Insurance Fraud in UK Law

So the effect of a fraudulent claim is retrospectively to remove or bar the insured's pre-existing cause of action: see paragraph 23(i) above. The question on Mr and Mrs Gottlieb's appeal is whether it makes all the difference if the sum happens to have been received before the fraud is even committed. If it had not been received, but was merely outstanding, then it would be forfeit.

This invites the question why we should in any way reduce the severity of a rule which is deliberately designed to operate in a draconian and deterrent fashion.

There are certain contracts expressed by the law to be contracts of the utmost good faith where material facts must be disclosed; if not the contract is voidable. Apart from special fiduciary relationships contracts for partnership and contracts of insurance are the leading instances. In such cases the duty does not arise out of contract; the duty of a person proposing an insurance arises before a contract is made; so of an intending partner.

The diligence of the insurers in this case is to be highly commended. We were told that until relatively recently the police have not had the resources to investigate this type of fraud. At the beginning of this year the City of London Police have been funded by the insurance industry to set up a motor insurance and insurance fraud enforcement department which has the capacity to deal with 100 cases per month. As was said by counsel for the insurers today, that is the tip of the iceberg.

Fifthly, and in any event, as Mr Berry submits, if “the Brogsitter test” is as Mr MacDonald Eggers characterises it and is applicable in relation to section 3, that test is met in the circumstances of this case. The Insurers' claim is that there has been an insurance fraud by the Owners and the Managers for which the Bank is vicariously liable.

In our judgment, the duty falling upon the insurer must at least extend to disclosing all facts known to him which are material either to the nature of the risk sought to be covered or the recoverability of a claim under the policy which a prudent insured would take into account in deciding whether or not to place the risk for which he seeks cover with that insurer.

The defendant submits through Mr. Crow that the Court has no jurisdiction to entertain the Originating Summons, because there is no relevant trust to found jurisdiction under Order 85. He urges that there is no trust, constructive or otherwise, in favour of the Liquidator or the Insurance Company yet established, or even claimed by the Liquidator.