False evidence entitles insurer to reject claim

by Resolve Editor Kate Tilley

The NSW Supreme Court has ruled an insurer is entitled to deny a claim under a mobile plant and equipment package insurance policy because of fraud.

Citiline Concrete Pumping Pty Ltd took action against Chubb Insurance Australia Ltd after it denied a claim for damages to a concrete pump fitted onto a Volvo truck. 

Justice James Stevenson found Chubb was entitled, under s28(3) of the Insurance Contracts Act 1984, to reduce its liability to nil because of Citiline’s misrepresentation and non-disclosure about the pump unit’s history and it was entitled to refuse payment because the claim was made fraudulently (s56 of the Act).

Citiline’s owner, Ms Rania Nasr, engaged broker Arthur J Gallagher & Co on 24 January 2019 to insure the previously uninsured unit, which had been involved in accidents on 23 August 2017 and 11 September 2018.

Cover was bound on 13 February 2019 with effect from 31 January 2019 for 12 months. The unit was insured against material damage for $450,000 for the pump itself and $100,000 for the truck on which the pump was mounted. The policy also provided for loss of income cover of $30,000.

On 21 February 2019, Ms Nasr’s husband, Roger, used the unit to move a skip bin so he could get better access to clean and maintain the unit and it was damaged in the process.

No proposal form

No proposal form had been completed for the insurance, but the broker wrote to a senior underwriter at Chubb outlining details of the cover required, which included a statement: “no accidents/claims”.

Chubb argued that statement was a misrepresentation because the unit had been involved in “accidents” which had led to “claims” being made by Citiline against third parties responsible for those accidents. Chubb’s policy terms included that it was providing cover on the basis: “nil losses or claims last 5 years”.

Justice Stevenson said Mr Nasr had operated the unit on each of the prior incidents, but neither was his fault. Citiline claimed against the third party responsible each time and ultimately settled through their insurers.

The first accident occurred on 23 August 2017 when a tow crane operated by NZE Constructions Pty Ltd backed into the unit. As Citiline was uninsured, it made a claim on NZE, which then claimed on its insurer, Tokio Marine Management (Australasia) Pty Ltd. The claim was settled in June 2018 for $450,000.

The second incident occurred on 11 September 2018 when a piece of metal became detached from a Boral concrete agitator truck, fouling the unit’s pumping apparatus.

Citiline’s claim on Boral was referred to its insurer, CGU Insurance Ltd.

That claim was settled in February 2021 for $197,000.

Email erroneous

“Thus, the unit had been involved in two ‘accidents’, each of which had resulted in a ‘claim’ by Citiline to the third party responsible for the accident, which third party had referred that claim to its insurer,” Justice Stevenson said.

Citiline’s counsel argued the broker’s email should have been read as meaning there had been no “accidents” in which Citiline was at fault and no “claims” made by Citiline that were not “made whole” by a third party.

“The difficulty I see with that submission is that it is not what the broker said. The broker made the unqualified representation that there had been no ‘accidents’ or ‘claims’ at all,” Justice Stevenson said.

He said it was relevant that after the 2017 incident Citiline had been advised to completely replace the unit’s boom, slew gear, reduction gear box and other components for about $450,000, but decided to have another organisation repair the damage for about $200,000.

False evidence

Citiline’s counsel did not challenge Chubb’s evidence it would not have issued a policy had the insurer know the full circumstances.

On 20 June 2019, Ms Nasr met a Chubb investigator investigating the potential business interruption loss and told him there had been no damage to the unit when they purchased it and none since, until the 21 February 2019 incident.

Under cross-examination, Ms Nasr admitted she made untrue statements to the investigator “to avoid jeopardising Citiline’s claim under the policy and make it more likely that Chubb would pay the claim”.

Citiline Concrete Pumping Pty Ltd v Chubb Insurance Australia Ltd (No 2) [2022] NSWSC 1152 judgement 30/8/22