Lloyd's Maritime and Commercial Law Quarterly
FRAUDULENT INSURANCE CLAIMS: DEFINITION, CONSEQUENCES AND LIMITATIONS
D Rhidian Thomas *
Over the last two decades the subject of fraudulent insurance claims has evoked substantial judicial and academic debate. The experience has revealed the absence of any settled view as to the appropriate legal analysis and the stance of public policy. Consequently the law is in a state of constant motion, with virtually every facet of the subject touched by varying degrees of uncertainty and many issues yet to be resolved. The present article is an attempt to analyse the condition of the law and anticipate its future progress. Particular emphasis is given to the definition of a fraudulent claim and the potential remedies available to insurers under the law of contract and by reference to the principle of good faith. Also analysed are fraudulent claims clauses and the common law remedy of forfeiture
.
I. INTRODUCTION
Notwithstanding that some 250 years have elapsed since Lord Mansfield enunciated the principle of good faith as one of the jurisprudential pillars of the modern law of insurance contracts,1
substantial uncertainty continues to surround the legal perception, analysis and consequences of a fraudulent claim made in the context of the insurance relationship.2
Recent years have witnessed a concerted but inconclusive judicial and academic scrutiny of the question,3
ever increasingly conducted against the backdrop of the debate
* Professor of Maritime Law, Director of the Institute of International Shipping and Trade Law, School of Law, University of Wales Swansea.
1. Carter
v. Boehm
(1776) 3 Burr. 1905. In the slightly later case Pawson
v. Watson
(1778) 2 Cowp. 786, 788 Lord Mansfield was of the broad opinion that “by the law merchant, all dealing must be fair and honest, fraud infects and vitiates every mercantile contract”. This wider view has not survived, save in a small number of legal categories; see Bell
v. Lever Bros Ltd
[1932] AC 161, 227, per
Lord Atkin.
2. For textual commentaries, see S Park, The Duty of Disclosure in Insurance Contract Law
(Dartmouth, Aldershot and Sydney, 1996), ch 8; A McGee, The Modern Law of Insurance
(Butterworths, London, 2001), ch 19; M Clarke, The Law of Insurance Contracts
, 4th edn (LLP, London and Hong Kong, 2002) (hereafter “Clarke, LIC
”), ch 27; J Mance, I Goldrein and R Merkin (eds), Insurance Disputes
, 2nd edn (LLP, London and Hong Kong, 2003), ch 4; N Legh-Jones, J Birds and D Owen (eds), MacGillivray on Insurance Law
, 10th edn (Sweet and Maxwell, London, 2003) (hereafter “ McGillivray
”), ch 19; P MacDonald Eggers, S Picken and P Foss, Good Faith and Insurance Contracts
, 2nd edn (LLP, London and Hong Kong, 2004) (hereafter “McDonald Egger et al, GFIC
”), ch 11; FD Rose, Marine Insurance: Law and Practice
(Informa, London and Singapore, 2004), ch 5.
3. Agapitos
v. Agnew
(The Aegeon
) [2002] EWCA Civ 247; [2003] QB 556; [2002] 2 Lloyd’s Rep 42, 43, [1], per
Mance LJ: “The waves of litigation over the last 20 years have involved repeated examination of the scope and application of any post-contractual duty of good faith.” The relevant authorities are examined below. For academic comment, see, H Bennett, “Mapping the doctrine of utmost good faith in insurance contract law” [1999] LMCLQ 165; Y Baatz, “Utmost Good Faith in Marine Insurance Contracts”, in M Huybrechts (ed), Marine Insurance at the turn of the Millenium
, vol 1 (Intersentia, Antwerpen and Oxford, 1999), 15–33; Sir A Longmore, “An Insurance Contracts Act for a new century” [2001] LMCLQ 356; B Soyer, “Continuing duty of utmost good faith in insurance contracts: still alive?” [2003] LMCLQ 39; D Foxton, “The post-contractual duties of good faith in marine insurance policies: the search for elusive principles”, ch 4 of D R Thomas (ed), Marine Insurance: The Law in Transition
(Informa, London, 2006) (hereafter “Foxton, MILIT
, ch 3”).
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