At common law, in the absence of a fraud clause in the insurance policy, fraud can only be relied upon to the extent to which it prejudices the insurer. If an element of the claim is fraudulent only the fraudulent portion of the claim is forfeited at common law. There is no implied term in
The English Supreme Court had the following to say regarding the standard insurance policy fraud clause which excludes liability if the insured makes a claim ‘by fraudulent devices’. The court said:
‘The expression is borrowed from a standard clause avoiding contracts of fire insurance which was widely used in the 19th and early 20
Even though the law discourages fraudulent insurance claims, South African insurers still have to protect themselves when it comes to fraud.
While the English courts apply draconian and deterrent laws to prevent fraud, South African law only disallows the portion of an insurance claim that is fraudulent. The valid part of a partially fraudulent claim
In English law an insured who uses a fraudulent device to promote an otherwise valid claim forfeits the claim.
This is not the position in South African law. Unless there is an appropriately worded fraud clause an insured who embellishes their claim with a lie where it is in all other respects valid will not
Insurers who seek to rely on the fraud exclusion in a policy should bear in mind that the insurer bears the onus of proving the fraud. The question is always: can you prove the facts that establish the defence?
The onus is an ordinary civil one on a balance of probabilities but fraud will not