THE DOCTRINE OF UBERRIMA FIDES IN INSURANCE LAW—A CRITICAL EVALUATION
| Author | R. A. Hasson |
| DOI | http://doi.org/10.1111/j.1468-2230.1969.tb01239.x |
| Published date | 01 November 1969 |
| Date | 01 November 1969 |
THE DOCTRINE
OF
UBERRIMA
FIDES
EVALUATION
IN INSURANCE LAW-A CRITICAL
To
give a legal rule a certain rubric is of course a very important
way of determining the fate in the future
of
that particular rule.
Few
of
us
are against
an
equitable
”
rule, for example, just
as
there ,are bound
to
be few supporters
of
a
rule which
is
against
public policy.”
If
we go further
and
translate our rule into a
foreign language, its goodness
”
(or
badness
”
as the case
may be) is heavily underlined. Thus a rule requiring
“
uberrima
fides
”
from a contracting party is more impressive sounding than
one merely requiring the exercise of “the utmost good faith.”
Con-
versely,
to
say that something
is
<<
contra
bonos
mores
”
seems
to
be
more damning than
to
say that the same thing
is
against public
policy.”
Whether
it
is the above factor
or
some other,
it
is
surely
remarkable that the insured’s duty
to
disclose material facts to
the insurer
on
his
own initiative-the malled
ubelrima
fides
principlehas been subjected
to
virtually
no
critical assessment by
either English courts
or
commentators.
In
this paper,, an attempt
will be made
to
suggest that the current English principle is
thoroughly unsatisfactory
in
that
it
does
not
reflect the reasonable
expectations
”
of
insurer and insured and in that
it
is
a
rule that
works
against
fairness
”
in the insurance contract.’
An
(attempt will also be made
to
show that the classical doctrine
on
this subject as stated in the leading case
of
Carter
v.
Boehm
has
been misunderstood and misapplied by English courts.
By
way
of
sharp contrast American courts in the nineteenth century correctly
understood and interpreted the case.3
1
An
attempt will be made to give
content
Q
hhese &her amorphous notions
of
‘’
good
fai8th
”
during khe course
of
this
paper.
For
an excellent diacuaaion
of
these
and
related notions
in
lthe law
of
insurance,
see
Kessler,
Forces
Sharing
the
Life
Insurance
Contract
in
University of Chicago Law School
Conference
on
Insurance (Conference
Series
No.
14,
1954)
3.
I
em greakly indebted to Professor Friedrich
Eawler
for
his
considerable
cw&.tance in helping me
to
6hink about,
and
to
give weight
to,
lthese con-
eiderakions.
He
does
not,
of
course, bear
any
responsibility for euch
con-
clusions
ae
I
have ‘reached
in
&he presenlt paper.
2
(1766)
3
Burr.
1905.
3
An
analogy
can
be made here with regard
to
the problem
of
“insurable
intered
”
in marine iasurance
law
;
here
also,
khe
‘‘
liberal tnadition
”
of
Lord Mansfield has prevailed
in
the
United
Stakes
after being rejected
in
England.
See
Lord Chorley,
“
Liberal Trends
in
Present-Day Commercial
Law
”
(1940)
3
M.L.R.
972
ah
278-279.
615
616
THE
MODERN
LAW
REVIEW
VOL.
32
CARTER
v.
BOEHM
AND
AFTER
In
Rozanes
v.
Bowen
Scrutton
L.J.
said that,
“It
has been for
centuries in England the law
in
connection with insurance
of
all
sorts
.
.
.
[that] it is the duty of the assured
.
. .
to make a full
disclosure
to
the underwriters without being asked of all the
material circumstances
.
.
.
$2
5
Since the above passage reflects a very widely held assumption
among both English judges and commentators,
it
would be well
to examine its accuracy.
It
is
submitted that the statement quoted
above reflects only very recent judicial doctrine and not a rule of
great antiquity. Indeed, the lalleged principle,
so
far from being
a correct statement of the law in all types
of
insurance, does not
even accurately describe the law with regard to marine insurance in
the eighteenth century.
All this leads us to
Carter
v.
Boehm
6;
in that celebrated
decision,
it
will
be recalled, the insurer set up, as
a
defence against
the insured, the argument that the insured had not disclosed (in
a marine policy)
a
highly material fact, namely, the weakness
of
Fort Marlborough
on
the island of Sumatra ‘and the probability
that the
Fort
would be attacked by the French.
In
the course
of
his judgment Lord Mansfield
C.J.
laid down as follows
:
‘‘
The special facts, upon which the contingent chance
is
to
be computed, lie most commonly in the knowledge
of
the
insured only; the under-writer trusts to his representation, and
proceeds upon confidence, that he does not keep back any
circumstance within his knowledge,
ta
mislead the under-writer
into
a
belief that the cirwmstance does not exist, and
to
induce
him
to
estimate the risque, as
if
it
did not exist.”
This
passage has been rcspeatedly cited
to
the point where the
rest
of
the Chief Justice’s opinion hmas been ignored. The effect of
this lop-sided reading
of
the judgment has been
to
make
it
appear
that
it
is the insured’s duty
to
supply information while the
insurer’s role in this process
is
an entirely passive one.
A
reasonably careful reading of the opinion, however, makes
it
clear that Lord Mansfield placed the responsibility for obtaining
the relevant material information
on
the insurer. After sll,
it
was
the insured, and not, as someone familiar only with the quoted
passage might have (assumed, the insurer, who was the successful
party
in
the litigation.
The most important concealment alleged by the insurer was
with regard to the
‘(
condition of the place.”
On
this point, Lord
Mansfield said
:
‘‘
The underwriter knew the insurance was for the governor.
He knew the governor must be acquainted with the state
of
the
place. He knew the governor could not disclose
it,
consistently
with his duty. He knew the governor, by insuring, appre-
4
(1928)
32
L1.L.R.
98.
6
(1766)
3
Burr.
1905.
5
Ibid.
7
nia.
at
p.
1909.
Nov.
1969
UBERRIMA
FIDES
IN INSURANCE LAW
617
hended; at least, the possibility of
an
attack. With this
knowledge, without asking
a
question, he underwrote. By
so
doing, he took the knowledge of the state of the place upon
himself.
It
was
a
matter,
as
to
which he might be informed in
various ways
:
it
was not a matter, within the private knowledge
of the governor only.”
.
This passage would seem
to
indicate beyond any doubt that Lord
Mansfield conceived of the insured’s duty as being
a
very narrow
It
is difficult
to
believe that an English insurer in
1766
would
have found
it
particularly easy
to
obtain extra-official information
on
the security
of
Fort Marlborough from foreign capture but this
is precisely what Mansfield required of an underwriter, once such an
underwriter had been put
“
on
guard
”
by the application from the
governor
for
insurance. In short, the insured’s duty to disclose
arises only with regard
to
facts that the insured
“
privately knows,
and the [insurer]
is
ignorant
of,
and has
no
reason
to
suspect.”
lo
Perhaps the next most significant case in which
Lord
Mansfield
expressed his views
on
the subject of the insured’s duty
to
disclose
is
Mayne
v.
Walter
(1787).”
h
this case, the insured (plaintiff)
sought
to
recover against the insurer in respect of the loss
of
super-
cargo, which was lost when the ship carrying
it
was captured by a
French privateer. The insurer resisted ,payment arguing that the
insured should have disclosed that there was in force at the relevant
time a French ordinance providing that
no
Dutch ship could carry
the super-cargo
of
a country at war with France
on
pain of such
cargo being seized as prize. Mansfield decided in favour of the
plaintiff; the core of his brief judgment is worth quoting in some
detail
:
“If
both parties were ignorant of it [the ordinance], the
underwriter must run all risks: and if the defendant knew
of
such
an
edict
it
was his duty to enquire,
if
such a supercargo
were
on
board.”
l*
Then, in the next sentence follows the statement
of
principle which
underlies this oase ‘as well as
Carter
v.
Boehm.I3
‘‘
It
must be a
fraudulent
concealment of circumstances, that will vitiate
a
policy.”
l4
Ibid.
a.t p. 1915.
9
It is submitted that the
fa&
that
Lord
Manafiel: regarded the principle
of
disdmure he was dating in the present case
as
applicable
to
a11
conkmots
and
ddings,”
(ibid.
at
p. 1910) tends
to
support Qhe argument .that he
thought
of
the duty
of
disclosure
in
narrow
terms.
Cedainly one would not
expe&
so
praiotical
a
judge
to
decree something
as
obviously imprmtical as
a
broad duty
of
dieclosure applicable throughout the whole range
of
contrwtual
ddings.
10
Ibid.
ah
p.
1911.
