“Exaggeration won’t matter – will it?”

Robin Selley

After a few helpful recent cases for Claimant’s on the issue of “fundamental dishonesty” the Supreme Court recently gave its decision in the case of Hayward v Zurich Insurance plc [2016] UKSC 48.

The Claimant had suffered injury during the course of his employment and took the opportunity to grossly overstate the extent of his disability, claiming more than £400,000 from his employer’s insurers.

Zurich, having admitted primary liability for the accident, suspected that the Claimant might be trying to pull a fast one and did plead that to be the case in terms of the extent of injury and subsequent loss. However, the insurer chose to settle the claim for a fraction short of £135,000 even though they had surveillance evidence at that time.

That was not the end of the case as we know.

The insurer was made aware that the Claimant had been lying all along and had fully recovered from his injuries a year before settlement was agreed. As such they sought to undo the settlement on the basis of fraud and have the award repaid to them. At trial, the Judge decided that the settlement should be set aside and repaid, awarding Mr Hayward £14,720.  However, the Court of Appeal overturned that decision and held that, given Zurich was aware of the fraud at the time of settlement; it could not be set aside once proof of the fraud was obtained.

Zurich appealed to the Supreme Court and in a landmark judgment for Defendants, the Supreme Court unanimously decided that where an insurer suspects fraud but has still chosen to settle a claim, they would be entitled to set aside the settlement under the tort of deceit, if they subsequently obtained proof that it was in fact fraudulent.

This follows hot on the heels of the decision in Versloot Dredging BV & Anor v HDI Gerling Industrie Versicherung AG & Ors [2016] UKSC 45 of the ability to decline payment on the basis of collateral lies told by the assured, although the lie in the Versloot Dredging case didn’t affect the value of the claim, so one not to be confused with Hayward.

Yes this case opens for the door for Defendant’s to revisit old settled cases that they may have had strong suspicions about. But could that door not open both ways, where Claimants have had strong suspicions that Defendants have acted fraudulently? The difficulty there of course is that one camp has much deeper pockets and can afford to take the point further, the other most probably can’t.

Posted in Personal Injury Claims & ATE Insurance

‘Fightback’ in Fundamental Dishonesty Claims

Linsey Carroll

The definition of ‘Fundamental Dishonesty’ is a term which has caused difficulty for both claimants and defendants since the advent of s.57 of the Criminal Justice and Courts Act 2015.  In the past year, both claimants and defendants have seen rulings from the Court in their favour, leading to increased confusion as apposed to clarity.

However, the Court of Appeal has recently assisted the Claimant’s cause, by providing support to a previous ruling in a lower Court, which held that the failure of a claimant to prove their case does not automatically mean that the claim was Fundamentally Dishonest, stripping the Claimant of its QOCS protection.

Whilst the initial case of Da Costa in the County Court did not directly deal with the finding of Fundamental Dishonestly and the loss of QOCS protection, it still had relevance in relation to the argument.

In Da Costa, Lady Justice Black said: “The first thing to say is that a finding of fraud does not inevitably follow from a rejection of an accident claim as not proved. There may be many reasons why the claim is not proved other than that it has been fraudulently manufactured.

The words of Lady Justice Black have now been expanded upon in the Court of Appeal Case of Meadows v La Tasca (as yet unreported).

The claimant in the matter was initially unsuccessful in her tripping claim against the Defendant.  The defendant made an application asking the Court to find the claimant Fundamentally Dishonest, and upon reviewing the application and evidence, District Judge Khan concurred with the defendant and made a finding of dishonestly against the claimant.  As a result, QOCS protection was removed and the Claimant was ordered to pay the defendant’s costs in the sum of £7,210.00.

District Judge Khan ruled that he had not believed what the claimant or her witness had said had happened, describing their evidence as “riddled with inconsistencies”.

He said: “In those circumstances, it is difficult to see how this is not a dishonest claim. This is not, for example, a claim where there has been a misremembering of key events, or some confusion or lack of clarity in relation to dates, events, premises or the like. The effect of the inconsistencies… was such that I simply did not believe what Miss Meadows said to me or Mrs McGrath said to me.”

