The law draws a distinction between “negligent conduct” and “grossly negligent conduct”. Grossly negligent conduct is synonymous with reckless conduct. The distinction is of great legal significance. If a conduct is deemed to be “negligent”, an insurance policy is bound to respond to a claim. If, however, it is found to be “grossly negligent”, an insurer is entitled to avoid a claim. Given the fine and often blurry line between these two forms of negligent conduct, it is unsurprising that there have been a lot of legal disputes revolving around this issue, particularly in insurance cases. Some of these disputes have been resolved through rigorous court litigation, whilst others have been resolved by the Office of the Ombudsman for the Short-term Insurance (“OSTI”). Grossly negligent clauses feature prominently in short-term insurance policies. It is, consequently, not uncommon for insurers to reject insurance claims on the basis of gross negligence. In the latest Ombudsman's Briefcase, there is a finding relating to a car insurance claim which many readers and insurance enthusiasts may find interesting and even harsh on the insurer.


The insured vehicle was stolen at a security-controlled complex where the insured resided. The insured discovered the theft of the vehicle in the morning, at around 6h00. She was in disbelief that her vehicle was stolen. Therefore, she did not immediately inform the tracking company. She contacted her brother-in-law and, together with the chairperson of the body corporate, searched around the complex. She then attended to other chores. Thereafter, she went to report the incident at the police station. It is at the police station where she was asked whether she had reported the incident to the tracking company – which she answered in the negative. From the police station, she went to work, and this is where she contacted the tracking company. This was around 10h35. Upon submission of the insurance claim, the insurer rejected the claim. The rejection was predicated upon the gross negligence clause. The insurer submitted that the conduct of the insured, i.e., failure to report the theft incident as soon as she discovered it, was grossly negligent and, as such, deprived the insurer an opportunity to recover the vehicle (or, otherwise, minimised the possibility of recovery). The OSTI found that the insured's conduct, at best, was negligent, but certainly not grossly negligent. The OSTI stated that there was no certainty as to the time at which the vehicle was stolen, and therefore, there was no guarantee that acting swiftly at around 6h00, would have ensured recovery of the vehicle.


In favour of the insurer, there is a sound argument to be made that the clause linked to the gross negligence clause is unambiguous and should be adhered to, failing which the insurer should be able to escape liability. Clause 4.5 of the policy in the case under discussion stipulates, “[the insured] need to take all reasonable precautions to prevent or minimise loss or damage…” It may be argued that notwithstanding her state of shock and disbelief the insured should have contacted the tracking company when, at the latest, realising that the vehicle is not within the complex. It would be reasonable to expect that, upon discovery of the theft of a vehicle, a person would call his or her tracking company. This is the main reason why insurers insist on the installation of a tracking device. If people wait for hours upon discovery of a theft of the vehicle before informing their tracking company, it would be pointless for insurers to require that the tracking device be installed. The fact that there was no certainty with regard to the time of theft is no justification for the delay in notifying the tracking company. In any event, there is never any guarantee that there will be recovery of a stolen vehicle if an insured reports the theft sooner, as, in some cases, vehicles are totally stripped in minutes; however, the responsibility to notify the tracking company soon remains. The writer is of the view that, whilst the actions of the insured could have been quicker, there may be room to argue that in the absence of certainty regarding the time of theft, she had to be given the benefit of the doubt in that the incident may have happened many hours ago and the chances of recovery were almost non-existent. This argument would accord with the principles of fairness and justice.


This case illustrates the unceasing dilemma in matters concerning “negligence” and “gross negligence” in insurance claims. This will continue to be the case, as each case presents its own peculiar facts and circumstances. Given the principles of equity, it may be necessary for insurers to revisit and reconsider their policy wordings. Most gross negligence clauses, as they stand, are open to interpretation and that exposes them (insurers) to liability. Whilst it is impossible to cater for all sorts of incidents that may occur and how they may occur, it may be beneficial to expand on the clause so as to provide “examples” of what may constitute gross negligence.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.