AVIVA INSURANCE LTD V BROWN

[2011] EWHC 362 (QB), Queen's Bench Division, Mr Justice Eder, 25 February 2011

Insurance (property) - Fraudulent claim - Loss by subsidence - Claim for accommodation costs - Assured giving rent quotation for premises which he already owned - Use of fraudulent means and devices - Remedy for fraudulent claim

The assured was the owner of 13 Friern Barnet Lane. He insured the property against various perils, including subsidence. In the event of an insured peril occurring, the policy covered rebuilding or repair costs, and also the cost of temporary accommodation if the premises became uninhabitable. The assured made a claim for subsidence in 1989, and a further claim was made in 1996. Liability was admitted, and the work was carried out in 2008 at a cost of £176,951.68, plus and a further amount of £3,132.82 for damage to a skylight. The dispute arose in respect of the cost of alternative accommodation. The insurers, through their loss adjusters, refused to pay more than £3,000 per calendar month by way of rental. The matter was referred to the Financial Services Ombudsman Bureau which ruled, in December 2003, that the assured was entitled to alternative accommodation for the full repair period and to the same standard as the insured property. The insurers still refused to meet the assured's demands. The assured considered whether he might use his mother's old house, 38 Lyonsdown Avenue, which he owned. On 11 July 2007 he stated that he had found a house that he considered suitable as alternative accommodation and that he had spoken with agents who had been in touch with the owners. In the event this option was not pursued, and the assured decided to rent the neighbouring house, 15 Friern Barnet Lane. The house had belonged to him, but he had sold it to his own company, Northway. On 26 October 2007 Northway told the loss adjusters that it was willing to negotiate a tenancy with the assured at £7,366.67 per month, payable monthly in advance by bankers order and with a one months' rent deposit paid at the commencement of the tenancy. The tenancy was entered into on 1 December 2007, and a total of £58,500 was ultimately paid for accommodation. The insurers subsequently sought to recover all of its payments from the assured on the grounds of fraudulent claim, in that the assured was the owner of both 38 Lyonsdown Avenue and 15 Friern Barnet Lane, and that he fraudulently stated in his communications of 7 July 2007 and 26 October 2007 that the houses belonged to third parties. Eder J found that the assured had, on 7 July 2007, fraudulently represented that 38 Lyonsdown Avenue was not his, and that his conduct amounted to the use of fraudulent means or devices. There was, however, no fraud in respect of 15 Friern Barnet Lane because the assured believed that the insurers were aware that he was the owner. Eder J held that there could be a finding of fraud only where it was established that the assured's conduct was dishonest by the ordinary standards of reasonable and honest people and that he himself realised that by those standards his conduct was dishonest. The latter requirement was not satisfied with respect to 15 Friern Barnet Lane. The assured was ordered to repay the rebuilding and accommodation costs, but he was allowed to retain the cost of the broken skylight, which was a separate claim.