Woolcot Waste Pty Ltd (WW) operates a garbage collection business. It owns a large

compacting garbage truck. Normally the truck is driven by Mr. Woolcot, but in case of illness

and holidays, one of three employees must drive it. WW had a no drink/no drive policy.

On the morning of January 1, 2006, Stanley, aged 21, a rich young employee decided to drive

because Mr. Woolcot was on holidays and only he and an unlicenced employee reported to

work. He was not expecting to be the driver. On New Years Eve, he had consumed an

unknown quantity of the drug ecstasy at a dance party, and not slept before coming to work.

He went to dance parties and nightclubs a couple of times a week; his photograph often

appearing in the social pages of popular magazines documenting the goings on of the rich and

rowdy set. In the course of his work at 6am on January 1, he had a serious road accident,

killing two people and totally destroying three vehicles.

The garbage truck is insured by RMA Insurance Limited (RMA), for accidents occurring while

the truck was driven by a person with the consent of WW. All drivers must be approved by

RMA. WW was required to provide a comprehensive notification form containing details of all

drivers of the garbage truck at least 14 days prior to them first driving the vehicle. RMA had the

right to accept or reject any particular driver if they had an adequate reason to do so. An

additional excess of $5,000 applied to drivers under 25. A further excess of $10,000 applied in

a situation where RMA had not received and accepted a driver notification form.

When he was employed on 1/12/2005, Stanley had completed a driver notification form. It

disclosed that he was 21, had had a licence for 2 months and no relevant driving experience.

The notification form was provided to RMA via the Insurance broker who always arranged WW

insurance. RMA policies and procedures dictated that the insured be notified in writing that

such a driver was unacceptable due to his age and/or experience. RMA advised the broker for

WW by fax on 23/12/2005 of their rejection of Stanley as a driver. The office of the insurance

broker was closed in the period 20/12/2005-10/1/2006 and WW was not advised about the

contents of the fax until 10/1/2006.

Please advise the Manager of RMA Insurance whether RMA has reasonable prospects of

success if it:

1. Denies liability under the insurance policy for breach of the condition that only

approved drivers operate the garbage truck

2. Denies liability under the insurance policy for breach of the duty to disclose that

Stanley was an unacceptable driver.

3. Exercises its right of subrogation against Stanley to sue him for any amount it

has to pay out.