Mind the GAP - Another successful fraud recovery

Acting for a large motor insurer, Crawford Legal Services has recovered over £40,000 from a policyholder who received an insurance payout for the total loss of a BMW M3, allegedly stolen in March 2021.

The policyholder told his insurers that, having seen a flat tyre warning light when driving home from work on 29/03/2021, he pulled over and parked up to prevent further tyre damage. He claimed that he then spent a few days arranging a replacement tyre, returning to the car to have it fitted a few days later. On arrival, he found that his vehicle had 'gone', although there was no sign of glass or debris on the ground. After reporting this to the police, he made a claim with his motor insurer for the loss of the car. His insurer paid £39,948.32 to BMW Finance and a balance of £136.68 to the policyholder nett of his £1,000 excess deduction.

The policyholder then turned his attention to his GAP RTI policy which, had the claim been validated, would have paid out a further £25,157.42.

Importantly, the policyholder sent his car keys to the GAP insurer as part of the validation exercise. These were cross-referenced against the recorded calls made to his motor insurer which included confirmation that he had been in possession of both car keys at all times.

The GAP insurer obtained a key data report which confirmed that one key fob had indeed been used on 29/03/2021, broadly consistent with the policyholder's own account. The other key fob was then used on 30/03/2021 when the car was driven a further 77 miles. Data showed that the coolant temperature was well above its normal operating range, suggesting that the car was driven aggressively despite the low tyre pressure warning. The brake pad warning light was also seen on this key fob.

Clearly, the second key had been used with the vehicle the day after the policyholder said that he had left it parked up due to the damaged tyre. The policyholder suggested that he had purchased a new tyre to replace the flat one, but no evidence had been provided of this purchase.

The GAP claim was abandoned when the policyholder was asked for further information and to explain the key fob data readings.

This policyholder very quickly arranged to repay his motor insurer immediately and in full following the receipt of a letter of claim.

Historically, vehicle insures have been reluctant to pursue policyholders for cost recovery when they have made a total loss payment in good faith, even when the claim later turns out to be fraudulent.

However, CLS is now recovering hundreds of thousands of pounds, acting on a CCFA basis to recover payments made in breach of contract, fraudulent misrepresentation, through unjust enrichment and/or deceit.

Summary

• Motor insurers often settle total loss claims unaware that the policyholder also has a policy of GAP RTI Insurance in place. This was a typical case where the total loss paid off the finance only, leaving a very modest sum for the policyholder - there appeared to be no financial motive for a fabrication of the theft circumstances. The GAP policy changes reveal a substantial financial motive. Motor Insurers must be aware of the opportunity that GAP RTI policies presents to opportunist and organised fraudsters.

• Motor Insurers are increasingly instructing CLS to advise them on recovery proceedings, based on demonstrating how policyholders with assets or 'something to lose' are often quick to re-pay the sums they have received rather than face expensive legal proceedings, and potentially more serious contempt of court / exemplary damage sanctions.

To find out more about Crawford Legal Services and how it is tackling GAP insurance fraud, please contact Peter Oakes.

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