Good Faith and Insurance Contracts
Page 163
CHAPTER 7
The assured’s duty of the fair presentation of the risk at placing
Introduction
7.01 The essence of the obligation of the utmost good faith as it has been examined by the courts is typified by the duty of the assured, prior to the agreement of the contract of insurance, to bare all that he knows to the insurer, to the extent that this is material.1 The duty allows the insurer to receive all the information that the assured has or ought to have so that he may evaluate the data and thereby develop his opinion on the nature and profitability of the risk put to him. 7.02 This duty of full disclosure traditionally2 has been analysed as two distinct obligations,3 albeit closely related:- 1. the duty not to misrepresent material facts;
- 2. the duty to disclose all material information known to him.
There may be said to be a third duty that binds the assured at the time of concluding the insurance contract and that is closely related to the duty not to misrepresent material facts: namely, a duty to abstain from fraudulent misrepresentations, whether material or not. Park4 suggested this to be a separate head of the duty. The duty to abstain from fraud and material misrepresentation are largely the same, save possibly for one or two differences. We propose to discuss each of the elements required to establish a cause of action for breach of each of the duties to refrain from misrepresentation and non-disclosure, and then to pay some brief attention to the question of fraud.