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Recent developments in the fight against fraudulent claims

The Government estimates that fraud costs the UK economy £52 billion per year, with insurance fraud costing the insurance industry an estimated £2.1…

Things are getting hot, very hot, for fraudsters.  

The UK Government estimates that fraud costs the UK economy £52 billion per year, with insurance fraud costing the insurance industry an estimated £2.1 billion.  As such, it is little wonder that insurance firms are progressively investing more time, money and expertise in the prevention and detection of fraudulent insurance claims. 

Given the cost of such claims, insurance companies are increasingly taking a robust stance  by seeking criminal sanction, including applications for committal for contempt of Court, and private prosecution. 

Saul Burton considers the most recent case law involving insurance companies taking action against claimants who have been found to be fraudulent. 

Royal & Sun Alliance Insurance Plc v Fahad (2014) QBD (Spencer J) 17/10/2014

The claimant (F) sought damages from the Defendant (RSA) following a road traffic accident that was subsequently proved to have been staged.  Evidence proved that the claimant was in fact in a relationship with the ‘unknown’ driver of the other vehicle. 

 At trial the claimant’s statement was shown and proven to be false and consequently RSA sought permission to bring committal proceedings against F on the basis of CPR 32.14: the claimant had falsely signed a statement of truth without an honest belief in its accuracy. 

In considering RSA’s application, the Court stated that permission to bring proceedings must be given on the basis of public interest, and in determining public interest the following should be considered: 

  • the strength of the case;
  • the significance of the false statements;
  • whether the deponent understood the consequences of making a false statement; and
  • The deterrent effect of contempt proceedings.

Further, it was confirmed that limited weight should be attached to the likely penalty. As such, the Court held that the Claimant’s activities were of such seriousness, that permission to bring proceedings was granted. 

AXA v Paul Gustar (2014) (unreported)

In this, as yet unreported, case the claimant brought an employer’s liability insurance claim of £100,000 for an alleged workplace accident.  In short, the Claimant contended that he had sustained a back injury after slipping on the wet floor of a lorry bed.  However, medical records showed that the back problems pre-dated the accident, and text messages implied that the injury was caused by pushing his girlfriend’s car. 

The Claimant’s claim subsequently failed and, in terms similar to RSA v Fahad, AXA sought permission to bring contempt proceedings, but permission was refused on the basis that it would take up a disproportionate amount of Court time. 

AXA pursued a private prosecution under the provisions of the Fraud Act.  Truro Crown Court subsequently found Mr Gustar guilty on two counts of fraud and he was ordered to serve a three year suspended sentence.   

Judge Clark told Mr Gustar: "…The view was taken that a person who brings a fraudulent claim for damages should not be allowed to walk away scot free…." .  In addition, the judge held that Axa was ‘entirely justified’ in bringing the prosecution. 

In light of the above cases, it is likely that in the coming years more and more criminal sanctions will be sought to provide a strong deterrent to anyone who is minded to pursue a fraudulent claim. 

The Government is also supporting the fight against fraudulent claims and has recently announced the creation of a task force to report back on how to reduce fraud across all types of insurance.  An interim report is expected in March 2015. Proposed amendments to the Pre Action Protocol would require solicitors to investigate whether previous claims have been made by a potential claimant and confirm to the defendant that this has been done, with sanctions if the claimant’s solicitors fail to complete the checks.