach of her driver's licence because she had a passenger. Her father complained that did not cause or contribute to the crash.

But the IFSO case manager believed it was a factor.

'The case manager believed that, if a suitably qualified person had been sitting beside [her], he/she could have alerted [her] to the third-party vehicle stopping suddenly in front of her, and the need to apply the brakes before the collision occurred. He/she could have advised [her] to slow down due to the partially wet road conditions, enabling her to brake in the event that the third party vehicle in front should stop suddenly.'

Similar cases were dealt with the year before, with the same conclusion. But in one, an insurer agreed to meet the claim when the driver with the restricted licence complained that her brother and sister were, in effect, her dependants because their mother had died.