Dagger, Shield, or Double-Edged Sword?: The Reciprocal Nature of the Doctrine of Uberrimae Fidei

The doctrine of uberrimae fidei is generally recognized as one of the most firmly entrenched principles in maritime law. Almost every circuit court has recognized the continuing vitality of this doctrine in modern marine insurance cases, and it is experiencing a recent trend toward consistent use. The utility of the doctrine as applied by insurers cannot be understated, because it is a recognized and common method for voidance of the insurance policy. The doctrine is a mutual one, requiring both parties to an insurance contract to act in good faith. However, reliance upon the doctrine is almost exclusively by insurance companies against their insureds, as a method for voiding the policy, rather than the other way around. Insureds have just begun to press for the application of this doctrine against insurers, which requires a certain level of conduct in the underwriting process.
What are the ramifications of the reciprocal duty of good faith as applied to the marine insurer? As will be discussed below, the doctrine originally grew out of the nature of marine insurance at the time. In previous centuries, underwriters did not have the resources to obtain all material information relative to the risk insured; thus, it was imperative that the insured provide full disclosure of all such information that was solely in its possession. However, with the advent of modern technology, skilled marine surveyors, and worldwide agents, modern underwriters are at less of a disadvantage with respect to investigating a risk. The Internet, modern communications, and transportation now provide more options than ever for an underwriter to obtain significant information about a vessel, cargo, or other marine risk prior to binding coverage. Therefore, may an underwriter rest on its laurels and require that the insured provide any and all information that might be relative to the risk, without any reciprocal obligation to conduct its own investigation, or at least to ask questions designed to obtain the information he needs? What about once the contract is entered into: Does the insurer have a reciprocal duty of good faith in adjusting and investigating a claim? While the reciprocal duty is only beginning to be explored and relied upon by insureds as a way to respond to the potentially harsh consequences of the doctrine, it is likely that such arguments will increase.
This Article will explore the historical context of uberrimae fidei and its use and application in marine insurance law. It will also provide an analysis of the current state of the acceptance of the doctrine in the various federal circuits which have addressed its application in maritime law. The Article will then address the reciprocal nature of the doctrine by examining both U.S. and English case law in which the doctrine has been applied, or was sought to be applied, against insurers. The Article will further address bad faith in maritime cases and how and whether an overlap exists between the reciprocal duty of uberrimae fidei and state law regarding bad faith. Finally, the Article will conclude with some thoughts regarding the nature of the reciprocal duty and what ramifications it may hold for legal practitioners representing underwriters and claims handlers.