Versloot Dredging BV v HDI Gerling Industrie Versicherung AG

The appeal was heard by the Supreme Court in July 2016. Versloot Dredging BV and another appealed against the decision of the Court of Appeal, which had dismissed their claim for damages under a marine insurance policy. The Court of Appeal had held that the claim was defeated by the fraudulent claims rule, which applies to claims which are either wholly invented or fraudulently exaggerated. The insured had embellished the claim with evidence which was dishonest but which, once the facts were known, was irrelevant to the merits of the claim. The Supreme Court allowed the appeal. The fraudulent claims rule applies to claims which are either wholly invented or fraudulently exaggerated. The rule does not apply to collateral lies, which are irrelevant to the merits of the claim. The rule has no application to collateral lies told after the commencement of legal proceedings, when experience suggests that parties are most likely to gild the lily. The extension of the fraudulent claims rule to lies which are found to be irrelevant to the recoverability of the claim is a step too far. It is disproportionately harsh to the insured and goes further than any legitimate commercial interest of the insurer can justify.