Accident Settlements are Final - Even if Fraud is Subsequently Proved

In a decision that will be unwelcome to the insurance industry, the Court of Appeal has ruled that a man who lied his way to a £135,000 damages settlement following a workplace accident is entitled to keep all of the money.

The Court acknowledged that its decision 'stuck in the throat', in that it permitted the man to keep money he had secured through his dishonesty. However, in rejecting a bid by the employer's insurance company to strip him of his ill-gotten gains, it emphasised the public policy reasons why settlements of personal injury claims are treated as final.

The man had initially sought £420,000 in damages after he suffered back injuries in the accident. His employer's insurance company was suspicious from an early stage but ultimately agreed to settle his claim for just under £135,000.

Two years later, however, the insurance company was contacted by the man's neighbours, who expressed the view that there was 'nothing wrong with him'. The insurance company's response was to launch fresh legal action against him, accusing him of fraud. A judge found that he had dishonestly exaggerated the effects of the accident and ordered him to repay all but £14,720 of the payout.

The man's lawyers did not challenge the finding of dishonesty but argued that the insurance company was irrevocably bound by the settlement. In upholding the man's appeal, the Court noted that the insurance company had suspected fraud at the time the claim was made but had agreed to the settlement 'with their eyes wide open'.

The Court noted that a wider principle was at stake: that parties who voluntarily settle claims should not be entitled to revive them only because better evidence emerges subsequently. A ruling in the insurance company's favour would gravely undermine the public policy which encourages the settlement of litigation.

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