Supreme Court decision could result in further litigation

The Supreme Court’s judgement today that courts have the power to strike out claims entirely in certain cases could lead to further litigation, according to lawyers.

Lord Clarke, who handed down the ruling in the Fairclough Homes Ltd versus Shaun Summers case, dismissed the appeal on the grounds that it would not be “proportionate or just” to strike the claim out, but said the court unanimously held that it had the power to strike out a claim for “abuse of process”.

The case centred on a fraudulent claim of £838,000 made by Summers after he suffered an injury in an accident at work in May 2003.

Summers was eventually awarded £88,716.76 in damages after evidence proved his claim was exaggerated.

Fairclough Homes’ insurer Zurich had argued that the entire claim for compensation made by Summers after an accident at work should be “struck out” because it was “substantially fraudulent” and an appeal was made to the Supreme Court.

Hogan Lovells insurance litigation partner Nick Atkins said:”This decision will in general be a disappointment to insurers as Mr Summers was given permission to keep the sum that was awarded to him and the court didn’t go as far as the industry was urging in the fight against insurance fraud.

“Importantly, the decision has given courts jurisdiction to strike out in cases in the future but only in ‘very exceptional circumstances’. The extent to which this ruling will help to act as a deterrent to those who abuse the process will depend upon how this proviso of ‘very exceptional circumstances’ is interpreted in future cases. What represents exceptional circumstances is likely to be hotly debated and unfortunately could lead to yet further litigation.

“Exaggerated and fraudulent claims are a plague on the industry and any additional legal armoury to help the fight against fraud should be welcomed; the Supreme Court has ruled that the appropriate remedy in such a case is to penalise the fraudulent claimant in costs or to find them in contempt of court.

“The insurance industry should, however, take some comfort from the fact that the Supreme Court accepted that, if such fraudulent claims have reached epidemic proportions, it may be that prosecutions are needed as a deterrent to others. However, this may be an uphill struggle, given that the CPS considered whether to prosecute the claimant but concluded that it was not in the public interest to do so.”