Myles’ employee crashed and damaged a work ute when using it for personal use, causing damage to the equipment in the open tray. The employee was intoxicated. Myles made a claim to his insurer for the damaged equipment, but his claim was declined due to a clause in the policy requiring Myles to take reasonable care to protect equipment from being damaged.
Myles disagreed with the insurer’s decision to decline his claim and complained to FSCL.
Dispute
Myles said he was unfairly being held responsible for his employee’s actions, particularly as the damage happened outside of employment hours. He said the insurer had insufficient evidence for finding that he had not taken the necessary reasonable care to protect the equipment from damage.
The insurer said the policy required Myles to take reasonable steps to ensure the equipment was not damaged. The insurer believed that by allowing an employee to use a work vehicle after hours, Myles had not taken reasonable care, as it was not unforeseeable that the equipment would be damaged.
Review
Myles had a responsibility to take “reasonable care to protect the equipment from accidental damage, theft, or loss” under his policy. We needed to decide whether it was open to the insurer to decide that Myles did not take “reasonable care” in this case.
We understood that Myles could not control what the employee did outside of work hours, but it seemed that as the owner of the equipment, Myles had total control over whether the employee had access to the vehicle and equipment outside of work hours.
There were multiple factors that led us to find it was likely that Myles did not take reasonable care to protect the equipment. The employee had been employed by Myles for only 12 days before the accident, and Myles had not conducted any background checks on the employee. Myles had inadequate basis to trust the employee with the equipment outside of work hours. Further, the employee had a licence with a “zero alcohol” condition. Myles would have sighted the licence due to the prerequisite for the employee to have a current full drivers’ licence, and he should have seen that it was pink with “zero alcohol” printed on both sides. A quick google search would have revealed that the employee had either committed repeat drink-drive offences or a serious first-time drink-drive offence. The driving offences should have been a red flag when trusting the employee to take the ute and tools home.
We acknowledged that the employment agreement said that the employee could not use the vehicle outside work hours without Myles’ permission, and that this permission was neither asked for nor given. However, this clause in the employment agreement was not enough to relieve Myles from the requirement to take reasonable care in protecting the equipment.
We held that it was reasonable for the insurer to find that Myles took too much of a risk in allowing the employee to have the vehicle and equipment at his private address.
Resolution
We suggested to Myles that he discontinue his complaint, as we were unlikely to find that the insurer had unreasonably declined his claim.
Myles did not respond to our preliminary view, so we closed our complaint file.
Insights for consumers
Business owners should ensure they take all necessary care required by their insurance policies to protect their equipment. In particular, they should not allow equipment to be taken to an employee’s private address if there are multiple red flags as to the trustworthiness of the employee.
