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

104 CONNECTICUT INSURANCE LAW JOURNAL [Vol. 16:1
other common contracting situations, the parties similarly lack equality of
information. The explanation for this exceptional feature of insurance
must, therefore, lie elsewhere. The investigation begins by considering
Lord Mansfield’s reasoning. It then goes on to review the jurisprudence
surrounding the good faith requirement and how it evolved into a duty of
so-called utmost good faith.
B. THE RATIONALE
Lord Mansfield explained that the policy considerations underlying
the duty are the prevention of fraud and the furtherance of good faith: it
therefore fulfils a prophylactic role. 23 He based it upon the concept of
“concealment,” but over time this developed beyond deliberate
concealment so as to encompass all non-disclosure, however innocent, of a
material fact. In Carter v. Boehm, the underwriter had argued that the
insured had been fraudulent in failing to disclose the fort’s vulnerability to
attack. 24 This contention was unsuccessful, it being held that the
underwriter must be taken to have realised that the Governor, by insuring,
obviously apprehended the possibility of an attack. 25 By underwriting the
risk, the insurer thereby assumed knowledge of the state of the fort. 26 It
was stressed that the underwriter, sitting in London, was in a better position
than the Governor to stay informed about the fortunes of the war and so it
was not a matter within the private knowledge of the Governor only, but
was, in fact, in the public domain. 27 Lord Mansfield concluded that a
verdict in favour of the underwriters would have had the effect of turning a
rule against fraud into an instrument of fraud. 28 He proceeded on the basis
that good faith was a mutual duty, not an obligation borne solely by
23
This is a narrower view than that expressed over a century later by
Channell J in Re Yager & Guardian Assurance Co., [1912] 108 L.T. 38 (K.B.), to
the effect that the rationale underlying the disclosure duty is not the need to
prevent harm to the insurer as such, but the need for a true and fair agreement
whereby risk is transferred. Id. at 44-45.
24 Carter, 97 Eng. Rep. at 1163.
25 Id. at 1167.
26 Id.
27 Id.
28 Id. at 1169.