11
See
khe
report.
in Park,
The Law
of
Marine Insurances
(1787)
at
p.
220.
12
Ibid.
l3
See
note
2,
supra.
14
See
Park
(note
11,
supra)
at p.
221.
The
decisions
in
Carter
v.
Boehm
and
Mayne
v.
Walter
are
cited
only
a.s
examples
of
Mansfield’s approach; the
views he
skates
in them are echoed in
a
number
of
other si nifioant decisions.
See,
e.g., Nobel
v.
Kennoway
(1780)
2
Doug. 510; held unserwriter under
an
obligation
to
inform himself with respect to the practice
of
the trade he insures,
618
THE
MODERN
LAW
REVIEW
VOL.
32
The position which
Lord
Mansfield took up in these and other
cases was followed in
Friere
v.
Woodhouse (1817).“
In
that case,
the insurers argued, unsuccessfully, that the insured (plaintiff)
should have disclosed the fact of the arrival
of
the
Victonoso,
a ship
which had sailed in company with the insured’s ship. Burrough
J.
held that the times of arrival of vessels must be presumed
to
be
within the knowledge
of
the underwriters, since they could easily
learn of
it
by consulting Lloyd’s printed lists, where such informa-
tion could be easily obtained. Without speaking
of
the need to
show
‘‘
fraud,” the opinion,
in
effect, seems
rto
require precisely this
before avoiding the policy because of In the judge’s
words
:
‘‘
What
is
exclusively known
to
the assured ought to be
communicated; but what the underwriter,, by fair inquiry and
due diligence, may learn from ordinary sources of information
need not be disclosed.”
l1
Again,
it
seems abundantly clear that (even) in cases of marine
insurance the insured’s duty of disclosure at the end of the
eighteenth century was
a
narrow one. The duty did not arise in
respect
of
facts which the insurer might discover by
“
fair inquiry
”
pursued with
cc
due diligence.” (We have seen, through the decision
in
Carter
v.
Boehrn,l8
that these requirements might be very onerous
ones for the insurer, in
a
particular situation.) Unfortunately,
developments in the nineteenth century began to undercut the
simple and entirely rationa,l body
of
principle, whose outline we
have traced.
It
is relevant now
to
examine some of these develop-
ments.
DEVELOPMENTS
IN
THE
NINETEENTH
CENTURY
Zn
1828
there was decided the ease of
Lindenau
v.
Desboro~gh,~~
whose facts are
so
peculiar
that
it
is
difficult
to
appreciate its having
any general importance for the ,subject under discussion. However,
largely because of some uniiecessary dicta by two judges, the case
has acquired a greater importance. The Duke of Saxe Gotha had
placed his insurance with the insurer’s agents in Germany and the
present action was brought
to
recover money payable
on
the policy
after the Duke’s death. The insurer
set
up as
a
defence the fact
that the Duke’s doctors in Germany had mentioned that the Duke
was hindered in his speech but they had not made any mention of
the Duke’s
“
mental faculties
”-a
highly relevant omission since
regardless of whether such practice
is
established or not; and
also
Court
v.
Martineau
(1782)
8
Doug.
161,
where Lord Mansfield held that an insurer’s
decision to waive certain information could be inferred from the payment by the
insured
of
a
very large premium.
15
1
HOD
N.P.
578.
16 See,
e.g.,
Mackintosh
v.
Marshall
(1843)
11
M.
&
W.
116;
Foley
v.
Tabor
(1861) 2
P.
&
I?.
662
for similar hddinga.
1‘
See note
16,
supra,
at
p.
573.
18
See
note
2,
supra.
19
(18’28)
8
B.
&
C.
586.
Nov.
1969
UBERRIMA
FIDES
IN INSURANCE LAW
619
the Duke eventually died as the result
of
a
large tumour
on
the
brain which he had had for a number
of
years and which might
well have been the source
of
his speech and mental difficulties. Lord
Tenterden
C.J.
found for the defendant (insurer); his opinion does
not appear
to
attempt any broad statement of principle. He seemed
to
attach great importance
to
the
fact
that:
“
In
the present case,
the insurance
was
upon the life
of
a foreigner.”
2o
On
this very
narrow basis, the outcome is defensible and rational. The insurer in
the circumstances was bound
to
rely
on
the assessment
of
the
Duke’s doctors;
to
have required the Duke
to
come
to
England for
an
independent medical examination,
one
might well assume, was
not a practical alternative at. the time the case wss decided.
In
their concurring judgments, however, Bayley
J.
and Littledale
J.
made general statements of principle, which are remarkable for
their breadth. Bayley
J.
stated
:
‘‘
I
think that in all cases
of
insurance, whether
on
ships,
houses,
or
lives, the underwriter should be informed
of
every
material circumstance within the knowledge of the assured; and
that the proper question is, whether any particular circumstance
was in fact material and not whether the party believed
it
to be
so.
The contrary doctrine would lead
to
frequent suppression
of information, and it would often be extremely difficult to
show that the party neglecting
to
give the information thought
it
material.”
21
In
a similar vein, Littledale
J.,
after pointing out that in cases
of
life insurance
cc
certain specific questions are proposed as to points
affecting in general all mankind,” noted in addition:
“
but there
may also be circumstances affecting particular individuals which
are
not
likely
to
be
known
to
the assurers.”
22
The insured was,
in
his Lordship’s view, under a duty
to
disclose any material facts
in
this area (regardless of whether the insured believed the fact
to
be
material
or
In
Bates
V.
Hewitt
(1867),24
a
landmark marine insurance case,
there was handed down not only very broad dicta such as we have
seen in
Lindenau,
but also
a
very signillcant decision which demon-
strates
clearly the change
in
legal doctrine from the principles
evolved in the eighteenth century.
In
Bates,
a
policy had been effected in
1864
on
the
Georgia,
B
vessel which had been used as a Confederate cruiser in
1868
and
1864
and which was afterwards dismantled and sold
to
the plaintiff.
The name
of
the
Georgia
had been well known
to
the British public
at the time she was cruising, and
dter
s%e had been laid up in
Liverpool had been the subject
of
considerable public interest in the
20
Ibid.
,&
p.
591.
21
lbid.
at
p.
692.
22
Ibid.
ah
p.
693.
as
Ibid.
2’
(1867)
L.R.
2
Q.B.
696.
620
THE
MODERN
LAW
REVIEW
VOL.
32
London Press and in the House of Commons. The defendant, one of
Lloyd’s underwriters, had been aware
of
tall the ship’s notoriety
earlier; but at the time the risk was proposed, nothing jogged his
memory and he remained iinaware that
this
might be the
Con-
federate cruiser. While the jury found the defendant ignorant with
regard
to
‘the latter point, they also
found
that at the time of
insuring the cruiser, he had abundant means from the particulars
to
be found in the slip
of
identifying the ship. Despite the fact that
the insurer therefore had the means available
to
provide himself with
the correct information, a unanimous court held that this did not,
nevertheless, release the plaintiff from the duty
of
disclosure.
All three
of
the judges who delivered opinions made gallant
attempts at trying
to
show that the principles they were formulating
were of considerable antiquity. Thus Lord Cockburn
C.J.
stated
:
“
No
proposition of insurance law
can
be better established
than this,
viz.,
that the party proposing the insurance is bound
to communicate to the insurer all matters which will enable
him
to
determine the extent
of
the
risk
against which he
undertakes to guarantee the assured.”
It
is perhaps significant that
no
authority
is
cited
in the entire
opinion. Mellor
J.,
after making an heroic attempt to reconcile the
present decision with what Lord Mansfield said
in
Carter
v.
Boehm,20
stated the true basis underlying his opinion in the follow-
ing brief passage
:
“
I
annot help thinking that
to
enable
a
person proposing
an insurance
to
speculate upon the maximum
or
minimum
of
information he is bound
to
communicate, would be introducing
a most dangerous principle into the law
of
insurance.”
27
Finally, Shee
J.
after conceding that the underwriter in the present
case might
‘‘
if
he had instituted inquiries
”
have discovered the
material fact in question, nevertheless added:
“
but that he is
not
obliged to
do.”
28
It
will be remembered that Lord Mansfield saw
this matter from
a
lradically different angle in
Carter
v.
B~ehm.~~
Despite the
fact
that the approach exemplified by
Lindenau
v.
Desborough
30
and by
Bates
v.
He.cPritt
31
had become the dominant
one by the end of the nineteenth century,
it
is important
to
point
out that
it
rested
on
rather slender authority. Thus in
London
Assurance
v.
Man~e1,~~
in
the course
of
prescribing a broad duty of
disclosure for an assured who had taken out a life insurance policy,
Sir
George Jesse1
M.R.
relied
on
three cases, two
of
which did not
25
Ibid.
at
pp.
