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others subscribed from the confidence reposed by them in the Sect. 571. skill and judgment of him whose name stood first, and their belief that he had duly ascertained and weighed all the circumstances material to the risk (u). This rule, however, Limitations is subject to many limitations.

on this rule.

extends to

tions per


It must strictly be confined to intelligence relating to the (1) It only proposed insurance, with regard to which it is reasonable to representasuppose that the first underwriter would require information, tinent to and without being informed of which, it may be presumed, an ordinary he would not have accepted the risk. It cannot, therefore, extend to such representations as relate to matters of collateral agreement, which a subsequent underwriter can have no reason to infer, from the terms of the policy, to have been communicated to the first.

Thus, in Pawson v. Watson, Lord Mansfield held, that a representation that "the ship mounts twelve guns and twenty men," being in effect an engagement that the ship should sail with that armament, could not affect subsequent underwriters, to whom it had never been communicated, merely upon proof that it had been made to the underwriter whose name stood first in the policy. "A representation to the first underwriter," says his Lordship, "has nothing whatever to do with that which is the agreement or the terms of the policy; no man who underwrites a policy subscribes, by the act of underwriting, to terms of which he knows nothing, but he reads the agreement and is governed by that: matters of intelligence, such as that a ship is or is not missing, are things in which a man is guided by the name of the first underwriter, who is a good man, which another will therefore give faith and credit to, but not to a collateral agreement which he can know nothing of" (x).

Of course, if the representation to the first underwriter be

(u) The English cases which establish the rule are Pawson v. Watson (1778), 2 Cowp. 785; Barber v. Fletcher (1779), 1 Dougl. 306; Stackpole v. Simon (1779), 2 Park, Ins. 933; Marsden v. Reid (1803), 3 East,

572; Feise v. Parkinson (1812), 4
Taunt. 640; Forester v. Pigou (1813),
1 M. & S. 9, 13; Bell v. Carstairs
(1810), 2 Camp. 543.
(x) 2 Cowp. 788.

Sect. 571. not of material facts, it cannot avail a subsequent one; and if it was of such a nature that it ought to have put the first underwriter on further inquiry, it will be equally imputed to the negligence of the subsequent underwriter that no such inquiry was made (y).

(2) Formerly the rule was only applicable to the policy.

(3) The rule

includes only representations that lower the terms.

The rule not favoured.

572. Until the decisions under 30 Vict. c. 23, the applicability of this rule was restricted to the policy, because the slip could not even be given in evidence for any purpose whatever () but since the slip may be given in evidence whenever it is material (a), the rule becomes applicable to either the policy or the slip, and will probably, in consequence of the state of facts, be more frequently applied to the latter than the former.

573. A still further limitation of the same rule is, that it only applies where the tendency of the representation is to induce the underwriters to take the risk on lower terms.

Where the first underwriter was called to prove a representation made to him, the tendency of which would have been to increase the estimate of the risk, Lord Tenterden decided, at Nisi Prius, that this evidence was not admissible as against a subsequent underwriter (b).

Even under these limitations the English Courts have regarded the rule with great jealousy, and on many occasions have expressed their dissatisfaction with it. Heath, J., on one occasion said, that "the evidence had been admitted rather on precedent than on reason" (c); and Lord Ellenborough "Whenever the question comes distinctly before the Court, whether a communication to the first underwriter is virtually a notice at all, I shall not scruple to remark that

(y) Barber v. Fletcher (1779), 1 Dougl. 306.

(z) Marsden v. Reid (1803), 3 East, 572. In this case the names of the underwriters appeared in a different order on the policy from that on the slip; but the slip was not admissible in evidence, as the law then stood, to show that the underwriter

to whom a representation had been made stood first in order on the slip though not on the policy.

(a) See ante, ss. 34 et seq.

(b) Robertson v. Majoribanks (1819), 2 Stark. N. P. 573, 575; 2 Duer, Ins. 779.

