Pedestrians A and B were compensated for making different types of claims. Pedestrian A received compensation for loss of earnings due to mobility issues, while pedestrian B simply claimed for loss of earnings based on fake pay slip records. Both cases draw attention to the principle of representation of data as a basis for making claims in insurance contracts. Two types of misrepresentation could occur in such circumstances: fraudulent and misrepresentation. Therefore, the main area of law applicable in this case refers to the treatment of fraudulent data provided by pedestrians A and B. This area of law is mostly concerned with the falsification of data or non-disclosure of information used to settle an insurance claim.
The cases presented by pedestrians A and B differ in law due to their contents, substance, and implications. In the case of pedestrian A, they should be indemnified with respect to bodily harm and not loss of earnings. This is because the claim on the falsification of earnings was made through fraudulent means, while the one on the bodily injury was just. The Criminal Justice and Courts Act of 2015 examines such situations where part of a claim is justified and the other falsified. The courts generally rule in favor of awarding damages to genuine parts of the claim and limiting such payments to the extent that falsification of claims does not interfere with the awards given. Therefore, the bodily injury claim was justified and subject to compensation, while the loss of income claim was rejected on the grounds that it was based on fraudulent claims.
In Sharon’s Bakery (Europe) Ltd v. AXA Insurance UK Plc (2012), Sharon Bakery makes a claim for a loss of property that occurred due to an accidental fire. In the claim, the insurer, AXA Insurance UK, rejected the claims on two grounds. The first one was that the claimant had entered into a contractual relationship with another party, Lombard North Central – a relationship that was material to the insurance contract. The second ground for rejecting the claim was the falsification of documents submitted to process the claim. The claimant argued that the accusations of falsification of documents were unjust and did not provide sufficient grounds for the insurer to reject the claim.
It was ruled that the falsification of documents was of material significance to the underwriter when processing the claims. Therefore, it provided sufficient grounds for rejecting the claim. The same argument is applicable to the claims made by pedestrians A and B because, in one case, documents were falsified, and in the other, there is a perception problem regarding what the pedestrian could do or not do after the accident. In case B, there are sufficient grounds for voiding the claim because there is evidence of dishonesty.
However, in the first case, such claims have to be substantiated in a court of law because the inability to earn due to mobility concerns observed when one is playing golf is a perceptual one. In other words, in the case of pedestrian A, the type of fraudulent data obtained could be assumed a case of innocent misrepresentation because their ability to play golf during the claims processing period cannot be reliably used to prove malice. Comparatively, the case involving pedestrian B has a different set of circumstances proving fraudulent misrepresentation because fake pay slips were provided to support the claim, thereby proving malice on the part of the victim. Therefore, this act amounts to a case of fraudulent misrepresentation.
Relative to this definition, Hodgin says that a fraudulent misrepresentation occurs when a person makes a false statement with the intention of putting them in an advantageous position in the negotiations of a contract or the settlement of an insurance claim. The use of fake pay slips to make the loss of earnings claim is one such example of fraudulent misrepresentation.
While highlighting differences in law between these two types of misrepresentation, all parties are expected to act fairly and give honest information when entering into a contract agreement. The notion of materiality is central in determining such cases where misrepresentation has occurred. The law deems both instances as cases of fraudulent and innocent misrepresentation, respectively. However, in both cases, the ominous is on the insurer to consider all material facts before making payments for claims.
In Bilbie v Lumley and Others, it was held that claims could not be recouped when the insurer acted in ignorance of the law. In this case, an insurer paid a claim for a policy to repudiate for non-disclosure but was unaware of the legal ramifications of doing so. Hence, he sought the claims settlement back, but the courts ruled that the contract could not be set aside under the pretext of ignorance of the law. Therefore, it is prudent for insurers to be cognizant of all legal ramifications of their actions, failure to which they may not be able to recover erroneous payments.