Fraud only forfeits fraud

Axa General Insurance v Gottlieb (Court of Appeal - 11 February 2005)

The appellants had insured their home with Axa for many years. In a particular policy year, they made four claims under the buildings policy - three in respect of water escape and one for storm damage.

Axa became suspicious about the claim for alternative accommodation and repair costs under the first two claims ("the fraudulent claims"). The third and fourth claims were accepted as being genuine.

Axa had made payments to the appellants under the fraudulent claims before and after the fraud was committed and subsequently issued proceedings to recover all payments under the fraudulent claims, as well as payments made under the genuine claims on the same policy.

It was held Axa was entitled to recover all sums paid under the fraudulent claims, both before and after the fraud. They could not, however, recover payments made under the genuine claims.

The appellants appealed, arguing the fraud should not affect the interim payments made before the fraud in respect of genuine loss. Axa also appealed, arguing the fraud entitled them to recover payments made under the genuine claims. The decision at first instance was upheld.

Comment: The Court of Appeal took this opportunity to stress that the rule relating to fraudulent insurance claims is a special common-law rule. The fraud forfeits the whole of the claim to which the fraud relates and any interim payments under that claim are, therefore, recoverable, whether they took place before or after the fraud was committed. Genuine claims on the same policy are unaffected. - Julian Smart, BLM Birmingham.

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