The Association of British Insurers (ABI) has criticised a UK court decision allowing a claim for damage to a ship despite lies told by the claimant to support its case.

The UK Supreme Court, overturning a previous decision, found although false statements were made, the “collateral lies” were irrelevant to the merits of the claim.

ABI Director of General Insurance Policy James Dalton says “lies are lies” and the ruling risks pushing up the cost of insurance and prolonging the payout process for honest customers.

“Allowing ‘collateral lies’ in the course of an insurance claim flies in the face of the work the insurance industry and the Government have been doing to crack down on the cheats and fraudsters,” Mr Dalton said.

The claim was lodged after the vessel DC Merwestone was incapacitated following a flood in its engine room.

The owners told the insurer’s solicitors that the crew had informed them the bilge alarm sounded that day, but could not be investigated because the ship was rolling in heavy weather.

“This was a lie told by the owners to strengthen the claim, accelerate payment under the policy and take the focus off any defects in the vessel for which the owners might have been responsible,” a summary of the case says.

Judges hearing the case decided by a majority of 4-1 to allow the claim. They said the lie was “irrelevant”, since the damage was caused by a peril of the sea, with water entering through an inlet valve during the voyage.

The case was Versloot Dredging BV and another (appellants) v HDI Gerling Industrie Versicherung AG and others (respondents).