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

134 CONNECTICUT INSURANCE LAW JOURNAL [Vol. 16:1
Martineau. 190 Further, the clear implication seems to be that given that the
insurers or reinsurers draft the policy terms; there is more than adequate
opportunity for them to take the necessary steps to protect themselves in
relation to the risks to be underwritten.
C. ALIGNING THE INSURER’S REMEDY OF AVOIDANCE WITH THE
DUTY OF UTMOST GOOD FAITH
We have seen that the consequence of non-disclosure is to render
the insurance contract voidable, thereby entitling the insurer to avoid it ab
initio. 191 Any premium paid is returnable to the insured except in cases of
fraud (unless the policy otherwise provides). 192 Not surprisingly, as with
the requirements of inducement and waiver, the conditions governing the
exercise of the avoidance remedy have also attracted considerable judicial
attention of late. Again, the views expressed have not been entirely
consistent. In The Grecia Express, Colman J. suggested that the right to
avoid is conditional upon the insurer acting with “duty of the utmost good
faith.” 193 He also reasoned, as commented above, that an insured is entitled
to litigate the issue of the truth or falsity of material circumstances in order
to argue that, if it is shown to be incorrect, the insurer would be acting in
bad faith or unconscionably in avoiding the policy. 194 In a similar vein, in
Manifest Shipping Co. Ltd. v. Uni-Polaris Shipping Co. Ltd., 195 Lord
Hobhouse, delivering the leading speech, identifies the need for some
balance to be struck between the parties in the post-contract situation and
suggests, as did Lord Mansfield in Carter v. Boehm, that the courts should
guard against the danger of the good faith duty being turned into an
190 (1782) 99 Eng. Rep. 591.
191
Abram Steamship Co. v. Westville Shipping Co., [1923] A.C. 773, 781.
See also Glasgow Assurance Corp. v. Symondson & Co., (1911) 16 Com. Cas.
109, 121 (Scrutton J., suggesting that the only remedy available for non-disclosure
is avoidance of the contract).
192 PARK, supra note 18, at 218. The Marine Insurance Act, 1906, 6 Edw. 7,
c. 41, § 83(3)(a) (Eng.) provides, “Where the policy is void, or is avoided by the
insurer, as from the commencement of the risk, the premium is returnable,
provided that there has been no fraud or illegality on the part of the assured . . . .”
193
Strive Shipping Corp. v. Hellenic Mut. War Risks Ass’n (Bermuda) Ltd.
(The Grecia Express) [2002] EWHC 203.
194 Id.
195 [2003] 1 A.C. 469, 496-97.