Commentary on Sections Part 5: Good Faith and Contracting Out Section 14: Good faith
113.Section 17 of the Marine Insurance Act 1906 provides that insurance contracts are contracts based upon the utmost good faith. It also provides that, “if the utmost good faith be not observed by either party, the contract may be avoided by the other party”. The common law mirrors this provision in relation to non-marine insurance.
114.Section 14 removes avoidance of the contract as a remedy for breach of this duty of good faith, both from the 1906 Act and at common law.
115.Section 14(4) repeals section 2(5) of CIDRA, which is superseded by the provisions of this section.
116.The intention of section 14 is that good faith will remain an interpretative principle, with section 17 of the 1906 Act and the common law continuing to provide that insurance contracts are contracts of good faith.