604-605.
26
See note
2,
supra.
27
See
note
24,
supra,
at
p.
6W.
28
Ibid.
at
p.
611.
29
See note
2,
supra.
30
See
note
19,
supra.
51
See
note
24,
supra.
32
(1879)
11
Ch.D.
363.
Nov.
1969
UBERRIMA
FIDES
IN
INSURANCE
LAW
621
deal with an insurance situation of any kind. The
first
authority
relied
on
was a dictum
of
Lord Cmworth’s in
Dalglish
V.
Ja~vie,~~
a case,
‘‘
which had nothing
to
do with insurance, but which referred
to
,the principles
on
which a special injunction ought
to
be granted
ex parte.)’
34
The second authority relied
on
is
a dictum
of
Baron Parke’s
in
Moens
v.
Heywo~th,~~
which was
‘‘
a.
case
of
an ordinary mercan-
tile contract,
not
of an insurance contra&.’:
36
The last case relied
on
is
Lindenau
v.
De~borough,~‘
whose freakish character has been
sufficiently indicated above.
The fact th’at the broad duty of disclosure had not completely
triumphed by the end of the nineteenth century is borne out, not
only by the reliance placed in cases such as
London Assurance
v.
Manse1
38 on
authorities of doubtful weight, but also by the fact that
on
a few occasions, the older and more restricted view
of
disclosure
received judicial support. Thus
as
late as
1895,
Lopes L.J.
expressed the view
in
a
case decided by the
Court
of Appeal that
mere silence
on
the part of the insured with regard
to
a material fact
did not avoid a policy, in the absence of fraud.39
TWENTIETH-CENTURY
FUNDAMENTALISM
The conflict between the
“
broad
”
and the
‘‘
narrow
”
duty of dis-
closure may fairly be said
to
have been finally resolved in favour of
the former theory by the decision
of
the
Court
of Appeal
in
Joel
V.
Law Union and Crown Insurance
(1908).“O
Since the date of that
decision the only question has been
as
to
the breadth of the duty to
disclose. In
Joel
itself the Court of Appeal drew a distinction: the
assured was under
no
duty to disclose facts he did not know of, since,
as Fletcher Moultun L.J. put
it,
‘‘
you cannot disclose what you do
not know.”
On
the other hand,
if
the assured knew of
a
fact,
his duty
to
disclose was not affected by the fact that he (the assured)
thought the fact was not a material
In
Australia and New Zealand Bank Ltd.
v.
Colonial and Eagle
Wharves Lt~l.,~~
McNair
J.
remarked
obiter
that the “trend of
opinion supported the view that the assured was under a duty to
disclose not only
known
facts but also such facts, which in the
ordinary course
of
business he the assured might reasonably be
expected
to
discover.”
44
In
line with this view, Professor Ivamy
33
(1850)
2
Mac.
&
G.
231,
243.
34
See
note
32,
supra,
sit
p.
368.
35
(1842)
10
M.
&
W.
147, 157.
36
See
note
32,
supra,
at
p.
368.
37
See note
19,
supra.
3*
See
Hambrough
V.
Mutual
Life Insurance Company
of
N.Y.
(1895)
72
L.T.
140
at
141
(C.A.).
See
also
e.g.,
the statement
by
Lo;!
Campbell C.J. in
Wheelton
v.
Hardisty
(1852)
2
El.
&
B1.
232
at
p.
273:
In
the preaent case
the plainti&
were
neither guilty
of
misrepresentation nor
of
fraudulent
concealment.”
48
[1908]
2
K.B.
863
(C.A.),
affirming
[1908]
2
E.B.
431.
41
Ibid.
at
p.
884.
43
[1960]
2 Lloyd’s Rep. 241.
38
See
note
32,
supra.
42
Ibid.
44
Ibid.
at
p.
252.
622
THE
M0I)ER.N
LAW
REVIEW
VOL.
32
has argued that an insured is guilty of a breach
of
duty towards the
insurers
if
he does not disclose facts which he might have discovered
if
he had made reasonably careful inquiries; &he determination of
whether
or
not the insured has complied with
this
duty will (we are
told)
‘<
in each case depend
on
the circumstances.”
46
It
is not essential, for present purpos~s,
to
decide whether the
law
on
this point is
&s
laid
down
in
Joel
v.
Law Union and Crown
Insurance,
or
whether
a
doctrine of
‘‘
constructive knowledge
yy
applies
to
all classes
of
insurance.
It
is very unlikely that
an
insurer
will
need
to
rely
on
the
inwned’s
‘‘
constructive knowledge
”
with
the possible exception
of
a
marine insurance case.
In
any event,
the argument of
this
paper is that even the
“
knowledge-but-not-
necessarily-appreciation
”
standard required of the insured in
Joel
is
an excessively high one and should
be
rejected.
It
is now proposed
to
examine some
of
the case-law with regard
to
athe duty
to
disclose four allegedly material facts. These par-
ticular facts have been chosen both for their importance in practice
and also because they demonstrate very clearly the unfortunate
results that are liable
to
occur
when
it
is
sought
to
apply an unsatis-
factory rule.
(1)
The claims history of the insured-including notice
of
rejection
The law in this area shows a remarkable cleavage between
marine insuramce situations (where the duty
to
disclose is extremely
narrow)
and
the situation prevailing in other fields
of
insurance
law where
an
unfairly broad duty of disclosure applies.
Thus, although
it
would be fatal
to
the ‘assured’s claim in a
marine insurance situation
It0
represent untruthfully that previous
underwriters have taken the proposed risk at the same
or
.at
a
lower
premium,46 yet the insured is not bound
to
disclose the fact that the
other underwriters have previously declined
to
accept the same
risk.47
Similarly, the insured is under
no
duty
to
report any
apprehensions that may have been expressed about the subject-
matter
of
the insurance by other under~riters,~~
or
by foreign
correspondent^.^'
By way
of
sharp contrast
it
is now settled by the decision
of
the
Court
of
Appeal
in
Locker
4
Woolf Ltd.
v.
W.
Australian Insurance
CO.~O
that an insured must. report
a
rejection with regard to
an
45
See
General Principles
of
Insurance Law
(1966)
at
p.
78.
46
Sibbald
v.
Hill
(1814)
9
Dow.
263.
47
Glasgow
Assurance Corp.
V.
Symondson
(1911) 16
Com.Cas.
109,
especially
48
Lebon
v.
Straits
Insurance
Co.
(1894) 10
T.L.R.
517
(C.A.).
49
Cantiere Meccanico Brindisino
‘v.
Janson
[1912]
8
E.B.
452.
60
119363 1
K.B. 408
(C.A.);
cf.
also
the
decision
in
London Assurance
V.
Manse1
(1879)
11
Ch.D.
363,
which
pendlsed
an
insured
for failing to disclose
the
fa& of
previoue rejectione
by
other
companies,
despite
the faot hhgt the
applicant had been accepted by
the
company
to
which he had submitted his
most
recent
application.
ah
p.
119.
Nov.
1969 UBERRIMA FIDES IN INSURANCE
LAW
623
entirely different type of insurance
(e.g.,
fire insurance) from the
type he has now applied for
(e.g.,
motor insurance). The Court of
Appeal
in
Locker
seems
to
have been
so
impressed by the incantation
o€
the phrase
uberrima fides
that
it
did not bother
to
deal with the
highly relevant argument advanced by counsel for the insured
:
‘‘
If
the insurance companies desire
to
have information as
to
other
Further, the insurer may wail himself
of
the principle
of
uberrima fides,
even though he (the insurer) has put his question
to
the insured with regard
to
previous rejections in
an
ambiguous
form. This
is
the teaching
of
the decision in
Glicksman
v.
Lanca-
shire and General Assurance
CO.,~~
,a
cme whose facts seem
to
be
derived from a short story
or
a novel.
In
Glicksman,
the insured,
whose natural language was Yiddish
to
the exclusion of English
which he could neither read
nor
write,53 sought
to
take out an insur-
ance policy for
a
business in which he was a co-partner. The insured
answered
c‘
No
”
in
reply
to
the question
‘c
Have you ever been
refused insurance before?
”
This answer was correct
if
“you
”
were
to
be read in the plural,, but
it
was not true
if
“
you
”
referred
to
the singular
as
the appellant had been refused insurance when
carrying
on
business alone. Their Lordships held that even
if
‘‘
you
”
were
to
be read
in
the plural, the insurance company could
still avoid the policy
on
the ground that the insured had failed
to
disclose a material fact,
i.e.,
that he had once personally been
refused insurance.
The principal issue in question
in
this case is best brought out in
the brief concurring opinion
of
Lord Atkinson.
