How does this additional weapon complement the alternative defence of fraud? Most ARPI policies contain a condition dealing with fraudulent claims, but even in the absence of such a clause a term will be implied into a contract allowing the insurers to reject a claim if it is fraudulent. Indeed, self-induced loss could not be covered by an insurance policy as it is not an accidental loss.

Until recently, in the absence of an express clause, there was some uncertainty as to the precise nature of the remedy available to the insurer if he accuses the assured of making a fraudulent claim or, indeed, causing his own loss (as against complaining of a breach of utmost good faith). In the absence of an express term in the policy, the obligation not to make a fraudulent claim results from a court implying a term into the policy. It is quite clear that a breach of the term allows the insurer to reject the claim, but does it allow it to avoid the policy? There was little English authority directly on this point in respect of fraud until recently.

Obiter dicta comments were made in Britton v. Royal Insurance Co. (1866) 4F&F 905 which suggested that where fraud was involved the insured should forfeit all benefit under the policy. In Orakpo v. Barclays Insurance Services, Hoffman LJ and Parker LJ seemed to follow this line of reasoning. The Court of Appeal has even more recently been required to consider the problem in Diggens v. Sun Alliance and London Insurance Pic (unreported) 29 July 1994. On this occasion the court was constituted by Evans LJ, Parker LJ and Nouse LJ. It was alleged by underwriters that a homeowner had inflated his claim fraudulently or in breach of his continuing duty of good faith. The underwriter sought not only to resist further payment of a claim which might have been fraudulently made but also recover monies which had been properly paid in respect of an insured peril. Evans LJ confirmed that in the case of fraudulent claims, Britton v. Royal should be followed.