It could have been the perfect crime: an intentional fire in an empty property to claim landlord insurance. There were no eye witnesses, no victims and no direct evidence either that the landlord consented to the fire or that his friend, Mr Sen, had lit it. If only Mr Sen hadn’t left his mobile phone behind.

Presented with a mountain of circumstantial evidence, the New South Wales Court of Appeal in Sachin Sharma v Insurance Australia Ltd trading as NRMA Insurance [2017] NSWCA 307 upheld a decision in favour of the insurer, who rejected a landlord policyholder’s claim, citing policy exclusions and on the basis the claim had been made fraudulently within the meaning of section 56 of the Insurance Contracts Act 1984 (Cth).

The Policy

In rejecting the insured’s claim, the insurer relied on two policy exclusions:

  1. A general exclusion from cover for loss or damage arising from an intentional act or omission by the policyholder or someone acting with the policyholder’s consent.
  2. A specific exclusion of loss or damage caused by fire if the fire was started with the intention to cause damage by the policyholder or someone who enters the policyholder’s rental property with the policyholder’s consent.

The Circumstances

The trial judge weighed the circumstantial evidence to satisfy himself, on the balance of probabilities, that the fire had been deliberately lit with the consent of the insured, thus activating both the specific and general policy exclusions. This evidence included the following findings (which were upheld on appeal):

  1. Phone records of four mobile phones - the insured’s phone, a pre-paid phone in the name of an ex-tenant of the insured (which the judge found was likely used by the insured), Mr Sen’s phone and the phone left at the scene (the Scene Phone).
  2. Mr Sen lied to police about using the Scene Phone, saying he had lost it a year ago, despite having called his girlfriend from it on the night of the fire.
  3. A ‘consciousness of guilt’ of the insured, including his conduct under cross-examination and the timely deletion of five common contacts from his phone during the trial.

The Appeal

The insured appealed on 18 grounds. In summary, those grounds were directed to whether the trial judge erred in finding against the insured based on inferences from circumstantial evidence. The Court of Appeal dismissed this argument, commenting there was a “compelling inference in [the] circumstances” that the insured consented to the lighting of the fire and that these inferences were well-supported by the insured’s evidence and the manner in which it was given.

The insured also pleaded judicial error in interpreting the policy, arguing that the specific exclusion only applied if the insured consented both to the entry onto the property and the starting of the fire. This ground was shot down in flames, with the Court of Appeal finding that the ordinary and natural meaning of the exclusion is clear: the insured’s consent is required only to the entry onto the property. In any event, having found the fire was deliberately lit with the insured’s consent, the general policy exclusion also applied.

The weight of circumstantial evidence and interpretation of a clearly-worded policy came to the insurer’s aid in this matter. To discuss policy claims or exclusions please contact Dajana Malnersic or Nicola Bailey on 02 9234 1500.