19. Insurance is uberrimae fidei.—A contract of marine insurance is a contract based upon the
utmost good faith, and if the utmost good faith be not observed by either party, the contract may be
avoided by the other party.
20. Disclosure by assured.—(1) Subject to the provisions of this section, the assured must disclose to
the insurer, before the contract is concluded, every material circumstance which, is known to the assured,
and the assured is deemed to know every circumstance which, in the ordinary course of business, ought to
be known to him. If the assured fails to make such disclosure, the insurer may avoid the contract.
(2) Every circumstance is material which would influence the judgment of a prudent insurer in fixing
the premium, or determining whether he will take the risk.
(3) In the absence of inquiry the following circumstances need not be disclosed, namely:—
(a) any circumstance which diminishes the risk;
(b) any circumstance which is known or presumed to be known to the insurer. The insurer is
presumed to know matters of common notoriety or knowledge, and matters which an insurer in the
ordinary course of his business as such ought to know;
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(c) any circumstance as to which information is waived by the insurer;
(d) any circumstance which it is superfluous to disclose by reason of any express or implied
warranty.
(4) Whether any particular circumstance, which is not disclosed, be material or not is, in each case, a
question of fact.
(5) The term “circumstance” includes any communication made to, or information received by, the
assured.
21. Disclosure by agent effecting insurance.—Subject to the provisions of the preceding section as
to circumstances which need not be disclosed, where an insurance is effected for the assured by an agent,
the agent must disclose to the insurer—
(a) every material circumstance which is known to himself, and an agent to insure is deemed to
know every circumstance which in the ordinary course of business ought to be known by, or to have
been communicated to, him; and
(b) every material circumstance which the assured is bound to disclose, unless it comes to his
knowledge too late to communicate it to the agent.
22. Representations pending negotiation of contract.—(1) Every material representation made by
the assured or his agent to the insurer during the negotiations for the contract, and before the contract is
concluded, must be true. If it be untrue the insurer may avoid the contract.
(2) A representation is material which would influence the judgment of a prudent insurer in fixing the
premium, or determining whether he will take the risk.
(3) A representation may be either as to a matter of fact, or as to a matter of expectation or belief.
(4) A representation as to a matter of fact is true, if it be substantially correct, that is to say, if the
difference between what is represented and what is actually correct would not be considered material by a
prudent insurer.
(5) A representation as to a matter of expectation or belief is true if it be made in good faith.
(6) A representation may be withdrawn or corrected before the contract is concluded.
(7) Whether a particular representation be material or not, is, in each case, a question of fact.
23. When contract is deemed to be concluded.—A contract of marine insurance is deemed to be
concluded when the proposal of the assured is accepted by the insurer, whether the policy be then issued
or not; and for the purpose of showing when the proposal was accepted, reference may be made to the
slip, covering note or other customary memorandum of the contract, although it be unstamped.