General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
The doctrine of utmost good faith in an insurance contract requires:
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
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.
Why the other options are wrong
- A) The duty runs both ways; while the applicant must disclose material facts, the insurer also owes honest dealing.
- C) The insurer's duty exists, but the applicant's duty to disclose material facts is equally central to the doctrine.
- D) Applicants need not volunteer personal opinions or judgment — only material facts — consistent with CIC Section 339.
Memory hook
Utmost good faith is a two-way street: applicant tells all material facts, insurer plays fair.