Insured's Duty of Disclosure in Canadian and English Law

Abstract

In law, insurance contracts are said to be subject to the doctrine of uberrima fides, i.e., they are contracts of utmost good faith obliging both the insurer and the insured to conform to high standard of conduct, especially regarding disclosure of material facts affecting the appreciation of the risk to be covered. In theory, this doctrine applies equally to the insurer and the insured, but in practice it has come to mean that the insured is under a heavy onus of dis closure when he applies for insurance coverage of any type, either personally or through an insurance agent. The modern doctrines of disclosure originated in the law of marine in surance in 16th century England. At that time, it was not unfair to expect very high standard of disclosure from the insured, because as the owner of the vessel or cargo to be insured, he was in better position than the underwriter to know the nature and extent of the risk to be covered. The underwriter was at comparative disadvantage with regard to the accurate assessment of the risk. The situation is vastly different today, since the insurance industry is wealthy, large and supremely organized. Its expertise in matters of risk assess ment and its corps of trained personnel give it an undoubted advantage over the lay consumer of insurance services. Most risks of an ordinary consumer type are highly standardized, such as automobile coverage, package home owner's coverage, and life insurance coverage. Despite these tremendous changes in the insurance marketplace, the insurer continues to enjoy preferred legal position in the area of disclosure of material facts. As will be seen, the classical doctrine was enunciated by Lord Mansfield in the 18th century and has not changed substantially since then. In the face of well entrenched common law doctrines, the insurance con sumer must rely upon legislative intervention for the fulfillment of his reasonable expectations. However, legislative regulation of standards of dis closure is p