Declining Claims For False Statements Requires Strong Evidence

An insurance company can decline a claim if you make a false statement in support of your claim.  Fabricated losses such as staged burglaries, arson and exaggerated claims where contents that were not owned by the insured but are added to the claim as lost, stolen or damaged are examples of false statements.  Be aware that even if you have a genuine claim, false statements provided to the insurance company’s claims officers, investigators or loss adjustors, such as not telling the entire truth about circumstances surrounding the claim, can also entitle an insurance company to decline the claim.  The effect can have serious consequences for you as the insurance company may then cancel your insurance leaving you possibly in breach of your obligations to the bank and you may find it difficult to get cover from other insurance companies.

The onus of proof to decline a claim based on a false statement is on the insurance company to prove as confirmed in the recent High Court case of Angus v ACE Insurance Limited [2014] NZHC 258 per Cooper J.  The insurance company declined a claim for damage to a property caused by a deliberately lit fire.  The customer claimed that robbers had burnt down the property.  The insurance company alleged the customer had made a false claim and had actually started the fire himself (based on the police conclusion).  The High Court held that where the crucial issues concern credibility, the assessment of the evidence must take into account the seriousness of the allegations i.e. fraud and arson.  The Court stated that there needs to be strong evidence supporting the insurer’s allegations in order to meet the test to prove the statement was false on the balance of probabilities.  In this case, the Court found on the balance of probabilities that the insured had set the hotel on fire for the purpose of making a false claim.

The important point to take from the case is that insurers must have strong evidence to decline a claim based on the allegation of a false statement.   Given the potential consequences of having a claim declined, it is definitely worthwhile considering challenging an insurer’s decision, especially since the onus is on the insurer to have strong evidence in support of an allegation that there was a false statement.

It is obvious to avoid declinature you must tell the truth when making a claim.  However, if the insurer decides to investigate your claim, misinterprets your answers and declines a claim based on an allegation of a false statement, it may be worth your while contacting me to discuss whether the insurer’s decision can be challenged.