A life insurance claim brought by the wife of a drug addict who jumped to his death four years ago after becoming embroiled in fraud allegations has been dismissed in the Supreme Court of NSW.

Sydney man Peter Larcombe took out a life insurance policy with OnePath, now valued at $2.63 million, in November 2014.

His wife Catriona Smith, 40, was nominated as beneficiary and lodged a claim after Mr Larcombe committed suicide in August 2016, aged 38, by jumping from the roof of a carpark while on holiday in Los Angeles with Ms Smith and their two young sons.

OnePath declined the claim on the basis Mr Larcombe made misrepresentations about his drug use and smoking, and fraudulently failed to comply with his duty of disclosure.

Supreme Court records just published reveal he was a smoker, drinker and regular user of cocaine and other drugs who was referred by doctors to a rehabilitation clinic in Byron Bay. He was also “embroiled in a significant controversy surrounding an alleged major fraud” with allegations that he had stolen millions of dollars.

Mr Larcombe was accused of being a mastermind behind one of the biggest corporate tax frauds in Australian history, the $130 million Plutus tax fraud scheme which involved labour hire and payroll firms diverting millions of dollars owed in taxes into other companies.

Investment company Hartford Investments, run by Mr Larcombe and linked to the scheme, was investigated for funnelling money into Sydney property developments and more than $11 million in "uncommercial" transactions.

The Supreme Court judgement says attempts by Ms Smith to describe her husband’s drug use as “recreational, occasional, irregular, sporadic or socially acceptable” was a mischaracterisation.

The medical records reveal that "three years before 2015 he took drugs every day for 18 months and … that when he started he just could not stop, and sometimes had hallucinations”.

“OnePath would not have issued the policy had it known of his drug use,” the judgement says.

On his insurance policy application form, Mr Larcombe falsely said he had not smoked in the last 12 months, while in the ‘Medical History’ section he falsely said he had not taken drugs on a regular or ongoing basis or injected any unprescribed drugs, or ever received advice, counselling or treatment for drug dependence.

“Mr Larcombe was an educated and sophisticated man. It is inconceivable that he did not know and understand that … he was being asked, in plain English, whether he was taking or had previously taken or used or injected illicit drugs,” the court judgement says.

It was inconceivable he thought the questions related to “caffeine, over-the-counter pain killers, herbal remedies, creams and ointments, cold presses or lip salves, or that he considered that OnePath would be interested in these things and not interested in ecstasy, ice and cocaine use,” it says.

Mr Larcombe also wrote he had a “health check due to age” when the check up, by a doctor in Double Bay, “was not due to age but, rather, due to him having binged on cocaine”.

That doctor testified Mr Larcombe said he presented in a ‘fairly sort of distressed state,’ concerned that he had swallowed a plastic bag of cocaine and might die, and admitting bingeing on cocaine and ice (crystal methamphetamine). He described himself as a moderate smoker who regularly consumed alcohol and cocaine.

Ms Smith, described as “intelligent and articulate” and occupying responsible human resources roles at major law firms, observed Mr Larcombe taking ecstasy tablets and snorting bags of cocaine in Bondi, Kings Cross and Darling Harbour, in bathrooms and disabled toilet facilities and at numerous parties over many years, and said he had a dealer.

However, she argued Mr Larcombe used cocaine on special occasions or celebrations in the same way as others may drink alcohol together, and that it was a normal activity within his social circle.

This was rejected by the judge, who said her evidence was “deftly crafted to place the best and most benign complexion on Mr Larcombe’s drug use”.

“Mr Larcombe’s use of cocaine was far more regular and serious than her evidence sought to portray,” the judge said.

Mr Larcombe called Ms Smith in June 2015 to say that he had checked himself "into rehab". He told the medical registrar he had “a binging issue” and “a problem with cocaine, base (amphetamine), ice and pills” and it was “like a slippery slope”.

“It is inconceivable that he did not know that he was, and for a long time had been, a non-trivial drug user (and) did not know and understand that his illicit drug use was relevant to OnePath’s decision whether to accept the risk and, if so, on what terms. I find that he did know and understand this,” the judge said.

Ms Smith was ordered to pay OnePath’s legal costs.

The full judgement can be read here.