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Daily Insurance Industry News
Wednesday 23rd of May 2018
July 12, 2010

Law Commission reviews fraudulent claims statute

by Gill Montia

Story link: Law Commission reviews fraudulent claims statute

The Law Commission and Scottish Law Commission, which are conducting a joint review of insurance contract law, are currently considering the insured’s post-contract duty of Good Faith.

As insurance contracts are said to be based on mutual duties of good faith, commissioners have been looking at how these duties work after the contract has been formed.

An issues paper has now been published on the policyholder’s duty to act honestly during the life of a contract, and in particular the remedies which should be available to the insurer if a policyholder makes a fraudulent claim.

Under section 17 of the Marine Insurance Act 1906, if a policyholder acts fraudulently, the insurer may deny the whole insurance contract, and demand back any money paid on previous claims.

However, in practice courts are reluctant to allow this and instead have said that a fraudulent claimant should forfeit their entire claim (even the part that is legitimate) but that other claims should remain unaffected.

The Commission is behind this policy and is tentatively proposing that section 17 of the Act should be reformed.

Issues Paper 7 also considers fraudulent claims in joint and group insurance, and whether the duty of good faith has other implications.

Industry responses will be welcomed up until the 11th October 2010.

 

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