The claimant appealed this ruling, and after hearing evidence on behalf of the claimant, His Honour Judge Hodge QC overturned the finding of Fundamental Dishonesty made by Deputy District Judge Khan..  He said that;

‘It was not appropriate for the district judge to find that the accident had not happened in the circumstances described. He should have limited his decision… to a decision simply that the claimant had not made out her case on the evidence before him.’,  and went on to say that: ‘The inconsistencies and curiosities highlighted by the judge did not entitle him to go further and to find that the claim had been fabricated, and thus was fundamentally dishonest.’

The costs order against the claimant was reversed and the defendant ordered to pay an additional £12,500 for the costs of the appeal.

Claimant solicitors have indicated that they are seeing a worrying trend of defendants alleging Fundamental Dishonesty where a claimant simply fails to prove their claim at trial, and this may lead to increased costs if claimants seek to appeal these findings.  Reducing the costs of litigation was of course something which the reforms of Lord Justice Jackson and the introduction of QOCS had hoped to achieve.

Given the latest Judgment in Meadows, there appears to be some respite afforded to the claimant, from what seemed like the latest line of attack from the defendant.  The battle may have been won by the claimant for now at least, but the war continues…

Posted in Personal Injury Claims & ATE Insurance

“Whiplash” Numbers in decline

Robin Selley

It has been reported recently in the legal press that the number of personal injury claims being made is starting to decline, or as one report put it, they are in “freefall”. If taken at face value, these reports would suggest that the end of the PI market is nigh (to the huge joy of the insurers and government) but is it right to take such a pessimistic view at this stage?

First off, the National Accident Helpline Group reported to the London Stock Exchange that falling case numbers in its PI unit were ‘in line’ with the company’s predictions.

Meanwhile, new figures obtained by the Association of Personal Injury Lawyers (APIL) reveals that the government’s compensation recovery unit recorded 335,365 claims in 2015/16 where the compensator had used the term ‘whiplash’ to describe the injury, a fall of 11% in the number of “whiplash” claims recorded for the previous year. The figures obtained show a steady decline in numbers from 2012/13 but is that not surprising, given the rush to acquire claims prior to the 1st April 2013 in any event?

So is it really surprising that these figures are now starting to show a drop in the numbers as the Personal Injury sector still await the publication of a consultation on further reforms to low value “whiplash” claims, or is this just a natural correction post Jackson?

Statistics released by the HSE show that the number of workers fatally injured in 2015/16 (144) is 7% lower than the average for the past five years (155). Over the latest 20-years there has been a downward trend in the rate of fatal injury, although in recent years this shows signs of levelling off.

There was bound to be a large increase in the number of claims recorded in the run up to the Jackson reforms and perhaps now we are seeing a levelling off across the personal injury sector, against a constant bombardment from insurers and Government seeking to prevent those genuinely injured,  having access to justice and redress.

Posted in Personal Injury Claims & ATE Insurance

So when is it OK to tell a “collateral” lie?

Robin Selley

A collateral lie, what exactly is it? It is an untruth, but one which does not affect the overall validity of the claim made, so said the Supreme Court in a case involved a Dutch cargo ship, which ran into difficulty after its engine room was flooded. The crew falsely said they could not investigate an alarm, because the ship was rolling in heavy seas. However, the accident was caused by bad weather, so this lie was irrelevant, it was ruled.

The judge at first instance found that the lies from the ships crew amounted to a “fraudulent device” and thus invalidated the claim. The Court of Appeal upheld the initial judgement, but that has now been overturned by the Supreme Court who found that it is OK to tell a “collateral” lie on an insurance claim.

In giving Judgment, Lord Mance said: “The critical point is that, in the case of a collateral lie….the insured is trying to obtain no more than the law regards as his entitlement, and the lie is irrelevant to the existence of that entitlement. Such a lie is immaterial to the claim.”

The implications of this ruling could be far reaching, affecting household, travel and motor policy claims.

On the subject of telling “lies” the thorny subject of “fundamental dishonesty” rumbles on. It would seem that Claimant PI practitioners are receiving correspondence from Defendant lawyers on a regular basis where this is raised, even in claims where liability has been conceded. Perhaps Defendants are raising “fundamental dishonesty” as a matter of routine, in the hope of capturing the minority of claims which are deemed to be “fundamental dishonesty”? Cast the net wide in the hope of capturing a dishonest claim. Maybe that approach is justified.

