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Fraudulent devices after Versloot

6 December 2016

Versloot Dredging BV and another (Appellants) v HDI Gerling Industrie Versicherung AG and others (Respondents) [2016] UKSC 45

Following the Supreme Court decision in Versloot in July 2016, insurers are not entitled to refuse a fraudulent devices claim where lies told by an insured were collateral to an otherwise valid claim.

The facts

A ship’s engine room had flooded, causing €3.2 million of damage. It was agreed the loss was genuine but the cause of loss was unclear. The ship manager falsely told insurers’ solicitors that the bilge alarm had sounded and was heard by the crew, but they were unable to investigate the leak as the ship was rolling in heavy weather. The manager believed that the lie would strengthen the claim and accelerate payment under the policy. He was concerned that, if it was found the owners had failed to adequately maintain the ship, policy exclusions might entitle insurers to refuse the claim.


It was held that the lie was irrelevant to the merits of the claim because the policy did not contain any exclusion that could have been engaged. Despite this, both the High Court and the Court of Appeal found the ship manager’s statement to be a fraudulent device allowing insurers to reject the claim.

The Supreme Court overturned the decision on a 4:1 majority. The court held that where the cause of the claim was covered and the amount claimed was unchanged by the lie, the method of advancing the claim, even by making reckless untruths, was irrelevant.

Lord Sumption provided the leading judgment and made a distinction between fraudulent claims which fabricate or exaggerate a claim and fraudulent devices (otherwise known as collateral lies). A collateral lie, defined as a lie about the cause of loss but which turns out on the facts to not affect the validity of or the indemnity amount an insured is entitled to under their insurance policy, will not prevent a right to recover.


The timing of the decision coincides with the commencement of the Insurance Act 2015, narrowing the scope of a ‘fraudulent claim’ and reflects the wider public and political appetite to apply proportionate remedies to claims. The defence of fraud in s.12 of the Insurance Act 2015 will now only apply to fabricated and fraudulently exaggerated claims and not fraudulent devices. Although this was a marine insurance claim, the court was clear the decision is intended to apply to all consumer and commercial insurance policies.

With insureds able to submit falsified documentation or statements in support of a valid claim, underwriters may wish to consider including specific clauses in policies to prevent an insured from using fraudulent devices when making a claim.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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