Insurer not required to indemnify policy holder for injury on farm

The District Court of New South Wales has ruled that Insurance Australia Limited (IAL) was entitled to deny indemnity to the cross-claimant for a personal injury claim on several issues, including due to the broad drafting of the exclusion clauses and fraud.

In issue

• The right of the insurer to decline indemnity in respect of claims made with the dishonest intent of inducing a false belief, for the purposes of obtaining indemnity under a policy.

The background

The plaintiff, Mr Lynch, initiated a claim against Bredbo Pty Ltd (Bredbo) and a director of Bredbo, Mr Streeter, for injuries he sustained on 9 September 2022 when a vehicle driven by Mr. Streeter on Bredbo’s farm property overturned. Mr Streeter, in turn, brought a cross-claim against Insurance Australia Limited (IAL) for indemnity under an insurance policy between IAL and Bredbo.

Pertinently, the plaintiff had been engaged by Mr Streeter to provide painting services at the property, however, on the date of the subject incident, he had been invited to participate in an evening of hunting (predominantly deer and pigs) on the property. Mobile video evidence of the incident recorded an obscured view of Mr Streeter driving the ATV into the path of a wild pig, causing the vehicle to roll and fracturing the plaintiff’s leg.

Mr Streeter submitted two versions of the claim form to IAL. The first, submitted on 6 October 2022, described the accident with a 'worker' as a passenger in an all-terrain vehicle, which swerved and rolled due to soft, wet ground and neglected to include the time of the accident. The second, submitted on 12 October 2022, included the time of the accident (8:45 pm), and referred to the injured party as a ‘claimant’ rather than a ‘worker’.

In light of the apparent discrepancies in the evidence, IAL challenged the grant of indemnity on multiple grounds, including whether:

1. The injury in question arose in connection with Bredbo’s 'business' such that the insuring clause was triggered
2. The Firearms Exclusion in the policy applied in the circumstances
3. Mr Streeter deliberately (or recklessly or negligently) hit the pig with the ATV in breach of the Legality Condition
4. Mr Streeter’s conduct in respect of the incident was in breach of the Reasonable Precautions Condition
5. Mr Streeter had lied about the purpose of the trip and whether the plaintiff was working at the time of the incident with the dishonest intention of inducing a false belief on the part of his insurer, amounting to fraud pursuant to section 56 of the Insurance Contracts Act 1984 (ICA)

The decision at trial

The judgment provides a succinct summary of relevant case law regarding policy interpretation. In particular, Gibson J cited the approach outlined by the High Court in McCann v Switzerland Insurance Australia Ltd and Ors (2000) 203 579, being as follows:

Adopting the above principles, her Honour found in IAL’s favour on each ground except for the breach of the Legality Condition, as follows:

1. Although it was not in dispute that the policy responded to incidents, 'arising out of or in connection with ownership and occupation of the premises and any private work undertaken by employees', the court accepted IAL’s submission that to extend to these circumstances would render the insuring clause so broad that it would need to respond to any liability in connection with the ownership and occupation of the farm. Additionally, the plaintiff was found not to be an employee.
2. Despite the fact that the incident did not involve the use of a firearm, the court held that the drafting of the Firearm Exclusion was so broad that it would be enlivened in circumstances which arose out of 'an activity involving the use' of a firearm. As the hunting trip involved the use of a firearm, the exclusion applied.
3. With respect to grounds 3 and 4, Gibson J accepted that Mr Streeter had engaged in reckless behaviour in the operation of the ATV, however, the evidence did not substantiate a finding that the Legality Condition was triggered.
4. Finally, the court addressed the allegations of fraud and emphasised the serious implications arising from such a claim. This required a careful evaluation of the evidence and, in this matter, Gibson J concluded that Mr Streeter’s credit and the inconsistencies in the documentary evidence (including text messages, statements, correspondence and, of course, the footage of the incident) were sufficient to conclude that IAL had met the burden of proof for fraud and was entitled to refuse indemnity pursuant to section 56 of the ICA.

The court dismissed Mr Streeter’s cross-claim, and costs were reserved for special orders.

Implications for you

This decision highlights important considerations for Insurers:

• Thorough Investigations: Insurers must remain vigilant and conduct comprehensive investigations into the causes of incidents, questioning any missing information or discrepancies in claim forms. The presence of conflicting evidence, such as video footage or witness statements, can play a crucial role in establishing fraud.
• Intention of the policy: Notwithstanding broad drafting of clauses, consideration must be given to the commercial intention of the policy and the extent of the coverage intended by Underwriters.

This case also reinforces the importance of transparency and honesty in the claims process. Insurers are within their rights to deny claims based on fraudulent intent, but the allegations must be substantiated with clear, convincing evidence. This decision serves as a reminder for insurers to thoroughly investigate claims, particularly when fraud is suspected, and to ensure that all relevant information is considered before making a final determination.

Lynch v Bredbo Pty Ltd [2025] NSWDC 54