AFCA determinations public reporting

Determination

 

Case number	12-00-1071922
Financial firm	NTI Limited

 

  

Case number: 12-00-1071922 18 September 2024

1.             Determination overview
   1.      Complaint

The complainant is an equipment dry hire business and held mobile plant and equipment insurance with the financial firm (insurer). On 3 August 2023, it lodged a claim for theft of an excavator it had hired out. The theft was said to have occurred on 21 July 2023.

The insurer denied the claim. It says that the complainant has not shown a claimable loss under the policy terms and that exclusions otherwise apply because the excavator had been hired out and the hirer, Z, did not return it.

The complainant maintains that the excavator was stolen after the hire contract had ended by someone other than Z. It wants the insurer to accept the claim on a total loss basis.

The complainant is represented by insurance broker P. For brevity’s sake, the complainant and P are referred to below as ‘the complainant’ unless context requires otherwise.

2.      Issues and key findings

Is the insurer entitled to deny the claim?

No. It is more likely than not the excavator was stolen after the hire period concluded. The complainant has therefore shown a claimable loss under the policy terms. The insurer has not established on the balance of probabilities Z stole the excavator, so the exclusions it relies on have not been triggered.

Why is the outcome fair?

The outcome is fair because the claim on balance falls within the scope of cover and the insurer has not established it is excluded.  

3.      Determination

This determination is in favour of the complainant.

The insurer is required to accept the claim, and pay to the complainant within 21 days of the date this determination is issued:

• the amount payable under the policy terms and conditions
• interest pursuant to section 57 of the Insurance Contracts Act, 1984 (Cth) (ICA) on that amount from 3 January 2024 (date claim was denied) to the date of payment.

 

2.             Reasons for determination
   1.      Is the insurer entitled to deny the claim?

No. It is more likely than not the excavator was stolen after the hire period concluded. The complainant has therefore shown a claimable loss under the policy terms. The insurer has not established on the balance of probabilities Z stole the excavator, so the exclusions it relies on have not been triggered.

​Complainant must show claimable loss under the policy  

​The complainant is required to show on the balance of probabilities (that it is more likely than not), that it suffered a claimable loss under the policy. This means it must show the loss was caused by a risk for which it is insured.  

​Subject to the terms and conditions set out in the product disclosure statement (PDS), the policy covers theft of insured property during the period of insurance.

The PDS defines ‘theft/stolen’ as ‘the dishonest or criminal act of appropriating or taking Insured Property, Extras or Working Accessories without the consent of the person in lawful possession thereof’.

The complainant dry hired the excavator to Z from 8 July 2023. The hire contract was extended several times and concluded on 20 July 2023. The complainant says when it went to collect the excavator from the agreed pick-up address on 21 July 2023, it was not there. On 25 July 2023, after multiple attempts to contact Z, the complainant notified the police.

​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.  

​Insurer denied the claim

The insurer appointed external investigator A to assist it with its enquires. On 14 November 2023, A interviewed B, a director of the company that owns the complainant. A transcript of the interview has been provided. B’s comments included that:

• as far as he was aware, Z was not a regular customer
• ‘I think he's a bit of a crook, to be honest’
• there had previously been five or six instances in which a hirer had stolen/not returned hired equipment. In all but one of those cases, he had eventually recovered the item
• he had not heard anything from the police, which was disappointing given the information he had provided to them about Z.

On 15 November 2023, A attended the pick-up address and confirmed the excavator was not there. A reported that the property owner H told him:

• Z had answered his ad for someone to undertake excavation work at his property. It became clear Z was not qualified to do the work, so he terminated the arrangement
• soon afterwards, sometime in late July 2023, his elderly mother had called him while he was not at the property, notifying him that a tow truck had arrived to collect the excavator
• he knew little about Z and had not spoken to him since he removed the excavator from the property in late July 2023.

The insurer notes from the police report that Z was identified on 25 July 2023 as the person of interest (suspect).

The insurer says the complainant has not noted an encumbrance or interest for the excavator on the Personal Properties Securities Register (PPSR). Nor has it identified the excavator as stolen on the PPSR or National Exchange of Vehicle and Driver Information (NEVDIS). The insurer submits that the excavator’s loss was not reported to police as a theft and has not been recorded as stolen.

In addition, the insurer says as the complainant attended the pick-up address on 21 July 2023 at which time the excavator could not be found, it is more likely than not that it was removed from that property during the hire period.

Seemingly in the alternative, the insurer says that while the period of hire finished on 20 July 2023, the complainant did not formally close out the contract until 4 October 2023. The insurer notes that the complainant had cancelled the policy with effect from 31 August 2023.

It also submits that the excavator could not have been transported by a hook or underlift tow truck. It says that style of towing requires the use of the towed vehicle’s rear wheels, and the excavator does not have wheels, it has tracks. It notes Z had a truck suitable to transport the excavator, which he had used to collect it at the start of the hire and that Z retained its key.

The insurer says P’s suggestion in an email dated 11 June 2024, that Z did return the key was a recent invention, not consistent with the evidence as a whole.

The insurer says that the complainant has not established a claimable theft loss because:

The client has wilfully and consensually parted with the machine under a hire contract with the Hirer, therefore the policies operative clause has not been triggered.