His
Lordship des-
cribed as
“
lamentable
”
the continued failure of insurance com-
panies
to
put questions such as the present one “in clear and
unambiguous language.”
54
Thus, in the present case, the question
should have read:
‘‘
Have you
(or
either one of you) ever been
refused insurance before
?
”
It
is raspectfully submitted that the
House of Lords erred in this case by allowing the insurer
to
have the
best
of
both worlds; this should not have been permitted even
if
the
insured had been
a
person of greater sophistication than the illiterate
tailor in
Glicksman
v.
Lancashire and General Insurance
Co.
The law with regard
to
the insured’s duty
to
give details of pre-
vious losses seems, unlike the apparently unqualified duty
to
give
details of previous refusals
of
the insured by an insurer,
to
be
limited,
but the extent
of
these limits
is
not clear.
In
Becker
v.
Marshall
(1922),55
Scrutton
L.J.
in the
Court
of
Appeal expressed
the view
obiter
that the duty
of
the insured
to
give details of pre-
insurances, they should make this clear.
.
.
.
Y3
51
51
52
53
54
Ibid.
a4
.
42.
[1927]
2.C.
139, affirming
the
aeciaion of
the Court
of
Appeal
at f19253
2
E.B.
693.
Ibid.
at
p.
142
(per
Viscount
Dunedin).
Ibid.
at
p.
144;
note
deo
the remarka
of
Scrutton
L.J.
on
the =me
subjeot
when the
%me
case
was
before the Court
of
Appeal,
“251
2
K.B.
693
p
.
606-608.
65
(1922) 12
L1.L.R.
413
(C.A.P.
624
TEE
MODERN
LAW
REVIEW
VOL.
32
vious losses was qualified
in
var:ous ways.
In
his Lordship’s words
:
“
The question of
date
must arise, amount must arise, and the
circumstances of the loss must arise.”
56
Despite these dicta,
Becker
V.
Marshall
was put forward in the
subsequent case
of
Ewer
v.
National Employers’
Mutual
General
Insurance Assn.
LtdYS7
as an authority supporting an unlimited
duty of disclosure by the insured with regard to the details of his
(the insured’s) previous losses. Happily,
in
Ewer,
Mackinnon
J.
refused to hold that the decision in
Becker
stood
for such
a
(‘
very
wide and disastrously general proposition.”
58
Unfortunately, the
learned judge having satisfactorily explained the decision in
Becker
v.
Marshall,
then proceeded to distinguish
it
59
on
the basis that in
Becker
v.
Marshall
there was involved
a
(‘
basis
of
the contract
clause.”
6o
This essay in distinguishing cases unhappily makes it
appear that the limitations with regard
to
the details of a loss which
Scrutton
L.J.
spelt out in
;Becker
v.
Marshall
may be sidestepped
by the simple expedient
of
making the insured guarantee the accu-
racy
of
every answer.
Finally, with regard
to
the duty to give information relating
to
previous losses,# mention should be made of the decision
in
Roberts
v.
Avon
Ins.
CO.~~
because the factual situation is one that may
recur with some frequency in insurance law generally.
In
Roberts
v.
Avon Ins.
Co.
the insured left a bknk
in
response
to
the follow-
ing statement
on
his proposal form
:
“I
have never sustained a loss
in
respect
of
any
of
the
NoTE.-Give date, amount and name of insurers in respect
On
these facts, Barry
.J.
held that the insurer was entitled
to
avoid the policy because of the failure of the insured to give
details of a previous loss. The learned judge accepted the state-
ment in Macgillivray quoted by the counsel for the insured that
a
simple failure by the insured to answer a question without more
constituted a waiver of such information by the insurer.63 This,
contingencies specified in this proposal.
.
.
.
of each
loss.”
56
58
59
60
61
62
63
Ibid.
at
p.
414. [1937]
2
All
E.R.
193.
Ibid.
at p.
200.
His Lordship distinguished the decision in
a
subsequent
oase,
ArtLude
Press,
Ltd.
v.
Eagle, Star
&
British Dominions Insurance
Go.
(1924) 18
L1.L.R.
382
on
the same ground.
An extended discussion
of
this ‘type
of
clause is not possible within the scope
of the present paper but,
8s
will be apparent from the examination
of
subsequenh
caws,
the device whereby the
ilusnrer
compels the insured
to
guarantee, regardless
of
m~aterllity, the accuracy
of
his (the insured’s)
answers
it0
uedions in the proposal form, is
used
aa
a.n
additional
weapon
(together wi% the
uberrima
jides
doctrine). The leading cases
on
this sublect
are the decisions
of
the House of Lor&
in
Thomson
V.
Weems
(1884) 9
App.Ca5.
671
,and
in
Dawsons Ltd.
v.
Bonnir
[1922] 2
A.C.
413.
See
text at
ride
56,
supra.
[1956]
2
Lloyd’s
Rep.
240.
The relevant psssa
e
from Macgillivray appeaxs
in
the 3rd ed. at
p.
M)3
and
is
quoted
at
[1956]
8
Lloyd’s Rep.
240
at
p.
B9.
Nov.
1969
UBERRIMA FIDES IN INSURANCE LAW
625
however, according
to
his Lordship was not the situation in the
present case; in
this
case the insured’s blank implied a negative
answer to the question.
It
is submitted, with respect, that the
above distinction is absurd. Leaving a blank
to
a
simple question
‘‘
Have you suffered any loss?
”
(at present treated as a waiver
situation) would appear to both
a
reasonable layman
or
a profes-
sional
to
be as negative
a
response as was the leaving of a blank in
response
to
the relevant statement in
Roberts
V.
Avon
Ins.
CO.
In
this case, as in
so
many other situations, the courts have allowed
insurers to effect
a
radical change in the balance
of
power
in
an
insurance relationship by the mere addition to,
or
change in, the
standard wording
of
the policy. Given the fair number of people
who must (for one
or
other reason) fail
to
reply
to
answers in pro-
posal forms and given also the ease with which in most cases the
insurance company can obtain the information withheld,
it
is
extremely difficult to see why insurers should enjoy the freedom to
manipulate the rules
of
the game in their favour
in
this area.
Rational and equitable rules can,
it
is submitted, be fashioned
for the chaotic and unjust wilderness described above. In the first
place,
a
distinction should be drawn between
on
the one hand the
insured’s duty
to
give details
of
previous refusals
to
insure him
(or
his property),, and
on
the other the insured’s duty
to
give details of
previous losses suffered by him (the insured). With regard
to
the
fist duty,
it
is submitted that the marine insurance rule, which
does
not
recognise this should be *applied across the entire
field of insurance law. This is
so
because information with regard
to a refusal only tells the insurer to investigate his risk with great
care. But this, one should have thought, only describes the insurer’s
duty at the present time with regard
to
the investigation
of
all risks.
In
short,
if
‘an
applicant for insurance has been rejected by a pre-
vious insurer for arbitrary
or
capricious reasons, it is monstrous
to
penalise such
a
person further by holding that his subsequent
insurance is void because of his (the applicant’s) failure
to
disclose
an earlier capricious refusal
!
On
the other hand,
if
the applicant
was rejected by
an
earlier insurer for
good
and sufficient reasons,
it
is presumably open to the subsequent insurer
to
ascertain by intelli-
gent and searching questions what those reasons were.
It
does not require much ‘argument
to
establish that an insured’s
accident history will often be of greatest importance to an insurer.
This fact, however, does not argue for
a
broad duty of disclosure;
on
the contrary, it is submitted that the duty of disclosure should be
a
very narrow one.
In
the first place, the information allegedly
withheld must be closely related to the circumstances
of
the present
loss in the manner described by Scrutton
L.J.
in
Becker
v.
Second, an insurer’s failure
to
ask questions with regard
to
losses should be regarded as a waiver of this information, as
84
See
cases
cited
in
notes
47-49,
supra.
65
See
text
at
note
56.
supra.
626
TEE
MODERN
LAW
REVIEW
VOL.
a2
should the insurer’s acceptance of blank replies
to
questions
in
the
proposal form (regardless
of
the form
of
the question). Further, an
insurer should not be allowed
to
take advantage
of
ambiguous ques-
tions
in
the proposal Finally, the insurer should not be
able
to
render immaterial information material by the simple exped-
ient
of
using
a
‘‘
basis
of
the contract clause.” This alternative,
unhappily,, appears
to
be open
.to
an insurer.
(2)
Criminal convictions
The small body of case-law requiring the insured
to
disclose pre-
vious criminal convictions is worthy
of
note, principally because it
illustrates the ludicrously unjust results that are liable to occur
from the application
of
an unsound rule.
