What happens when an insured deliberately causes the very event insured against under an insurance policy? And what is the impact where the insured is suffering some form of mental illness?
In a recent decision, the court was faced with an insured who was clearly suffering mental problems when he deliberately set fire to his house in a suicide attempt. Did this deliberate act fall outside the cover provided?
There are two overlapping bases for cover not extending to deliberately caused damage. The first is that policies are generally interpreted as excluding deliberately caused losses: these are not fortuitous and generally fall outside the scope of cover. The second is that public policy precludes insured from claiming for their own deliberately caused losses. And to reinforce these two principles, policies often contain a specific exclusion.
In this case, though, the question was: what was the impact of the insured's mental health problems on his claim? The court concluded that if the insured was insane, using the criminal law test of insanity, then the claim could be maintained. This meant that if the insured could show that he did not know the nature and quality of the act he was doing, or if he did now, that he did not know that it was wrong, then the claim might be covered. In this case, the court held that the insured did know what he was doing was wrong. His claim was therefore not covered.
During a recession the temptation to make fraudulent claims increases. These might be based on deliberately caused damage. They might be based on fraudulently presented claims, where there is no damage. They might be based on fraudulent exaggeration of a genuine claim. Or indeed they might be genuine, but supported by fraudulently generated evidence (known as a "fraudulent device"). In any of these cases, the insured's claim is likely to be rejected (or in the language of fraudulent claims, forfeited).
This decision will make it harder for insureds to argue that they are not responsible for their own acts even where the difficult economic circumstance may push people to take desperate measures.
Further reading: Porter v Zurich Insurance Company [2009] EWHC 376
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 12/03/2009.