Pleading Fraud in a Responsible Manner

Our Technical Lead and Operations Manager, Kevin Perkins, recently spoke to The MASS Insight Magazine about pleading fraud in a responsible manner. 

"Fraud in all its guises is deplorable; it is far from a victimless crime. 

Many years ago I recall one elderly policyholder on a matter I dealt with being absolutely distraught that an individual had brought a claim purporting to be a passenger in her car right on the cusp of limitation. There were so many questions; how had they got her details, how did they know a genuine accident had occurred, who on earth was this person(!).  

She really was genuinely upset and it drove home to me just how much of an effect it can have on an individual policyholder not just the compensator who ultimately has to foot the bill.  

It is right therefore that the insurance industry commits significant resource to highlighting, combatting and punishing fraud and takes a zero tolerance attitude toward those seeking to advance spurious claims.  

That said, I attended a Trial recently which struck a significant tone with me in terms of the dilemma the industry faces when deciding whether or not to allege fraud and which demonstrated to me that the issue is as complex as it is diverse.  

In the case in question an allegation of fundamental dishonesty had, quite properly, been alleged against the claimant on the basis of exaggeration. There were huge inconsistencies in the losses claimed and the evidence disclosed in support with the claimant’s medical records in particular casting significant doubt on the veracity of the claim presented. The claimant’s statement did little to quell those fears and the parties found themselves at Trial with more questions than answers. 

However, during cross examination it became increasingly apparent that the claimant himself believed that he was injured to an extent far beyond that which he actually was and despite the plethora of medical records and reports clearly indicating otherwise. He was convinced that the accident had stopped him from playing sport professionally even though this was not supported in any way, shape or form. 

The outcome was an award for the claimant in a significantly lower sum than he had been seeking but the allegation of dishonesty could not be made out and was in fact dismissed on the basis that the claimant held a genuine belief, unreasonable as it was, that the losses he was claiming were appropriate. He had not, the court held, set out to deceive. 

Whilst in the case mentioned the pleading was entirely justified the whole episode got me thinking about the effect of advancing a positive pleading of fraud and the challenges and questions that need to be overcome/asked before such a case is put forward by a defendant. 

For one, fraud is an extremely serious allegation to make. Those found responsible could ultimately find themselves facing a custodial sentence, I myself have brought contempt proceedings for an insurer against one such individual who had falsified documents in support of a fictitious loss of earnings claim. 

To assert that an individual has deliberately set out to deceive for personal gain immediately calls into question their character and totally shifts the dynamic of a case. From a procedural basis alone it can lead to expensive and protracted legal battles which inevitably need resolving at Trial. 

Insurers and their representatives should therefore be hesitant to allege fraud on the basis of mere suspicion or hunch. Where red flags are present, thorough investigations ought to be carried out including a forensic review of the documentation and evidence available before a positive pleading is advanced. Often that pleading should be made in conjunction with the input of skilled counsel, there must, in my view, be credible and significant evidence to support any allegation. 

What certainly does not sit right with me is the thought of fraud being alleged purely as a defence in itself. That is to say, utilised as a tactic to ‘put off’ claimants from pursuing their claim further purely because there is a negligible risk to them, for example in terms of costs, should a fraud allegation be made out.  

I would hasten to add I have not been privy to any such behaviour but understand that it does happen. To me, as a defendant lawyer, that seems to be disingenuous; a genuinely injured claimant ought to be compensated, it is those that try to cheat and deceive to the detriment of people like my elderly client all those years ago who ought to face the consequences of their actions. 

The point I wish to make is that the pleading of fraud is a powerful tool at a defendant’s disposal, but a tool that ought to be wielded responsibly. There is a need to ensure that fraud is pleaded in the right circumstances and for the right reasons. It should not be used as a litigation tactic to force a party to throw in the towel through fear of the repercussions. Those sorts of ‘wins’ would seem hollow and counterproductive to me.  

Of course I appreciate that there will be comments that if an individual has done nothing wrong then he/she has nothing to fear when fraud is alleged and that justice will ultimately prevail and I accept that school of thought.  

My view though is that the puzzle is a little more opaque; to me, both sides of the dispute need to be genuine with an ethos of promoting justice, fairness and efficiency and not their own personal or commercial interests."

Credit: Insight Magazine | MASS