By way of example, consider the decision
of
the
Court
of Appeal
in
Schoolman
v.
Hall.67
In
that case, the insured suffered
a
burglary
loss
which the company admitted to be genuine. The
company, nonetheless, raised in defence the fact that the insured
had failed
to
disclose his ciiminal record. Despite the fact that the
insured’s record related, in Asquith
L.J.’s
words
“
to a dim and
remote past,” bs-the most recent
of
the insured’s convictions had
take place fifteen years before the taking out of the policy, the
court upheld the company’s defence.
In
‘addition to rejecting the insured’s
‘‘
materiality
”
argument,
the court in
Schoolman
v.
Rall
also gave short
shrift
to
the insured’s
second line
of
argument. This was that since the insured had
been asked fifteen questions, the truth and accuracy
of
which he
(the insured) guaranteed, the information given in answer to
these questions represented all the information that the insurance
company wished to have. All other information, the insurance com-
pany must be taken
to
have waived. Despite
its
summary rejection
by the court,
it
is
submitted that insured’s argument is one
of
very
great force and is one which (it is respectfully submitted) should
have prevailed.
In
Regina Fur
Co.
v.
Bos~om,~~
Pearson
J.
accepted as material
a
single conviction for receiving’ stolen property in
1988,
more than
twenty years earlier (a
‘(
dimmer and remoter past
”
than was
involved
in
Schoolman
v.
Hall).70
His
Lordship’s initial reluctance
to find that the conviction was material was dispelled,
in
the first
place, by the argument that the delinquent director had occupied a
predominant position in the company sought to be insured and
second by the evidence of two expert witnesses (both underwriters
66
Cf.
Glicksman
v.
Lancashiie
and
General Assurance
CO.
“%7]
A.C.
139
e7
[1951]
1
Lloyd’s Rep. 139
(C.A.).
68
Ibid.
ait
p.
143.
69
[1951]
2
Lloyd’s Rep. 466.
70
The Court
of
Appeal affirmed Pearson
J.’s
judgment, without, however, any
discussion
of
the question under consideration here; see [1958]
2
Lloyd’s
(for discussion
see
text
at
notes
52-54,
supra).
Rep.
425.
Nov.
1969
UBERRIMA FIDES IN INSURANCE
LAW
627
from Lloyd’s) who stated that they regarded the conviction as a
material fact.?’
Happily, in the most recent decision
on
the subject,,
Roselodge
Ltd.
v.
Castle,72
some limit seems
to
have been
set
to
the duty to
disclose in this
area.
In
this
case, the insurer refused
to
indemnify
the plaintiffs, diamond merchants, who had insured diamonds
against all risks
on
the ground that these facts had not been dis-
closed: (i) that
R,
the principal director
of
the company seeking to
effect the insurance, had been convicted
of
bribing a police
oflticer
in
1946
and
(ii)
that
M,
the plaintiffs’ sales manager, had been
convicted
of
smuggling diamonds into the United States in
1956.
Two of the three underwriters called by the insurer stated their
view of the duty to disclose previous convictions
in
terms that can
fairly be described
wi
being outrageously broad. Thus, according
to
Mr.
Archer, one
of
the experts in question, a man who had stolen
apples when he was seventeen,
after
which time he lived a blameless
life for Bty years, was more likely
to
steal diamonds at the age
of
sixty-seven than someone who had not committed this youthful
indis’cretion.
73
Essaying his owxi evaluation of the materiality
of
the two
con-
victions,
McNair
J.
decided that
R’s
convictim in
1946
was
not
material since
it
had
‘(
no
direct relation
to
trading
as
a
diamond
merchant.”
74
His
Lordship held that in the case of
M’s
conviction,
there was such a
cc
direct relationship
”
and
it
must be regarded
as
material. Although this holding obviously represents a more
enlightened approach than that demonstrated in the two earlier
cases discussed in this section,
it
is submitted that
on
the facts in
Roselodge Ltd.
v.
Castle
that the insurer should have berm held to
have waived the information relating to
M’s
previous conviction.
Remarkably enough (given the type
of
insurance involved
in
this
case), the insurer
in
Roselodge Ltd.
v.
Castle
did not ask
M.
any
questions relating
to
moral hazard. To require the court to step into
the breach,, as
it
were, means that in the fist place, the court may
have to make
an
extremely difficult decision with regard
to
the
materiality of
a
particular fact when
it
lacks both the requisite
knowledge
to
make this determination, ‘as well
as
adequate means
for obtaining such knowledge.75 Secondly, and perhaps even more
seriously, permitting a judge
to
6c
second guess
”
an
insurer tends
to dilute the well-established and essential duty
of
the insurer to
make the relevant inquiries of the insured.
[1957]
2
Lloyd’s
Rep.
466
at
p.
484.
7*
[1966]
2
Lloyd’a
Rep.
113.
73
Ibid.
ait
p.
132.
74
Ibid.
‘5
Dean
Spencer
L.
Kimbsll
of
the Wiwonsin Law School has writ,ten, in
another connection,
of
the general tendency
of
American judges
in
insurance
law
“
It0
intervene in
complex
mathera about which
hhey
know very little
”;
see his
Essays
in
Insurance
Regulation
(Ann Arbor,
1966)
at
p.
130.
As
re
ards
knowledge
of
insurance
practice,
it
is
extreme1 doubtful if English
jufgm are
in
a
better position than ltheir American bretgren.
628
THE
MODERN
LAW
REVIEW
VOL.
32
(8)
Illness
The body of case-law on the insured’s duty
to
disclose illnesses is
not
a
large me, but the traps which may lie ahead for the insured in
this area seem
to
be sufficiently serious for this subject
to
receive
brief separate treatment.
As a preliminary matter, note should be taken of McCardie
J.’s
important decision in
Yorke
v.
Yorkshire Insurance
CO.~~
In
this
case, the learned judge severely restricted the class
of
persons who
might give expert evidence
on
questions
of
health
to
include only
those persons who had expert medical knowledge.
In
these cases,
his Lordship stated:
“
.
.
.
the matters at issue are usually physiological, medi-
cal,
or
neuropathic. The directors of insurance companies are
but rarely medical men. Seldom,
if
at all, do they personally
see the proposer.”
77
However, nine years before the decision in
Yorke,
the Court
of
Appeal in
Joel
v.
Law
Union
and Crown Insurance
78
allowed in-
surers
to
avail themselves of both
“
the basis of the contFact
clause,,”
I9
as well
gs
the insured’s duty of disclosure. Fletcher
Moulton
L.J.
had this
to
say of the insurance companies’ attempt
to
pile Pelion
on
Ossa:
“
Insurers are thus
in
the highly favourable position that
they are entitled not only
to
bona fides
on
the part
of
the
applicant, but also
to
full disclosure of all knowledge possessed
by the applicant that is material
to
the risk.
And
in my opinion
they would have been wise
if
they had contented themselves
with this. Unfortunately the desire to make themselves doubly
secure has made them depart widely from this position by
requiring the assured to agree that the accuracy, as well as the
bona fides, of his answers to various questions put to him by
them
or
on
their behalf shall be a condition of the validity of
the policy.
.
.
.
I
wish
I
could adequately warn the public
against such practices on the part
of
insurance ofices.”
In
Mutual Insurance Company
of
New York
v.
Ontario Metal
Products CO.,~~
the insured escaped from the above trap only because
he (the insured) was able
to
avail himself of the protection
of
the
Ontario Insurance Act, which, in effect, provided that only a
material
misrepresentation of fact could void the policy.82
That the insured’s duty is unreasonably broad
in
this area, with-
out regard
to
a
(‘
basis
of
the contract
”
clause
in
the policy, is
indicated by consideration of a recent decision.
In
Godfrey
v.
Britannic Assurance CO.,~~
the facts were that the insured after
76
[1918
1
K.B. 662.
77
Ibid.
78
[1908]
9
E.B. 863
(C.A.)
79
See note
60,
supra.
60
[1908]
9
K.B.
863
at
p.
i(85
(emphasia added).
81
[1925]
A.C.
344
(P.C.).
*z
See
sub-8s.
(3) and
(4)
of
a.
156
of
the Ontario Insurance
Act
(R.S.Ont.,
1914,
c.
183), quoted
in
the advice
of
the Board at
p.
350.
83
[1963] 2
Lloyd’s
Rep.
515.
Nov.
1969
UBERRIMA FIDES IN INSURANCE LAW
629
losing weight underwent
a
hospital examination in 1959; he was
told that he might have minor kidney trouble and that he should
take care, although the insured need not consider himself in any
sense an invalid.
In
May 1959 the insured again consulted his
doctor
and
underwent
a
second examination; as
a
result
of
this
visit, he was informed that he had a mild chest infection which
would clear up
if
he took the antibiotic tablets which were pres-
cribed.
