Criminology and the Case for Amending Section 56 of the Insurance Contracts Act 1984
The requirement under Australian law that insurers still pay claims tainted by fraud at a court’s discretion, even when that discretion is only exercised in an uncertain range of exceptional cases, is bad public policy. For the reasons examined in this paper, the longstanding approach in the United Kingdom of empowering insurers to reject all claims tainted by fraud without exception is preferable. To support and provide context to this conclusion, this paper addresses (1) the features of claims fraud, its prevalence, and different attitudes and responses to it, (2) key concepts derived from the criminological study of fraud prevention as a framework for assessing the efficacy of legal responses, (3) the applicable Australian law in outline, and (4) the equivalent law in the UK and its respective basis in public policy.
The Problem of Claims Fraud
The Incidence of Claims Fraud
Insurance fraud is a socially costly activity. Insurance itself is expensive, with insurance premiums comprising approximately 7 per cent of aggregate global Gross Domestic Product. [1] Comprehensive data on insurance fraud or suspected insurance fraud in Australia are not collected. A 2001 estimate puts the incidence of fraud at up to 10 per cent of claims in Australia. [2] In the UK, the Association of British Insurers (ABI) has reported that 118,500 fraudulent claims were detected in 2013 with a total value of £1.3 billion. [3] A large amount of insurance fraud is believed to remain undetected. [4] The Insurance Council of Australia (ICA) asserted in 1997 that fraud contributes an average of $70 to the annual cost of each general insurance policy issued in Australia. [5] The perception on the part of judges that insurance fraud is a socially costly activity influences sentencing and is addressed in later in this paper.
Attitudes to Claims Fraud
Insurance fraud has had a longstanding influence on the development of insurance and insurance law [6] and is a major concern of most insurance companies. [7] It is paradoxical that the relationship of trust and good faith expected in law between the parties to an insurance contract [8] coincides with an insurance industry said to feature
a fierce mutual distrust between insurance companies and their customers. Customers often complain that their claims have been refused because they failed to properly complete a form or did not read or understand the fine print on the insurance policy. The insurance industry is often equally distrustful of its clients. [9]
Economic models of incentives for fraud and associated claims monitoring costs determine the design of optimal insurance policies across different subject matter and market conditions, such as in terms of whether a straight deductible contract is used or some degree of co-insurance is required on the part of the insured. [10] Superficially, it may appear that insurers have a financial incentive to resist paying all claims robustly because reducing the proportion of premiums devoted to paying claims increases the proportion of profit on premium income. However the optimum approach to claims is simply to take the cheapest course of action. Insurers may thus ignore and condone fraud by paying questionable claims when doing so is likely to be the cheapest course of action given the likely cost of investigating the questionable claim and defending the decision not to pay it. [11] The cost of fraud is capable of being externalised to policyholders through higher premiums. [12] This may foster an attitude on the part of the insurance industry that fraud is, in the aggregate, a foreseeable cost of providing insurance to be deterred and managed within acceptable levels, with less emphasis on fraud as a socially deviant act [13] that it is imperative to eliminate by means of effective individual sanction.
