Court considers question of fundamental dishonesty

Court considers question of fundamental dishonesty

47708393_xlClaire Laver, partner in the claims solutions group at DAC Beachcroft, comments on the recent case of Shahid v Puddick and considers whether it opens up a new avenue for insurers in the fight against fraud.

What was the background to the introduction of section 57 of the Criminal Justice and Courts Act 2015 (CJCA 2015)?

The compensation culture in England, Wales and Northern Ireland has reached epidemic proportions and the judiciary has indicated that legislation is necessary to empower them to discourage fundamentally dishonest claims and ensure that compensation is only awarded in cases of genuine and reasonable claims. This legislation introduces a provision to require the court to dismiss in its entirety any claim where it is satisfied that the claimant has been fundamentally dishonest, unless it would cause substantial injustice to the claimant to do so. It was anticipated that the main effect of the reform would be the wider behavioural impact of discouraging claimants from making exaggerated claims.

What were the key issues in the recent phantom passenger cases?

In the recent decisions the court were asked to consider dismissing claims brought by phantom passengers, dismissing the genuine personal injury claims brought by genuine occupants who have supported the presence of phantom passengers, dismissing genuine vehicle related loss claims and dismissing claims in their entirety where there has been a finding of fundamental dishonesty pursuant to CJCA 2015, s 57. The new legislation has empowered the court to move away from principles of tort and the decision in the case of Ul-Haq v Shah [2009] EWCA Civ 542, [2010] 1 All ER 73 in circumstances where the claimants are found to be fundamentally dishonest.

What factors led the court to a finding of fundamental dishonesty in these cases?

The courts were asked to consider the strength of the oral evidence of all the parties. In each case the strength of the defendants’ oral evidence was crucial. Adverse evidence affecting the claimants’ credibility along with inconsistent medical evidence was also adduced. On the whole the defendants’ evidence was preferred to the extent that the court felt they could make such a finding pursuant to CJCA 2015, s 57.

How do these decisions tie in with other developments in this area of law and do you have any predictions for the future?

There has been a flurry of legislation and common law decisions in the last 18 months which deal with fraudulent insurance claims to include CJCA 2015, s 57 and section 12 of the Insurance Act 2016. The Supreme Court decision in Versloot Dredging BV and another v HDI Gerline Industrie Versicherung AG [2016] UKSC 45, [2016] 3 WLR 543, and our case of Hayward v Zurich Insurance Company plc [2016] UKSC 48, [2016] 3 WLR 637, have aligned the way insurance claims are dealt with and provide a consistent deterrent message. Organised fraudsters have changed their tactics by presenting claims in areas of insurance other than motor and by using professional enablers in an effort to circumvent detection and fixed costs implemented by the civil justice reforms. These changing tactics will require a higher dependence on data analytics and expertise in handling claims fraud across a multitude of product lines.

What should practitioners take from the judgment?

Insurers should feel comforted by the new legislation. For phantom passenger claims securing the strongest possible evidence as early as possible from the insured will be key to the strategy set for defending the claim. Consideration should be given as to whether liability should be admitted. The timing of any admission will also be key. Arguably compensation should not be paid to the genuine claimant who supports a bogus passenger claim because there is now the possibility that his entire claim will be dismissed if he is found to fundamentally dishonest by supporting the presence of a phantom passenger. Continue to try to secure other adverse credibility evidence and plead defences accordingly.

Interviewed by Anne Bruce. The views of our Legal Analysis interviewees are not necessarily those of the proprietor.


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