A police officer investigating a Taranaki crash involving an off-duty officer had a conflict of interest and his investigation was "substandard", the police watchdog has found.
In November 2015, the off-duty policeman overtook a truck on a country road, forcing an oncoming driver to swerve off the road.
The woman suffered minor injures and her car was damaged.
The investigating officer decided to issue the off-duty officer with a written warning, rather than prosecuting him, as long as he paid the woman reparation.
The woman complained to the Independent Police Conduct Authority in March last year, saying police were treating the officer more favourably than they would an ordinary member of the public.
"The investigating officer should have investigated the crash more thoroughly", ICPA chairman Judge Sir David Carruthers said in his decision released on Thursday.
"The decision to issue a written traffic warning to the off-duty officer was not appropriate in the circumstances."
The officer had not communicated clearly with both parties about the intended outcome and they had different views on whether he would be charged.
He should also have recognised there may have been a perceived conflict of interest and notified a supervisor, Sir David said.
However, the authority did not find the investigating officer's written traffic warning was because of bias or favouritism.
The officer last year pleaded guilty to careless driving.