Lying to insurer need not invalidate claim, judges rules

Lying on an insurance claim can be acceptable - and even legal - says a Supreme Court ruling that could affect all household polices.

Judges declared that "collateral lies", statements which are untrue but do not affect the validity of a claim, should not necessarily invalidate a claim.

The court was ruling on the case of a Dutch cargo ship whose owners lied about adverse weather conditions. The lie, given to speed up the process, was deemed to have had no other bearing on the claim.

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"The critical point is that the insured is trying to obtain no more than the law regards as his entitlement and the lie is irrelevant to the existence of that entitlement. Such a lie is immaterial to the claim," said Supreme Court judge Lord Clarke.

The judgement suggests that "someone who puts in an insurance claim for a stolen computer worth £1,000 - but who fabricates a receipt for that amount - would still have a valid claim", says the BBC.

The Association of British Insurers said that while "inflating the value of an otherwise genuine claim still remains fraud", the new principle will apply to millions of households, travel and motor policies.

Insurers will no longer able to use collateral lies as an excuse to reject a valid claim. However, they have warned that premiums will go up if they end up paying out more as a result of the ruling.