Compensation claims: Fraud focus

04 May 2006
Compensation claims: Fraud focus

The number of fraudulent claims against hotels and other licensed premises is on the rise. Cases of people allegedly slipping, tripping and falling are becoming more common - and claims are also getting more creative.

The total sum awarded in compensation claims in the UK exceeded £10b last year, and this figure is expected to rise. One in 10 UK companies has been the target of a fraudulent claim and the cost to UK businesses exceeds £550m each year.

And fraudulent claims against hotels, pubs and restaurants are becoming increasingly sophisticated. Because of this, only an estimated 10% of such claims against hotels are uncovered.

Fraudsters see hospitality companies as easy targets because they often don't have appropriate risk management protocols in place, such as inspection records and housekeeping policies.

A look at recent cases shows how fraudsters are becoming more creative.

In the case of Rutherford v Greene King (2005), the claimant alleged that he had fallen out of a first-floor window while playing pool at the Hope & Anchor pub in Upper Street, Islington, north London. He suffered severe head and facial injuries.

He argued that the large French-style windows with low sills made it foreseeable that someone who had been drinking heavily could fall through them. But it was later discovered by solicitors Weightmans, acting for the defence, that the main "independent witness" did not exist.

In fact, the accident had occurred further along Upper Street, outside the premises of a council building, when the claimant was attempting to stand on a set of railings and urinate into a basement. Further surveillance also showed that he was continuing to work while alleging that he was unable to do so because of his injuries.

In the case of Barry v Greene King (2005), the claimant alleged that he had fallen from an old beer garden wall at a Hemel Hempstead pub. He said that a number of bricks had given way and he had fallen
14 feet in to a basement car park below, suffering severe facial and head injuries.

Despite this, the claimant said, he had been able to pick himself up and walk to a local hospital, without alerting pub staff about the accident. He produced extracts of statements from four friends who were said to have witnessed the accident.

However, the defence pointed out that there had been notices attached to the wall, stating that it was potentially dangerous and that no one should sit or lean on it. CCTV footage also showed that the claimant could not have fallen where he alleged. Finally, inspections carried out by security staff failed to reveal any brickwork or blood in the car park area below the wall on the morning after the accident was said to have occurred.

The claimant dropped the case.

Tripping accidents are some of the most common reported. In Moore v The Manor Hotel in Yeovil (2005), the claimant alleged that, despite negotiating a step up into the ladies' toilets on the first floor of the premises, she had forgotten about the step when exiting. She had also failed to notice the "caution" sign on both sides of the door.

Even though she was attending her office Christmas party, she denied that she had been drinking excessively or that drink had had any part in the cause of her alleged accident.

The court wholly rejected her claim on the basis that there had been no similar previous accidents and that the signs warning of the presence of the step were clear.

Finally, and perhaps the most extraordinary example, is the case of Ayala v Wendy's Restaurants, San Jose, California. The claimant alleged she had bitten into a human finger in a bowl of chilli. She was later arrested after it was proved that she had purchased the fingertip for $100 from a construction worker following a genuine accident. She had a history of making fraudulent claims against fast-food restaurants and was sentenced to 10 years in prison.

Many recent claims relate to individuals who have sought to claim for damages against owners of property where there is a clear defect at the premises. Such instances are becoming increasingly common and are difficult to defend without positive evidence to throw doubt on the circumstances of the alleged accident or on the credibility of the individual claimant or their witnesses.

Avoiding claims

To protect you and your establishment from such claims, there are a number of measures that can be taken.

Complaints of defective premises, torn carpets or missing stair-treads should be taken seriously and inspected at the time the complaint is made. If the area cannot be fixed immediately by a temporary repair, the area should be cordoned off and/or warning signs placed around it.

Complaints of defects in premises may be a prelude to a false claim being levelled against the business at a later date. If it can be shown that the hazard was present and notified to the property owner some time before an alleged accident occurred, there is little prospect of defending such a claim.

If possible, hotel managers should take photographs and relevant measurements as soon as possible after an accident has been reported, to show the state of affairs at the time. In a recent case that didn't make it to court (McAnespie v Newtz bar in Coventry), associates of the claimant were found pulling loose carpet from stair treads the day after an alleged accident in which the claimant had fallen while drunk, to make it look as if the bar had been at fault.

While some smaller claims can be managed by having effective risk measures in place, claims involving more serious injury require specialist investigation. Solicitors have access to the insurance industry fraud database and the Department of Work and Pensions Benefits Network, to which all claims must be reported. These are invaluable tools in dealing with fraudulent claims.

A good piece of advice to hospitality businesses is: be suspicious, carry out frequent inspections of your premises and document them. Where appropriate, always put up clear warning signs.

The advent of "no win, no fee" funding means that claims can be brought in which the claimant is at little risk of incurring any costs of his own. Since the hotel and licensed trade industry is clearly seen as a soft target for fraudulent claims, it is likely that the problem will only get worse.

Ivor Long is an associate at solicitors Weightmans, specialising in workplace safety. Contact him by e-mail at:
After you receive a claim… It can be difficult to avoid claims completely, be they fraudulent or genuine. Following receipt of a claim, a number of measures should be taken immediately:

  • Late reports of an accident, or the lack of any report, should be treated with suspicion.
  • Detailed statements should be taken from the injured party, and also from all witnesses, which must include their full names and addresses to allow further contact.
  • Immediately pass on claims and correspondence to your insurer or broker, and notify them of your suspicions where appropriate
    (the Personal Injury Pre-action Protocol requires letters of claim to be acknowledged within 14 days, and a decision on liability from the company/insurer in three months).
  • There are very strict timetables to which your insurers are required to adhere in all claims for injury. Ignoring claims will not assist your late attempts to defend them and will have adverse cost implications.
  • Never allow your staff to admit responsibility or mention previous complaints or accidents. These will be used against you, to show that you were aware of the possibility that an accident could occur.

Points for operators

  • Use of CCTV or false cameras should be considered.
  • All premises should have written evidence of full weekly inspections or audits of the premises.
  • Any defects should be repaired immediately, or the area put out of commission by use of barriers or warning signs.
  • Spa and pool areas should be inaccessible to guests at night.
  • During wet cleaning of floor surfaces, appropriate warning signs must be put in place and left in place until the floor is dry.
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