Lloyd's Maritime and Commercial Law Quarterly
Unpicking the fraudulent claims jurisdiction in insurance contract law: sympathy for the devil?
“If one examined a sample of insurance claims on household contents, I doubt if one would find many which stated the loss with absolute truth.”†
James Davey *
The response of most policymakers, including the judiciary, to fraudulent insurance claims has been to insist on clear, Draconian rules to deter prospective fraudsters. However, whilst the recent spate of appellate decisions, led chiefly by (now) Lord Mance, has supported this view, there is evidence of dissent. The contrary view is inspired, at least in part, by the lack of a corresponding rule to control insurer conduct during the settlement of claims. If such negotiations are to remain adversarial in nature, then the regulation of bad faith must be evenhanded. This has led to moves away from a Draconian rule, in other jurisdictions (such as Australia) and in other forms of dispute settlement, including the Financial Ombudsman’s Service. This article considers the tensions between these two positions, and the likely effect on future insurance practice.
I. INTRODUCTION
The prevalence of fraudulent claims against insurers has long troubled policymakers, including the English courts.1
In 2004, the insurance industry put the level of reported insurance fraud at £200 million,2
and estimated the total cost at £1 billion.3
In recent cases, the public policy of deterring such offences has been reiterated by judges involved in criminal prosecutions for insurance fraud,4
and in civil cases by and against insurers themselves.5
This is part of a wider campaign to deter fraudulent insurance claims. Recent developments have included greater co-ordination between insurers and law enforcement
* Lecturer, Cardiff Law School. I am grateful to Professor Richard Lewis and to two anonymous referees for their comments on an earlier draft. The usual caveat applies. A version of this paper was delivered to the Anglo-German Lawyers Association conference (Bristol, 2005).
† Orakpo
v. Barclays Insurance Services
[1995] 1 LRLR 443, 450, per
Staughton LJ.
1. See MA Clarke “Lies, Damned Lies, and Insurance Claims: The Elements and Effects of Fraud” [2000] NZLR 233, 233.
2. Post
(23 March 2005).
3. Association of British Insurers (hereafter “ABI”), Fraud Law Reform: Consultation on Proposals for Legislation—A Response by the ABI
(ABI, 2004).
4. R
v. Mehboob
[2000] 2 Cr App R (S) 343 (CA). (Four-year custodial sentence for conspiracy to defraud road traffic insurers.)
5. See AXA General Insurance
v. Gottlieb
[2005] EWCA Civ 112; [2005] Lloyd’s Rep IR 369.
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