The insured lodged a claim with his motor vehicle insurer, Shannons, seeking indemnity in relation to damage said to have been caused to his Mercedes in a collision.

The insured said that the collision occurred after an unknown vehicle turned in front of his line of traffic, causing an emergency situation. The insured vehicle was hit from behind by a Toyota Hilux, causing it to collide with a Toyota Corolla in front of him.

Shannons obtained forensic evidence which concluded that the Corolla had, in fact, reversed into the insured vehicle. The forensic evidence also indicated that the insured vehicle was switched off when it sustained the relevant damage. Both conclusions were contradictory to all drivers’ versions of events and suggested that the collision had been staged. The claim was denied as fraudulent.

At first instance, the Magistrate applied Vidal v NRMA Insurance Ltd, which establishes that an insurer may put an insured to proof, notwithstanding that an allegation of fraud has been made, whether the claim be for theft, fire or other similar claims.

The Magistrate accepted the evidence of the witnesses called by the insured as truthful. The Magistrate also accepted that a collision of some description occurred on the date alleged between the three parties. However, he was not satisfied, on the balance of probabilities, that the collision occurred ‘without intent’. At the same time he was not satisfied that the collision had been staged.

The Magistrate found in favour of Shannons on the basis of a ‘no insured event’ defence and dismissed the insured’s claim.

On appeal, the insured argued that an insured event (i.e. a collision) had been made out on the basis that the Magistrate had accepted the drivers’ evidence as truthful and concluded that a collision of some description occurred on the relevant date.

This argument was rejected by the NSW Supreme Court. While the Magistrate accepted the evidence of the drivers as truthful, he was correct in assessing the weight to give to such evidence in light of the conflicting forensic evidence and the inconsistencies identified by Shannons with the drivers’ original versions of events.

The Supreme Court also held that Shannons were entitled to put the insured to proof and that the Magistrate made no error in finding that the insured bore the onus of proving all elements of his case, including that the alleged accident had occurred ‘without intent’. The insured had failed to discharge this burden and his claim failed on that basis.

Issa v Australian Alliance Insurance Company Ltd t/as Shannons Insurance

The approach taken by the Supreme Court appears different to that taken in McLennan v IAL insofar as it suggests that an insured must establish that every claim must have occurred ‘without intent’. It will be interesting to see how such an approach applies to a claim for fire damage.