Doctrine of Ubberimae Fidei: DR Nurjaanah Chew Li Hua

DOCTRINE OF UBBERIMAE
FIDEI
Dr Nurjaanah Chew Li Hua

LLB(Mal)(Hon), LLM (Mal), PhD (Manchester)
chewlihua 11/23/2018
Doctrine of ubberimae fidei
Information asymmetry
fairness
To act in utmost good faith

at all times
Party - information within his

exclusive k/l
Obligation to disclose +
duty not to misrepresent
 Carter v Boehm (1766)

“Good faith forbids either party
by concealing what he privately
knows, to draw the other into a
bargain, from his ignorance of
that fact, and his believing the
contrary …”
Carter v Boehm (1766)
 Lord Mansfield:
 The special facts, upon which the

contingent chance is to be computed,
lie most commonly in the knowledge of
the insured only; the under-writer trusts to
his representation, and proceeds upon
confidence, that he does not keep back
any circumstances within his knowledge,
to mislead the under-writer into a belief
that the circumstances does not exist,
and to induce him to estimate the
risqué, as if it did not exist.
Carter v Boehm
 The under-writer knew the insurance was for the
governor. He knew the governor must be
acquainted with the state of the place. He knew
the governor could not disclose it, consistently
with his duty. He knew the governor, by insuring,
apprehended, at least, the possibility of an
attack. With this knowledge, without asking a
question, he underwrote. By so doing, he took
the knowledge of the state of the place upon
himself. It was a matter, as to which he might be
informed in various ways: it was not a matter,
within the private knowledge of the governor
only.
Insured’s duty under Carter v
Boehm
Duty only in respect of matters

exclusively within his knowledge
Matters which cannot be ascertained

or obtained by insurer through other
means – fair inquiry
Insurer’s duty under Carter v
Boehm
To inform itself of the practice

of the trade it insures
Fair inquiry & due diligence
Section 17, MIA 1906
(original)
A contract of marine insurance is a contract
based upon utmost good faith, and, if the
utmost good faith be not observed by either
party, the contract may be avoided by the
other party.
(current)
A contract of marine
insurance is a contract based
upon utmost good faith.
Question
Whether the new

amended section 17
MIA applicable in
Malaysia?
Partial codification
Did not incorporate the full

extent of the doctrine of UGH
London Assurance v.
Mansel
“…Whether it is life or fire or
marine insurance, I take it
good faith is required in
all cases…:
 applies to both insured and

insurer
 Duty to disclose & not
misrepresent
 From pre-contract to post-
contract
Duty of utmost good faith
Duty not to put

Duty of Duty not to
in fraudulent
disclosure misrepresent
claim
Duty to not Duty to act

delay claim professionally
Schedule 9, FSA
s.129
Replaced s.150,
Insurance Act 1996
Sch 9 applicable w.e.f.
1.1.2015
S.150, Insurance Act 1996
S.150, Ins. Act 1996 still

applicable to contracts of
insurance entered into,
varied or renewed b4
1.1.2015
Para.1(1), Schedule 9, FSA
Schedule 9, FSA 2013
para. 1(2)
Provisions under the

Schedule prevails over
Contracts Act 1950
No contracting out – para.3,
Schedule 9, FSA
Disclosures & representations by
consumers b4 contract formed,
varied or renewed
Non-contestability of life
policies & remedies 4
consumers in Pt 3
Any term in contract that puts

consumers in a worse position =
VOID
PRE-CONTRACTUAL DUTY OF
DISCLOSURE
Consumer Duty of
insurance Disclosure
contracts
Other
contracts
Contracts other than c.i.c
para.4, Schedule 9, FSA
Proposer 2
disclose 2
insurer
He
B4
contract R knows
2b R
Reas. person
knows R
Relevant matter – to the
insurer – para4(1), Sch.9, FSA
Whether 2 accept risk or not?
Rates & terms 2b applied
No need to disclose
para. 4(2), Sch. 9, FSA

Common
Diminishes risk
k/l
Insurer ought
Insurer knows Waived
2 know
Deemed waived
para.4(2), Sch.9, FSA
Incomplete/
Proposal
No answer irrelevant
form or Qs
answer
Insurer DID DEEMED

NOT pursue waived
Insurer’s duty to inform
proposer
Para. 4(4), Sch.9, FSA

Duty
Pre- continues till
contractual contract
In writing
duty 2 formed,
disclose varied or
renewed
PRE-CONTRACTUAL DUTY OF
DISCLOSURE – Consumer
insurance contracts
Para.5, Sch.9, FSA
Para.5(1), Sch.9, FSA
B4 contract
Insurer – R Qs
B4 c.i.c entered into or
varied
Not 2
Reasonable
Consumer misrepresent
care
in answers
B4 c.i.c is renewed - insurer
may
Specific R Qs
Give a copy of matter previously disclosed

