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Category: Insurance case law · Reviewed by Amy Price, Account Executive · Last reviewed June 2026
The Supreme Court’s landmark decision holding that a “collateral lie” — a fraudulent device used to support an otherwise good claim — does not, of itself, defeat the entire claim. The decision reshaped the fraudulent claims rule in English insurance law on the eve of the Insurance Act 2015’s commencement.
Versloot Dredging BV and another v HDI Gerling Industrie Versicherung AG and others [2016] UKSC 45 — Supreme Court of the United Kingdom, 2016.
Citation, court and year verified against the official judgment text published by The National Archives, Find Case Law (https://caselaw.nationalarchives.gov.uk/uksc/2016/45).
The claimants were the owners and managers of the DC Merwestone, a Dutch-flagged dredger. While on a voyage in January 2010, the vessel suffered an ingress of water into the engine room. The cause was a combination of a pump leaking sea water and a failure of the bilge alarm system, with the further cooperation of weather, vessel design and crew action. The vessel suffered a serious flooding casualty, the main engine was lost, and the owners claimed under their hull and machinery policy for damage of around EUR 3.2 million.
The claim was honest in its substance — there was a genuine insured loss within the terms of the policy. However, in the course of pressing the claim against insurers and to expedite payment, the owners’ managing director made a statement to the effect that the vessel’s master had heard a bilge alarm sound at midday on the day of the casualty and reported it to the office. That statement was untrue. It had been invented in order to deflect any suggestion that the loss might have resulted from crew negligence or unseaworthiness, and to encourage insurers to pay promptly. Crucially, however, the statement was unnecessary to the claim: the loss would have been recoverable on the truth.
Insurers refused to pay and pleaded the fraudulent claims rule, contending that the entire claim was forfeit because of the untruth. At first instance, Popplewell J held that the rule extended to “fraudulent devices” — false statements made to bolster a genuine claim — and that the claim therefore failed. The Court of Appeal reluctantly affirmed. The matter then went to the Supreme Court.
The single overarching issue before the Supreme Court was:
Does the fraudulent claims rule — the long-standing principle that fraud in support of a claim forfeits the entire claim and entitles the insurer to refuse payment — extend to “collateral lies”: statements that are untrue but immaterial, in the sense that the truth would, if known to insurers, have led to the same indemnity?
Subsidiary issues included whether, if the rule extends so far, the principle is compatible with Article 1 of the First Protocol to the European Convention on Human Rights (peaceful enjoyment of possessions), and whether the matter ought to be addressed by judicial development of the common law or left to legislation.
The Supreme Court allowed the appeal by a majority of four to one. Lord Sumption gave the leading judgment, with Lords Clarke, Hughes and Toulson concurring. Lord Mance dissented.
The majority held that the fraudulent claims rule does not extend to collateral lies. Where a lie is told in support of a claim but turns out to be irrelevant to the insured’s entitlement under the policy — because the truth would have produced the same recovery — it is described as a “collateral lie” or “fraudulent device” that does not impeach the genuineness of the claim itself. To forfeit a genuinely good claim on account of such a lie was, the majority concluded, a disproportionate and unjust penalty inconsistent with the modern law’s emphasis on proportionality of remedy.
Lord Sumption (paraphrased) drew a careful distinction between fraud that goes to the substance or quantum of the claim — which remains fatal — and fraud which is merely incidental. The former entitles the insurer to repudiate the whole claim; the latter does not. The penalty for collateral lies, if any, lies in the realm of professional conduct or police, not in the loss of a good civil entitlement.
Lord Mance dissented on the basis that the deterrent function of the fraudulent claims rule was undermined by the majority’s analysis and that the rule, as previously understood, served a useful and proportionate purpose in discouraging dishonesty in claims handling.
The fraudulent claims rule in English insurance law does not extend to a “collateral lie”: a false statement made in support of a claim which, when stripped away, leaves a genuinely good claim within the terms of the policy. Such a lie does not entitle the insurer to refuse the whole claim. The rule remains fatal to fraud that affects the existence, value or extent of the claim itself, but not to lies that are irrelevant to the insured’s entitlement.
Versloot Dredging is a landmark of modern insurance law, with significance both for the common law and for the Insurance Act 2015:
Common-law fraudulent claims rule. The decision marks a recalibration of the rule, importing a proportionality limit and aligning English law more closely with civilian jurisdictions that distinguish between substantive and collateral fraud.
Insurance Act 2015, section 12. Section 12 of the Insurance Act 2015 codifies remedies for fraudulent claims. The section came into force on 12 August 2016 — a few weeks after the Supreme Court’s decision in Versloot. The Law Commission had previously taken the view that fraudulent devices should defeat a claim, and section 12 was drafted on that footing. Versloot reopens the question of whether section 12 captures collateral lies, and authoritative commentary now suggests that the position under the Act is more nuanced than the Law Commission may have intended.
Marine insurance and claims handling. The decision is regularly cited in marine and commercial claims where insurers seek to take fraud points. Insureds and brokers should be aware that a lie which would defeat the claim under the older authorities may no longer do so.
Practical implications. The case reinforces the need for clear, accurate and properly supported claim presentations. Although collateral lies will not defeat a good claim, they remain inadvisable: they may damage credibility, lead to costs sanctions, or expose the maker to disciplinary, regulatory or criminal consequences.
Distinguishing The Brillante Virtuoso. Versloot concerns collateral lies in support of a genuine claim. Cases such as Suez Fortune v Talbot (The Brillante Virtuoso) concern wholesale fraudulent claims where the loss itself was procured by the assured. The rule remains fatal in the latter context.
For brokers, the case is an important reminder that claims communications must be accurate, and that “helpful” but untrue colour added to a claim narrative can have serious downstream consequences even if the claim itself is good.
By Apex Insurance Brokers on 2026-06-06. Next review: 2026-12-06.
This entry is part of the Apex Insurance Wiki. Last reviewed by Apex Insurance Brokers on 2026-06-06. Apex Insurance Brokers Limited, FCA FRN 724952, Companies House 07014570. Not regulated advice — consult your broker on your specific position.
A false statement made in support of a claim which, once stripped away, leaves a genuinely good claim within the terms of the policy. The Supreme Court held such a lie does not entitle the insurer to refuse the whole claim.
It confines it. The rule remains fatal where the fraud goes to the existence or amount of the loss. What the decision removes is forfeiture for a lie that turns out to be irrelevant to the validity of the claim.
This page explains what the case decided; it is not advice on any particular claim. The safe course in any claim is accuracy, because whether a statement is genuinely collateral is a question decided after the event by a court.
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