Yeganah v Zurich Insurance Company
(Queens Branch Division 24 May 2010)
Following a fire at his house, the Claimant sought from his buildings and contents insurer, Zurich, 270,000 in respect of reinstatement costs and 51,000 in respect of damage to contents (under which head of loss there was a 40,000 limit).
The policy included Condition 4:-
If a claim is fraudulent or false in any way, we will not make any payment and all cover will end.
Zurich refused to pay arguing that (1) the Claimant had deliberately caused the fire and (2) he was in breach of Condition 4 of the policy in that he had lied both about the value of clothing damage (exaggerating the claim by 10,000) and had planted charred clothing in the house after the fire. The value of claims accepted and agreed other than the clothing was 30,788 almost as much as the limit of indemnity.
The Court held that (1) Zurich had, narrowly, failed to discharge the heavy burden on it of proving arson, and (2) the Claimant was in breach of Condition 4 on the grounds alleged by Zurich. That is to say, the Claimants conduct, although it had only modest effect on the overall value of the claim, was seriously dishonest.
The outcome was that his entire claim failed and the Claimant recovered nothing. The same result would have been reached even without Condition 4, as the general law requires that as soon as there is any fraud in the claims process, the whole insureds claim is fraudulent and fails in its entirety.
This case should serve as a sobering reminder to policyholders of the perils in making a claim which is even only dishonest in part. As Lord Hovhouse put it in The Star Sea (2001) :-
The logic is simple. The fraudulent insured must not be allowed to think; if the fraud is successful then I will gain; if it is unsuccessful, I will lose nothing.