The driver told the New Zealand Herald that he believed a body was on the gurney as it trundled through the busy road.
The hearse, with its boot still open, pulls up in front of the gurney and the driver runs out with his phone pressed to his ear.
The undertakers responsible for the morbid mishap have since insisted there was no corpse on the gurney when the clip was filmed.
The motorist who caught the incident on dashcam, told NZME he was "shocked".
"I heard this noise, and the next thing, you know, I saw the stretcher with the body on it flying through the intersection".
A New Zealand driver's dashcam captures a gurney sliding along the road.
A nearby petrol station worker was behind the counter serving a customer when he looked outside and saw the driver loading the gurney and body bag back into the hearse.
He also thought there was a body inside, and described the scene as "crazy".
It stops rolling at the side of the road.
When he accelerated at the intersection, the stretcher fell out.
The astounded onlooker watched as the hearse driver stopped the auto, jumped out and retrieved the gurney with the help of a passing motorcyclist.
According to the report, Little said that the driver of the hearse was returning to the funeral home on Dominion Road; he had not closed the boot of the auto properly because of which the incident happened.
But the hearse's owner, Davis Funerals in Dominion Rd, says the gurney was empty.
However, he said he could understand why anyone would think that there was a body on the stretcher.
The Funeral Directors Association of New Zealand has described it as a "rare mistake", which was being investigated by the funeral home, the Metro reported.
The funeral company has said there was no body in the bag.