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Surely the point here is that the insurers agreed settlement terms with their "eyes open".

They were aware of a potential element of exaggeration, but must have accepted that the Claimant had "some" injury.

They compromised the settlement att an amount significantly less than was sought knowing, and having pleaded that the Claimant was exaggerating.

They had their bite of the cherry. Whilst it is an unpalatable Judgment, however you look at it, it is clearly legally correct.