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Friday, 23 September 16
"COLLATERAL LIES" DO NOT NECESSARILY UNDERMINE AN INSURANCE CLAIM
 KNOWLEDGE TO ELEVATE
An insured was not precluded from recovering under an insurance policy even though it had made a false statement during the claims process with a view to strengthening its claim. The Supreme Court in Versloot Dredging BV & anr v HDI Gerling Industrie Versicherung AG [2016] UKSC 45 considered the extent of the fraudulent claims rule which applies to insurance contracts and prevents an insured recovering under an insurance policy where the claim is fabricated or exaggerated. The Supreme Court held (Lord Mance dissenting) that this rule does not apply to false statements that are immaterial to an insured’s right to recovery under the policy. Insurers have expressed their concern at the decision.
The claimant ship owners suffered irreparable damage of a vessel’s engine after the engine room was flooded, causing a loss of EUR 3,241 million, which they sought to recover from the defendant insurers. The ship owners had falsely stated, in response to inquiries made by the insurers, that an alarm had sounded but that no action had been taken by the crew as the alarm was attributed to the ship rolling in heavy seas. In actual fact no alarm had sounded. The ship owners had been frustrated by the insurers’ delay in recognising the claim and this statement was intended to reassure the insurers that the ship was seaworthy with fully operational alarm systems. They believed that this statement would fortify the claim and accelerate payment.
The alarm statement was later discovered to be false, but was irrelevant to the validity of the claim. Although the alarm had not sounded, it was tested shortly after the incident and found to be working. Even if it had not been working, Popplewell J at first instance held that this would not assist the insurers as the alarm’s failure to sound would not have been the proximate cause of the loss. Popplewell J concluded that the loss was caused by a peril of the seas covered by the insurance policy. Nevertheless, Popplewell J held that the insurers were entitled to repudiate the entire claim under the ship owners’ insurance policy as a result of this false statement. The ship owners appealed, with the Court of Appeal upholding the decision.
Fraudulent and exaggerated claims
At common law it is well established that if an insured makes a fraudulent or exaggerated claim on its insurer, the insured loses the right to recover the entirety of that claim, including any genuine losses it would have obtained. The law refuses to sever the honest part of the claim from the invented part.1 This is commonly referred to as the “fraudulent claims rule”.
Section 12 of the Insurance Act 2015 (which came into force on 12 August 2016) has preserved this rule. It does not, however, define what constitutes a fraudulent claim and does not refer to a situation where a valid claim is supported by a false statement.
Collateral lies and fraudulent devices
The extension of the common law rule to justified claims supported by false statements is more recent and controversial. Lord Sumption referred to Agapitos v Agnew (The Aegeon) [2003] QB 556, where Lord Mance had considered, obiter, whether the fraudulent claims rule could apply to a lie made in the presentation of a claim which does not affect the merits of, or the amount of, the claim. This has been generally termed a “fraudulent device” (or, adopting Lord Sumption’s expression, a “collateral lie”). Lord Mance considered that such collateral lies were also subject to the fraudulent claims rule.
The majority of the Supreme Court, with Lord Sumption giving the lead judgment, disagreed with this approach. Lord Sumption distinguished between a fraudulent exaggerated claim, which is designed to enable the insured to gain something which it is not entitled to, and a justified claim supported by a collateral lie. Where the lie is irrelevant to the existence or the amount the insured is entitled to, the insured gains nothing from the lie which he was not already entitled to by law and the insurer loses nothing from meeting a liability it already had (having crystallised at the moment of loss). The lie is therefore dishonest but the claim is not.
Lord Sumption concluded that it was disproportionately harsh to the insured and would go further than any legitimate commercial interest for the fraudulent claim rule to extend to collateral lies. The policy of deterrence did not justify such an extension of the rule.
COMMENT
The historic justification for the fraudulent claim rule was as a clear deterrent to fraudulent claims, recognising that insurers can be dependant on the insured for information, both at the formation of the contract and in the processing of claims. Honest policyholders would otherwise bear the financial burden of costs incurred by the insurers due to fraudulent or exaggerated claims, through increased premiums. As the judges recognised, fraudulent insurance claims are a serious issue, with insurance fraud widely perceived as victimless (a perception the judges emphasised was quite false).
However, this judgment prevents any extension of this rule and limits an insurer’s right to reject a claim. Although the decision has raised concerns within the insurance industry, it is far from being an invitation for an insured to embellish an insurance claim without fear of any consequences. Any attempt to enhance a claim which would result in increasing the amount recoverable will lead to forfeiture of the entirety of the claim if discovered. Even where a false statement is wholly collateral to a justified claim, an insured may be penalised for that statement if exposed. In the context of a contested claim, any settlement agreement induced by the false statement could be set aside. Moreover, there could be cost orders in any proceedings, increased premiums and difficulty in obtaining future insurance policies after the requirement to disclose the insured’s claims history in any insurance proposal is met. Insureds will also want to avoid litigation concerning whether a false statement is collateral or not to a justified claim.