Types of Claims Fraud
The meaning of fraud at common law (or more properly, fraudulent misrepresentation) comprises a false representation made ‘[1] knowingly without belief in its truth or [2] recklessly, careless of whether it be true or false’. [14] This common law meaning has been adopted for the meaning of ‘fraud’ as the term is used in the Insurance Contracts Act 1984 (Cth) [15] (the IC Act). When considering fraud at the level of public policy, this meaning is subject to the limitation that it does not recognise explicitly that insurance fraud is manifest across a range of behaviour, from criminal organisations engaged in arson at one extreme to, at the other extreme, ‘small businesses engaged in technical frauds unaware that their conduct may result in sanction.’ [16] Nor does this meaning recognise explicitly that insurance fraud (in common with the loss underlying a claim) presents two dimensions of harm — economic damage certainly, but also broad ‘psychological and health damage including disruption of expectations about future security and welfare’. [17] For insurance claims fraud, a distinction may be drawn between wholly invented claims and exaggerated claims, in which a genuine loss is padded out with claims for additional items or inflated valuations. Exaggerated insurance claims are considered the most prevalent (although not the most costly) type of all commercial fraud [18] and are tied to the practice of settling claims for a negotiated amount rather than litigating them. A policyholder’s expectation that the insurer will seek to revise downwards the value of a claim is a common motivation for exaggerating its reported value, [19] as is the desire to be compensated for the inconvenience of the underlying loss and the time required to make and resolve the claim. [20]
Detecting and Responding to Claims Fraud
The practice of resolving claims by negotiated settlement gives rise to ‘two aspects to the recognition by insurers of the insurance fraud problem: the extent to which they take steps to detect it, and the extent to which, having detected it, they are willing to record it as fraud.’ [21] The immediate priority on the part of an insurer in assessing each claim is to investigate the claim only to the extent that the standard of evidence collected by the investigation (and its cost) is proportionate to the benefit of that evidence to the insurer as a basis for revising down the value of the claim through negotiated settlement, or otherwise rejecting the claim with confidence that litigation commenced by the policyholder will not end with embarrassment to the insurer.
The typical response to questionable insurance claims in Australia is for insurers to investigate them with the assistance of private investigators in place of police or other authorities, and then resolve fraudulent claims outside the courts. [22] This is in contrast to the United States, in which insurers are more inclined to resort, as a means of resolving disputed claims, to criminal trials with
prosecutors funded separately from the state’s general revenues. These prosecutors’ salaries are either entirely or in large part paid by monies obtained by direct assessments on the insurance industry. The adoption of this prosecution funding method allows insurance fraud prosecution programs to exhibit the most comprehensive presence of any private industry in the enforcement of relevant criminal laws. [23]
The preference for criminal responses to questionable insurance claims in the United States changes the fundamental character of claims investigation by empowering insurers to present private claims investigation ‘as a public service, not an effort to avoid an obligation’. [24] In this context it is to be expected that ‘the insurance-crime link can be a potent tool in the hands of the insurance adjuster’, [25] especially when the insurer has the benefit of ‘perceptions of industry influence on the impartiality of the prosecutor.’ [26] The likelihood of criminal proceedings as a first-line response by an insurer to a questionable claim must be a substantial disincentive to fraudulent claims. But it may also be a substantial disincentive to making and maintaining an accurate claim that is questionable only in appearance as a result of commercial opportunity rather than deception, such as when a wide range of expert opinion is possible about the correct valuation of a loss and a claim is pursued at the top end of that range.
The Criminology of Fraud Prevention
Crime-As-Choice Theory
The concept underlying many or most contemporary interpretations of white collar crime, including insurance fraud, is that white collar crimes are a product of a process of choice on the part of a wrongdoer, albeit not necessarily rational choice. [27] The rational prerequisite for a choice to adopt fraudulent conduct is some likelihood of benefiting by doing so. Markets in which such opportunities are substantial are said to be ‘criminogenic’ (that is, crime creating). This characterisation applies to the susceptibility of the insurance claims process to exaggeration or fabrication of the policyholder’s loss. [28] The root of this susceptibility is what the economics literature terms an information asymmetry between insurer and policy holder: generally the policyholder will have the most complete information about the loss and the insurer will face a cost in obtaining or verifying it independently. [29] From this information asymmetry, the economics literature derives an
