The Duty Of Disclosure - Part 1 of 2

Introduction.

It is a fundamental principle of insurance law that the utmost good faith must be observed by each party. This rule was stated clearly by Lord Mansfield since 1766, when he said¹that: "Insurance is a contract upon speculation. The special facts, upon which the contingent change is to be computed, lie more commonly in the knowledge of insured only: the underwriter trusts to his representation and proceeds upon confidence that he does not keep back any circumstance in his knowledge, to mislead the underwriter into a belief that the circumstance does not exist and to induce him to estimate the risqué as if it did not exist. The keeping back of such a circumstance is a fraud and, therefore, the policy is void. Although the suppression should happen through mistake, without any fraudulent intention; yet still the underwriter is deceived and the policy is void; because the risqué run is really different from the risqué understood and intended to be run at the