Finally, insurers can consider including clauses in insurance contracts precluding the recovery of any claims supported by collateral lies. It is likely that going forward insurers will seek legal advice as to the merits of doing so.
Source: Allen & Overy
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Monday, 07 November 16
INDONESIAN COAL PRICE REFERENCE ROSE 59.57 PER CENT YEAR TO MONTH
COALspot.com: The Indonesia coal benchmark price hits to its highest level since May 2013. The government declared benchmark prices for Indo ...
Monday, 07 November 16
HANDYSIZE: THE ASIAN INDICES RECORDED A GRADUAL DROP EVERY DAY - THE BALTIC BRIEFING
Capesize
A rumour-fuelled market this week but essentially rates a touch firmer and owners cautiously optimistic. The flotilla of vessels heading ...
Monday, 07 November 16
THE SUPRAMAX CHARTER RATES FOR INDONESIA TO INDIA WERE RATING AT AROUND $7500-8000 A DAY
COALspot.com: The Baltic Exchange, tracking rates for ships carrying dry bulk commodities rose slightly and ending in a positive note this past wee ...
Friday, 04 November 16
U.S COAL PRODUCTION UP WEEK OVER WEEK
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totalled an estimated 17 million short tons ...
Friday, 04 November 16
INDONESIAN INFRASTRUCTURE DEVELOPMENT TRENDS ARE UNANIMOUSLY AFFIRMED
Press Release: October 20-21, 2016 Indonesia Infrastructure Summit (IIC) opened at the Hyatt Hotel in Jakarta The theme of the meeting was "Pr ...
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- Grasim Industreis Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Semirara Mining and Power Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- IEA Clean Coal Centre - UK
- Latin American Coal - Colombia
- Global Coal Blending Company Limited - Australia
- Indika Energy - Indonesia
- Samtan Co., Ltd - South Korea
- Karaikal Port Pvt Ltd - India
- Standard Chartered Bank - UAE
- Central Java Power - Indonesia
- PowerSource Philippines DevCo
- Dalmia Cement Bharat India
- PNOC Exploration Corporation - Philippines
- Coastal Gujarat Power Limited - India
- Meenaskhi Energy Private Limited - India
- Parliament of New Zealand
- Indogreen Group - Indonesia
- Australian Commodity Traders Exchange
- Kapuas Tunggal Persada - Indonesia
- Minerals Council of Australia
- Ministry of Transport, Egypt
- Kalimantan Lumbung Energi - Indonesia
- Riau Bara Harum - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- The University of Queensland
- Timah Investasi Mineral - Indoneisa
- European Bulk Services B.V. - Netherlands
- Jaiprakash Power Ventures ltd
- Pipit Mutiara Jaya. PT, Indonesia
- Kideco Jaya Agung - Indonesia
- Marubeni Corporation - India
- Kohat Cement Company Ltd. - Pakistan
- ASAPP Information Group - India
- Ambuja Cements Ltd - India
- ICICI Bank Limited - India
- Binh Thuan Hamico - Vietnam
- Petrochimia International Co. Ltd.- Taiwan
- Commonwealth Bank - Australia
- Rashtriya Ispat Nigam Limited - India
- Vedanta Resources Plc - India
- Holcim Trading Pte Ltd - Singapore
- Neyveli Lignite Corporation Ltd, - India
- Wood Mackenzie - Singapore
- Siam City Cement PLC, Thailand
- Maheswari Brothers Coal Limited - India
- Pendopo Energi Batubara - Indonesia
- Banpu Public Company Limited - Thailand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bangladesh Power Developement Board
- Trasteel International SA, Italy
- SMC Global Power, Philippines
- Energy Development Corp, Philippines
- Aboitiz Power Corporation - Philippines
- Globalindo Alam Lestari - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Altura Mining Limited, Indonesia
- Kobexindo Tractors - Indoneisa
- Chamber of Mines of South Africa
- Manunggal Multi Energi - Indonesia
- Iligan Light & Power Inc, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Sarangani Energy Corporation, Philippines
- Ministry of Finance - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Bhoruka Overseas - Indonesia
- Mintek Dendrill Indonesia
- Wilmar Investment Holdings
- Attock Cement Pakistan Limited
- Antam Resourcindo - Indonesia
- Simpson Spence & Young - Indonesia
- Oldendorff Carriers - Singapore
- Heidelberg Cement - Germany
- Straits Asia Resources Limited - Singapore
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Merrill Lynch Commodities Europe
- GVK Power & Infra Limited - India
- Uttam Galva Steels Limited - India
- Bharathi Cement Corporation - India
- Singapore Mercantile Exchange
- Madhucon Powers Ltd - India
- Sindya Power Generating Company Private Ltd
- Kartika Selabumi Mining - Indonesia
- Rio Tinto Coal - Australia
- Meralco Power Generation, Philippines
- CIMB Investment Bank - Malaysia
- Power Finance Corporation Ltd., India
- Coal and Oil Company - UAE
- Ceylon Electricity Board - Sri Lanka
- Savvy Resources Ltd - HongKong
- Indonesian Coal Mining Association
- Bayan Resources Tbk. - Indonesia
- Mercuria Energy - Indonesia
- Deloitte Consulting - India
- Tata Chemicals Ltd - India
- Orica Australia Pty. Ltd.
