Carter v Boehm
(1766) 3 Burr 1905; 97 ER 1162
Independent editorial summary — not the official judgment. Read the full judgment via the source link.
Ratio Decidendi
Insurance is a contract upon speculation in which the special facts on which the contingent chance is computed most commonly lie in the knowledge of the insured alone, so good faith forbids either party from concealing what he privately knows to draw the other into a bargain. The duty of disclosure does not, however, extend to matters the underwriter knows or ought to know, to general topics of speculation on which the means of information and judging are open to both parties, or to grounds on which either party may be innocently silent.
Facts
Roger Carter took out a policy underwritten by Charles Boehm for the benefit of his brother George Carter, Governor of Fort Marlborough in Sumatra, insuring for one year from October 1759 against the loss of the fort to a foreign enemy. The fort was taken by the French under Count D'Estaigne within the year, and a special jury of merchants found for the plaintiff. The underwriter moved for a new trial, objecting that circumstances had not been sufficiently disclosed - in particular the weakness of the fort and the probability of its being attacked by the French, said to appear from letters written by the governor to his brother and to the East India Company.
Judgment Summary
Lord Mansfield, refusing the new trial, laid down the governing principle that good faith forbids either party to a contract from concealing what he privately knows, while holding that the insured need not mention what the underwriter knows, ought to know, or waives being informed of, including general topics of political and natural speculation. On the facts there was no improper concealment: the underwriter in London in May 1760 could judge the probability of a European attack better than the governor could when he gave his instructions in September 1759, and having asked no questions at the time he could not raise the objection after the event. The court was unanimous that the verdict for the insured was well founded, and the rule for a new trial was discharged.
Key Quotes
"Insurance is a contract upon speculation."
— Lord Mansfield(verbatim, verified against the judgment)
"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. But either party may be innocently silent, as to grounds open to both, to exercise their judgment upon."
— Lord Mansfield(verbatim, verified against the judgment)
Subsequent Treatment
Remains the foundational authority on utmost good faith in insurance - the report itself records it as discussed and approved in Bates v Hewitt (1867) - though the disclosure duties it inspired are now codified and qualified by the Consumer Insurance (Disclosure and Representations) Act 2012 and the Insurance Act 2015.
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