Following a landmark Supreme Court decision last week, insurers have vowed to seek to overturn personal injury settlements if they believe dishonesty has been involved.
Ruling in Hayward v Zurich, the court ordered a claimant to repay around £120,000 after his claim against an insurer was proved to be false.
The claimant, named as Mr Hayward, had settled for £134,973 after apparently suffering back injuries following an accident at work. Overturning a Court of Appeal judgment from last August, the Supreme Court set aside that agreement after Hayward’s neighbours disclosed evidence that he had fully recovered. Hayward ended up with £14,720 in damages.
Insurers told the Gazette that they will not actively seek out dishonesty in past settlements, but that they will be emboldened to fight claims if new evidence comes to light.
‘Zurich is unflinching in its pursuit of fraudulent claims,’ said Karl Helgesen, the firm’s UK chief claims officer. ‘For too long policyholders have suffered financially due to the illegal actions of those who simply think the law doesn’t apply to them.’
Scott Clayton, claims fraud and investigations manager at Zurich, said the Hayward case was a ‘point of principle’ that insurers could not abandon at the Court of Appeal. ‘It is a deterrent factor and the penalties for dishonesty have never been greater,’ Clayton said. ‘If we hadn’t done anything, people could walk away from court and throw their crutches off without any fear of recourse.’
He denied that the firm could have done more to investigate the claim originally, adding that insurance companies ‘do not have an infinite amount of time’.
While similar cases might not be imminent, experts say Hayward is of great significance for the future of personal injury law.
‘This decision confirms that fraud does unravel all,’ said Catherine Burt, spokesperson for the Forum of Insurance Lawyers and head of counter-fraud at national firm DAC Beachcroft. ‘Insurance companies will be free to revisit settlements made before hard evidence of fraud comes to light and will be able to pursue those who thought they had got away with it.’
Zurich went to the highest court after the Court of Appeal ruled Hayward’s settlement should stand, saying the insurer went in with its ‘eyes open’ and citing the ‘wider principle’ of finality of settlements.
But five Supreme Court justices unanimously overruled that judgment.
Lord Clarke said it could not be fairly said that Zurich had full knowledge of the facts, and that in some cases the insurer could suspect a representation is false but nevertheless be held to rely upon it as a matter of fact.
‘It is difficult to envisage any circumstances in which mere suspicion that a claim was fraudulent would preclude unravelling a settlement when fraud is subsequently established,’ he added
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