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CHAPTER 7 Good faith

Law of Liability Insurance


Page 54

CHAPTER 7

Good faith

7.1 Existence and nature of the duty

Underlying all stages of the relationship between insured and insurer is an important substratum of obligation, the reciprocal duty of (utmost) good faith. Mainly decided cases focus on the duty of the insured, it being “an essential condition of the policy of insurance that the underwriters shall be treated with good faith, not merely in reference to the inception of the risk, but in the steps taken to carry out the contract”.1 This was said in 1904 but nearly a century later, in The Star Sea,2 Lord Hobhouse confirmed that “utmost good faith is a principle of fair dealing which does not come to an end when the contract has been made”, and quoted a distinguished judge of an earlier generation as saying that the obligation of good faith rests on the insured “throughout the currency of the policy”.3

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