INITIAL ONUS OF PROOF STILL RESTS ON AN INSURED - EVEN IN A FRAUD CASE

The courts have once again confirmed a critical principle in insurance law: the initial onus of proof rests with the insured, even when fraud is alleged.

This principle was at the heart of the case involving Antonio Sgro, who claimed his Ferrari 360 Modena (insured with AAMI for an agreed value of $190,350) was stolen from a suburban Sydney street in 2011.

The Claim and the Dispute

Sgro alleged that his Ferrari was stolen during a five-hour window of opportunity near his home.  AAMI investigated the claim and refused payment on the basis that it was fraudulent.

Sgro commenced proceedings in the District Court and later appealed to the Court of Appeal.  He was unsuccessful at both stages, with the courts holding that AAMI was entitled to refuse the claim.

Key Legal Principles from the Case

This case highlights several important issues for insurers dealing with alleged fraud:

• Onus of proof remains with the insured
  Even where a defence of fraud fails, the insured must first establish that their claim is covered under the policy.  The onus is not discharged if the likelihood of the insured event having occurred is no greater than the likelihood that it did not occur.

• Insurers don’t have to disprove the claim outright
  An insurer does not bear the onus of disproving the insured’s claim in the first instance.

• No “benefit of the doubt”
  A court should not give a plaintiff the benefit of the doubt if the evidence does not establish that their version of events is more probable than not.

• Fraud requires more than dishonesty
  Dishonesty alone is not enough to make out a defence of fraud under section 56 of the Insurance Contracts Act 1984 (Cth).  Clear evidence must show that the conduct was engaged in for the purpose of obtaining a benefit.

• Establishing fraud is complex
  Fraud allegations are hard to prove.  Financial motive is only one factor.  The insured’s intention to create a false belief to obtain a benefit is a crucial element that must be established.

Why This Matters

For insurers, the case confirms that:

• The onus of proof remains with the insured from the outset.

• Courts will require clear evidence before accepting fraud as a defence.

• Fraud investigations must focus on intention and benefit, not just suspicion or motive.

For insureds, it is a reminder that even without a fraud finding, a claim may fail if it is not proven on the balance of probabilities.

Final Thoughts

This case underscores the importance of thorough investigations and evidence gathering in disputed claims.  Fraud allegations are serious and difficult to prove, but insurers are entitled to resist claims where the insured fails to discharge their initial burden of proof.

At QNA Investigations, we assist insurers by uncovering facts, verifying evidence, and providing clarity in complex claims.  If you’d like to know more, contact us by phone on +61 2 9212 5000 or via email at mail@qnainvestigations.com.au.

Read the original article here

Read the decision of the court of appeal here