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Determination
Case number | 12-00-1081792 |
Financial firm | RAC Insurance Pty Limited |
Case number: 12-00-1081792 29 August 2024
The complainant held home building and contents insurance with the financial firm (insurer). He lodged a claim after the home was damaged by a fire on 7 May 2020.
The insurer initially denied the claim as it had cancelled the policy. However, in a previous determination, AFCA concluded that the cancellation did not take effect until after the fire occurred. The insurer was required to consider the complainant’s entitlement to coverage for the claim under the policy terms.
Following further investigations, the insurer has again denied the claim. It says the fire was deliberately lit by the complainant and that the claim is fraudulent.
The complainant disputes the insurer’s claim decision and wants it to accept the claim. He also seeks compensation for indirect financial losses including having to sell the home undervalue due to the damage, and compensation for stress and inconvenience.
Yes. Based on the exchanged information, I am satisfied it is more likely than not that the complainant deliberately lit the fire and that the claim is fraudulent.
No. As the insurer was entitled to deny the claim, it is not liable for the indirect financial losses claimed.
No. The insurer did not mishandle the claim and its decision to report the findings of its investigation to the police was not unreasonable.
The circumstances in which the home was damaged mean it would not be fair to require the insurer to cover the claim or to pay the complainant compensation.
This determination is in favour of the insurer.
The insurer is entitled to deny the claim. It is not required to take any other action.
Yes. Based on the exchanged information, I am satisfied it is more likely than not that the complainant deliberately lit the fire and that the claim is fraudulent.
The complainant is required to show, on the balance of probabilities (that it is more likely than not), that he suffered a claimable loss under the policy. This means he must show the loss was caused by a risk for which he is insured. This includes showing the loss occurred in credible circumstances consistent with known and confirmed evidence.
Subject to the terms and conditions set out in the product disclosure statement (PDS), the policy covers damage to the complainant’s home or contents caused by a listed insured event. Those events include ‘Fire’.
It is not in dispute that the complainant’s home was extensively damaged by fire on 7 May 2020. Accordingly, I am satisfied that he has shown a claimable loss under the policy terms.
Once the complainant proves the existence of a claimable loss, the insurer is liable for the loss unless it shows an exclusion or limiting condition applies. The insurer has the onus of proving, on the balance of probabilities, the application of the exclusion or condition.
The insurer’s records shows that the complainant informed it of the fire on the date the fire occurred. He advised that he had burnt his arm, a candle possibly spread the fire, and approximately $100,000 in damage to the home had occurred. The complainant also said he had been wanting to move east and that the home had been nothing but problems.
The insurer appointed fire scene expert SJ to assist it with its investigations. SJ interviewed the complainant on 28 May 2020, at which time the complainant said:
On 3 June 2020, the complainant provided essentially the same version of events to MS, the insurer’s investigator. However, when MS re-interviewed him on 2 August 2022, he:
Forensic and other evidence show inconsistencies in version of events
After interviewing the complainant and inspecting the home with him on 28 May 2020, SJ provided a report to the insurer in which he concluded:
SJ provided a supplementary report dated 20 November 2022. Based on the combustion and fire flow patterns, SJ rejected the complainant’s suggestion the fire may have been due to the presence of fumes left over from the January 2020 vandalism incident, or from third parties pouring flammable liquid in the home before he arrived. SJ maintained the views expressed in his first report.
The insurer obtained information from the fire service under Freedom of Information legislation (FOI). The information shows:
The insurer also obtained under FOI information from the police. The information shows:
Insurer says claim is excluded
Based on its investigations, the insurer says it is more likely than not that the complainant deliberately lit the fire. It says it is therefore entitled to deny the claim because the PDS states on page 28 that the policy does not cover:
Loss, damage or liability caused by, arising directly or indirectly from, or in any way connected with, an intentional act by you or your family or a person who has entered your site with consent from you or your family.
Insurer alleges fraud
The insurer also says the major inconsistencies between the versions of events presented and the available evidence indicate the claim is fraudulent. It has denied the claim on that basis as well.
The ability of an insurer to deny a fraudulent claim is confirmed by section 56 of the Insurance Contracts Act, 1984 (Cth) (ICA). Case law concerning that provision establishes that a finding of fraud ‘involves a finding that a person has been untruthful and deliberately so, with the intent of obtaining financial gain’.
It is self-evident that alleging fraud is a serious matter and should not be made lightly. While the standard of proof remains on the balance of probabilities, given the seriousness of a fraud allegation, I must be comfortably satisfied that a finding of fraud is warranted.
Typically, an insurer is expected to produce evidence of motive, opportunity, character and credibility, supported by expert evidence where appropriate.
Motive
The policy had sums insured of $315,000 for the building and $84,000 for contents.
The insurer has obtained bank statements from the complainant. It says these show he had almost no funds and considerable debts. He was receiving Jobseeker payments.
