WHAT DOES THE DUTY OF UTMOST GOOD FAITH (UBERRIMAE FIDEI) IN INSURANCE CONTRACT MEAN FOR THE CONSTRUCTION INDUSTRY

This article aims to understand what does the duty of utmost good faith (uberrimae fidei) in insurance contract mean for the construction industry. In construction insurance contracts, the duty of utmost good faith (uberrimae fidei) plays an important role. The analysis of case law shows that an insurer has the right in law to avoid the contract of insurance in its entirety if the insured was guilty of fraud, non-disclosure or misrepresentation before the contract was entered into. It seems to be unjust because even though the insured may be honest, he could still be in breach of duty. Utmost here means that both the insurer and the insured have the duty beyond the reasonable integrity and honesty. Furthermore, the insurer may also have a claim in the case of a breach of utmost good faith during the contract. It proceeds on the basis that the insurer likewise owes the insured a duty of good faith. While sounding good in theory, it can be argued that it may mean very little in practice. In the last decade, the English courts are turning their eyes towards the mutuality of the duty of good faith owed by the insurers to the insured. There is a new practical focus in the construction industry on inducement to balance the risk on the insured and insurer, where the mutuality of the duty of good faith is shifting towards the obligations on the insurers.