Opinion ID: 697655
Heading Depth: 2
Heading Rank: 4

Heading: The Duty Owed to the Reinsurers

Text: 66 The plaintiffs argue, and the district court found, that the defendants were under a duty to the plaintiffs of utmost good faith (uberrimae fidei ). The defendants refer to the same standard. We agree that a reinsurer like NERCO, having obtained by treaty the power to impose significant risks and liabilities upon plaintiff retrocessionaires, owed to them the utmost good faith in its dealings under the treaties. See generally Unigard Sec. Ins. Co., Inc. v. North River Ins. Co., 4 F.3d 1049 (2d Cir.1993). 67 This means that, as the district court properly recognized, defendants owed plaintiffs a duty to exercise good faith and to disclose all material facts. In the non-marine context, however, a claim of fraud may not be founded on innocent misrepresentation and concealment. Thus, the district court properly required the plaintiff to prove that 68 the defendant made a false representation of a material fact with knowledge of its falsity for the purpose of inducing the plaintiff to act thereon, and that the plaintiff relied upon the representation as true and acted upon it to his damage. 69 Kennedy v. Josephthal & Co., Inc., 814 F.2d 798, 805 (1st Cir.1987) (quoting Danca v. Taunton Sav. Bank, 385 Mass. 1, 8, 429 N.E.2d 1129, 1133 (1982) (citations omitted)). 70 The standard for fraudulent concealment is similar: 71 Except with respect to marine risks, concealment exists and avoids the policy where the insured has knowledge of a fact material to the risk which honesty, good faith, and fair dealing require that he should communicate to the insurer but which he designedly and intentionally withholds. 72 9 George J. Couch, Cyclopedia of Insurance Law Sec. 38:2 (2nd ed. 1985) (Couch). Massachusetts' adherence to the same rule is indicated in Century Indem. Co. v. Jameson, 333 Mass. 503, 504-05, 131 N.E.2d 767, 769 (Mass.1956); see also Unigard, 4 F.3d at 1069 (holding that simple negligence in not disclosing a material fact does not constitute bad faith so as to avoid a policy of reinsurance).