Uberrima Fides in Marine Insurance Contract…

Insurance and Reinsurance, Legal, Marine Insurance — By on December 19, 2014 at 11:12 AM
Mariella Theophanous

Mariella Theophanous

Uberrima Fides in Marine Insurance Contract; Fairness, Commercial Suitability and Possible Reforms,  by Mariella Theophanous of L. LOUCAIDES-THEOPHANOUS LLC

Abstract

Parties in insurance contracts are under a duty to act in utmost good faith – Uberrima fides. There has been controversy as to the duties said to flow from the duty of utmost good faith. The author suggests that the pre-contractual duties that are often categorised as flowing from the good faith principle are in fact minimum functionality rules necessary to contracts of speculation. Utmost good faith does not and should not have anything to do with the imposition of duties and there is no need to refer to a duty of utmost good faith as a guiding principle. As to the post-contractual context of duties between insurers and assureds, there is a growing understanding that utmost good faith is irrelevant.  In addition to the above, the utmost good faith concept should be abandoned as a guiding principle or a general duty due to its uncertainty that negatively impacts commerce and unduly prejudices the assureds. Until the legislature takes a step towards this direction, the courts could equate the utmost good faith duty in s.17 of the Marine Insurance Act 1906 with the duties of disclosure and non-misrepresentation. Finally, it can be strongly argued that the remedy for breach of the duties of the assured is too harsh and disproportionate.

The first part of the article will analyse the emergence of the duty of good faith. The second part will discuss the duty’s codification in statute and the duties said to be flowing from it, as found in statute. The third part will discuss the breach of duties and the final part will comment on proposals for reform. The aim of this article is to offer fresh perspectives on the understanding and application of the duty of utmost good faith and to contribute to the existing area of study.

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