Carter v Boehm
Insurance is a contract of the utmost good faith, so the insured must disclose facts within his knowledge which the insurer does not know and which are material to the risk.
Facts
Captain Carter, the governor of Fort Marlborough in Sumatra, took out insurance against the risk of the fort being taken by a foreign enemy. The fort was captured by the French, and he claimed under the policy. The insurer refused to pay, arguing that Carter had failed to disclose that the fort was weak and poorly defended, and that he had known that it was likely to be attacked by the French.
Legal principle
Lord Mansfield held that the insurer was liable. He said that insurance is a contract upon speculation, in which the special facts upon which the contingent chance is to be computed lie most commonly in the knowledge of the insured only, and that good faith forbids either party, by concealing what he privately knows, to draw the other into a bargain from his ignorance of that fact and his believing the contrary. However, the insured need not disclose matters which the insurer knows or ought to know, such as general political matters, and the weakness of the fort and the risk of a French attack were matters of general knowledge, which the insurer could have assessed. The case is the foundation of the duty of utmost good faith in insurance.
Related cases on utmost good faith, disclosure, warranties and insurable interest
- Bank of Nova Scotia v Hellenic Mutual War Risks Association (Bermuda) Ltd (The Good Luck) [1992] 1 AC 233
- Dawsons Ltd v Bonnin [1922] 2 AC 413
- Feasey v Sun Life Assurance Co of Canada [2003] EWCA Civ 885
- Lambert v Co-operative Insurance Society Ltd [1975] 2 Lloyd's Rep 485
- Lucena v Craufurd (1806) 2 Bos & PNR 269
- Macaura v Northern Assurance Co Ltd [1925] AC 619
- Manifest Shipping Co Ltd v Uni-Polaris Shipping Co Ltd (The Star Sea) [2001] UKHL 1, [2003] 1 AC 469
- Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd [1995] 1 AC 501
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This summary is for study and revision and is not legal advice. Although our case summaries are checked for accuracy, we do not guarantee that they are free from errors or omissions. Always read the full judgment for the court's reasoning.