In
June 1961, the insured submitted an application for
insurance to the insurers, who accepted
it
a
month later.
In
January
1962, the insured
died
of common nephritis.
In
an action
on
the policy, Roskill
J.
upheld the insurer’s
argument that the insured’s failure
to
disclose the circumstances of
the medical examinations (as well ,as the Pact that between 1959 and
mid-1961, he had suffered recurrent attacks of sore throat, cough
and mild fever) avoided the policy, despite the fact that the insured
had not appreciated the materiality of the withheld inf~rmation.~~
This result is certainly an arguable one, especially given the fact
that the deceased had answered
“
No
”
in reply to the following ques-
tion in his policy application:
“
Question
5
(a):
Have you suffered
from any illness
or
accident
or
received medical advice
or
treat-
ment, with
or
without an operation
?
”
On
the other hand,. given
the insured’s lack of expertise in medical matters (illustrated
in
this
case by the fact that the insured
did
not apparently appreciate the
materiality of tihe withheld information)
it
is submitted that the
phrase
‘‘
medical advice
or
treatment
”
in the above question should
have been read as referring back to
“
illness
or
accident
”
instead of
being regarded as creating
a
new head
of
information. Reading the
question in this way would have relieved the insured from giving
the
information withheld.85
As
it
is,
it
is difficult to agree with Roskill
J,’s contentions that the present case represented
a
proper applica-
tion of the
contra proferentem
doctrine,se and that, in the present
case, he had avoided
“
attributing
to
the assured anything which
could fairly only be said
to
be within the knowledge of
a
lawyer,
a
doctor
or
a man with long experience in a life ofice.”
s7
(4)
Nationality
(of
insured)
The bizarre decision of Lush
J.
in
Home
v.
Poland
89
merits
attention even although
it
may
no
longer represent good law. This
84
The principal case relied on by
his
Lordship
in
this regard is
the
deckion
in
Lzfe Association
of
Scotland
v.
Foster
and
Others
(1873) 11
Macph.
351.
In
that caoe, the assured failed
to
tell the insurer
of
a
small swellin
in
her groin which,
unknown
to her, was a symptom
of
a
rupture from
whlcf
she died. The
Inner
House of the Court
of
Session
denied recovery
on
the
ground th& there
had
been
a
failure
to
disclose
a
makerial
fact.
s5
This, in deot, wa3 the argument advanced
on
behalf
of
the insured:
see
[1963]
9 Lloyd’s
Rep.
515
at p.
527.
86
Ihid
a7
Ib;d:
at
p.
532.
88
There
is
a small
body
of
case-law
on
the
“
nationality
”
of
a
ship. Since these
cases are almost invariably the product
of
wantime conditions. thev
do
not
warrant discussion here.
-
s9
[1922]’2
K.B.
364.
630
THE
MODERN
LAW
REVIEW
VOL.
32
is
so
for
a
number
of
reasons;
in
the first place,
it
is by
no
means
clear that the decision
can
be relegated
to
the limbo
of
legal
history.90 Second,
if
the dixisim does represent good law, its effect
can only be described as catastrophic. Finally, the decision is
worthy
of
note
because
it
represents,
in
all possibility, the high-
water mark in terms of injustice and absurdity that
a
doctrine
purporting to apply conduct in conformity with
absolute good
faith
”
has yet achieved.
fi
Horne
v.
Poland,
the insured was an alien who had been born
in Roumania and had come
to
England at the age of twelve; twenty-
two years later he took out an insurance policy against burglary.
When he claimed
in
respect of an alleged loss, the insurer pleaded
that the insured had failed
to
disclose the fact
of
ahis
alien birth and
childhood and that this failure
to
disclose a material fact avoided the
policy. Lush
J.
upheld this defence and found for the insurer.
Alien birth was not inevitably fatal to recovery; this’would not
be the case where:
cc
[T]he assured
.
. .
[came] from
.a
state where
the business and social habits, the training and education that
a
child receives and the views taken as the observance of legal and
other obligations areaotoriously exactly as those prevailing here.”
91
Seemingly quite independently of bhe expert evidemce tendered in
this
case (the admissibility of which
his
Lordship doub.ted)
92
the
learned judge decided that Roumania was not such a state.
Despite this
gross
essay in xenophobia, land despite Lush J.’s
statement toward the end
of
his opinion that
cc
[I]t
would seem
more just that underwriters should inquire as
to
bhe nationality of
proposed insurers
93
if
they attach importance
to
it
’)
no subsequent
decision seems to have challenged the fundamen+al premise
of
Horne
v.
Poland.94
Rather, the correctness
of
the decision seems
to
have
been taken for granted, with attempts being made only
to
limit the
scope of the decision. Thus,,
in
Becker
v.
Marshall,gs
for
example,
Scrutton
L.J.
remarked
obiter
that the presence
of
a
foreign name
might put
‘<
the underwriter on inquiry as
to
foreign nationality, if
he thought
it
important.
. .
.”
96
Similarly,
in
Lyons
V.
J.
W.
Bentley Lt~l.,~’
Lewis
J.
applied what may
be
termed a
de minimis
90
91
92
93
94
95
96
Nat
only has
any
doubt bem
&
on
athe correctntm of the basic princi le
stated in the case (see text
at
notes
95-97,
infra),
but the case seems tose
cited with remarkable frequency
as
a
general illustration of the duty to
disclose in non-nationality cases.
[1922]
’2
K.B.
364
at
pp.
365-366.
In
this conneotion, contmat the decision
of
the Court of Appeals for the
Seventh Circuit
in
Roberto et al.
v.
Hartford
Fire
Insurance
Co.,
177
F.
2nd
811
(7th
Cir.
1949)
where
.the
insured waa
not
only,
&11
&lien but
bad
been
incaroera,ted for
perjury
committed
on
an
ap
licatlon form for citizenahip
and was liable
to
deportation
for
this offence. T\e Court of
Appeds
held that,
in
the absence of inquiry, the insurer had
b
Show
that the insured had
fraudulently conceded the above information. The
court
proceeded
Q
hold
thah .the insurer
had
failed
to
ghow that the insured
hd
sotsd
fraudulently.
(1m)
12
L1.L.R.
413
(C.A.);
see
also
Carlton
V.
Park
(1929) 10
L1.L.R.
98.
Ibid.
at
p.
414.
97
(1944) 77
L1.L.R.
335.
Ibid.
&t
p.
365.
nid.
at pp.
367-36s.
Nov.
1969
UBERRIMA FIDES IN INSURANCE
LAW
631
exception to the duty holding that the duty
to
disclose foreign birth
did not arise in the case of the insured who had been born in Russia
but had come
to
England at bhe age
of
five, where he had spent the
next sixty years of
his
life.
The danger in the
IIorne
v.
Poland
doctrine becomes parti-
cularly acute when that case is considered against the background of
apparently very widespread discrimination practised
on
national
(and racial) grounds in at least one field
of
insurance-namely, that
of motor-vehicle insuranc-revealed by the
PEP
study
on
racial
discrimination in
1967.98
Given the widespread extent of such
discrimination, together with the wooden and sterile manner
in
which %he doctrine of
uberrima fides
has generally been applied,
it
is, unfortunately, not impossible that
an
English court will follow
“
industry practice,” and hold that a failure
on
the part
of
an
insured to reveal his nationality (and possibly also his race) voids
the policy.
An
underwriting
of
the doctribe of
Horne
v.
Poland
in
this manner (even if the xenophobic content
of
the latter opinion
were to be omitted) would represent nothing less than a disastrous
development
.99
EXPERT
EVIDENCE
Before attempting to note a brief overall critique
of
bhe doctrine,
together with some suggestions for its reform,
it
is
necessary
to
con-
sider briefly the important subject of expert evidence in this area.
Once again, the starting point of wisdom is
to
be found in Lord
Mansfield’s opinion in
Curter
v.
Boehm.l
In that case, the follow-
ing remarks were made with regard
to
the evidence given by the
brokers
:
“
It
is mere opinion
;
which is not evidence.
It
is
opinion
without the least foundation from any previous precedent.
or
usage.”
It
is not unreasonable
to
suggest that one of the factors
which explains this sceptical attitude
to
expert evidence lay
in
the
judge’s realization that the respective parties did not enjoy equality
in terms
of
access
to
expert evidence. Remarkably enough, this
inequality does
not
appear to have been made the subject
of
any
98
See
PEP
Report
on
Racial Discrimination in England
(April
1967)
sit
p. 100;
W.
W.
Daniel
Racial Discrimination in England
(Penguin Special, 1966) et
pp.
