Insurer Must Pay After Unfounded Fraud Allegations
Insurer Must Pay After Unfounded Fraud Allegations
The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.
A leading insurance company has been ordered to cover a fire damage claim submitted by a policyholder who passed away from cancer two years ago, highlighting the consequences of unjust fraud accusations.
The claim was initially submitted in January 2022 for damage incurred to the man’s remote metal home in New South Wales. The insurer denied the claim on the grounds that the property was fraudulently misrepresented in terms of its status and functionality.
The policyholder, under heavy medication due to his illness, was questioned by the insurance company’s investigators. Unfortunately, he passed away roughly five months following the submission of the insurance claim. His estate's executor took over the complaint afterwards.
Recently, the Australian Financial Complaints Authority (AFCA) determined that the insurer, IAG, did not provide adequate evidence showing that the policyholder had breached his disclosure commitments. Thus, they must honour the claim.
According to AFCA, “Even if there had been a breach, the insurer has not convincingly shown that it resulted in the renewal of the policy when it would not have been otherwise. Thus, it is fair that the insurer accepts the claim.”
AFCA pointed out that IAG did not submit a declaration from its underwriters to either prove it would not have undertaken or renewed the policy. Despite cautions regarding potential adverse inferences, the insurer failed to provide necessary documentation on its underwriting practices pertaining to this case.
Originally, IAG contended that the policyholder had wrongly described the condition of his property upon policy initiation in October 2019, claiming it was watertight, structurally sound, secure, well-maintained, and inclusive of functional kitchen and bathroom facilities, and specifying its construction date as approximately 2019.
The policy contained a clause explicitly stating, “We don’t insure buildings under initial construction.”
AFCA’s investigation found that, as of the relevant policy renewal date in October 2021, the property's construction was completed, and it had been continuously occupied for over a year, meeting structural and maintenance codes.
“Each renewal constituted a new insurance contract,” the ombudsman declared.
Moreover, AFCA emphasized that the allegation of fraud, which carries grave implications, wasn’t sufficiently supported given that for a misrepresentation to amount to fraud, it must be made either knowingly or recklessly.
EVEN if I had determined that the policyholder breached the disclosure duty-which I have not-the insurer did not provide necessary proof to show it would not have entered the 2021-22 policy period without the alleged breach,” AFCA noted.
In their ruling, AFCA also highlighted the insurance contract and product disclosure statements omitted critical information regarding the duty to avoid misrepresentation, relevant disclosure duties, or consequences of any such breaches.
For more information on the ruling, it can be reviewed here.
This article has been adapted from one originally published by Insurance News Magazine.
Please Note: We do not endorse any specific products or companies. Some content is sourced from third parties, including press releases, and may not be independently verified for accuracy or completeness.
New broker compliance data has put a spotlight on an issue that matters to every fitness professional who relies on public liability, professional indemnity or broader business insurance: renewal timing and communication. On 18 June 2026, Insurance Business reported that the Insurance Brokers Code Compliance Committee`s 2025 Annual Data Report recorded 5,417 breaches of the Insurance Brokers Code of Practice affecting 14,842 clients. - read more
Australian consultants rely on timely, accurate insurance renewals to keep professional indemnity, public liability and other business covers aligned with current contracts. A recent annual compliance update from the insurance broking sector has underlined why renewal discipline matters: missed or late renewal contact was reported as the leading category of broker code breaches for the past year. - read more
Build Australia’s latest construction technology coverage, published on 16 June 2026, highlights how geographic information systems, or GIS, are moving beyond digital mapping to become a practical project tracking tool for modern construction sites. The report frames GIS as a way to connect dispersed teams, complex schedules, site conditions and operational data into a shared spatial view, helping project leaders make faster and better-informed decisions. - read more
The liquidation of authorised representative network Sphere Insurance Group has put broker governance and client continuity back under the spotlight. According to early estimates reported by Insurance News, the failed network could owe more than $11 million to creditors, including insurers, underwriting agencies and a secured lender. The figures are preliminary and based on company records, with the liquidator still investigating the group’s financial position. - read more
Berkshire Hathaway Specialty Insurance (BHSI) has announced the promotion of Anna Spink to Head of Marine, Australasia. This strategic move underscores BHSI's commitment to bolstering its marine insurance operations across the region. - read more
Running a business comes with inherent financial risks. Whether you own a small café or a large construction company, unforeseen incidents can lead to significant financial losses. - read more
Today, we're diving into the world of public liability insurance, a crucial topic for anyone running a small business or working as a self-employed professional in Australia. - read more
Public liability insurance is a crucial aspect of managing risk for businesses in Australia. This type of insurance covers costs associated with claims made against a business for property damage or personal injury caused during business operations. - read more
Welcome to our comprehensive guide on public liability insurance. If you run a business, you've probably heard this term thrown around quite often. But what exactly is public liability insurance? - read more
Public liability insurance is designed to protect your business from financial loss if you are found liable for causing injury or property damage to a third party. This type of insurance covers legal costs and any compensation claims that might arise from accidents or incidents involving your business operations. - read more
Start Here !
Knowledgebase
Proximate Cause: The primary cause of loss in an insurance claim, which sets in motion a chain of events leading to the damage or injury.
No comments yet. Be the first to share your thoughts.