+ request 2 confirm or amend
Duty of consumer – reasonable care NOT

2 misrepresent
Consumer’s duty under
para.5(1) & (3) deemed
waived
No Qs by insurer
•Para.5(5)
No answer/incomplete or irR
NOT pursued by insurer
•Para.5(6)
Insurer’s duty to inform
consumer
Para. 5(7), Sch.9, FSA

Duty
Pre- continues till
contractual contract
In writing
duty 2 formed,
disclose varied or
renewed
Residual duty to disclose
Consumer to disclose other R

matters
Reasonable care
Duty of UGF prevails
2b exercised by both
consumer and insurer
All dealings after contract
entered into, varied or
renewed
Including claims
Duty to take reasonable
care
para.6, Sch.9, FSA
Misrepresentation in life
policy
 > 2 years
 s/m made or omitted, report of dr,
referee or others or documents
 Inaccurate/ false/ misleading
 Non-contestable – para 13, Sch 9, FSA
2013 UNLESS:
Proven – a material matter or
suppressed a material fact AND
fraudulently made or omitted
If misrepresentation by
consumer – para 7, Sch.9,
FSA
Life ins. < 2 yrs +
general insurance
No reasonable care in
answering R Qs
Remedies in Division 2
available to insurer
Misrepresentation by
consumer – para.7(3)
Deliberate or reckless
Careless
Innocent
Deliberate or reckless
if consumer knew
Untrue or misleading or did not care
• Para.7(4)(a)
R to insurer or did not care
• Para.7(4)(b)
Misrepresentation made dishonestly –

para. 7(5)
Careless or innocent
misrepresentation
If not deliberate or

reckless
Para.7(6)
Burden of proof – deliberate
or reckless misrepresentation
Burden on insurer
Balance of probability
Presumption – para.7(8)
Clear & specific Q
Consumer knew it 2b R to
insurer
Duty of disclosure - proposer
 Para.4(1), Sch.9 – other than c.i.c.

 [Section 150(1), Insurance Act 1996]
 The duty arises before the contract of

insurance is entered into.
 The proposer shall disclose to the insurer:
 A matter that he knows to be relevant to the
insurer; or
 A matter that a reasonable person in the
circumstances could be expected to know to
be relevant
DUTY TO DISCLOSE – PARA 4,
SCH 9
INS. CONTRACT
OTHER THAN
CIC
B4 CONTRACT VARIED OR
ENTERED INTO RENEWED
2 disclose R A reasonable
matter person - R
What NEED NOT be
disclosed by proposer?
 Para.4(2), Sch.9
 Section 150(2), Insurance Act 1996:
 The duty of disclosure not required for a matter that:
(a) Diminishes the risk
(b) Is of common knowledge
(c) The insurer knows or in the ordinary course of his
business ought to know; or
(d) The insurer has waived the requirement of disclosure
DUTY TO DISCLOSE – PARA
4(2), SCH 9
NEED NOT
DISCLOSE
DIMINISHES COMMON INSURER

WAIVED
RISK K/L KNOWS
What NEED NOT be
disclosed by proposer?
Diminishes
risk
Para.4 Common
waived (2) k/l
Insurer knows
or ought to
chewlihua know 11/23/2018
Onus on insurer to pursue
 Para.4(3), Sch.9
 Section 150(3), Insurance Act 1996
 where the proposer fails to answer or
gives an incomplete or irrelevant
answer to a question, the burden is on
the insurer to pursue further.
Otherwise, the insurer is deemed to
have waived the requirement of
disclosure on that particular matter.
Onus on insurer to pursue
• No answer
Insurer • If NOT
• Incomplete or • To seek • D of discl.
irrelevant answer deemed
answer • To get waived
clarification
Proposer Waiver
PARA 4(3), SCH 9
NO ANSWER/INCOMPLETE/IRRELEVANT
INSURER DID NOT CLARIFY
DEEMED WAIVED
Para. 4(3), Schedule 9, FSA
No answer,
incomplete/ Disclosure
Insurer DID NOT
irrelevant answer deemed waived
follow up
in proposal form by insurer
or Q
PARA 4(4), SCH 9
DUTY OF INSURER
TO INFORM IN WRITING
DUTY OF DISCLOSURE
Duty of disclosure – para.5,
Sch.9 – C.I.C.
Consumer – reas
Specific Qs care not to B4 renewal
misrep
If no Qs – Incomplete or Duty of insurer to

