The implications of driving a damaged vehicle after a collision

Some confusion exists within the insurance industry on the application of the proximate cause doctrine and the resultant impact on a short-term policy. This doctrine is often erroneously presented to validate insurance claims which, when scrutinised, shou

In this article, I shall attempt to clarify what I believe to be the correct approach to matters of dispute within these realms, with particular reference to the insurance implications of driving a motor vehicle after being involved in a collision.

It is widely understood that a claim will be payable where the loss sustained is proven as the result of the specific and defined insured event, for example, a collision. Based on this principle, and in cases of dispute, the broker seeks to convince the insurer that the proximate cause of the damage is covered and that all direct losses flowing from the collision should be met.

Through experience, most of us will without hesitation quote that the proximate cause is the active, direct and efficient cause of loss in insurance that sets in motion an unbroken chain of events which brings about damage, destruction or injury without the intervention of a new and independent force.

What is commonly misunderstood is the application of the “new and independent force”. I shall illustrate this observation by way of example.

The insured who is solely protected against theft will be indemnified for goods stolen but will not be paid for the malicious damage to his fixed property that was incurred during the course of the robbery, unless the latter event is specifically covered. In this example, the new and independent cause is the malicious damage.

In such a set of circumstances we then need to agree on the interpretation of the insurer’s liability where a policy exclusion is in place. So, should the standard exclusion of employee involvement be operative, then, notwithstanding proximate cause, theft by an employee will not be claimable.

Agreement of the above principles will allow us to extend the debate to engine damage incurred subsequent to a motor collision.

On many occasions, following a collision, the driver believes it prudent and beneficial for both his employer and the insurer to drive the vehicle to an appropriate place at which the damaged vehicle may be repaired. HCV recently experienced the situation where, post collision, an extensively damaged vehicle was driven 250km to a repair shop. Significant engine damage was consequently incurred.

Broker submissions were made that engine damage is to be indemnified in accordance with the proximate cause doctrine. The argument was presented as if the collision was the specified cover and the engine damage a link in the chain of events that flowed from the collision. If you follow this line of reasoning, then you could conclude that driving the vehicle after the collision is, in itself, the new and independent force, and therefore damage flowing from this indirect cause would not be covered.

However, I believe this approach is in any event flawed as the insurer’s obligation stems from an operative clause which provides insurance coverage on an all risks basis. So, unlike a policy written on a defined events basis the comprehensive option equates to cover against all perils subject to the reflected policy terms, conditions and exclusions – and accordingly reliance on the proof of proximate cause is not material in the general course of events.

Let’s take this matter further and briefly examine what the duties and obligations are for the parties to the insurance contract in such a situation.

As a general rule, the insured is required to attend to all that is necessary, with due care, to minimise losses. Failure to do so may prejudice his rights as a claimant.

Additionally, the driver and owner must ensure that at all times his/their vehicle is only operated whilst in a roadworthy state. Such condition is a regulatory requirement and is also specified on standard motor policies. Accordingly, to drive a vehicle that has sustained significant structural damage contravenes such an obligation and will negate the insured’s right to claim for any further losses whilst driven in such a condition.

In my opinion, the insurer’s liability is excluded, not only due to the above but also in light of the existence of two policy exceptions which have general application.

The first is that the insurer will not be liable for losses of a consequential nature. So, the secondary damage to the engine arises as a result of the damaged vehicle having been driven whilst damaged and will be treated as indirect and consequential. The exception is thus triggered and the insurer will, in the absence of sound reason, reject such a claim.

The second exception – the insurer will not be liable for losses caused by mechanical or electrical failure or breakage – is self explanatory and applies to all damages relating to mechanical or electrical breakdowns irrespective of proximate cause.

In short, the above highlights why a driver should be urged not to drive a vehicle following significant damage. And why reference to the proximate cause is not the brokers’ panacea.

Naturally, if the damage is merely cosmetic and the vehicle remains roadworthy, the driver may continue to drive the vehicle and no rights will be jeopardised.

To ensure that proper indemnity is achieved to the complete satisfaction of the insured remember to engage and predetermine preventive measures to avoid disappointment. Because even if insurers were to accept an argument founded on the proximate cause doctrine the exception supersedes this and the damages may be rejected.