(c) Brine v. Featherstone (1813), 4 Taunt. 869.

the proposition is to be received with great qualification; it Sect. 573. may depend on the time and circumstances under which the communication was made; but on the mere naked unaccompanied fact of one name standing first on the policy, I should not hold that a communication made to him was virtually made to all the subsequent underwriters;" and his Lordship said that the question was one of such magnitude that if it should arise he should direct it to be put on record for the opinion of all the judges (d).

first under


574. Of course, if the subscription of the first underwriter Where the is obtained under a secret agreement or understanding that writer is a it is not to be binding, and for the sole purpose of leading duck," this mere "decoy others to insure, the exhibition of the policy or slip thus avoids the subscribed is justly regarded as a fraud on the subsequent underwriters, and on that ground avoids the policy (e). This rule, it is said, will extend to the case of any prior underwriter, though his name may not be first in the policy (ƒ).

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Definition and general principles.

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575. CONCEALMENT, in the law of insurance, is the suppres sion of, or neglect to communicate, a material fact within the knowledge of one of the parties which the other has not the means of knowing, or is not presumed to know. A material fact is one which is calculated, if communicated to the other of the parties, to induce him either to refrain altogether from the contract or not to enter into it except on more favourable terms (a). Defined in these terms, the principle is equally applicable to the assured and the underwriter.

The contract is one uberrimæ fidei, and on the plainest principles of equity such a contract which one party has thus been induced to enter upon from his ignorance of the thing concealed shall not be enforced against him by the other who has concealed it. Whether such suppression of the truth arise from fraud (that is, from a wilful intention to deceive for the party's own benefit), or merely from mistake, negligence, or

(a) See post, s. 589; 1 Marshall, Ins. 463; 1 Phillips, s. 531; and per

Tindal, C. J., in Elton v. Larkins (1832), 5 C. & P. 392.

accident, the consequences will be the same (b). The ground, Sect. 575. in short, on which the policy is avoided is that the party has been, in fact, deceived, not that the other party has intended to deceive him.

on which

As we have seen in the preceding chapter, it is a condition Principles of this contract, implied by law as a matter of public policy, concealment that the contract is free from misrepresentation or conceal- avoids the policy. ment; and if there is a breach of this condition, either by misrepresentation or concealment of a material fact, the contract is voidable. Fraud in its effect goes beyond the condition; for if fraud be present in either form, whether of misrepresentation or concealment, it avoids the policy, although the subject misrepresented or concealed be not a material fact.

Generally speaking, as the facts lie most within the peculiar knowledge of the assured, it is the underwriter who avails himself of the defence of concealment; yet he, as well as the assured, is bound to disclose all circumstances, peculiarly within his own knowledge, in any decree affecting the risk. Thus, if the underwriter, at the time of subscribing the policy, knew that the ship had arrived safe, the contract will be void as to him, and an action will lie against him to recover back the premium (c).

576. In order that a concealment should have the effect of Time of concealment. avoiding the policy, it must have taken place at the time of making the contract; and for the reasons already stated in respect of Representations (d), the contract is now regarded by the Courts as complete when the slip is initialed by the underwriter (e). Consequently anything coming to the know

(b) Carter v. Boehm (1766), 3 Burr. 1909; Ratcliffe v. Shoolbred (1780), 1 Park, Ins. 413; 1 Marshall, Ins. 464; Shirley v. Wilkinson (1786), 1 Dougl. 206; Thompson v. Buchanan (1782), 4 Br. P. C. 482; per Willes, J., Anderson v. Pacific Fire & Mar. Ins. Co. (1872), L. R. 7 C. P. 65, 68; per cur. Ionides v. Pender (1874),

L. R. 9 Q. B. 531, 537.

(c) Per Lord Mansfield in Carter v. Boehm (1766), 1 W. Bl. 594; 3 Burr. 1909; see also 3 Benecke, System des Assecuranz, c. x. pp. 90,


(d) Ante, ss. 522, 567.

(e) When, however, the policy tendered to the underwriter and exe

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