The story
Nimisha travelled to India for a friend’s wedding, taking her wedding jewellery with her. Nimisha was staying in a private guest house with other wedding guests, and sharing a room with the bride’s aunt and sister.
Reasonable care of jewellery
After the reception Nimisha removed all her jewellery, placed it in a transparent plastic pouch, and packed it in her large suitcase underneath her wedding clothes ready for her return home to New Zealand. Nimisha knew her travelling companions were planning a trip to the local market the following day, and then would be travelling by night train to another tourist location, before flying to Mumbai and then immediately on to New Zealand. Nimisha felt her jewellery would be safest in her suitcase. She could not be sure whether she locked her suitcase that night or the following morning, but was certain the suitcase was locked before she left for the market.
Discovery of theft
Nimisha did not open her suitcase again until she returned to New Zealand. Her travel clothes were kept in a smaller travelling bag. When Nimisha opened her suitcase in New Zealand she discovered the plastic pouch and all her jewellery had been stolen.
Insurance claim
Nimisha could not understand how her jewellery was stolen. The last time she had seen the jewellery was at the guest house, so made enquiries with the guest house owner, her travelling companions and notified the police in India. When she was unable to locate her jewellery she made an insurance claim for $15,000 worth of stolen jewellery.
Dispute
Nimisha’s insurer declined her claim saying it was unreasonable for her to keep such valuable jewellery in an unlocked suitcase in an unlocked room.
Nimisha did not agree explaining:
- it was not possible to lock her room – the key had been lost
- she was staying in a private guest house, not open to the public
- although she was not sure when she locked her suitcase, it was locked before she went to the market
- it was not safe to wear the jewellery to the market or take it in her handbag.
FSCL’s review
The policy required Nimisha to take all reasonable precautions for the safety of her personal effects. Nimisha was not required to avoid every conceivable risk; this would defeat the purpose of insurance. Instead the courts apply a reasonable person test. Provided Nimisha acted as a reasonable person when assessing and exposing herself to risk, her insurer was obliged to accept the claim. If Nimisha had been grossly careless, grossly negligent or reckless then she had to accept liability for the loss.
We carefully assessed the finely balanced evidence in this case and were satisfied Nimisha had reasonably assessed and avoided the risks. We considered:
- it was reasonable for Nimisha to pack her jewellery in her suitcase, rather than wear it to the market or take it in her handbag
- although the room was unlocked, the guest house was not open to the public and it was not unreasonable for Nimisha to trust wedding guests closely related to her good friend
- given the room was unlocked, it would have been reasonable for Nimisha to lock her suitcase while she was at the market
- on balance we accepted Nimisha’s statement that she locked her suitcase before leaving for the market.
Outcome
We recommended the insurer accept Nimisha’s claim. The insurer noted that it could not understand how the jewellery could be stolen from a locked suitcase, but it accepted the claim paying compensation of $9,800, after deducting the policy excess of $200. Nimisha was very happy with the outcome.
Lesson
Insurance is designed to protect you from loss in circumstances where you have taken reasonable care. Provided you act as a ‘reasonable person’ when assessing and avoiding risk, your insurer cannot decline a claim on the grounds that you did not do enough to avoid loss. It is inevitable that occasionally, despite reasonable precautions, loss occurs and it is these circumstances that insurance is designed to cover.
