Key Takeaways

The QSC has decided in favour of Insurance Australia Limited’s (‘IAL’) rejection of a multi-million dollar claim by Cassa Bedding Pty Ltd (‘Cassa’) on the basis that the fire was deliberately lit by Cassa’s sole director, John Cassimatis (in circumstances where there was no proven motive to the standard required), for the purpose of fraudulently obtaining benefits under the policy within the meaning of s56(1) of the Insurance Contracts Act 1984 (Cth) (‘ICA’).

Brief Facts

The plaintiff, Cassa, operated a bed manufacturing and wholesale business from its leased factory premises at Yeerongpilly, Brisbane, Queensland.

Cassa’s factory was destroyed by fire shortly after 9:15pm on the evening of Saturday 29 August 2015.

On 16 October 2015, Cassa made a claim on its insurance policy with IAL.

By its letter of 2 February 2016, IAL declined indemnity alleging that the fire was ‘caused by arson’ and that the person responsible was Mr Cassimatis, the sole director of Cassa. IAL argued that an exclusion clause under the policy applied where the loss or damage was caused by the willful acts of the insured and/or another party with the insured’s knowledge and consent. In addition, IAL contended that the claim was fraudulent within the meaning of s56(1) of the ICA which states that an insurer may refuse to pay out the insured if the insurance claim was fraudulent.

The issues before the Court included, whether the:
1.   fire was deliberately lit by Mr Cassimatis;
2.   exclusion clause for willful act could be applied; and
3.   claim was made fraudulently within the meaning of s56(1) of the ICA.

The Court found that the central issue for determination was whether IAL had 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.

Mr Cassamitis denied that he lit the fire and said that there was no motive.

Investigations by IAL

Extensive investigations made on behalf of IAL brought circumstantial evidence before the Court, including CCTV footage, 000 calls and (quite importantly) photographs and video footage from the mobile phone of a private individual which in combination led the fire investigators to find that the fire had at least an additional seat inside of the building in circumstances where the evidence and the circumstantial evidence was that Mr Cassimatis was the only individual present at and inside of the building up until shortly before the fire started.

Judgment

Although, it was found to be the case that Cassa was undercapitalised and unable to pay liabilities (i.e employees’ superannuation), Mr and Mrs Cassimatis had a high level of personal debt, and Cassa’s best customer which was responsible for 25% of its sales, was in ’serious financial difficulty’, the Court found that IAL had not proven motive on the part of Mr Cassimatis to the standard required.

Nonetheless, the Court found that although the absence of a proven motive was not in itself determinative and that the absence of a proven motive will make the drawing of a wrongdoing difficult, the evidence connecting Mr Cassimatis to the deliberate act of causing the fire was so ’potent’ that the absence of any proven motive will assume less importance.

The Court accepted the following key points of evidence, namely that:

• Mr Cassimatis was the only person in the factory at the relevant time of the night.
• Mr Cassimatis lit at least two fires, one outside of the factory in the vicinity of the skip bin and the other(s) inside the building.
• Both fires were likely to have been fueled by an accelerant (i.e. petrol).
• Neighbouring CCTV footage revealed that Mr Cassimatis attempted to avoid detection as he drove away from the factory by switching his headlights off and then switching his headlights back on once he passed the train station.
• Mr Cassimatis lied to the investigators about the time he left the factory.

Justice Burns found:

• on the balance of probabilities, that Mr Cassimatis deliberately caused the factory fire and that the brace of the alternative theories proposed by Mr Cassimatis were 'fanciful’;
• Cassa’s claim was made fraudulently within the meaning of s56(1) of the ICA given that Mr Cassimatis had deliberately started the fire to induce a false belief on the part of IAL as to Cassa’s entitlement to make a claim for the purpose of obtaining the benefits under the policy for such a loss.

Implications

The investigation and location of evidence that might be available to establish both causation and those responsible in cases of suspected arson can never be too thorough.

In this case the still images and video recordings taken by the private witness to the fire on her mobile phone assumed particular importance for:

• the final conclusions reached by the fire experts as to there being more than one seat to the fire, one of which was inside the building, in circumstances where Mr Cassimatis was by his own admission (given in a statement to the Court prior to this evidence becoming known and being presented to the fire investigators) the only person present inside the building; and
• the inferences drawn and the findings made by the Trial Judge as against Mr Cassimatis.  

It is possible for insurers to successfully defend declinature where arson is suspected on a circumstantial case and in the absence of strong evidence as to opportunity and/or motive, if they can satisfy the court affirmatively on the balance of probabilities that the fire was deliberately lit by the person identified with a view to advancing a fraudulent claim on the strength of his or her own handiwork.