From an ATE insurers’ perspective, Defendants have been reluctant in the past to actively pursue such allegations as they know perfectly well that if such a finding of fraud is made, the Claimant will lose the benefit of ATE cover and the Defendant would be unlikely to recover any costs in any event. Instead, they tend to raise the argument, indirectly.

But disbelieving the Claimant does not mean a claim was fundamentally dishonest. Who says so? His Honour Judge Freedman does!

In the original fast-track trial of Nesham v Sunrich Clothing, the District Judge ruled that on the balance of probabilities the Claimant could not prove that the Defendant had breached the duty of care that was owed to him so the claim failed. QOCS should have applied but the Defendant then sought to accuse the Claimant of being a liar and that he was fundamentally dishonest.

It could be suggested that a losing party in a PI claim must have been lying. Lawyers will often find that parties give varying accounts of how an accident may have occurred. However, HHJ Freedman held on appeal that “merely because an account of an accident has been rejected does not, to my mind, equate to fundamental dishonesty”.

HHJ Freeman added “Up and down the country on a daily basis, judges are being asked to decide whose account of a road traffic accident is more reliable ….And it is the experience of everybody who litigates in this field that drivers involved in an accident will give different and contrary versions of accidents to the extent of not just which lane they were in, but where they came from, the route they had taken and so forth… which may not constitute dishonesty, far less fundamental dishonesty.”

The Defendant was ordered to pay the Claimant’s costs of the appeal! A few more of these sensible decisions and hopefully Defendants will start to pick and choose the cases to run these arguments on with a little more thought. By all means go after those Claimants who grossly falsify and exaggerate their evidence for personal gain, but if a lie has no material effect to the overall validity of the claim made, is it worth pursuing the argument?

Posted in Personal Injury Claims & ATE Insurance

European General Data Protection Regulation (GDPR)

Robin Selley

It seems that big changes to data protection as we know it are on their way to the UK as after several years of preparation and lobbying, the European Parliament has finally adopted the new European General Data Protection Regulation (GDPR) [Directive 95/46/EC].

So what is the GDPR you ask?

Well it will officially replace the basis behind the Data Protection Act 1998 and will become law in all EU member states from May 2018. The GDPR will also affect any businesses who process the personal data of EU citizens, even if they are based outside of the EU.

The document lays out compliance measures that each member state will need to meet before they take over for good in the summer of 2018 but what are the main changes we can expect from the GDPR?

One of the biggest relates to data responsibility as under the GDPR, both Data Controllers and Data Processors will be responsible for protecting their data.

All organisations will be obligated to have a full and firm understanding of what data they acquire, hold and process – and the legal basis for that data. Data protection measures must be integrated into business processes, in order to respect the rights of data subjects.

Most organisations will have to appoint a data protection officer, particularly those which process large amounts of sensitive personal data.

Additionally, the GDPR introduces a new obligation to notify data breaches to the relevant authorities within 72 hours of their first discovery.

At present the Information Commissioner can, in certain circumstances, impose financial penalties of up to £500,000. Under the new rules, non-compliance fines for failures to report breaches will be tiered – with a top tier fine up to a staggering 4 per cent of global annual turnover from late-reporting firms.

Firms may need to increase their privacy, in particular given the cyber-threats that exist at present. Policies and procedures for handling security breaches may need to be reconsidered and updated with all of this completed before the implementation date.

This news comes at a time when a London HIV clinic that leaked data on 781 of its patients has been fined £180,000.

The Information Commissioner’s Office (ICO) said the breach was “likely to have caused substantial distress” to those affected by the leak. Under data protection rules, the breach was deemed as sensitive and the organisation issued such a hefty fine as a result. Under the new regulations, could the fine have been even higher?

Organisations may require a data protection officer if they don’t have one already, and assess how and for what purpose they currently hold and/or process data. It may also be worth starting to review and update existing contracts in respect of parties’ data protection obligations.

Processing personal data is fundamental to the work of a solicitor. The Data Protection Act 1998 (DPA) regulates the processing of information relating to individuals at present. Solicitors should already be well versed with the DPA but the clock is ticking on preparing for the GDPR.

