Hayward v Zurich: Supreme Court ruling “a huge boost for counter-fraud initiative”
A man whose injuries were more exaggerated than first thought cannot keep all of his out-of-court settlement, the Supreme Court has unanimously ruled.
Hayward v Zurich Insurance Company [2016] UKSC 48 concerned whether an insurance fraudster should be allowed to keep his £135,000 out-of-court settlement on the basis the insurer suspected fraud at the time the settlement was reached.
Colin Hayward injured his back during an accident at work. He said he continued to have serious lumbar pain which restricted his mobility so that he could not work.
However, Zurich presented video evidence showing Hayward undertaking heavy work at home. The parties reached an agreement, embodied in a Tomlin order, where Zurich agreed to pay nearly £135,000 in full and final settlement of his claim. Two years later, Hayward’s neighbours approached the employers to say they believed he had entirely recovered from his injury at least a year before the settlement was reached. Zurich sought to rescind the settlement on the basis of fraudulent misrepresentation. The agreement was set aside and Hayward was awarded £14,720 and he was ordered to repay the remainder of the settlement.
Hayward appealed, contending that belief was a necessary component of a claim based on misrepresentation. He argued that the insurers had not been deceived but had entered into the agreement due to the fear the court might believe his misrepresentations.
Ruling that the settlement could be re-opened and the settlement be reduced to £14,720, Lord Clarke said Zurich did not know Hayward “was deliberately exaggerating the seriousness and long term effects of his injuries”.
David Williams, partner at DAC Beachcroft Claims Solutions Group, which acted for Zurich, says the ruling is “a huge boost for counter-fraud initiatives, as it confirms that new evidence obtained after a settlement can now be used to recover the proceeds of fraud”.
“This judgment is crucially important for insurers and defendants faced with a claim they view as suspicious but on which they cannot obtain cogent evidence of fraud. Settlement of the claim pre-trial will not prevent the settlement from being reopened when evidence of the fraud later comes to light.”
Karl Helgesen, UK Chief Claims Officer at Zurich comments: "Zurich is unflinching in its pursuit of fraudulent claims. For too long honest policyholders have financially suffered due to the illegal actions of those who simply think the law doesn’t apply to them.
"In this case, Mr Hayward had deliberately exaggerated the effects of his injury throughout the entire process and bizarrely continued his deceit even after the disclosure of damning video evidence.
"After many years of tirelessly pursuing this outcome, with the determined assistance of DAC Beachcroft, Zurich is extremely pleased with the Supreme Court's judgment which will serve as a warning that fraudulent activity will not be tolerated—even when a pay-out has been made."