200-203
(a
study
based
on
and amplifying .the PEP survey) which inform
us
that
e
West Indian applicant who was arefully mmtched as regard4
relevant criteria such
as
motoring history and occupmtion with
a
white
Englishman and
an
immigrant of Hungarian origin, suffered discrimination
at
hhe hands
of
17-90 insurers,
as
compared with his two co-applicants.
On
six occasions cover was refused altogether and on 11 other occasions, the
West
Indian applicant waB quoted
a
higher premium
than
was demanded of the
other two applicants.
99
It
is
unlikely that English law gives relief against
&his
kind
of
discrimination
through eome variant
of
sthe doctrine of “public policy.” For
a
good dis-
cutesion
of
the limited proteotion afforded
by
ths common law
in
thia regard
8e~
Hepple,
Race Jobs and the
Law
in
Britain
(Penguin, 1968) p. 91
et
seq.
1
(1766)
3
Burr.
1905.
2
Ibid.
at p. 1918.
632
THE
MODERN
LAW
BEVIEW
VOL.
32
comment by ,an English This inequality assumes great
importance when the limited judicial knowledge of the insurance
industry is taken into account; such ignorance would seem to render
even more powerful the testimony of
‘(
experts.”
A nowEnglish case which yet affords an excellent example
of
present-day English practice in this
area
is to be found in the
majority opinion of the Supreme
Court
of
Canada in
Henwood
v.
Prudential Insurance
CO.~
In
Henwood,
the insured under a life
insurance policy failed
to
disclose the fact that she had paid several
recent visits to a psychiatrist
(as
well as to other physicians) despite
having been asked
in
the proposal form
to
list the names of all
physicians she had consultcd, including those who had treated her
‘(
for any nervous disorder.” Subsequently; the insured died
in
an
automobile accident in circumstances wholly unconnected with
nervous and mental disorder. At the trial the insurer called its own
medical and underwriting,experts who testified that
if
the company
had had knowledge of the information withheld
from
it,
it
would
have issued a policy mly after a subsequent medical examination
and then at a higher premium.
Acting largely
on
the basis
of
this uncontradicted evidence, a
majority
of
the court held that the materiality of the withheld in-
formation had been estab1ir;hed. Spence
J.
however dissented and
it
is submitted that his dissenting opinion is greatly to be preferred
as against the majority opinion. The learned judge pointed out that
the insurer’s two expert witnesses not only limited their remarks
to
the policy of their own company, but they had also expressly
con-
fessed they were ignorant
of
the policies of other insurers with
regard to the issue before the court.s
His
Lordship counselled that
the adoption of such an approach would result ultimately in the
replacement of the prudent insurer
”
test by a test which instead
made decisive the idiosyncrasy
of
individual insurers.0
CRITIQUE
It
is now possible to sumniarise briefly the various defects of the
uberrima fides
as
it
exists today. In the first place, current doc-
trine,
so
far from representing a restatement of classical doctrine as
set out in decisions such as
Carter
v.
Boehm,‘
sets out an entirely
different principle, one largely fashioned during the present century.
It
is respectfully submitted that
Carter
v.
Boehm
was correctly read
3
Cf.,
however, the remark9
of
a
Scotttish judgeLord
Robertson
in
Zurich
General Accident
CE
Liability Insurance
Co.
v.
Leoen,
19??
S.C.
406.
In
the
course of his opinion in that oase, his Lordship remarked:
I
recognise that
in
a
case
of
this kind
it
may be difficult for litigants
in
the
position
of
defenders to procure suiteable evidence.”
Ibid.
at
p.
411.
4
(1967)
64
D.L.R.
(2d)
715
(Sup.Ct.Can).
(I
am
grateful
b
Professor Brad,lep
E.
Crawford
of
the University
of
Toronto Law Faculty
for
a reference
to
this
5
Ibid.
at
p.
731.
7
(1766)
3
Burr.
1905.
cam.)
6
ad.
Nov.
1969
UBERRIMA
FIDES
IN
INSURANCE
LAW
633
by
a
number
of
American courts
in
the nineteenth century who
read the case as stating a
"
narrow
"
rule
of
disclosure.8
More seriously,
it
is clear (in the words
of
the Law Reform Com-
mittee Report
on
Conditions and Exceptions in Insurance Policies)
that
'
. . .
a
fact may be material
to
insurers
.
.
.
which would
not necessarily appear
to
a
proposer for insurance, however honest
and careful,
to
be one which he ought
to
disclose."
lo
Further, the
doctrine seems to work harder against laymen than against profes-
sionals. The
''
marine
"
professional is
in
the strongest position
:
in
the first place, he does
not,
as we have seen previously," have to
disclose information that has
to
be disclosed by other classes
of
applicants. Secondly,
it
would 'appear that the courts ,are more
ready
to
infer
a
waiver
of
information by the insurer in
a
marine
insurance situation than in other insurance situations.12 The land-
based professional does not occupy
as
privileged
a
position as his
marine cousin but he would still appear
to
be in
a
stronger position
with regard
to
the working
of
the doctrine than
is
the layman who
applies for,
e.g.,
life insurance.
In
the first place, the professional
is more likely to know that la duty
to
disclose exists and
to
know
also what information the insurer needs
to
know, than is likely
in
the case with
a
lay applicant
for
life insurance. Secondly,
it
is likely
that an applicant for life insurance will be asked more questions
(some
of
them relating to his health,
a
matter in which he has
no
expertise) than will be true in the case of a businessman taking out
a
policy against fire
or
burglary.
Thirdly, the doctrine is
in
error
in assessing the strength
of
the
parties with regard
to
knowledge. The doctrine assumes that the in-
sured
is
in
B
stronger position than the insurer because he (the
insured) has more knowledge than the insurer. But the possession
of
greater knowledge,
it
is submitted, puts the insured in a weaker
position, since he (the insured) does not know which parts of that
information the insurer wishes
to
have.
It
is submitted, however,
that it
is
the insurer who should be seen as the stronger party, since
See
e.g.,
the citation of
Carter
V.
Boehm
6,Ygether yith other authorities, both
English
'and
American) in support of
a
narrow duty of disolosure. See
Gates and Downer
v.
Madison County Mutwl
Ins.
Co.
1
Selden (N.Y.) 469
at p. 475 (1851). There are c number
of
other opinions in the same vein
but
it
is
possible here to mention
only
the classic opinion
of
Judge (later
Chief Justice) Taft
in
Penn Mutual Life Insurance
Co.
v.
Mechanics Saoings
Bank
d
Trust
Co.,
72 Fed. 413 (C.C.A. 6th
1896).
Cmnd; 62 of 1957. The Committee's remarks
on
hhe
subject
of
the
uberrima
fides
doctrine do not warrant 'any detailed discussion. The analysis
of
the
dootrine is extremely superficial and
Bhe
propom18 for
its
reform timid and
confusing.
lo
Ibid.
p. 4, para. 4.
This
conclusion
is,
of
course, directly supported by the
findings in
a
number of decided
msm.
11
See
cases cited at
no&
47-49,
supra.
l2
Compare,
e.g.,
4he decision of the Coupt
of
Appeal
in
Mann, MacNeal
d
Steeoes Ltd.
v.
Capital Counties Insurance
Co.
[1921]
2
E.B.
300
(Insurer's
failure
to
make any inquiry with regard
.to
insured's
cargo
held
.to
conetitute
a
waiver with regard
to
such information) with the deoiaion of the
same
court in,
e.g., Schoolman
v.
Hall
(see text
ah
notes 67-68,
supra).
VOL.
32
22
L
634
THE
YOIDERN
LAW
REVIEW
VOL.
3?
he (the insurer), is aware of what information he seeks
to
have.13
As
against this, the insured, even under the limited formulation of
the doctrine, requiring
him
to
disclose only facts within his know-
ledge,14 may well be in the position
of
either not knowing,
or
else
being uncertain as
to
the materiality
of
a
particular fact.
In
short, current doctrine as applied seems
to
assume that the
purchase of insurance
is
some kind of
emptio
spei.
Despite the
various gambling analogies which invariably suggest themselves in
any discussion of an insurance contract,
it
is submitted that such
a
contract is not analogous
to,,
say, the entering
of
a football pool
coupon.15 Even without the detailed regulation by both legislative
and administrative agencies
of
the terms and conditions
of
an insur-
ance policy such as exist in the United States, and every European
country (with the exception
of
Holland),16
it
wouId appear
to
be
necessary
to
emphasise the fact that the purchase of insurance,
whether by layman
or
by professional, represents
a
“
purchase
”
of
the greatest importance. The failure of this
cc
purchase
”
will in
most cases involve far more serious results for the
“
purchaser
”
than
is
likely
to
be true in the event of any other defective goods
or
commodity the insured acquires.
