Utmost Good Faith
The standard of honesty and disclosure both parties owe in an insurance transaction, higher than ordinary commercial contracts. It underlies the rules on representations, concealment, and warranties.
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Practice This Concept
The doctrine of utmost good faith in an insurance contract requires:
Both the applicant and the insurer to deal honestly and disclose material facts — Insurance contracts are contracts of utmost good faith: both parties must act honestly. Because the insurer relies heavily on the applicant's statements of health, habits, and history, the applicant must disclose material facts truthfully; the insurer, in turn, must deal fairly and may not profit by concealing information from the applicant. This mutual obligation is the foundation of the concealment, representation, and warranty rules found in the California Insurance Code.
National insurance concept
Insurance contracts are based on utmost good faith, which requires the applicant to:
Disclose all material facts relevant to the risk, including those not specifically asked about — Insurance is a contract of utmost good faith (uberrima fides): because the insurer relies on the applicant for information it cannot easily verify, the applicant must volunteer all material facts, not just answer questions literally. Concealment of a material fact — even an unasked one — can entitle the insurer to rescind. This duty is the foundation of the application process and of California's concealment and representation rules.
National insurance concept
- General InsuranceThe doctrine of utmost good faith in an insurance contract requires:
- General InsuranceInsurance contracts are based on utmost good faith, which requires the applicant to:
- General InsuranceThe principle of utmost good faith in insurance requires:
- General InsuranceWhich statement accurately describes the doctrine of utmost good faith in insurance con…
- State RegulationsThe doctrine of utmost good faith in insurance means that:
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