Simple checks could save insurers time and money
After-the-event (ATE) insurers should check the validity of claims more carefully before selling policies, a leading fraud lawyer has warned.
DLA insurance claims fraud head Jamie Taylor said insurers spent "huge amounts of time and resources" defending fraudulent claims, to find their costs were not covered by the ATE policies taken out by fraudsters.
He said it was a further example, as pointed out by the House of Lords in Callery v Gray, of the abuses possible in the current ATE system.
"If an insurer believes a claim is fraudulent, it may instruct a solicitor, who then carries out a significant amount of work to uncover and prove the fraud," Taylor said.
"The claimant issues proceedings but, after the evidence of fraud is disclosed, drops the case.
"The solicitor obtains a costs order against the claimant which can be enforced against the claimant's ATE policy that covers his opponent's costs.
"The defendant's solicitor makes a perfectly legitimate claim on the policy for our costs, having successfully defended the claim, and the ATE insurer refuses to indemnify the claimant because the policy has exclusion for dishonesty."
Taylor said there were extremely simple checks that could be used by ATE insurers and agent solicitors to check the claimant's veracity.
"For example, I recently dealt with a file and within two minutes found out that the claimant and the defendant, who purported to have never met, had actually lived at the same address in the years previous," he said.
"The ATE insurer or the claimant's solicitors could have found that out just as easily, if they had bothered to check.
"It hasn't yet put insurers off tackling fraudulent claims, but it shows how the current costs climate is open to abuse, and how defendant's insurers are being penalised even in situations where a fraudulent claim is successfully defended."