Shipping and Insurance: Honesty in Claims

Shipping and Insurance: Honesty in Claims

Is it ever acceptable to be dishonest in the course of a shipping insurance claim? The expert shipping and maritime lawyers at Bahamas shipping law firm ParrisWhittaker are highly experienced in providing full service legal advice to shipping companies, for instance, where maritime insurance claims and other disputes are involved.

‘Fraudulent devices’

The Court of Appeal in the UK has ruled(1) in no uncertain terms in favour of the insurance underwriters in relation to the consequences of an insured’s use of a fraudulent device in the presentation of its insurance claim.  A fraudulent device is a statement made recklessly, or with knowledge of its untruth, to support the claimant’s claim that was honestly believed to be true.

In this case, a vessel suffered damage whilst carrying goods following partial flooding.  The ship-owners claimed under its hull and machinery insurance policy, but the underwriters refused to pay up on the basis of fraudulent statements about the flood made in a letter from a representative of the ship-owners.  The ship owners started proceedings against the underwriters.

The Appeal Court had to consider whether the rule whereby a fraudulent claim deprived the insured of any right to recover anything, also applied in the case of 'fraudulent devices'.  The court upheld an earlier ruling and found that it was proportionate for the rule to be applied in such circumstances.   An insured who employs a ‘fraudulent device’ consequently forfeits his claim - even if the claim itself is not exaggerated or embellished and would otherwise have been recoverable under the insurance policy.

The ruling is clearly significant for insurers – not only in the shipping and maritime sector but in the wider business arena. 

How can we help?

The shipping lawyers at ParrisWhittaker have years of experience advising ship-owners in disputes with others, including those involving insurance claims.  If you are facing a claim or think you have a potential shipping or insurance claim, contact us straightaway for urgent advice.

(1) Versloot Dredging BV v HDI-Gerling & others, The DC Merwestone [2014] EWCA Civ 1349 ,