December 2020


Fraudulent responses enable insurer’s claim rejection

by Partner Catherine McAdam and Lawyer Ellen Ryan,  Moray & Agnew*

An insurer has successfully avoided a life policy on the basis of fraud.

The insured, Peter Larcombe, committed suicide on 19 August 2016 by jumping from the roof of a car park in Los Angeles, California.

NSW Supreme Court Justice David Hammerschlag said there was a dearth of evidence about the circumstances of Mr Larcombe’s death. The death certificate recorded him as having never married and living in Dubai.

He had a bodyguard and was embroiled in a significant controversy about an alleged major fraud. There were allegations he had stolen millions of dollars.

Mr Larcombe was a cocaine user, a drinker and a smoker. Occasionally, he used drugs other than cocaine.

On 21 November 2014, 19 months before he died, Mr Larcombe took out a life insurance policy with OnePath Life Ltd. The policy amount, after indexation, was $2.625 million.

Catriona Smith, to whom he was married, was the nominated beneficiary.

She claimed under the policy but the insurer declined the claim on the basis Mr Larcombe failed to comply with his duty of disclosure and made misrepresentations about his smoking and drug use.

On 30 October 2014, Mr Larcombe had applied for the policy and represented that he did not smoke (at least in the last 12 months prior) and had never used drugs. In response to the following questions in the application form, he answered ‘no’:

  • During the last 12 months, have you smoked tobacco or any other substance?
  • Do you take, or have you ever taken drugs or any medications on a regular or ongoing basis?
  • Have you ever used or injected any drugs not prescribed for you by a medical attendant or have you ever received advice, counselling or treatment for drug dependence?

Relying on those representations, OnePath issued cover.

After proceedings began, OnePath obtained an order that Ms Smith answer interrogatories. As a result, she admitted that, before policy inception on 21 November 2014:

  • She had observed Mr Larcombe snort cocaine at least eight times in the six years before policy inception, including four months before completing the application.
  • She had observed him take ecstasy (amphetamine) tablets on 3-4 occasions in 2008 and 2009.
  • There were several occasions when she saw Mr Larcombe smoke tobacco during the 12 months to November 2014.

Ms Smith’s answers to interrogatories formed the basis of the underwriting evidence that, had the drug use been disclosed, death cover would not have been issued on any terms, and, had there been no drug use and had Mr Larcombe disclosed that he had smoked during the 12 months before the application, “smoker rates” would have been applied.

Issues and evidence

At hearing, the court determined all issues in OnePath’s favour, including that Mr Larcombe fraudulently failed to comply with the duty of disclosure imposed by the Insurance Contracts Act (ICA); and OnePath’s avoidance under s29(2) of the ICA should be upheld.

The only witnesses who gave evidence were Ms Smith and a treating doctor. Ms Smith conceded in cross examination that:

  • Mr Larcombe had a drug dealer
  • He likely used cocaine when she was not present.

OnePath called evidence that Mr Larcombe had a significant and long-standing history of taking illicit drugs, usually cocaine, but also base amphetamine, ecstasy and crystal methamphetamine. OnePath drew attention, in particular, to:

  • Ms Smith’s evidence, which disclosed no fewer than eight occasions, in the six years before policy inception, including four months before completing the application, she saw Mr Larcombe use cocaine and again on 31 December 2014, two months after the application
  • Mr Larcombe’s use of other drugs
  • A GP’s evidence that Mr Larcombe “binged on cocaine and ice” on the weekend of 13 September 2014 (six weeks before applying for the policy) and had raised liver function, which is consistent with alcohol or drug use
  • Another GP recording (seven months after policy inception) that Mr Larcombe had been taking cocaine heavily and him referring Mr Larcombe to the Sydney Clinic
  • The Sydney Clinic recording (seven months after policy inception) that, three years previously, Mr Larcombe took drugs every day for 18 months and was sober for about three months.

The Sydney Clinic records noted a “binging issue” and said Mr Larcombe had a problem with cocaine, base amphetamine, ice, and pills, and had had significant quantities of cocaine over the previous month.

The thrust of Ms Smith’s argument was that Mr Larcombe used cocaine in social settings, on special occasions or celebrations when people used it in the same way as others may drink alcohol together, and that it was a normal social activity within his social circle, even though it involved illicit drugs.

Ms Smith characterised Mr Larcombe’s drug use as recreational, occasional, irregular and sporadic. She argued the evidence did not establish any significant use of cocaine beyond that which she gave evidence of having observed.

Ms Smith argued Mr Larcombe did not know, and that a reasonable person in his position would not have known, that “occasional social use of cocaine was relevant to the decision of OnePath to insure his life, in circumstances where he was relatively young, of good health, self-employed in the finance business, earning a good income, and in a relationship with one young child”.

OnePath called evidence from the original underwriter (which was not challenged) that:

  • He would not have been prepared to offer cover on any terms had Mr Larcombe’s history of drug use (as disclosed in the answers to interrogatories) been disclosed
  • Had there been no drug use and Mr Larcombe disclosed that he had smoked tobacco in the 12 months before the application, a higher premium would have been charged.


In finding in favour of OnePath, the court found Mr Larcombe’s failure to disclose drug use was fraudulent. The court also found Mr Larcombe was a smoker and his answers to the questions about smoking were false.

In particular, the court found:

  • Mr Larcombe’s drug use was serious, regular and much heavier than revealed in Ms Smith’s evidence
  • Her submission the questions in the application were unclear was rejected. Justice Hammerschlag said the questions “are clearly and obviously directed to the use of illicit drug use”.
  • It was inconceivable that Mr Larcombe did not know he was, and for a long time had been, a “non-trivial drug user” and did not know and understand that his illicit drug use was relevant to OnePath’s decision whether to accept the risk and, if so, on what terms.

Justice Hammerschlag found Mr Larcombe did know and understood that but, regardless, a reasonable person in his circumstances could be expected to know that.

The court also rejected an argument that because Mr Larcombe had made some disclosures in the application, including the correct name of a GP, that established his lack of fraud.

Instead, the court found his disclosures were consistent with a finding of fraud, as nothing in the application would have alerted OnePath to any problem. It was significant that Mr Larcombe gave an inaccurate answer that his most health check was due to age (in fact he attended because he binged on cocaine) and he made no disclosure that he was a smoker.


The life insurance industry is well aware that fraudulent breach of the duty of disclosure is difficult to prove, especially when the insured is dead. The insurer needs to rely on inferences to establish fraudulent intent. This judgement establishes that fraud can be established despite the death of the insured.

The admissions made by Ms Smith about Mr Larcombe’s drug use, prompted by administering interrogatories, were critical to OnePath’s success. Interrogatories are a useful tool in obtaining admissions before a hearing, which assists an insurer to determine the strength of its case, before proceeding to a hearing.

*The authors appeared for OnePath in the proceedings. This is an edited version of an article that first appeared in the Moray & Agnew publication Legal Directions.

A November Sydney Morning Herald article detailed more information about the case and Mr Larcombe’s background.

Catriona Smith v OnePath Life Ltd [2020] NSWSC 1185

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