Supreme Court boost for insurance industry

Posted: 29th July 2016

SCIn a decision which will be hailed by the insurance industry as a major boost to its fight to root out fraud, the Supreme Court has ruled that an insurance company that agreed to settle a personal injury claim for almost £135,000 was entitled to tear up the deal after the full extent of the claimant’s deceit became apparent.

Zurich Insurance provided indemnity cover to an employer, one of whose workers, Mr Hayward, was injured in a workplace accident. Liability was swiftly admitted before suspicions were raised and the man’s deliberate exaggeration of his injuries was exposed by covert surveillance. A £134,973 settlement of the case was subsequently agreed.

Zurich later gathered further evidence which showed that the claimant had fully recovered from his injuries a full year before the settlement. In those circumstances, a judge allowed an application to set aside the settlement and awarded the man a much reduced payout of £14,720.

That decision was later overturned by the Court of Appeal on the basis that the insurer was aware of Hayward’s fraud at the time of the settlement and was thus bound by its terms. In allowing Zurich’s appeal against that ruling, the Supreme Court found that the settlement was induced by the claimant’s fraudulent misrepresentation. The insurer was at the time unaware of the full extent to which he had exaggerated the consequences of the accident.

‘This decision confirms that fraud does unravel all,’ said one commentator. ‘Insurance companies will be free to revisit settlements made before hard evidence of fraud comes to light and will be able to pursue those who thought they had got away with it.’