Insurance Law : Making Insurance Claims

What actually makes or breaks an insurance relationship is the making of an insurance claim. No amount of marketing and selling of an insurance policy could usurp the claims experience of the insured person when he submits the claims form following the happening of the event covered under the insurance policy. If he is successful with the insurance claim, he will probably be leaving with a satisfied experience and will probably reinsure with the same insurance company. On the other hand, if the claim is somehow rejected due to various reasons, the insured person is likely to be totally dejected and might probably be cursing his luck!

What then is involved in making an insurance claim? Is it as simple as filing in a claim form and waiting for insurance proceeds to arrive in a couple of days? Hardly. The onus of establishing that a loss had occurred as envisaged under the insurance policy lies with the insured person. He bears the burden of proving his claim and the insurance company is not liable to indemnify the insured person unless a claim is properly made out and proved. Though some claims are easier to prove and establish than others, the insured must produce sufficient credible proof of loss before the insurance company is liable under the insurance policy.

As discussed earlier, one salient feature of contracts of insurance is the principle of good faith wherein parties to the insurance policy are under a duty to come bona fide and clean hands. When a party comes and acts in bad faith, the other party is entitled to repudiate the contract and discharge all his liabilities under the contract. This principle of requiring good faith does not just stop at the point of proposing the insurance coverage but also extends to making a bona fide insurance claim. What this means is that the insured person is also under a duty to ensure that his insurance claim is genuine and he does not make a claim for an amount greater than his actual loss. In the event an exaggerated claim is discovered by the insurance company, the insurance company is entitled to treat the grossly inflated claim as an attempt to defraud the insurance company and in this circumstances, the insurance company is at liberty to repudiate the claim on the basis that the insured person did not come in good faith.

Notwithstanding the entitlement of the insurance company to repudiate an insurance claim on the ground that the amount claim was grossly inflated and hence, there was an intention to defraud the insurance company, the onus of proving the attempt to defraud is obliged to prove that allegation. In this connection, the ball is at the insurance company's court to prove the elements of fraud being perpetrated and where fraud is to be proven, the standard of proof required is much higher than the balance of probabilities.

In determining whether an insurance claim is fraudulent, the insurance company is not called to prove the ingredients of fraud beyond reasonable doubt. The insurance company may take into account the surrounding circumstances of the loss for any suspicious activities. The insurance company is entitled to look into the claims history of the insured person for signs of repeated claims of similar nature to see if there is a pattern of fraud involved. The insurance company is also likely to look into the financial position of the insured person as the fact that an insured person is under pressure from his creditors to settle his outstanding debts represent a powerful inducement for a fraudulent or exaggerated insurance claim to be filed.

Just like allegations of fraudulent claims, an insurance company bears the burden of proving that the loss was caused by arson. The insured person is not obliged to show that his claim was not caused by his own deliberate conduct. The burden of proof is also much higher upon the insurance company and this burden is higher than on the balance of probabilities.