Saturday, 5 March 2011

Aviva Insurance Limited v Roger George Brown [2011] EWHC 362 (QB): overclaiming

How tempted have you been to inflate an insurance claim?  Someone bumps your Romanian rotbox in a car park and you claim it was a concours condition Corniche?  That carpet paint got spilt on was genuine Bukhara silk?  Don’t be led into it.  If you claim too much on your insurance, not only do you not get the inflated amount, you don’t even get your genuine amount.
A lesson Mr Brown learnt to his considerable cost.  Even worse for him was that he got somewhat messed around by Aviva beforehand.  Simple enough background; he owned both halves of a semi, living in one, renting the other.  Got insurance underwritten by Aviva.  The bit he lived in however suffered from subsidence.  He made a couple of claims, the last one in 1996.
Yes, 1996.  It's back to the days of Bleak House.  By 2000 everyone had agreed that serious work needed to be done.  Mr Brown said he would have to move out as the dust would aggravate his asthma.  Policy small print suggested he could stay in “equivalent” accommodation.  And this is where it all went seriously wrong.
What was equivalent?  Mr Brown said it had to be basically what he had.  Six bedroom house in an expensive area of London.  With room for four cars and a yacht.   But Aviva dragged its feet.  An unending liability to pay six grand a month minimum?  Aviva dragged its feet so much Mr Brown dragged Aviva to the Financial Ombudsman Service.  Successfully.
Even then, Aviva failed to play ball.  By 2007 the rent for an equivalent was 10 k per month.  Aviva refused to pay it.  So Mr Brown came up with an alternative idea.  He’d move next door.  The tenants in the other half of the semi had moved out, so Mr Brown would move in.
Now, Mr Brown, strictly speaking, didn’t own next door.  His letting company did.  He did own the letting company though.  Essentially, he instructed the letting company to charge the appropriate rent.  Seven and a bit thousand per month.  Which now was charged to him; and he charged it back to Aviva.  They agreed to pay the rent, and everything was tickety-boo.
Until mid-2008.  Aviva did a bit of investigation behind the rental company to which it was paying £1,700 per week.  And discovered a familiar name as the director.  Aviva therefore stopped payment.  It was not going to cover the cost of Mr Brown living at home.
Aviva went further.  Evidently aggravated by Mr Brown’s constant complaints of late payments and insistence Aviva stick to the terms of the policy and the FOS judgment – how dare he insist on his legal rights? – Aviva sued for the payments it had made.  Over £200k.  Not just the rent, but the repair costs of the other half of the semi.  On the basis that Mr Brown had misled them over the rent – and, if you lie on one claim, you lose all of them.
Aviva claimed 22 separate fraudulent statements, ranging from how much it would cost for Mr Brown to go back to his mum’s old house through to him chasing Aviva because his landlord (himself) was threatening him.  Were they fraudulent?  It depended on Mr Brown’s state of mind.
The judge looked at the evidence.  In the end he decided that Mr Brown had done nothing really wrong in renting his own house.  He’d been honest enough over it, he had sought legal advice as to whether he could rent from himself, there was evidence that, for tax reasons, he had to pay a market rent for it.  Just so happened that he would get it reimbursed by Aviva.  That was OK, there was no need to tell Aviva the full SP – it was a proper rent which he would have received anyway, had he found a tenant, and which Aviva would have had to pay, had Mr Brown found somewhere else to live.
The judge did however find against Mr Brown on another point.  He owned his mother’s former house and was thinking about moving in there, and charging Aviva rent for it.  In the end he didn’t go through with that one; but he had told Aviva he had handed the house over to a trust, hence the need to pay rent.
The judge found this was fraudulent.  Mr Brown knew he hadn’t given it to a trust.  What’s more, he had signed off a witness statement which said he had just been thinking about giving it to a trust.  Contradiction.
The consequences for Mr Brown were severe.  Even though his statement had not actually led to him receiving any payment, even though he would have been entitled to payment for repair and rent anyway, even though he had been messed around for years and years by Aviva, even though moving next door meant Aviva paid out less than had Mr Brown moved elsewhere, Mr Brown lost.  He had to repay all the repair charges and all the rent (which he had paid himself, so not THAT bad).  But the repairs were the bulk of the claim - £175k – and he’s out of pocket for all of that.  Why?  Because insurance contracts are all or nothing.  Lie on one bit, and you lose even your genuine claim.  This is an age-old principle to try to dissuade fraudulent claims.
It looks to me that this one is particularly harsh; even the judge thought it was.  Even if we go with the statement being fraudulent, rather than “merely” being sharp, it made no difference at all to the validity of the rest of the claim.  What’s more, Mr Brown was in these straits because Aviva was refusing to comply with the policy, and even with the FOS ruling.  Could that have been some sort of mitigating factor?  It doesn’t seem to have been addressed.  The judge seems to have been constrained by precedent, but there’s surely some wiggle room – a lack of causation, for instance.   Had Mr Brown never mentioned his mum’s old gaff Aviva would have had to pay what they did anyway.

So, if you a drunken party guest slashes your painting, and you claim it’s a Monet, you won’t get payment – even if it’s a Manet.

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