deemed irrelevant ans or clearly inform –
waived no ans – duty on in writing – duty
para5(5) insurer 2 pursue 2 disclose
Consumer to disclose other relevant

matters
Para.5(8)
Duty of disclosure - proposer
R matter
2 Insurer
Whether to accept risk + applicable rates & terms
Insurer to inform in writing
para. 4(4), Sch. 9, FSA
Insurer to B4 contract
inform in
writing
Pre-contractual
duty of
disclosure +
continue
Para. 5, Schedule 9, FSA
Pre-contractual duty of
disclosure 4 consumer ins.
contracts
Insurer may request consumer to
answer specific questions
Relevant 2 decision of insurer –

whether to accept risk + rate & terms
Para. 5, Schedule 9, FSA
 Duty of consumer – reasonable care
NOT to make a misrepresentation to
insurer when answering Qs
Insurer may request 2 answer more
specific Qs
Request consumer to confirm or
amend
Duty on consumer – reasonable care

NOT to misrepresent
Failure to answer or
give relevant answers,
etc – if not pursued
further by insurer =>
deemed to have been
waived by insurer
Insurer to informed
proposer of his pre-
contractual duty of
disclosure which continues
until contract is formed,
varied or renewed
Consumer –
reasonable care to
disclose relevant
matter to insurer
Duty of utmost good faith retained

Both parties
Dealings with each other
Continues until contract of
insurance has been entered
into, varied or renewed
claims
Reasonable care – para. 6,
Schedule 9
Manner Consumer
it was insurance
sold contracts
Insurer aware or
R explanatory material ought to know
or publicity by insurer cir. of consumers
Std – reas
consumer Clarity of Qs
in the cir.
Joel v. Law Union
 Application for life insurance. Q –
whether he ever suffered mental illness.
Ans – NO. He was not aware of the fact
that he had been previously treated for
acute mania. The insured subsequently
committed suicide.
 Ct – insurer liable.
“ the duty is to disclose, and you
cannot disclose what you do not
know”
Sy. Pembinaan Lida S/B v.
Talasco Insurance
SC - Issuance of cover note

after the risk occurred – fire.
The fact that the fire had
occurred should have been
disclosed – fraudulent
claim.
Relevant cases
 Roselodge Ltd v. Castle
 Lambert v. Cooperative Insurance
Society
 Toh Kim Lian & Anor v. Asia Insurance Co
 Azizah bte Abdullah v. Arab Malaysian
Eagles Sdn Bhd
 P & O Insurance v. Kathirvelu
 AIA v. Koay Fong Eng
Prohibited business
conduct
s.124(1), FSA 2013
Schedule 7, FSA 2013
CONTRAVENTION IS AN
OFFENCE: S.124(3), FSA 2013
IMPRISONMENT not more than 5 years
FINE not more than RM10m
BOTH
INSURER’S PRE-
CONTRACTUAL DUTY OF
DISCLOSURE
S.129(1) & Sch 9, para 11
Prohibition of inducing
Voidable contract
Sch 9, para 11
FSA 2013
MISLEADING , FALSE OR
DECEPTIVE S/M
FRAUDULENTLY CONCEAL A
MATERIAL FACT
UNAUTHORIZED SALES
BROCHURES/ ILLUSTRATION
S.129(2) FSA 2013 –
Contravention is an offence
5 years imprisonment
Fine of RM10m
Both
Section 129(2), FSA 2013
Breach of duty of disclosure in

para 11, Sch.9
•Insurer’s duty
Offence – 5 years or RM10m or

both
•Similar to s.150(4) but higher penalty
Insurer’s pre-contractual
duty of disclosure – para. 11,
Sch. 9, FSA
Insurers NOT to induce BY
• Agent/ broker • To enter into • Misleading/false

• Financial adviser • Vary/renew or deceptive
or rep. • Contract of s/m
insurance • Conceal
material fact
• Unauthd. Sales
brochures/
illustration
Effect – induced – para.
11(2), Schedule 9
Where a person is induced to enter
into, vary or renew a contract of
insurance in such a manner, the
contract shall be voidable and the
person shall be entitled to rescind
it.
Duty of disclosure – insurer &
insurance agent
Para.11, Sch.9 [Section 150(4)]
INSURER INSURANCE AGENT
NOT TO INDUCE
MUST USE AUTHD.
MUST DISCLOSE MATERIAL FACTS
BROCHURES/ILLUSTRATION
NOT TO MISREPRESENT
MISLEADING S/M FALSE OR DECEPTIVE
WHERE BREACHED – induced
to enter into CoI – para.11(2)
Voidable contract
Person induced to get the

insurance – policy contract
Non- disclosure/ misrepresentation by

insurer/agent
Cases
Banque Keyser Ullman SA v.

