February 2014
Breach of Conditions of Driver’s Licence
Can an insurer decline a claim if you breach your driver’s
licence?
TIPS
Car insurance policies usually exclude
cover for damage caused when the
driver has breached a condition of their
licence. Driving in breach of your
licence conditions is likely to increase
the risk of an accident.
 Ensure you comply with
the conditions of your
licence. Failure to do
so can mean no
insurance cover if you
have an accident .
In the case of a restricted driver’s
licence, claims are often declined when
the driver is driving outside of the time
permitted by their licence i.e. between
10pm and 5am.
Claims are also declined when an
If you have an accident while breaching accident occurs when drivers are driving  Parents are urged to
the terms of your licence, your insurer is with passengers, but without a
monitor the driving of
unlikely to pay for the damage to your supervisor.
their children to ensure
car or any other car.
they are aware of the
consequences of
breaching their licence
What is the breach of licence?
conditions.
The most common breaches of licence
recognition and less ability to safely
 If you have an
are when drivers without a full licence
negotiate identified hazards. Reaction
accident while
are driving with passengers and/or
time of a young driver is said to be
driving after 10pm without a supervisor. slower than that of an experienced
breaching the
driver.
conditions of your
Commentary about young drivers
licence, your insurer is
highlights their relative driving
Having a suitably qualified supervisor
unlikely to pay for any
inexperience. Inexperience often
provides guidance to an inexperienced
damage to your car or
equates to a lower level of hazard
driver.
any other car.
What if the breach of licence did not cause the accident?
The law states that if the breach of the
terms of your licence did not cause or
contribute to the accident, your insurer
cannot apply the exclusion to your
claim.
If you can prove, on the balance of
probabilities, that the breach of the
licence (most commonly, having
unauthorised passengers without a
supervisor in the car) did not cause or
contribute to the accident, then the
insurer cannot decline your claim on the
basis of licence breach.
If having unauthorised passengers
without a supervisor did contribute to
the accident, this is enough for your
insurer to decline your claim.
In practice, it is often difficult to prove
that a supervisor would not have
assisted the driver to avoid the
accident.
The Insurance & Savings
Ombudsman Scheme Inc.
may be able to help you
Conditions of Graduated Licences

Fair and reasonable
The licensing system has 3 stages (learner, restricted and full) which apply
regardless of the applicant’s age when a licence is first applied for. The
conditions of learner and restricted licences are:

Independent
Stage 1—Learner Licence

Impartial

Free to consumers
1. You must not drive alone.
2. When learning to drive, you must be accompanied by a suitably qualified
person (“supervisor”) who must sit in the front passenger seat beside you at
all times. Your supervisor must hold and have held a current full New
Zealand driver’s licence for at least 2 years.
The ISO Scheme is
The ISO Scheme resolves
complaints between
consumers and insurers
which are Participants of
the ISO Scheme.
Stage 2—Restricted Licence
1. You can drive on your own.
2. You cannot drive between the hours of 10pm and 5am or with passengers
(other than your spouse or dependents) without a supervisor.
3. If you sit your practical driving test in a car with an automatic transmission,
you can only drive automatic cars unless you have a supervisor.
Real examples
 Kate’s daughter, Mary, was driving Kate’s car. Mary had an accident. At the
time, Mary only held a restricted driver’s licence and she was driving with an
unlicenced passenger in the car. The conditions of Mary’s restricted driver’s
licence only allowed Mary to drive with a passenger if the passenger was a
suitably qualified driver.
The ISO Scheme’s
Complaint Process
1. Unhappy with a claim
outcome?
2. Tell your insurer you
have a complaint.
3. Go through your
insurer’s internal
complaints process.
4. Unhappy with the
outcome?
Kate’s insurer, XYZ, declined the claim as Mary was in breach of her driver’s
licence. Kate argued that having a passenger in the vehicle did not, in any way,
contribute to the accident. Kate thought that the accident was caused by a
combination of bad road design, slippery conditions and driver inexperience.
However, there was no evidence that the accident would have occurred, even if
Mary had been supervised by a suitably qualified driver (as Mary was required
to have in the car if she was driving with passengers). The ISO Scheme believed
that a suitably qualified driver could have prevented the accident by advising
Mary to slow down in the conditions.
 One week after insuring his car, Tim had an accident. Tim turned right from a side
5. Get a letter of
“deadlock”.
road onto a major motorway when a second vehicle struck the lefthand side of the
vehicle. Tim’s friend was in the passenger seat.
6. Refer your complaint
to the ISO Scheme
within 2 months of the
date of the letter of
“deadlock”.
Tim’s car was extensively damaged. Tim made a claim to his insurer XYZ and his
car was declared a total loss. XYZ declined the claim as Tim was driving in breach
of his licence when the accident happened, as his passenger had only held a full
driver’s licence for one week.
The ISO Scheme believed that a suitably qualified driver could have prevented
the accident by instructing Tim not to proceed until the way was clear.
Insurance & Savings Ombudsman Scheme Inc., PO Box 10845, WELLINGTON
Freephone: 0800 888 202 | Email: [email protected] | www.iombudsman.org.nz