Insureds were found to have lit a fire at their business premises and also to have significantly and deliberately exaggerated the value of their stock and equipment losses entitling their insurer to refuse payment of the claim made under a business insurance policy.

In Issue

The Supreme Court of New South Wales was called upon to consider whether a claim made on a business policy in respect of fire damaged property was a fraudulent claim within the meaning of section 56 of the Insurance Contracts Act, 1984 (ICA) and accordingly if so, whether the insurer was entitled to refuse payment of the claim.

In summary, section 56 of the ICA provides that:

• where a claim under a policy is made fraudulently, the insurer may not avoid the contract but may refuse payment of the claim;
• in proceedings in relation to such a claim, the court may, if only a minimal or insignificant part of the claim is made fraudulently and non-payment of the remainder of the claim would be harsh and unfair, order the insurer to pay, in relation to the claim, such amount, if any, as is just and equitable in the circumstances;
• in exercising the power conferred by s56 (2), the court shall have regard to the need to deter fraudulent conduct in relation to insurance but may also have regard to any other relevant matter.

The background

The plaintiff insureds, Mr Voitenko and Mrs Voytenko, carried on party hire and dumpling/spring roll supply businesses respectively from the same premises. In May 2010 the...

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