Exaggerated Injury Claim Proves Expensive

When an insurance company obtained evidence that a claimant had fraudulently misrepresented the extent of his injuries when making a personal injury claim, it took the case all the way to the Supreme Court in order to obtain a repayment. 

The man claimed that he had suffered a serious back injury in an accident at work in 1998, and in 2003 was paid more than £120,000 in compensation by Zurich, his employer’s insurance company.

Zurich had suspected that the man’s description of his injuries was exaggerated. When neighbours contacted the insurer in 2005, providing evidence that this was so, it applied to the court, initially claiming damages for deceit, but later simply asking that the original judgment be set aside.  

The court found that the man had deliberately and dishonestly exaggerated his injuries and ordered him to repay nearly £98,000 to Zurich. He appealed. The Court of Appeal noted that Zurich had been suspicious of his claims from the outset and therefore could not claim to have relied on his false statements when settling the case. It reinstated the original settlement. 

Zurich appealed against that decision. The Supreme Court concluded that the man had made materially false representations regarding his injuries and that these were significant in the value of the settlement. It was not necessary that Zurich believed them: they had, as a matter of fact, induced Zurich to settle the case in the way it did.

Had the insurer been certain that the claims were false, it could not have persuaded the Court that it had settled them relying on the untrue statements. However, because it had no proof of the falsehood of the claims at that time, Zurich might reasonably have concluded that a trial judge would have believed the man’s evidence. It therefore relied on the misrepresentation in making the settlement. 

The decision opens the door for insurers that are sceptical of the degree of injury claimed by an injured person but which have nevertheless settled the case to apply to the court to reopen the decision should they subsequently obtain evidence that the extent of the injuries was originally seriously exaggerated.