Fraudulent Claims That Cannot Be Challenged

The case of Hayward v Zurich Insurance Company Plc was determined by the Court of Appeal on 31 March 2015 but it started as long ago as June 1998 when Mr Hayward suffered an accident at work in which he injured his back.

In 1999, Mr Hayward’s employer obtained video surveillance evidence which appeared to show Mr Hayward carrying out heavy work at home.

In May 2001, Mr Hayward issued proceedings against his employer claiming his injury continued to cause him serious lumbar pain which restricted his mobility and, in turn, he had developed a depressive illness. Mr Hayward claimed compensation exceeding £420,000.

The employer’s defence was conducted by its insurer (‘Zurich’). Zurich admitted liability for the accident but disputed the amount being claimed on the ground that Mr Hayward had “exaggerated his difficulties in recovery and current physical condition for financial gain”. Zurich relied on the 1999 video.

Zurich did not believe Mr Hayward’s representations were true but recognised there was a real risk a judge would accept them as true and so, on 3 October 2003, Zurich entered into a settlement agreement on terms that it would pay Mr Hayward the sum of £134,973.

In around 2005, Mr Hayward’s neighbours, Mr and Mrs Cox, approached the employer to say that they believed Mr Hayward’s claim to have suffered a serious back injury was ‘dishonest’ because, from their observations of his conduct and activities, they believed he had entirely recovered from his injury by 2002 at the latest.

Zurich subsequently issued proceedings against Mr Hayward claiming he had fraudulently misrepresented the extent of his injury. Zurich asked for the settlement agreement to be set aside and for Mr Hayward to repay £134,973. The trial judge found Mr Hayward had indeed dishonestly exaggerated the effects of his injury and so he set aside the settlement agreement.

Mr Hayward accepted the judge’s finding that he had been dishonest but nevertheless he appealed against the judge’s decision to set aside the settlement agreement on the grounds that (a) Zurich believed his representations were false when it entered into the settlement agreement and (b) “a man cannot be deceived if he knows the truth”.

The Court of Appeal allowed Mr Hayward’s appeal and allowed him to keep all of the £134,973. The Court stated “It may stick in the throat that [Mr Hayward] can retain the reward of his dishonesty but [Zurich] will have made the deal with [its] eyes open to the possibility of fraud and there is an important public interest in the finality of settlements”.

It perhaps regretful the Court did not balance the competing public interest arguments between (a) finality of settlements and (b) the need to discourage fraudulent claims, the need to encourage members of the public to report fraudulent claims and / or the impact fraudulent claims have on the level of insurance premiums paid by employers, businesses and members of the public.

For more information, please contact Richard Moss on 0845 6200013 or

Richard Moss is a boutique law firm that specialises in the resolution of all types of property-related problems.

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