ABSTRACT

One of the most important principles of the contract of insurance is the utmost good
faith in which one of the parties to the contract, the insured, is expected to disclose every
material facts at his disposal to the insurer at the commencement of the insurance
contract in order not to void the contract abinitio. The failur e on th e part of th e
insured not to dis cl ose or to m ake misrepresentation will automatically void the
contract abinitio or to exclude the other party insurer from liability of any claim
that may arise under such contract. This dissertation has attempted to look at the
principle of good faith worldwide, by tracing the historical background of insurance,
the theoretical development of insurance, emergence of insurance companies in Nigeria
and by widely studying the general principle of insurance contract and the claim
settlement experience of insurance in Nigeria whether there is fairness in the operation
of the principle or not. When emphasis shall be laid on the law of utmost good faith, the
principle of Caveat Emptor, overview of the principle of utmost good faith, the
meaning of materials facts and the duration of the disclosure under the policy of
insurance, the role of intermediaries as regard the law of utmost good faith and of course
remedies for breach of utmost good faith. The dissertation concluded by looking at
the utmost good faith and its impact on claims settlement in Nigeria as regard
common law, statues and relevant cases in Nigeria and abroad; recommendation
proffered on the inequality on the operation of utmost good faith and the general
expectation from insurance as a whole.

CHAPTER ONE
GENERAL INTRODUCTION
1.1 INTRODUCTION
Insurance is a form of risk management, primarily used to hedge against the risk
of a contingent loss; in essence, insurance is simply the equitable transfer of a risk of a
loss, from one entity to another, in exchange for a premium1. The history of insurance
could be traced to early methods of transferring or distributing risk by Chinese traders as
early as the 3rd millennia BC. These merchants travelling treacherous river rapids would
cleverly distribute their wares across many vessels, whereby their losses are distributed in
which the vessels that are saved from capsizing compensate for the ones that are
capsized. The modern profit insurance manifested in Babylon almost 2000 years B.C. in
a contract of loan of trading capital to traveling merchants. The contract contained a
clause that the risk of loss due to robbery in transit was borne by the party providing the
loan. In consideration for bearing the risk, the lender calculated interest on the loan at an
exceptionally high rate.
The Greeks and Romans introduced the origin of health and life insurance around
600AD, when they organized guilds/benevolent societies such as (collegian and military
societies) which afforded members certain benefits, such as proper burial rites, or a
financial contribution towards burial costs or traveling expenses or members of the army.
In exchange for this benefit, members of the society made regular contribution to it.

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