Seeking damages in motor insurance fraud cases


Where the facts of a case allow and should intelligence suggest the fraudster has the means to pay, exemplary damages should be sought by parties against which motor insurance fraud is attempted, writes Thomas Crockett of 1 Chancery Lane

In cases of proven motor insurance fraud, there are a number of punitive measures that can potentially be visited upon perpetrators. Proceedings for committal for contempt remain the most powerful weapon in an insurer’s armoury for obvious reasons, and because it is the nature of such cases the prospect of the enforcement of any financial remedy may be difficult. Where, however, a defendant party is able to satisfy any money judgement, it is clear that aggrieved insurers are looking at ways to maximise any award beyond compensatory damages.

The Court of Appeal, in Axa Insurance UK v Financial Claims Solutions & Ors (2018, EWCA Civ 1330), recently considered the availability of and approach to exemplary damages in motor insurance fraud cases.

The respondents had pursued claims on behalf of fictional claimants for damages in respect of two road traffic accidents allegedly caused by persons insured by Axa. In reality, there had been no accidents, and hire agreements and medical reports submitted in evidence were fabricated. Indeed, the first respondent was not authorised to conduct litigation. The respondents obtained judgements in default despite not having served Axa, and commenced enforcement proceedings for damages of £85,000. Having been obliged to make a payment into court, Axa obtained an order setting aside the default judgements and striking out the claims. One of the respondents later pleaded guilty to a charge of fraud. Following the issuing of Part 20 proceedings against the respondents for deceit and unlawful means conspiracy, Axa obtained judgement for its outlay in investigating the fraud, but not exemplary damages.

Axa appealed to the Court of Appeal on the basis that the judge erred in failing to consider that the respondent’s conduct had “been calculated … to make a profit for himself which may well exceed the compensation payable [to Axa]”, applying the ratio of Rookes v Barnard (No.1) (1964, A.C. 1129). It was further argued that the availability of other and more punitive means of redress such as criminal charges of committal proceedings should not have been weighed as a factor against awarding exemplary damages.

The Court of Appeal (Sharp, Flaux LJJ and Sir Stephen Richards) held it was important to keep in mind that exemplary damages remained anomalous and the exception to the general rule, and that its scope should not be extend. That said, the court held that the case before it fell within the Rookes v Barnard so-called ‘second category’, where such an award would be appropriate when the potential benefit from the frauds for the respondents was viewed prospectively against the level of likely compensatory losses for Axa. Such an award was held to be particularly appropriate in a cases where the respondents attempted (and almost succeeded in committing) a sophisticated, sustained and cynical fraud from the outset, involving the falsification of the fact of accidents and documentation.

It was held that it was not relevant that criminal proceedings could have been brought. The court followed the ratio of Borders (UK) v Commissioner of Police of the Metropolis [2005, EWCA Civ 197), in which a ‘double jeopardy’ argument was rejected.

Turning to the quantum of such damages, the Court of Appeal held that this was unaffected by the availability of contempt of court proceedings as they would go to the totality of the fraud and not just to those portions subject to contempt proceedings, which would have to be proven to the criminal standard. It held that the amount of exemplary damages should be principled and proportionate, taking into account the need to deter and punish, as well as the specific features of this case. It was held each of the three respondents should be liable to pay £20,000.

This level of award (ie, a total of £60,000) is typical of the recent trend of higher awards of exemplary damages in such cases: an award of some £50,000 was made in Stefanov v Zurich & Ali (2016, HHJ Madge, Central London County Court); and one widely reported to have been a record at £70,000 was made in EUI Limited v MS Globenet t/a ACE & Mohammed Samavat (2018, Mr Recorder Sells QC, Central London County Court).

Certainly, where the facts of a case allow and should intelligence suggest the fraudster has the means to pay, exemplary damages should be sought by parties against which motor insurance fraud is attempted. In addition to other punitive remedies, it should serve as a powerful disincentive for a scourge that many believe and understand to be widespread.

Thomas Crockett is a barrister at 1 Chancery Lane

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Mark Dugdale is the editor of Claims Media. Mark welcomes articles, letters or feedback from readers and can be reached via