optimal indemnification profile […] shown to involve systematic underpayment of claims at the margin as a means to deter loss exaggeration, with the extent of underpayment limited by expected litigation costs and potential bad-faith claims. The key testable implication of the theory is that the extent of underpayment should be greater for classes of claims for which loss exaggeration is easier. Empirical analysis of insurance settlements for bodily injury liability in automobile accidents confirms this prediction. This suggests that liability insurers optimally choose claims payment strategies to lessen a claimant’s incentive to exaggerate losses. [30]
Not only are insurers able to externalise the cost of fraudulent claims to premiums rather than absorb them from profits, but insurers may reduce the cost of fraud to themselves by increasing their general level of resistance to payment in the categories of claim in which information asymmetries are greatest and loss exaggeration easiest. This general resistance to payment in certain categories of claims over others (say, where the ground of claim under an income continuation policy is an invisible psychiatric condition with symptoms capable of being fabricated, rather than a bodily injury) is burdensome on all prospective claimants, not only fraudulent ones. This burden is all the more insidious because the expectation of resistance to claims by insurers feeds back into claimants’ motivation to exaggerate claims to establish a negotiating positon from which to compromise. [31]
General Deterrence
General deterrence is regarded by criminologists as an especially effective response to insurance fraud because the choice of fraudulent behaviour tends to involve a perception that the benefit of the behaviour to an individual is greater than its cost, and because people with insurance in the first place typically have ample financial resources and social capital of which they can be deprived by way of sanction. [32] Formal criminal sanctions maintain the moral legitimacy of the proscription of fraudulent conduct, and this moral legitimacy is capable of overriding a cost-benefit analysis in favour of fraud by rendering such conduct taboo, that is morally impermissible whatever the perceived benefit. [33]
Of course, general deterrence through criminal sanction depends on a perceived probability of crime detection and conviction. Survey research by the ABI indicates that
a majority [of survey respondents] considered that fraudsters were unlikely or very unlikely to be detected. It can be assumed that although legal sanctions are perceived to be severe, the risk of apprehension is considered so minimal that that a rational assessment favours offending. [34]
Offenders’ perceptions about the probability of crime detection and conviction can be warped by the prioritisation of short term gains and the discounting of the cost of sanctions. Within the discipline of criminology this is termed ‘hyperbolic discounting’. [35] Hyperbolic discounting has been observed to be greater in circumstances of financial desperation, [36] a recurring theme in questionable insurance claims, of which the suspected arson of the insured premises of a business in financial difficulty is emblematic. Conversely, white collar crime in general has been observed to increase ‘during boom times [in which wrongdoers are] emboldened by a belief that a rising economic tide hides their activities’. [37]
Situational Crime Prevention
Another criminological technique for the suppression of insurance fraud is situational crime prevention [38] by manipulating the specific environment in which a crime may be committed. A ‘randomised field experiment’ [39] by a group of Canadian criminologists achieved a statistically significant reduction in the average claim value of a group of policyholders sent a letter emphasising that exaggerating a claim could result in the forfeiture of the entire claim (under applicable Canadian law) as well as being a crime, compared to a control group of policyholders whose claims were processed in the ordinary way. [40] A situational deterrent particularly supported by economic theory is cooperation among insurers to share information about past suspicious claims. [41]
Fraudulent Claims in Australian Law
Section 56 of the IC Act
The civil consequences of fraud in relation to an insurance claim [42] appear from section 56 of the IC Act, which provides that:
(1) Where a claim under a contract of insurance, or a claim made under this Act against an insurer by a person who is not the insured under a contract of insurance, is made fraudulently, the insurer may not avoid the contract but may refuse payment of the claim.
(2) In any proceedings in relation to such a claim, the court may, if only a minimal or insignificant part of the claim is made fraudulently and non-payment of the remainder of the claim would be harsh and unfair, order the insurer to pay, in relation to the claim, such amount (if any) as is just and equitable in the circumstances.
(3) In exercising the power conferred by subsection (2), the court shall have regard to the need to deter fraudulent conduct in relation to insurance but may also have regard to any other relevant matter.
