The fraudulent claims clause — UK PI

The fraudulent claims clause gives insurers the right to reject a claim — and terminate the policy — where the insured makes a fraudulent claim. Section 12 of the Insurance Act 2015 codifies the position.

What the clause covers

Fraudulent claims: claims made knowing they're false or exaggerated.

Fraudulent means: fabrication of evidence, false statements, exaggeration of loss.

Extends to fraudulent devices used to advance an otherwise genuine claim.

Applies to the individual claim — but insurer can terminate the policy prospectively.

Insurer remedies under s.12 Insurance Act 2015

• Refuse the claim in its entirety — even if part of it is genuine.
• Recover payments already made in respect of the fraudulent claim.
• Terminate the policy prospectively (from date of fraud, not from inception).
• Retain premiums paid up to the date of fraud.

The honest-error protection

s.12 does not apply where the insured makes an honest error in the claim.

Simply overstating loss without deliberate falsehood is not fraud.

Ambiguous circumstances that turn out to be non-fraudulent don't trigger s.12.

The burden is on the insurer to prove fraud — on the balance of probabilities.

Practical discipline for professional firms

1. Provide the file honestly and completely.
2. Preserve contemporaneous documentation.
3. Avoid embellishing or 'presenting the best case'.
4. Recognise that partial errors can compromise the whole claim.
5. Where genuine complexity exists, disclose it — don't hide it.
6. Broker involvement in high-value or complex claims essential.

Frequently asked

Related

• Insurance Act 2015 fair presentation deep-dive
• Coverage disputes UK PI insurance
• Notification and circumstances clause UK

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