Noms
ON
REFORM
It
is not within the scope
of
this paper to offer detailed statutory
provisions but some general--if disconnectedremarks
on
the shape
such reforming provisions might take would appear to be in order.
In
the first place
it
is submitted &hat any reform
of
uberrima
fides
should take place only as
a
reform
of,
at least, the main body
of
insurance law. Thus, apart from
‘ubem-ma
fides
itself there
should (as a minimum) have
to
be undertaken a reform
of
the law
relating to conditions and warranties (inclqding the
“
basis
of
the
contract clause
”
17)
and the problems involved in the responsibility
of insurance companies for the acts
of
their
‘‘
agents.” Second,
13
I
am indebted
to
my friend Professor Adhur
A.
Leff,
Yale Law School, for
this suggestion.
14
Cf.
the wider duty of disclosure, requiring
the
insured’
to
make
“
reasonably
careful inquiries stated
in
Hardy Ivamy,
General Principles
of
Insurance
Lam
(1966)
at
p. 78.
15
See,
e.g., Appleson
v.
H.
Littlewood Ltd.
[1939]
1
All
E.R.
464
(C.A.)
(no
enforcement of contra& beoauee
of
absence
of
mtent
to
creattf?‘ legal relations).
16
See, e.g., the excellent surveys by Kimball and Pfennigstorf, Legislative and
Judicial Control
of
the Terms
of
:purance Contracts
:
A Compamtive Study,”
39
Indiana
L.J.
675
(1964);
Administrcvtive Control
of
the Terms
of
Insurance Contracts: A Comparative Study,”
40
Indiana
L.J.
143
(1965).
Both
essays appear, in slightly abridged form,
in
Kimball,
Essays
in
Insurance
Regulation
(Ann Arbor,
1966).
Unless
the
“bask of #the contract” problem
is
satis-
faotorily dealt mlh, any attempted reform of
the
law relating
It0
the insured’s
duty
of disclosure would appew
b
be fukile,,?ince it would seem
to
amtunue
to
be possible
to
make what
is
“
immaterial material by the mere addition
of
a
provision
in
a policy.
18
See,
in
particular,
khe
disturbing implications
of
the Court of Appeal in
Newsholme
v.
Road Transport Insurance
Co.
Ltd.
[1929]
2
K.B.
356.
17
See note
60,
supra.
Nov.
1969
UBERRIMA
FIDES
IN INSURANCE LAW
635
it is submitted that any reforming provisions
on
this subject should
not cover the law relating
to
marine insurance. Both the law and
practice in this area, as we have had occasion
to
note briefly above,
appear
to
work satisfactorily and there would appear
to
be every
argument for leaving well alone
in
this
area.
Turning more specifically to the form revised disclosure provi-
sions
might take,
it
is submitted that, while foreign legislation should
obviously be consulted, great care be taken in borrowing statutory
provisions. The statutory provisions of many American states, to
take but one example, are too brief for English conditions. The
brevity of these statutory provisions is
to
be explained by reference
to
two very closely connected factors.
In
the first place, very often
the statutory provision will represent
no
more than codification
of
the pre-existing common law position. But even where this is
not the case, a brief statutory provision will be interpreted in the
light of
a
general judicial solicitude for the position of the insured.
The fact that these circumstances are not present
in
England
makes
it
advisable that -any statutory provisions
go
into far greater
detail than any potential foreign model appears
to
do.
Without being exhaustive,, a model disclosure statute might
well provide for the following.
In
the first place,
it
might be desir-
able
to
provide that
.an
insured is under
no
obligation
to
provide
information with regard
to
certain matters. As examples
of
such
“
classified
”
information could be included
an
applicant’s race
or
nationality; further, the insured should be deemed
to
be under
no
obligation
to
reveal that he has previously been refused insurance.
The key provision in the statute should state in the clearest
possible language that any failure by an insurer
to
ask of an insured
information customarily sought by insurers in the type of policy in
question should be deemed a waiver
of
such information. The
burden of proof
to
show that
a
particular piece
of
information was
so
esoteric as not
to
have been ascertainable by ordinary inquiry
should again clearly
be
placed on the insurer.
The adoption
of
the abovedescribed waiver principle should
reduce the insured’s duty of disclosure to (justly) narrow limits.
With regard
to
the disclosure of this
6c
unascertainable
”
informa-
tion, the insured should be penalised only
if
he acted in
6c
bad
faith,”
i.e.,
if
he knew,
or
had very
good
cause
to
believe that a
particular piece
of
information would in fact be material
to
the
insurer. The burden
of
showing
cc
bad faith
”
should again be
placed
on
the insurer.
The insured’s duty of disclosure should
also
be recognised in
another situation, namely, when the insured comes into possession
of material information between the time
of
the application for
a
policy and the time the policy is issued.
If
American case-law
is any guide,I9 disputes arise more frequently over the duty
to
l9
See,
e.!.,
the
case3
collected
by
Patterson,
“Insunsnce
Law
During
the
War
Years,
46
Colum.L.Rev.
345
at
p.
372
(nn.
137
and
138)
(1946).
The
636
THE
MODERN
LAW
REVIEW
VOL.
32
disclose in this situation than is true of the insured’s duty
to
disclose
“
unascertainable
”
information. The duty
to
disclose such
information should be recognised (as
it
is
in American law),
except that the policy should be made
to
spell out clearly that
such an obligation exists.
It
is,
it
is submitted, all too easy
for
an
insurance applicant to think that
a
contract has been concluded
at the time the policy was applied for.2o
Again,
it
might be desirable
.to
expressly provide for the
contra
poferentem
principle
in
a
separate provision. Perhaps more
valuable than such
a
provision would be one stating that the insurer
is responsible
for
any ambiguities in questions asked in the appli-
cation.
Indeed,
the situation
in
Glicksman
v.
Lancashire and
General Insurance
Co.,
*l
could be set out, with,
of
course,
a
different outcome indicated.22
Finally, even with a much limited duty
of
disclosure,
it
is
still
desirable to provide that an insurer prove clearly the materiality of
some particular piece
of
information that has been withheld.
In
particular, serious consideration should be given
to
reforming the
manner in which exp,ert evidence
is
given,
so
that the responsibility
for
ascertaining insurance practice becomes the responsibility of
the
court,
instead of being left, as at present,
to
the unequal
struggle between the Such a system would not attain
complete objectivity since obviously most expert testimony will
continue to be given by underwriters, but
it
will at Ieast make
it
impossible for an insurer
to
hand-pick his experts
or
to
call
cc
experts
’)
from the insurer’s own company.24
Would-be reformers frequently make the claim that the changes
they propose in any given area
of
the law are conservative rather
than radical in nature. That claim can,
it
is submitted, be made
with special force in the present area. Changes of the kind indicated
20
21
22
23
24
insured’s obligation
to
make disclosure
of
information
in
such circumstances
seems
to
have been olearly sebtled by lthe decision
of
th0 United Statm
Supreme Court in
Stipcich.
v.
Metropolitan Life Insurance
Co.,
277
US.
311
(1928).
It
is perhaps this circumstance that explains Professor P&tterson’s opposition
to
t.he d&rine, stating that it placed
“a
severer burden
on
the insured
[to
volunteer information] after the application
is
signed than before.” See his
artiole (previous note)
ah
p.
372.
[1927]
A.C.
139
(see
Qext at notes 5%54,
supra.).
Another case which might be used
as
an
illustration
in
this connection is
the decision
in
Brewtnall
V.
Cornhill
Motor Insurance
Co.
Ltd.
(1930) 40
L1.L.R.
166. In that cme, the
insured
was asked the
cmt
price of her
car;
she put
down
L145 but did
not
disclose that part of this price was made up bp
part exchange
of
tanother car. Izharles
J.
held (correctly, it is submitted) that
there
had
been no failure to disclose
a
material fact,
as
the insurance
company
could
have obtained
a
complete breakdown of the price by framing their
question
more carefully.
See generally, the discussion of the problem of expert evidence in this area at
p.
631,
supra.
See,
e.g., Henwood
v.
Prudential Insurance
Go.
(discussed
at
p. 6322. See
notes
4-6).
Nov.
1969
UBERRIMA FIDES IN INSURANCE LAW
637
above
would
do
no
more than
to
bring presentday English
doctrine in line both with its
''
classical
"
eighteenth-century ante-
cedents as well as the presentday law
in
the United States and the
various countries
on
the European continent.
R.
A.
HASSON."
*
B.A.
(Cape
Town),
LL,B.
(Lond),
u.M.
(Yale)
Reeearch
Associate,
Yale
Law
School.
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