Homeowner wins fire dispute after insurer alleges fraud

A claimant whose property was severely damaged by fire will be compensated after successfully challenging an insurer’s decision to decline the claim over allegations of fraud.

Insurance Manufacturers of Australia said the complainant had not been “truthful and frank” in describing the circumstances of the event and that the available information showed that it was “more likely a fraudulent claim”.

The homeowner said the insurer acted on incorrect information and had no “actual evidence” to prove its argument. He sought for the insurer to cover the loss as well as further compensation for its claims handling.

The insurer said it relied on investigations from its assessor, evidence from the complainant’s neighbours, and the circumstances of the claim lodgement to come to its decision.

It noted that the loss occurred within three months of the inception of the home building policy and that the man only lodged the claim months after the fire occurred.

The insurer also referred to “vague and inconsistent” statements made by the claimant to its investigator and that a forensic report suspected human involvement as part of the cause of the fire.

The Australian Financial Complaints Authority (AFCA) accepted that there was reasonable cause for the insurer to investigate the claim but said there was insufficient evidence to show that the fire was deliberately lit.

AFCA said the forensic report issued “a few hypothetical assumptions” as possible causes of the fire but concluded that the source had been undetermined.

It acknowledged that some nearby residents held concerns regarding the property owner but said this was unreliable evidence to show that the man had intentionally caused the fire. It also highlighted that the neighbours and claimant had a strained relationship, potentially influencing their testimony.

The complainant said that he intended to lodge the claim on May 25 2021, a day after the fire, but was told by a representative of Insurance Manufacturers of Australia that a police report number was required given the circumstances of the claim. The insurer questioned his recollection, saying this was not usual practice.

AFCA noted call records that showed the complainant phoned the insurer on May 25, with the call lasting about 38 minutes. It said that without further notes from the insurer on the nature of the conversation, the claimant’s recollection was likely accurate.

The ruling said that Insurance Manufacturers of Australia’s case against the homeowner was “based on circumstantial evidence,” and was not compelling enough to show that the claim was fraudulent.

“The complainant has shown he has no criminal record. The information from the complainant shows he is experienced in purchasing and renovating properties,” AFCA said.

“He has provided reasonable information in support of his position and which also highlights inconsistencies in the insurer’s evidence.”

It required the insurer to accept the claim and award the homeowner $2000 for non-financial losses caused by the insurer’s handling of the claim as well as a $5000 contribution to his legal costs.

AFCA noted that the insurer “continued to push the investigation” despite limited information to show that the claim was fraudulent, which unnecessarily extended the claim.

“I accept the insurer was entitled to investigate the claim and that the initial circumstances and indications provided reasonable cause for it to investigate the claim,” AFCA said.

“However, after a certain point, having investigated various aspects of the claim, it was reasonably clear that the element required to pursue an allegation of fraud was not present.”

Click here for the ruling.