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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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Tuesday, 23 August 16
4200 GAR COAL INDEX CLIMB 15.96% YEAR TO DATE - CS COAL INDEX
COALspot.com: Average 4200 GAR coal index of Indonesian origin rose 1.65 % week over week to averaging $31.46 per ton this past week, shows CS (i) ...
Tuesday, 23 August 16
KOMIPO TO IMPORT 250K OF 5,700 KCAL/KG NAR COAL FOR Q4' 16
COALspot.com: South Korea state-owned utility Korea Midland Power (KOMIPO) issued a new tender for total 250,000 Metric Tons of Bituminous Coal for ...
Monday, 22 August 16
INDONESIA'S CS 5000 GAR THERMAL COAL INDEX, ROSE TO A 57-WEEKS HIGH TO TOP $43.47 A TON
COALspot.com: Indonesia’s CS 5000 GAR thermal coal index, rose to a 57-weeks high to top $US43. 47 a ton in the latest week, extending a 18-w ...
Monday, 22 August 16
THE FREIGHT MARKET WAS STEADY THIS PAST WEEK; CAPE INDEX DECLINE 5.38%
COALspot.com: The Baltic Exchange, tracking rates for ships carrying dry bulk commodities rose and ending in a positive note this past week except ...
Friday, 19 August 16
U.S. YEAR-TO-DATE COAL PRODUCTION TOTALLED AN ESTIMATED 421.6 MMST
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totalled an estimated 15.8 million short ton ...
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Showing 2311 to 2315 news of total 6871 |
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- India Bulls Power Limited - India
- Gujarat Sidhee Cement - India
- Meralco Power Generation, Philippines
- OPG Power Generation Pvt Ltd - India
- Deloitte Consulting - India
- Attock Cement Pakistan Limited
- Planning Commission, India
- Makarim & Taira - Indonesia
- Sarangani Energy Corporation, Philippines
- Coalindo Energy - Indonesia
- Banpu Public Company Limited - Thailand
- Therma Luzon, Inc, Philippines
- Manunggal Multi Energi - Indonesia
- Sojitz Corporation - Japan
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Vizag Seaport Private Limited - India
- TeaM Sual Corporation - Philippines
- Dalmia Cement Bharat India
- Thiess Contractors Indonesia
- Parry Sugars Refinery, India
- Toyota Tsusho Corporation, Japan
- CNBM International Corporation - China
- Rashtriya Ispat Nigam Limited - India
- Salva Resources Pvt Ltd - India
- Agrawal Coal Company - India
- South Luzon Thermal Energy Corporation
- GN Power Mariveles Coal Plant, Philippines
- Coal and Oil Company - UAE
- Standard Chartered Bank - UAE
- Edison Trading Spa - Italy
- Sree Jayajothi Cements Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Mercuria Energy - Indonesia
- Bangladesh Power Developement Board
- Straits Asia Resources Limited - Singapore
- Oldendorff Carriers - Singapore
- Rio Tinto Coal - Australia
- Posco Energy - South Korea
- Chamber of Mines of South Africa
- GMR Energy Limited - India
- Marubeni Corporation - India
- PTC India Limited - India
- SN Aboitiz Power Inc, Philippines
- ASAPP Information Group - India
- Tamil Nadu electricity Board
- Sinarmas Energy and Mining - Indonesia
- Global Coal Blending Company Limited - Australia
- Renaissance Capital - South Africa
- Bukit Baiduri Energy - Indonesia
- Eastern Energy - Thailand
- Billiton Holdings Pty Ltd - Australia
- Videocon Industries ltd - India
- Malabar Cements Ltd - India
- Power Finance Corporation Ltd., India
- Gujarat Mineral Development Corp Ltd - India
- LBH Netherlands Bv - Netherlands
- Ministry of Transport, Egypt
- Bayan Resources Tbk. - Indonesia
- Price Waterhouse Coopers - Russia
- Leighton Contractors Pty Ltd - Australia
- Aboitiz Power Corporation - Philippines
- Borneo Indobara - Indonesia
- Central Electricity Authority - India
- Chettinad Cement Corporation Ltd - India
- Karaikal Port Pvt Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- The Treasury - Australian Government
- The University of Queensland
- Bukit Makmur.PT - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Trasteel International SA, Italy
- Kumho Petrochemical, South Korea
- Krishnapatnam Port Company Ltd. - India
- Kepco SPC Power Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Baramulti Group, Indonesia
- Anglo American - United Kingdom
- Indian Oil Corporation Limited
- White Energy Company Limited
- SMC Global Power, Philippines
- Holcim Trading Pte Ltd - Singapore
- SMG Consultants - Indonesia
- Wilmar Investment Holdings
- Global Business Power Corporation, Philippines
- Lanco Infratech Ltd - India
- Port Waratah Coal Services - Australia
- Latin American Coal - Colombia
- Bank of Tokyo Mitsubishi UFJ Ltd
- MS Steel International - UAE
