Collateral lie ruling ‘a blow for honest customers’
The UK Supreme Court has ruled that it is acceptable to tell a collateral lie on an insurance claim. The judges voted four to one for the change, which is likely to affect millions of insurance policies.
The precise case that the Supreme Court ruled in favour of involved a Dutch cargo ship, which ran into difficulty after its engine room flooded in bad weather. However, the crew deliberately lied on their insurance claim, saying that they could not investigate an alarm informing them of the flooding because the ship was rolling.
In the original court case, the judge ruled that the lie invalidated the crew’s claim. The Supreme Court overruled this judgement. Lord Mance, a judge in the case, claimed that a collateral lie should not bar the insured from being able to claim for what ‘the law regards as his entitlement’.
The Association of British Insurers (ABI) has responded to the ruling, with director of general insurance policy James Dalton claiming that it is ‘a blow for honest customers’. He continued: “This decision risks pushing up the cost of insurance and prolonging the pay-out process for the vast majority of people who are honest customers. As the dissenting judge, Lord Mance, said, allowing lies will ‘distort the claims process by the time and cost involved in unveiling the fraud and attempting to ascertain its true implications’. Lies are lies. Insurers will investigate all suspicious claims and we make no apology for doing so as it keeps premiums down for honest customers.”