This category covers a “multitude of sins” but the most common type of fraudulent claim is the gross exaggeration of a claim by, perhaps, including property that has long since been sold or claiming new for old. Indeed, it is often a nice distinction to draw between a claim which is carelessly inflated and a claim which is knowingly and grossly exaggerated, thus allowing the assured to use the condition. In Ewer v. National Employers’ Mutual [1937] 2 All ER 193 it was held that an exaggeration of the claim for negotiating purposes may not amount to fraud. If the case was to be determined today it is possible that, although not fraud, the exaggeration of the claim may well be held to be material information which should be disclosed when presenting the claim, thus allowing the insurer to avoid for breach of the duty of utmost good faith depending upon the scope of the continuing duty of good faith discussed below.

In the Court of Appeal decision of Orakpo v. Barclays Insurance Services 1994 (unreported, 29 March 1994), the court found that the appellant had so grossly exaggerated his claim for lost rent as to amount to fraud. The court conceded that most household insurance claims were exaggerated but, by asserting that his “bed-sits” would be fully occupied for two years and nine months even though there were only three occupants, the plaintiffs claim amounted to fraud.

Historically, in the context of insurance contracts, fraud has been more frequently alleged in respect of the operation of the contract, but, as discussed below, with the development of the law, such allegations may become rare. Ironically, although the ability of the insurers to allege a breach of the duty of good faith in respect of both placement and making claims may make it easier for insurers to avoid contracts in respect of careless or silly errors by assureds, it will not help them in respect of the problem which concerns insurers most-self-induced loss. Indeed it seems likely that fraud will only need to be alleged by insurers when a loss is suspected of being self-induced