disclosure
Analyse the nature of the duty of Utmost Good Faith (disclosure) in insurance, with particular reference to marine insurance.

INTRODUCTION
It must be remembered that an insurance contract is based on mutual belief that assured is permitted to get the money in settlement and that an insurer has to base his understanding of claim and contract on real risks involved.

UTMOST GOOD FAITH - DISCLOSURE
When an article is to be insured, there is a contract signed by all the parties involved which is based on mutual understanding that the assured is entitled to money in settlement (provided there is an acceptable claim) and insurer has to base his attitude towards claims on the conditions of the contract (Goodacre 1981)
The principle of good faith means that the insurer has to establish his judgement on the facts given to him by the assured - with that in mind, insurer has to decide whether to undertake the insurance and at what rate.

The problem with non-disclosure of material facts is that once anything dreadful happens to insured article, insurers will not pay, as it is pointed out by Goodacre:
The Marine Insurance Act, 1906, under the heading of Disclosure and Representations, states that a �contract of marine insurance is a contract based upon the utmost good faith, and, if the utmost good faith be not observed by either party, the contract may be avoided by the other party�. (section 17)
Source: J K Goodacre (1980)

Therefore, the person that is willing to use marine insurance has to tell the insurer about various relevant material facts before the insurance is undertaken. However, the problem comes with trying to define these material facts and trying to establish which of them are material - relevant (meaning, which of them would influence insurer�s decision). With that comes the fact that insurer has to know about this part himself - he does not have to be told about these material facts. And as been found in The Bedouin case, 1894, it means that the assured has to answer questions posed by insurers truthfully, because if he does not say the truth, even if the fact asked about is not a material one, it will violate the insurance (Goodacre 1980). However, it also states that a duty of disclosure is a positive duty - meaning that the assured has to state the material facts, without insurer having to make inquires (Tate v Hyslop, 1885).

There is an important observation to be made, based on the quotation above: the act does not say that the breach of good faith makes the contract void, but that it can be avoided (Goodacre, 1981). Therefore, the wronged party can avoid the contract from the moment that it was signed as if it never existed. So if this happens, the premium that the assured paid should be returned, with the exception of deliberate fraud:
Where the policy is void, or is avoided by the insurer as from the commencement of the risk, the premium is returnable, provided that there has been no fraud or illegality on the part of the assured; but if the risk is not apportion able, and has once attached, the premium is not returnable.
Section 84 of the Marine Insurance Act, sub-section 3 (a)
Source: J K Good acre (1981)
Even then, the policy is legally valid and therefore a ruling of the court can be obtained. The assured has to state that he made a mistake, so that the insurance is cancelled by agreement and therefore the premium can be given back to him. Otherwise insurers might hold on to the premium on the grounds of fraud.
There is also an important point that the right of the insurer to avoid the contract is not linked to the source of damage to the vessel, so that there is no need to show that the damage occurred due to the undisclosed material fact (Hodges).

As can be seen from above, the duty of disclosure is admittedly closely related to the doctrine of utmost good faith (Hodges). Therefore, the breach of utmost good faith is recognised by proof of non-disclosure.
Fact of a non-disclosure may be fraudulent or innocent, so if a material fact was withheld fraudulently it would not only breach the duty of utmost good faith but also breach the duty of disclosure (Hodges). But if the assured withheld a material fact by mistake or unknowingly, without any fraud in mind, then it would not breach a duty of good faith but will still breach the duty of disclosure - therefore allowing insurer to avoid a contract.
With that in mind, it is therefore important to define what is meant by material facts, as it influences the facts that assured has to mention. However, this is easier said than done due to various likes and dislikes of different insurers. What one insurer might consider a material fact, another might not. So, a question of whether a particular fact is material or not has to be related to various circumstances and if needed be ultimately answered by a court. Even facts that are uncertain have to be mentioned, as an insurer has to have the opportunity of deciding whether a vessel might be in danger, even if the information is false (Goodacre, 1981).
It is important to understand whether a knowledge arising from claims experience is still needed to be mentioned to insurer or whether he/she has to know things like that. From various cases, it can be said that if insurer does not ask the assured about the common knowledge risks, then the facts do not have to be mentioned. Finally, it has been decided that a fact is a material one only when its non-disclosure would affect insurer�s decision to undertake the policy or would affect premium rates (Hodges). Also, any facts given by assured , even if they turn out to be immaterial have to be true. However, as it was mentioned already, just the material facts have to be mentioned by assured - he does not have to disclose all the information available, unless he is asked to give details on certain facts and risks.
It is also significant to remember that misrepresentation of material facts is still counted as non-disclosure, because if an insurer was to know the real picture, not a more favourable one, it would affect his decision (Goodacre, 1981).
Therefore, what is said and presented about material facts have to be believed true, even though it might turn out to be untrue later on.
It is important to remember that facts should be disclosed before contract is concluded:
A contract of marine insurance is deemed to be concluded when the proposal of the assured is accepted by the insurer, whether the policy be then issued or not
Source: S Hodges

Therefore, there is a time limit - meaning, that any material facts that assured himself gets to know about only after the contract is concluded do not have to be mentioned to insurer. This line of reasoning was enforced in few cases, the most important of which is Niger Co Ltd v Guardian Assurance Co Ltd 1922, where it was pointed out that once the duty had �attached� there were not more facts that had to be disclosed and therefore no more duty of disclosure and that whatever happens afterwards, insurers do not have to be contacted (Hodges). However, in the more recent cases and with the section 17, the above idea has been discontinued - so that the duty of good faith goes on even after the concluding of the contract. Therefore, if the assured acquires any knowledge of material facts, he has to contact insurers and tell them about it , whether it is before or after conclusion of a contract.

CONCLUSION
As can be seen from above, assured has to not only disclose all the material facts, but he also has to tell the truth about them. The common knowledge that can be found in periodicals and coming from previous claim experience does not have to be repeated by the assured as insurer is assumed to know about it all. However, saying that, it still very much depends on circumstances of each contract and claim. Misrepresentation of material facts is still counted as non-disclosure and therefore makes the contract avoidable.

The avoidable contract is not a void one, but a contract when the premium has to be returned and claim does not have to be paid. This happens when material facts were not disclosed, but assured still had good faith in a way that he thought he disclosed all. The contract is thought to be void only when fraud has taken place and principle of good faith has been broken.
The material facts have to be disclosed before the contract and then as soon as the assured knows of them. What classifies material facts is hard to determine but section 18 of the M.I.A. deals with that - it mainly states what sort of facts do not have to be disclosed so that everything else comes under material facts.


REFERENCES
Goodacre ACII J. K. (1980) Collected Papers on Marine Claims (Witherby and Co Ltd: London) pp.3-27
Goodacre ACII J.K. (1981) Marine Insurance Claims 2nd ed. (Witherby and Co Ltd: London) pp.19-27
Hodges S. (1997) Marine Insurance Laws (Biddles Ltd: Guilford and King�s Inn) pp.83-94