1. Car Theft and the Insurance Contracts Act 1984 (Cth)
SJ Traves

2. Scenarios:
Where the insured claims wrongly that his or her vehicle was stolen
Where the insured’s vehicle was stolen but the insured has breached a clause in the insurance policy
Where the insured claims his or her vehicle was stolen but makes an actionable non-disclosure or misrepresentation prior to entry into the insurance contract

3. Scenario #1
Where the insured claims wrongly that his or her car was stolen.

8. Australian Institute of Criminology
10% of all claims paid are received by policyholders who have fabricated or inflated a claim
Majority of insurance fraud is committed by otherwise law abiding people
Fraud adds $70 to the cost of every general insurance policy issued in Australia
25% of people knew someone who had made a false claim or “padded” a claim, 14% agreed that “padding” a claim is acceptable and almost 50% said they would do nothing if they became aware of an instance of insurance fraud

9. What is a “fraudulent claim?”
In order to prove fraud the insurer must show that the insured intended to deceive the insurer.
The insurer must prove there was not merely an error, or carelessness, or mistake on the part of the insured, but an intention to deceive it.

10. Proving fraud Insurer bears the onus
Standard of proof is the balance of probabilities
The court will require cogent evidence of such conduct: Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449.

11. s56(1):
Where a claim under a contract of insurance, or a claim made under this Act against an insurer by a person who is not the insured under a contract of insurance, is made fraudulently, the insurer may not avoid the contract but may refuse payment of the claim.

12. Dishonesty may attach to all or only part of a claim
Person claims vehicle stolen when in fact it was not then the whole claim is made fraudulently
Person truthfully claims vehicle stolen but wrongly claims that it contained at the time a $5000 laptop and $ worth of jewellery then only part of the claim is made fraudulently.

13. 56(2):
The Court may, if only a minimal or insignificant part of the claim is made fraudulently and non-payment of the remainder of the claim would be harsh and unfair, order the insurer to pay, in relation to claim, such amount (if any) as is just and equitable in the circumstance”.

14. 56(3):
The Court shall have regard to the need to deter fraudulent conduct in relation to insurance but may also have regard to any other relevant matter.

15. Cases which satisfy s56(2) are relatively rare.
Entwells Pty Ltd v National & General Insurance Co Ltd (1991) 6 ANZ Insurance Cases

17. Ricciardi v Suncorp Metway Insurance Limited [2001] QCA 190
56(2) seems only to apply where there is a distinct component of a claim which, although fraudulent, was minimal.
Chesterman J: “a fraudulent over statement of value by $10,000 or more is not capable of being regarded as minimal or insignificant”.

18. Is there a distinction between a fraudulent claim, and an otherwise valid claim which is supported by evidence tainted by fraud?
Compare GRE Insurance Ltd v Ormsby (1983) 29 SASR 498 and To v AAMI Ltd [2001] 3 VR 279.

19. GRE Insurance Ltd v Ormsby
Held: While it was true insured had provided a false statement this did not entitle insurer to refuse to pay the claim because the claim itself was valid.

20. To v AAMI Ltd [2001] 3 VR 279.
Existence of an underlying valid claim did not render fraud irrelevant.
Fraud would disentitle the insured from her claim whether the claim was in fact valid, or not.

21. Co-insureds
Where more than one insured is insured under a policy and one of the insureds acts fraudulently, but the other does not, may the innocent co-insured recover?
Look to the nature of the promise to insure: is the promise made to the insureds jointly, or separately?

22. Co-insureds Look to words of the policy first.
In absence of provision to the contrary, where two insureds insure separate interests in property the contract will be held to insure them separately and the interests of an innocent co-insured will be unaffected by the fraud of the other.
In absence of a provision to the contrary, where property is jointly owned then the rights of an innocent co-insured are affected by the fraud of the other.

23. No fraud but does the loss come within the terms of the policy?
Ocean Harvester Holdings Pty Ltd v MMI General Insurance Ltd [2004] QCA 41

24. Car theft and insurance claims
First determine whether the insured has established on the balance of probabilities that the vehicle was stolen so as to come within the terms of the policy
If your vehicle is stolen and not found we will pay you the agreed value…
“Stolen” has been held to mean “taken away without the cooperation or connivance of the insured: Simon v NRMA

25. Car theft and insurance claims
If this question is determined adversely to the insured, there would be judgment for the insurer.
If the insured is successful in establishing, on the balance of probabilities, that the vehicle was stolen, then it is necessary to consider the insurer’s contention that the theft of the vehicle was a fraudulent one.
The insurer must prove that the insured was involved or knew of the fraudulent event or activity: Purcell v SIO (1982) 2 ANZIC ; Hammoud Brothers Pty Ltd v Insurance Australia Ltd [2004] NSWCA 366; Rezo v NRMA Insurance Ltd [2004] ACTSC 123; Simon v NRMA Insurance Ltd [1992] NSWCA.

26. Scenario #2
Where the insured’s vehicle was stolen but the insured has breached a clause in the insurance policy.

27. What happens when an insured breaches a term in the policy?

28. Section 54 of the Insurance Contracts Act 1984 (Cth)
The section applies whenever an insured does an act or omission during the policy period as a consequence of which the insured would, but for s54, be entitled to refuse cover.

29. Insurer’s remedy under s54
Depends upon whether the act or omission by the insured could reasonably have contributed to a loss under the policy.

30. Could act or omission cause loss
If yes, insurer is entitled to deny the claim subject to the insured proving that it didn’t in fact cause the loss or was only partly responsible, in which case the insurer must pay the claim but can reduce it by an amount representing the prejudice suffered to it by the insured’s act or omission.
If no, the insurer must pay the claim but can reduce it by an amount representing the prejudice suffered to it by reason of the insured’s act or omission.

31. Scenario #3
Where the insured claims his or her vehicle was stolen but makes an actionable non-disclosure or misrepresentation prior to entry into the insurance contract.

32. Section 21 – duty of disclosure
The insured's duty of disclosure             
(1)  Subject to this Act, an insured has a duty to disclose to the insurer, before the relevant contract of insurance is entered into, every matter that is known to the insured, being a matter that:
                     (a)  the insured knows to be a matter relevant to the decision of the insurer whether to accept the risk and, if so, on what terms; or
                     (b)  a reasonable person in the circumstances could be expected to know to be a matter so relevant.

33. Section 21A
Motor vehicle insurance has been declared an “eligible contract” in the Insurance Contracts Regulations 2000
A less onerous disclosure obligation applies to domestic insurance (as opposed to commercial insurance)
Insured required to answer the specific questions asked in the proposal.

34. Certain statements not misrepresentations – s26
          
(1)  Where a statement that was made by a person in connection with a proposed contract of insurance was in fact untrue but was made on the basis of a belief that the person held, being a belief that a reasonable person in the circumstances would have held, the statement shall not be taken to be a misrepresentation.
(2)  A statement that was made by a person in connection with a proposed contract of insurance shall not be taken to be a misrepresentation unless the person who made the statement knew, or a reasonable person in the circumstances could be expected to have known, that the statement would have been relevant to the decision of the insurer whether to accept the risk and, if so, on what terms.

35. Remedy – s28
(2)  If the failure was fraudulent or the misrepresentation was made fraudulently, the insurer may avoid the contract.
(3)  If the insurer is not entitled to avoid the contract or, being entitled to avoid the contract (whether under subsection (2) or otherwise) has not done so, the liability of the insurer in respect of a claim is reduced to the amount that would place the insurer in a position in which the insurer would have been if the failure had not occurred or the misrepresentation had not been made.