Fraud: is there such a thing as an irrelevant lie?

This morning, for the majority of the Supreme Court, there definitely is. The Justices have decided 4:1, in Versloot Dredging v HDI Gerling & Others, that an insured may tell lies in the presentation of a claim and that the law will allow full recovery from its insurer. The qualifications are that such lies would need to be immaterial or collateral ones and that the claim is otherwise genuine as to liability and amount. Although this is said to serve to distinguish between the Versloot claim and cases of fraudulent exaggeration, it has to be said that distinction seems to be an extraordinarily fine one.

Quite what sort of message the majority decision sends to the insurance community at a time when there is significant political and business focus on the prevention, detection and prosecution of claims fraud across all lines of business will be worth further serious reflection over the short to medium term.

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Versloot Dredging: fraudulent device rule tested in the Supreme Court

Relatively few cases reach trial in relation to fraud by the insured. The fraud has usually been detected at or before proceedings and the insured’s claim fails entirely, under the principle that ‘fraud unravels all’. However, on 16 and 17 March the Supreme Court (Justices Mance, Clarke, Sumption, Hughes & Toulson) heard such a case in Versloot Dredging v HDI Gerling It turns on whether ‘fraud unravels all’ should apply equally to the use of fraudulent devices as it does to fabricated claims. This blog post summarises the issues and judgment is awaited in due course. Continue reading