QCR Spring 2017: Gilding the lily: will a collateral lie invalidate an insurance claim?
Versloot Dredging BV v HDI Gerling Industrie Versicherung AG  UKSC 45.
For over 150 years, the common law has protected insurers against paying fraudulent claims. This position is founded on a clear public policy decision to deter fraud. Should the law take the same view, however, where the insured tells a lie to his insurer which bears no relevance to the underlying validity of the claim? This is the issue which came before the Supreme Court.
Versloot Dredging BV was the owner of the DC MERWESTONE; HDI Gerling was the insurer. In January, 2010, whilst at sea the ship suffered from flooding in the engine room and the main engine became damaged beyond repair.
The flood was caused by a combination of crew negligence, negligence on the part of contractors and unseaworthy pumps. The owner claimed in excess of€€3million under the marine insurance policy. In the course of discussing its claim with the insurer, the insured wrongfully alleged that the bilge alarm had sounded several hours earlier than it in fact did.
The allegation was made to try to move the claim forward more quickly. The fact that it was untrue did not however matter for the purposes of determining what caused the flood and therefore whether the claim was covered under the insurance policy.
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