Category: Insurance Act 2015 — claims provisions · Reviewed by Matt Bartlett, Director · Founder · Last reviewed 2026-06-11
A forfeiture clause is a policy term, historically widespread in fire, household and commercial property policies, providing that the fraudulent making of a claim by or on behalf of the insured forfeits all benefit under the policy from the date of the fraud, now operating alongside the statutory remedies in section 12 of the Insurance Act 2015.
Category: Insurance Act 2015 — claims provisions Also known as: fraud clause, forfeiture provision, fraudulent claim clause Related concepts: Fraudulent claim, Section 12 Insurance Act 2015, Insurance fraud, Conditions precedent
A forfeiture clause is an express contractual provision found in many general insurance policies, particularly fire, household, commercial property and motor wordings, which states that the insured will forfeit all benefit under the policy if any claim is fraudulent or supported by fraudulent means or devices. Historically, such clauses formed the principal contractual mechanism for dealing with insurance fraud. Their effect, on the standard wording, was that any fraud in the making of a claim destroyed both the tainted claim and the underlying policy benefits, often with retrospective effect to the start of the policy year. The common law developed parallel doctrines to similar effect, but the standard forfeiture clause was the primary tool relied upon by insurers. Following the entry into force of section 12 of the Insurance Act 2015 on 12 August 2016, the field is now governed in part by statute. Section 12 sets out the statutory remedies for fraudulent claims in non-consumer contracts: the insurer is not liable to pay the fraudulent claim, may recover sums already paid, and may treat the contract as terminated with effect from the time of the fraudulent act, retaining the premium. Section 12 does not abolish forfeiture clauses but interacts with them: contractual forfeiture provisions remain enforceable, but the statutory remedies provide a baseline regime that cannot be displaced to the insured’s detriment for consumer contracts (by virtue of the Consumer Insurance (Disclosure and Representations) Act 2012 and section 12’s parallel reach). Forfeiture clauses remain commercially important because they often go further than the statutory remedy, for example by addressing the position of co-insureds, by extending forfeiture to all claims arising from a single insured event, or by combining forfeiture with cancellation of the policy ab initio.
The legal basis of forfeiture clauses lies in the law of contract: parties are free, subject to controls on unfair terms, to agree that fraudulent conduct by one party will entitle the other to terminate the contract and forfeit benefits. The doctrine has deep roots in English insurance law, exemplified by cases such as Britton v Royal Insurance Co (1866) 4 F & F 905, in which Willes J described fraud as “a thing totally different in kind, character and degree from negligence and even from gross negligence” and confirmed forfeiture as the natural consequence.
The common law rule on fraudulent claims, developed in Galloway v Guardian Royal Exchange (UK) Ltd [1999] Lloyd’s Rep IR 209 and AXA General Insurance Ltd v Gottlieb [2005] EWCA Civ 112, holds that a fraudulent claim destroys not only the fraudulent element but the entire claim, and any honestly made claims arising after the fraud are also forfeit. Forfeiture, however, does not operate retrospectively to defeat claims paid (or accrued) before the fraud, a point established in Gottlieb. The position on “fraudulent devices” (where the underlying claim is genuine but the insured deploys lies or fabricated evidence to bolster it) was relaxed by the Supreme Court in Versloot Dredging BV v HDI Gerling Industrie Versicherung AG (The DC Merwestone) [2016] UKSC 45, in which the majority held that the use of a “collateral lie” did not forfeit the underlying genuine claim. The Supreme Court’s decision applies to the common-law rule but the same approach informs the construction of standard forfeiture clauses.
Section 12 of the Insurance Act 2015 codifies the statutory consequences of a fraudulent claim in non-consumer contracts. The parallel rules for consumer contracts are in Schedule 1, Part 1 to the Consumer Insurance (Disclosure and Representations) Act 2012, as amended. The Insurance Act 2015 does not displace contractual forfeiture clauses; the parties remain free to agree forfeiture terms, subject to section 16 (contracting out) and section 17 (transparency) restrictions in non-consumer contracts. Forfeiture clauses cannot, however, exclude the statutory minimum protections in consumer contracts.
In practice, the operation of a forfeiture clause is straightforward where the insurer can prove fraud to the civil standard (balance of probabilities, but with the cogency of evidence required to be commensurate with the seriousness of the allegation, per Re H (Minors) [1996] AC 563 and Re B (Children) [2008] UKHL 35). The clause operates to:
The insurer must plead and prove the fraud with particularity. Pleadings should set out the specific representations alleged to be fraudulent, the knowledge or recklessness of the insured, and the materiality of the fraud. Suspicion alone is not enough; the insurer must satisfy the court that the insured acted dishonestly. Cases such as Direct Line Insurance plc v Khan [2001] EWCA Civ 1794 illustrate the rigour required.
Forfeiture clauses interact with section 12 of the 2015 Act. Where the contractual clause is more generous to the insurer than the statutory baseline (for example, by providing for forfeiture of all claims under the policy year rather than just from the date of the fraud), the contractual term will prevail in non-consumer contracts provided the section 16 contracting-out conditions are satisfied. Where the clause is less generous than the statutory baseline, the statutory remedies will apply. For consumer contracts, the CIDRA framework provides a floor that cannot be undercut by contract.
Forfeiture clauses operate alongside, but separately from, the law on fraudulent inducement and pre-contractual misrepresentation. A misrepresentation at placement is governed by the duty of fair presentation (sections 3 to 7) and the remedies in Schedule 1; misconduct at the claims stage engages forfeiture and section 12.
Forfeiture clauses vary considerably in scope and severity. Standard household policy forfeiture clauses typically state that “if any claim under this policy is in any respect fraudulent, or if any fraudulent means or devices are used by you or anyone acting on your behalf to obtain any benefit under this policy, all benefit under this policy shall be forfeited”. Variations include:
Some modern wordings dovetail the forfeiture clause explicitly with section 12, providing that the insurer’s rights are “without prejudice to the remedies set out in section 12 of the Insurance Act 2015”. This avoids any argument that the contractual remedies are intended to displace the statutory floor.
A small business holds a commercial property policy containing a standard forfeiture clause: “if any claim under this policy is in any respect fraudulent or supported by fraudulent means or devices, all benefit under this policy shall be forfeited”. The business suffers a genuine fire loss but, when submitting the claim, the director overstates the value of stock destroyed by ÂŁ50,000 in support of an otherwise genuine claim of ÂŁ500,000. The insurer investigates and discovers the overstatement. Under both the forfeiture clause and section 12 of the Insurance Act 2015, the entire claim (including the genuine ÂŁ450,000) is forfeited, the insurer may recover any interim payments made, and the policy is terminated from the date of the fraudulent overstatement. Other claims accrued before the fraud (for example, a small theft claim paid two months earlier) remain unaffected. The example illustrates the severity of forfeiture as a remedy and the importance of careful and honest claim presentation. A different outcome would arise on the Versloot Dredging analysis if the director had used a “collateral lie” (e.g. a false statement about who locked up on the day of the fire) that did not affect the value or substance of the claim; that lie, being a fraudulent device unconnected to the merits, would not forfeit the genuine claim.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-11. Next review: 2026-12-11.
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