Evaluation of Reforms to the Juristic Bases of Remedies for Fraudulent Insurance Claims

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 Dissertation Title:

A Critical Evaluation of Reforms to the Juristic Bases of Remedies for Fraudulent Insurance Claims and the Efficacy of The Law as a Deterrent to Insurance Fraud

ABSTRACT

 

The impact of insurance fraud is extremely damaging to both the industry and policyholders as aside from fiscal costs, it can also negatively affect the insurers’ perception of insureds. Uniquely, the civil courts have been tasked to develop the appropriate legal remedy to fraudulent insurance claims, and the civil law plays an important role of fraud deterrence.

However, the law behind the legal remedy to fraudulent insurance claims has been marred by conflicting principles and ambiguous judgments, and the common law has developed in a piecemeal fashion. In this respect, the Insurance Act 2015 and the recent landmark decision of Versloot Dredging have introduced significant changes to the remedies available to fraudulent insurance claims.

This paper aims to examine the impact of reform on the main juristic bases for the fraudulent claims remedy, and in doing so, evaluate the efficacy of the law as a public policy deterrent to fraud.

This paper first considers the impact of reform to three discrete legal bases of remedy. The paper finds that the reform has clarified certain difficult principles and improved remedial flexibility of the courts. It has mitigated the harshness in the remedy of avoidance, and now allows some scope for fraudulent behavior in relation to the falsification of evidence in insurance claims. Although this is a welcome move for insureds, it raises doubt as to the efficacy of the law as a deterrent to fraud. This paper also undertakes a socio-legal analysis with regard to the deterrent nature of the law

Abstract 2
Contents 3
Introduction 4
Chapter 1: The Good Faith Principle 7
Chapter 2: The Common Law 12
Chapter 3: Express Terms 20
Chapter 4: Classes of Fraud 23
Chapter 5: Deterrence 35
Conclusion 40
Bibliography 43

 

CONTENTS PAGE

 

 

 

 

 

 

 

INTRODUCTION

Insurance fraud occurs when there is an element of deceit in either the application or claims stage of an insurance policy. Although there is no statutory definition for insurance fraud per se, Lord Herschell in Derry v Peek[1] held that “fraud is proved when it is shown that a false representation has been made knowingly or unknowingly, or without belief in its truth, or recklessly, without caring whether it be true or false.”[2] Insurance fraud is punishable by criminal law under s.2 of the Fraud Act 2006, but prosecutions are rare, and the civil courts have been left with the task of finding an appropriate legal regime to govern fraudulent insurance claims.[3]

Insurance fraud has now become a serious and expensive problem[4] that has enormous cost to both the industry and policyholders,[5] and the Association of British Insurers (ABI) have estimated that this adds an average of £50 to every policyholder’s premium. Fraudulent claims are increasingly viewed as an “easy crime”, and a recent ABI survey has shown that 42% of respondents saw insurance fraud as an easy way to make money quickly, while another 27% felt that the penalties for fraud were negligible.[6] In this respect, there are two main interrelating themes within the law governing insurance fraud. The first is that the state of the law is “convoluted and confused”, [7]and the second is that of deterrence where “the fraudulent insured must not be allowed think: if the fraud is successful, then I will gain; if it is unsuccessful, I will lose nothing.” [8]

At the time of this paper there have been several recent and significant reforms to the fraudulent claims regime. Firstly, the Insurance Act 2015 now replaces the archaic Marine Insurance Act 1906 with regard to provisions relating to the remedy for fraudulent claims. Secondly, the very recent judgement in Versloot Drudging has meant that fraudulent devices will no longer taint a genuine claim.[9] These developments were the result of a comprehensive review undertaken by the United Kingdom Law Commission, and the reforms were aimed at improving both the clarity and efficacy of the fraudulent claims law as a deterrent to fraud.

Dissertation Objectives

This paper aims to analyse the impact of recent legislative and reform case law development to civil law remedies in fraudulent insurance claims. In doing so, the paper will also evaluate the efficacy of the law as a public policy instrument for the deterrence of fraud. The paper will contain an examination of the three main juristic bases for remedies, its application to various classes of fraud, and a socio-legal analysis of the law’s deterrent nature.

For brevity and depth, this paper will limit itself to an examination of civil remedies for single parties in a fraudulent claim; this means that a discussion of criminal remedies, fraudulent non-disclosure, fraudulent misrepresentation and parties to composite or joint insurance will be outside the scope of this research.

To achieve the main research objectives, this paper will seek to answer three main research questions:

  1. What the problems inherent to the various legal bases for the remedy of fraudulent claims? How has recent legal reform impacted their operation?
  2. How does the fraudulent claim remedy apply to various classes of fraud?
  3. Has the fraudulent claim remedy been an effective deterrent to fraud?

 

Methodology and Structure

This paper will adopt a doctrinal approach with elements of socio-legal analysis incorporated where relevant. A mixture of primary sources and secondary sources will be used. This paper will draw on (but not limit itself to) case law, legislation, textbooks, government reports and journal articles,.

The first chapter will examine the good faith principle as a legal basis for the remedy as well as the impact of amendments to s.17 of the Marine Insurance Act 1906. The second chapter will examine the common law rule as another basis for the remedy, and explore the impact of s.12 to the said remedy. The third chapter will look at express and implied terms as a basis for remedial action and further consider how the law has evolved to tackle contractual issues that arise from such clauses. The fourth chapter will examine how the fraudulent claim remedy applies to various classes of fraud; in particular, developments to the law of fraudulent devices. The fifth chapter will evaluate the law as a tool for fraud deterrence and the efficacy of the existing law.

 

 

CHAPTER 1: THE GOOD FAITH PRINCIPLE

This chapter will examine the utmost good faith principle as the basis for remedies in fraudulent claims, its development and dismissal as a continuing post-contractual duty, and the impact of legislative reform on the principle.

 

  1. Origins of the Good Faith Principle

The duty of utmost good faith (uberrimae fidei) is central to the judicial basis upon which fraudulent claims are found upon, and can trace its origins to Lord Mansfield’s ratio in the very early case of Carter v Boehm.[10] Mansfield believed that the rationale of the duty lay in the fact that the insured was in an advantageous and asymmetric bargaining position from the beginning, and that “Insurance is a contract of speculation… where special facts …lie… in the knowledge of the assured.”[11] This duty had been codified in s.17 of the Marine Insurance Act 1906 (hereinafter referred to as ‘the MA 1906’) where:

A contract of marine insurance is a contract based upon the utmost good faithand, if the utmost good faith be not observed by either party, the contract may be avoided by the other party”[12]

 

The wording of s.17 meant that a breach of the duty resulted in a singular remedy of complete policy avoidance ab initio – the contract is treated as if it never existed and all valid claims, regardless of whether or not they had been paid, would be recoverable. [13] As can be imagined, the harshness and inflexibility of this sanction left insurers with “weapon of genuine power” which prompted the courts to look for ways to limit its scope to appropriate cases.[14]

1.2 Post-Contractual Application

The wording and early reading of s.17 had raised arguments that it was intended to be confined to the pre-contractual period as a backdrop to specific obligations set out in succeeding sections of the MA 1906.[15] Nevertheless, this appears to be “past praying for[16] after such a concept was examined with some controversy in The Litsion Pride.[17] The case did not concern fraud; it involved a marine policy term that required notice to the insurer when the ship entered a war zone. Since the notice triggered higher premiums, the claimant only gave notice once loss was sustained. Hirst J found that the insured had not acted in good faith by attempting to deprive the insurer of premiums, and this breach of s.17 allowed the insurer to avoid the contract ab initio.[18] This meant that there was implicit judicial validation of the duty’s post-contract application to fraudulent claims.

This approach was also favoured in Orakpo v Barclays Insurance Services[19], where Staughton LJ noted that he “could readily accept that there is a duty not to make fraudulent claims”.[20] However he did voice his dissatisfaction with the harshness of the proposed punishment. Accordingly, Hoffman LJ “(did) not see why the duty of good faith on the part of the assured should expire when the contract had been made… any fraud in making the claim goes to the root of the contract.[21] In the Star Sea,[22] the court reluctantly accepted this post-contract application; although they criticised the remedy as “anomalous and disproportionate”,[23] they failed to arrive at a determination as to whether avoidance was applicable to the submission of fraudulent claims, preferring instead to leave it for further judicial development.[24] It would appear that the courts, despite acknowledging the harshness of the law, did not attempt to limit the application of the good faith principle.

The general acceptance was reversed when subsequent cases attacked the idea that the duty of utmost good faith could apply post-contract. In Royal Boskalis Westminster NV v Mountain[25], Rix J found that “[a]part from The Litsion Pride itself, there is no authority which holds that the post-contractual duty of good faith goes wider in the claims context than a duty not to make fraudulent claims“.[26] More recently in Agapitos v Agnew,[27] Mance LJ in did not conceal his dislike of the draconian consequences of s.17,[28] and preferred instead to find a fraudulent claims remedy under the common law rule based in public policy.[29] This position was further adopted in several subsequent cases[30].

Interestingly, the Law Commission was of the view that fraudulent insurance claims could fall under the duty of utmost good faith.[31] This is based on the fact that Mance LJ’s decision in  Agapitos was made in obiter as a mere tentative opinion.[32] However, it would seem that this is now academic given the post-reform amendments to s.17.

1.3 Reform

S.17 of the MA 1906 had led to uncertainty as the courts sought to fashion a less radical result that related more to penalisation of the fraudulent claim itself, and judges had “struggled to characterise the rule in way which escapes the full consequences of avoidance under s.17”.[33] The use of the pre-contractual remedy in post-contractual claim as advanced in The Litsion Pride and Orakpo had fallen out of favour,[34] with the courts instead preferring to base fraudulent claims within the common law. This is because the rationale behind s.17 was that misrepresentation or a non-disclosure vitiates the consent of the insurer to enter into the contract in the first place; in a post-contractual context, however, the insurer has already entered into the contract and the fraudulent claim does not diminish this consent.[35] On this analysis, it appears that the judiciary’s initial adoption of the good faith principle was entirely misplaced.

