In a decision which could have a significant impact for insurers and the insured alike, a 4:1 majority in the UK Supreme Court recently delivered judgment in Versloot Dredging BV v HDI Gerling Industrie Versicherung AG [2016] UKSC 45. The Court was asked to consider whether collateral lies rendered a claim fraudulent, which would have the effect of voiding the entire claim.

A collateral lie (otherwise known as a fraudulent device) is a lie told by the insured party to bolster their claim or speed up the claims process, which does not inflate an insurer's liability. The majority distinguished collateral lies from the fabrication of the entire claim and the dishonest exaggeration of a claim, both of which will still void an entire claim.

In finding collateral lies were not fraudulent conduct, the majority held that the policy of deterring fraudulent or dishonest conduct did not justify voiding an entire claim where the fraudulent conduct was immaterial to the claim itself.

Importantly, it was made explicit that the decision would apply not only to maritime insurance (the context of the dispute before the court) but to all consumer and commercial insurance policies.

See the Court's decision here.