The Insurer’s Pre-Contractual Duty of Utmost Good Faith: A Critical Analysis of the Common Law Rules

This article considers the insurer’s pre-contractual duty of utmost good faith at common law. It critically analyses the ambit of the duty, the test of materiality of information or facts to be disclosed by the insurer, the classes of material facts, the way of performing the duty, and remedies for the insurer’s breach of the duty. The removal of the sole remedy of avoidance of insurance contract for the insurer’s breach of the duty by the Insurance Act 2015 clears the way for the courts to develop new effective remedies. A three-elements test of materiality (risk-recoverability-inducement) for the insurer’s duty of disclosure is suggested; the basis on which effective remedies to the harmed insured may be developed is proposed; and the possible directions for the future development of the insurer’s pre-contractual duty of utmost good faith are discussed.