ABSTRACT
Insurance is a rare species of contract where both parties, the insured and the insurer, are under a mutual duty of utmost good faith. The general duty borne by contracting parties to avoid misrepresentation is extended and reinforced in insurance contracts by the additional obligation to disclose all facts material to the risk. Lord Hobhouse also noted that the rationale underlying the special treatment of insurance contracts is the disparity between the knowledge of the insured and the underwriter. The difficulty of drawing a bright line between non-disclosure and misrep-resentation in insurance contracts can be seen in relation to an insured's failure to answer a specific question raised by the insurer. Physical hazard can pose problems especially in life or health insurance because an insured may not be aware that a particular condition is symptomatic of a more serious health risk.
