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CHAPTER 12 The insurer’s duty

Good Faith and Insurance Contracts

Page 373


The insurer’s duty


12.01 Mutuality or the common obligation owed by both parties to the contract of insurance is a trade mark of the common law duty of good faith applicable to insurance contracts.1 Much of the jurisprudence developed by the courts over the years which have marked the development of the duty has been concerned principally with the position of the assured in bearing the full weight of the obligation to observe good faith in his dealings with the insurer, chiefly because the assured knows much more about the insured risk than the insurer. At common law, the position of the insurer remained somewhat vague. It is clear that, at common law, the insurer owes the assured a duty to act in good faith;2 it is also plain that the insurer is obliged to disclose material information to the assured before and when the contract is made. However, the test of materiality is not altogether clear and the scope of the duty in other circumstances has barely been tested. This chapter proposes to analyse this duty of good faith as it falls upon the insurer and suggest how the parties may respond to factual scenarios that may occasion the observance of good faith.

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