Insurance companies will be able to claw back personal injury payouts where claimants are later found to have been more dishonest than they realised at the time of settlement, after a landmark Supreme Court decision.
Colin Hayward claimed more than £400,000 in damages after injuring his back at work in 1998, saying his mobility and ability to work were restricted by continual pain.
Insurers Zurich became suspicious and obtained video evidence that Mr Hayward was exaggerating the extent of his disability, suggesting he was able to carry out heavy work in his home.
In 2003 they agreed to settle the case for £134,973. However, further evidence supplied by neighbours two years later showed that he had, in fact, fully recovered before the payout was made.
In August 2015 the Court of Appeal rejected Zurich’s argument that Mr Hayward should repay most of the money he received on the basis that settlements should be final.
But all five Supreme Court justices sitting in the case agreed that the Court of Appeal was wrong, ordering Mr Hayward to repay £120,000 of his compensation, leaving him with just £14,720.
Lord Anthony Clarke acknowledged that insurers are sometimes compelled to settle claims that they suspect but cannot prove to be dishonest.
Zurich said it was important to fight the case to prevent a scenario where fraudulent claimants could throw away their crutches as soon as they walked out of the courtroom without any fear of penalty.
The company’s UK chief claims officer said: “For too long honest policyholders have financially suffered due to the illegal actions of those who simply think the law doesn’t apply to them.
“In this case, Mr Hayward had deliberately exaggerated the effects of his injury throughout the entire process and bizarrely continued his deceit even after the disclosure of damning video evidence.
“After many years of tirelessly pursuing this outcome Zurich is extremely pleased with the Supreme Court’s judgment, which will serve as a warning that fraudulent activity will not be tolerated, even after a payout has been made.”
Anthony McCarthy, of Macks Solicitors in Middlesbrough, said the ruling underlines the important of telling the truth in personal injury cases.
“This claimant was clearly embellishing the extent of his injuries in an attempt to dishonestly obtain more compensation than he was rightfully entitled to,” he said.
“The case establishes that even years after cases are settled, insurers can reclaim money paid out if they later prove that fraud has taken place.
“It’s quite right that Mr Hayward should repay this money – indeed, if this case happened today, he would lose all of his compensation and probably end up behind bars.
“However, it would be unfair on honest claimants, who make up the vast majority of cases, to imply that fraud is more widespread than it actually is.”
