The plaintiff owned a property at Mosman. There was a large and expensive residence being constructed on that property. The property was insured for the amount of $4.2million by the defendant against risks including loss or damage by fire. On 10 May 2013, a fire broke out at the property and caused substantial damage. The cost of rectification was approximately $1million.
The plaintiff claimed on the policy. The defendant refused to pay on the basis that the claim was fraudulent. It alleged that the fire was lit deliberately; the plaintiff had a financial motive for setting the fire; and the plaintiff made false statements to the defendant and its agents in connection with, and to induce payment of, the claim.
The Decision at Trial
The defendant’s case imputed serious dishonesty to the plaintiff and it was required to prove its case on the balance of probabilities in accordance with s 140 of the Evidence Act (NSW). The court noted that in order to satisfy the onus, “the defendant must adduce proofs that raise a “more probable than not” inference in favour of what it urges; there must be a reasonable and definite inference available on the whole of the evidence; there must be something more than conflicting inferences of equal degrees of probability. And in assessing whether the defendant has satisfied its obligation, the Court must take into account the gravity of the matters alleged….”.
The issues for determination were whether the plaintiff caused or connived at the setting of the fire and whether the plaintiff knowingly made false misrepresentations to the defendant to induce it to pay the claim, therefore excluding the plaintiff from cover under the policy.
The court inferred that the fire was set deliberately, by someone other than the plaintiff, who had knowledge of the alarm code and who may have had a key to the property. However, the court could not conclude that access to the property was obtained by someone whom the plaintiff had entrusted a copy of the key for the purpose of setting the fire. To the contrary, the court observed that the plaintiff’s financial interests would have been best served by prompt completion of the building works and sale of the property thereafter. Although the court acknowledged that the plaintiff’s statements to the defendant were inconsistent from time to time, it did not accept that the statements made by the plaintiff were with knowledge that they were false and with the intention of misleading the defendant into accepting and paying the claim.
Considering and weighing the evidence as a whole, and bearing in mind the gravity of the finding for which the defendant contended, the court was not satisfied, on the balance of probabilities, that it was the plaintiff who caused the fire to be set (or that the plaintiff connived at its being set). The court therefore concluded that the defendant failed to discharge its onus of proving that the plaintiff was relevantly responsible for setting the fire.
A Verdict was entered for the plaintiff for $991,946 plus interest.
Implications for you
For an insurer to successfully deny an insurance claim for fraud, the standard of proof that the insurer must meet is the standard of balance of probabilities, requiring thorough investigation and consideration of all of the evidence.