Picking Up the Pieces - Liability Cover for Accidents Caused by Your Negligence

Are you financially prepared for a major accident outside the boundary of your home caused by you?

Does your home and contents insurance policy provide liability cover if you cause injury or death to another person in an accident?

Though most Australians insure their homes, more than one-third do not insure their contents.  Contents insurance covers the financial cost of repairing or replacing your household personal possessions and furnishings such as curtains, furniture, white goods, stereo, TV, computers and other electrical appliances, clothing, jewellery, sporting equipment and even toys.

It is important to check that the home and contents insurance includes liability cover to protect against financial loss if your actions or your negligence is found to cause a person to be injured or killed.

The insurance should cover two key financial risks.  One is the compensation that you may be ordered to pay the injured party, plus their legal costs if a claim against you is upheld.  The second is the legal cost of defending a claim.  Ordinarily the level of coverage for all claims from any one incident under contents legal liability cover should be at least $10 million including all associated legal costs. Some policies will provide coverage of up to $30 million for public liability.

The importance of checking your home and contents insurance cover was recently highlighted when the ACT Supreme Court ordered a cyclist to pay nearly $1.7 million in damages to a fellow cyclist who was knocked off his bike and hit by a car when the cyclists side by side collided on their way home from work.

At the time, the cyclists were riding on a major road in a designated cycling lane after dark. The wheel of the offending cyclist struck a wooden stake lying on the cycle-way.  The accident occurred during the evening peak hour in winter when there was adequate lighting; which the court found would have allowed the offending cyclist to see the wooden stake.  The primary judge found that the offending cyclist should have seen the wooden stake in adequate time to take evasive action had he been keeping a proper look out for objects on the cycle-way.

The offending cyclist appealed the decision that he had breached his duty of care and caused injury and financial loss to his fellow cyclist on the grounds that the findings against him were based on inadequate evidence about flawed lighting, and that expert evidence was required to show that he failed to exercise reasonable care.  He also argued the primary judge did not properly explain his reasons for finding the accident was avoidable.  The ACT Court of Appeal found that none of the challenges to the primary judge’s findings were supported by the evidence.  Special leave to appeal to the High Court was refused.

The subsequent publicity surrounding the case, as it was widely reported in the Canberra media, resulted in an increase in the membership of the local cycling group Pedal Power ACT which automatically provides insurance coverage for its members.

Fortunately, the negligent cyclist had insurance protection under his general home and contents insurance policy which provided liability cover for his fellow cyclist’s injuries. Certainly, cyclists should have insurance protection against liability to others, in their own interest as much as for the victims of anyone they negligently injure.  Whilst this may be a benefit of membership of a local cyclist organisation, it is prudent to check whether this coverage exists as part of a home and contents insurance policy.

Written by Bill McCarthy, Special Counsel, Insurance Law & Liability.