Skandia (UK) Insurance [1990]
La Banque Financiere v.
Westgate Insurance [1990]
HoL
Banque Keyser Ullman SA v.
Failure to disclose fraud of

P’s agent
Steyn J – D insurer liable
both in negligence &
breach of utmost good
faith
CA – D insurer not liable for

negligence but liable for
breach of utmost good
faith. However, claim
dismissed – breach did not
sound in damages.
Skandia (UK) Insurance
HOL
 affirmed on different ground, i.e.
that the breach of ugf had not
caused the loss.
Endorsed the conclusion of the
CA that the only remedy for
breach of ugf was rescission and
recovery of premium.
La Banque Financiere v.
Westgate Insurance [1990]
Submission – insurer owe a duty

of ugf to the assured (the
banks). Insurer had discovered
but failed to disclose to the
assured that Mr Lee had issued
fraudulent cover notes
Misstatement of age
Para. 1, Schedule 8
Insurer shall NOT avoid a

life policy or refuse a claim
under a life policy by
reason only of a
misstatement of age of the
life insured.
recalculation
Burden of proving non-
disclosure
 The burden lies on the party alleging non-
disclosure & seeking to avoid the contract.
 section 103, Evidence Act 1950
“The burden of proof as to any particular fact
lies on that person who wishes the court to
believe in its existence, unless it is provided by
any law that the proof of that fact shall lie on
any particular person.”
 AIA v. Koay Fong Eng
 Leong Kum Whay & Anor v. AIA
Insurance intermediaries
Agent
Others Broker
Intermediary
Banks Adjuster
Para. 12, Sch. 9, FSA 2013
Insurance agent
Authorized
Contract – deemed 2b insurer’s agent
Para. 12(1), Sch. 9
Knowledge of agent
•=
Knowledge of insurer
Para12(2), Sch.9
s/m made, act done by ins. agent
4 formation or variation of contract
Deemed 2b insurer’s s/m or act despite

breach of para 11 by agent
Exception – para.12(3),
Sch.9
Collusion or connivance
•Ins. Agent + proposer
Agent ceased
•Insurer taken all reasonable
steps 2 inform

Doctrine of Ubberimae Fidei: DR Nurjaanah Chew Li Hua

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DOCTRINE OF UBBERIMAE

Dr Nurjaanah Chew Li Hua

To act in utmost good faith

Party - information within his

 Carter v Boehm (1766)

 The special facts, upon which the

Duty only in respect of matters

Matters which cannot be ascertained

To inform itself of the practice

Fair inquiry & due diligence

Whether the new

Did not incorporate the full

 applies to both insured and

Duty not to put

Duty to not Duty to act

S.150, Ins. Act 1996 still

Provisions under the

Any term in contract that puts

Whether 2 accept risk or not?

Rates & terms 2b applied

para. 4(2), Sch. 9, FSA

Insurer DID DEEMED

Para. 4(4), Sch.9, FSA

Para.5, Sch.9, FSA

Give a copy of matter previously disclosed

Duty of consumer – reasonable care NOT

Para. 5(7), Sch.9, FSA

Consumer to disclose other R

para.6, Sch.9, FSA

Untrue or misleading or did not care

R to insurer or did not care

Misrepresentation made dishonestly –

If not deliberate or

Clear & specific Q

 Para.4(1), Sch.9 – other than c.i.c.

 The duty arises before the contract of

DIMINISHES COMMON INSURER

INSURER DID NOT CLARIFY

If no Qs – Incomplete or Duty of insurer to

Consumer to disclose other relevant

Whether to accept risk + applicable rates & terms

Relevant 2 decision of insurer –

Duty on consumer – reasonable care

Duty of utmost good faith retained

SC - Issuance of cover note

s.124(1), FSA 2013

Schedule 7, FSA 2013

IMPRISONMENT not more than 5 years

FINE not more than RM10m

Breach of duty of disclosure in

Offence – 5 years or RM10m or

Insurers NOT to induce BY

• Agent/ broker • To enter into • Misleading/false

MISLEADING S/M FALSE OR DECEPTIVE

Person induced to get the

Non- disclosure/ misrepresentation by

Banque Keyser Ullman SA v.

Failure to disclose fraud of

CA – D insurer not liable for

Submission – insurer owe a duty

Insurer shall NOT avoid a

Contract – deemed 2b insurer’s agent