Lloyd's Maritime and Commercial Law Quarterly
INFORMATIONAL ASYMMETRY AND THE MYTH OF GOOD FAITH: BACK TO BASIS
FD Rose *
A substantial body of law has accumulated on the provision of information, true and false, in the negotiation, conclusion and performance of insurance contracts. This is closely associated with the idea that insurance contracts are peculiarly subject to overriding notions of good faith. It is argued here: that the roles for good faith in insurance law are in fact more modest than is generally assumed; that many of the particular issues concerning the provision of, or failure to provide, information in an insurance context are better explained by more general principles of law; and that English law is not (as is generally assumed) generally hostile to good faith requirements but encourages good behaviour and discourages bad behaviour as is appropriate, and insurance law illustrates this general position.
I. INTRODUCTION
The most widely accepted feature of insurance contracts is that, unlike contracts generally, they have an association with an idea, or ideas, of good faith. This has been the basis of an elaborate edifice of more specific ideas. Even so, but also in consequence, the relevant area of law, or at least our understanding of it, remains unsettled and controversial.1
That
* Professor of Commercial Law, University of Bristol. In its original form this paper was delivered as a lecture to the Maritime Law Association of Australia and New Zealand on 25 July 2002 while the author was a University of Auckland Foundation Visitor, for which opportunity he is grateful to Professors Ross Grantham and Charles Rickett. In a later, revised form, it was delivered on 6 May 2006 to the Advanced Workshop on Marine Insurance Theory and Practice held at Scansano in Italy, organized by Professor Johan Schelin of the Maritime and Transport Law Institute, University of Stockholm. Gratitude to those who have commented on it is accompanied by the traditional disclaimer.
1. The literature is unfortunately too voluminous to cite fully here. In addition to materials cited elsewhere in this article and in the following citations, see, eg, Lord Mustill and JCB Gilman (eds), Arnould’s Law of Marine Insurance and Average
, 16th edn, vols 1–2 (1981), vol 3 (1997); J Beatson and D Friedmann (eds), Good Faith and Fault in Contract Law
(1995); MG Bridge, “Does Anglo-American contract law need a doctrine of good faith?” (1984) 9 Can Bus LJ 385; J Cartwright, Misrepresentation, Mistake and Non-Disclosure
, 2nd edn (2007); MA Clarke, Law of Insurance Contracts
, 5th edn (2006) and Looseleaf, chs 22–23; HN Bennett, The Law of Marine Insurance
, 2nd edn (2006), ch 4; HN Bennett, “Mapping the doctrine of utmost good faith in insurance contract law” [1999] LMCLQ 165; RA Hasson, “The doctrine of uberrima fides
in insurance law—a critical evaluation” (1969) 32 MLR 615; Sir A Longmore, “Good faith and breach of warranty: are we moving forwards or backwards?” [2004] LMCLQ 158; P Macdonald Eggers, S Picken & P Foss, Good Faith and Insurance Contracts
, 2nd edn (2004); GP McMeel, “Presentation of the risk and utmost good faith”, ch 5 of FD Rose, Marine Insurance: Law and Practice
(2004) (hereafter “Rose, MILP”); Lord Mance, I Goldrein and R Merkin, Insurance Disputes
, 2nd edn (2003); N Legh-Jones, J Birds and D Owen (eds), MacGillivray on Insurance Law
, 10th edn (2002), chs 16–18; R Merkin, Colinvaux’s Law of Insurance
, 8th edn (2006), ch 6; S Park, The Duty of Disclosure in Insurance Contract Law
(1996); G Spencer Bower, Sir AK Turner and RK Handley, Actionable Misrepresentation
, 4th edn (2000); G Spencer Bower, Sir AK Turner and RJ Sutton, The Law relating to Actionable Non-Disclosure and other breaches of duty in relations of confidence, influence and advantage
, 2nd edn (1990); J-A Tarr, Disclosure and Concealment in Consumer Insurance Contracts
(2002); Sir G Treitel, The Law of Contract
, 11th edn (2003) (hereafter “Treitel”), chs 9–10.
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