THE DOCTRINE OF UTMOST GOOD FAITH UNDER COMMON LAW

The doctrine of uberrima fides is one of the most relevant concepts in insurance law. The principle of 'most good faith' has always been the crown in the field of marine insurance law. This doctrine came from the Carter v Boehm case and the doctrine evolved under common law in the following cases until the codification of the 1906 Marine Insurance Act. However, there are still some differences in English law concerning the understanding of the utmost good faith in practice, as the test is based on a hypothetical situation and the scope of the statutory provisions are still uncertain. Therefore, the analysis of this doctrine is crucial for the study of the Marine Insurance Law in the United Kingdom, which requires a study of the pre-existing Common Law describing the basis and approach of the courts, and also, if necessary, to reshape the law on marine insurance. 

Definition of Marine Insurance: The contract of Marine Insurance is a special (insurance) indemnity arrangement that protects against physical and other damage to moveable property and related assets, as well as against liabilities that occur or emerge during the course of a sea voyage. As per section 1 of Marine Insurance Act of 1906, “A contract of marine insurance is a contract whereby the insurer undertakes to indemnify the assured, in the manner and to the extent thereby agreed, against marine losses, that is to say, the losses incident to marine adventure.”

Origin of Doctrine of Good Faith: The common law doctrine of "good faith" in insurance contracts originated in the 18th century. Lord Mansfield is credited with the first articulation of this concept in Carter v Boehm. The action was based on a 12-month insurance policy for the benefit of the governor of Fort Marlborough, George Carter, against the loss of Fort Marlborough on the island of Sumatra in the East Indies by a foreign enemy. The governor also had an insurable interest in the goods he owned, which were kept at the fort. The event against which it had been insured occurred: the fort was taken over by Count D'Estaigne during the political period. The defendant's underwriter, Mr Charles Boehm, denied that underwriters were liable to pay the insured for a fraud arising from the concealment (non-disclosure) of circumstances that should have been revealed – in particular, the fort's vulnerability and the French's possibility to attack the fort.

The complainant should not have done the concealment, rather should have revealed all that was of concern in that insurance policy. If the reality had been known to the insurer the situation would have been different. Two letters from the governor were relied upon in support of the insurer's defence – one to his uncle, his trustee, the complainant in the case, and the other to the East India Company governor. The first letter to his brother suggested that the governor was in much fear that the French would have invaded before. In the eye of the first letter, the governor conjectured to his brother that the French have such an intention the previous year. They said he would not have taken the fort's insurance if the governor had revealed what he knew or what he ought to have known. This was indeed dishonest concealment and the underwriters should not be held responsible.