Given the convoluted development and the narrowly construed remedy of the good faith principle, it is no surprise that the Insurance Act 2015 now abolishes the remedy of avoidance in s.17, [36] leaving the provisions of s.17 merely as:

“A contract of marine insurance is a contract based upon the utmost good faith”

It was accepted that this section could not be removed because it places a pre-contractual duty on the insurer, and because it may have useful post-contractual functions outside of fraudulent claims.[37] The utmost good faith principle is now retained as an interpretive principle which would give the courts a freer range to apply the duty of good faith to post-contractual issues.[38] As will be further examined in Chapter 2, specific statutory provisions dealing with fraudulent claims have been introduced through the Insurance Act 2015,[39] meaning that the general duty of good faith ought to be no more than background[40]. However, there are no provisions which affect express provisions, so an insurer could technically continue to rely on a breach of such a term as a basis for remedy.

 

 

 

 

 

CHAPTER 2: THE COMMON LAW RULE

This chapter will examine the origins and operation of the common law rule of fraudulent claims (hereinafter referred to as the ‘fraudulent claim rule’) as the main juristic basis for remedies. This chapter will also evaluate the impact that the Insurance Act 2015 (hereinafter referred to as the ‘2015 Act’) as it relates to the current law on remedies.

2.1 Origins of the Rule

The origins of the fraudulent claim rule can be traced back to early fraudulent claims clauses, the high frequency of which prompted courts to put extensive effort into introducing a general rule of law.[41] Quite apart from the duty of the insured to act in good faith, the prevalence of express terms has led to the development of a separate common law principle, founded in public policy, to the effect that fraud defeats a claim in its entirety.[42] However, the exact relationship between the two veins of law has not been clear, and the legal position remains somewhat confusing.[43]

In Britton v Royal Assurance Co.[44], one of the earliest illustrations and oft-quoted examples of the fraudulent claim rule, the insured sought a claim for an amount far exceeding the actual loss of property resulting from a fire. The judge, Wiles J, ruled against the insured and set out the forfeiture policy as… if the assured set fire to his house, he could not recover…, if the claim is fraudulent, it is defeated altogether… he could not recover anything…The contract of insurance is one of perfect good faith on both sides…It would be most dangerous to permit parties to practice such fraud… the insured forfeits all claim whatever upon the policy… The law upon such a case is in accordance with justice, and also with sound policy”.[45]

Yet, the rationale that such a forfeiture is “in accordance with legal principle and sound policy” leads to the question of what “forfeit all benefit” actually means.[46] The traditional view of the duty to not make a fraudulent claim is rooted in the general duty of utmost good faith as set out in s.17 of the MA 1906,[47] which if true, would allow the insurer to avoid the policy ab initio as a consequence of a breach. In this respect, Eggers has also interpreted the fraudulent claim rule and the good faith avoidance remedy as “amount(ing) to the same remedy… (as they) describe the identity and effect of the same remedy”.[48]

However, this position has since been dismissed, and the public policy rationale for the common law principle has been affirmed in subsequent cases. In Galloway v Royal Guardian Royal Exchange[49], the insured, following a burglary, claimed for an extra computer than had not actually been lost. The Court of Appeal held that despite there not being an express clause barring full recovery in the event of a fraudulent claim, the policy would be treated as if such a clause was there “in accordance with legal principles and sound policy”.[50] Lord Woolf MR and Millett LJ also considered various tests to determine the substantiality of the fraud involved in an effort to align the law with the general policy of fraud deterrence.[51] In this case, the substantiality requirement can be presumed to be the equivalent of the materiality requirement in a pre-contract utmost good faith context[52], although this is now academic given that later cases recognise the fraudulent claim rule and good faith as separate concepts.

Lord Hobhouse in The Star Sea[53] confirmed the existence of the common law principle and attempted to compare the fraudulent claim rule with the law of illegality[54]. He also highlighted the rationale for the forfeiture as one where “the fraudulent insured must not be allowed to think: if the fraud is successful, then I will gain; if it is unsuccessful, I will lose nothing”.[55] It would seem that the judiciary had intended for the forfeiture to act as a punitive measure to deter would-be fraudsters who seek to submit exaggerated claims.[56]

More recently in Agapitos v Agnew[57], Mance LJ affirmed that the fraudulent claim rule arose from the common law and “fell outside the scope of section 17”.[58] He further dismisses the idea that the fraudulent claim rule as having any basis in the law of illegality,[59] and argues that the law is intended to be draconian in nature to deter prospective fraudulent claimants.[60]

 

2.2 The Fraudulent Claim Rule in Operation

Under the general rule, it is clear that insured loses all benefits if the claim is fraudulent.[61] However, the operation of the fraudulent claim rule in relation to interim payments and retrospective claims and warrants further discussion.

In AXA General Insurance Ltd. V Gottlieb,[62] the insureds made four insurance claims, two were fraudulent and two were genuine. The insurers sought to recover all four payments and argued that forfeiture should apply retrospectively to all claims made that year. In his judgement, Mance LJ reiterated his dicta in Agapitos; the fraudulent claims rule was a special common law rule that operated to forfeit the entire tainted claim.[63] By extension, this meant that interim payments made by the insurer were recoverable as “there (was) no reason why the consequences of making a fraudulent claim rule should depend on the timing of any payment”.[64] The courts chose to allow this recovery to deter fraudsters who were tempted to make a claim knowing that they would lose nothing.[65] Moreover, it was also believed that insurers would cease to make interim payments if they were unable to recover the said payments in fraudulent scenarios.[66] On the other hand, Mance LJ found “…no basis or reason for giving the common law rule… retrospective effect …on separate claims which have already been settled under the same policy.” Legitimate claims were not affected as long as they remained untainted by the fraudulent element – this is of sensible as it prevents the practical application of the rule from becoming a remedy of avoidance ab initio.[67] This means that the fraudulent claim rule provides a scope for flexibility in relation to the forfeiture of claims.

2.3 Reform

2.31 A Codification of the Fraudulent Claim Rule

S.12 of the 2015 Act, which deals with the general position of remedies for fraudulent claims, has been construed to replace the common law principle, which they mirror and expand.[68] In an echo of the general fraudulent claim rule, s.12(1)(a) states that an insurer will not be liable to pay a claim should the insured make a fraudulent claim under the contract for insurance. S.12(1)(b) follows that the insurer may recover any sums paid to the insured in respect of that claim.

Although it is not envisioned that this new statutory embodiment would lead to vastly different results, it would be worthwhile to note that certain criticisms relating to the implication of s.12 to fraudulent devices (namely on how the provisions fail to make a distinction between classes of fraud)[69] has very recently been consigned to history in light of the Supreme Court ruling[70] in Versloot Dredging.[71] This development will be examined in greater detail in Chapter 4.

2.32 Termination of Fraudulent Insurance Contracts

Another noteworthy area that has been clarified in s.12(2) 2015 Act involves the terminability of a fraudulent insurance contract.

Prior to the 2015 Act, the law regarding the terminability of insurance contracts (bar avoidance ab initio) was wholly undeveloped.[72] Although it had never been authoritatively decided, the pre-reform approach of the courts was likely to be an adoption of ordinary contractual analysis;[73] support for this can be found in The Star Sea,[74] where Lord Hobhouse considered three possible legal bases for analyses: the basic principle of utmost good faith, general contract principles including repudiation, and the existence of a special sui generis common law relating to fraudulent claims. Although the court reluctantly opted for the remedy of avoidance, Mance LJ picked up on this in Axa Insurance v Gottlieb[75] and stated that:

“There seems to me some force in the argument that the common law rule relating to fraudulent claims should be confined to the particular claim to which any fraud relates, while the potential scope and operation of more general contractual principles might in some circumstances also require consideration”

Merkin had interpreted this to mean that termination relies on the severity of the fraud involved,[76] which could have potentially led to a proportionality style assessment of terminability where the class of fraud is taken into account. Clarke believed that a contract involving a fraudulent claim is terminable at the option of the insurer.[77] This seemed sensible given that the law has traditionally respected parties’ freedom to contract, and the insurer may elect to remain liable for valid policies.[78] However, the law was unclear on the legal basis for termination, and there was no guidance as to whether the termination should be automatic or invoked by notice from the insurer.

The Law Commission chiefly considered these issues. Despite some initial support for automatic termination, it was determined that clarity regarding the effect of termination was essential, with the judges of the Court of Session preferring the approach where “the insurer elects to terminate or rescind the insurance cover on discovery of the fraud”. [79] In this respect, statutory guidelines now govern the terminability of insurance cover; s.12(1)(c) of the 2015 Act distinguishes between a ‘fraudulent claim’ and a ‘fraudulent act’ (the behavior that makes the claim fraudulent, which may be after the initial submission of the claim), and allows the insurer to treat the contract as having been terminated from the time of the ‘fraudulent act’ subject to notice being given to the insured. S.12(2)(a) provides that an insurer who decides to terminate the contract is entitled to refuse all liability in respect of a ‘relevant event’ occurring after the fraudulent act. Finally, s.12(3) states that if an insurer treats a contract as having been terminated, then all rights and obligations of the parties with respect to a ‘relevant event’ occurring prior to the fraudulent act will not be affected.

