On 25 December 2011, a catastrophic hail storm struck
metropolitan Melbourne, resulting in widespread property damage.
The storm also gave rise to an unprecedented number of fraudulent
Indemnity disputes arising from hail damage claims are usually
determined by the Financial Ombudsman Service. In the absence of
directly relevant case law there has been uncertainty within the
industry as to whether insurers can deny claims with some
manufactured 'hail' damage in their entirety, or whether
they must pay to repair the proportion of damage that was genuinely
caused by hail.
In this unreported decision of the Magistrates Court of
Victoria, it was held that an insurer is entitled to deny indemnity
on the basis of fraud where an insured claims for manufactured
damage, even where there is a relatively high proportion of genuine
The insured was the owner of a Ford utility which was damaged by
hail on 25 December 2011 and a claim was made for storm damage.
Indemnity was denied by the insurer on the basis of forensic
evidence that approximately 90% of the damage was inconsistent with
hail damage and had been manufactured with tools. The insured
issued proceedings in the Magistrates' Court of Victoria for
the agreed value of the vehicle. Hall & Wilcox acted for the
The Court accepted evidence that in addition to some genuine
hail damage, the insured's vehicle had significant manufactured
damage. Even the insured's own expert conceded that between 16%
and 36.6% of the damage was inconsistent with hail. The
inconsistent indentations exhibited scratch marks and often
appeared in linear or clustered patterns. The court did not accept
that the inconsistent damage could have pre-existed the storm or
that it could have been caused by wear and tear. It was held that
the insured intentionally caused the damage in an effort to render
the vehicle a total loss and make a claim for the agreed value of
Section 56(2) of the Insurance Contracts Act 1984
provides that where a fraudulent component of a claim is
"minimal or insignificant," the Court may order the
insurer to pay such amount as is just and equitable in the
circumstances. The Court considered the meaning of s.56(2) in the
context of the forensic evidence and concluded that even if it
accepted the evidence of the insured's expert (that 16% to
36.6% of the damage was inconsistent with hail), the fraudulent
conduct could not be considered "minimal or
The Court held that the insurer was entitled to deny
AR Carpentry Pty Ltd v Insurance Manufacturers of
Australia Pty Ltd
Even where a vehicle has genuine hail damage, if an insured
intentionally causes further damage with the intention of having
the vehicle written-off, the insurer is entitled to deny the entire
claim on the basis of fraud.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The failure of a party to call a witness does not necessarily give rise to an adverse inference being drawn in accordance with Jones v Dunkel (1959) 101 CLR 298. An unfavourable inference is drawn only if evidence otherwise provides a basis on which that unfavourable inference can be drawn.
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