In the case of Hayward v Zurich Insurance Company plc  UKSC 48, the Supreme Court unanimously
decided that evidence in support of suspected fraud which
subsequently came to light after settlement of an injury claim may
be taken into consideration, and therefore, settlement will no
longer mean the end of the case if a finding of fraud is later
In this case, the claimant was injured at work in an accident
for which liability was accepted. The claimant offered to settle
his claim for £420,000. After obtaining surveillance footage
which the insurers said showed the claimant was exaggerating his
injuries, a counter offer was made in the sum of £134,974.
This offer was accepted in 2003 and the matter was settled.
However, some years later, the insurers obtained further
evidence which showed that the claimant had recovered from his
injuries at least one year before the settlement was reached. The
insurers initiated proceedings, attempting to rescind the
settlement, setting aside the judgment and to seek damages for
At trial, the judge concluded that the settlement agreement
should be set aside and that the claimant should be awarded damages
of £14,720 and be ordered to repay the settlement sum. The
claimant appealed this decision. The Court of Appeal overturned the
first instance decision and held that the insurers were aware of
the fraud at the time of settlement, and therefore that settlement
could not be set aside. Given the insurers' earlier pleading of
fraud, it was held that they could not now rescind the settlement
agreement when proof of fraud was later obtained.
The insurers appealed to the Supreme Court, who rejected the
Court of Appeal's analysis and re-instated the first instance
decision that the settlement is set aside, with a reduced sum paid
to the claimant as compensation for his true injuries. The Supreme
Court found that the insurers did not know that the claimant had
deliberately exaggerated his injuries to the extent that was later
discovered and that the insurers had done all they could to
investigate at the time. Lord Toulson commented that "it
is difficult to envisage any circumstances in which a mere
suspicion that a claim was fraudulent would preclude unravelling a
settlement when fraud is subsequently established."
The Supreme Court appeared reluctant to have too wide a
definition of a fraudulent claim, but this case sends a clear
message to fraudulent claimants.
Claimants should be informed at an early stage that if they are
caught performing an action which is inconsistent with their
witness evidence, their claim could be significantly affected. They
should also be advised to keep their legal advisor updated about
any changes in their symptoms or capabilities.
It should be noted that the majority of claimants are genuine.
However, it is worth bearing in mind that the end of the case will
not necessarily be the end of the case where fraud is suspected.
Not only are insurers willing to reopen a claim but they are
willing to go that step further.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Settling contentious claims without prejudice to liability is an everyday occurrence for most Insurers. The vast majority of claims which are subject to litigation are settled at some point in the course of the proceedings, and the settlement is usually expressed to be without admission of liability.
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