On a closer reading, this would mean that insurers are only allowed to terminate a fraudulent insurance contract and recover ‘tainted’ claims with retrospective effect from the point of the fraudulent activity. In practice, this would allow insureds to retain valid claims under the same policy which were made after the fraudulent act. The Law Commission has also iterated that notice prior to termination is essential, and that the failure to take any action would constitute a waiver by the insured.[80] Therefore, these provisions represent an endorsement of the modern trend of the law; they remove any question of s.17 avoidance as an appropriate remedy, and recognise that fraud does not affect any previous valid claim where loss arises before the fraud takes place.[81]

CHAPTER 3: EXPRESS TERMS

This chapter will examine express and implied terms as a legal basis of remedies to fraudulent claims.

Fraudulent claims clauses are not a modern concept, and for centuries have been generally regarded as the first line of defence adopted by insurers.[82] They do not by themselves generate a waiver of other remedies except possibly in cases where the clause expressly and unambiguously establishes a waiver.[83] Although parties are given the freedom to contract on specific terms, they would still be limited by restrictions imposed by broad doctrines of public policy and legality.[84]

Although fraudulent claims clauses are used to set out the remedial framework in the event of  fraud,  an insurer may include a clause merely to bring the policyholder’s attention to the general fraudulent claim rule; the courts have typically interpreted them in this light.[85] In Fargnoli v GA Bonus Plc[86], Lord Penrose thought such a clause to be ambiguous and ruled that it relieved the insurer only of liability for the tainted claim and did not allow for avoidance ab initio. The issue of ambiguity in the wording has presented an issue for the courts, and Clarke has stated that the general rule is one of literal interpretation.[87] However, this rule may be overridden in cases where the courts struggle to reconcile it with the actual intention of the parties, and in Agapitos v Agnew[88], Mance LJ held that ‘forfeiture’ in the clause referred to the common law rule and not s.17 avoidance ab initio.[89]

The courts have shown a reluctance to strike out even particularly harsh remedies, and in Joseph Fielding Properties v Aviva Insurance Ltd,[90] they decided not to interfere with a clause that stated that “we will at our opinion avoid the policy from the inception of this insurance”. In this case, the court had found no reason to refer to the common law rule due to the absolute nature of the clause, and held that all previously paid claims were recoverable. This meant that the courts are prepared to accept draconian remedies to uphold the parties’ freedom to contract, and although express terms are governed by the Unfair Terms in Consumer Contracts Regulation 1999, it seems unlikely that the fraudulent claim rule as a rule of law is subject to it.[91] Nevertheless, and in a purely contractual context, Hooley has found the courts increasingly unwilling to enforce contracts that are administered in an unreasonable manner.[92] Moreover, a consumer insured might be able to lodge a complaint to the Financial Ombudsmen Service (FOS) should such a clause be used to deny a claim, thereby reducing the bargaining asymmetry that may have put him at an disadvantage. In the unlikely event that the policy purports to exclude remedies for fraud, such exclusion would probably be ineffective, [93] meaning that a clause can only restate the common law rule or extend any available remedies. Despite this, however, parties cannot purport to exclude or limit their own fraudulent behavior.[94]

Prior to the 2015 Act, and where no express term is provided in the contract, the courts have attempted to imply a term  largely on the basis on standard principles of contract law.[95] This area of law was muddled and there was confusion as to whether the judiciary was actively proposing an implied term theory or simply attempting to expand the scope of fraudulent claim rule.[96]

In Orakpo v Barclays,[97] Staughton LJ stated that such a term should be implied not as a matter for business efficacy, but “as a matter of law… it is a term which the law imposes unless parties contract out of it”. This approach was endorsed by Hoffman LJ, but criticised for being unclear on its exact operation.[98]

Soyer, however, praised the use of the implied term as it allowed for greater remedial flexibility. The use of implied terms based on contractual analysis could have potentially made damages available to insurers who suffer losses while investigating a fraudulent claim.[99] Although the Court of Appeal had previously ruled that s.17 of the MA 1906 could not operate to support a claim for damages,[100] the abolishment of the post-contractual duty of good faith means that the common law rule now take precedence. That being said, the Law Commission has omitted to include a right to damages under s.12, and so it would technically only be possible for an insurer to be awarded damages should the basis of the remedy be found in an implied term of contract. It is submitted that this is now academic given that s.12 now codifies the general fraudulent claims principle and effectively removes any need for express terms to be included in an insurance contract. Nevertheless, the flexibility of the implied term could have operated to provide a more proportionate remedy. Moreover, it could have potentially improved the law’s deterrent nature by allowing insurers to claim damages for fraud investigation.

CHAPTER 4: CLASSES OF FRAUD

As previously discussed, the law of remedies is clear in respect to wholly invented claims. If there is no loss or the loss is a result of the deliberate act of the insured, then the insured should recover nothing.[101] However, the cases of fraud that involve genuine claims warrant further discussion. This chapter will examine the remedial treatment of two main classes of fraud, namely: exaggerated claims and claims supported by fraudulent means (herein referred to as ‘fraudulent devices;).

4.1 Exaggerated Claims

Exaggerated claims are where the insured has suffered some loss but not as much as the amount he is seeking to recover. This is the most common type of fraudulent claim and can be very difficult to deal with given the complexity of differentiating between genuine and fabricated claims,[102] and it is almost impossible to determine the state of mind of the insured at the time of submission. This means that the court would have to rely on the exaggeration amount as a point of reference.[103] Moreover, not all exaggerated claims may be fraudulent;[104] as acknowledged by Staughton LJ, some people put forward inflated claims for the purpose of negotiation, knowing that these claims will be cut down by an adjuster.[105] It is a commercial reality that parties do engage in “horse trading[106] and in many cases it appears that the court have chosen to turn a blind eye[107] to minor infractions. That being said, an invented portion of a claim will always be fraudulent.[108]

In Guardian v Galloway[109], an insured added the cost of an extra computer worth £2000 to a genuine claim of £16,133. This was held to be fraudulent, and the court rejected the idea that the exaggerated amount should be considered as a proportion of the overall claim.[110] This case illustrates the harshness of the “all or nothing” rule.[111] However, there has been a body of authority accepting to some degree that overvaluation is not fraud, [112] and courts have been prepared to give the insured the benefit of the doubt. In Tonkin v UK Insurance Limited,[113] the court held that an exaggeration of £2000 (0.3% of the entire claim) did not amount to fraud. This decision has been criticised as a departure from Galloway, and especially so because of the deliberate fraud involved.[114] It would appear that the court was unwilling to find fraud in Tonkin because of the overwhelmingly disproportionate remedy, but this De minimis approach was said to be an “open invitation… for fraudulently exaggerated claims… as it appear to be in the insureds interest to exaggerate their clam”.[115] The judicial approach is now to consider the exaggerated portion of the claim in isolation, and determine if it was sufficiently serious to justify stigmatising as fraud.[116]

It is important to note that exaggerated losses taint the claim even where losses are mutually exclusive. In Direct Line v Khan,[117] an insured under a home and contents insurance policy made an exaggerated claim in respect of lost rent; this was held to taint his claim for the replacement of lost contents as well as the restatement of the building. The harshness of this principle can be seen in Yeganeh v Zurich,[118] where an exaggerated contents claim for clothes worth £12,465 was held to taint the overall claim of £200,00.

 

4.2 Fraudulent Devices

The law of fraudulent devices has been subject to very recent judicial scrutiny, and the Supreme Court in Versloot Dredging[119] has held that insurance claims supported by fraudulent devices are no longer fraudulent. This is a very interesting reversal from previous cases, and this section will examine the historical judicial treatment of fraudulent devices before analysing the Versloot ruling in greater depth.

4.2.1 The Development of Fraudulent Devices

A fraudulent device is used in situations where there has been genuine loss, but some fraud is used to advance the claim or conceal some form of defence.[120] The use of fraudulent devices have only been examined relatively recently and its definition and law (bar the application of Versloot) has been recently minted in Agapitos[121] where Mance LJ sets out various classes of fraud and defines a fraudulent device as one where “…the insured believes that he has suffered the loss claimed, but seeks to improve or embellish the facts surrounding the claim, by some lie”.[122]The use of fraudulent devices is not new, however, and can be traced back to the early case of Wisenthal v World Auxiliary Insurance Corporation,[123]where it was held that “fraud… was seeking to obtain an advantage … by lies and deceit”.[124]

In Agapitos, the insured submitted a forged document that alleged that no “hot work” was done on a ship when it had in fact taken place. This requirement of notice was part of the insurance policy as the “hot work” increased the fire risk to the ship. Although the loss was genuine, this was a breach of warranty and the question was whether the use of the fraudulent device amounted to fraud. The judge at first instance, Toulson J, felt that there was no reason that a collateral lie should transmogrify the claim into a fraudulent one.

On appeal, however, Popplewell argued that fraud in the pursuit of a claim should attract parallel treatment with the fraudulent claim rule and therefore the whole claim should be forfeit.[125]. Mance LJ took the same view, and explained that fraudulent devices were a “sub-species” of fraudulent claims,[126] which were accordingly subject to the fradulent claim rule. He did, however, consider the possibility of a “an obviously irrelevant lie” that might not attract the same sanctions.[127] To this end, Mance LJ suggested that:

the court should only apply the fraudulent claim rule to the use of fraudulent devices or means which would, if believed, have tended, objectively but prior to any final determination at trial of the parties’ rights, to yield a not insignificant improvement in the insured’s prospects—whether they be prospects of obtaining a settlement, or a better settlement, or of winning at trial”.[128]

Mance LJ therefore introduced a two-stage hybrid test of materiality which contained the subjective test of intention and the objective test of the lie’s impact – both tested at the time the lie was made. The fraud must not be “unsubstantial”, and it must be “directly” related to and intended to promote the claim. In addition, Mance LJ explained that inducement was not needed as it was “irrelevant” to  the overarching legal policy to deter fraud. [129] Nevertheless, there has been some division over this view.[130]

For better or for worse, this clarification of fraudulent devices gave insurers another basis upon which they could prove fraud, and this will be examined in further detail in Chapter 5. It is important note that although the views of Mance LJ were all made in obiter, they continued to be cited in subsequent cases, and the test was applied in the Game Boy,[131] where an insured who fabricated a valuation of a vessel was held to have made a fraudulent claim.

