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Zurich fraud decision gives fresh hope to insurers

31 May 2011

The insurance industrys campaign against fraud received a shot in the arm after the Court of Appeal allowed Zurich Insurance to pursue a claim for fraudulent representation.

According to Steven Conway, a partner at law firm Browne Jacobson the decision in Zurich Insurance Co PLC v Colin Hayward brings much needed clarity to when an insurance company can pursue an action in the courts once it discovers that an earlier settlement it had agreed to was subject to false representations.

The defendant, Colin Hayward, had been injured in an accident at work in 1998. He claimed damages amounted to just under £420,000 which included a claim for loss of earnings on the basis that he would remain unfit for any work.

The defendants insurers, Zurich Insurance became suspicious that he was exaggerating his injuries and in 1999, obtained video surveillance of him.

Proceedings were subsequently issued in which Hayward alleged he had sustained a spinal injury and had a depressive disorder.

Eventually in October 2003 the claim was settled for around £135,000. However two years later further evidence emerged which suggested that Mr Hayward had made a complete recovery from his injuries by mid-2002, over a year before settlement.

In 2009 Zurich started fresh legal action against Hayward seeking damages and alleging that the settlement of the claim in 2003 had been obtained by false representation, and had offered more in settlement than it would otherwise have done.

Whilst a Deputy District Judge at Cambridge County Court allowed Zurichs claim to proceed it was overturned on appeal on the grounds that there was no material difference between Zurichs allegations in both cases and therefore there was no right to re-visit the issue. However the Court of Appeal disagreed in light of the fresh evidence presented. The judge also stressed the vital role of statements of truth which parties must be able to rely upon in reaching a settlement.

Steven Conway, a partner at Browne Jacobson, commented:

"This is a welcome decision for defendants and their insurers who are safe in the knowledge that if fresh evidence later comes to light they will not be prevented by the courts from pursuing claimants for damages. It also serves as a reminder to those claimants who make miraculous post-settlement recoveries that they can still be pursued if they have induced settlement through deceit."

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Lakhbir Rakar

Lakhbir Rakar

PR Manager