There has been some uncertainty about the burden of proof in suspicious or fraudulent insurance claims since McLennan v Insurance Australia Ltd last year. The New South Wales Court of Appeal has now confirmed that, where a claim is made for the theft of a motor vehicle, the onus remains on an insured to prove that the vehicle was stolen.
The insured was the owner of a Ferrari which he alleged was stolen from a suburban street. The insured made a claim under his insurance policy for the agreed value of the vehicle. During the investigation of the claim, the insured made a number of statements to the insurer that were not truthful and on the basis of this the trial judge held that the insured had not discharged his onus of proving that the vehicle had been stolen.
In dismissing the insured’s appeal, the Court of Appeal found that in order for the insured to succeed, he needed to satisfy the Court of the facts necessary to establish the cause of action. There was no onus on the insurer to prove a negative. That is, the insurer did not need to prove that the theft did not occur in order to deny indemnity for the claim. In circumstances where the probability of the vehicle having been stolen was equal to the probability that it was not stolen, the insured’s claim must fail. Accordingly, it was open to the trial judge to find that on the basis of the insured’s dishonest conduct throughout the claim, he had not proven the occurrence of an insured event. To this extent, the Court of Appeal reaffirmed the longstanding principle set out inHammoud Brothers Pty Ltd v Insurance Australia Limited.
The Court also considered the circumstances in which a claim can be denied on the basis of fraud. In order to make a finding of fraud, it would not have been necessary for the Court to be satisfied that the insured was complicit in the fabricated theft of the vehicle. It would only have been necessary for the Court to find that the insured dishonestly intended to create a false belief in the insurer for the purpose of inducing payment of the claim.
Sgro v Australian Associated Motor Insurers Ltd
Which party bears the burden of proof in an indemnity dispute will depend on the policy wording and the nature of the insured event. Where the insured event is ‘theft,’ the onus remains on an insured to prove that their property was stolen.