Hill Dickinson is a limited liability partnership

1. Hill Dickinson is a limited liability partnership

2. Fraud: Does the punishment fit the crime? Rhys Clift October 2007 Hill Dickinson is a limited liability partnership

3. Outline • Introduction • General attitude to civil fraud • Fraud in insurance claims: difficulties in pleading and proving • Section 17 MIA, 1906 • The Fraudulent Claims Rule • Threats to the FCR • Conclusion

4. Introduction: extent and types of fraud • The extent of fraud - £14bn pa. • Insurance fraud (UK) £1.bn pa. • Probably three main types of fraudulent claim:- • Deliberate loss. • Exaggeration (cf: negotiation). • “Fraudulent devices”. • But not “non-disclosure”

5. General attitude to civil fraud • Will not deprive claimant of benefit of genuine claim (provided fair trial not impossible). • Examples:- • Personal injury (£1m/£55,000). • “Braer” pollution: the salmon case. • Might have an impact in costs.

6. Fraud in Insurance Claims • Pleading fraud: difficult, requires full particulars:- • Who made the representation? • How and when? • How is it false? • Knowledge of falsity (recklessness as to the truth or falsehood).

7. Fraud in Insurance Claims • The impact of the split profession. • The requirement of prima facie evidence. • Result: “fraud” not uttered (the elephant in the room).

8. Fraud in Insurance Claims • Proving fraud: the burden of proof:- • Criminal standard: “beyond reasonable doubt”. • Civil standard: “on balance of probability”. • “Civil fraud”: “no other reasonable explanation”? • Example: “THE MILASAN” (2000).

9. The application of Section 17? • An easy alternative to pleading fraud? • Cf: duty of disclosure on placement (duty is onerous). • Origin: “LITSION PRIDE” (1985). • Now clear no full parallel duty of disclosure in relation to claims (“STARSEA” (2001)).

10. The application of Section 17? • Clear that Section 17 only applies to the formation of the contract. • So, post placement it may still apply to:- • Amendments/variations. • Renewals. • “Held covered” provisions. • (But not applicable at all to claims).

11. Fraudulent Claims Rule • General rule of law: anomalous and draconian. Result forfeiture of claim (“STARSEA” 2001). • Three points: • Sufficient basis to plead fraud. • Includes deliberate losses, exaggerated claims and claims supported by fraudulent devices. • Not available for mere non-disclosure however deliberate and however intended to mislead.

12. Fraudulent Claims Rule • Timing: when does the duty end? • Only before proceedings! • Forfeiture: what is forfeit? • “All benefit under the policy” • But what exactly does this mean (Axa v Gottlieb)?

13. Threats to Fraudulent Claims Rule • Anomalous and draconian. What justification? Punishment, deterence? • Harmonisation of fraud rules? • Tougher on general fraud or fraud after proceedings; or • Softer by eradication of Fraudulent Claims Rule. • Do Underwriters genuinely rely on assured in claims presentation?

14. Conclusion

15. For further information please contact:Rhys CliftHill DickinsonDirect Dial +44(0)20 7280 9199Emailrhys.clift@hilldickinson.comFax+44 (0)20 7283 1144Websitewww.hilldickinson.com