Marine insurance – collateral lies: when lies are not fraud

Abstract

Purpose The purpose of this study is to review the reasoning of the judgment of the United Kingdom Supreme Court in Versloot Dredging BV and another (Appellants) v. HDI Gerling Industrie Versichering AG and Others (Respondents) [2016] UKSC 45 in finding that there is no remedy or sanction for the use of fraudulent devices (so-called “collateral lies”) in insurance claims and to consider potential implications for underwriters. Design/methodology/approach The methodology is a typical case law analysis starting from case facts and the reasoning with short comments on legal implications. Findings Despite no sanction provided by law for the use of fraudulent devices, the room still opens for the underwriters to stipulate the consequence of using the fraudulent devices by the express term in the insurance contract. Research limitations/implications The main implication from the judgment is that underwriters are likely to incur more investigating costs for insurance claims. Originality/value This work raises awareness of the marine insurance industry (especially underwriters) as to the approach of the English law towards the use of fraudulent devices.