Duty of disclosure in a contract of insurance: A critical analysis of the extent to which the common law and the Malaysian Insurance Act 1996 serve to protect the interests of the insured / Rosmi Yuhasni Mohd Yusuf

The doctrine of utmost good faith is central to the whole mechanism of insurance. As a contract of utmost good faith, in contrast to good faith as in non-insurance contracts, it imposes upon the parties to such a contract mutual duties to disclose facts, which are materials to the risk, that are not known by the other party. The Insurance Act 1996 as the primary legislation governing insurance business in Malaysia contains numerous provisions regulating insurer's conduct of business. Certain provisions pertaining to the regulation of the contractual terms of insurance policies are made in the interest of policyholders. Provision in relation to the duty to observe utmost good faith is provided under Section 150 of the said act. The first part of this paper discusses the concept of utmost good faith in a contract of insurance as it manifests in the English law. The second part analyses the adoption of the common law's test of materiality in Malaysian jurisdiction and certain provisions in the Insurance Act 1996 with an intention to seek the answer as to whether these two primary sources of law serve the interest of the insured when dispute in relation to nondisclosure of material facts arise. The author concludes that a modest reformation is needed in the Insurance Act 1996 to incorporate some elements of fairness in both pre and post-contractual duties of disclosure while the judiciary shall carefully look into the development of precedent effecting non-disclosure of material facts especially in the light of decisions arrived in Abu Bakar (1974), Pan Atlantic (1994) and the 'Star Sea' (200 I) cases of insurance law.