Interestingly, the FOS has taken a different view in that it looks at whether or not the document in question was used “solely to substantiate transactions that really took place, or (if) customers intend(ed) to obtain more than they were entitled to[132] This reflected a more nuanced view of the rule as the FOS takes into account the nature of the fraud in its determination.[133] Nevertheless, and although this appears to somewhat undermine[134] the general rule on fraudulent devices, this approach can mitigate the potential harshness of the fraudulent device rule . In Aviva v Brown[135], an insured, under an insurance cover for alternative accommodation, rented a property which he in fact owned. Eder J found the insured liable for one count of fraud (through the usage of a fraudulent device) and had no choice but to order the insured to forfeit the majority of claims that arose under the policy. This was despite the fact that the insured’s representations did not and could not affect the handling of the claim.[136]

Based on the factual situation, Eder J found that the “the conclusion was harsh”,[137] and Merkin believed that the “law had gone too far” with the fraudulent claim rule’s applicability to fraudulent devices. The insured had genuinely believed that the insurer was aware of his interest in the property and the insurer had not acted upon the notice of intention to rent, thereby leaving the insured unaware that he committed fraud. Swaby believes that this was attempted fraud at worst,[138] and that any competent insurer would have been well aware of the facts if they had read the insured’s file.[139] Accordingly, Swaby characterized the case as being a “sledgehammer to the proverbial nut”.

Thus, the nuanced approach of the FOS was precisely designed to mitigate[140] the effect of stringent  rulings that were disproportionately harsh on the insured, such as the subsequent case of Sharon’s Bakery v Axa.[141] In this case, The insured was had forged an invoice for a piece of destroyed machinery as the original invoice was missing. The judge found the insured liable for fraud and all benefits under the policy were forfeited. It is also worthy to note that the law does not allow for the insured to claim consequential losses from a genuine claim, and there is no recourse against insurers who unfairly delay payment.

The fraudulent device rule was discussed during the consultation session for the Law Commission’s second paper. Several commercial judges,[142] including Popplewell (who was counsel for the insurer), considered that the general rule may have been stretched too far.[143] In particular, they compared the fraudulent claim rule’s application to fraudulent devices with that of personal injury claims where it was commonplace for claimants to exaggerate their injuries. This deceit is not punished with the avoidance of damages, rather, the exaggerated portion of the claim would be disregarded. By extension, there is no reason “why an assured whose house burns down loses his buildings and contents entitlement to hundreds of thousands of pounds because he falsely claims for extra laptops”.[144]

This position was also explored in Summers v Fairclough Homes,[145] where it was held that only the fraudulent portion of an exaggerated personal injury claim would be forfeited.

 

4.2.2 The Versloot Rulings

First Instance

In Versloot Dredging,[146] the insured, in order to claim for the loss of a ship, fabricated a crew report in order to show he met the requirements of due diligence under the insurance policy. The claim of €3.2 million for the loss of a ship itself was completely genuine. Popplewell J, who was previously counsel for the insurers in Aviva v Brown,[147] presided over the court of first instance.

Popplewell cites a large portion of Mance LJ’s decision in the Agapitos,[148] and observed that although the fraudulent claim rule has been settled as a fundamental principle of insurance contract law, [149] the fraudulent device rule had only originated in the Agapitos; as the decision itself was made in obiter, he was not bound to follow it.

Popplewell J also went on to explain that the rationale behind the fraudulent claims rule does not apply to fraudulent devices because the insured is not seeking to gain any more than what they were entitled to.[150] This defeats any argument that the rule acted to deter potential fraudsters who were claimed for self-gain. Moreover, he believed that the “the condemnation (of fraud) must take… colour from the differing circumstances of each case.[151] Accordingly, he recognised that the forfeiture of a genuine claim worth €3.2 million was a “disproportionately harsh sanction[152] which was borne of a reckless untruth and not a carefully planned deceit. He instead considers “a materiality test which permitted the court to look at whether it was just and proportionate to deprive the assured of his substantive rights, taking into account all the circumstances of the case[153] Despite this, Popplewell with ‘manifest reluctance[154] opted to apply Mance LJ’s dicta as he had felt that the issue needed further judicial treatment, and he was unable to provide the same level of analysis as a full Court of Appeal.[155]

Court of Appeal

The case was subsequently appealed, and the Court of Appeal felt similarly bound to apply earlier case law. Clarke LJ was of the view that the extension of the fraudulent claim rule to fraudulent devices had been approved by the Supreme Court in Summers v Fairclough Homes. He also considered various other cases[156] where Mance LJ’s dicta had been endorsed, before reiterating the underlying public policy interest of fraud deterrence as the principal justification of the fraudulent claim rule’s application to fraudulent device.[157] Accordingly, he chose not to endorse Popplewell’s proportionality test on this principle of deterrence as he felt that the calculation of fraud was still unclear, and there was a possibility of encouraging fraud if parties felt that they could recover even a small part of a fraudulent claim. Clarke LJ believed that the critical issue at hand was whether or not the fraud claim rule’s application to fraudulent devices was proportionate to the policy of deterrence, rather than whether or not it was proportionate to the relevant fault.

A human rights argument against the rule was also considered; under s.6 of the Human Rights Act 1998, the state could not impair the right of persons with regard to their entitlement to enjoy their possessions. It was argued that under the fraudulent claim rule, the avoidance of what was otherwise a genuine entitlement to property was in breach of this right. On this point, Clarke LJ decided that there was no breach as s.6 was overridden by public policy, the fraudulent claim rule was proportionate to the objective sought, and the sanction was not penal in nature.[158]

As such, Clarke LJ seems to approach the Versloot issue from a public policy standpoint, as opposed to Popplewell and Swaby, who are predominately focused on its disproportionate treatment of (presumably) consumer insureds in an asymmetric bargaining position.

Supreme Court

By a majority of four to one, the Supreme Court reversed the Court of Appeal and ruled in favour on the insured; it was held that the fraudulent claim rule was not applicable to valid insurance claims that were supported by fraudulent devices. According to Soyer, this has hit the insurance market like a “bombshell”[159] and will have implications across all sectors of the industry.[160]

In giving the leading judgment, Lord Sumption held that in claims involving fraudulent devices the “the lie is dishonest, the claim is not”.[161] There was no convincing nexus between a lie told at inception and a lie told at claims stage because the insurer is bound to pay genuine claim anyway.[162] Moreover, he felt that it was illogical for the fraudulent devices rule to cease applying on the commencement of litigation as it was when most insureds were tempted to “gild the lily” and submit falsified documents for legal expediency.[163] On the other hand, Lord Hughes opted step back and base his decision within the historical development of the law. He considered how the MA 1906 was originally intended to protect a fledging insurance industry, and moreover, notes that Parliament had left s.12 of the 2015 Act open for the judicial interpretation of fraudulent claims.[164] This meant that it was acceptable for the fraudulent claims rule to be reformed.

On the other hand, Mance LJ grounded his dissenting judgement in the public policy of deterrence, and argued that “abolishing the fraudulent devices rule means that claimants pursuing a bad, exaggerated or questionable claim can tell lies with virtual impunity[165] He also went on to criticise the approach of both Sumption and Hughes as being a non-sequitur,[166] and argued that they failed to understand that the insurance industry was an institution based on the assessment of risk and the settlement of claims.

This ruling is highlights a major change in the judicial approach toward fraudulent claims. Under the new law, insureds who embellish a genuine claim with fraudulent evidence cannot be penalised under the fraudulent claims rule. The Supreme Court did consider the issue of deterring insurance fraud, but concluded that there were sufficient protections in place. In particular, the contempt of court rules (involving false evidence) and the insurer’s pre-litigation right to terminate cover prospectively were deemed sufficient to deter would-be fraudsters. Moreover, insureds who submit false evidence would be stigmatised as any finding of prior fraud would remain disclosable.[167]

Of course, the efficacy of this decision has yet to be seen. It is prudent to note that insurers are still free to simply design express clauses that penalise the use of fraudulent devices. This will warrant further judicial treatment, and it will be interesting to examine the approach of the courts. The author believes that it would not be logical for express terms to defeat the Versloot ruling in its entirety, and that courts will have to carefully balance the freedom to contract with consumer protection, perhaps by assessing the element of reasonableness within the contract.[168]

CHAPTER 5: DETERRENCE

This chapter will examine the rationale and efficacy of the law as a deterrence to fraud.

5.1 Legal Basis for civil law as a Deterrence

Given that civil law is tasked primarily to compensate loss arising from a breach, it seems curious that it would be tasked instead to inflict punishment as a deterrent.[169] Arden LJ has remarked that “a civil sanction, particularly a financial one, may in a more appropriate case be more effective than a criminal sanction…”,[170] however, this view is contested, and the Bar Council believes that “the logic may not be so simple… and if the matter goes to court, (the insured) will be liable for litigation costs  and in a claim for deceit the costs incurred…. He may well be subject to a criminal sanction.”[171] Likewise, Clarke argues that the accused in civil claims do not have the same safeguards as those in criminal law; for example, the burden of proof in civil claims is much less than that of criminal law.[172]

Nevertheless, the Law Commission has noted that criminal prosecution for insurance fraud under the Fraud Act 2006 is rare,[173]  and it was deemed necessary for civil remedies to play a role in deterring fraud. On this note, there has been a wide body of academic support for this, and Merkin believes that “there is a clear need to deter fraud and that… should be the paramount consideration.”[174] The Lloyds Market Association has also expressed their support for a “clear but fair law on forfeiture as a deterrent to fraud.”[175] Thus, the judiciary has been tasked with developing the appropriate civil law remedies to fraudulent claims. In this respect, the author believes that a financial sanction would be preferable to criminal sanction for reasons of public policy.

