In Direct Line Insurance (DLI) v. Kenneth Ronald Fox  EWHC 386 (QB), DLI sought to recover sums paid under a buildings insurance policy to an insured, Mr Fox, in respect of fire damage to Mr Fox's home. Mr Fox had made a claim for recovery under the policy, which DLI accepted, entering into a written agreement providing Mr Fox with a settlement amount and also providing for a VAT payment upon the provision of certain documentation from Mr Fox following the damage being repaired. The VAT provision in the written agreement was expressed as a condition precedent to receipt of the VAT payment. Mr Fox sent an invoice attempting to satisfy the VAT provision but after enquiry from DLI (suspecting that it was a false document), Mr Fox retracted this document and no longer sought the VAT payment. The policy provided that it would become void in the event of a fraudulent claim by the insured.
DLI claimed that Mr Fox had fraudulently attempted to procure the VAT payment by submitting a false document, the effect of which was that the policy became void and all benefit under the policy was forfeited. Mr Fox, amongst other things, argued that: (1) he had not sought to advance a fraudulent claim under the policy but had instead submitted a misleading document in an attempt to satisfy a condition precedent in the written agreement which was distinct from the policy and not subject to the duty of utmost good faith; (2) he had retracted the false invoice and ceased seeking the VAT payment before DLI had decided whether or not to make the VAT payment.
The Judge found that (1) with respect to the first argument, Mr Fox was correct and accordingly did not have to repay sums paid to him by DLI whose claim thereby failed (2) with respect to the second point there was nothing in English law providing that the consequences of the rule concerning fraudulent claims could be mitigated by retraction and to that end retraction was immaterial. Even if it were material it was only possible where made voluntarily and at a point when the insurer had not raised any suggestion that he was suspicious about the claim or relevant element in it.
It is common that insurance policies will provide that they become void, depriving the insured of all benefit under the policy, should a fraudulent claim be made. This reflects the legal principles in the absence of such contractual provision. This case shows however that submitting a false document in an attempt to receive a payment from an insurer will not be treated as a fraudulent claim under the policy to the extent that the insured's submission is to satisfy a condition precedent in an agreement settling the insured's claim.