Legal news
Fraudulent insurance claims - clarity needed
In a consultation paper published today, the Law Commissions of England and Wales and of Scotland ask what should happen if a policyholder makes a fraudulent claim on their insurance, and call for clarity in the existing law.
Insurance contracts are based on good faith – that of both the insurer and the policyholder. This is established in section 17 of the Marine Insurance Act of 1906. Under section 17 if a policyholder acts fraudulently, the insurer may deny the whole insurance contract, and demand back any money paid out to a policyholder on previous claims.
In practice, the courts are reluctant to apply this remedy. Instead, they have said that a fraudulent claimant should forfeit their entire claim, even the part that is legitimate, but their other claims should not be affected.
In their paper, The Insured’s Post-Contract Duty of Good Faith, the Commissions suggest that the courts are applying the right policy but that the cases appear incompatible with section 17. The Commissions ask:
* Should a policyholder forfeit the whole of a claim if any part of it is fraudulent?
* Should a fraudulent claim affect previous, valid claims?
* Should section 17 be amended?
The paper also asks what should happen where fraudulent claims are made on joint and group insurance.
“This consultation aims to establish some clarity in what is a complex and convoluted area of law," said Professor Hector MacQueen, Scottish Law Commissioner. "It is also an opportunity for us to ask questions such as how should we decide what is meant by ‘fraud’ and should the duty of good faith itself be codified or left to the courts to define.”
The Commissions seek responses by 11th October 2010.
July 2010
Fraudulent insurance claims - clarity needed (date added: 09 July 2010)
Data protection laws - views required (date added: 07 July 2010)
Implementing the Equalities Act (date added: 05 July 2010)
Crofting Reform Bill (date added: 02 July 2010)
