Malta: Utmost Good Faith In Insurance Contracts

Last Updated: 14 November 2018
Article by Dr. Veronica Grixti and Dr. Joshua Chircop

Most Read Contributor in Malta, November 2018

In a judgement presided by Mr. Justice Toni Abela, in the names Knightsbridge Developments Limited vs Citadel Insurance plc, the Civil Court, First Hall held that the principle of utmost good faith in insurance contracts applies not only at the moment of conclusion of the contract but also throughout the course of the performance of such contract.

The plaintiff company was planning to build a block of nineteen apartments with garages, a semi-basement car park and a cafeteria in St. Paul's Bay, Malta. The plaintiff therefore obtained a Contractors All Risk Insurance Policy in its favour with the defendant company against any risks which such construction may have presented.

Before the commencement of the policy in question, the plaintiff company's architect had outlined in his Works Method Statement that the underlying terrain of the property in question was topographically and geologically unstable due to stiff boulder clay foundations. For this reason, he had recommended that the said clay should be resisted by means of 1000m diameter piles closely spaced to form a continuous uninterrupted retaining structure. The defendant company had then agreed to issue the aforementioned policy on the basis of an undertaking by the plaintiff company to abide by these recommendations together with concurring advice from the defendant company's own architect.

The plaintiff company allegedly suffered damages as a result of a collapse of the foundational walls, other rubble and clay caused by landslide. Consequently, the plaintiff company made a claim with the defendant company in terms of the aforementioned insurance policy requesting compensation for the said damages allegedly suffered. However, the defendant company held that the plaintiff company was not covered by the insurance policy issued in its favour and was thereby not entitled to compensation from the defendant company for several reasons.

This article shall be tackling one of the said reasons, namely that the plaintiff company had violated fundamental conditions of the insurance policy because it failed to take necessary precautions and implement measures proposed by the Works Method Statement issued by the plaintiff company's architect.

The Court held that following the incident, expert civil engineers discovered that not all the aforementioned piles were constructed in the area which was identified in the Works Method Statement. Moreover, it resulted that there was no landslide in the areas where the piles were constructed as per instructions. In this regard, the Court pointed out that if the plaintiff company had proceeded scrupulously in terms of the Statement, the incident could have probably been avoided.

In this regard, the plaintiff argued that the piles could not be installed because (1) the site was already excavated, (2) it did not have access to certain machinery due to the unevenness of the site and (3) the neighbours refused to give access for the necessary precautionary works to be conducted. The Court did not dispute these arguments however it noted that the works that were meant to be conducted prior to the incident were nonetheless carried out after the incident.

The Court held that the insured must always take all necessary measures to avoid insured risks as if he were not in fact insured. In this respect, the insured must continue to use the diligence of the bonus pater familias (the good family man) independently of the fact that he is insured. In this manner, the insured would be protecting his own interests together with the interests of the insurer.

With reference to the Constitutional Court judgement in the names Lina Zerafa nomine vs Avv. Joseph Fenech nomine decided on the 30th May, 1980, the Court further held that a contract of insurance is considered valid when there is the consensus ad idem of the parties. Moreover, whilst in ordinary contracts the parties must abide by the principle of buona fede (good faith), in insurance contracts the parties are bound by the higher grade of uberrima fides (utmost good faith). The Court here quoted the Court of Appeal judgement in the names Michael Beruello vs Victor Cordino proprio et nomine decided on the 11th July, 1994.

The Court held that the application of uberrima fides is extended beyond the moment of conclusion of the contract of insurance, that is, when the proposal form is presented, and in fact it continues to apply throughout the course of the performance of the said contract. This principle obliges both parties.

Thus, if the plaintiff company was encountering difficulties in relation to the above, it was obliged to inform the defendant company so that the latter company would be in a position to evaluate the situation and prepare itself for the possible eventuality of the insured risk materializing. The principle of uberrima fides necessitates that such information had to be transmitted to the defendant company. The plaintiff company was obliged to inform the defendant of the changes in the circumstances of the risk because the defendant may have wished to amend the amount of the premium and make its own recommendations. From the acts of the case, it did not appear that the abovementioned difficulties were brought to the attention of the defendant company.

The policy of insurance provided as follows: "The insured shall at his own expense take all the reasonable precautions and comply with all reasonable recommendations of the Company to prevent loss, damage, or liability and comply with statutory requirements and manufacturers' recommendations". Moreover, the policy further provided that "The insured shall immediately notify the Company by telegram and in writing of any material change in the risk and cause at his own expense such additional precautions to be taken as circumstances may require, and the scope of cover and/or premium shall, if necessary be adjusted accordingly". The Court held that when the plaintiff encountered the abovementioned difficulties, it did not conform by any means to the latter two provisions in the insurance policy.

Accordingly, the Court decided in favour of the defendant company and therefore, rejected the plea of the plaintiff company for compensation.

This judgement is currently subject to appeal.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions