Mr Carter was the Governor of Fort Marlborough (now Bengkulu), which was built by the British East India Company in Sumatra, Indonesia. Well he called himself Governor but he was self-appointed. He was actually an employee of the British East India company.
He took out an insurance policy against the fort being taken by a foreign enemy with Boehm. He knew the French were likely to attack but what was insured?
The French did attack, and Mr Boehm denied the insurance claim and so accordingly Carter sued. A witness called Captain Tryon testified that Carter knew the fort was built to resist attacks from natives but not European enemies.
Lord Mansfield held that Carter had failed in his duty of utmost good faith (the latin being uberrimae fidei) in failing to disclose these material facts. He stated,” Insurance is a contract based upon speculation. The special facts, upon which the contingent chance is to be computed, lie most commonly in the knowledge of the insured only; the underwriter trusts to his representation and proceeds upon the confidence that he does not keep back any circumstance in his knowledge, to mislead the underwriter into a belief that the circumstance does not exist, and to induce him to estimate the risque as if it did not exist.
Good faith forbids either party by concealing what he privately knows, to draw the other into a bargain from his ignorance of that fact, and his believing the contrary”.