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Principle of Mutual Responsibility of Disclosure - Case Study Example

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The author of the paper titled "Principle of Mutual Responsibility of Disclosure" critically assesses and identifies how the courts have both developed and interpreted the duty of disclosure to which both lords Mustill and Mansfield make reference…
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Principle of Mutual Responsibility of Disclosure
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Download file to see previous pages Lord Mansfield though rejected Carter’s claim for not having disclosed the material facts, he cited an example of the insurer insuring the ship knowing full well that it had already arrived. He observed that good faith prohibited either party from hiding the fact so as to tempt the other into a bargain.

The principle of mutual responsibility of disclosure was challenged by the underwriters in Banque Financiere de la Cite SA v Westgate Insurance Company Ltd2. Although a non- marine case, it may be relevant for the purpose of utmost good faith principle. A group of banks advanced monies to four companies represented by one Mr. Ballestro on the basis of credit insurance policies. The gemstones deposited as security for the loan turned out to be fake with the result the insurers avoided the claim citing fraud exclusion clause. Bank sought to still claim for the reason that the insurers had breached their duty of utmost good faith by not disclosing the fraud committed by one Mr. Lee who had been an employee of the brokers. Though the courts of first instance and appeal upheld the claim of the Bank, House of Lords reversed the decision on other grounds than the mutuality of good faith.

Further, the duty of good faith exists only between the assured and the insurer who are original parties to the contract of insurance. In Bank of Nova Scotia v Hellenic Mutual War Risks Association (Bermuda), ‘Good Luck’3, it was held by the Court of First Instance that there was no duty of good faith between the Insurers and the Bank who were only mortgagees and assignees of the insurance policy. Since the assignee cannot have better rights than the assignor who was the assured in this case, insurers did not owe a duty to the assignee. The court of the first instance observed that the assignee could claim only if the insurer had failed in his obligation of disclosure to the assignor. ...Download file to see next pagesRead More
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