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District Court 27 April 2012

Younan v GIO General Limited

[2012] NSWDC 67

Fraud & dishonesty
INSURANCE FRAUDULENT CLAIM INSURER ENTITLED TO REFUSE PAYMENT

Citation: Younan v GIO General Limited [2012] NSWDC 67
Court: District Court of New South Wales
Date: 27 April 2012
Judge(s): Gibson DCJ

Background

The plaintiff brought proceedings against her motor vehicle insurer for breach of contract, seeking $70,000. This sum represented the difference between the agreed insured value of her vehicle ($80,000) and the $13,500 salvage proceeds recovered after the vehicle was written off in an accident on 1 August 2010.

The insurer refused to pay the claim. It relied on two grounds: alleged non-disclosure of the plaintiff's suspended driver's licence when the policy was taken out in December 2009, and the plaintiff's subsequent conduct in withholding information about the whereabouts of her partner, Mr Raymond Younan, during the insurer's investigation.

The insurer raised defences under both ss 28 and 56 of the Insurance Contracts Act 1984 (Cth). Section 28 addresses non-disclosure and misrepresentation before the contract is entered into. Section 56 addresses fraudulent claims made under the policy.

  • Whether the plaintiff or her partner fraudulently failed to disclose the suspension of the plaintiff's driver's licence when the insurance policy was taken out.
  • Whether, if the non-disclosure was not fraudulent, the insurer's liability should nonetheless be reduced under s 28(3) of the Insurance Contracts Act.
  • Whether the insurance claim itself was made fraudulently within the meaning of s 56 of the Insurance Contracts Act, entitling the insurer to refuse payment.
  • What weight to give to conflicting and inconsistent evidence from the plaintiff, her partner, and the insurer's witnesses.

Decision

Gibson DCJ found the plaintiff and her partner had maintained an intimate personal and financial relationship throughout the relevant period and were, in practical terms, living together. The court rejected their evidence that Mr Younan would not have known of the plaintiff's driving history. It found the transfer of the vehicle into the plaintiff's name and the subsequent taking out of insurance were driven by Mr Younan's need to protect himself from the consequences of his own impending licence loss.

The court was satisfied, applying the elevated civil standard in Briginshaw v Briginshaw (which requires greater caution and more cogent evidence where serious allegations such as fraud are involved), that the plaintiff and Mr Younan had a dishonest intent to induce the insurer to provide the policy. The failure to disclose the plaintiff's suspended licence amounted to fraudulent non-disclosure. On that basis, the insurer was entitled to refuse payment under s 56 of the Insurance Contracts Act.

Gibson DCJ added that even if the non-disclosure had not been characterised as fraudulent, liability would have been reduced to nil under s 28(3). That subsection permits reduction of an insurer's liability to the amount that would have applied had the non-disclosure not occurred. The court found that had the true position been disclosed, the insurer would not have issued the policy at all.

The court also noted a series of false statements made by the plaintiff during the investigation, including misleading information about Mr Younan's whereabouts, which contradicted the documentary evidence and further undermined the plaintiff's credibility.

Orders Made

  • Judgment for the defendant.
  • The plaintiff to pay the defendant's costs.
  • Liberty to restore in relation to costs.
  • Exhibits retained for 28 days.

Key Takeaways

  • The District Court confirmed that fraudulent non-disclosure at the time of entering an insurance policy can entitle an insurer to refuse payment of a subsequent claim under s 56 of the Insurance Contracts Act 1984 (Cth).
  • Applying the Briginshaw standard, fraud in civil insurance proceedings must be established with evidence commensurate with the seriousness of the allegation. The court found that standard was met on the facts.
  • Under s 28(3) of the Insurance Contracts Act, even where non-disclosure is not fraudulent, an insurer's liability may be reduced to nil where the insurer would not have entered into the contract on any terms had it known the true position.
  • Inconsistencies between a claimant's early recorded statements, documentary evidence, and later court testimony were significant factors in the court's adverse credibility findings.
  • A close personal and financial relationship between a policyholder and the person who arranged the policy may be directly relevant to whether knowledge of material facts can be attributed across both individuals.

Legislation and Cases Referenced

Legislation
- Insurance Contracts Act 1984 (Cth), ss 28 and 56
- Evidence Act 1995 (NSW), s 135

Cases
- Briginshaw v Briginshaw (1938) 60 CLR 336
- Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449
- Hammoud Bros Pty Ltd v Insurance Australia Ltd [2004] NSWCA 366
- To v Australian Associated Motor Insurers Ltd (2001) 3 VR 279
- Walton v Colonial Mutual Life Assurance Society Ltd [2004] NSWSC 616
- Australian Securities and Investment Commission v Rich (2005) 216 ALR 320
- Simon v NRMA Insurance Ltd (NSW Court of Appeal, 22 October 1991, unreported)
- NASA v AAMI (NSW Court of Appeal, 22 October 2001, unreported)
- Aqua-Marine Marketing Pty Ltd v Pacific Reef Fisheries (Australia) Pty Ltd (No 4) [2011] FCA 578
- Rural Enterprises Pty Ltd v Rimanui Farms Ltd [2010] NSWSC 1036
- Trimcoll Pty Ltd v Deputy Commissioner of Taxation [2007] NSWCA 307