Insured gets burnt on fraudulent insurance claim

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By David Slatyer, Partner and Nica Manosca, Law Graduate

In Cassa Bedding Pty Ltd v Insurance Australia Ltd [2022] QSC 1, the Court dismissed Cassa Bedding’s (Plaintiff) claim for breach of policy of insurance against its insurer, Insurance Australia Ltd (Defendant). In Justice Burns’ reasons, he states he was satisfied to the standard required that the Plaintiff’s sole director, Mr John Cassimatis (Mr Cassimatis), was responsible for the fire, and therefore, the loss suffered by the Plaintiff.

Background Facts

The Plaintiff operated a bed manufacturing and wholesale business from a leased factory premises at Yeerongpilly. On 29 August 2015 at 9:25pm, the Plaintiff’s factory was burnt to the ground, including all equipment and stock, and as a result, the Plaintiff’s business was brought to a standstill. The Plaintiff quickly made a claim on its policy of insurance with the Defendant. However, after conducting extensive investigations, the Defendant refused to pay the claim and instead alleged that Mr Cassimatis had deliberately started the fire. Thereafter, the Plaintiff went into voluntary administration.

Mr Cassimatis has a long history in bed manufacture and sales, in various roles. From early 2007, he was the sole director of Mattress Innovations Pty Ltd, which owned a factory on Ipswich Road, Rocklea. This factory was also destroyed by fire on 25 April 2007. The insurer, Suncorp Metway, answered the policy and paid $1.6 million to Mattress Innovations Pty Ltd in or about August 2007.

On 14 February 2014, the Plaintiff was registered, with Mr Cassimatis becoming its sole director. The Plaintiff then purchased a mattress manufacturing business in Yeerongpilly, which was in financial difficulty. Mr Cassimatis then quickly expanded the business. He leased additional manufacturing premises and, prior to the fire, was investigating relocating the manufacturing to Vietnam.

The Proceeding

In the proceeding, the Plaintiff claimed indemnity for property and other economic loss occasioned by the fire under a policy of insurance with the defendant. The Defendant denied liability and maintained the claim on the policy made by the Plaintiff was made fraudulently within the meaning of section 56(1) of the Insurance Contracts Act 1984 (Cth).

The central issue for determination in this proceeding was whether the Defendant has proved to the required standard that the fire was deliberately lit by Mr Cassimatis in order to set up a fraudulent claim on the policy of insurance, an allegation which Mr Cassimatis strongly denied but also claimed would have been an act bereft of motive. In his denial, he stated he had “nothing to gain and everything to lose” by burning down the factory.

The onus was then on the Defendant to prove the following:

  1. that the fire was deliberately lit and, consistently with the way in which the case was conducted, that the person responsible was Mr Cassimatis;
  2. that the claim on the policy of insurance was made fraudulently;
  3. that the wilful act exclusion under the policy is engaged and/or that the claim was made fraudulently within the meaning of s 56(1) of the Insurance Contracts Act.

The Defendant alleged various circumstances against Mr Cassimatis which the Defendant alleged should infer arson. Among these alleged circumstances were “Mr Cassimatis driving away from the factory in darkness without his headlights illuminated to avoid detection; switching the lights for his vehicle off again as he approached and then passed the Yeerongpilly Railway station to again avoid detection; and misleading investigators about the time of his departure from the factory.” In addition to these, the Defendant alleged that Mr Cassimatis had a financial motive to burn down the factory, for reasons that the Plaintiff’s business was undercapitalised, had knowledge that its best customer was “in serious financial difficulty and likely to fail”, and a successful claim on the policy of insurance could accrue to the Plaintiff approximately $7.6 million dollars in policy benefits.

The Court was not satisfied that the Defendant had clearly identified and then proved to the standard required the existence of a motive to burn down the factory. However, the Court concluded that the “absence of any proved motive is not determinative” and “where, as here, the evidence connecting Mr Cassimatis to the act of destruction is so potent, the absence of any proven motive will assume less importance.”

To that end, the Court then focused on the circumstances that have been proved and considered the weight to be given to the united force of all of those circumstances in order to then determine whether the Defendant had proved its case. In determining the matter, the Court considered circumstantial evidence which included CCTV cameras, Queensland Fire and Emergency Services investigations, Queensland Police Service investigations, eyewitnesses and forensic evidence by fire investigation experts. While CCTV cameras in the factory were destroyed in the fire, the neighbour’s CCTV cameras produced vital evidence, including the time Mr Cassimatis left the factory, which he misled investigators about.

Decision

After considering all the evidence before it, the Court was satisfied to the requisite high civil standard (in Briginshaw v Briginshaw (1983) 60 CLR 336) that Mr Cassimatis was the only person in the factory from about 6:30pm until about 9:25pm and that prior to about 9:25 pm, Mr Cassimatis lit at least two fires, which were probably fuelled by an accelerant such as petrol; one outside the factory in the area of the skip and the other or others inside the building. After leaving the factory, Mr Cassimatis kept the headlights for his vehicle switched off to avoid detection. He then later lied to investigators about the time he left the factory, and subsequently caused a claim to be advanced on the policy of insurance on behalf of the Plaintiff for the loss caused by the fire. The Court was therefore satisfied that the fire was caused by the wilful conduct of Mr Cassimatis, with the knowledge and consent of the Plaintiff, and, as such, the Plaintiff’s claim is expressly excluded from cover under the policy. Further, the Court was satisfied that the claim was made fraudulently within the meaning of s 56 of the Insurance Contract Act. Therefore, the Defendant was entitled to refuse payment of the claim on the policy of insurance and was entitled to judgment on the whole of the claim made by the Plaintiff in this proceeding.

For further information, please do not hesitate to contact us.

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