When Does The Duty Of Utmost Good Faith Arise - Part I

Published: 25th August 2010
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Historically, the duty of utmost good faith has been considered to be a pre-contractual duty and extends up until the date when the contract is completed - not when the contract actually incepts. This is logical because the underwriter's judgement can only be affected until such time as he has completed the contract. In the case of a contract placed at Lloyd's, completion might occur two or three months before the inception of the policy of insurance, or afterwards.

In Black King Shipping Corporation and Wayang (Panama) S.A. v. Massie (The Litsion Pride) [1985] 1 Lloyd's Rep 437, Hirst J endorsed the view that "the assured must act with the utmost good faith towards the underwriters, this being an obligation which rests upon them throughout the currency of the policy". This is all very well in theory, but it is difficult to see what steps the underwriter could take after the completion of the contract to change his position even if he does discover material facts-the contract is concluded. Therefore, primarily, the continuing duty must relate to the proper presen┬Čtation of claims or a change to the risk rather than to the underwriting of the contract.

What if certain facts change during the currency of the contract? For example, the assured may have represented to the insurer prior to inception that its warehouse premises were patrolled by four security guards. This was indeed true at the time the contract was completed, but during the currency of the contract, prohibitive costs causes the assured to reduce the number of security guards to two.

Willis J. Watson is a freelance writer since 2006, living in United States and he writes about he enjoys the most...insurance policies. If you want to read more informations about Landlord Insurance Quote and also read more reviews about Commercial Insurance Quotes, you can check out his websites.

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