What happens to a claim if fraud is proven by the insurer?

When an insurer proves that fraud has occurred in connection with a claim, the appropriate action is to deny the entire claim, irrespective of whether parts of the claim may have been valid. This is based on the principle that fraud undermines the trust that is foundational to the insurance contract. In instances of fraud, the insurer is entitled to reject the claim entirely, as allowing any portion of the fraudulent claim would contravene the integrity of the insurance process and encourage dishonest behavior.

In such cases, the negative implications of fraud extend beyond mere financial loss; they go to the heart of the contract's terms. Since fraud violates the principles of good faith and fair dealing, the insurer is justified in refusing to pay any amount related to such a claim. This punitive measure serves as a deterrent against future fraudulent activities and helps maintain the overall stability and reliability of the insurance industry.