You can’t claim insurance if you lit the fire

07 February 2022

The Supreme Court of Queensland was satisfied on the balance of probabilities that a factory fire was deliberately lit to advance a fraudulent claim on the policy of insurance, notwithstanding that the allegation was steadfastly denied, the evidence was wholly circumstantial and the financial motive unclear.

In Issue

  • Whether the plaintiff caused a fire and then advanced a fraudulent insurance claim for the resultant loss.

The background

On 29 August 2015, the plaintiff, Cassa Bedding Pty Ltd’s (Cassa) bed manufacturing and wholesale business was destroyed by factory fire. Cassa promptly made a claim for indemnity under its insurance policy.

The defendant, Insurance Australia Ltd (formerly CGU Insurance Ltd) (IAL) alleged that the fire had been deliberately lit by Cassa’s sole director, Mr John Cassimatis.

The insurance policy contained an express exclusion for loss or damage caused by wilful acts of the insured (or another party with the knowledge and consent of the insured). IAL denied liability on the basis that the exclusion was triggered and that the claim was made fraudulently within the meaning of section 56(1) of the Insurance Contracts Act 1984 (Cth) (ICA), which provides that an insurer may refuse to pay a fraudulent insurance claim.

Mr Cassimatis steadfastly denied responsibility for the fire. Queensland Fire and Emergency Services and Queensland Police Service investigated the cause of the fire. However, no person was charged with any criminal offence in relation to it.

Cassa sought damages from IAL for breach of the insurance policy.

It was noted by way of background, that Mr Cassimatis had been the sole director of another bed manufacturing business which was destroyed by factory fire in April 2007. In that case, the insurer had answered the subsequent indemnity claim to the tune of $1.6 million.

The decision at trial

Despite the gravity of the allegations, Justice Burns was satisfied on the balance of probabilities that Mr Cassimatis was responsible for the fire, notwithstanding that the allegation was denied and there was no clear financial motive.

The Court reviewed voluminous evidence as to the existence of a financial motive for Mr Cassimatis to have lit the fire and claimed insurance. However, the evidence as to motive was convoluted. Cassa’s business was growing, but it was under capitalised. Further, Cassa’s best customer which accounted for around 25% of sales was in financial difficulty. It was suggested that Mr Cassimatis knew of Cassa’s best customer’s financial difficulties and that if it failed, the financial repercussions would be serious.

The Court considered the evidence could not be disentangled to satisfactorily prove any financial motive. However, the absence of any proved motive was not determinative. His Honour considered the evidence connecting Mr Cassimatis to the fire, although circumstantial, was so potent that that the absence of a proven motive was less important.

For his part, Mr Cassimatis maintained that he had nothing to do with the fire. His Honour was scathing of Mr Cassimatis’ account, describing it as:

…[from] almost start to finish a shameless concoction. Mr Cassimatis repeatedly lied under oath and, while there can be no doubting his intelligence or ability to parry under cross-examination, he left me with the firm impression that he had given a great deal of thought to how he might explain away any aspect of the evidence that he believed might implicate him in the starting of the fire…” [138]

His Honour was satisfied the facts gave rise to a reasonable and definite inference that Mr Cassimatis started the fire and knowingly advanced a fraudulent insurance claim. It was accepted the evidence established:

  • At about the same time a deliberate fire was started in the factory, a deliberate fire was started in a skip bin outside of the factory. Accelerant had been applied to both fires.
  • Mr Cassimatis was the perpetrator who lit the fires. He was alone in the factory when the fires were set. He then attempted to avoid detection when he was driving away from the factory by switching off his headlights at different times. Mr Cassimatis had attempted to explain this act, which was captured on CCTV footage, on the basis that he was undertaking motor vehicle diagnostics. His Honour considered this explanation was fanciful.
  • Mr Cassimatis lied to investigators about the time he left the factory to distance himself from the fire, in circumstances where the fire was seen by witnesses minutes after his departure from the factory.

His Honour found the fire and resultant loss were expressly excluded from cover under the Policy, being caused by the wilful conduct of Mr Cassimatis, with the knowledge and consent of Cassa. It was further found to be a claim made fraudulently within the meaning of section 56 of the ICA.

Cassa’s claim was dismissed by the Court and judgment entered for IAL on the whole of the claim.

Implications for you

This case demonstrates that in certain circumstances, despite the absence of clear motive and the serious nature of the allegations, circumstantial evidence may be so overwhelming as to satisfy the Court of wilful conduct on the part of the insured.

Cassa Bedding Pty Ltd v Insurance Australia Ltd [2022] QSC 1

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