In Sgro v Australian Associated Motor Insurers Ltd [2015] NSWCA 262, the New South Wales Court of Appeal determined that for an insurer to deny a claim on the basis of fraud, it must prove that the insured made a false statement for the purpose of persuading the insurer to pay the claim.


Mr Sgro was an owner of a 360 Modena Ferrari, which he had insured with Australian Associated Motor Insurers (“AAMI“). Mr Sgro alleged that his vehicle was stolen and he made a claim with AAMI for the value of the vehicle, being $190,350.00.

AAMI denied the claim on the basis that MR Sgro made six false statements in relation to his insurance claim, namely surrounding its whereabouts on the date of the alleged theft. On this basis, AAMI alleged Mr Sgro had committed fraud in accordance with section 56 of the Insurance Contracts Act 1984 (Cth) (“ICA“).

Mr Sgro commenced proceedings against AAMI in the District Court of NSW. Olsson J held that, although she had been satisfied that Mr Sgro’s vehicle was stolen, there were inconsistencies in his evidence that entitled AAMI to deny his claim pursuant to section 56 of the ICA. However, Olsson J did not make actually make any finding of fraud against Mr Sgro.

Decision on appeal

Mr Sgro appealed Olsson J’s decision on several grounds, including that her Honour had allegedly erred in a finding AAMI was entitled to refuse Mr Sgro’s claim pursuant to Section 56 of the ICA.

The Court of Appeal determined that, on the balance of probabilities, Mr Sgro could not establish that his vehicle was in fact stolen.

However, this did not necessarily mean that AAMI had established fraud for the purposes of section 56 of the ICA.

The Court of Appeal said that given the gravity and seriousness of a finding of ‘fraud’ it is important that such allegations are plead correctly and without fault. Although AAMI’s pleadings alleged that Mr Sgro had made false statements, AAMI did not plead that the false statements were made ‘with the intent to induce AAMI to pay the claim’.

The Court held that without such pleading it was unable to find that AAMI had established its case of fraud.


Insurers should be careful when denying claims based on fraud under section 56 of the ICA. It must be shown, and expressly pleaded, that the fraud was perpetrated with an intention to induce payment of the claim.