FSCL Case Study

Debra* has a fabric manufacturing business. Debra’s stock is manufactured and stored in a large factory in Wellington where she has 14 staff members.

One evening after Debra and her staff had left work for the day, several intruders broke into Debra’s factory. One of the intruders disarmed the alarm using the alarm code, and they all rummaged through the factory and carried out a handful of tools each.

Debra got a call from her alarm company that evening about the disabled alarm (because this was unusual activity), so she went down to the factory to check everything was okay. Once she arrived, she realised there had been a break-in, so she notified the police.

The claim

Debra told her insurance broker about the burglary shortly afterwards, and her broker sent her a claim form to complete. Debra filled out the claim form but did not complete a list of stolen items, because she had not yet worked out exactly what had been stolen. Debra’s broker sent the claim form on to her insurer.

Debra’s insurer wanted to know what had been stolen during the burglary so that they could assess the claim, so Debra’s broker asked her for this information.

Debra was busy with work but began sending invoices/proof of purchases for all of her tools to her broker, and the broker forwarded these on to the insurer. Debra also sent her broker sent a copy of the CCTV footage of the burglary, and an invoice for the repair of a window that was damaged during the break-in.

The interview

Debra’s insurer was a little confused about the size of the claim, because they had reviewed the CCTV footage and thought it looked as though Debra had claimed for more items/tools than were stolen, so they contacted Debra for an interview.

During the interview with her insurer, Debra explained that she had not yet worked out exactly what had been stolen, so she had been putting an inventory of all her tools together with her broker.

Debra’s insurer asked her to put together a list of all the stolen items only, and to provide proof of purchase for these items within one week. Debra sent invoices for the stolen items over to her broker by the deadline she was given, and the broker forwarded them to the insurer.

The insurer’s decision

The insurer, who had grown suspicious of Debra’s claim, compared the recent invoices with all of the earlier invoices / proof of purchase documents they had received from the broker. It appeared Debra was only claiming for $7,000 worth of tools, not $40,000 as first thought.

Debra’s insurer noted the discrepancy in the value of the claim and decided that Debra had dishonestly inflated the size of the claim initially. The insurer declined the claim based on a condition in the policy that allowed them to decline any claim that is ‘dishonest or fraudulent in any way’.

The complaint

Debra’s insurer did not renew her policy and she approached a new broker to help her obtain a new policy with a different insurer. The new insurer declined to offer Debra a policy after she disclosed that she’d had a previous claim declined and her policy had been cancelled.

Debra was very stressed because she no longer had insurance for her business, so she referred a complaint to FSCL with the help of a representative.


Debra said that she had not dishonestly inflated her claim. She explained again that she believed she had been putting together an inventory of all her tools with her broker, and that she was unaware that the broker had passed on all the invoices and quotes to her insurer as part of the claim.

Debra’s representative explained that Debra had a medical condition that meant she struggled with small details and concentration at times. In the context of the burglary, the claim, and running a busy business, there had been a misunderstanding around the inventory Debra was putting together and what items were being claimed as stolen in the burglary.

Debra’s insurer believed she had been dishonest and claimed for more items than were stolen.


After reviewing all of the insurer’s internal emails about the claim, FSCL could see that the insurer had formed an opinion early on that Debra was being dishonest. The way they approached the interview with Debra was adversarial, and it appeared that Debra’s explanation about the claimed items was not considered by the insurer, because they had already made up their minds.

FSCL had some questions for Debra, because it was clear there was at least a misunderstanding in terms of what she was claiming for, and why she had sent so many invoices to her broker.

Debra explained what her understanding had been – that is, she was genuinely putting together an inventory of tools in order to establish what had been stolen, and to have a schedule for future reference.

FSCL’s view

In light of her medical condition, and FSCL’s experience dealing with Debra, FSCL decided that she ought to be given the benefit of the doubt. FSCL did not think there was sufficient evidence in this case to reach the very high threshold needed to allege fraud by the insured, Debra. This meant FSCL thought her claim should be paid, and FSCL explained this in its decision to Debra and the insurer.

FSCL also confirmed with the insurer that Debra’s policy had lapsed rather than been cancelled. The insurer wouldn’t offer to renew the policy, based on Debra’s claims history, and FSCL explained to Debra that this was fair because it was a commercial decision.

A lapsed policy is different to a cancelled policy, so FSCL told Debra that she did not need to declare that she had a cancelled policy when making future applications for insurance.

ResolutionFSCL issued a final decision on the complaint and Debra accepted it. This meant it was binding on the insurer.

Insights for participants

It is important not to pre-judge the circumstances of a claim before having all of the relevant information, because this can lead to pre-determination.

Sometimes things may appear a certain way or leave a negative impression at first. However, it pays to keep an open mind whilst you go about gathering information, because there may be a different explanation available once you take the time to put a full picture together. You should also look out for any vulnerabilities your client may be suffering from.

Sept 2023

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