Modern Law of Marine Insurance Volume Five, The
CHAPTER 5
Page 98
The development of the law of remedies for an unfair presentation of the risk
Page 98
Introduction
5.1 When an assured and an insurer negotiate towards the conclusion of an insurance contract, there is a mutual duty of utmost good faith, owed by each to the other. It is a duty of utmost good faith, because it requires more than the usual duty attendant on a party to any contract (both commercial and consumer contracts, both insurance and non-insurance contracts) not to misrepresent material facts to the other. The duty of utmost good faith requires the parties to make an insurance contract, at least at common law, not only to ensure that any representation it makes to the other is substantially correct, but also to disclose or impart to the other material information. 5.2 This duty of the utmost good faith manifests itself most commonly in the duty of an assured to disclose information to the insurer prior to the insurance contract. This is because prior to the formation of the insurance contract, the assured knows more about the risk than does the insurer. Indeed, this is one of the rationales for the imposition of the duty first as a matter of commercial practice and then as a matter of law. Indeed, this duty found early expression in the London Insurance Code in the 16th century.1 One article of the code provided thatall persons whatsoever, that will cause any Assurance to be made, and meaneth to take any benefit by Assurance … shall not conceale any thing, that may tend to the hurt & hindrance of the Assurer, but with playne and true meaning shall give & continue his Assureance for as the Assurer putteth himself in place of the Assured … so ought the Assured to practice no sleight nor deceipt, to the hindrance of the Assurer, And if any deceipt be found & so judged by the Iudges, or Councellors appointed for the tyme being, such pollicy of Assureance shalbe voyd, and the Assurer shalbe freed.2