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Going downhill fast

Matt travelled to Thailand for a holiday with his friends. While there, Matt’s friend, Joe, hired a motorbike. Matt had ridden motocross bikes for years and was keen to take the bike for a spin. Matt took the bike to the top of a nearby hill to admire the view.


The accident

On his way back down the hill Matt applied the brakes to no effect. As an experienced rider, Matt knew to change down through the gears in an attempt to slow the bike. Unfortunately, the bike was still travelling too fast for Matt to pull into his driveway safely. Matt continued on down the road until he saw a grassy field and decided that would be the safest place to get off the bike. Matt was able to jump clear of the bike but hit his head on a rock in the grass. Although Matt was wearing a helmet, the helmet did not completely protect his face, and Matt broke the bone around his eye.

Matt was able to walk from the crash site back to the villa where he was staying and his friends called an ambulance to take Matt to hospital.


Insurer is advised of Matt’s injuries

While Matt was being assessed by the hospital staff Joe called Matt’s insurer and advised Matt had been injured in a motorbike accident when the brakes failed. Joe gave some information about the accident and the insurer’s staff member, Stephen, advised that although motorbike accidents were covered by the policy, more information would be needed before the claim could be approved.


More detailed information is provided to the insurer

By the following day, Matt was recovering from surgery and Stephen was able to speak to Matt, who confirmed the details of the accident, but most of the conversation was with Joe.

Joe gave Stephen more detailed information about the accident, including the advice that Matt did not have a New Zealand motorbike licence and the motorbike Matt was riding was 250cc.


Claim declined because Matt was unlicensed

The insurer assessed the claim and declined to cover Matt’s costs because Matt was riding a motorbike on a public road without a motorbike licence, and the bike was over 250cc. This meant the claim was excluded under the insurance policy. Matt’s family borrowed the money to pay the hospital and Matt rearranged his flights and return to New Zealand.


Matt’s view

Section 11 of the Insurance Law Reform Act obliges insurer to accept the claim

Matt considered the insurer was obliged to accept the claim because the accident was caused by brake failure, not because he did not have a licence or that the motorcycle was over 250cc. Matt referred to section 11 of the Insurance Law Reform Act 1977 (the Act), which says that where an exclusion is included in a policy because the excluded circumstances would increase the risk, if the insured can prove that the excluded circumstances did not cause or contribute to the loss, the insurer cannot rely on the exclusion.


Accident caused by brake failure

From the beginning, Matt had told the insurer the accident was caused because the brakes failed. After returning to New Zealand Matt asked a qualified mechanic to review photographs Matt’s friends had taken of the bike after the accident. The mechanic confirmed that the brakes were faulty and the bike was not roadworthy.


Licence and engine size irrelevant to loss

Matt said he has ridden motocross off-road for years and although he does not have a motorbike licence, when he became aware that the brakes were not working, he acted as any experienced rider would. In Matt’s view, whether he held a licence or not was irrelevant to the accident. Matt also said that the size of the engine made no difference as he was travelling slowly at the time.

Matt asked FSCL to review his complaint


The insurer’s view

The insurer considered it was entitled to decline the claim because the policy excluded cover if the insured was riding a motorbike without the appropriate licence or if the motorbike was over 200cc. From the insurer’s perspective Matt’s decision to ride a motorbike over 200cc when he did not have a licence led directly to the accident. If Matt had read his policy, he would have known that he was not covered should an accident occur and should never have even been on the motorbike. The insurer did not address the section 11 argument raised by Matt.



Section 11 of the Act applies

After carefully considering all the material, we were of the view section 11 applied and, as neither of the exclusions relied upon either caused or contributed to the loss, the insurer was obliged to accept Matt’s claim.

Given that Matt was an experienced rider and behaved as any experienced rider would when faced with brake failure, the fact that he did not have a motorbike licence neither caused or contributed to the accident. Even if Matt had held a motorbike licence, when the brakes failed he would have been in exactly the same situation.

Similarly, the size of the engine did not appear to have caused or contributed to the loss. Matt was not travelling at excessive speed and was attempting to brake while going downhill.


Suggested insurer reconsider claim

We suggested to the insurer that it reconsider its position. The insurer advised that, on reconsideration, it accepted that section 11 applied and it would reassess Matt’s claim on this basis. 

Matt claimed:

  • $20,258.11 for medical expenses
  • $482.06 to change his flights and extend his insurance cover.
  • $400 Matt for additional accommodation and taxi expenses, for which he did not have receipts.
  • $967.93 paid by Joe to the motorbike rental company for the damage to the bike, Matt explained that the motorbike hire company had taken Joe’s passport as security and would not return it until Joe paid for the damage
  • compensation for the costs incurred by his mother when she used her savings and topped-up her mortgage to pay his medical expenses.



The insurer assessed Matt’s claim and offered $22,094.94 in full payment of the claim. The insurer’s offer covered:

  • medical expenses
  • additional travel costs
  • additional accommodation costs
  • cost of extending insurance cover beyond original departure date
  • the cost incurred by Matt’s mother when she paid his hospital expenses
  • the excess that would usually have been charged.


The insurer declined to cover the cost charged by the motorbike hire company for the damage to the bike. The insurer explained that the policy would only cover the insurance excess if Joe had purchased separate motor vehicle insurance when he hired the bike.

Matt accepted the insurer’s offer and the complaint was resolved on this basis.


Key insights for the participant

Insurance policy exclusions only allow a claim to be declined where there is a direct link between the risk the exclusion was designed to avoid and the cause of the loss. In this case the accident was caused by brake failure and regardless of Matt’s licence or the engine size we considered it likely the accident would have occurred in any event.