The obvious seems to have been overlooked. Assuming it's a "pay monthly" account, the account is tagged not to the phone, but to the SIM card. Potentially, the loss/theft of the SIM could be more expensive the the loss of even the most expensive phone. There are obvious circumstances where you might take the SIM out of your phone... you're in the pub with your mates, your phone runs out of juice, and you get a call that you want to take; borrow your mate's phone (assuming he's on the same network) and you can switch SIMs; you CAN now take/return the call, using his battery power. But what happens if you forget to switch the SIMs back? Bear in mind that the mate who lent you his phone is Australian, and phones his girlfriend in Brisbane every night. The international calls will be billed to YOU, because the SIM in his phone is YOUR SIM. Point is... calls made from whatever phone the SIM is installed in will be billed to YOUR account. If (for example) you'd given your mate his phone (and SIM back) but carelessly left YOUR SIM on the bar, and left it behind... if someone nicks it, and sticks it in their own phone... you're paying the bill for any calls that they make (up to the exact moment when you officially report that the SIM has been stolen). A SIM isn't just a cheap bit of plastic with a chip embedded in it: it's potentially a direct line into your bank account!
They refused at first, but with a little persistence and a crap load of letdowns & wasted time/money waiting for their monkeys on the phone, they offered to settle. They could not prove the card was not in the phone in the end.
Tip: If you insure your phone, make sure the you keep the number you registered inside the phone you insured. Stupid rule considering it was 3rd party insurance and not with a network.