In July 2023, a South-Island based dealership that sold new and used vehicles made a claim to their insurer for $35,000 to cover the cost of a vehicle that was stolen from their site.
A claim had been made for the same vehicle in March 2023 which needed repairs for damage caused by a break-in. When the repairs were completed, the vehicle was parked at the back of the dealership’s yard overnight, ready to be returned to the sales floor after being cleaned. The workshop manager arrived at the dealership the next morning to find the gate padlock was missing. He checked to make sure all the vehicles were still there and replaced the padlock. A month later, the dealership received an inquiry about the vehicle and realised it was missing.
The insurer declined their claim. The dealership complained to FSCL.
Dispute
The insurer said that the dealership failed to take reasonable precautions to protect the vehicle. They said that there were no visible signs of an attempt to break into the building where the keys were stored, and they could not find the key for the missing vehicle. The insurer said that the dealership appeared to have left the key in the vehicle, contributing to it being stolen. The insurer also referred to their Retail Motor Vehicle Conditions (RMVT) endorsement, which required all the dealership’s vehicles to be locked and the keys securely locked in a safe.
The dealership said that the vehicle was locked securely in the service bay overnight, but it was possible that an employee stole the vehicle. They said that the RMVT endorsement didn’t apply because the car was not on the sales floor, it was in the care and custody of their service department, and it was unreasonable to expect the service department to remove the keys while they were working on it.
Review
To decline the dealership’s claim, the insurer had to be satisfied that:
- the dealership was reckless, either subjectively, in that they took a risk that the dealership recognised they shouldn’t have taken, or objectively, in that an ordinary person would not have taken that risk, or
- if an employee had stolen the vehicle, that the dealership had not reported the theft within 72 hours, as required by the insurance policy.
It was our view that:
- It was more probable than not that the dealership did not take all reasonable precautions to lock the vehicle’s keys in the office or a safe.
- The dealership’s actions were reckless, in that another dealership would have recognised the risk of leaving the key in the car overnight and would not have taken the risk.
- The claim was excluded from cover for theft by an employee because the theft was not reported in a timely manner.
- It was reasonable for the insurer to decline the claim.
Resolution
We explained our findings to the dealership, and they discontinued their complaint.
Insights for policy holders
It is important that policy holders read, understand and comply with the terms of their policy, to ensure that they are eligible for cover when they need it and that they take reasonable precautions to minimise their risk, as insurance will not cover all risks.
