By Vanessa Irenuma
The principle of utmost good faith, often referred to as uberrimae fidei, is a fundamental and longstanding concept in the insurance industry. It embodies the idea that both the insurer (the insurance company) and the insured (the policyholder) must act honestly and in good faith when entering into an insurance contract. This principle serves as the bedrock of insurance agreements, shaping the relationship between the two parties. This doctrine of utmost good faith has become a fundamental characteristic of insurance contract and distinguishes it from all other forms of contract. The good faith in the contract simply means that none of the parties to the contract should withhold any material information or misrepresent material facts that will help the other party in protecting it’s position under the contract. Joseph Irukwu V. Trinity Mills Insurance Broker the court held and restated the position of the law that the contract of insurance should be the one of utmost good faith, uberrimae fidei.
The insured at the point of applying for insurance cover is under obligation to disclose to the insurer all material facts with in his knowledge that the insurer does not know or is deemed not to know. an insurer is entitled to cast-off or avoid the insurance contract in it’s entirely where the insured is guilty of fraud, non-disclosure of material facts or misrepresentation before the contract was entered into.Tab Assurance Co. Limited V. Akwuzie Industries Nigeria Limited the court held that since the respondent contracted with the appellant in bad faith, the contract is rendered illegal, void and of no effect.
ELEMENTS OF THE DOCTRINE
The doctrine is premised on three fundamental elements, they are fraud, non-disclosure and misrepresentation. The effect of these element is that the parties could be deceived, can be misled and present a situation that is baseless and false.
1] FRAUD—A contract created with inaccurate information from intentional misinformation or fraudulent concealment may cause the contract to become voidable. Further, in the case of the provision of goods or services before the information is discovered or disclose, the misinformed party may enforce legal action. facts supplied by the insured when filling the proposal form will be considered fraudulent if the information supplied turn out to be false, and the insured knowingly presented same to the insurer to be truth, Therefore citing fraud he can validly disclaim the policy. Derry v. Peek where the court held that a proposer is guilty of fraudulent misrepresentation if he knowingly makes a false statement. The insured would also be guilty if he willfully conceals material fact within his knowledge from the insurer, which the insurer can void such contract or avoid entering into such contract. whether the contract is entered into or not the insurer is entitled to claim damages in tort of deceit and retain the premium already paid by the insured.
2] NON-DISCLOSURE—This contract is recognized by law that both parties should deal fairly and in good faith, there is non-disclosure where a fact relating to the risk is not made known by the party in possession of those facts to the other party. the rationale for non-disclosure is that the parties are not in an equal bargaining position and in particular the insured will usually be in possession of information about himself which is not known to the insurer and which the insurer could not reasonably ascertain. In order to balance the situation, a duty of utmost good faith is imposed on both parties, though in practice it will usually have most relevance to the insured in relation to the disclosure of his own circumstances at the time the policy is entered into. Failure to disclose it must be information within his[insured] knowledge, the fact must be material to the decision to be reached to take or not to take the risk to cover the insured. Tab Assurance Co. Limited V. Akwuzie Industries Nigeria Limited where the court rightly held that the insured was not entitled to be paid on the claim, so the betrayal of the element of good faith in the policy proved fatal against the insured interest.
3] MISREPRESENTATION— a misrepresentation is a false statement. In insurance, a misrepresentation is a false statement of a material fact on which the insurer relies and provides cover. The insurer does not have to prove that the misrepresentation is intentional, if a material fact is misrepresented, the insurer could choose to avoid the policy because of the violation of utmost good faith. the insurer is entitled to avoid a contract of insurance if the insured induced him to enter into the contract by misrepresentation of fact that is material to the risk to be ensured against. The onus of proof of inducement will be on the insurer to prove because he alleged the issue of inducement. For the insured to be guilty of the doctrine of utmost good faith, the following condition must be present:
1]the fact to be disclosed must be material to the contract.
2]it must be peculiarly within his knowledge and so full disclosure is expected from him.
Messrs. Century Insurance Co. Limited V. Obi Atuanya where the court held that, the insured was not guilty of non-disclosure and could not have been guilty of misrepresentation since he was not aware of the cancellation of the earlier contract of insurance as at the time he contracted the present. The insured is required not to be fraudulent in supplying facts concerning the contract. the obligation is on the insured to disclose the fact by way of statement that are true and not misrepresentation of the correct state of things. This obligation does not affect the making of statement of opinion, this is because statement of opinion is an expression of personal perception of any issue, and not an expert opinion. Akpata V. African Alliance Insurance Company Limited where the court held that at the time of the insured contracting he was not in the position to know or appreciate the critical nature of his death status because he was neither an expert nor a medical personnel so, the court refused to uphold the assertion of the insurer that the insured was guilty of non-disclosure or misrepresentation as to the insured health status. A statement made by an insured regarding any health status, is seen as a statement opinion, but when such statement is made with an existing medical report, it becomes a statement of fact and becomes a material fact that is capable of being construed against the insured.
CONCLUSION
In summary, the principle of utmost good faith is a fundamental element of insurance contracts, emphasizing the importance of honesty, transparency, and good faith throughout the insurance relationship. It helps maintain trust and fairness in the insurance industry while ensuring that both parties are fully informed and protected under the terms of the policy.
1. Joseph Irukwu V. Trinity Mills Insurance Broker [1997]12 NWLR[Pt 531]11
2. Tab Assurance Co. Limited V. Akwuzie Industries Nigeria Limited [1995]4 NWLR [Pt388]
3. Derry V. Peek [1889]LR 14 App Cas 337
4. ]Messrs. Century Insurance Co. Limited V. Obi Atuanya 3 PLR/1966/91 [HC-L]
5. ]Akpata V. African Alliance Insurance Company Limited [1967]NWLR 12