Utmost good faith

Every contract of marine insurance is a contract entered into by the insurer on the assumption of the assured’s utmost good faith. The insurer generally does not see the goods, nor the packing by which the goods are protected; he/she does not see the transport equipment with which the goods will be moved. The insurer thus relies entirely on the declarations made by the assured and his good faith is therefore the essence of every contract of insurance. This places upon the party seeking insurance cover the duty to disclose every relevant fact which affects the level of the risk which the insurer is being asked to accept. If the assured does not disclose all the relevant facts, and the insurer can point to any lack of disclosure, the policy becomes void. Courts of law have uniformly upheld this view.

What do you need to tell the insurer?

Information, which the assured must disclosed to the marine insurance company includes:

  • The precise nature of the goods, including any inherent property of the goods which may affect the risk, e.g. fragility, flammability, corrosiveness etc.
  • The nature of the packing and protection afforded the goods
  • The full identification marks and numbers applied to the packages, including any labelling or cautionary marks intended to indicate the special nature of the contents
  • The route over which the goods will travel, including the mode or modes of transport to be employed.
  • Whether or not the goods will be containerised, and if so, whether the cargo will be packed into a full container either a 6 or 12 metre, (FCL) or move as a less than container load (LCL) or groupage
  • Whether the goods are new or second-hand

These elements of information must be disclosed for every shipment in respect of which insurance cover is required. In addition, when you first approach an insurance company in view of taking out an insurance policy, you must be prepared to disclose the full nature of all prior claims you may have had with any other insurance company.

Second hand goods

All goods declared for the purpose of marine insurance are assumed by insurer to be new goods, unless otherwise stated. For this reason, traders must be aware that a failure to declare goods as second-hand will be a failure to disclose a material fact, and this could invalidate the insurance cover.