The use of insurance law as a deterrence has also characterised fraudulent claim remedies as being far more stringent than its civil law counterparts (e.g. remedies for personal injury). As previously illustrated in the judgement of Fairclough, this distinction “could not be greater”.[176] Moreover, the public policy role of the civil law as a deterrent to fraudulent claims has deeply divided the opinion of the judiciary. This is particularly evident when sanctions are considered; for example, the recent judicial treatment of fraudulent devices illustrate the spectrum of this divide and the murkiness of the law. The author believes that there is no clear consensus as to the policy of deterrence, and judges have traditionally left the law to develop in a piecemeal fashion.[177]

The removal of the remedy of avoidance ab inito from s.17 MA 1906[178] and recent ruling on fraudulent devices in Versloot seem to indicate increasing judicial leniency where sanctions are perceived to be disproportionately harsh. This shift, if any at all, must be continually balanced with the need to ensure the efficacy of the law as a “strong anti-fraud deterrent”.[179]

 

5.2 Impact of the Law as a Deterrence

It is difficult to accurately evaluate the impact of the fraudulent claim rule as there is no empirical data to show that it does deter fraud,[180] and moreover, there is a growing body of academic literature that question the effectiveness of sanctions as a deterrence.[181]

There is also a surprising contrast between the number of fraudulent claims being reported. In 2012, insurers detected 118,500 fraudulent claims involving £1.3 billion. The Fraud Intelligence Bureau on the other hand only recorded 8,583 cases of insurance fraud in 2014.[182] Although criminal statistics are usually underreported, the striking difference suggests that the insurance industry has been recording fraudulent claims without reporting them to the authorities, and this would also imply that insurers’ suspicions of fraud are not necessarily supported with evidence.[183]

The Law Commission in 2014 had stated that “the law on insurers’ remedies for fraud is confusing… (and) that there is a clear need for a clear statement on the civil law consequences of fraud to act as a deterrent…[184] Although recent reform has improved the clarity of law and mitigated the harshness of the fraudulent claim rule, these were only limited measures as the Law Commission believed that it was an area “best left for the courts to develop[185]. While this means that there is no risk of s.17 style rules being codified and misapplied in the future, it does mean that the law has been left to develop in a piecemeal fashion. This is somewhat ironic given that one of the aims of the Law Commission was to counter this exact “piecemeal common law development of remedies”.[186]

According to David Hertzall: “if the law is to act as a deterrent, it must be clear and easy to understand.”[187] The author is of the view that the current law is not significantly clearer. Where there was once a clear good faith remedy of avoidance ab initio, there now exists a single fraudulent claim rule that allows for interim payments and repudiation by the insurer. Although the author welcomes this move, it does stand to reason that the new law is more complex in its operation as compared to absolute avoidance. Moreover, the recent judicial reversal of the fraudulent device rule does not improve the clarity of the law for prospective insureds (if anything, it simply reset the common law back to 2003). Some legal practitioners have also questioned if this has created “A charter for fraudsters[188] where insureds may feel tempted to introduce falsified evidence without fear of any punitive action being levied against them. On the other hand, Rawlings and Lowry believe that the fraudulent device rule may have exacerbated policyholders’ problems,[189] by creating an additional basis upon which fraud could be found. They have suggested that the fraudulent device rule may have encouraged insurers to increase the standard of evidence in order to deny genuine claims, terminate the policy and retain the premium. In this respect, the FOS has scrutinised certain ‘overzealous’ practices where insurers who insist on receipts create the temptation for insureds to create substitutes for lost receipts.[190] Whatever the case, this issue has now been resolved following the ruling in Versloot.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONCLUSION

In seeking to evaluate the impact of recent reforms to the law of fraudulent claims and its efficacy as a public policy deterrent to fraud, this paper sought to answer three research questions, namely:

  1. What the problems inherent to the various legal bases for the remedy of fraudulent claims? How has recent legal reform impacted their operation?
  2. How does the fraudulent claim remedy apply to various classes of fraud?
  3. Has the fraudulent claim remedy been an effective deterrent to fraud?

The paper first examined the three main juristic bases which provided a remedy for fraudulent claims. Although a core tenet of insurance contract law, the principle of utmost good faith provided a disproportionately harsh sanction on the insured as the only remedy under this duty was one of complete policy avoidance ab initio. Moreover, the post-contractual application of this duty to fraudulent claims is now regarded to have been a misinterpretation of the law. The application of the good faith duty is now consigned to history as the Insurance Act 2015 removes the remedy of avoidance from the wording of s.17.

The origin of the fraudulent claims remedy under common law, or fraudulent claims rule, can be traced back to the principle of utmost good faith. This later proved to be an unpopular view, and the judiciary instead found the rule to exist in a public policy context of common law. However, the distinction between the common law and duty of good faith has traditionally remained muddled.  Unlike the remedy of utmost good faith, the fraudulent claim rule allowed interim payments to be recovered by insurers, thereby adding a scope for remedial flexibility. The 2015 Act now codifies the fraudulent claims rule and introduces a provision to govern the terminability of a fraudulent insurance contract under the said rule. This was an area that the courts previously struggled with.

Express terms are most commonplace basis for remedial action. The courts have generally deigned to interfere with express terms due to the general principle of freedom to contract. In this regard, the courts have also struggled to deal with policies where there was an absence of express terms, and have attempted to imply a remedy on the basis on contractual analysis. However, there have been no clear judicial consensus toward implied terms. The 2015 Act now creates a common law remedy for fraudulent claims; this means that it is no longer strictly necessary for express terms in an insurance contract (unless parties choose to do so), and by extension, would mean that the implied term has no practical application.

The treatment of exaggerated claims has been patchy. Although the courts were initially hesitant to find a remedy where the sanction would be too disproportionate the claim, it led to a de minimis approach where it seemed that insured were able to get away with minor exaggerations. The current approach of the courts is to deal with the fraudulent portion in isolation to determine the seriousness of the fraud. The law of exaggerated claims has been relatively uncomplicated. On the other hand, there has been significant development to the law of fraudulent devices. The traditional rule set out by Mance LJ has now been overturned, and fraudulent devices will no longer operate to taint a genuine claim.

The legal basis for using the civil law as a deterrent (as opposed to criminal law) was founded in reasons of public policy and practice. Whilst this has generated some controversy, it appears that the unique role of the fraudulent claim remedy has divided judicial opinion and resulted in a piecemeal evolution of the common law. Recent reforms have highlighted growing judicial leniency toward insureds in fraudulent claims, and it is submitted that the courts will have to tread carefully between mitigating the harshness of sanctions and ensuring an effective deterrence to fraud.

The author believes that the recent reforms have improved overall remedial flexibility and clarified certain difficult principles. The legislative reforms were welcome by many academics and judges, but there was criticism of the decision to reverse the rule of fraudulent devices and there is concern that it may lead to an uptake of fraudulently evidenced claims. The author also believes that the law is still unclear, and the impact of the new rules may instead serve to further complicate the clarity of remedies. Therefore, it is submitted that there is still much to be done to improve the efficacy of the law as a deterrent to fraud.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BILIOGRAPHY

 

BOOKS

Birds J, Birds’ Modern insurance Law (10th Ed Sweet & Maxwell 2016)

Clarke M, “Law of Insurance Contracts (Looseleaf)” (LLP Informa Publishing: London, Service Issue Number 22, 1st December 2010)

Eggers P-M, Picken S, Foss P , “Good Faith and Insurance Contracts” (2004, 2nd Edition, Informa

Gilman J and Merkin R, “Arnoulds Law of Marine Insurance and Average” (2008, 17th Edition, Sweet and Maxwell: London)

Lowry J and Rawlings P, “Insurance Law: Doctrines and Principles” (2005, 2nd Edition, Hart Publishing: Oxford)

Merkin R , “Colinvaux’s Law of Insurance”(2010, Ninth Edition, Sweet and Maxwell: London)

 

Summer J, “Insurance Law and The Financial Ombudsman Service” (2010, Informa Publishing: London)

 

JOURNAL ARTICLES

 

Aitkens R, “The post-contract duty of good faith in insurance contracts: is there a problem that needs a solution?” (Journal of Business Law 2010, 5, 379-393)

Bugra A and Merkin R, “Fraud” and fraudulent claims” (British Insurance Law Association journal, No 125, October 2012)

 

Burns A and Belgrove S, “Fraud—the Aftermath” (155 NLJ 628)

Clarke M, “Lies, Damned Lies and Insurance Claims: the Elements and Effect of Fraud” (2000 N.Z.L. Rev. 233)

 

Davey J, “Unpicking the fraudulent claims jurisdiction in insurance contract law: sympathy for the devil “([2006] Lloyds Maritime and Commercial Law Quarterly 223)

 

Eggers P-M, “Remedies for the failure to observe the utmost good faith” ([2003] Lloyds Maritime and Commercial Law Quarterly 249)

 

Friedmann D, “Contract law and the law of insurance” (Law Quarterly Review 2004, 120(Jul), 407-411)

 

Hart A, “Liar Liar” (The Lawyer, 22 September 2003 at 25)

 

Hjalmarsson J, “The standard of proof in civil cases: an insurance fraud perspective” (E. & P. 2013, 17(1), 47-73)

 

Hooley R, “Controlling contractual discretion” (C.L.J. 2013, 72(1), 65-90 at 65)

Hjalmarsson J, “The law on fraudulent insurance claims” (Journal of Business Law 2013, 1, 103-117)

 

Lowry J and Rawlings P, “Fraudulent claims: framing the appropriate remedy” (Journal of Business Law 2006, May, 339-346)

