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 risk 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.Lord Mansfield went on to hold that the duty was reciprocal and that if an insurer withheld material facts, the example cited being that an insured vessel had already arrived safely, the policyholder could declare the policy void and recover the premium.

Lord Mansfield proceeded to qualify the duty of disclosure: either party may be innocently silent, as to grounds open to both, to exercise their judgment upon.... An under-writer can not insist that the policy is void, because the insured did not tell him what he actually knew....

He needs not to be told general topics of speculation.Lord Mansfield found in favour of the policyholder on the grounds that the insurer knew or ought to have known that the risk existed as the political situation was public knowledge: There was not a word said to him, of the affairs of India, or the state of the war there, or the condition of Fort Marlborough.

If he thought that omission an objection at the time, he ought not to have signed the policy with a secret reserve in his own mind to make it void.In Manifest Shipping Co Ltd v Uni-Polaris Shipping Co Ltd[1] John Hobhouse, Baron Hobhouse of Woodborough said, As Lord Mustill points out, Lord Mansfield was at the time attempting to introduce into English commercial law a general principle of good faith, an attempt which was ultimately unsuccessful and only survived for limited classes of transactions, one of which was insurance.