Fraudulent insurance claims: High Court dismisses subsidence claim in full

Mills & Reeve have successfully defended insurers following a full High Court trial in Elliott v The Members of Lloyd’s Syndicate 4444 [2026] EWHC 1773 (TCC), a property coverage dispute arising from alleged subsidence damage.

The court dismissed the claim in full, finding that the claimant had neither proved insured subsidence damage during the policy period nor established any recoverable quantum. It also held that he had fraudulently exaggerated the claim by knowingly relying on a false quotation.

As one of the relatively rare, reported judgments to apply section 12 of the Insurance Act 2015 following a contested trial, the decision provides a useful illustration of the fraudulent claims rule and policy fraud clauses, while also addressing proof of loss, underinsurance and double insurance.

Summary

Mr Elliott claimed for alleged subsidence at his property under a policy placed with members of Lloyd’s Syndicate 4444 through Canopius Management Agents Limited. The policy covered the period from 9 August 2017 to 8 August 2018.

The claimant alleged that cracking observed in 2018 was caused by subsidence associated with a large Cedar of Lebanon tree. The documentary history revealed earlier subsidence, previous insurance claims, prior damage to the garage and extensions, and recoveries from third parties.

Because the policy responded only to loss or damage occurring during the period of insurance, that history was central. The court held that no subsidence damage had been proved during the policy period and that the evidence instead pointed to earlier movement. The claimant’s evidence was found to be “entirely unreliable”; it followed that “nothing he says can be accepted” unless supported by unequivocal documents. The court also held that, even if liability had been established, only nominal damages would have been awarded because the claimant had not proved the recoverable quantum.

The fraud finding

The fraud allegation concerned works to the garage block. A local builder provided a genuine quotation for converting the garages into habitable space; it did not concern subsidence, stabilisation or underpinning.

The claimant relied on a purported revised quotation adding structural works, including excavation and concrete underpinning, and sent it to insurers in support of a payment request. The court found that the additions were intended to present ordinary conversion works as works connected with the insured loss.

The builder denied creating or authorising the altered quotation, and the judge accepted his evidence. The court found a deliberate and dishonest attempt by the claimant to obtain money from insurers to which the claimant knew he was not entitled.

The judgment also records that, in May 2025, over a year before the trial, the claimant offered the builder £10,000 to withdraw his evidence. The court treated that episode as further support for its finding of sustained dishonesty.

The trial evidence and cross-examination

That finding rested substantially on the oral evidence. Mr Elliott was cross-examined by counsel for the insurers for upwards of two days in what the judge described as “courteous and fair but also searching” cross-examination.

The judge found that Mr Elliott was “evasive and argumentative” in cross-examination and did not give convincing answers to the allegations of dishonesty. His account that the policy followed a cold call from insurers was contradicted by the contemporaneous documents and other witnesses. The court also took account of his £10,000 offer to the builder and concluded that he had knowingly used the false quotation to inflate his insurance claim.

The trial also exposed changing and contradictory explanations for the false quotation. In their written opening, counsel for the claimant suggested that the builder had asked him to amend it because the builder's wife, who would ordinarily have done so, had thrown him out of the house. The judge regarded that account as “absurd” and “an insult to the intelligence of the court”, not least because the builder would scarcely have agreed to expand the scope of work into the unfamiliar territory of underpinning for exactly the same price. By closing submissions, the claimant invited the court to disregard the quotation but preserve the balance of the claim. The court rejected that attempt to divide a single claim into honest and dishonest parts.

Although the builder was described as having strong feelings against the claimant, the judge found him credible and compelling on the central issue: the scope of works agreed in November 2021. The competing witness assessments were therefore decisive in establishing that the quotation was false and had been deployed deliberately.

Taken together, those matters led the judge to conclude that Mr Elliott’s attempts to explain the two quotations had “only served to deepen the mire of dishonesty”. The false quotation, the changing explanations and the other dishonest conduct revealed at trial each compounded the last.

Section 12 of the Insurance Act 2015 – Fraudulent Claims

Section 12 of the Insurance Act 2015 provides the statutory remedies available to an insurer where the insured makes a fraudulent claim. Although the provision has been in force since August 2016, reported judgments in which it has been applied following a contested trial remain relatively rare, and the decision in Elliott is a useful illustration of section 12 in practice. In summary, the insurer is not liable to pay the claim, may recover sums already paid in respect of it, and may by notice treat the contract as terminated with effect from the time of the fraudulent act. If the insurer does terminate, it need not return any of the premiums paid under the contract and may refuse liability for relevant events occurring after the fraudulent act.

The judgment emphasises an important distinction within section 12. Termination from the time of the fraudulent act may matter where there are separate claims or relevant events before and after the fraud. But that did not assist the claimant here. The court found there was one claim: the subsidence claim first notified in July 2018. The false quotation was later deployed in support of that claim as part of an attempt to obtain an interim payment to which he was not entitled.

On that analysis, the claimant could not argue that the dishonest element should simply be carved out while the rest of the claim survived. Applying the fraudulent claims rule, the court held that this was a classic case of fraudulent exaggeration: if an insured dishonestly exaggerates a claim, the whole claim is forfeit. The same result also followed from Condition 7 of the policy, which closely mirrored the statutory provisions and provided an additional contractual route to the same conclusion.

Fraudulent exaggeration, not a collateral lie

The judgment also engages with the Supreme Court’s decision in Versloot Dredging BV v HDI Gerling Industrie Versicherung AG. That case distinguishes between three situations: a wholly fabricated claim, a genuine claim that has been dishonestly exaggerated, and an otherwise valid claim supported by an immaterial collateral lie.

The claimant’s case was treated as falling within the second category, albeit that the judgment states that this was being somewhat generous to the claimant. This was not a case where the insured had told an irrelevant lie in support of a claim that was otherwise valid and quantified. The false quotation was intended to obtain payment for works that were not covered by the policy and to present ordinary conversion works as structural underpinning works. The dishonesty therefore went to the amount and presentation of the claim itself.

Other issues

Even without the fraud finding, the claim would not have succeeded. The court held that no subsidence damage had been proved during the policy period. The claimant argued that the insurers had admitted liability, relying on a June 2019 email from the TPA (as agents for the insurers) which stated that “underwriters have responded by advising there are no underwriting issues and liability is accepted” as a pre-action admission under CPR 14.1. The court rejected that argument. Had liability been established, the claimant would have recovered nominal damages only, having failed to prove the recoverable quantum. The court also found that the property was underinsured and that a separate buildings policy gave rise to double insurance, both of which would have further reduced any recovery.

Conclusion

The decision is not simply a fraud case. It shows how policy-period damage, causation, evidence, policy conditions, quantum, underinsurance and double insurance can determine a complex property coverage dispute. For insurers, it reinforces the value of early investigation, close review of the documentary history and careful scrutiny of the basis for payment.

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