- The contract of insurance is the Locus Classicus illustration of the so called contracts uberrimae fidei i.e. utmost good faith.
- It modifies the common law principle of caveat emptor
- Both parties are bound to disclose material facts. The duty to disclose on the part of the insurer and insured is voluntary and bilateral. It was so held in Carter V. Boehm.
- Parties are bound to disclose material facts in their actual and presumed knowledge.
- A fact is deemed material if a reasonable person in the circumstance of the insured and disclosed it.
- In the alternative, a fact is deemed material if it would have influenced the judgement of a prudent insurer in determining whether or not to take the risk and how much premium to charge.
- The duty to disclose generally exists throughout the negotiation period.
- Non-disclosure of a material fact renders the contract voidable at the option of the innocent party.
- Although the contract of insurance is one of the utmost good faith, certain matters need not be disclosed, for example unknown facts, matters of public notoriety insureds opinion, legal propositions or provisons etc.
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