Posted in Personal Injury Claims & ATE Insurance

Hip – Hip – Hypocrisy

Simon Pinner

The budget this week increased IPT from 9.5% to 10%. This latest announcement exposes a deep hypocrisy in government thinking and pronouncements. The best way to spot hypocrisy is normally to ask the right questions, so here are four of them:

  1. The government told us that it was determined to reduce the cost of motor insurance – how does increasing IPT assist this aim?
  1. We are told that this latest 0.5% increase in IPT is to pay for flood prevention. Where therefore has the income gone from the 3.5% increase in IPT which took place only a few months ago? Attempts to link certain taxes to certain expenditure are always popular – of course I wish that all of my tax was spent helping disabled children and that none of it was spent by government quangos. Labelling tax as one thing or the other does not change real spending, it only changes the labels.
  1. We were told that removing the right to claim general damages for whiplash would reduce fraud. It is equally true that abolishing housing benefit would reduce benefit fraud, and that abolishing all types of money would reduce bank robberies but this of course is rather beside the point. Something which is beneficial should only be reduced or removed if the fraud associated with it is at such a level as to cancel out (or at least severely damage) the benefit itself. Are personal injury claims at that level, given that the levels of damages are heavily controlled by the courts and that the number of claims is falling?
  1. We have not heard about “the Compensation Culture” for a while, but this appears to lie at the heart of the government’s antipathy to compensation for personal injuries. The Compensation Culture argument was that legitimate activities (maypole dancing, sports days and charity events etc.) were being inhibited because of a culture of compensation. How will removing the right to claim whiplash in motor accidents fulfil this aim?

Presumably the aim is to allow people the freedom to drive more recklessly?

Posted in Personal Injury Claims & ATE Insurance

Dishonest Deafness Claim Did you Say?

Robin Selley

It has only been a matter of time before an insurer sought to have a deafness claim thrown out on the grounds of  ‘fundamental dishonesty’ and now that has happened.

A claim for hearing loss was made against Diamanttek, a diamond drilling company. The Claimant alleged that they did not enforce the use of PPE before 2013, over a 10 year period of employment.

The Claimant also alleged that no training had been provided about the correct use of hearing protection and that warnings were not given about the dangers of noise exposure.

These are often routine allegations made by Claimant’s in such cases, which are often refuted by way of witness evidence and / or the documents.

The defendant had maintained that the Claimant was supplied with PPE throughout his employment and denied liability.

At the first hearing DDJ Kilbane rejected the claimant’s evidence and dismissed the claim but was not willing to rule the claim was fundamentally dishonest, allowing QOCS to remain in place.

However, the Defendant appealed that decision and on the 8th February Judge Gregory, sitting in Coventry found the claim to have been fundamentally dishonest and granted Allianz permission to recover its costs from the Claimant.

Allianz believe this is a first for a disease claim.

But, will insurers now adopt the same stance when dealing with any employers liability claims where the dispute relates to one of provision of PPE and training in compliance with the various regulations that may apply?

The principles would essentially be the same would they not?

Or is this part of the insurance industries concerted attack on claims for Noise Induced Hearing Loss?

Posted in Personal Injury Claims & ATE Insurance

Blog Post – Part 36 offers and fixed costs?

Robin Selley

The Court of Appeal has given judgment in Broadhurst v Tan and it’s some good news for Claimant’s.

The Issues

The Court heard appeals on two cases (Broadhurst v Tan and Smith v Taylor) as to whether fixed costs should apply when a Claimant beats their own Part 36 offer.

In Broadhurst the judge held that fixed costs continued to apply. Whereas in Smith the judge held that fixed costs were inconsistent and did not apply before awarding the Claimant indemnity costs. So which is the right policy to adopt?

The Result

The Court of Appeal upheld the decision in Smith and allowed the Claimant’s appeal in Broadhurst.


Don’t get too carried away with these decisions.

Essentially, where a claimant makes a successful Part 36 offer in a section IIIA case, fixed costs will be awarded to the last staging point provided by rule 45.29C and Table 6B. The Claimant will then be entitled to costs to be assessed on the indemnity basis in addition from the date that the offer became effective.

The onus remains on the Claimant to make their Part 36 offer as attractive and as early as possible, preferably before proceedings have been issued in order to gain the full benefit of indemnity costs.

Defendants will need to be alive to the fact that the fixed costs will cease to apply if a Claimant beats their own offer. The upshot is that Claimants could obtain a generous result in terms of costs if their Part 36 offers are pitched correctly.

