Fraudulent claims result in custodial sentences

Clyde & Co have successfully applied for the committal of three Defendants for contempt of court.

Contempt proceedings were brought on behalf of Admiral Insurance following the failed attempt by the three Defendants to make fraudulent insurance claims in relation to a staged road traffic accident.

The decision has important ramifications for those involved in fraudulent claims.  Whilst the first and third Defendants had filed witness statements directly refuting Admiral's allegations of fraudulent behaviour, the second Defendant did not.

In addition, all three Defendants had abandoned their original claims before going to a trial.

Whilst the failure by the second Defendant to file a witness statement mitigated against the offence the Court still handed down custodial sentences to all three Defendants.

Historically, the vast majority of committal proceedings have involved claimants who went to trial and lied in the face of the Court. In this instance, none of the three Defendants went that far and all of them purged their contempt prior to the final hearing. This decision suggests that a claimant who knowingly pursues (and issues) a fraudulent claim is likely to receive a custodial sentence.

Background

The respondents had been involved in an alleged motor vehicle collision which formed part of a larger fraud ring, and had pursued their individual claims for personal injury.  Evidence was presented which indicated that the collision had been staged.

When presented with Admiral's concerns about the validity of the claims, the Defendants reiterated that the claims were genuine.  Going further, they also threatened to pursue indemnity costs against our insurer client on the basis that the allegation of fraudulent activity was false, and expressed a degree of outrage at what they termed a "baseless allegation".

Following evidential developments, the Defendants abandoned their original claims and committal proceedings were brought.

Outcome

The Court made it clear that it takes a very dim view of fraudulent insurance claims, stressing that they waste huge amounts of time and costs.

The Court did acknowledge that the claims had not proceeded to trial, and thus the Defendants had not given evidence on oath. Furthermore, the Defendants had made full and early disclosure of their contempt once committal proceedings had commenced.

However, the first and third Defendants were sentenced to 6 months imprisonment, reduced from 9 months due to mitigation.

The second Defendant was sentenced to 4 months imprisonment, his reduced sentence due to the fact he had not signed a statement of truth in his witness statement.

What can we learn?

• In the authorities cited in mitigation by the Defendants, it was pointed out that those who received custodial sentences for contempt had lied under oath in the face of the Court, whereas the Defendants in this instance had not gone that far. It now appears however that the threshold for a prison sentence is lower than was previously thought.
• The Court was obviously keen to send out a strong message that if one is brazen enough to issue a fraudulent claim, then one can expect to receive a custodial sentence.
• It is entirely possible that a degree of weight was attached to the Reply to the Defence (filed on behalf of all three Defendants) which had threatened Admiral with indemnity costs on account of their "baseless allegation" that the claim was not genuine. Of course, the allegation was not baseless and the level of apparent indignity coupled with the threat of indemnity costs counted heavily against these Defendants.

Commenting, Ben Neyland, Head of Fraud said:

We are satisfied that Dodd, Tyrell and Fitzpatrick have been found guilty and given custodial sentences for their fraud. This result sends a clear warning to other criminals who think they can make easy money from making a false claim from a staged accident.

Our hope is that people who are approached by the organised gangs who run these schemes will take note that even though all three defendants had abandoned their original claims before getting to trial, the Court still felt it appropriate to hand down custodial sentences. This judgment sends out the important message that as soon as someone agrees to be part of a staged accident for financial gain, they run the real risk of imprisonment.

Insurance fraud is not a victimless crime, it affects all motorists through higher premiums and staged accidents can put other road users at risk of serious injury or even death. We will use all resources available to us to root out fraudsters and scammers.

Damian Rourke, Partner at Clyde & Co said:

We believe this is a significant judgment which will make potential fraudsters sit up and take notice.

The promise of a so called "easy pay-out" needs to be carefully balanced against the very real risk of a custodial sentence which the Court has acknowledged arises as soon as someone agrees to be involved in a fraudulent claim.

The Court has also sent a very strong message to Claimants and their representatives that they need to properly assess allegations of fraud or impropriety rather than simply "reacting" with threats as such a reaction may ultimately be a very costly one.