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CHAPTER 10 The post-contractual duty of good faith

Good Faith and Insurance Contracts

Page 297


The post-contractual duty of good faith

The post-contractual duty of good faith

10.01 Despite suggestions to the contrary,1 it was reasonably settled at common law that the duty of utmost good faith continues to apply beyond the making of the insurance contract and throughout the relationship between the parties governed by that contract.2 That this is so is apparent from the fact that Willes J in Britton v Royal Insurance Company held that the assured was obliged to exercise the “perfect good faith” in the presentation of a claim under the policy.3 Yet this continuity of the duty during the contractual relationship is not made obvious in the statutory embodiment of this common law duty in section 17 of the Marine Insurance Act 1906. That section provides: “A contract of marine insurance is a contract based on the utmost good faith, and, if the utmost good faith be not observed by either party, the contract may be avoided by the other party.” Sections 18–20 of the Act4 impose specific obligations on the assured and its agents to disclose all material circumstances and to refrain from misrepresentation during negotiations leading up to and including the conclusion of the insurance contract. In Versloot Dredging BV v HDI Gerling Industrie Versicherung AG,5 Lord Sumption said that:

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