Marine Cargo Insurance
5
GOOD FAITH, NON-DISCLOSURE, MISREPRESENTATION AND THE DUTY OF FAIR PRESENTATION
Introduction
5.1 This chapter considers good faith, non-disclosure and misrepresentation under the current law and, in parallel, analyses and compares the duty of fair presentation introduced by the Insurance Act 2015, which comes into force on 12 August 2016.1 The chapter begins with a consideration of the principle of good faith, which is the setting for both the current disclosure obligations2 and for the duty of fair presentation that applies under the 2015 Act.3 Disclosure, misrepresentation and the duty of fair presentation under the 2015 Act are then considered and compared, following which the remedies for breach of the duty are examined. The next section of this chapter deals with “Contracting Out” as the provisions regarding the duty of fair presentation under the Insurance Act 2015 are a default scheme subject to contracting out. Finally, the application of the rules as to materiality and inducement is illustrated in the context of marine cargo examples. 5.2 Where a consumer is insured, the Consumer Insurance (Disclosure and Representations) Act 2012 (“CIDRA”)4 has abolished the disclosure obligation and substituted a duty on the consumer to take reasonable care and not to make misrepresentations to the insurer.5 CIDRA defines a consumer as an individual and a consumer insurance contract is one which is entered into by an individual “wholly or mainly” for purposes unrelated to the individual’s “trade, business or profession”.6 Although cargo insurers occasionally insure individuals,7 particularly in relation to international removals of furniture and effects, consumer insurance is outside the scope of this book which deals with non-consumer insurance.8The principle of good faith
The role and rationale of the principle
5.3 Section 17 is the first of four sections of the Marine Insurance Act 1906 headed “Disclosure and Representations”. It sets the scene for the application of the rules relating to disclosure, representation and the duty to make a fair presentation9 by stating the general principle that, “a contract of marine insurance is a contract based upon the utmost good faith”.10 In essence, the principle “forbids either party by concealing what he privately knows, to draw the other into a bargain”.11 Lord Mansfield summarised the rationale behind the doctrine in the following well-known passage from his judgment in Carter v. Boehm:12“The special facts, upon which the contingent chance is to be computed, lie most commonly in the knowledge of the insured only: the underwriter trusts to his representation, and proceeds upon confidence that he does not keep back any circumstance in his knowledge, to mislead the underwriter into a belief that the circumstance does not exist, and to induce him to estimate the risk, as if it did not exist.