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The search for reform in fraud goes on

Yesterday’s announcement that the Law Commission would not recommend to the Lord Chancellor that “Fraud by victims of personal injury” should be a project for inclusion in the 12th Programme of Law Reform will be greeted with disappointment by the insurance industry.

News from the Law Commission

Yesterday’s announcement that the Law Commission would not recommend to the Lord Chancellor that “Fraud by victims of personal injury” should be a project for inclusion in the 12th Programme of Law Reform will be greeted with disappointment by the insurance industry. The ABI’s recent news that the value of fraudulent insurance claims uncovered by insurers rose to a record £1.3 billion in 2013, up 18% on the previous year (more than double the cost the UK’s shoplifting bill) further illustrated the need for reform in this area.

The outcome is particularly surprising, given that the Law Commission proposed the topic itself almost a year ago and, whilst the proposal elicited strong views, there was a preponderance of support for it to be included, with 16 of the 18 responses in favour of reform. Perhaps ironically, the strength of feeling appears to have militated against its inclusion; it appears that the Law Commission viewed the project as being controversial and was reluctant to recommend it in the absence of government support.

Those who did respond positively were informed by the Supreme Court’s decision in Summers v Fairclough Homes that the strike out of claims would only be suitable in “very exceptional circumstances”, leaving the bar set unreasonably high. The Law Commission’s announcement could mean that insurers select another case to test the law in this area. The dearth of case law post Summers means that it is difficult to predict whether a different outcome would be achieved although the sentences handed down by courts in recent contempt proceedings (as highlighted by one of our recent cases) suggests that the climate at least may have changed.

The introduction of the Qualified One Way Costs Shifting regime to personal injury cases in April last year means that defendants need now only prove “fundamental dishonesty” (not fraud) to be able to recover costs from a claimant, but a lack of judicial guidance in this area so far from the Court of Appeal means that there is uncertainty as to what constitutes “fundamental dishonesty”. The only available definition has been provided by HHJ Maloney in the case of Gosling v Screwfix, but as our analysis demonstrates, until the Court of Appeal have cause to provide us with their definition, no conclusions can be reached as to whether the regime will work or have a deterrent effect. In any event, the only threat to claimants from this approach is in costs, which it seems to us is an inadequate penalty for a fraudulent claimant.

For now insurers should continue to use the existing tools available, like contempt proceedings, to aid them in combatting fraud.

For further information contact Marcus Davies, Professional Support Executive on 0161 603 5146 or by email at marcus.davies@dwf.co.uk

By Marcus Davies

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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