In addition, it submits that the claim is excluded because:

• the dry hire additional benefit, pursuant to which the standard exclusion – hire, lease or loan to a third party is deleted, excludes the hirer’s theft of or failure to return the insured property (PDS page 30)
• the policy does not cover loss or damage to insured property by an insured, anyone acting on their behalf or with their authority transferring title to or parting with the insured property whether voluntarily or induced by a fraudulent scheme, trick, false pretence or fraudulent business transaction (PDS page 36), and
• the policy does not cover theft of insured property by any person to whom the insured property is on hire under any agreement (PDS page 56).

Further, the insurer says that it does have a product offering that extends cover for non-return or theft by a hirer. It notes the complainant did not purchase such cover and, even if it had applied for the cover, the application would likely have been declined due to the prior history of thefts and non-returns.

Complainant says claim should be accepted

The complainant says Z only had lawful possession of the excavator during the hire period, which ended on 20 July 2023. It submits it is more likely than not that the excavator was unlawfully taken after that.

In support of its position, the insurer refers to H’s indication to A that the excavator was removed from his property in late July 2023, and to the notation on the police report that the incident type was ‘Actual Stealing’. It notes the policy does not oblige it to record the loss of the excavator on the PPSR or the NEVDIS.

In the circumstances, the complainant says it has established a claimable theft loss.

The complainant submits that the insurer has not proven on the balance of probabilities that the exclusions relied on apply. It notes that there is no evidence proving Z stole the excavator, and says the following information suggests he did not do so:

• he provided his personal details when he hired the excavator
• he would be the first person of interest in any police investigation
• he hired the excavator after responding to H’s advertisement, and commenced work for H
• he extended the hire period several times and paid the complainant
• it is unlikely that a thief would hire the excavator for a genuine job, commence work, extend and pay for the hire, and only after taking those steps, steal it
• the police have not charged Z.

The complainant acknowledges that it initially thought Z may have stolen the excavator. However, it says given the lack of evidence against him, it now believes the excavator was taken after Z left it at the agreed pick-up location (H’s property).

The complainant has provided an email from a towing company stating:

• it is common for the type of excavator involved to be moved from site to site without the operator being present
• these machines often have the same key, allowing a transport company to use keys easily purchased on the internet to move them between sites
• it also possible to use tilt trays to winch load this size of machinery without difficulty, as they are light enough to skid up the tray.

It also says that while it initially had difficulty contacting Z, it eventually did at which time he confirmed he had left the excavator at the pick-up location. Further, P says the reason the key’s return was not mentioned earlier was that he only discovered it had been after taking instructions, when for the first time AFCA, raised that as a specific issue.

The complainant says that the insurer’s alternative submission that the excavator was only stolen after the policy was cancelled is ‘a ridiculous scenario’.

Finally, the complainant says whether the insurer offers cover for non-return or theft by a hirer is not a relevant consideration. P also says that the cover cannot be added to the particular policy type the complainant held.

Insurer is not entitled to deny the claim

I am satisfied that the complainant has shown a claimable loss, and I am not satisfied the insurer has established the exclusions it relies on apply. This is because:

• the exchanged information supports a finding that the excavator has been stolen
• noting H’s comments, it is more likely than not that the theft occurred in late July 2023, after the hire period and Z’s right to lawful possession had ended
• therefore, there has been a theft for the purposes of the policy
• the exclusions the insurer relies on all relate to theft or fraudulent conduct by a hirer
• the insurer therefore must show it is more likely than not that Z stole the excavator
• that the complainant initially thought Z stole the excavator and the police named Z as a person of interest are not of themselves sufficient proof
• A recorded that H told him he had not spoken to Z since Z removed the excavator from his property in late July 2023. However, H was not present when the excavator was collected in late July 2023, he was told by his elderly mother a tow truck had arrived to take it
• A did not report that H’s elderly mother advised H that the person collecting the excavator was Z, or that she knew who Z was. Nor did A speak to her
• it is therefore unlikely H could have known that it was Z who collected the excavator
• I find the reasons the complainant has put forward as to why it is unlikely that Z took the excavator more persuasive
• in the circumstances, the insurer has not met its onus of proving on the balance of probabilities the exclusions have been triggered
• the formal closing out of the contract on 4 October 2023 does not mean the hire agreement remained on foot until then. The closing out was an administrative step, and it was noted that the step was being taken as the excavator had been stolen
• while the issue of whether and when Z returned the key has not been entirely satisfactorily explained, that does not alter the outcome.

Accordingly, the insurer is required to accept the claim. Within 21 days of this determination being issued, it is to pay the complainant the amount payable for the excavator under the policy terms and conditions. It is also to pay interest pursuant to section 57 of the ICA on that amount from 3 January 2024 (date claim was denied) to the date of payment.

2.      Why is the outcome fair?

The outcome is fair because the claim on balance falls within the scope of cover and the insurer has not established it is excluded.  

3.             Supporting information

1.      The AFCA process

AFCA’s approach is based on fairness

AFCA has determined this complaint based on what is fair in all the circumstances, having regard to:

• the legal principles
• applicable industry codes or guidance
• good industry practice
• previous decisions of AFCA or its predecessor schemes (which are not binding).

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.

We assess complaints on available information and circumstances

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:

• available documents
• the recollections of the parties
• all relevant circumstances.

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.