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Accident Settlements are Final – Even if Fraud is Subsequently Proved

In a unique decision, which is bound to cause dismay in the insurance industry, the Court of Appeal has ruled that a fraudster, who lied his way to a £135,000 damages payout following an accident at work, is entitled to keep all of the money.

The Court acknowledged that its decision was ‘unattractive’, and ‘stuck in the throat’, in that it permitted the man to retain the fruits of his dishonesty. However, in rejecting a bid by insurers to strip him of his ill-gotten gains, it emphasised the public policy reasons why settlements of personal injury claims are treated as final.

The man had initially sought £420,000 in damages after he suffered back injuries in a workplace accident. His employers’ insurers were suspicious from an early stage but ultimately agreed to settle his claim for just under £135,000.

Two years later, however, the man’s neighbours contacted the insurers, expressing the view that there was ‘nothing wrong with him’. The insurers’ response was to launch fresh legal action against him, accusing him of fraud. A judge later ruled that he had dishonestly exaggerated the effects of the accident and ordered him to repay all but £14,720 of the money.

The man’s lawyers did not challenge the finding of dishonesty but argued that the insurers were irrevocably bound by the settlement. In upholding the man’s appeal, the Court noted that the insurers had suspected fraud at the time but had agreed to the settlement ‘with their eyes wide open’.

The Court noted that a wider principle was at stake: that parties who voluntarily settle claims should not be entitled to revive them only because better evidence emerges subsequently. A ruling in the insurers’ favour would gravely undermine the public policy which encourages the settlement of litigation.