Lowry J and Rawlings P, “Insurance Fraud: ‘the convoluted and confused’ state of the law” (Law Quarterly Review (2016) Jan 132)

Merkin R, “Marine insurance: perils of the seas and fraudulent claims” (Insurance Law Monthly, July 5th 2013)

 

Merkin R, “The Assureds Post-Contractual Duty of Good Faith” (Insurance Law Monthly, September 20 2010)

 

Merkin R, “The Meaning of Fraud” (Insurance Law Monthly, January 25th 2012)

 

Naidoo A and Oughton D, “The confused post-formation duty of good faith in insurance law: from refinement to fragmentation to elimination?”(Journal of Business Law 2005, May, 346-371)

Padfield A and Nichols S, “Insurance: Watch this space” (162 New Law journal 1346)

Rainey S, “The Law Commission’s Proposals for the Reform of an Insurer’s Remedies for Fraudulent Claims Made under Business Insurance Contracts” ([2013] Lloyd’s Maritime and Commercial Law Quarterly 357)

 

Rose F, “Informational Asymmetry and The Myth of Good Faith: Back to Basis” ([2007] Lloyds Maritime and Commercial Law Quarterly, 181)

Soyer B, “Continuing duty of utmost good faith in insurance contracts: still alive?” ([2003] Lloyds Maritime and Commercial Law Quarterly 39)

Swaby G, “Insurance law reform: deterring fraud in the twenty-first century” (Int. J.L.M. 2011, 53(6), 413-434)

 

Swaby G, “The price of a lie: discretionary flexibility in insurance fraud” (Journal of Business Law 2013, 1, 77-102)

 

Tarr J-A, “Fraudulent insurance claims: recent legal developments” (Journal of Business Law 2008, 2, 139-157)

 

Thomas R, “Fraudulent Insurance Claims: Definition, Consequences and Limitations” ([2006] L.M.C.L.Q 485)

 

WEBSITES

The Bar Council, “Insurance Contract Law: Post Contract Duties and Other Issues: Responses to Questions”     <http://www.barcouncil.org.uk/media/131971/lrc_response_post_contract_duties_and_other_issues_insurers_remedies_for_fraudulent_claims_200312.pdf> Last accessed 1/3/2017

Baird G, ‘What is a fraudulent claim?’ (Kennedys, 25 July 2016)   <http://www.kennedyslaw.com/casereview/what-is-a-fraudulent-claim/> Last accessed 1/3/2017

Financial Ombudsman Service, “Ombudsman News” (Issue 41, November 2004 at Page 8) < http://www.financial-ombudsman.org.uk/publications/ombudsman-news/41/41.pdf> Last accessed 1/3/2017

Law Commission, “Insurance Contract Law: Summary of Responses to Issues Paper 7: The Insured’s Post-Contractual Duty of Good Faith” (December 2010) http://lawcommission.justice.gov.uk/docs/ICL7_Summary_of_Responses.pdf> Last accessed 1/3/2017

Law Commission, “Reforming Insurance Contract Law: Summary of Responses to the Second Consultation Paper: Post Contract Duties and other Issues: Chapter 2: Insurers’ Remedies for Fraudulent Claims” (2012) <http://lawcommission.justice.gov.uk/docs/insurers-remedies-for-fraud_responses.pdf> Last accessed 1/3/2017

Soyer B, ‘Case Comment: Versloot Dredging BV & Anor v HDI Gerling Industrie Versicherung AG & Ors [2016] UKSC 45’ (UKSC Blog 15 Aug 2016)  <http://ukscblog.com/case-comment-versloot-dredging-bv-anor-v-hdi-gerling-industrie-versicherung-ag-ors-2016-uksc-45/? Last accessed 1/3/2017

 

 

GOVERNMENT PAPERS

Law Commission, Insurance Contract Law: Business Disclosure; Warranties; Insurers’ Remedies for Fraudulent Claims; and Late Payment  (No. 353, 2014)

 

 

 

 

TABLE OF CASES
Agapitos v Agnew (The Aegeon) (No.1) [2003] Q.B. 556
Aviva Insurance Ltd v Brown [2011] EWHC 362 (QB)
Axa Insurance Ltd v Gottlieb [2005] 1 C.L.C. 62
Black King Shipping Corp v Massie (The Litsion Pride) [1985] 1 Lloyd’s Rep. 437
Britton v Royal Insurance Co (1866) 176 All E.R.843
Carter v Boehm (1766) 97 E.R. 1162
Danepoint Ltd. v Allied Underwriting Insurance Ltd [2005] EWHC 2318 (TCC)
Derry v Peek (1889) 14 App. Cas. 337;
Direct Line Insurance Plc v Fox [2009] EWHC 386 (QB)
Eagle Star Insurance Co Ltd v Games Video Co (GVC) SA [2004] EWHC 15 (Comm)
Fairclough Homes Ltd v Summers [2012] UKSC 26.
Galloway v Guardian Royal Exchange (UK) Ltd [1999] Lloyd’s Rep. I.R. 209
Goulstone v Royal Insurance Co (1858) 1 F & F 276
Joseph Fielding Properties (Blackpool) Ltd v Aviva Insurance Ltd [2010] EWHC 2192 (QB
Levy v Baillies (1831) 131 E.R. 135
Manifest Shipping Co Ltd v Uni-Polaris Insurance Co Ltd (The Star Sea) [2001] C.L.C. 608
Marc Rich Agriculture Trading SA v Fortis Corporate Insurance NV [2005] Lloyds Rep I.R
Nsubuga v. Commercial Union [1998] 2 Lloyds Rep 682.
Orakpo v Barclays Insurance Services Co Ltd [1994] C.L.C. 373
Royal Boskalis Westminster NV v Mountain [1999] Q.B. 674
Sharon’s Bakery (Europe) Ltd v AXA Insurance UK Plc [2011] EWHC 210 (Comm);
Tonkin v v UK Insurance Limited [2006] EWHC 1120 (TCC)
Twinsectra v Yardley [2002] 2 A.C. 164
Wisenthal v World Auxiliary Insurance Corpn Ltd (1930) 38 Ll L Rep 54For
Versloot Dredging BV v HDI Gerling Industrie Versicherung [2016] UKSC 45; AG [2015] Q.B.608 [2013] EWHC 1666

LEGISLATION

Insurance Act 2015

Fraud Act 2006

Marine Insurance Act 1906

Unfair Terms in Consumer Contracts Regulations 1999

 

 

 

 

 


[1] Derry v Peek [1889] UKHL 1

[2] Ibid 373

[3] Law Commission, Insurance Contract Law: Business Disclosure; Warranties; Insurers’ Remedies for Fraudulent Claims; and Late Payment  (No. 353, 2014) para 21.3

[4] Ibid para 19.1

[5] According to the Insurance Fraud Bureau, undetected general insurance claims total £2.1 billion a year: see

http://www.insurancefraudbureau.org/. (Last accessed 1/3/2017)

[7] Versloot Dredging BV v HDI Gerling Industrie Versicherung AG  [2013] EWHC 1666

[8] Manifest Shipping Co Ltd v Uni-Polaris Insurance Co Ltd (The Star Sea) [2001] C.L.C. 608  per Lord Hobhouse at [62]

[9] This will be examined in detail in Chapter 4

[10] Carter v Boehm (1766) 97 E.R. 1162

[11] Ibid

[12] At this point, it would be necessary to analyse s.17 as it was prior to the Insurance Act 2015 (which will only apply to contracts entered into force on or after August 2016) in order to better appreciate the development of the principle and the impact of the reform

[13] See: Eggers P-M, Picken S, Foss P , “Good Faith and Insurance Contracts”, (2004, 2nd Edition, Informa Professional: London at 437)

[14] Davey J, “Unpicking the fraudulent claims jurisdiction in insurance contract law: sympathy for the devil “([2006] Lloyds Maritime and Commercial Law Quarterly 223) 227

[15] Lowry J and Rawlings P, “Insurance Fraud: ‘the convoluted and confused’ state of the law” (Law Quarterly Review (2016) Jan 132)

[16] Manifest Shipping Co Ltd v Uni-Polaris Insurance Co Ltd (The Star Sea) [2003] 1 A.C. 469 Lord Clyde at [6].

[17] Black King Shipping Corp v Massie (The Litsion Pride) [1985] 1 Lloyd’s Rep. 437

[18] Ibid

[19] Orakpo v Barclays Insurance Services Co Ltd [1994] C.L.C. 373

[20] Ibid at 382

[21] Orakpo v Barclays Insurance Services Co Ltd [1994] C.L.C. 373at 451.

[22] Manifest Shipping Co Ltd v Uni-Polaris Insurance Co Ltd (The Star Sea) [2001] C.L.C. 608

[23] Ibid at 494

[24] Ibid 515

[25] Orakpo v Barclays Insurance Services [1997] L.R.L.R. 523 (reversed on other grounds: Royal Boskalis Westminster v Mountain [1999] Q.B. 674; [1997] 2 All E.R. 929)

[26] Orakpo [1997] L.R.L.R. 523 at 596.

[27] Agapitos v Agnew (The Aegeon) (No.1) [2003] Q.B. 556

[28] Lowry J and Rawlings P, “Insurance Fraud: ‘the convoluted and confused’ state of the law” (Law Quarterly Review (2016) Jan 132) 6

[29] Agapitos v Agnew (The Aegeon) (No.1) Q.B. 556

[30] See: Sharon’s Bakery (Europe) Ltd v AXA Insurance UK Plc [2011] EWHC 210 (Comm).

