Lloyd's Maritime and Commercial Law Quarterly
THE PRE-CONTRACTUAL DUTY OF (UTMOST) GOOD FAITH: THE PAST AND THE FUTURE
Guy Blackwood*
This paper asks whether there is a need to introduce reform into the law of pre-contractual non-disclosure and misrepresentation and the remedies for breach of the duty of (utmost) good faith. It examines the specific proposals advocated by the Law Commission and offers views from the perspective of a practitioner.
I. INTRODUCTION
In this paper, I offer my views on the proposals contained in the Law Commissions’ Consultation Paper No 204: Insurance Contract Law: the Business Insured’s Duty of Disclosure and the Law of Warranties.1 This paper does not address warranties or duties of disclosure as they relate to brokers.
The concept that an assured ought to deal fairly with his insurers and make a fair presentation of the risk to be insured has been part of English law for hundreds of years. Thus, in De Costa v Scandret,2 Lord Macclesfield LC held:
“The insured has not dealt fairly with the insurers in this case; he ought to have disclosed to them what intelligence he had of the ship’s being in danger … For if this circumstance had been discovered, it is impossible to think that the insurers would have insured the ship at so small a premium as they have done; but either they would not have insured at all, or they would have insured on a larger premium … .”
The policy was avoided.
In the celebrated case of Carter v Boehm
3 in 1766, Lord Mansfield established that the duty of “good faith”—and not utmost good faith—was reciprocal and that the underwriter ought himself to have played a full part in the information-gathering process. The underwriter “ought not to have signed the policy with a secret reserve in his own mind to make it void; if he dispensed with the information, and did not think this silence an objection then he cannot make it up now, after the event”.
* Barrister, Quadrant Chambers.
An earlier version of this article was presented at a symposium for market participants entitled “Reforming Marine and Commercial Insurance Law”, organised by the Institute of the International Shipping and Trade Law at Swansea University in collaboration with the Law Commission, which was held at the Association of British Insurers’ London headquarters on 25 April 2013.
1. Law Commission and Scottish Law Commission, Insurance Contract Law: the Business Insured’s Duty of Disclosure and the Law of Warranties (LCCP No 204; ScLCDP No 155: 2012) (hereafter “LCCP 204”).
2. (1723) 2 P Wms 170, 170.
3. (1766) 3 Burr 1905, 1918–1919.
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