- SN Aboitiz Power Inc, Philippines
- Coalindo Energy - Indonesia
- Indian Oil Corporation Limited
- Xindia Steels Limited - India
- Makarim & Taira - Indonesia
- London Commodity Brokers - England
- OPG Power Generation Pvt Ltd - India
- Kaltim Prima Coal - Indonesia
- San Jose City I Power Corp, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Essar Steel Hazira Ltd - India
- Eastern Energy - Thailand
- Carbofer General Trading SA - India
- Therma Luzon, Inc, Philippines
- Petron Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Kumho Petrochemical, South Korea
- Borneo Indobara - Indonesia
- Sical Logistics Limited - India
- The Treasury - Australian Government
- South Luzon Thermal Energy Corporation
- MS Steel International - UAE
- Indian Energy Exchange, India
- AsiaOL BioFuels Corp., Philippines
- Semirara Mining Corp, Philippines
- Ministry of Mines - Canada
- Larsen & Toubro Limited - India
- Romanian Commodities Exchange
- Africa Commodities Group - South Africa
- Gujarat Electricity Regulatory Commission - India
- Edison Trading Spa - Italy
- GN Power Mariveles Coal Plant, Philippines
- Georgia Ports Authority, United States
- Toyota Tsusho Corporation, Japan
- GAC Shipping (India) Pvt Ltd
- Barasentosa Lestari - Indonesia
- Interocean Group of Companies - India
- Port Waratah Coal Services - Australia
- Cement Manufacturers Association - India
- The State Trading Corporation of India Ltd
- Intertek Mineral Services - Indonesia
- PTC India Limited - India
- Bulk Trading Sa - Switzerland
- Bukit Asam (Persero) Tbk - Indonesia
- Salva Resources Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kepco SPC Power Corporation, Philippines
- Parry Sugars Refinery, India
- Global Green Power PLC Corporation, Philippines
- Anglo American - United Kingdom
- McConnell Dowell - Australia
- Gujarat Sidhee Cement - India
- Sakthi Sugars Limited - India
- VISA Power Limited - India
- Jindal Steel & Power Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Jorong Barutama Greston.PT - Indonesia
- India Bulls Power Limited - India
- Directorate Of Revenue Intelligence - India
- Aditya Birla Group - India
- Ind-Barath Power Infra Limited - India
- Baramulti Group, Indonesia
- Formosa Plastics Group - Taiwan
- Malabar Cements Ltd - India
- Renaissance Capital - South Africa
- Economic Council, Georgia
- Central Electricity Authority - India
- Posco Energy - South Korea
- Medco Energi Mining Internasional
- Sojitz Corporation - Japan
- Electricity Generating Authority of Thailand
- White Energy Company Limited
- Agrawal Coal Company - India
- TeaM Sual Corporation - Philippines
- Indo Tambangraya Megah - Indonesia
- Planning Commission, India
- Billiton Holdings Pty Ltd - Australia
- Thiess Contractors Indonesia
- Siam City Cement - Thailand
- Bank of Tokyo Mitsubishi UFJ Ltd
- Cigading International Bulk Terminal - Indonesia
- Goldman Sachs - Singapore
- Asmin Koalindo Tuhup - Indonesia
- Sree Jayajothi Cements Limited - India
- International Coal Ventures Pvt Ltd - India
- New Zealand Coal & Carbon
- Tamil Nadu electricity Board
- CNBM International Corporation - China
- Videocon Industries ltd - India
- Bhushan Steel Limited - India
- Australian Coal Association
- Orica Mining Services - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Chettinad Cement Corporation Ltd - India
- Bhatia International Limited - India
- Bukit Makmur.PT - Indonesia
- GMR Energy Limited - India
- Thai Mozambique Logistica
- Star Paper Mills Limited - India
- Price Waterhouse Coopers - Russia
- Karbindo Abesyapradhi - Indoneisa
- Electricity Authority, New Zealand
- Global Business Power Corporation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Independent Power Producers Association of India
- Bukit Baiduri Energy - Indonesia
- Energy Link Ltd, New Zealand
- Vizag Seaport Private Limited - India
- SMG Consultants - Indonesia
- Lanco Infratech Ltd - India
- Mercator Lines Limited - India
- Metalloyd Limited - United Kingdom
- Vijayanagar Sugar Pvt Ltd - India
- IHS Mccloskey Coal Group - USA
- Mjunction Services Limited - India
- Eastern Coal Council - USA
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