- Grasim Industreis Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Kaltim Prima Coal - Indonesia
- Economic Council, Georgia
- Kohat Cement Company Ltd. - Pakistan
- Energy Link Ltd, New Zealand
- Gujarat Electricity Regulatory Commission - India
- Kideco Jaya Agung - Indonesia
- Sindya Power Generating Company Private Ltd
- IEA Clean Coal Centre - UK
- GVK Power & Infra Limited - India
- The State Trading Corporation of India Ltd
- Interocean Group of Companies - India
- Indian Energy Exchange, India
- Independent Power Producers Association of India
- Mintek Dendrill Indonesia
- Barasentosa Lestari - Indonesia
- ICICI Bank Limited - India
- Singapore Mercantile Exchange
- Thai Mozambique Logistica
- Pendopo Energi Batubara - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Star Paper Mills Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Bulk Trading Sa - Switzerland
- Central Java Power - Indonesia
- McConnell Dowell - Australia
- Tata Chemicals Ltd - India
- Jaiprakash Power Ventures ltd
- Heidelberg Cement - Germany
- Jorong Barutama Greston.PT - Indonesia
- Electricity Authority, New Zealand
- London Commodity Brokers - England
- Riau Bara Harum - Indonesia
- Madhucon Powers Ltd - India
- Indonesian Coal Mining Association
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bahari Cakrawala Sebuku - Indonesia
- Meenaskhi Energy Private Limited - India
- Miang Besar Coal Terminal - Indonesia
- Xindia Steels Limited - India
- New Zealand Coal & Carbon
- Essar Steel Hazira Ltd - India
- Medco Energi Mining Internasional
- Mercator Lines Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Coastal Gujarat Power Limited - India
- Globalindo Alam Lestari - Indonesia
- Simpson Spence & Young - Indonesia
- Commonwealth Bank - Australia
- Binh Thuan Hamico - Vietnam
- Intertek Mineral Services - Indonesia
- Africa Commodities Group - South Africa
- Orica Australia Pty. Ltd.
- Ind-Barath Power Infra Limited - India
- San Jose City I Power Corp, Philippines
- Minerals Council of Australia
- Eastern Coal Council - USA
- Parliament of New Zealand
- Savvy Resources Ltd - HongKong
- GAC Shipping (India) Pvt Ltd
- PowerSource Philippines DevCo
- Ambuja Cements Ltd - India
- Larsen & Toubro Limited - India
- Alfred C Toepfer International GmbH - Germany
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kartika Selabumi Mining - Indonesia
- Petron Corporation, Philippines
- AsiaOL BioFuels Corp., Philippines
- Bharathi Cement Corporation - India
- IHS Mccloskey Coal Group - USA
- Georgia Ports Authority, United States
- Indogreen Group - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Ministry of Mines - Canada
- CIMB Investment Bank - Malaysia
- Australian Coal Association
- Jindal Steel & Power Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Sakthi Sugars Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Directorate Of Revenue Intelligence - India
- VISA Power Limited - India
- Wood Mackenzie - Singapore
- Formosa Plastics Group - Taiwan
- Electricity Generating Authority of Thailand
- International Coal Ventures Pvt Ltd - India
- Mjunction Services Limited - India
- Indo Tambangraya Megah - Indonesia
- Bhatia International Limited - India
- Semirara Mining and Power Corporation, Philippines
- Orica Mining Services - Indonesia
- Vedanta Resources Plc - India
- Samtan Co., Ltd - South Korea
- Cement Manufacturers Association - India
- Global Green Power PLC Corporation, Philippines
- Semirara Mining Corp, Philippines
- Romanian Commodities Exchange
- Bukit Asam (Persero) Tbk - Indonesia
- Antam Resourcindo - Indonesia
- Sical Logistics Limited - India
- Bhoruka Overseas - Indonesia
- PNOC Exploration Corporation - Philippines
- Indika Energy - Indonesia
- Energy Development Corp, Philippines
- European Bulk Services B.V. - Netherlands
- Siam City Cement - Thailand
- Kobexindo Tractors - Indoneisa
- Ministry of Finance - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Bhushan Steel Limited - India
- Australian Commodity Traders Exchange
- Altura Mining Limited, Indonesia
- Goldman Sachs - Singapore
- Siam City Cement PLC, Thailand
- Uttam Galva Steels Limited - India
- Carbofer General Trading SA - India
- Directorate General of MIneral and Coal - Indonesia
- Maheswari Brothers Coal Limited - India
- Ceylon Electricity Board - Sri Lanka
- Aditya Birla Group - India
- Maharashtra Electricity Regulatory Commission - India
- Iligan Light & Power Inc, Philippines
- Timah Investasi Mineral - Indoneisa
- Metalloyd Limited - United Kingdom
- Merrill Lynch Commodities Europe
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