Uberrimae Fidei is a legal doctrine, the Latin for ‘utmost good faith.’
Predominantly a feature of insurance contracts (although not exclusively), it imposes on obligation upon the parties to the contract requiring absolute disclosure of all relevant particulars both at the time of the contract being executed and subsequently during its term. However, the vast majority of the cases that end up in court are in respect of non-disclosure of relevant information or particulars by the insured.
To date, if that ethical standard was violated, the legal remedy imposed by the courts was to effectively void the policy and refuse to enforce payment of any claim. What in reality happened of course was that the insurer simply refused to pay, cited breach, and left the claimant the option of either accepting it or challenging it. Few of course, have the wherewithal prosecute a challenge and what’s more, of those few, only those with a better than average chance of success would seriously consider litigating against an insurance company given the potential costs such an action may incur.
That stance though, was stood on its head recently when the Supreme Court in the United Kingdom (SC) refused an appeal to overturn an award of damages made in the county court that arose from the following:
The claimant was a site supervisor for a house building company who claimed around $1.5 million in damages for a work-related injury. During his rehabilitation period, he was filmed by the insurer going about his daily business without impediment and it was clear from the evidence garnered that his claim was greatly exaggerated. The insured though, did suffer serious injury from the accident; it resulted in two fractures and two operations.
When the case went to court, the insurer sought to have the claim struck out in its entirety, part of its argument being that without such sanction, there was no visible deterrent to future fraudulent claims.
The claimant’s counsel argued that was that whilst there was admittedly exaggeration with the original claim, that did not, or should not, negate the valid elements of it.
The county court held that this argument had merit and awarded a significantly reduced sum of $157,000 to the insured as a gross figure. From that were to be deducted costs and benefits already received, with the likelihood being the insured would see little if any of that money. The court recognised the non-meritorious elements of the claim and dealt with them accordingly.
The insurer appealed the award, seeking to void the claim. Upon review the SC, possibly surprisingly, found favour with county court judge’s award.
The SC’s main contention was that ‘punishment’ for the exaggerated elements was adequately dealt with by reasonable assessment of the damages in cognisance of the non-meritorious elements and with a concomitant diminution thereof. The SC saw no need to dismiss the claim in its entirety, which would constitute a ‘throwing out of the baby with the bathwater’ but acknowledged that this may be a remedy in exceptional circumstances that the court had the right to exercise.
Now, as a legal doctrine, effectively enshrined in common law, the historic approach was persuasive but not binding and as the common law, does, it has now evolved. This, though, is also now an implied term in any (UK-based) insurance contract and as such, contravention of it stands as a breach of contract. Notwithstanding its status, the assessment of damages remains broadly the same.
At first glance, one might think the doctrine as it has stood for some time now (implied term notwithstanding) ought to be persuasive, but upon reflection there is a logic to the SC’s ruling.
Damages claimed are rarely 100 per cent accurate; that is why 100 per cent recovery is rare. Granted, this was an extreme case (and begs the question of a fraud, which is separate matter altogether and no doubt a further measure that the insurer may pursue at its discretion). But relying on the court to exercise its discretion in awarding damages that reflect the context of a particular case is already a circumstance that exists.
If a claimant (or respondent) unnecessarily costs the court time and money, for example by failure to attend or through progressing issues that have no reasonable expectation of success the court can and does, reflect that behaviour when assessing the award of damages and costs.
The approach taken by the SC in the instant case, is in reality no different.
I thought most insurance contracts already did, but I suspect now that contracts going forward will have the ‘Uberrimae Fidei’ obligation as a very clear contractual condition (as opposed to an implied term) a fundamental term, breach of which will be fatal to contract and which will avoid the opportunity for the above decision to be persuasive.