On appeal from: [2015] EWCA Civ 327

The Supreme Court has unanimously allowed the appeal of an insurer, in a case that considered the impact that an exaggeration of the extent of an injury could have on an insurance settlement figure.

The respondent had been injured at work, in an accident which the employer admitted liability for. However, the respondent deliberately and dishonestly exaggerated his injury to achieve a higher settlement figure from the appellant insurer. At the time the settlement was agreed, the insurer had video evidence proving this exaggeration. It later obtained further evidence that the respondent had fully recovered a year before the settlement. The insurer had therefore sought to set aside the settlement and claimed damages for deceit.

The judge had found that his deliberate exaggeration meant that a reduced sum was warranted, but the Court of Appeal held that the insurer ought not to be able to set aside the settlement agreement, as it knew Mr Hayward had committed a fraud at the time the settlement was agreed.

Lord Clarke gave the lead judgment, with Lord Toulson giving a concurring judgment. The other Justices agreed with these judgments.

The Supreme Court found that the insurer did not know that the respondent had deliberately exaggerated his injuries to the extent that was later discovered. The insurer had also done everything it could to investigate. The fact that the insurer was aware that there may have been some misrepresentation did not prevent the finding that the respondent’s fraud had induced them to enter into the settlement.

The Supreme Court allowed the appeal against the Court of Appeal decision and restored the judge’s conclusion that the settlement be set aside, with a reduced sum paid to the respondent as compensation for injuries.

For judgment, please download: [2016] UKSC 48
For Court’s press summary, please download: Court’s Press Summary
For a non-PDF version of the judgment, please visit: BAILII

To watch the hearing, please visit: Supreme Court website (16 June 2016 morning session), (16 June 2016 afternoon session)