Recklessness and the policy of insurance

12 April 2016

Given that a policy of liability insurance operates on the assumption of negligent conduct, consideration of reckless behaviour has consistently been found to require a greater departure a reasonable standard of care than mere negligence.

Here the Court looks at whether the relevant test is solely subjective or whether it contains an objective element.


The proceedings involve an incident which arose during the handover for an arranged access visit in relation to the child of the defendant and her former husband Mr Quici. The two had an acrimonious relationship and there was a Domestic Violence Restraining Order in place, restricting Mr Quici.

The defendant and Mr Quici met on a roadside for the purpose of exchanging custody of their daughter. The defendant got out of her vehicle and exchanged custody of the child with Mr Quici before arguing for a short time and then returning to her vehicle.

Mr Quici hit the window of the defendant’s vehicle in a forceful way, causing the defendant to become frightened. The defendant stated that she wanted to leave and loudly revved the engine of her vehicle. The defendant drove her vehicle out of the carriageway in order to exit the vicinity. The front left wheel of the defendant’s vehicle went over Mr Quici’s right foot and the left side of the defendant’s vehicle struck Mr Quici’s right leg causing injury.

Key issue

The key issue considered by the Full Court was the proper interpretation of the meaning of “reckless indifference” and whether the appropriate test is purely subjective or contains an objective element. In this case being within the statutory policy of CTP insurance in South Australia.

Initial proceedings

The matter was initially heard in the District Court of South Australia. The Motor Accident Commission (MAC) brought an action seeking its statutory right of recovery as provided by s124A of the Motor Vehicles Act (SA). This allows recovery in circumstances where the defendant drove a motor vehicle with the intention of, or in the alternative, “reckless indifference” as to, causing bodily injury.

The Judge noted:

“On the question of reckless indifference, at one level it may be said that the defendant proceeded whilst being indifferent to the position of Mr Quici. This is because I find that she moved her vehicle forward into a space that, objectively assessed, was either too narrow for her car to pass, or that was so narrow and because of her own lack of skills as a driver, she was incapable of driving through safely.”

His Honour rejected the claim of intentional driving – there was no appeal against that rejection. His Honour also dismissed the contention that the defendant had driven with reckless indifference given the factual findings – the appeal was against this order. Even though the MAC were successful at first instance they appealed on a question of the correct interpretation as it had significance for the CTP Scheme.

1. Appeal proceedings

MAC appealed the decision on the basis that His Honour had erred in his formulation of the relevant test for the term ‘reckless indifference” as he had imported an objective element into that test.

It was argued that the relevant test as to recklessness, noting that the term was contained in a policy of insurance, was that which was articulated by Lord Diplock in Fraser v B N Furman (Productions) Ltd1. Diplock LJ relevantly observed;

“ is not enough that the employer’s omission to take any particular precautions to avoid accidents should be negligent; it must be at least reckless, that is to say, made with actual recognition by the insured himself that a danger exists, and not caring whether or not it is averted…”

The Full Court agreed the test was relevant to the statutory policy and ruled that the Judge had erred by including an objective component in assessing the conduct of the defendant.

The Full Court approved Debelle J in Mead v Allianz Australia Insurance Ltd2 where he said:

“Instead, the condition…requires that the insured is not reckless in the sense explained in the decisions I have mentioned. It will have been noticed also that the test of recklessness is subjective, not objective. So in Plasteel…it was held that the test of the existence of a risk should be determined by the perception of the insured and not by that of a reasonable person

The Court concluded, adopting the wording from Fraser, that:

“the issue [in this case] is whether the defendant drove her motor vehicle with the actual recognition herself that a danger existed and not caring whether or not the danger was averted”

It was unnecessary for the Court to then make any finding as to the facts in this case given that MAC’s appeal was only to clarify the correct interpretation of the relevant provision.

2. Outcome and interest for insurers

The case is of interest to all liability insurers as Fraser also forms the foundation of the test applied when examining if an insured is in breach of the condition of “reasonable care” within liability policies. This is founded on the examination of ‘reckless indifference’. This case is a timely reminder that when looking at whether an insured’s conduct has departed so significantly from the standard of care so as to amount to a breach of the reasonable care condition, it is a purely subjective test. It is not to be measured against what may objectively be thought to be reckless, but rather examines the subjective intent of the insured in the circumstances of their conduct.

This article was written by Michael Tilley, Partner.

1[1967] 1 WLR 898

2[2006] NSWSC 366

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