The Good Faith In The Insurance Contract
Dissertations Gratuits : The Good Faith In The Insurance Contract. Recherche parmi 300 000+ dissertationsPar jamesman • 12 Février 2013 • 1 616 Mots (7 Pages) • 1 235 Vues
Before dealing with the evolution of the doctrine of utmost good faith and determining whether it is still alive and well, we must consider the doctrine in itself and see how it was applied before the 21th century.
The doctrine of utmost good faith – which creates an obligation, on the both parties of an insurance contract, to reveal all the material facts prior the contract - was established by Lord Mansfield in the case Carter v Boehm1. We can reasonably think that this doctrine was established in order to encourage good faith. Indeed, relationships between contractors should be based on the trust and the good faith is the first step of such a relationship. By protecting this fundamental step and by preventing the fraud, the law place itself as a “moral guardian” of the trust between the insurer and the insured. If this vision of the law can be seen as utopist, it does not make any doubt, that in the 18th century, this vision of law was beyond the doctrine of the utmost good faith.
However, Lord Mansfield restricted the doctrine. He stated that the insured does not have to mention the material facts that the insurer knows or is deemed to know. The fact that there is a restriction to the doctrine can be seen as dramatic for the evolution of the latter. Indeed, it is, perhaps, because the doctrine was not completely “pure” at the origin that it would softly become less strong under the pressure of our modern age. If this restriction can be seen as fair enough; it seems that, on the other hand, the only justification on such a limitation was that the insurance law should have for aim the protection of the insured welfare. Indeed, the proposer or insured can profit from the “weak-professionalism” of the insurer by not divulging materials facts that the insurer should have known and therefore getting an insurance contract he should have not obtained. It follows that the balance of trust between the both parties is not equal anymore. If the reasoning beyond this restriction can seem fair, the effects show us that, from the origin, the doctrine was not as perfect as we can think and therefore the evolution of the doctrine appear as not outrageous and unforeseeable as we could think – even if the motives upon this evolution can be dictated, sometimes, by cynical “rules of profits” in a consumerist society; we will return on this point later.
Finally, Lord Mansfield stated, from the date of the origins of the doctrine, that the duty of good faith does not have consequences just for the proposer or insured but that insurers are also subject to a similar duty. Indeed, this doctrine is reciprocal.
The principle of good faith was then codified in the Marine Insurance Act 1906. It is the section 17 which provides the doctrine under the heading “Disclosure and Representation”.
It is interesting to see how the doctrine moved from the 18th century to the 21th century and to determine if the weak balance [between the insured and the insurer], given by lord Mansfield, is still alive nowadays. The remedy of avoidance is one tool which allows us to appreciate such an evolution.
If the doctrine of utmost good faith is shown not to have been observed, the contract of insurance can be avoided by the insurer. The non respect of the doctrine put back the parties in their pre-contract positions - which is an extremely severe remedy. Indeed, in doing so, it is not only the relevant claim which is avoided but the wholly contract. If we think that the remedies are proportionate to the harm caused by the non-respect of law, it has to be admitted that the doctrine of utmost good faith is extraordinary strong in the insurance law.
This “all or nothing” remedy of avoidance under s17 is the quintessence of the doctrine of utmost good faith. As long as this remedy applies, we can say that the doctrine is still well and alive.
But there are temptations to limit the remedy of the breach of the disclosure theory (which is the continuing of the doctrine of the utmost good faith as well as the duty of misrepresentation).
There are interesting questions arise regarding non-disclosure and misrepresentation in co-insurance situations. Co-insurance arises when more than one party insures separate insuring under the same policy. The question is whether the insurer is entitled to avoid the wholly policy, when only one co-insured is guilty of a material non-disclosure or misrepresentation, in the case where there is only one contract. If it seems difficult for the insurer to avoid only against one party where there is a single contract2, the Court of Appeal, on the other hand, did not give the right to the insurer to avoid against an innocent co-insured in New
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