Versloot Dredging v HDI Gerling (The DC Merwestone)

In the 30 years since the controversial decision of Hirst J in The Litsion Pride,1 English courts have had to grapple a number of times with the issue of what constitutes a “fraudulent claim” on an insurance policy. In particular, courts have had to consider whether the use of what has been called a “fraudulent device” to embellish what is actually a valid claim (in which the insured may not have absolute confidence) makes it a “fraudulent claim”. The issue has now been dealt with by the Supreme Court in Versloot Dredging BV and another v HDI Gerling Industrie Versicherung AG (The DC Merwestone),2 the most important insurance law judgment given by the highest court since The Star Sea.3 The answer, according to the majority, is that when an insured, unsure of whether his claim is actually valid, attempts to enhance what is in fact a good claim with what the majority prefer to call a “collateral lie”,4 with the aim of improving the chances of the claim’s being accepted by the insurer, but which “collateral lie” would not be material to a court’s decision on the validity of the claim, it is not a “fraudulent claim”. The insurer cannot refuse to pay the claim on that basis alone.