Good Faith and Insurance Contracts
There have been temptations to impose a moral stamp upon the obligation of disclosure and the greater duty of good faith, although the House of Lords has impressed the need to view the issues touching the duty in light of the law and not moral imperatives.1 The designation of the duty as one of good faith suggests that there is a morality underlying the open dealing required of the parties to the insurance contract. The duty of disclosure is in play only at times when the insurer is in a position to decide upon an adjustment of his rights and obligations, and, for the purposes of that decision, needs the benefit of all available information. The duty at placing will cease to be in full force when the insurer is bound by the insurance contract he has made. The law has deemed this time of “no return” to be the time when the insurer is bound “in honour” to insure the risk, even though there is no binding contract as a matter of law.2 It is not only the assured’s duty of disclosure that may be viewed in this light. It applies equally to the insurer.
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