INSURANCE LAW 1.2 UTMOST GOOD FAITH
Requires that parties to the contract must disclose all material facts within their knowledge. Non-disclosure or misrepresentation amounts to a breach of this duty and the innocent party would be entitled to avoid the contract especially where such induced him to enter the contract-University of Nigeria Nsukka V Turner. As Lord Mansfield noted in ***Carter V Boehm that good faith forbids either party, by concealing what he privately knows to draw the other party into a bargain.
EXTENT AND NATURE OF THE DUTY:
- It applies to all kinds of insurance contracts-Jessel Mr in London Assurance V Mansel.
- The duty is to disclose matters of fact rather than opinion: In Akpata V African Assurance Insurance Co, The insured replied that he was in good health (although he had complained of stomach pain). He was diagnosed of stomach cancer after the insurance had been taken out. Court held that he did not breach the duty.
- The duty is to disclose facts within one’s knowledge. In Joel V Law Union and Crown Incorporation, the insurers sought to avoid liability where the insured committed suicide out of mental depression. They claimed that the insured failed to disclose that she was suffering from acute depression. The court held that since she did not know, she owed no duty to disclose.
- There is no duty to disclose matters of common knowledge… facts which the insurer already knows or is presumed to know-Carter V
Facts which suggest that the subject matter is exposed to more danger, point to the moral integrity of the insured (like past criminal conviction(s)), health (Canning V Farquhar), age, previous insurance history (London Assurance V Mansel).
At common law, facts which may induce or prevent the insured/insurer from entering the contract were deemed to be material. A material fact was whatever a prudent insurer would consider as material. However, by virtue of Section 54 and 55 of the Insurance Act 2003 any information not specifically requested shall be deemed immaterial. In Schoolman V Hall, the court held that since no questions were asked about the insured’s criminal history, he needed not to disclose that he had a shady past.
In practice, insurers usually put an omnibus clause “is there any other thing we ought to know?” thereby going back to the common law provision.
By virtue of Section 54(2), an insurance agent who assists the insured in filling the application is deemed to be the agent of the insured-National Assurance co V Iduogbe follows the same position. To this end, disclosure made to the agent (acting within his authority) is disclosure to the insurer.