The Development of the Principle of Uberrima Fides over the years

As a general rule, Maltese law attributes good faith to contracts, however, the law embraces the added tranch of requiring uberrima fides (utmost good faith) in the case of insurance contracts.^[1] Uberrima fides applies where the parties seeking insurance cover are required to disclose all material facts to the insurer. As stated in Mackenzie v Coulson,^[2] “There is no class of documents as to which the strictest good faith is more rigidly required in courts of law than policies of assurance”, owing to the fact that the insurer “knows nothing and the man who comes to him to ask him to insure knows everything”.^[3]

The doctrine is said to apply to the contract of insurance throughout its duration and a continuing duty extends during the currency of the contract of insurance.^[4] However, the time at which the doctrine is most important is when the contract is being negotiated. At this point, the proposed insured is bound to make a full disclosure of all material facts to the insured, and the insurer must make a similar disclosure regarding the cover and terms offered. The insured’s requirement to make full disclosure of all material facts arises again in the matter of long-term business of insurance contracts, where a policy may have lapsed (for non-payment of a premium), and the insured wishes to revive the policy or to re-apply for the cover.^[5] The duty of the insured to make a full disclosure to the underwriters applies even in the event that the insured is not asked of all the material circumstances.

Consequently, in practice, this duty of utmost good faith falls most heavily on the insured who is assumed to be in a position of advantage in relation to the insurer. The principle of uberrima fides was interpreted rigidly in previous years, most notably in the case of Salvatore Sammut vs Middlesea Insurance P.L.C^[6], wherein the Court concluded that the non-disclosure on the part of the insured rendered the contract void.  This rigid interpretation of the principle of uberrima fides was detrimental to the rights of the insured in a contract of insurance. In fact, as Semin Park states in The Duty of Disclosure in Insurance Contract Law (1996) Dartmouth, the principle of uberrima fides “must not be indiscriminately used by insurers and judges as an excuse for ignoring insurance claims.”

The courts have recently addressed this issue in a consolidated effort to protect the interest of both parties to an insurance contract, whereby the inception of ‘consumer insurance contracts’ and a general view that in observing the basic rule of uberrima fides, the insurer should give the benefit of the doubt to the insured, has gained ground.^[7]

In more recent case law, the interpretation of the principle has shifted from the rigid approach which required both parties to disclose all facts, to a more lenient approach whereby the parties must not misrepresent themselves or the material facts when answering questions.^[8] Therefore courts began drawing a distinction between the principle of good faith in the traditional sense and the precontractual duty not to misrepresent the material facts.^[9]

This shift in the interpretation of uberrima fides was witnessed in Alfred Scicluna vs Citadel Insurance,^[10] whereby the court held that non-disclosure or misrepresentation alone could not void the policy, unless it is proven that such non-disclosure or misrepresentation induced the insurer into entering into the contract of insurance with the insured.

By way of example, a misrepresentation which induced the insurer into entering into the contract of insurance with the insure was witnessed in Teg Industries Ltd vs Gasan Insurance. In this case, the insured failed to notify the insurer of numerous relevant facts including its insurance history, the fact that the company had suffered a fire in previous years, and the fact that its insurance cover was refuted by other insurance companies. In quoting John Bird’s Modern Insurance Law, the court thus held that Teg Industries had misrepresented themselves in failing to disclose such pertinent information from the insurer.

Furthermore, this duty not to misrepresent oneself, as held in GasanMamo Insurance Limited v Alexander Jan Edward Van Reeven u Jeanette Marie Van Reeven in solidum^[11] is imposed on the contracting parties, namely the insurer and the insured, and it does not extend to third parties. In this case, the insurer sued the defendants (being a mother and son) over a traffic accident claim whereby Alexander Jan Edward Van Reeven had crashed his mother’s car into two parked cars. The mother’s car was insured with Gasan Mamo Insurance. Alexander Jan Edward Van Reeven had filed a false police reporting claiming that the car had been stolen before the accident occurred and he was subsequently charged and convicted for filing such a false claim.

Since the insurer had already paid the necessary compensation to the owners of the two damaged cars, and the payments were issued on the basis of a false claim, the insurer filed a lawsuit against the insured and her son, for a breach of the principle of uberrima fides, thereby asking for the reimbursement of the payments made by the insurer. However, the court held that the son’s false report could not result in the mother’s breach of her duty of uberrima fides towards the insurer. The court therefore dismissed the insurer’s claim for reimbursement of the fees.

Recent judgements therefore seem to acknowledge that the rigid interpretation of the principle was detrimental to the insured. In recent judgements it is evident that the principle is not being interpreted as rigidly as it had been in the past, but rather it is being developed to produce a more equitable approach in the interest of justice, thereby providing a fair balance between the interests of the insurer and the insured.

^{[1] Michael Beruello vs Victor Cordino proprio et nomine (Court of Appeal) decided on the 11th July, 1994
[2] Mackenzie v Coulson decided in 1869
[3] Rozanes v Bowen (Court of Appeal) decided in 1928
[4] Knightsbridge Developments Limited vs Citadel Insurance plc (First Hall, Civil Court) decided on 7th July 2017
[5] Dr Edward Zammit-Lewis et vs Middle Sea Valletta Life Assurance Co. Limited (First Hall, Civil Court)  decided on the 18th February 2015
[6] Salvatore Sammut vs Middlesea Insurance P.L.C (First Hall, Civil Court) decided on 14th May 2004
[7] ZN vs MIB Insurance Agency Ltd, Lloyds Malta Ltd (Arbiter for Financial Services) decided on 27th July 2022
[8] Young vs Royal Sun Alliance Plc (CSOH 32, Outer House of the Court of Session in Scotland) decided in 2019
[9] Teg Industries Ltd vs Gasan Insurance (Court of Appeal) decided on 3rd February 2012
[10] Alfred Scicluna vs Citadel Insurance (First Hall, Civil Court) decided on 12th October 2016
[11] GasanMamo Insurance Limited v. Alexander Jan Edward Van Reeven u Jeanette Marie Van Reeven in solidum (Court of Appeal) 26th October 2022}