A recent Court of Appeal case has provided useful guidance on the judicial approach to when an insurer can avoid a policy for misrepresentation. In Alan Bate v Aviva Insurance UK Limited, the Court held that there is a distinction between a fraudulent claim and “evidence of fraud” in the old ICOB 7.3.6 (now ICOBS 8.1). If the policyholder uses a fraudulent device in making the claim (for example, makes dishonest assertions), that will be sufficient for the insurer to avoid the policy, even if the claim itself is not fraudulent i.e. the claim relates to a peril which is genuinely insured.
ICOBS 8.1 provides that for policies entered into on or after 6 April 2013, that a consumer’s policy claim can only be rejected for misrepresentation if there is evidence of fraud or the consumer made the misrepresentation in breach of the duty set out in section 2(2) of the Consumer Insurance (Disclosure and Representations) Act 2012 to take reasonable care not to make a misrepresentation and the insurer can show that without the misrepresentation, that insurer would not have entered into the contract at all or would have done so only on different terms. The “evidence of fraud” wording has been preserved in ICOBS 8.1 so the case is still relevant under the new rules. For policies entered into before 6 April 2013, the rules remain similar to the old ICOB 7.3.6.