The public policy consideration in favour of empowering a court to excuse ‘only a minimal or insignificant part of the claim [being] made fraudulently’ [43] was stated to be that
[f]raud should be discouraged but not to the extent that the insured suffers loss far in excess of the damage his fraud has caused to the insurer. […] For example, it may be unfair for an insured to have the whole of a legitimate claim for the loss of contents worth $100,000 disallowed because he fraudulently claimed for the loss of a non-existent watch worth $50. [44]
Thus Australian law limits the policy imperative of discouraging claims fraud by tolerating and upholding ‘partially-fraudulent’ claims at the discretion of a judge. By way of illustration, a claim for damage to business premises of between $222,589 and $528,000 has been found to contain a claim for damaged stock inflated by an amount of at least $27,412 and probably more, but the amount of the fraudulent claim was described as relatively small and did not prevent an order that the insurer pay the remainder of the claim. [45] The amount of $27,412 was characterised only as relatively small, and not explicitly as ‘a minimal or insignificant part of the claim’. In a contrasting decision, an inflated valuation of $30,000 of a building found to have had a real value of $20,000 or less (due to the insured giving the valuer inaccurate information about the building’s condition) was found to have been incapable of being ‘minimal or insignificant’. [46] The Queensland Court of Appeal has held that ‘a fraudulent over statement of value by $10,000 or more is not capable of being regarded as minimal or insignificant.’ [47] Further, according to the language of section 56, for a claim tainted by fraud to be excused by a court and payment of the non-fraudulent part ordered, the claim must be capable of division into constituent parts, only one of which (the ‘minimal or insignificant’ part) may be made fraudulently. [48]
But far more fundamentally, especially given the paramountcy of good faith in the performance of insurance contracts, [49] the language of section 56(2) incorrectly assumes that a part of a claim can remain a ‘minimal or insignificant part’ but still be made fraudulently. A part of a claim that is made fraudulently — so as to taint the claim with fraud and render it ‘made fraudulently’ within the meaning of section 56(1) with the consequence that the insurer may refuse to pay the claim, and except for section 56(1) could avoid the whole contract of insurance — cannot logically be ‘minimal or insignificant’ in anything but a most confined and artificial sense. Section 56(2) begins by referring to ‘such a claim’ (being a claim described as being ‘made fraudulently’ in section 56(1)) and then enlivens a power to ‘order an insurer to pay such amount (if any) as is just and equitable in the circumstances’ where ‘non-payment of the remainder of the claim would be harsh and unfair’. But this arises only when the same component of the claim (which must be significant enough to trigger section 56(1) and allow the insurer to refuse payment of the claim subject only to the intervention of a court) can be found to be ‘minimal or insignificant’. The historical approach of equity and the common law has been to attach very considerable significance to any fraud whatsoever through the principle ex turpi causa oritur non actio and related doctrine. [50] Section 56 departs from this approach by positing at the level of principle that some instances of insurance fraud are capable of being ‘minimal or insignificant’ in the context of a claim.
The policy basis of section 56 of the IC Act
The report of the Australian Law Reform Commission (‘ALRC’) that is the origin of the approach taken in section 56 [51] advances, in essence, two policy grounds in favour of the section. First, the ‘limited discretion’ in the section is needed because ‘there appears to be no other way of achieving the objective of providing a strong disincentive to fraud without at the same time imposing penalties for fraudulent conduct which are disproportionate to the offences committed’. [52] Precisely how the forfeiture of a person’s claim in relation to which that person has behaved fraudulently could be ‘disproportionate to the offences committed’ is not explained. The second policy ground is the assertion that
it is doubtful whether many insurers would totally reject a substantial claim merely because the insured had acted fraudulently in relation to a minor part of it. A claim for $3000 lost baggage would usually be met even if a fraudulent claim that a camera worth $200 was included in that baggage was rejected. [53]
Whatever the actual practice of insurers was in 1982 when the ALRC report was prepared, it is doubtful that amending the IC Act to now entitle insurers to reject a fraudulent claim in total by removing from Australian law the concept of permissible margin of fraud around ‘minimal or insignificant’ parts of claims would do anything other than promote general deterrence. Doing so would overcome the criticism that section 56(2) sends a mixed message to potential wrongdoers.
