Malhotra Leisure Ltd v Aviva Insurance Ltd [2025] EWHC 1090 (Comm)

Richard Waller KC and Michael Ryan acted for the successful insured, Malhotra Leisure Limited, in its claim for an indemnity against Aviva arising from a flood at one of its hotels during the national Covid-19 lockdown. The claim had been declined by Aviva on grounds that the insured had deliberately caused the flood and pursued its claim dishonestly including by making dishonest statements in the presentation of the claim in breach of a fraud condition in the policy. The Commercial Court has now handed down judgment dismissing all of Aviva’s fraud allegations, finding that the flood was fortuitous and that there was no dishonesty in the presentation of the claim.

The Court has also given obiter guidance on the interpretation of fraud conditions in insurance policies following the Supreme Court’s decision in Versloot Dredging BV v HDI Gerling Industrie Versicherung [2017] 1 AC 1 which abolished the doctrine of fraudulent devices/collateral lies at common law. The Court accepted submissions on behalf of the insured that fraud conditions which seek to write in a power to decline claims on the basis of fraudulent devices or collateral lies should generally be read as being subject to the limitations of the old common law doctrine stated by Mance LJ in The Aegeon as modified by Lord Mance in Versloot. Thus, for an insurer to decline a claim under a fraud condition, the relevant fraudulent device/collateral lie must generally (i) directly relate to the claim, (ii) be intended to improve the assured’s prospects of obtaining a settlement or winning the case; and (iii) if believed be objectively capable of yielding a not insignificant improvement in the insured’s prospects of obtaining a settlement or better settlement.

Please click here for a copy of the judgment.

Richard and Michael were instructed by Fred Banning of Clarke Mairs LLP.