Insurers have recently succeeded in obtaining a criminal conviction for contempt of court against a claimant who had brought a dishonestly exaggerated claim against one of their insureds. This is an important decision in the fight against claimants presenting dishonest claims in litigation. It is also another protection for insurers against fraudulent claims on insurance policies.
In the underlying claim, the claimant sought damages for back injuries suffered following a collision with the defendant's vehicle. During the course of those proceedings, the claimant verified a series of documents by signing statements of truth. The damages claimed were in excess of £750,000. The defendant's insurers believed that the claimant was exaggerating the severity of her disabilities and made a payment of £25,000 into court. They subsequently produced surveillance footage and other evidence which showed that the claimant had presented a clearly misleading case. The evidence contradicted the extent of her disabilities. She also failed to acknowledge disabilities she suffered from prior to the accident. Having been presented with this evidence, the claimant agreed to accept the payment into court out of time and was responsible for meeting the costs of insurers.
The defendant's insurers then brought a private prosecution for contempt of court. Under Part 32.14 of the Civil Procedure Rules, such proceedings may be brought against a person if he makes, or causes to be made, a false statement in a document verified in a statement of truth without an honest belief in its truth.
In such a case, the applicant must show, beyond reasonable doubt:
- that the statement was false;
- that the statement has, or if persisted in would be likely to have, interfered with the course of justice in some material respects; and
- that at the time it was made, the maker of the statement had no honest belief in the truth of the statement and knew of its likelihood to interfere with the course of justice.
In this case, the court held that the claimant had made two false statements, the falsity of which would have interfered with the course of justice by allowing her to claim damages to which she was not entitled. The court further found that the claimant did not honestly believe in the truth of those two statements. Indeed she knew that they were entirely misleading. She was consequently fined £2,500 (a custodial sentence was considered to be disproportionate in the circumstances).
This decision is helpful for insurers in at least two ways. The first, and obvious, way is that it provides an additional disincentive to claimants in proceedings against their insureds making dishonest statements in support of a claim. Establishing a contempt of court will be difficult. Mere exaggeration is not enough. But this decision emphasises that the courts will not tolerate dishonesty in litigation even where there is a genuine element to the case. This will be welcomed by insurers and insureds alike.
The second way is in the context of fraudulent insurance claims. In general, the presentation of a fraudulent claim means that the insured forfeits the claim. Where, however, litigation is under way, the fraudulent claim doctrine no longer applies. Instead, the insurer is generally forced to rely on the courts' case management powers. The fact that the insured could face a criminal conviction (and, in the worst cases, a custodial sentence) if a fraudulent claim is brought or indeed a fraudulent document is used to support a genuine claim, once litigation is under way, is an extra protection for insurers. This too will be welcomed especially given the increased likelihood of fraudulent claims in the current economic climate.
Further reading: Walton v Kirk [2009] EWHC 703 (QB)
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 13/05/2009.
