They say the proof of the pudding is in the eating. The proof of an insurance policy is in the making of a claim.
A claim is a call on the insurer by a policyholder to provide indemnity or cover for a claim under the policy.
To make a successful claim, the following conditions must be satisfied:
- the policyholder must establish that the loss claimed is covered by the insurance policy – that is, that the loss arose from an insured event;
- where the insurance policy contains exclusions, it is the insurer’s responsibility to demonstrate that cover for a claim is excluded;
- the policyholder must show they have suffered loss as a result of an insured event or risk;
- the policyholder must have an economic relationship with the subject of the insurance policy (but not necessarily a legal or equitable interest) at the time of entering the contract or at the time of loss. This means that policyholders can insure property they don’t own if they will sustain an economic loss if the property is damaged by an insured event (ss 16, 17 Insurance Contracts Act 1984 (Cth));
- the policyholder should give notice of a claim in accordance with the terms of the policy, although failure to give such notice may not necessarily allow an insurer to refuse to pay a claim;
- the loss must not have been intentionally brought about by the policyholder’s deliberate acts;
- the claim must be made honestly – an insurer may refuse to pay a fraudulent claim, even where the claim would have been covered by the policy if the insurers were told the true circumstances of the claim;
- the policyholder has an obligation to reduce their losses. The nature and extent of this responsibility will vary from case to case, but it requires the policyholder to do what is reasonable in the circumstances of the claim. Generally, after an insured event has occurred the insurer should cover expenses necessarily incurred by the policyholder in protecting the insured property from further loss or damage or in minimising any loss.