Car insurance case in Appeal Court

Press, Volume CXIV, Issue 33581, 9 July 1974, Page 2

Car insurance case in Appeal Court

(New Zealand Fr«»« Assoclalion) WELLINGTON, July 8. The Court of Appeal today reserved judgment in an appeal brought by a car dealer against a Supreme Court decision upholding an insurance company’s refusal to pay out after the dealer’s car was wrecked when its brakes failed.

The company contended that the vehicle was being driven in an unsafe condition at the time of the accident. The appeal was brought today by Bruce Taylor, a New Lynn motor-vehicle dealer trading as Wild Goose Car Sales, against the. decision of Mr Justice Perry in the Supreme Court m Auckland on March 16, 1972, in favour of the Victoria Insurance Company, Ltd, Auckland. The facts were that Mr Taylor had insured his car under a motor-vehicle commercial policy. In 1969 he bought a Vauxhall car and reconditioned it. Early in February, 1970, the car was taken to Kenlock Motors, Ltd, Glen Eden, for a warrant of fitness. There the car was road tested and checked. A warrant of fitness was issued. On September 4, 1970, the car was being driven by a prospective purchaser when the brakes failed and the car collided with an oncoming vehicle. The car ... was wrecked and the appellant suffered a net loss of $5OO. Claim refused The appellant then lodged a claim, but the Insurance company declined to accept liability under the policy, as it contended that the vehicle was in an unsafe condition at the time of the accident Under one of the policy’s exclusion clauses this prevented a pay-out. The Court of Appeal today comprised Mr Justice McCarthy, Mr Justice Richmond, and Mr Justice Woodhouse. Mr R. S. Walker appeared for the appellant and Mr S. G. Lockhart for the respondent. “Important case” Mr Walker submitted that it was a case of public importance. as the in the Magistrate’s Court and

Supreme Court meant that any insured person could lose his cover if his car was being driven in an unsafe condition. despite the fact that the msured did not know of the defect, which was latent rather than potent. Mr Walker said there were four main relevant facts in the case. The first was that by getting a valid warrant of fitness, the insured had complied with the condition in the policy that he take all reasonable steps to safeguard the car from loss or damage. The second fact was that the appellant did not dispute the fact that the car was in an unsafe condition at the time of the accident. The third fact was as to the appellant’s knowledge of unsafeness. The courts below had found as a fact that neither the appellant nor his employees had known that the

car was unsafe at the time of the accident, and had no reason to believe that it should be unsafe. Finally, Mr Walker said, the fact that the nature of the defect in this case was latent, rather than potent, was of paramount consideration in this case. The defect was in the assembly of the brake shoes and a leaking brake cylinder, and was undetectable on a visual inspection. Mr Walker submitted that either knowledge of the defect was necessary, or that the test was an objective one, namely that the defect had to be such as to be reasonably discoverable by the insured owner. He submitted that such a test accorded with common sense.

Cover excluded

Mr Lockhart submitted that the clause quite clearly excluded cover if the car was, at the time of the accident, being driven in an unsafe condition. Although this was a harsh result, he said, it was the plain meaning of the words in the exclusion clause.