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The burden of insurance contracts

It is obvious that before the introduction of new innovation the burden or risk of insurance contract lies heavily on the insured to show utmost good faith in all his dealings with the insurer. This was the position of the law before 1988 Decree No 40 and later was consolidated by Insurance Decree 1997 No (2). The effect of this law was to remove the loopholes and intrigues available to the insurer against the insured.

The insures were mandated by the law to prepare a proposal form, in form of a questionnaire, and any information he considers as material facts must appear there and if there is the fact not requested in the proposal form shall be deemed not to be a material fact.

See section 58 (1) Insurance Decree (1997). See the case of Benjamin Apugo Ltd (1979) IMSLR7.

There the insurer fraudulently claimed that he had the capacity to ensure goods-in-transit which is a district category from motor insurance in which he was registered to undertake.

The plaintiff was induced to ensure 18 vehicles we used to transport products of his customers (Nigeria Breweries) who owing to this wrong policy with the disabled insurer terminated his haulage contract with the insured.

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The court held that the contract of insurance is username fidei, the defendant is bound to disclose about his incompetence to the insured as the insured depending on the assurances given to him by the insurer of his capacity to ensure and therefore the policy has been breached.

His Lordship awarded the insured  #600 return of premium and #20,000 damages for loss suffered.

Again, the doctrine of uberrimae Fidei was established in the case of Chukwurah v. Royal Exchange Assurance Co. Ltd (1974) 4 ECSLR 319. Here the insured stated that the car was new in the proposal form but later the insurer discovered it was 7 years old secondhand.

It was held that the age of the car at the time it was offered for insurance was a material fact and that non-disclosure of that fact would avoid the policy.

However, the insurer failed to prove that the car was second hand and that the insured had failed to disclose the same.

So, the insured was held entitled to indemnity to the extent of the market value of the car which was totally lost in an accident.

Yet, on Appeal on another ground of breach of a warranty that is, the car was driven by a person with one month and two days old driving license, which is a breach of material undertaking by the insured that the car would be driven only by a person with no less than a one-year full license to drive.

The previous judgment was overturned. See the case of century Assurance v. Atuanya  (1966)  2 NCLR 314.

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The doctrine of utmost good faith (Uberrimae fidei) is implied in every contract of insurance. That is marine, life and property insurance contract abide by the principle of utmost good faith and breach of material facts can lead to void contract or policy.

To this extent, non-disclosure of material facts by both parties would nullify the contract.

The doctrine is established also in the case of TABS Assurance Co. Ltd v. Akwuzie Industries Ltd (1995) 4 NWLR (pt 388) 223 at 225, the court of Appeal held that the fact that the raw materials ordered by the insured had perished at the sea to the knowledge of the insured before he entered into a contract with the agent of the insurer, the contract was illegal and breach of utmost good faith principle.

Similarly, the case of Ma Kim Ying v.

“Insurance contracts”, Manu Life Assurance (2012) 4 KCFI 971, Mr. Wong long applied for a life policy on 12th July 2004 and it was issued back 18th July 2004 with Mr. Wong as the policyholder and the wife is the sole beneficiary. Later Mr. Wong died on 14th May 2007 from an illness that he did not disclose to the insurer.

The court held that the non-disclosure of the illness at the time of filling the form/proposal form amount to a breach of the principle of Uberrimae Fidei, which is also fraudulent because the fact withheld was a material fact, and that the underwriter had been induced to write the policy when it would otherwise have not been written and that the incontestability clause did not provide a defense.

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Again, the case of Drake insurance Plc V. Provident Insurance Plc (2007) EWHC 109. It was held that the duty of good facts commences before a policy we made via the duty.

In summary, the judiciary prior to the 1997 insurance Decree, applied the innovation in various ways to suit both the insured and insurer, not allowing the principle of the exclusion clause to weigh uniformed insured down and deprive they are indemnified if the loss they insured occurred.

See the case of Philips v. Africa Alliance Insurance Co. Ltd (1992) NLRI.

The court held that the administrator of the estate of the deceased failed to prove that the insured was 39 years at the beginning of the policy, that a younger man may have been presented for medical test leaching to the insurance of the policy.

The court held the misrepresentation of the age of the insured in the proposal form amount to fraud on side of the insurer has the effect of nullifying the contract.

See the case of Chukwuah v. Royal Exchange Assurance Co. Ltd (1974) EC SLR 319 and the case of century v. Atuanya (Supra).

See the case of CGU v. AMP (2009) 20  ILJ 92 at 108, the court held that utmost good faith required the insured to act in accordance with commercial standards of decency and fairness with due regard to the legitimate interest of the insured.

See Yadis Nigeria Limited v. Great Nigeria insurance company  Limited (2001) Sc 333.

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