The Government has announced further measures aimed at fighting fraudulent insurance claims. According to the Ministry of Justice (MOJ), the measures demonstrate the Government’s on-going commitment to reduce insurance costs and it promises to legislate for the changes before the election in May 2015.


The proposals include:

  • requiring courts to dismiss claims in full where the claimant has been ‘fundamentally dishonest’;
  • banning lawyers from encouraging claims by offering incentives such as cash or iPads;
  • reducing questionable whiplash claims by improving medical assessments, ensuring they are only conducted by independent accredited professionals and setting fixed fees for medical reports (this proposal is already subject to consultation); and
  • introducing new rules to discourage the practice of ‘pre-med’ offers.

The reference to ‘fundamental dishonesty’ is of particular interest given recent discussion of the concept in respect of costs.


Hill Dickinson partner, Stratos Gatzouris, as Head of the Fraud Special Interest Group in FOIL (Forum of Insurance Lawyers) has been campaigning for the 12th Law Commission to consider legislation to clarify and correct the decision inSummers -v- Fairclough Homes Ltd [2012]UKSC 26

In Summers, it was found that a claim could, in theory, be dismissed if it was ‘tainted by dishonesty’ - but only in very specific circumstances. The court ruled that an exaggeration of the injuries sustained was not sufficient to strike out the entire claim for abuse of process.

The MOJ announcement looks as if it will go some way to address the Summers decision by specifically requiring courts to dismiss claims where the claimant has been found to be fundamentally dishonest. The concept of fundamental dishonesty has previously been used as an exception to Qualified One Way Costs Shifting (QOCS), introduced as part of the Civil Justice Reforms in Part 44.16. 

In the recent county court decision of Gosling -v- Screwfix (unreported), the court made a finding of fundamental dishonesty. The claimant lost QOCS protection and was ordered to pay the defendant’s costs on an indemnity basis. In that case, the court held that dishonesty in relation to any significant aspect of a claim (in this case quantum), could amount to fundamental dishonesty. Contrary to Summers, the decision in Gosling indicates that significant exaggeration of an injury could constitute ‘fundamental dishonesty’. The court suggested that a finding of fundamental dishonesty would be made if around half the value of the claim was found to be dishonest (click here to read our review of this case).{please include hyperlink to SGA article in latest fraud newsletter}

What does it mean?

It is hoped that the risk of losing an entire payout will deter fraudsters from pursuing exaggerated or fabricated losses and so reduce the cost of claims for insurers. It is anticipated that the ban on incentives and regulation of medical assessments will also deter dubious claims. 

The announcement goes some way to temper the disappointing news that the 12th Law Commission has decided not to include the issue of personal injury fraud in its latest programme of reforms.

It seems that the MOJ has chosen to adopt the concept of ‘fundamental dishonesty’ to extend beyond QOCS and apply to claims generally. Extension beyond costs may result in confusion regarding the true definition and how ‘fundamental dishonesty’ is to be interpreted.

Stratos Gatzouris, partner at Hill Dickinson LLP, says: ‘The Law Commission (and the Government) have missed an opportunity to legislate for the forfeiture of an entire third party claim if one element of it is fraudulent (as is the case with first party fraud).  However, this Government announcement at least goes part of the way to addressing this issue.’

The concept of ‘fundamental dishonesty’ is gathering momentum, but it remains to be seen how it will be defined and applied in cases where there are genuine heads of claim, but with fraudulent elements. If the Gosling definition is adopted, this may act as a deterrent to would-be fraudsters.