The importance of telling the truth when obtaining insurance and lodging claims
10 Oct 2023
Introduction
In the recent case of Citiline Concrete Pumping Pty Ltd v Chubb Insurance Australia Ltd [2023] NSWCA 123, the New South Wales Court of Appeal handed down a decision that highlights the importance of telling the truth when arranging cover and when lodging claims.
The Case in a Nutshell
The case revolves around Citiline Concrete Pumping Pty Ltd (Citiline) and their pursuit of indemnity under a Mobile Plant & Equipment Package Insurance Policy (the Policy) issued by Chubb Insurance Australia Ltd (Chubb). This claim related to damage sustained by a concrete pump mounted on a Volvo truck (referred to as the "Unit") on 21 February, 2019.
Chubb contended that it was not liable to indemnify Citiline based on the following three points:
1. Misrepresentations: Chubb asserted statements made regarding the Unit at the inception of the policy were misrepresentations for the purposes of the Insurance Contracts Act 1984 (Cth) (the Act).
2. Non-disclosure: Chubb asserted that it could reduce its liability to zero due to Citiline's non-disclosure regarding the Unit's history.
3. Fraud Defence: Chubb contended that the claim was fraudulent pursuant to s 56 of the Act, entitling it to refuse payment.
Background
Citiline engaged an insurance Broker (Broker) on 24 January 2019, to secure an insurance policy for the Unit. The Policy was effective from 31 January 2019 to 31 January 31, 2020.
By way of email sent on 24 January, 2019, the Broker informed Chubb that there had been 'no accidents/claims' involving the Unit for the past 5 years.
The policy was active as of 13 January, 2019.
Citiline had, however, a history of using the concrete pump without insurance coverage and had previously been involved in accidents in both 2017 and 2018, incurring substantial damage. In each of these instances, Citiline opted to pursue claims against the responsible third parties, eventually reaching settlements through their insurers.
On 21 February 2019, Citiline's sole director and shareholder, directed her husband to perform maintenance on the concrete pump. During this routine maintenance work, while moving a skip bin, the concrete pump sustained damage. Citiline sought indemnity under the Policy for the damage sustained to the Unit.
Chubb declined indemnity.
Citiline commenced proceedings in the NSW Supreme Court.
Citiline lost at first instance and appealed the decision.
The Appeal
The New South Wales Court of Appeal upheld the primary judge’s findings and dismissed the appeal with costs. In doing so, the Court made the following findings:
1. Misrepresentation
At trial, Citiline conceded that the Unit 'had suffered accidents' and that 'there had been losses and claims'.
Chubb led evidence from the Head of Inland Marine Australia and New Zealand that, had the broker or Citiline disclosed the circumstances, Chubb would not have provided cover.
The Court found that statements made in the broker's email dated 24 January 2019, asserting that the Unit had not been part of any 'accidents' and had not been subject to any 'claims,' constituted misrepresentations having regard to section 26 of the ICA.
2. Non-disclosure
His Honour also concluded that Citiline failed to comply with its duty of disclosure under s 21 of the ICA, particularly in light of Chubb’s email dated January 24, 2019 that the terms of cover were subject to there being no losses or claims for the past 5 years.
Taking into account the evidence submitted during the trial, his Honour determined that Chubb was entitled to reduce its liability for the claim to nil pursuant to s 28(3) of the ICA. This aligns with the position Chubb would have been in had Citiline not made the representation and the true position disclosed.
3. Fraud s 56 of the Act
Section 56(1) of the Act allows an insurer to reject a claim if it is deemed fraudulent. Chubb argued that Citiline's claim was fraudulently made, as false statements were knowingly presented to induce the insurer to fulfill the claim.
The Court determined that the claim was made fraudulently in circumstances where:
• Citiline failed to disclose pre-existing damage when directly questioned by Chubb's loss adjuster.
• During cross-examination, Citiline openly admitted to making false statements to the loss adjuster regarding the pre-existing damage. These false statements were made with the intention of safeguarding Citiline's claim under the Policy and increasing the likelihood of Chubb approving the claim.
Accordingly, the Court held that Chubb had the right to deny payment of the claim in accordance with section 56(1) of the ICA, as the claim had been made fraudulently.
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