UNIVERSITY OF IRINGA

FACULTY OF LAW

COURSE NAME: INSURANCE LAW

COURSE INSTRUCTOR: NDITI, DR

STUDENT NAME: HASHIRU HAMIDU MDOTA

REGISTRATION NUMBER: LLB-30859

NATURE OF WORK: INDIVIDUAL ASSIGNMENT

DATE OF SUBMISSION: MAY 2023

QUESTIONS:

1. To whom does utmost good faith apply to?

2. What the differences between insurance warranty and representation
To whom does utmost good faith apply to?

In the issue of utmost good faith, the one way need to apply this condition is the both parties to
the insurance contract must have dealt in good faith when they are making a full disclosure of
all material facts in the insurance proposal or insurance policy.

For instance, I refer to the case of Carter v Boehm1 Lord Mansfield held that: …“The reason
for the rule that obliges parties to disclose is to prevent fraud and to encourage good faith.”
This means that every party to the insurance contract must be obliged to apply utmost good faith
for the purpose of preventing fraud and encouraging good faith.

So, utmost good faith is a principle that governs insurance, and utmost good faith comes from the
Latin maxim meaning uberrimae fidei. This principle is that the insurer and insured should
display the utmost good faith towards each other in relation to the contract.

For instance, under Section 25(1) of the Insurance Act,2 is elaborated that for the purpose of
discharging the duty to act honestly and in good faith in the best interests of an insurer, a
director or senior officer, and the same Act, subsection 2 it demonstrates a director or senior
officer of an insurer fails to comply with subsection (1), a policy-holder may institute
proceedings against such director or senior officer. In my view, that provision is demonstrated
by the fact the insurer is the director or senior officer, and there is a duty to act in honesty and
good, which is an utmost good faith.

Furthermore, that principle also needs insured to act in good faith, for instance, in the case of
JOSEPH V. LAW INTERGILITY INSURANCE CO. LTD 3. But the insured, provided that
he acted in good faith, can enforce an ultravires insurance policy against the company. This
means that the principle of good faith also apply to the insured.

And that parties to the insurance contract are being to apply the utmost good faith to prevent
there are several issues such as fraud, non-disclosure, or misrepresentation of material facts.
Exempli gratia, the insured, when he or she is making the life insurance, must reveal the true age
and details of the existing illness. If he does not disclose the true facts while getting his life
insured, the insurance company can avoid a contract. In the case of Carter v Boehm (supra), it

1
(1766) 97 ER 1162
2
2009
3
(1912) 2 ch 581 CA
is stated that the keeping back of such circumstances is a fraud, and therefore, the insurance
policy is void on the ground of the fraud, and the principle of utmost good faith was introduced.

Therefore, in the upshot above, the principle of the utmost good faith governs the insurer and
insured in the insurance contract for the purpose for preventing fraud and encouraging good
faith, so this principle is applied to both parties in the insurance contract.

Distinguish between warranty and representative

Introduction.

Warranty

According to black’s law dictionary is defined as a covenant by which the grantor in a deed
promises to secure to the grantee the estate conveyed in the deed, and pledges to compensate the
grantee with other land if the grantee is evicted by someone having better title.4

But warranty in an insurance policy is a promise by the insured party that statements affecting
the validity of the contract are true. So that a statement attesting that something the assured
person says is true. And that insurance contract is written on the principle of utmost good faith.5

So, for the contract to be valid, you may have to warrant that an assumption the insurer is making
is true. If you are applying for life insurance, you must make a warranty that you are not
terminally ill. If the insurer discovers that one of your warranties is untrue, it generally has the
power to void the contract and not honor any claims you make.

And representation is a statement of fact that is relied on by the receiving party and induces
them to enter into the contract. Or is the statement made in an application for insurance that the
prospective insured represents as being correct to the best of their knowledge. If the insurer relies
on a representation in entering into the insurance contract, and if it proves to be false at the time
it was made, the insurer may have legal grounds to void the contract.6

4
Brian A. Garner, editor in chief. Black’s law dictionary. St. Paul, MN: Thomson Reuters, 2014. Pg.1618
5
https://www.learnenglish4law.com/contract-law-the-difference-between-representations-and-warranties/ 17/5/2023
at 01:21pm
6
https://www.linkedin.com/pulse/representations-warranties-lisa-coubrough 17/5/2023 at 01:21pm
So, through those definitions, it is demonstrated that one is a promise by the insured party and
the other is a statement made in an application for insurance.7

Therefore, the following are the differences between warranty and representation;

In the case of All India General Insurance Co. Ltd. and Anr. v. S.P. Maheswari, AIR 1960
Mad 484. The court of Madrasthe main distinction between representation and warranty;

In the case of a warranty, the materiality or immateriality of the fact warranted signifies
nothing. Its incorrectness constitutes a defense to an action on the policy, even though it is not
material and was made in perfect good faith. Whereby, in the case of a representation, the
insurer can avoid the policy only by proving that the statement is false and fraudulent or that it
was false and material to the risk. In other words, it is only a material misrepresentation that can
avoid a policy if the truth of the facts contained in the representations be not warranted by the
policy.

A warranty forms part of the written contract, whereby a representation can be oral or in writing8

A warranty needs to be strictly complied with, in another hand a representation needs no

substantial compliance9

A warranty comes into existence after completion of contract only, whereby a representation can
be said to have been made due to involvement in entering into a contract, and it should precede
the formation of the contract.10

Also, in another different is adopted in the case of Life Insurance Corporation of India vs.
Permanent Lok Adalat and Ors.11 The breach of a warranty gives rise to claim for damages but
does not give the right to repudiate the contract. On the other hand, misrepresentation is
defined under the law of contact, and the remedies are provided therein.

Therefore, that parties need to consider carefully how they wish to use the terms representation
and warranty and in particular if they are to be separately defined in the contract giving rise to
different remedy in the event of a breach.
7
https://www.irmi.com/term/insurance-definitions/representation 17/5/2023 at 01:21pm
8
M.N. Srinivasan, Dr.N.R.Madhava, Principles of insurance law, 7th Ed. 2002, publishers by Wadhwa and Company
Nagpur. Pg.146
9
ibid
10
Ibid
11
2018
 BIBLIOGRAPHY.

STATUTE.

The Insurance Act, 2009

CASES LAW.

All India General Insurance Co. Ltd. and Anr. V. S.P. Maheswari, AIR 1960 Mad 484.

Life Insurance Corporation of India vs. Permanent Lok Adalat and Ors.

JOSEPH V. LAW INTERGILITY INSURANCE CO. LTD (1912) 2 ch 581 CA

Carter v Boehm (1766) 97 ER 1162

BOOK.

M.N. Srinivasan, Dr.N.R.Madhava, Principles of insurance law, 7th Ed. 2002, publishers by
Wadhwa and Company Nagpur.

LEGAL DICTIONARY.

Brian A. Garner, editor in chief. Black’s law dictionary. St. Paul, MN: Thomson Reuters, 2014

INTERNET SOURCE.

https://www.irmi.com/term/insurance-definitions/representation 17/5/2023 at 01:21pm

https://www.learnenglish4law.com/contract-law-the-difference-between-representations-and-
warranties/ 17/5/2023 at 01:21pm

https://www.linkedin.com/pulse/representations-warranties-lisa-coubrough 17/5/2023 at
01:21pm