Yeganeh v Zurich Plc

In an insurance claim, the insurer bears the burden of proving deliberate loss or fraud. Serious allegations require clear and cogent evidence, although the standard remains the balance of probabilities. Where competing causes remain possible, the court may conclude that the burden has not been discharged rather than choosing the cause it considers more likely. A fraudulent or false claim relating to part of the insured loss may, under the policy and general law, defeat the entire claim. The court must distinguish between carelessness or error and dishonesty, but deliberate presentation of a false claim is sufficient to engage the policy consequence.

The claimant sought indemnity under a buildings and contents policy after his house was destroyed by fire. The insurer alleged that he had deliberately caused the fire and had dishonestly exaggerated the contents claim. The court heard expert evidence concerning the possible accidental operation of a halogen heater and the location and subsequent discovery of clothing said to have been destroyed. The central issues were whether the insurer had proved arson and whether the contents claim was fraudulent or false.

1. Arson. The insurer bore the burden of proving that the claimant deliberately started the fire. The seriousness of the allegation required it to be clearly substantiated, although the applicable standard remained the balance of probabilities. The court accepted that the fire could have resulted from the halogen heater, although that explanation was very unlikely. The evidence did not establish a sufficiently reliable motive or other evidence of deliberate action. The arson defence therefore failed.
2. Alternative possibilities. The court applied the approach in The Popi M [1985] 1 WLR 948. A judge is not required to choose between competing factual explanations where the evidence remains unsatisfactory. It was open to the court to find that the insurer had failed to prove deliberate causation.
3. Contents claim. The evidence concerning the clothing, the claimant’s inconsistent accounts, his dishonest council tax conduct and misleading identification of expenditure led the court to conclude that clothing had been planted or otherwise introduced into the bedroom and that the related contents claim was false and partly fraudulent. The court distinguished dishonesty from mere carelessness, while finding that the claimant’s conduct went beyond innocent error.
4. Effect on the claim. The court accepted the general legal position stated in Axa General Insurance Ltd v Gottlieb [2005] EWCA Civ 112: fraud in the claims process makes the whole insurance claim fraudulent. Although Zurich failed to prove arson, its proof of the false clothing claim defeated the entire claim. The claim therefore failed.

Not stated in the judgment.