Question 1

Why does the duty of utmost good faith fall more heavily on the party seeking cover than on an ordinary commercial buyer?

Accepted Answer

Because the reinsurer usually cannot inspect the risk itself and must rely on what it is told — Unlike a buyer inspecting goods before purchase, a reinsurer prices a risk almost entirely on the cedent's own representations, so the law places the disclosure burden on the party with the information.

Question 2

What is the usual consequence of a material non-disclosure discovered after a large loss?

Accepted Answer

The reinsurer may avoid the whole contract from inception — A material non-disclosure can void the contract from its start date, not merely reduce or delay the one claim it relates to.

Utmost Good Faith

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