The continuing duty of utmost good faith
| Jurisdiction | South Africa |
| Author | Robert Merkin |
| Published date | 25 May 2019 |
| Citation | (1998) 10 SA Merc LJ 135 |
| Pages | 135-144 |
| Date | 25 May 2019 |
The Continuing Duty of Utmost Good Faith
ROBERT MERKIN*
Cardiff Law School
MICHELLE GEORGE**
Wilde Sapte
1 Juridical Basis of the Continuing Duty
Section 17 of the Marine Insurance Act 1906 (England) states that a
contract of insurance is one of utmost good faith. Sections 18 to 20 set
out the operation of that duty as regards disclosure and misrepresenta-
tion. It has often been commented by judges that ss 18-20 are simply
illustrations of the wider principle in s 17, and that the duty of utmost
good faith is not confined to pre-contractual matters.
1
However, the ambit
of that wider principle has yet to be finally determined despite the
numerous cases which have sought to apply the principle in recent years.
The modern starting point is
Black King Shipping Corporation and
Wayang (Panama) SA v Massie (The 'Litsion Pride').
2
In that case the
insured vessel was destroyed in a war zone. The policy provided that if
the vessel was to enter a war zone, notice was to be given to underwriters
and an additional premium was to be payable. Following the loss of the
vessel, notice was given to the insurers, it being suggested that the notice
had been given in due time but had been delayed. Hirst J, after a lengthy
review of the evidence, drew the inevitable conclusion that the assured
had tried to slip the vessel through a war zone as a short cut while
avoiding the obligation to pay an additional premium for that period, and
indeed the evidence showed that the assured was at the time insolvent
and could not have afforded any additional premium. The case was,
therefore, disposed of on the ground that the assured had fraudulently
made a false claim by misdescribing the circumstances surrounding the
loss. The troublesome aspect of the case is Hirst J's obiter acceptance
of the alternative analysis that, even if fraud had not been proved,
the underwriters could have avoided liability by demonstrating that the
assured had misstated material facts surrounding the circumstances of
the loss. The matter was put thus: whenever there is a contractual
requirement for the insured to give the underwriter information
which is material in that it would influence the judgement of a prudent
underwriter in making a decision under the contract for which the
information is required, the continuing duty of utmost good faith
* Professor of Commercial Law, Cardiff Law School; Insurance and Reinsurance Consultant,
Wilde Sapte, solicitors, London.
** Commercial Litigation Partner, Wilde Sapte, solicitors, London.
1
See, for example,
Container Transport International Inc and Reliance Group Inc v Oceanus
Mutual Underwriting Association (Bermuda) Ltd
2
135
(1998) 10 SA Merc LJ 135
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