It is not the case that the presence of some evidence that a claim is exaggerated necessarily renders the claim fraudulent. In relation to a claim for time spent cleaning and repairing equipment after a fire, Beach J in the Supreme Court of Victoria [54] held that
the figures put forwards on [the policyholder’s] behalf were so greatly exaggerated that they cannot be described as honest estimates but were clearly intended to deceive and to induce [the insurer] to pay a larger sum than was properly payable. Even had the amounts only been exaggerated not for the purpose of inducing [the insurer] to pay the full amount of the claim but for the purposes of fixing a basis upon which to negotiate a settlement, that still would have been fraudulent. [55]
It follows from the definition of fraud set out earlier in this paper that fraud has a mental element of deception or at least recklessness as to whether another person is deceived. This element must be proved ‘to the reasonable satisfaction of the tribunal’ recognising the ‘gravity of consequences that flow’ from a finding of fraud, which do not permit proof by ‘indirect inferences’. [56] Meeting this standard to prove fraud is potentially difficult and costly. [57] It is all the less attractive for an insurer to attempt to prove fraud when the path of doing so in court does not lead directly to the impugned claim being quashed. Instead, establishing fraud in relation to a only one component of a claim but not others leads on to the questions of whether (1) it is only a ‘minimal or insignificant’ part of the claim that is made fraudulently, (2) whether ‘non-payment of the remainder of the claim would be harsh and unfair’, and then (3) the weighing of discretionary considerations around what is ‘just and equitable’ under section 56(2) of the IC Act. Thus one effect of section 56 is to confer on parties to insurance fraud the benefit of the possible payment of non-fraudulent components of a claim affected by fraud.
The last review of the IC Act in 2003 appears to have omitted any critical review of section 56 and recommended only that the discretion contained in the section be exercisable by alternative dispute resolution bodies, and not only by judges. [58]
Section 56 raises public policy concerns by contributing to the cost of insurance generally. The cost of insurance is paid not only by people who can afford policies, but the economic sense of opportunity cost, also by people who cannot afford policies. When the price of insurance is too high, people who would have been disposed to buy insurance but could not afford to do so suffer the opportunity cost of having to bear the entirety of their loss when risks materialise that would have been insured against, had the insurance been affordable for them. Accepting that the cost of insurance should increase to accommodate, even if only in some exceptional cases, the non-fraudulent remainder of claims tainted by fraud further disadvantages those with limited financial resources who are deprived of insurance by their inability to pay and lose recourse to a policy because premiums are even just slightly too expensive to afford. The beneficiaries of the potentially permissible margin of fraud engendered by section 56 are people or more often companies who possess enough of the subject matter of the insurance, or insured subject matter of such great value, that when an insured risk materialises the total claim is so large that one part of it is capable of being ‘only a minimal or insignificant part of the claim’. To take an illustration from the case law, [59] for a claim for damaged stock fraudulently inflated by an amount of $27,412 to be found a ‘minimal or insignificant part of the claim’ and the insurer required to pay the remainder of the claim, it was necessary for the claimant to have had the financial resources to sustain and be indemnified for an actual, non-fraudulent, loss of between $222,589 and $528,000 in the first place. [60] Claims fraud by a well-resourced policyholder may already be expected to be tolerated by insurers to a greater extent than claims fraud by a less well-resourced policyholder for commercial reasons including the greater value of ongoing business from the well-resourced policy holder and assumptions on the part of insurers about the capacity of the policyholder to fund litigation in response to a claims dispute. In this way, the practical opportunity to be excused the consequences of partly-exaggerated claims under section 56 is not an equal one across the insurance market.
Criminal sanctions for claims fraud
Criminal sanctions against insurance claims fraud are clear-cut compared to the position under the IC Act. In R v Corcoran, [61] for example, the policyholder was convicted of fraud by a jury for inflating the loss caused by the stealing of his car by including a claim for a set of golf clubs said by him to have been in the boot of the car, when the same golf clubs were found stored in his home. The policyholder was sentenced to a fine of $1200 and ordered to repay $837 to the insurer, the amount of the part of the total insurance payment that be received for the loss of his car that corresponded to the golf clubs. A conviction was recorded and upheld on appeal. In sentencing, Claire DCJ remarked that
Insurance fraud is a serious problem in the community. It undermines the orderly administration of commerce. Honest people in the community must bear the cost of it because their premiums go up. There needs to be a sentence of such a kind that would discourage other people who might otherwise try their luck to similarly defraud insurance companies. Because this was a crime motivated by greed, the most appropriate way to deter others is by a significant financial penalty. [62]
However the penalty of being obliged to repay the entire amount paid by the insurer in respect of the policyholder’s stolen car would be a greater financial penalty, as the car was presumably insured for more than the $2000 or so the policyholder was ordered to pay in fines and repayments. The opprobrium of a fraud conviction is perhaps the greater burden on any fraudulent claimant than any but the most onerous financial penalties. In R v Corcoran [63] for example, the claimant was motivated to challenge his conviction in the Court of Appeal without success, despite the relatively small amounts the policyholder was ordered to pay compared to the presumed cost of the appeal.
