Trajkovski v Commonwealth Insurance Ltd (No. 2)  NSWDC 694
In a recent decision of the District Court of NSW, the Court considered whether confusion or misinformation amounted to fraud pursuant to section 56(1) of the Insurance Contract Act 1984 (Cth).
The proceedings arose from a contract for insurance entered into between the plaintiff, Mr Trajkovski, and the defendant, Commonwealth Insurance Ltd, whereby the insured was provided with a home and contents insurance package.
The plaintiff had been an enthusiastic collector of jewellery and alleged that his apartment was broken into on 3 September 2013. The plaintiff notified the police immediately and informed them that various items of jewellery had been stolen. The plaintiff informed police that the perpetrator created a hole in the ceiling of an apartment block to gain access to his apartment. Shortly after the event, the plaintiff lodged a claim on his insurance policy and sought losses from his insurer at the time, Commonwealth Insurance Ltd, for the aggregate amount of $323,600.00.
On around 10 December 2013, the Insurer refused the claim on the grounds that it was fraudulent and that the plaintiff had provided fraudulent statements and information in connection with the manner in which the theft occurred. As a result of such claims, the insurer invoked its rights under s56(1) and s60(1)(e) of the Insurance Contracts Act 1984 (Cth), which notes that where a claim is made fraudulently the insurer may refuse payment and may cancel the contract of insurance.
As a direct result of the decision made by Commonwealth Insurance Ltd, the plaintiff commenced proceedings against it on the basis that the insurer had breached its contract of insurance.
Questions considered by the Court
The first question to be determined by the Court was whether the alleged theft occurred in the manner covered by the policy of insurance and whether the policy extended coverage to such an insured event.
In order to consider these questions and whether the plaintiff made its claim to induce the insurer to accept the claim and make payment, the Court said it would first consider the policy entered into between the parties.
There was no dispute that the insurer was to cover for loss and damage resulting from theft, however, the insurer made submissions that an exception to a claim for theft existed. That exception is that if the loss or damage caused is intentional or is committed with reckless disregard for the consequences by the insured, it may refuse a claim and indeed cancel a policy on the basis that the insurer would be able to invoke its rights under s60(1)(e) of the Insurance Contracts Act 1984 (Cth).
In determining whether the theft occurred, the Court considered whether on a balance of probabilities it was likely that the intruder would have entered from the front door as opposed to the roof cavity. The Court determine that it was unlikely that the theft would have occurred from the roof cavity.
The Court noted that a finding of fraud requires a high standard of proof. The Court noted that the plaintiff’s evidence was not helpful and his recollection was quite poor. Notwithstanding this, the Court determined that it could not establish any fraud on part of the plaintiff and the defence pursuant to section 56(1) Insurance Contracts Act 1984 (Cth) would fail.
If an insurer wishes to invoke s56 on the basis of fraudulent statements, the statements must be fraudulent and the purpose for making such a statement must be done with the fraudulent purpose of inducing the insurer to pay a claim. The Court determined that inaccurate statements made, although indicative of a lack of credibility, cannot be deemed as fraudulent.
The Court ultimately concluded that fraud was not an element in these factual circumstances. Nevertheless, the Court found in favour of the defendant on the basis that it was unlikely that a theft occurred.