Did you know? There is a burden on an insured to prove that a claim made by the insured under a policy of insurance is covered by that policy.
The Burden of Proving an Insurance Claim
An insured who makes a claim under a policy bears the burden of proving, on the balance of probabilities, that the loss event being claimed is covered by the scope of the insurance policy.
The insured must establish that:
- an event covered by the policy has taken place;
- the event took place within the period of policy coverage; and
- the event caused the insured’s loss that is being claimed.
Once the insured has established these matters, the burden of proof then shifts to the insurer to show the loss event is not covered for reasons such as the applicability of any relevant exclusion.
The interesting facts and finding in the House of Lords decision of Rhesa Shipping Co SA v Edmunds (The Popi M) [1983] 2 Lloyds’ Rep 235 demonstrates an insured’s burden of proving that a loss event covered by a policy took place.
Facts of the Case
A shipping vessel, The Popi M, sunk in calm seas under fair weather. The shipowners claimed against her hull and machinery underwriters, contending that the ship’s sinking was caused by either a peril of the sea or by the crew’s negligence. The suggested peril of the sea was a submerged submarine.
The underwriters contended that the ship sunk because it was not seaworthy.
At the initial trial, the Court rejected both the shipowner’s contention that the vessel sank because of the crew’s negligence, and the underwriter’s argument that the vessel was not seaworthy. By way of “deductive reasoning”, the Court then concluded that the only explanation for the vessel’s sinking must have been that it had collided with a submerged submarine as this was the least unlikely cause of the loss. The Court of Appeal upheld this decision, and the matter made its way to the House of Lords.
The House of Lords found that the shipowners had not shown, on the balance of probabilities, that the submarine theory was the cause of the loss. In so deciding, the House of Lords commented that the earlier findings of the Court that a submarine was the reason for the ship’s demise was based on the unjudicial dictum in the Sir Arthur Conan Doyle novel, The Sign of Four, where Sherlock Holmes says to Doctor Watson “How often have I said to you that, when you have eliminated the impossible, whatever remains, however improbable, must be the truth?”.
The Rhesa Shipping-decision demonstrates that mere speculation of how a loss event may have occurred would not be sufficient for an insured to displace the burden it has to prove that a loss event had occurred that is covered by an insurance policy. As a first step for any successful claim, the insured must show that the claim is covered by the policy. If the insured does not satisfy this, the claim should be declined.
The content of this article is intended to provide a general guide to the subject matter. Specific advice should be sought about your specific circumstances.