Fradulent Claims in UK Law
In contrast to the positon under the IC Act, the UK, a fraudulent policyholder is obliged to repay to an insurer on demand by the insured the total amount received for a claim, and not only the part of that amount that was claimed fraudulently. By way of illustration, in Galloway v Guardian Royal Exchange (UK) Limited [64] the addition of a fraudulent claim for a £2000 computer supported by a forged receipt to a genuine claim for £16,000 tainted the entire claim and caused it to be forfeited. [65] Millett LJ commented that
The making of dishonest insurance claims has become all too common. There seems to be a widespread belief that insurance companies are fair game, and that defrauding them is not morally reprehensible. The rule which we are asked to enforce today may appear to some to be harsh but it is in my opinion a necessary and salutary rule which deserves to be better known by the public. [66]
Had the facts of R v Corcoran arisen in the UK, the fraudulent policy holder would have been obliged to repay to the insurer not only the amount he received for the golf clubs found in his house, but the entire amount of his claim for the loss of his car.
In a July 2014 joint report with the Scottish Law Commission, the Law Commission of England and Wales [67] recommended that the position that the insurer should have no liability to pay the fraudulent claim and be entitled to refuse all claims made under the policy after the fraudulent claim be embodied in legislation. [68] The two commissions considered that ‘there is a need for a clear statement of the civil law consequences of fraud, to act as a deterrent to wrongdoers.’ [69] A further proposed reform is the introduction of a statutory cause of action by which insurers may recover damages for the cost of investigating a fraudulent claim. [70]
Because the law of England and Wales has no equivalent provision to section 56 of the IC Act, insurance contracts in that jurisdiction may stipulate much harsher consequences than the forfeiture of the claim tainted by fraud [71] and may extend to the retrospective avoidance of the insurance contract, [72] which may have drastic financial consequences if the insurance contract is of a long duration and has covered multiple claims.
The policy underlying the law in England and Wales is the robust deterrence of fraudulent claims, recognising that ‘even a very minor reduction in the prevalence of claims fraud will result in significant financial savings.’ [73]
Assessment and Conclusion
The civil law response to fraud in the UK is vastly preferable to that of the civil law in Australia. It better serves the important public interest of access to affordable insurance premiums. It preserves an unfettered power for insurers to control of the cost of fraudulent claims by denying all payment in response to a policyholder’s claims fraud rather than descending into further questions about whether on ‘only a minimal or insignificant part of claim is made fraudulently’ and so on. In contrast with the US where criminal prosecutions funded by the insurance industry may be used as a first line response to test a claim suspected of being fraudulent, the prevalence of the private investigation of suspected fraud and the tendency to negotiate insurance settlements in Australia and the UK results in greater general deterrence attaching to the civil law consequences of fraud than those under the criminal law.
Criminal sanctions recognise that insurance fraud is a serious problem in the community and maintain the moral legitimacy of its proscription more effectively than does section 56 of the IC Act, which sends a mixed message to potential wrongdoers. Situational crime prevention techniques are proven to be effective in addressing the problem of exaggerated claims and favour clear messages about consequences that can be communicated simply. The presence of the judicial discretion in section 56 undermines situational crime prevention and evokes the problem of the proverbial curate’s egg, in that fraudulent insurance claims are not necessarily considered to be not wholly bad, but are capable of being treated as good in parts and consequently part-payable by insurers.
Stephen Colditz*
Footnotes
* Barrister, Level 9 Inns of Court Brisbane. The author thanks Professor Russell Hogg of the QUT School of Justice for his comments on an earlier draft of this paper.
