Hayward v Zurich Insurance: It ain’t over til it’s over
In the case of Hayward v Zurich Insurance Company plc  UKSC 48, the Supreme Court unanimously decided that evidence in support of suspected fraud which subsequently came to light after settlement of an injury claim may be taken into consideration, and therefore, settlement will no longer mean the end of the case if a finding of fraud is later made.
In this case, the claimant was injured at work in an accident for which liability was accepted. The claimant offered to settle his claim for £420,000. After obtaining surveillance footage which the insurers said showed the claimant was exaggerating his injuries, a counter offer was made in the sum of £134,974. This offer was accepted in 2003 and the matter was settled.
However, some years later, the insurers obtained further evidence which showed that the claimant had recovered from his injuries at least one year before the settlement was reached. The insurers initiated proceedings, attempting to rescind the settlement, setting aside the judgment and to seek damages for deceit.
At trial, the judge concluded that the settlement agreement should be set aside and that the claimant should be awarded damages of £14,720 and be ordered to repay the settlement sum. The claimant appealed this decision. The Court of Appeal overturned the first instance decision and held that the insurers were aware of the fraud at the time of settlement, and therefore that settlement could not be set aside. Given the insurers’ earlier pleading of fraud, it was held that they could not now rescind the settlement agreement when proof of fraud was later obtained.
The insurers appealed to the Supreme Court, who rejected the Court of Appeal’s analysis and re-instated the first instance decision that the settlement is set aside, with a reduced sum paid to the claimant as compensation for his true injuries. The Supreme Court found that the insurers did not know that the claimant had deliberately exaggerated his injuries to the extent that was later discovered and that the insurers had done all they could to investigate at the time. Lord Toulson commented that “it is difficult to envisage any circumstances in which a mere suspicion that a claim was fraudulent would preclude unravelling a settlement when fraud is subsequently established.”
The Supreme Court appeared reluctant to have too wide a definition of a fraudulent claim, but this case sends a clear message to fraudulent claimants.
Claimants should be informed at an early stage that if they are caught performing an action which is inconsistent with their witness evidence, their claim could be significantly affected. They should also be advised to keep their legal advisor updated about any changes in their symptoms or capabilities.
It should be noted that the majority of claimants are genuine. However, it is worth bearing in mind that the end of the case will not necessarily be the end of the case where fraud is suspected. Not only are insurers willing to reopen a claim but they are willing to go that step further.