Allegations of fraud raise the stakes in personal injury claims. Honest Claimants have nothing to fear but Claimants who exaggerate their symptoms to try and achieve a higher settlement sum have been given a clear warning by the Supreme Court.

The case in question is Hayward v Zurich Insurance Co plc [2016]. Mr Hayward had claimed compensation following an accident at work. His case was based upon his own testimony and medical evidence stating he had injured his back to such a degree that his future capacity for work was affected.

The Defendant insurers clearly suspected that Mr Hayward was exaggerating the severity of his symptoms. They obtained video surveillance evidence showing him carrying out heavy work at home. Despite this, the case settled in proceedings for £134,973. This figure reflected a midway figure between the highest and lowest possible outcomes for the future loss claim, depending on whether or not the Court accepted the Defendant's expert's comments on the video evidence.

The Supreme Court would not have been asked to consider the case at all if it had not been for the intervention of the Claimant's neighbours, who approached the Defendant two years later, providing evidence that Mr Hayward had made a good recovery long before his settlement.

Naturally, the Defendant's insurers wanted their money back. They went back to court and with assistance from the neighbours applied, successfully, to have the settlement set aside. The Claimant was awarded a lower award of £14,720 reflecting his true loss. Mr Hayward was ordered to pay back the balance.

The Claimant appealed. The Court of Appeal allowed the appeal on the basis that the Defendant had already asserted dishonesty when they disclosed the video evidence and must have had a perception that there was a misrepresentation. It was not possible to set aside an agreement arguing reliance on misrepresentation when they were clearly aware of it at the time of settlement.

The Defendant appealed. The Supreme Court found (unanimously) for the Defendant. The fact that the Defendant did not entirely believe the statements of the Claimant about the level of his disability (supported by the video surveillance) did not preclude the Defendant from arguing that they had been induced by the Claimant's representations when agreeing the original settlement terms.

Comment : This case is a good example of the dilemma that compensators face when they suspect exaggeration (and may even have some helpful evidence to support it), but also know that if the Claimant rebuts the challenge, there are high risks (and costs) at trial.

The Supreme Court has now sent a message to both compensators and Claimants that settlements can be overturned by arguing there was a misrepresentation, even where the Defendant may have had a strong suspicion of fraud all along.

As a side point, the Defendant had conceded in Hayward that it would not have been able to apply to set aside the settlement if it presented new facts which could have been known at the time had they conducted a diligent investigation. This is a reminder to compensators that it is always prudent to fully investigate a claim that causes concern before settlement - even if this adds to cost.

Claimants must also not be surprised if their claims are robustly and carefully scrutinised before settlement is reached.