Insurer wanted judge to strike out entire claim because elements were fraudulent
The government is facing pressure to change the law so it can strike out entire claims if parts are found to be fraudulent. This follows the Supreme Court’s dismissal this week of Zurich’s appeal to throw out a partially fraudulent liability claim.
The Forum of Insurance Lawyers (Foil) president Don Clarke has called for the government to carry out a full review of the law.
Clarke said Foil had called for the Law Commission to change the law, but so far their pleas have been ignored.
He said there was a case for making it law to strike out claims in their entirety if elements were fraudulent, provided it was properly thought through, so as to act as a deterrent against those thinking about committing fraud.
“I think generally it’s unacceptable for somebody to lie and lie again throughout the proceedings and then come out of the court case with damages,” he said.
But some insurers, such as Chubb, fear a change in the law could punish honest claimants. Instead, they are calling for defendants found guilty to pay the insurer’s legal bills, or for criminal proceedings to be taken against them by the police as a deterrent. They argue that even if a claim is struck out the insurer would still incur legal costs, and say that each case should be dealt with on its own merits.
Chair of the All-Party Parliamentary Group on Insurance and Financial Services MP Jonathan Evans said that parliamentary intervention was unlikely. However, he believed that the defendant’s claim award should go towards meeting the insurer’s costs if their claim was proved to be partly fraudulent.
“It seems to me that insurers ought to be looking at the possibility of recovery of costs and expenses in relation to the exaggerated part of the claim, which might soak up an awful lot of the compensation the defendant received,” Evans said.
Lord Clarke, who handed down the ruling last Wednesday, dismissed Zurich’s appeal on the grounds that it would not be “proportionate or just” to strike the claim out. But he said the court unanimously held that it had the power to strike out a claim for “abuse of process”.
The case centred on an £838,000 claim filed by Shaun Summers after he sustained injuries falling from a forklift truck while working for Fairclough Homes. Despite finding that Summers had made false statements about the effect and quantum of his injuries, it did not allow Zurich to strike out the entire claim because of the genuine injuries he had suffered.
Had Zurich won the case, it would have set a precedent for insurers throwing out entire liability claims if parts were proved to be fraudulent.
Chubb’s European claims manager Lynn George said that, despite being a bitter pill to swallow, the court had made the right decision.
“I think we have always got to be seen to be just and proportionate, and whilst I totally abhor what the man did and disagree with it, at the end of the day he did have a legitimate claim and sustained an injury and he was then compensated for that level of injury,” she said.
George said that insurers should get recourse by claiming costs from the defendant or passing on their information to the police to take criminal proceedings, while the onus was on law firms to ensure their clients weren’t making false claims.
Zurich UK chief claims officer Tony Emms said: “Zurich is disappointed by the decision of the Supreme Court, but pleased to have won the argument on the legal principles involved in this case, if not the application of those principles.
Talking points …
● Will the ruling in the Fairclough v Summers appeal have any bearing on a change in the law on striking out claims in their entirety if they are partly fraudulent?
● Could the judgment open the door for more legal cases to be brought by insurers, knowing that there is the potential to have fraudulent claims struck out in their entirety?
● What action will insurers take in the future to recoup their costs in fraudulent claims cases? And will it serve as a deterrent to potential fraudsters?