## Facts

- Owners of the passenger ferry *Aegeon* held a marine hull and machinery port-risks policy while the vessel was laid up for maintenance.
- The policy was endorsed to permit “hot works” only if an updated London Salvage Association (LSA) certificate was obtained and LSA recommendations were complied with before hot work began.
- Hot works were undertaken without an LSA surveyor having issued the required certificate before the incident.
- A fire occurred during hot works, resulting in the vessel’s constructive/total loss, and the insureds sought indemnity under the policy.
- In pleadings and witness material, the insureds advanced an account suggesting hot works began later than documents later indicated.
- After disclosure suggested an earlier start date for hot works, the underwriters sought leave to amend their defense to allege that the insureds used deliberate falsehoods and other “fraudulent means or devices” to advance the claim and therefore forfeited all recovery.
- The trial judge refused permission to amend; the underwriters appealed from that interlocutory case-management decision.

## Issues

1. Whether the common-law fraudulent-claims rule extends to an initially honest claim later advanced using “fraudulent means or devices” (deliberate lies or fabricated evidence) to improve prospects of recovery.
2. Whether “fraudulent devices” should be treated as a form of fraudulent claim for purposes of forfeiture.
3. Whether the fraudulent-claims rule is governed by, or separate from, the duty of utmost good faith under § 17 of the Marine Insurance Act 1906.
4. Whether forfeiture under the fraudulent-claims rule (and any relevant good-faith doctrine) applies only pre-litigation, with post-suit dishonesty left to procedural sanctions.
5. Whether the trial judge erred in refusing leave to amend to plead fraud given timing and prejudice.

## Decision

- The Court of Appeal dismissed the underwriters’ appeal and upheld refusal of leave to amend.
- The court accepted in principle that using fraudulent devices to promote a claim can fall within the fraudulent-claims doctrine and may justify forfeiture of the relevant claim.
- The court held that the fraudulent-claims rule is a distinct common-law doctrine and should not be treated as part of § 17’s remedy of avoidance for lack of utmost good faith.
- The court limited operation of the fraudulent-claims forfeiture doctrine to the pre-litigation period; once litigation is underway, dishonest conduct is primarily addressed through procedural and evidential rules (including costs and contempt-type remedies).
- Because the proposed fraud pleading focused substantially on alleged dishonesty in pleadings and litigation conduct, it fell outside the proper scope for contractual/insurance-law forfeiture; the late amendment would also cause substantial prejudice, including difficulty addressing allegations involving the deceased original insured.

## Legal Principles

- An insured who makes a fraudulent insurance claim may forfeit recovery, including any genuine part of the claim.
- Deliberate use of false statements or other fraudulent devices to bolster or promote a claim can, in principle, be treated as a form of fraudulent claim for forfeiture purposes.
- The common-law fraudulent-claims forfeiture doctrine is conceptually separate from § 17 of the Marine Insurance Act 1906 and does not depend on § 17’s avoidance remedy.
- The fraudulent-claims forfeiture doctrine is confined to pre-litigation claims conduct; post-suit dishonesty is generally governed by the court’s procedural powers and evidential controls, not by contractual forfeiture under insurance law.
- Leave to plead fraud late in proceedings may properly be refused where it would materially change the case, require substantial additional inquiry, and cause unfair prejudice.

## Conclusion

The Court of Appeal recognized that fraudulent devices used to advance an insurance claim can trigger forfeiture in principle, but confined that sanction to pre-litigation conduct and treated post-commencement dishonesty as a matter for procedural remedies, affirming the refusal to allow a late fraud amendment.


Agapitos v. Agnew, [2002] EWCA Civ 247 (Eng.)