[1] Rob Thoyts, Insurance Theory and Practice (2010, Routledge London), 1.
[2] Colin Ying, ‘Brilliant Lies’, paper delivered to the Australian Insurance Law Association, 1 August 2001 < https://www.aila.com.au/docs/default-source/speaker-papers/brilliant-lies-2.pdf?sfvrsn=2 > (viewed 7 November 2014).
[3] Law Commission of England and Wales and The Scottish Law Commission, Insurance Contract Law: Business Disclosure; Warranties; Insurers’ Remedies for Fraudulent Claims; and Late Payment (Law Commission Report 353, July 2014), 207.
[4] Ibid.
[5] Tony Baldock, Insurance Fraud (Australian Institute of Criminology Trends and Issues in Crime and Criminal Justice Paper 66, February 1997).
[6] Rob Merkin and Jenny Steele, Insurance and the Law of Obligations (2013, OUP), 193.
[7] Pierre Picard, ‘Economic Analysis of Insurance Fraud’ in Georges Dionne (ed), Handbook of Insurance (2013, 2nd ed , Springer New York) 349, 350.
[8] See generally Peter Mann, Mann’s Annotated Insurance Contracts Act (6th ed, 2014:Thompson), [12.10]; Insurance Contracts Act 1984 (Cth) Part 2 (‘The Duty of Utmost Good Faith’) noting also the amendments to s13 by the Insurance Contracts Amendment Act 2013 (Cth) to commence on 28 December 2015.
[9] Note 8, 2.
[10] Note 7, 389.
[11] R Ericson and A Doyle, ‘The moral risks of private justice: the case of insurance fraud’ in R Ericson and A Doyle (eds) Risk and Morality (2003, University of Toronto Press, Toronto), 332.
[12] Katie Richards, ‘Deterring Insurance Fraud: a critical and criminological analysis of the English and Scottish Law Commissions’ current proposals for reform’ (2013) 24 Insurance Law Journal 16, 35.
[13] Ibid.
[14] Derry v Peek (1889) 14 App Cas 337; Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676.
[15] Advance (NSW) Insurance Angencies v Mathews (1987) 4 ANZ Ins Case 60-813, 74,995 (Young J); Murphy & Anor v Swinbank & Ors [1999] NSWSC 934, [415].
[16] Note 12, 18.
[17] Michael Levi, ‘Financial Crimes’ in Michael Tonry (ed) The Oxford Handbook of Crime and Public Policy (2011 OUP), 3.
[18] Note 12, 20.
[19] Note 12, 33 — 34.
[20] Note 12, 35.
[21] Michael Clarke, ‘The Control of Insurance Fraud’ (1990) 30(1) British Journal of Criminology 1, 2.
[22] Adam Graycar, ‘Fraud Prevention and Control in Australia’ paper presented at the Fraud Prevention and Control Conference convened by the Australian Institute of Criminology, Gold Coast, 24 August 2000, 6.
[23] Aviva Abramovsky, ‘An Unholy Alliance: perceptions of influence in insurance fraud prosecutions and the need for real safeguards’ (2008) 98(2) Journal of Criminal Law and Criminology 363, 366.
[24] Tom Baker, ‘On the Genealogy of Moral Hazard’ (1996) 75(2) Texas Law Review 237, 263-264
[25] Ibid.
[26] Note 23, 363.
[27] Neal Shover, Andy Hochstetler and Tage Alalehto, ‘Choosing White-Collar Crime’ in Francis T Cullen and Pamela Wilcos (eds), The Oxford Handbook of Criminological Theory (2012, OUP), 474: ‘crime-as-choice theory’.
[28] Note 12, 36.
[29] See generally Aierre-Andre Chiappori, Bruno Jullien Bernard Salanie, and Francois Salanie, ‘Asymemetric Information in Insurance: General Testable Implications’ (2006) 37(4) RAND Journal of Economics 783.
[30] Keith J Crocker and Sharon Tennyson, ‘Insurance Fraud and Optimal Claims Settlement Strategies’ (2002) 45 Journal of Law and Economics 469, 469.
