Moral hazard and the duty of disclosure under the doctrine uberrimae fidei - A marine insurance law perspective

Abstract: A proposer to a marine insurance contract is subjected to a pre-contractual duty to disclose material information under the doctrine of utmost good faith (uberrimae fidei). The duty extends to comprise matters that concern moral hazard and the shipping company may consequently be required to volunteer information concerning the moral character of its owners, directors, employees and other agents connected with the insured interest at the pre-contractual negotiations with the insurance underwriter. The thesis provides the reader with a thorough examination of the legal framework that shipping companies are required to consider when fulfilling their pre-contractual duty of disclosure of information that specifically relates to moral hazard. It is concluded that the current law subjects the prospective assured to making a rather complicated assessment of the materiality of such information in order to determine the need for disclosure – an assessment that, if done incorrectly, may have disproportionately harsh economic implications to the assured. The thesis contributes to a clarification of the state of the law within this specific area by discerning guiding principles from case law, doctrine and statutes that may be vital for the prospective assured to consider before engaging in pre-contractual negotiations with an underwriter. The thesis does moreover provide an analytical evaluation of the current legal framework with the interests of the parties in mind. It is inter alia concluded that English marine insurance law does not take the perspective of the prospective assureds into consideration to the extent needed in order to achieve a balanced and proportionate legal apparatus within this specific field of law. Further legal clarification is needed in order to facilitate the predictability of the law from the assured’s perspective, particularly in relation to the assessment of whether certain allegations of dishonesty must be disclosed to the underwriter or not. It is furthermore alleged that the implications to the assured for making a mistaken assessment of the materiality of the information are disproportionate.