Carter v Boehm
| Carter v Boehm | |
|---|---|
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| Court | King's Bench |
| Citation(s) | (1766) 3 Burr 1905, (1766) 97 ER 1162 |
| Case opinions | |
| Lord Mansfield | |
Carter v Boehm (1766) 3 Burr 1905 is a landmark English contract law case, in which Lord Mansfield established the duty of utmost good faith or uberrimae fidei in insurance contracts.
Carter was the Governor of Fort Marlborough (now Bengkulu, Sumatra), built by the British East India Company. Carter took out an insurance policy with Boehm against the fort being taken by a foreign enemy. A witness, Captain Tryon, testified that Carter was aware that the fort was built to resist attacks from natives but would be unable to repel European enemies, and he knew the French were likely to attack. The French successfully attacked, but Boehm refused to honour the indemnifier Carter, who promptly sued.
Lord Mansfield held that Mr Carter, as the proposer owed a duty of utmost good faith (uberrimae fidei) to the insurer, he was required to disclose all facts material to the risk:
Lord Mansfield went on to hold that the duty was reciprocal and that if an insurer withheld material facts, the example cited being that an insured vessel had already arrived safely, the policyholder could declare the policy void and recover the premium.
Lord Mansfield proceeded to qualify the duty of disclosure:
Lord Mansfield found in favour of the policyholder on the grounds that the insurer knew or ought to have known that the risk existed as the political situation was public knowledge:
In Manifest Shipping Co Ltd v Uni-Polaris Shipping Co LtdLord Hobhouse said,
"The keeping back [in] such circumstances is a fraud, and therefore the policy is void. Although the suppression should happen through mistake, without any fraudulent intention; yet still the underwriter is deceived, and the policy is void."
It thus was not actual fraud as known to the common law but a form of mistake of which the other party was not allowed to take advantage. Twelve years later in Pawson v Watson (1778) 2 Cowp 786 at 788, he emphasised that the avoidance of the contract was as the result of a rule of law:
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