Case Study 23 - Policyholder supplies misleading and fraudulent documents in making a valid claim

Policyholder supplies misleading and fraudulent documents in the course of making a valid claim – insurers able to ‘forfeit’ policy from the date of the claim
Miss J made a claim under her general household policy for ‘escape of water’ damage. As the damage was reasonably limited, the firm simply asked her to send in repair estimates. She provided three. The firm discovered that all three estimates — purporting to come from different contractors — were fraudulently produced by one contractor who had carried out extensive works for Miss J in the past. The firm considered Miss J to be guilty of fraud. It cancelled her policy and refused to deal with the claim. Miss J then bought her complaint to us.
Complaint rejected
Miss J had already admitted supplying false information to the firm, and in an attempt to resolve the matter, had produced further – genuine – estimates from independent contractors. However, these merely served to show the extent to which the prices quoted in the fraudulent estimates had been exaggerated. If the fraud had not been discovered, the firm would have ended up paying more in compensation than was properly required of it, and more than Miss J was legally entitled to. To this end, the fraud affected the firm’s ultimate liability and was a fundamental breach of contract. Having applied that rationale, it was decided that the firm had been entitled to ‘forfeit’ the policy from the date of the claim.