Posted in Personal Injury Claims & ATE Insurance, The Jackson Report & ATE Insurance

Hearts and Minds

Simon Pinner

In 1966, U.S. President Lyndon Johnson instituted a “Hearts and Minds” campaign in Vietnam to try to win the Vietnam war by getting the support of the local population. This was in essence heavy-handed propaganda, and I mention it because the motor insurers of today appear to be taking their lessons directly from that strategy.

It is worth looking at an article on page 4 of The Times last Saturday (13/02/2016). Average motor premiums rose by £100 in the last 4 months of 2015 (a 17% increase equivalent to 68% a year) and the insurers were being asked for an explanation! The ABI was well able to explain:

  1. there had been an IPT increase. Fair enough but of course they forgot to mention that this was only a 3.5% increase, so to plug the gap they said:
  2. the rise was due to “a fresh campaign by unscrupulous companies trying to encourage dishonest whiplash claims”.

The explanation is of course so ludicrous that it beggars belief, and under normal circumstances would give rise to howls of derision. Claimant solicitors had put through such a sudden and massive barrage of fraudulent claims over a four-month period that it had radically skewed the nation’s motor insurance premiums. The heavy-handed Hearts and Minds campaign which the ABI has carried out however has meant that they can be reasonably confident of getting away with giving any explanation however impossible it may be.

Solicitors and other pressure groups in the personal injury industry really need to give widespread publication to these sort of comments, and the fact that they are routinely published even in papers like The Times shows how effective the motor insurers’ strategy has been to date.

It is also an indictment of the government that it has allowed and encouraged such a one-sided debate to continue.

Posted in After The Event Insurance, CFAs & ATE Insurance, Claimant Solicitors & ATE Cover, General Posts about ATE Insurance, Personal Injury Claims & ATE Insurance, RTAs & After The Event Insurance, The Jackson Report & ATE Insurance

Proposed Change to the Small Claim Limit Foiled? Probably not yet

Jon Gouldsmith

The Forum of Insurance Lawyers this week announced that they will be opposing the Government’s planned increase to the small claims limit to £5,000 and to remove general damages for minor soft tissue injuries.

They announced that they are ‘regrettably’ unable to support the AIB on this issue, saying ‘It is unfortunate that there has not been a willingness on the part of the government to wait until the effects of recent reforms have come to fruition before proposing further change’.

Very sensible I hear you say, but wait there was more….

‘What’s needed is a well thought through package of measures to bring about the government’s objectives’.

Those measures, as suggested by FOIL members, include:

  • Online access to justice for claimants (through the portal or by way of a new online process), which should make allowances for people with limited access to technology
  • Better regulation of Case Management Companies
  • A process allowing claimants to value their own claims

So although a small cheer may have been raised by claimant representatives reading the headlines this week, I suspect they were soon silenced when looking more closely at the detail.

FOIL’s suggested approach is clearly an attempt to cut out claimant solicitors from the process of making a personal injury claim, who they no doubt feel get in the way of reaching a quick settlement with the average injured victim.

Making a personal injury claim is a technical process and will preclude the average person from bringing a claim themselves even if the small claims limit is increased. A medical report must be sourced from an appropriate expert and the damages, both special and general, must then be assessed on the basis of the report. This is a specialised skill even in a claim for minor injuries/damage.

This is, in my opinion, why it is in fact quite unlikely that there will be the huge rise of litigants in person forecast by some commentators.

But there is an easy solution suggest FOIL. Why not create a simple online claims process (no doubt funded by the AIB) where medical experts (no doubt funded by the AIB) can be found and reports arranged, with a snazzy little online valuation calculator that can then tell you how much your claim is worth. In fact most defendant insurers have such a system, Colossus, why not use that?

I will not insult your intelligence by suggesting what this would do to the average level of compensation that victims would be paid, without the assistance of an expert with experience of negotiating settlements with defendant insurers and with the appropriate knowledge of the actual, not threatened, risks of rejecting an offer.

FOIL do make a valid point about using the small claims limit to reduce perceived high levels of fraudulent claims, which they think will do nothing. That must be correct. What will the average fraudster care if their case is now a small claim, indeed would they not prefer that the court has less resources to hear live evidence under cross examination? This could simply be playing into the fraudsters hands.

But I think claimant lawyers must treat FOIL’s entrance into the debate with some care, it looks like it might be a double edged sword.

Posted in After The Event Insurance, Personal Injury Claims & ATE Insurance
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