Lloyd's Maritime and Commercial Law Quarterly
MAPPING THE DOCTRINE OF UTMOST GOOD FAITH IN INSURANCE CONTRACT LAW
Howard N. Bennett *
One of the principal distinctions between insurance contract law and general contract law is the recognition by insurance law of the doctrine of utmost good faith. This doctrine gives rise to a variety of duties, some of which apply before formation of the contract while others apply post-formation. This article is concerned with the overall structure of the doctrine of utmost good faith and seeks to establish a coherent framework of principle within which the doctrine and its various duties can be developed. In doing so, it seeks specifically to address the role of the Marine Insurance Act 1906, s. 17, the scope of the doctrine with particular reference to post-formation duties, the juristic nature of the doctrine, and remedies for breach. The article commences with some comments on the text of s. 17 and an account of the decision of Hirst, J., in The Litsion Pride.1
The two main parts of the article then consider successively the pre- and post-formation aspects of the doctrine of utmost good faith.
A. THE MARINE INSURANCE ACT 1906, s. 17
Utmost good faith is the subject of four sections in the Marine Insurance Act 1906, viz. ss 17-20, which, it is generally accepted and has been held, codify for the law of marine insurance principles of the law of utmost good faith applicable equally to marine and nonmarine insurance and to primary cover and all levels of reinsurance.2 This has the result, arguably the considerable disadvantage, that the principles so codified have to accommodate all sectors of the insurance industry, from the telephone selling of consumer motor vehicle insurance to the placing of large fleets of vessels at Lloyd’s.
The starting point for any discussion of the doctrine is the Marine Insurance Act, s. 17, which provides as follows:
A contract of marine insurance is a contract based upon 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.
* Senior Lecturer in Law, University of Nottingham. This article is an expanded version of a paper delivered to the inaugural meeting of the Maritime Law section of the Society of Public Teachers of Law, Manchester 1998.
1. Black King Shipping Corp. v. Massie (The Litsion Pride)
[1985] 1 Lloyd’s Rep. 437.
2. Joel v. Law Union Insurance Co. [1908] 2 K.B. 863; Lambert v. Co-operative Insurance Soc. Ltd
[1975] 2 Lloyd’s Rep. 485; Pan Atlantic Insurance Co. Ltd v. Pine Top Insurance Co. Ltd [1995] 1 A.C. 501, 518. Section 18 is largely a codification of principles laid down by Lord Mansfield in Carter v. Boehm (1766) 3 Burr. 1905, 1909, a case concerning insurance of a fort.
165