Uberrimae Fides in Marine Insurance - Essay Example

? Uberrimae Fides in Marine Insurance What is the nature and scope of the duty of uberrimae fides in marine insurance? Is it necessary to have these measures? Critically analyze and discuss. Uberrima Fides and Marine Insurance Uberrima Fides is a Latin name by origin which is now frequently used in law documents, especially in insurance contracts. Its English translation is ‘Utmost Good Faith’1. The word was first used by the British Marines some centuries ago, however, in the recent times it is again gaining recognition and now the insurance companies dealing in marines required the reassurance of Uberrima Fides 2. This has left the concerned authorities to critically analyze the nature, history, application and scope of Uberrima Fides in Marine Insurance. In broader terms Uberrima Fides is used to disclose all the material that is to be traded through marines. For instance, as per this law both the parties i.e. issuer and receiver has to mention all the peculiar details to the insurer in order to certify that the traded material does not violate any of the marine insurance laws. Furthermore, there is full duty to the facts and figures of the disclosed material because majority of the information about enclosed material is kept hidden by the two parties. However, under this law they are obliged to mention each and every detail of the materials enclosed3. A lot of goods including machines, plants, household or commercial products are transported either by land, sea or air4. This merchandize incurs some transportation cost commonly known as fright charges and the law which covers all the indemnity or destruction of cargo is the Marine Insurance. The Marine Insurance companies either operating privately or in association with the government agencies have to make certain that the goods they are transporting are not violating the rules and regulations of the marine transportation through any means5. For this purpose they make use of Uberrima Fides in order to seek details of the disclosed material from the applicants of marine insurance. Though it seems very simple to mention details about the disclosed material from the insurer’s point of view, yet it is a very complex and highly law governing procedure which needs to be done under the obligations set by Uberrimae Fides6. The duty of Uberrima Fides in Marine Insurance The Duty of Uberrimae Fides in Marine Insurance was created hundreds of years back by the British Marine Forces in order to keep check and ascertain the insurance of transported material through marines. As per the Marine Law, vestigial insurance is used so as to define Uberrimae Fides7. Since insuring the risk of damage and destruction during the cargo transportation is a crucial matter and involves high level of complexities therefore historically Uberrima Fides were used to insure that highest standards of Good Faith are maintained between both the parties. Moreover, on the economic grounds Uberrimae Fides provides protection to the insurers through which they are no longer in danger due to insuring some poor or damageable material8. For instance, when centuries ago British Marines were used to allow transportation of goods through sea there was no law to certify the risks of damage and the associated agencies were forced to rely upon the information provided by the issuer of goods. Hence, if during the sail some damages occurred then insurer had to compensate those damages. Therefore it was found necessary to make laws in order to obtain peculiar information related to the goods to be transported9. Nature of Uberrima Fides The nature of Uberrimae fides is of pre contractual duty. It is an obligatory procedure by which both the parties have to make certain that the good they are issuing or receiving through marine transportation will not incur unnecessary damages and compensations to the marine insurance companies10. Uberrimae Fides is functioned somewhat in the same way as the misrepresentation is operated in fraudulent activities taking place during business transactions. The highly legal nature of Uberrima Fides obliges both the parties to provide all minor to major details about the goods transported. However, failure to do so might create hindrance in the insurance procedure. If the goods get damaged after the application of Uberrima fides then the insurance company is held responsible to compensate the losses11. Due to the exceptional nature of this insurance contract it is therefore affiliated with the optimistic duty of disclosure. In marine insurance it is only the concept of good faith put forward by the Uberrimae fides that inflicts a requirement of disclosure otherwise there is no other law which governs the exceptional nature of damages which occurs during the transportation of goods through marines12. Scope of Uberrima Fides Different analysts of law and insurance contract have argued upon the scope and validity of Uberrima fides. For instance, according to the Appellate Division Judge of South Africa; it is a completely vague law in marine insurance policies which does not governs the damages rather it emphasizes upon useless expressions. He further argues that Uberrima fides does not have any particular need in marine insurance and therefore its existence has not affected the transportation of goods and the on flight damages in any way13. However, others have defined its scope in entirely different ways. For instance, some law analysts states that Uberrima fides has a much greater scope and application from the insurers’ side as it guards and provides maximum protection to their insurance and damage policies. Furthermore it saves them from unnecessary compensations. Considering this aspect its scope cannot be challenged14. Moreover it saves the insurers to continuously monitor the transported goods since material that is cleared for transportation under Uberrima Fide usually does not incur damages. However, for the applicants of insurance it does not have any scope rather it creates immense difficulties for some of the exporters if they are unable to cover up the damageable nature of goods in presence of this law. Furthermore, in case if higher risks are identified during the procedure of Uberrima fides then the applicants are required to pay premiums in order to compensate those risks. Thus increasing the cost of goods transported for the exporter ultimately leading to an increase in cost of goods sold15. In insurance practice if Uberrimae fides are not applied then increase in liabilities may arise due to high risks and lack of information from applicants. Therefore using the procedures of Uberrimae Fides is very essential in order to avoid liabilities and risk dangers16. Significance and Necessity Uberrimae fides or the Utmost Good Faith which is established through the duty of disclosure among the two trading parties and the insurer of transportation of goods is of high significance in context with marine insurance17. Its necessity is basically substantiated on the basis of the fact that it provides protection against the fraudulent activities which takes place in marine transportation. Additionally it gives immense support when burglary insurance has to be investigated18. Following is the further explanation of Uberrimae fides necessity: Economically insurers have no other means of obtaining information about the disclosed items and since they have to provide insurance while dealing with all the risks and damaging factors therefore they regard Uberrima fides as a highly necessary element in marine insurance19. Different countries have entirely different transportation policies which have variable solutions to the damages of marine transportations. In such cases where damages occur both the sailing country and the host country have to face certain legal and political issues. However, in presence of Uberrimae fides these issues are avoided to a greater extent hence giving relief to the political and marine authorities of both the countries20. Uberrimae fides is also necessary because of the fact that it builds good faith between the two parties and also because it provides clear information about the disclosed materials to the insurance companies which they cannot obtain otherwise. Since the enclosed material cannot be judged for damages through any camera, digital photography, etc21. The goods transported while observing uberrimae fides are based upon mutual understanding and ethical grounds therefore they are highly regarded by the marine insurers. Though the terms and conditions of uberrimae fides incur extra costs for the applicants yet it provides them complete insurance against the damages which might occur during the transportation of goods22. Conclusion Uberrimae fides is an important procedure in marine insurance policy which develops good faith between the two parties participating in the marine contract. Its nature is significantly different from all other marine insurance contracts since it grants maximum protection to the insurance company or the insurer23. Research indicates that Uberrimae fides has its origin in the British Marines when centuries ago British marine authorities used to grant insurance to the transportation of goods through sea then they used to face substantial difficulties so as to identify risks and to locate possible damages which might incur during sail of goods24. Uberrimae Fides thoroughly investigates in to the peculiar details of goods to be transported and therefore it is regarded as the necessary measure by the marine insurance companies. 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