Whither the Duty of Good Faith in UK Insurance Contracts, John Lowry

130 CONNECTICUT INSURANCE LAW JOURNAL [Vol. 16:1
It will be recalled that Lord Mansfield returned to the role expected of
underwriters during the disclosure process in Noble v. Kennoway, in which
he held that the insurer was under a duty to inform himself of the practices
of the trade he insures. 165 Further, in Court v. Martineau, he was prepared
to draw the inference that the insurer had waived the disclosure of certain
facts by the large premium he charged for underwriting the risk in
question. 166
Opportunities to consider the insurers’ duty of utmost good faith
have been rare in modern times. However, in Banque Keyser Ullman S.A.
v. Skandia (U.K.) Insurance (C.A.), Slade L.J. said that the insurers’ duty of
disclosure should
… extend to disclosing facts known to him which are
material either to the nature of the risk sought to be
covered or the recoverability of a claim under the policy
which a prudent insured would take into account in
deciding whether to place the risk for which he seeks cover
with that insurer. 167
The House of Lords approved Slade L.J.’s reasoning in this respect. The
only remedy available to the insured where the insurer is in breach of duty
is avoidance ab initio. In practice, this affords little or no benefit to
insureds. An insurer’s breach will come to light when the loss has been
suffered – a time when an insured will want full recovery rather than a
return of the premium.
More recently, however, the issue has come to the fore in the
context of determining the insurer’s role during the disclosure process
not be told what lessens the risque agreed and understood to be
run by the express terms of the policy. He needs not to be told
general topics of speculation: as for instance - the under-writer is
bound to know every cause which may occasion natural perils….
Id. This particular element of the judgment was later codified, virtually verbatim,
in the Marine Insurance Act, 1906, 6 Edw. 7, c. 41, § 18(3) (Eng.).
165 (1780) 99 Eng. Rep. 326. See also Mayne v. Walter, (1782) 99 Eng. Rep.
548.
166
(1782) 99 Eng. Rep. 591. See also Drake Ins. plc v. Provident Ins. plc,
[2004] Q.B. 601 (reasoning of Rix L.J.).
167 [1990] 1 Q.B. 665 (A.C.) at 772. See also Aldrich v. Norwich Union Life
Ins. Co. Ltd., [1999] 2 All E.R. (Comm) 707.