Category: Insurance Act 2015 — claims provisions · Reviewed by Mark Fox, Broker · Renewals · Last reviewed 2026-06-11
Section 14 of the Insurance Act 2015 abolishes the remedy of avoidance for breach of the common-law and statutory duty of utmost good faith, while preserving that duty as an interpretive and gap-filling principle of insurance contract law.
Category: Insurance Act 2015 — claims provisions Also known as: s 14 Insurance Act 2015, abolition of avoidance for good faith breach, modification of utmost good faith Related concepts: Utmost good faith, Marine Insurance Act 1906, Fair presentation of the risk, Insurance Act 2015
Section 14 of the Insurance Act 2015 makes a fundamental but technical change to the longstanding doctrine of utmost good faith (uberrimae fidei) that underpins English insurance law. Before the 2015 Act, sections 17 and 18 of the Marine Insurance Act 1906 codified the rule that a contract of marine insurance was based on the utmost good faith, breach of which by either party entitled the other to avoid the contract ab initio. Although in form a duty owed by both parties, in practice the doctrine operated principally to allow insurers to avoid policies for non-disclosure or misrepresentation by insureds. The remedy was draconian: a single innocent or negligent failure to disclose a material fact could destroy the entire policy and any claim under it. Section 14 of the 2015 Act removes avoidance as a remedy for breach of the duty of utmost good faith but preserves the duty itself as a principle of construction and as informing the new statutory duty of fair presentation. Specifically, section 14(1) abolishes the rule that a contract of insurance is one of the utmost good faith with the consequence that it may be avoided for breach. Section 14(2) amends section 17 of the Marine Insurance Act 1906 to remove the reference to avoidance, leaving the bare proposition that a contract of insurance is based on the utmost good faith. Section 14(3) and (4) repeal section 18 of the 1906 Act (the duty of disclosure) and other related provisions, replacing them prospectively with the duty of fair presentation in Part 2 of the 2015 Act for non-consumer contracts (consumer contracts being governed by the Consumer Insurance (Disclosure and Representations) Act 2012).
The relevant provisions are in Part 5 of the Insurance Act 2015. Section 14(1) provides that “any rule of law permitting a party to a contract of insurance to avoid the contract on the ground that the utmost good faith has not been observed by the other party is abolished”. Section 14(2) amends section 17 of the Marine Insurance Act 1906 by removing the avoidance remedy. Section 14(3) makes consequential repeals of sections 18 to 20 of the 1906 Act for non-consumer contracts (Schedule 1 of the 2012 Act having already disapplied them for consumer contracts). Section 14(4) provides that section 14 takes effect subject to the modifications elsewhere in the Act, in particular the duty of fair presentation in Part 2 (sections 3 to 8) and the remedies for breach of that duty in Part 4 and Schedule 1.
The legislative history is set out in the Law Commission’s 2014 final report. The Commissions recommended modifying rather than abolishing the duty of good faith, on the basis that it had become a foundational principle of insurance contract law and informed the interpretation of policy terms. The intention behind section 14 was to remove the most punitive consequence of the doctrine (avoidance of the policy) while preserving its role as a yardstick of contractual conduct. The Explanatory Notes to the 2015 Act confirm that the duty of good faith remains as an interpretive principle, even though avoidance is no longer available.
Subsequent case law has confirmed that good faith continues to inform the interpretation of policy terms, notification provisions and the conduct of claims. Versloot Dredging BV v HDI Gerling Industrie Versicherung AG [2016] UKSC 45 (the DC Merwestone), although decided under pre-2015 law, was treated by the Supreme Court as consistent with the policy direction of the 2015 Act in relaxing the harsh rule on fraudulent devices. The remedy for breach of the duty of fair presentation is now governed by Schedule 1 to the 2015 Act, which provides for a proportionate remedies regime depending on the nature of the breach and the insurer’s hypothetical underwriting response.
