It may not have escaped notice that the personal injury case of Palmer v Mantas & Liverpool Victoria Insurance was decided in the High Court in January this year.[i] The dispute was mainly based on the defence put forward by the Insurer that the claimant, Natasha Palmer, had been fundamentally dishonest when pursuing her claim, which had arisen from her vehicle suffering a high speed rear end collision by a drunk driver in June 2014. The judge did not deny that there were some inconsistencies in the claimant’s evidence, but nonetheless felt that had she been “wholly consistent every time, that itself would tend to be suspicious”.
Of course, recollections can vary over time. Some matters fade away, while others grow in importance. Moreover, a post-accident public image and active lifestyle bravely posted on social media might well be hiding physical and mental pain. Nevertheless, it might raise a few eyebrows to see notionally consistent evidence described by the judge as “suspicious” when, by contrast, arguably material inconsistencies and omissions on the part of the claimant concluded with her being described as “an honest, helpful, impressive and dignified witness in her own case”. The judge had already reprimanded two experts appearing for the defendant Insurer, one of whom had described the claimant as self-pitying and histrionic!
It is not the remit here to re-examine the evidence, nor to criticise the outcome, but instead to briefly look at the practicalities of the law which this case brought into focus. The judge heard the claimant, the witnesses and the experts and made what he felt was the correct decision. However, just to put some context on matters, the claimant was making a significant seven figure claim (eventually awarded by the court at almost £1.7m), the extent of which the defendant Insurer was disputing. In short, the Insurer believed the claim was greatly exaggerated and sought to rely on Section 57 of the Criminal Justice and Courts Act 2015. The relevant section provides that the Court must dismiss the claim if the claimant has been “fundamentally dishonest”, unless the claimant would suffer “substantial injustice” by such a dismissal.
Various matters which the Insurer drew to the attention of the Court included:
- A failure by the claimant to refer, in her first statement, to part-time work in 2015 or her ability to take part in sport or exercise;
- The claimant wrongly asserting in that first statement that she had tried to go out for the first time post-accident in May or June of 2015, some 11-12 months later. This was attributed to brittle memory;
- The failure to mention impaired balance in the claimant’s first statement, which the judge found was not an essential concern for the claimant at that time because it was intermittent and her focus was on more pressing symptoms;
- The incorrect assertion (if taken literally) in her subsequent second statement that the claimant had not returned to running;
- The failure to mention the full extent of post-accident travel, which included a trip to India 6-7 months after the accident, where the claimant, who had also carried out some work there, said she “had spent a considerable amount of time in a hotel room and was not able to involve herself fully as she would have liked”, as well as a skiing holiday in 2016 where she had skied in the mornings but “only on the gentle slopes”, this in contrast with the much more intensive skiing she said she had been able to do pre-accident.
The judge stated that he was not provided with any reported legal authorities where a finding of fundamental dishonesty had been made by a court just because a claimant had failed to volunteer information that was not actually asked.
So, what does all this tell us about a Section 57 defence? The first thing that springs to mind is that no adverse inferences can likely be drawn from a claimant’s silence. Such adverse inferences have of course been part of the criminal law for over two decades and will be familiar to fans of crime dramas, but in a personal injury claim it seems a claimant can certainly later rely on in court something which was not volunteered at the earliest opportunity, even in a formal statement. Therefore, failing to mention particular symptoms early on will not necessarily prevent them from entering into the equation much later. It should be added that the adverse effects of this accident did not appear to reach their peak until 2017, almost three years later, this well after the claimant’s trip to India and the skiing holiday.
The second lesson is that individual and arguably quite weak elements of a defence will not automatically be lumped together to form one larger and stronger defence. Something far more damning and incontrovertible will be required, for example a claimant saying he was long term injured and prevented from working or playing football, yet is filmed playing a competitive match and scoring a ‘wonder goal’.[ii] Anything, or even many things, which might at least appear to be concealment or thought to be misleading might otherwise be explained away by saying “I was never asked”, or else by being attributed to a poor memory caused by the psychological trauma of the accident itself.
All of this might appear to sit uncomfortably with the duties and potential penalties involved in making a claim against one’s own insurance company. Although a policyholder can now tell what have been called collateral lies, this without forfeiting the honest claim that already existed,[iii], contracts between insurers and their insured are contracts of utmost good faith. The courts will not separate a claim tainted by fraud into its honest and dishonest parts, therefore the whole of a claim is forfeited by virtue of its fraudulent element.[iv]
That principle did not apply to negligence actions against another party, even if there was a third party insurer involved. The fraudulent claim rule was peculiar only to policyholders themselves.[v] The point has been summarised thus: “that 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.”[vi].
By implementing Section 57 of the 2015 Act, it is logical to assume that the statutory yardstick of “fundamental dishonesty”, although not defined, was meant to mirror for third party claimants the common law rule for policyholder fraud as outlined in Galloway, where Lord Justice Millet was not prepared to apply a minimum percentage measurement to fraud, but instead felt that any fraudulent attempt to obtain material gain could be punishable by the loss of the entire claim.
So, given that it is virtually inconceivable that Parliament intended to differentiate between attempting to defraud your own insurance company and attempting to defraud another person’s insurance company, the conclusion has to be that the same forfeiture rule would apply uniformly to both.
However, even if a Court finds the third party claimant has been fundamentally dishonest and therefore forfeits the whole claim by materially exaggerating it, the Insurer must still negotiate past the “substantial injustice” barrier. This is where, it is submitted, the two types of claim could begin to diverge.
In a third party claim, the hurdle of substantial injustice may prove to be almost impossible for an Insurer to overcome in all but the most extreme cases of fraud. Let us imagine for a moment that a claimant has what turns out to be a legitimate claim for say £800k following a serious car accident, but adds on £40k for some element of the claim which turns out to be completely fabricated. Is a Court going to declare that a severely injured claimant left with a long term or permanent disability should lose the whole claim for the sake of adding a fraudulent few percent? That might be too much to expect. The substantial injustice provision would then mean that the genuine part of the claim was still upheld despite the claimant’s ruse being discovered.
On the other hand, if a policyholder made a legitimate house insurance claim, but fraudulently added a personal computer (Galloway, below), or else made a false alternative accommodation claim as part of a genuine claim following a house fire (Khan, below), then each would likely lose the entire claim, including the much larger genuine part.
It is probably a long shot to expect that a mainly genuine personal injury claim is going to be entirely forfeited because it was tainted by an element of fraudulent exaggeration. Taking an overview, the Courts would probably find that to be substantially unjust even if there had clearly been some fundamental dishonesty on the part of the claimant.
It seems therefore that most third party claimants who fraudulently inflate their otherwise genuine claims are still going to be engaging in what the Supreme Court in Versloot described as a ‘one-way bet’, making an unlawful gain if they succeed but losing nothing whatsoever if they do not. In that particular respect, it appears unlikely that anything will change.