[31] Law Commission, “Reforming Insurance Contract Law Issues Paper 7: The Insured’s Post-Contract Duty of Good Faith” (July 2010) Para 2.23

[32] Ibid 2.20

[33] Law Commission, “Reforming Insurance Contract Law Issues Paper 7: The Insured’s Post-Contract Duty of Good Faith” (July 2010) Para 4.18

[34] Bugra A and Merkin R, “Fraud” and fraudulent claims” (British Insurance Law Association journal, No 125, October 2012) 3

[35] Clarke M, “Lies, Damned Lies and Insurance Claims: the Elements and Effect of Fraud” (2000 N.Z.L. Rev. 233) 252

[36]  for policies entered into or renewed after 12 August 2016

[37] Law Commission, Insurance Contract Law: Business Disclosure; Warranties; Insurers’ Remedies for Fraudulent Claims; and Late Payment  (No. 353, 2014)

[38] Lowry J and Rawlings P, “Insurance Fraud: ‘the convoluted and confused’ state of the law” (Law Quarterly Review (2016) Jan 132) 11

[39] Namely ss.12 and 13 of the Act

[40] Birds J, Birds’ Modern insurance Law (10th Ed Sweet & Maxwell 2016) 295

[41] Hjalmarsson J, “ The Law on Fraudulent Insurance Claims” (Journal of Business Law 2013, 1, 103-117 at 105)

[42] Birds J, Birds’ Modern insurance Law (10th Ed Sweet & Maxwell 2016) 295p292

[43] Clarke M, “Lies, Damned Lies and Insurance Claims: the Elements and Effect of Fraud” (2000 N.Z.L. Rev. 233)

[44] Britton v Royal Insurance Co (1866) 176 All E.R. 843

[45] Ibid at 908 – 909

[46] Noted by the Court of Session in Fargnoli v GA Bonus plc [1997] Re LR 374.

[47] Bugra A and Merkin R, “Fraud” and fraudulent claims” (British Insurance Law Association journal, No 125, October 2012) 1

[48] Eggers P-M “Remedies for the failure to observe the utmost good faith” ([2003] Lloyds Maritime and Commercial Law Quarterly. 249) 263

[49] Galloway v Guardian Royal Exchange (UK) Ltd [1999] Lloyd’s Rep. I.R. 209

[50] Ibid

[51] Ibid at 214

[52] Bugra A and Merkin R, “Fraud” and fraudulent claims” (British Insurance Law Association journal, No 125, October 2012) 5

[53] Manifest Shipping Co Ltd v Uni-Polaris Insurance Co Ltd and Others [2003] 1 A.C. 469

[54] Ibid at para 62

[55] Ibid

[56] Direct Line Insurance Plc v Fox [2009] EWHC 386 (QB) 39

[57] Agapitos v Agnew (The Aegeon) (No.1) [2003] Q.B. 556

[58] The Aegeon [2003] Q.B. 556 at 557

[59] Ibid para 29

[60] See: Rose F , “Informational Asymmetry and The Myth of Good Faith: Back to Basis”  ([2007] Lloyds Maritime and Commercial Law Quarterly  181) 219

[61] Agapitos v Agnew (The Aegeon) [2003] Q.B. 556

[62] Axa Insurance Ltd v Gottlieb [2005] 1 C.L.C. 62

[63] Lowry J and Rawlings P, “Insurance Fraud: ‘the convoluted and confused’ state of the law” (Law Quarterly Review (2016) Jan 132)

[64] Axa Insurance Ltd v Gottlieb [2005] 1 C.L.C. 62 at para 28

[65] As explained by Lord Hobhouse in The Star Sea

[66] Rose F , “Informational Asymmetry and The Myth of Good Faith: Back to Basis”  ([2007] Lloyds Maritime and Commercial Law Quarterly  181) 220

[67] Burns A and Belgrove S, “Fraud—the Aftermath” (155 NLJ 628)

[68] Birds J, Birds’ Modern insurance Law (10th Ed Sweet & Maxwell 2016) 295

[69] Rainey S and Walsh D, “Remedies for fraudulent claims under the Insurance Act 2015” in Clarke M and Soyer B, “The Insurance Act 2015: A New Regime for Commercial and Marine Insurance Law” (Routledge 2016) 74

[70] Where the majority held that a valid insurance claim supported by fradulent evidence is no longer to be treated as a fraudulent insurance claim

[71] Versloot Dredging BV and another (Appellants) v HDI Gerling Industrie Versicherung AG and others (Respondents) [2016] UKSC 45

[72] Rainey S and Walsh D, “Remedies for fraudulent claims under the Insurance Act 2015” in Clarke M and Soyer B, “The Insurance Act 2015: A New Regime for Commercial and Marine Insurance Law” (Routledge 2016) 60

[73] Ibid at 67

[74] Manifest Shipping Co Ltd v Uni-Polaris Insurance Co Ltd (The Star Sea) [2001] C.L.C. 608

[75] Axa Insurance Ltd v Gottlieb [2005] 1 C.L.C. 62

[76] Merkin R , “Colinvaux’s Law of Insurance”(2010, Ninth Edition, Sweet and Maxwell: London)

[77] Clarke M, “Law of Insurance Contracts (Looseleaf)” (LLP Informa Publishing: London, Service Issue Number 22, 1st December 2010)

[78] Rose F , “Informational Asymmetry and The Myth of Good Faith: Back to Basis”  ([2007] Lloyds Maritime and Commercial Law Quarterly  181) 221

[79] LC Summary of Responses 2012, para 2.19

[80] Law Commission, “Reforming Insurance Contract Law: Summary of Responses to the Second Consultation Paper: Post Contract Duties and other Issues: Chapter 2: Insurers’ Remedies for Fraudulent Claims” (2012) para 8.11

[81] Rainey S and Walsh D, “Remedies for fraudulent claims under the Insurance Act 2015” in Clarke M and Soyer B, “The Insurance Act 2015: A New Regime for Commercial and Marine Insurance Law” (Routledge 2016) 74

[82] Thomas R, “Fraudulent Insurance Claims: Definition, Consequences and Limitations” ([2006] Lloyds Maritime and Commercial Law Quarterly 485) 502

[83] The Mercandian Continent [2001] 2 Lloyd’s Rep 563, 568, [11].

[84] Thomas R, “Fraudulent Insurance Claims: Definition, Consequences and Limitations” ([2006] Lloyds Maritime and Commercial Law Quarterly 485 at 501)

[85] Galloway v Guardian Royal Exchange (UK) Ltd [1999] Lloyd’s Rep. I.R. 209 at 211.

[86] Fargnoli v GA Bonus plc [1997] Re LR 374

[87] Clarke M, “Lies, Damned Lies and Insurance Claims: the Elements and Effect of Fraud” (2000 N.Z.L. Rev. 233) 258

[88] Agapitos v Agnew (The Aegeon) (No.1) [2003] Q.B. 556

[89] Ibid 502

[90] Joseph Fielding Properties (Blackpool) Ltd v Aviva Insurance Ltd [2010] EWHC 2192 (QB).

[91] Lowry J and Rawlings P, “Insurance Fraud: ‘the convoluted and confused’ state of the law” (Law Quarterly Review (2016) Jan 132) 10

[92] Hooley R , “Controlling contractual discretion” (C.L.J. 2013, 72(1), 65-90) at 65

[93] HIH Casualty & General Insurance Ltd v Chase Manhattan Bank [2003] UKHL 6; [2003] 1 All E.R. (Comm) 349

[94] Law Commission, “Reforming Insurance Contract Law Issues Paper 7: The Insured’s Post-Contract Duty of Good Faith” (July 2010) Para 3.1

[95] Davey J, “Unpicking the fraudulent claims jurisdiction in insurance contract law: sympathy for the devil “([2006] Lloyds Maritime and Commercial Law Quarterly 223)227

[96] Thomas R, “Fraudulent Insurance Claims: Definition, Consequences and Limitations” ([2006] L.M.C.L.Q 485)510

[97] Orakpo v Barclays Insurance Services Co Ltd [1994] C.L.C. 373

[98] Naidoo A and Oughton D, “The confused post-formation duty of good faith in insurance law: from refinement to fragmentation to elimination?”(Journal of Business Law 2005, May, 346-371)354

[99] Soyer B, “Continuing duty of utmost good faith in insurance contracts: still alive?” ([2003] Lloyds Maritime and Commercial Law Quarterly 39)

[100] London Assurance v Clare (1937) 57 LI L Rep 254 by Goddard J at 270

[101] Bugra A and Merkin R, “Fraud” and fraudulent claims” (British Insurance Law Association journal, No 125, October 2012) 6

[102] Tarr J-A, “Fraudulent insurance claims: recent legal developments” (Journal of Business Law 2008, 2, 139-157) 141

[103] Soyer B, “Continuing duty of utmost good faith in insurance contracts: still alive?” ([2003] Lloyds Maritime and Commercial Law Quarterly 39)44

[104] Ibid

[105] Orakpo v. Barclays Insurance Services [1995] L.R.L.R. 443 (C.A.) 450.

[106] Nsubuga v Commercial Union Assurance co plc [1998] 2 Lloyd’s Rep. 682

[107] Davey J, “Unpicking the fraudulent claims jurisdiction in insurance contract law: sympathy for the devil “([2006] Lloyds Maritime and Commercial Law Quarterly 223) 238

[108] Hjalmarsson J, “ The Law on Fraudulent Insurance Claims” (Journal of Business Law 2013, 1, 103-117) 110

[109] Galloway v Guardian Royal Exchange (UK) Ltd [1999] Lloyd’s Rep. I.R. 209

[110] Ibid 382

[111] Bugra A and Merkin R, “Fraud” and fraudulent claims” (British Insurance Law Association journal, No 125, October 2012) 7

[112] Ibid at 6

[113] Tonkin v v UK Insurance Limited [2006] EWHC 1120 (TCC)

[114] Gilman J and Merkin R, “Arnoulds Law of Marine Insurance and Average” (2008, 17th Edition, Sweet and Maxwell: London) para 18-71

[115] Hart A, “Liar Liar” (The Lawyer, 22 September 2003 at 25) 25

[116] See Orakpo v Barclays Insurance Services Ltd [1995] LRLR 443 and Danepoint Ltd v Underwriting Insurance Ltd

[2005] EWHC 2318 (TCC).