In practice, section 14 has three principal effects. First, it removes avoidance as a self-standing remedy for breach of the duty of utmost good faith. An insurer can no longer rely on a generalised good faith argument to walk away from a contract; if it wishes to challenge the contract for pre-contractual non-disclosure or misrepresentation in a non-consumer case, it must establish a breach of the duty of fair presentation under sections 3 to 7 and engage the proportionate remedies in Schedule 1. Second, it preserves the duty of good faith as an interpretive principle: courts continue to read insurance contracts and the parties’ conduct under them through the lens of good faith, but without the nuclear remedy. Third, it leaves intact specific statutory and common-law rules that depend on a concept of good faith (for example, the fraudulent claims rule in section 12, the duty of fair presentation, and various conduct-of-claims rules) but does so without the overarching avoidance sanction.
For claims handling, section 14 has practical implications. Insurers may not refuse a claim, or seek to avoid the policy, on the bare ground that the insured has acted in bad faith; they must point to a specific contractual or statutory provision. Conversely, insureds may not avoid the policy if the insurer has handled the claim in bad faith; their remedies lie in section 13A (late payment damages), regulatory complaint and the general law of contract. The combined effect is to replace a binary “all or nothing” doctrine with a more proportionate set of remedies tailored to the nature of the breach.
The duty of good faith also continues to operate as a default rule of contract construction. For example, where a policy term is ambiguous, the court will tend to read it in a manner consistent with good faith. Notification clauses, cooperation clauses and claims-handling provisions are construed in a way that respects the mutual duties of the parties. The duty informs but does not enlarge the express terms.
The post-2015 framework varies according to the nature of the contract. For consumer contracts, the Consumer Insurance (Disclosure and Representations) Act 2012 has applied since 6 April 2013, replacing the duty of disclosure with a duty to take reasonable care not to make a misrepresentation, and providing a proportionate remedies regime in Schedule 1. The 2012 Act’s parallel structure is broadly mirrored by the 2015 Act for non-consumer contracts. For non-consumer contracts entered into on or after 12 August 2016, the duty of fair presentation in sections 3 to 7 of the 2015 Act applies. Marine and non-marine contracts are treated alike under the 2015 Act, the previous distinctions in the 1906 Act having been largely effaced for these purposes. Reinsurance contracts are within scope as a sub-species of insurance contracts.
Contracting out is permitted in non-consumer contracts under section 16, subject to the transparency requirements in section 17. In practice, some bespoke commercial wordings reinstate avoidance for innocent non-disclosure by express agreement, although the prevalence of such clauses is limited and they remain controversial. The interaction with foreign law is straightforward in principle: section 14 applies only to contracts governed by English, Welsh, Scottish or Northern Irish law.
Historical decisions on the pre-2015 duty of good faith remain relevant but should be treated with care. Cases such as HIH Casualty & General Insurance Ltd v Chase Manhattan Bank [2003] UKHL 6, Manifest Shipping Co Ltd v Uni-Polaris Insurance Co Ltd (The Star Sea) [2003] 1 AC 469 and Banque Keyser Ullmann SA v Skandia (UK) Insurance Co Ltd [1990] 1 QB 665 illuminate the historical scope of the doctrine, but their application to modern law must take account of section 14’s abolition of avoidance.
A commercial property insurer learns, mid-claim, that during the pre-contractual presentation the insured had failed to disclose a relatively minor protection issue that, while material in principle, would not on the evidence have led the insurer to refuse the risk or charge a higher premium. Under pre-2015 law, the insurer might have argued avoidance for breach of the duty of utmost good faith and disclosure under section 18 of the Marine Insurance Act 1906. Under the 2015 Act framework, that route is no longer available: the insurer must establish a qualifying breach of the duty of fair presentation under sections 3 to 7 and then engage the proportionate remedies in Schedule 1. If the hypothetical underwriting response to a fair presentation would have been to write the same risk on different terms, the remedy is to treat the contract as if those different terms had applied; if the response would have been to charge a higher premium, claims may be reduced proportionately; only where the insurer would have declined the risk altogether is avoidance available, and even then only on terms set out in Schedule 1. The example illustrates how section 14 has dismantled the doctrine of avoidance for breach of good faith and replaced it with a graduated, proportionate regime.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-11. Next review: 2026-12-11.
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