The insured sought to claim under his policy. The insurance company declined any payment, saying that part of the claim was fraudulent.
Hoffmann LJ said: ‘In my view, the claim also fails on the ground that it was substantially fraudulent. The relevant principle is stated as follows by Malcolm Clark in his book, The Law of Insurance Contracts (1989), at p.43 ‘This proposition is supported by both principle and authority. In principle insurance is a contract of good faith. I do not see why the duty of good faith on the part of the assured should expire when the contract has been made. The reasons for requiring good faith continue to exist. Just as the nature of the risk will usually be within the peculiar knowledge of the insured, so will circumstances of the casualty, it will rarely be within the knowledge of the insurance company. I think that the insurance company should be able to trust the assured to put forward a claim in good faith. Any fraud in making the claim goes to the root of the contract and entitles the insurer to be discharged. One should naturally not readily infer fraud from the fact that the insured has made a doubtful or even exaggerated claim.”
Sir Roger Parker said: ‘The appellant submits that the law, in the absence of a specific clause, is that an insured may present a claim which is to his knowledge fraudulent to a very substantial extent, but yet may recover in respect of the part of the claim which cannot be so categorized. To accept this proposition involves holding that, although an insurance contract is one of utmost good faith, an assured may present a positively and substantially fraudulent claim without penalty, save that his claim will to that extent be defeated on the facts. He may yet, it is said, recover on the honest part of the claim. I would be unable to accept such a proposition without compelling authority and there is none.
Judges:
Staughton LJ Hoffmann LJ and Sir Roger Parker
Citations:
[1995] Ll RLR 443, [1995] Lloyd’s Rep IR 443
Jurisdiction:
England and Wales
Cited by:
Cited – Galloway v Guardian Royal Exchange (UK) Limited CA 15-Oct-1997
The claimant’s policy had been declared void ab initio by the court. On the application form he had falsely stated that he had no convictions, but had only shortly before been convicted of obtaining a pecuniary advantage by deception. Part of the . .
Cited – Versloot Dredging Bv and Another v Hdi Gerling Industrie Versicherung Ag and Others SC 20-Jul-2016
The ‘DC MERWESTONE’ suffered a water ingress of water flooding the engine room. This resulted from (i) the negligence of the crew in failing to close the sea inlet valve of the emergency fire pump and drain down the system, after they had used the . .
Lists of cited by and citing cases may be incomplete.
Insurance
Updated: 12 December 2022; Ref: scu.214225