[117] Direct Line Insurance Plc v Fox [2009] EWHC 386 (QB)

[118] Yeganeh v Zurich plc and another company [2011] EWCA Civ 398

[119] Versloot Dredging BV v HDI Gerling Industrie Versicherung AG  [2013] EWHC 1666

[120] For example, a breach of warranty: US Trading Ltd v Axa Insurance Co Ltd [2010] Lloyd’s Rep. I.R. 505

[121] Agapitos v Agnew (The Aegeon) (No.1) [2003] Q.B. 556

[122] Ibid para 30

[123] Wisenthal v World Auxiliary Insurance Corpn Ltd (1930) 38 Ll L Rep 54For

[124] Ibid 61 – 62

[125] Agapitos v Agnew (The Aegeon) (No.1) [2003] Q.B. 556 2

[126] Ibid 45

[127] Ibid 38

[128] Ibid 38

[129] Ibid at 35

[130] Lowry J and Rawlings P, “Insurance Fraud: ‘the convoluted and confused’ state of the law” (Law Quarterly Review (2016) Jan 132)

[131] Eagle Star Insurance Co Ltd v Games Video Co (GVC) SA [2004] EWHC 15 (Comm)

[132] Ombudsman News, Issue 21 (October 2002) <available at http://www.financial ombudsman.org.uk/news/2012.html> Last accessed 1/3/2017

[133] Ombudsman News, 42/3 and 42/4 (December 2004/January 2005), available at

http://www.financial-ombudsman.org.uk/publications/ombudsman-news/42/42.pdf

[134] Lowry J and Rawlings P, “Insurance Fraud: ‘the convoluted and confused’ state of the law” (Law Quarterly Review (2016) Jan 132) 5

[135] Aviva Insurance Ltd v Brown [2011] EWHC 362 (QB)

[136] Bugra A and Merkin R, “Fraud” and fraudulent claims” (British Insurance Law Association journal, No 125, October 2012) 6

[137] Aviva Insurance Ltd v Brown [2011] EWHC 362 (QB) 127

[138] Swaby G, “The price of a lie: discretionary flexibility in insurance fraud” (Journal of Business Law 2013, 1, 77-102) 90

[139] Ibid at 91

[140] Financial Ombudsman Service, “Ombudsman News” (Issue 41, November 2004 at Page 8)

[141] Sharon’s Bakery (Europe) Ltd v AXA Insurance UK Plc [2011] EWHC 210 (Comm)

[142] Notably Mrs Justice Gloster DBE, Mr Justice Burton, Mr Justice Beatson, Mr Justice Christopher

Clarke, Mr Justice Flaux and Mr Justice Popplewell

[143] Law Commission, Insurance Contract Law: Business Disclosure; Warranties; Insurers’ Remedies for Fraudulent Claims; and Late Payment  (No. 353, 2014)  22.22

[144] Ibid 22.16

[145] Summer J, “Insurance Law and The Financial Ombudsman Service” (2010, Informa Publishing: London)

[146] Versloot Dredging BV v HDI Gerling Industrie Versicherung AG  [2013] EWHC 1666

[147] Aviva Insurance Ltd v Brown [2011] EWHC 362 (QB)

[148] Agapitos v Agnew (The Aegeon) (No.1) [2003] Q.B. 556

[149] Versloot Dredging BV v HDI Gerling Industrie Versicherung AG  [2013] EWHC 1666 146

[150] Versloot Dredging BV v HDI Gerling Industrie Versicherung AG  [2013] EWHC 1666 161

[151] Ibid 165

[152] Ibid at 225

[153] Ibid at 166

[154] As described by Clarke L.J. on appeal: see Versloot Dredging BV v HDI Gerling Industrie Versicherung AG [2015] Q.B.608 at [2].

[155] Versloot Dredging BV v HDI Gerling Industrie Versicherung AG  [2013] EWHC 1666 181

[156] Eagle Star Insurance Co Ltd v Games Video Co (GVC) SA [2004] EWHC 15 (Comm); Savash v CIS General Insurance Ltd [2014] EWHC 375 (TCC)

[157] Lowry J and Rawlings P, “Insurance Fraud: ‘the convoluted and confused’ state of the law” (Law Quarterly Review (2016) Jan 132) 9

[158] Versloot Dredging BV v HDI Gerling Industrie Versicherung AG [2015] Q.B.608 162

[159] Soyer B, ‘Case Comment: Versloot Dredging BV & Anor v HDI Gerling Industrie Versicherung AG & Ors [2016] UKSC 45’ (UKSC Blog 15 Aug 2016)  <http://ukscblog.com/case-comment-versloot-dredging-bv-anor-v-hdi-gerling-industrie-versicherung-ag-ors-2016-uksc-45/? Last accessed 1/3/2017

[160] Baird G, ‘What is a fraudulent claim?’ (Kennedys 25 July 2016)   <http://www.kennedyslaw.com/casereview/what-is-a-fraudulent-claim/ Last accessed 1/3/2017

[161] Versloot Dredging BV and another (Appellants) v HDI Gerling Industrie Versicherung AG and others (Respondents) [2016] UKSC 45 at 26

[162] Ibid at 91

[163] Ibid at 36

[164] Ibid 102

[165] Ibid 182

[166] Ibid 111

[167] Baird G, ‘What is a fraudulent claim?’ (Kennedys 25 July 2016)   <http://www.kennedyslaw.com/casereview/what-is-a-fraudulent-claim/ Last accessed 1/3/2017

[168] Hooley R , “Controlling contractual discretion” (C.L.J. 2013, 72(1), 65-90 at 65)

[169] Lowry J and Rawlings P, “Insurance Fraud: ‘the convoluted and confused’ state of the law” (Law Quarterly Review (2016) Jan 132) 11

[170] Direct Line Insurance Plc v Khan [2001] EWCA Civ 1794; [2002] Lloyd’s Rep. I.R. 364 39

[171] Bar Council “Insurance Contract Law: Post Contract Duties and Other Issues: Responses to Questions” < http://www.barcouncil.org.uk/media/131971/lrc_response_post_contract_duties_and_other_issues_insurers_remedies_for_fraudulent_claims_200312.pdf> Last accessed 1/3/2017

[172] Clarke M, “Law of Insurance Contracts (Looseleaf)” (LLP Informa Publishing: London, Service Issue Number 22, 1st December 2010)

[173] Law Commission, Insurance Contract Law: Business Disclosure; Warranties; Insurers’ Remedies for Fraudulent Claims; and Late Payment  (No. 353, 2014) para 21.3

[174] Merkin R, “Reforming Insurance Law: Is there a case for reverse transportation? A report for the English and Scottish Law Commissions On The Australian Experience of Insurance Law Reform”  59 <http://lawcommission.justice.gov.uk/docs/ICL_Merkin_report.pdf> Last accessed 1/3/2017

[175] Law Commission, Insurance Contract Law: Business Disclosure; Warranties; Insurers’ Remedies for Fraudulent Claims; and Late Payment  (No. 353, 2014)  para 21.11

[176] Padfield A and Nichols S, “Insurance: Watch this space” (162 New Law journal 1346)

[177] For example, Popplewell J in Versloot who applied the law with ‘manifest reluctance’

[178] Itself having been widely criticised by judges

[179] Swaby G, “Insurance law reform: deterring fraud in the twenty-first century” (Int. J.L.M. 2011, 53(6), 413-434) 427

[180] Lowry J and Rawlings P, “Insurance Fraud: ‘the convoluted and confused’ state of the law” (Law Quarterly Review (2016) Jan 132) 11

[181] P.H. Robinson and J.M. Darley, “Does Criminal Law Deter? A Behavioural Science Investigation” (2004) 24(2) O.J.L.S.

173; W.J. Cardi, R.D. Penfield and A.H. Yoon, “Does Tort Law Deter Individuals? A Behavioral Science Study” (2012)

9(3) J.E.L.S. 567.

[182] Crime in England & Wales, year ending September 2014 — Bulletin tables, Table 21. Action Fraud recorded 895

offences in the year to March 2014: Crime in England & Wales, year ending March 2014, Appendix Tables, table A5,

<available at http://www.ons.gov.uk/ons/index.html> Last accessed 1/3/2017

[183] Lowry J and Rawlings P, “Insurance Fraud: ‘the convoluted and confused’ state of the law” (Law Quarterly Review (2016) Jan 132) 12

[184] Law Commission, Insurance Contract Law: Business Disclosure; Warranties; Insurers’ Remedies for Fraudulent Claims; and Late Payment  (No. 353, 2014) para 21.5

[185] Law Commission, “Reforming Insurance Contract Law Issues Paper 7: The Insured’s Post-Contract Duty of Good Faith” (July 2010) Para 2.23 at para.3.62

[186] Law Commission, Insurance Contract Law: Business Disclosure; Warranties; Insurers’ Remedies for Fraudulent Claims; and Late Payment  (No. 353, 2014) para 21.8

[187] Scottish Law Commission, “What price should policyholders pay for fraudulent insurance claims?” (9th July 2010)

[188] Baird G, ‘What is a fraudulent claim?’ (Kennedys 25 July 2016)   <http://www.kennedyslaw.com/casereview/what-is-a-fraudulent-claim/ Last accessed 1/3/2017

[189] Lowry J and Rawlings P, “Insurance Fraud: ‘the convoluted and confused’ state of the law” (Law Quarterly Review (2016) Jan 132) 13

[190] Ombudsman News, Issue 21 (October 2002), <http://www.financial ombudsman.org.uk/news/2012.html> Last accessed 1/3/2017

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