6. Explain the Consequences of Submitting a Fraudulent Claim to the Insurer | Study Guide - Edubirdie

University:
Eastern Kentucky University
Course:
LGS 300 | Introduction to Legal Studies
Academic year:

2022
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139

Pages:

1
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6. Explain the consequences of submitting a fraudulent claim to the insurer What is a Fraudulent Claim? A fraudulent claim occurs when the insured: Intentionally misrepresents or exaggerates a claim, Submits false documents or inflated losses, Fails to disclose relevant facts during a claim to deceive the insurer.    Fraud is a deliberate act to gain a benefit to which one is not lawfully entitled under the policy. Legal Consequences of a Fraudulent Claim Repudiation of the Entire Claim:   The insurer is entitled to reject the entire claim, even if part of it is legitimate. This is because fraud undermines the principle of good faith (uberrimae fidei) that underlies insurance contracts. Cancellation of the Policy:  A fraudulent claim may entitle the insurer to cancel the entire insurance policy, either from the date of the fraud or ab initio (from the beginning), depending on the severity and timing of the fraud. Forfeiture of All Benefits:   In some cases, the insured may forfeit all benefits under the policy. The insurer may also deny future claims, even if they are unrelated to the fraud. Criminal Prosecution:   Submitting a fraudulent claim constitutes the crime of insurance fraud, which may lead to: - Criminal charges - Fines - Imprisonment Fraud is punishable under South African criminal law as a form of theft by false pretences or common law fraud. Civil Action by the Insurer:  The insurer may: - Sue to recover amounts already paid on the fraudulent claim, - Claim damages for losses suffered due to the fraud. Case Law Reference: Commercial Union Insurance Co of South Africa Ltd v Lotter 1999 (2) SA 147 (SCA) The court held that an insured who submits a fraudulent claim breaches the duty of good faith, and the insurer may repudiate the claim even if it contains some genuine elements.

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