In addition, the insurer notes that the complainant had advised in interview that he had ceased employment in January 2020. Further, that the company he had been working for had gone into liquidation, owing him a significant amount.
The insurer also emphasises the complainant’s comments that he had wanted to move east and that the home had caused him nothing but problems.
Opportunity
The insurer emphasises that the complainant purchased a large amount of kerosene only 15 minutes before the fire, which the evidence shows was caused by a liquid accelerant such as kerosene. The insurer also says the complainant was the only person in the home when the fire occurred.
Character and Credibility
The insurer refers to the conflicting versions of events the complainant provided at various times to it, SJ, MS, the fire service and the police.
It says SJ’s report, which discredits the complainant’s versions of events, should carry enormous weight given his expertise.
Additionally, the insurer notes that the complainant has an extensive criminal history, including for dishonesty offences and a separate arson charge.
The complainant says the insurer has unjustifiably denied his claim. He maintains that he had nothing to do with causing the fire.
He has not provided any expert reports but submits that SJ was biased as he was being paid by the insurer. He also points out that the charges the police brought against him in relation to the fire were eventually discontinued.
Insurer is entitled to deny the claim
Based on the exchanged information, I am satisfied it is more likely than not that the complainant deliberately lit the fire and that the claim is fraudulent. I find SJ’s reports and the insurer’s submissions on motive, opportunity, character and credibility persuasive.
I do not accept the complainant’s submission that SJ was biased merely because he was retained by the insurer. SJ is entitled to be paid for his expertise. SJ has extensive experience and qualifications as a fire investigator. Further, his findings are supported by the documents the insurer obtained under FOI.
I acknowledge that the charges of attempted fraud and criminal damage brought against the complainant were discontinued. However, as is apparent from the police FOI documents, the police clearly considered there was sufficient evidence to bring the charges. The decision to discontinue appears to have been made by the director of public prosecutions based on the prospect of meeting the criminal standard of proof.
The outcome in relation to the criminal charges is not binding in relation to this complaint as the burden of proof in criminal matters is beyond reasonable doubt while in civil matters (such as this) it is on the balance of probabilities
No. As the insurer was entitled to deny the claim, it is not liable for the indirect financial losses claimed.
Under paragraph D.3.2 of the AFCA Rules, we may require an insurer to compensate a complaint for indirect financial/consequential loss outside the policy terms. The maximum amount we may award is capped at $6,300. This may include the loss of use of a damaged item, a loss of income, or a loss of business opportunities.
The complainant claims the following indirect financial losses which he says he incurred due to the unreasonable actions of the insurer:
However, I am not satisfied that the insurer acted unreasonably. To the contrary, I have found that it was entitled to deny the claim because it is more likely than not the complainant intentionally lit the fire.
Accordingly, the insurer is not liable for the indirect financial losses claimed.
No. The insurer did not mishandle the claim and its decision to report the findings of its investigation to the police was not unreasonable.
Under paragraph D.3.3 of the AFCA Rules, we may award compensation for non-financial loss (capped at $6,300) where the insurer’s actions have caused an unusual amount of physical inconvenience, time taken to resolve the situation, interference with the complainant’s expectation of enjoyment or peace of mind.
The complainant says the insurer caused him considerable stress and inconvenience by unreasonably denying his claim. Further, he maintains that it acted inappropriately by reporting the findings of its biased investigations to the police. He says this led to his imprisonment for six months on charges of attempted fraud and criminal damage, only for the police to discontinue the charges.
I have already found that the insurer was entitled to deny the complainant’s claim on the basis he deliberately lit the fire. Further, I am not satisfied that the insurer’s investigations were biased. Given the serious issues that those investigations revealed, I consider that it was appropriate for the insurer to refer the matter to the police.
I note that documents the insurer obtained from the police and the complainant’s criminal history check certificate show:
I also acknowledge the insurer’s submission that the complainant did not raise any concerns about the fire damage having been disturbed or altered when he inspected the home with SJ on 28 May 2020, or in his various interviews.
In the circumstances, I am satisfied that the insurer did not mishandle the claim and its decision to report the findings of its investigation to the police was not unreasonable. It is not required to pay the complainant non-financial loss compensation.
The circumstances in which the home was damaged mean it would not be fair to require the insurer to cover the claim or to pay the complainant compensation.
AFCA has determined this complaint based on what is fair in all the circumstances, having regard to:
The respective parties have completed a full exchange of the relevant information, and each party has had the opportunity to address any issues raised. I have reviewed and considered all the information the parties have provided.
While the parties have raised several issues in their submissions, I have restricted this determination to the issues that are relevant to the outcome.
AFCA is not a court of law. We do not have the power to take or test evidence on oath, or to require third parties to give evidence.
When we assess complaints, we consider:
We give more weight to documents created at the time the events occurred. If there are no relevant documents, we will decide what most likely occurred based on the available information.
If there are conflicting recollections and these are evenly weighted, we may find that a claim cannot be established.