[31] See generally note 12, 33 – 24.
[32] S Wheeler, D Weisburd, and N Bode, ‘Sentencing the While Collar Offender: Rhetoric and Reality’ (1982) American Sociological Review 641, 642; D Weisburd, E Waring, and E Chayet, ‘Specific Deterrence in a Sample of Offenders Convicted of White Collar Crimes (1995) 23 Criminology 587, 590.
[33] R Paternoster and S Simpson, ‘Sanction threats and appeals to morality: testing a rational choice model of corporate crime’ (1996) 30 Law and Society Review 549, 554 & 577.
[34] Note 12, 35.
[35] Note 12, 42.
[36] Ibid.
[37] Note 27, 481 — 482; see further R Tomasic, ‘The Financial Crisis and the Haphazard Pursuit of Financial Crime’ (2011) 18(1) Journal of Financial Crime 7; D. Freidrichs, ‘Wall Street: Crime Never Sleeps’ in S. Will, S Handelman, and D. Brotherton (eds), How They Got Away with It — White Collar Criminals and the Financial Meltdown (2013, Columbia University Press New York), 15.
[38] Note 12, 48.
[39] E Blais and JL Bacher, ‘Situational Deterrence and Claim Padding: results from a randomized field experiment’ (2007) 3 Journal of Experimental Criminology 337.
[40] Ibid., 345.
[41] Note 7, 389.
[42] Excluding marine insurance claims, which are regulated separately: Marine Insurance Act 1909 (Cth).
[43] Insurance Contracts Act 1984 (Cth) s56(2).
[44] Commonwealth of Australia, Explanatory Memorandum to the Insurance Contracts Bill 1984, 81.
[45] Entwells Pty Ltd v National & General Insurance Co Ltd (1991) 6 WAR 68 (Ipp J).
[46] Ricciardi v Suncorp Metway Insurance Ltd [2001] QCA 190, [37] (Chesterman J, Williams JA and Mackenzie J agreeing).
[47] Ibid.
[48] Tiep Thi To v Australian Associated Motor Insurers Ltd (2001) 3 VR 279 (Buchanan JA, Charles and Callaway JJA agreeing); see also Tsorotes v RACV Insurance Pty Ltd (Full Court of the Supreme Court of Victoria unreported judgment delivered 20 November 1993).
[49] See note 8.
[50] For a most excellent and concise discussion, refer to Jonathan Sumption, ‘Reflexions on the Law of Illegality’, paper delivered to the Chancery Bar Association, London, 23 April 2012, available at < https://www.supremecourt.uk/docs/speech_120423.pdf >.
[51] Australian Law Reform Commission, Insurance Contracts (1982, Australian Law Reform Commission Report 20).
[52] Ibid, 14.
[53] Ibid., 147.
[54] Moxia Pty Ltd v AMP General Insurance Ltd (unreported judgment of the Supreme Court of Victoria (Beach J) delivered 21 September 1992).
[55] Ibid., 36.
[56] Briginshaw v Briginshaw (1938) 60 CLR 336, 362 (Dixon J).
[57] Johanna Hjalmarsson, ‘The Standard of Proof in Civil Cases: an insurance fraud perspective’ (2013) 17 The International Journal of Evidence and Proof 47, 48.
[58] Alan Cameron and Nancy Milne, Review of the Insurance Contracts Act 1984 Final Report on Second Stage: Provisions other than section 54 (2003, Commonwealth of Australia) xiii, 74.
[59] Note 45.
[60] Ibid.
[61] [2013] QCA 148; see also R v Lewis [2003] NSWCCA 375, [9].
[62] R v Corcoran (sentencing remarks of Judge Claire SC delivered 4 September 2012).
[63] Note 60.
[64] (1999) Lloyds Rep IR 209.
[65] Ibid., 213 (Lord Woolf MR).
[66] Ibid., 214.
[67] Note 3.
[68] Ibid., 207.
[69] Ibld., 219.
[70] Note 12, 30.
[71] Ibid., 25.
[72] Ibid., 28.
[73] Ibid., 32.
