Collateral lies not fatal to insurance claims

Versloot Dredging BV and Another v HDI Gerling Industrie Versicherung AG and Others (The “DC Merwestone”) [2016] 1 Lloyd’s Rep 468, [2016] UKSC 45, 20 July 2016

In this judgment the Supreme Court reconsidered the scope of the ‘fraudulent claims rule’ for insurance claims. The decision was made in the context of an insurance claim brought by the owners of a vessel which was incapacitated by an ingress of water flooding the engine room. The vessel’s manager lied about the crew’s inability to investigate or deal with the leak after the bilge alarm had sounded, with a view to concealing the possible responsibility of the owners and avoiding the effect of an Inchmaree clause. Both the High Court and the Court of Appeal held that the loss was in fact caused by a peril of the seas to which the ‘Inchmaree clause’ (an ocean marine insurance provision) was irrelevant, but the claim had been lost as a result of the collateral lie.