However the manager falsely told the insurers that one of the crew members told him about the alarm activation, in order to strengthen the claim and obtain a quicker payment. One of the shipowners’ managers suspected that what had happened was that the ship’s bilge alarm had sounded a warning about the leak but the crew had been unable to investigate or deal with it because of the rolling of the ship in heavy weather. In Versloot Dredging, the ship’s main engine was damaged beyond repair due to seawater flooding the engine room, and the shipowners claimed on their insurance. ![]() This is because the insured is using fraud to obtain more than its entitlement under the insurance contract, and the courts will not sever the exaggerated part from the honest part of the claim. This should be contrasted with the situation where an insured exaggerates its claim, which leads to the whole claim being rejected. The reasoning is that the statement does not lead to the insured obtaining more than it is legally entitled to under the insurance contract. The Supreme Court has now reversed this in the case of Versloot Dredging, so that now, if an insured makes a false statement in support of a claim, that claim cannot be rejected for that reason if the statement is irrelevant to the merits of the claim or the amount payable. However caselaw had extended this rule to include claims made using a ‘fraudulent device’, such as a false statement made in support of a claim, even if that statement was irrelevant to whether the claim was otherwise valid or not. This rule is in place to discourage fraud, having regard to the particular vulnerability of insurers, who will typically know a lot less than the insured about the facts which give rise to a claim. It is well established that an insured will not recover a fraudulent claim – the ‘fraudulent claims rule’. VERSLOOT DREDGING BV & OR V HDI GERLING INDUSTRIE VERISCHERUNG AG & ORS
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