Direct Line Insurance pls v Kenneth Ronald Fox

In April 2007, a fire at the insured’s house caused serious damage to the kitchen and hall and smoke damage to the remainder of the house and contents. the insured claimed under his home and contents policy and the insurer paid out various sums for alternative accommodation and damaged contents. Under a written aggreement date 7th June 2007, the insured agree to accept “in full settlement and discharge of all my buildings claims under your policy”.

The insurer relied primarily on the terms of the policy, which provided:” If any claim or part of a claim is made fraudulenty or falsely, the policy shall become void and all benefit under this policy will be forfeited’

According to Pinsent Masons LLP, there is still uncertainty as to whether a fraudulent claim should be treated as a breach of the duty of utmost good faith, so as to render policy void from the very beginning, or as a breach of special common law rule that invalidates the insurance claim, but not the policy as a whole. Recently, courts have appeared to favour the common law approach.

Based on Pinsent Masons LLP, The effect of this attempted fraud however was limited to the balance due under terms of settlement agreement, so thse questions were ultimately left unresolved.