Bike owner overturns insurer's 'false theft' claim denial

The owner of a stolen motorcycle who had his claim denied will be reimbursed for his losses after an Australian Financial Complaints Authority (AFCA) determination refuted allegations from his insurer that the claim had been false.

The complainant lodged a theft claim to IAG on June 9 last year after realising his bike was missing from his garage.

The man told the insurer that he had been trying to sell the bike for months and held a meeting with prospective buyers a week before the incident.

He claimed he observed the vehicle stored securely in the garage below his apartment block on June 6 and that it had not been used between the meeting and the theft.

Following a report from its factual investigator, referred to as Q, IAG informed the owner that it had denied the claim, saying that it “was not satisfied that a theft of the bike had taken place”.

The insurer alleged that the claimant had not acted in good faith as per section 13 of the Insurance Contracts Act 1984 (Cth), and that it was entitled to rely reduce its liability for the claim to nil.

AFCA noted that while the insurer did not specifically allege that the policyholder made a fraudulent claim, its contention was “analogous to fraud or dishonesty” and held “serious ramifications for the complainant”.

IAG argued that the man had a financial motive to make a false claim, noting that he had been unemployed for some time, relied on government payments during covid lockdowns, and was in debt.

Q’s report pointed out the insured had reduced the price to sell the vehicle from around $10,500 to about $8000 because he could not find a buyer and noted that he signed up for the comprehensive motor vehicle policy only a few days before the claimed event.

AFCA challenged the insurer’s allegations, saying that the complainant previously insured the vehicle with IAG until March 2021, but could no longer meet premium payments. It said that given his financial situation, it was understandable that the man would undersell the vehicle to increase the chance of a buyer.

“I accept that the complainant was not in a strong financial position and that some of the matters raised by the insurer could suggest a motive to make a false claim,” the ombudsman said.

“However, I am not satisfied that the insurer has comfortably proven the complainant was motivated to in essence commit a crime for purpose of making an insurance claim.”

The insurer said that the insured had a direct opportunity to be involved in the theft because he had access to the area where the vehicle was stored and its keys.

The claimant said the garage had multiple entries from which thieves could have entered, including a side door, which the police suspected had been where the bike was taken through.

The ruling accepted that the complainant could have committed the theft but said that IAG had “not presented any cogent evidence” to prove that he did.

Q’s report called into question the man’s explanation that he moved out of the apartment due to the threat that the thieves may return, noting that he had already called removalists before the incident.

The owner said that the possible return of the thieves had been a reason for his decision but also referred to previous concerns surrounding a nearby arson attack and the presence of drug addicts in the area as other factors for why he called the removalists.

AFCA noted that the police held no suspicions that the insured may have committed the theft and said his previous insurance history did not suggest any concerns surrounding his character.

The ruling required IAG to cover the claim and pay the complainant $10,700 plus interest from November 1 last year until the settled date.

It also mandated that the insurer compensate the claimant $2700 for its “poor claims handling” and unproven allegations that caused stress and inconvenience.

AFCA said IAG had “selectively referred to information to suit its narrative” and “reached a conclusion that the complainant was involved in the theft/acted fraudulently despite the police having no concerns at all about him or the legitimacy of the theft”.

Click here for the ruling.