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The Doctrine of Utmost Good Faith

Many of us are familiar with insurance policies. Most have at least one type of insurance coverage, if not more. The insurance market is highly competitive and subject to rules and regulations. What you may not realize is that an insurance policy is a contract.

The contract of insurance is an agreement between you and the insurance company. Your insurance company agrees to provide you with particular insurance coverage. You, in turn, agree to provide truthful information when applying for coverage. The insurance business runs on these agreements.

The principle of utmost good faith is at the heart of contract law. Every insurance policy implies the duty of utmost good faith. This is true whether the policy is a consumer insurance contract or a business insurance policy. It's part of the common law in every jurisdiction.

Insurance contracts require both parties to conduct themselves with honesty and integrity. However, not all insurance companies adhere to the principle of utmost good faith towards policyholders when handling insurance claims. Read on to learn more about the doctrine of the utmost good faith.

Insurance Contracts and Good Faith

The doctrine of the utmost good faith is sometimes referred to by its Latin name, uberrimae fides or uberrimae fidei. It's a contract law doctrine requiring contracting parties to act with honesty. The parties cannot mislead or withhold any essential information regarding the contract. Insurance industry contracts require the highest standard of good faith.

The Insurance Policy as a Contract

An insurance policy is a contract. The insurance contract is a document setting forth the terms and conditions of the coverage. It serves as the formal insurance contract. During underwriting, insurance companies gather information on whether to insure an applicant. The information also determines how the insurer will set premium prices. Underwriting could result in a higher premium or an outright denial.

The Parties to a Contract

The parties to an insurance contract include the insurer. The insurer consists of a licensed insurance agent or broker. 

The contract also includes the applicant. An applicant is a person who is seeking to buy insurance as an individual or on behalf of a business. The applicant is known as the insured. Once applicants pay the initial premiums and receive the insurance policy, they become the insured party.

How the Doctrine of Utmost Good Faith Works

In insurance contracts, the doctrine of utmost good faith requires a duty of disclosure. This requires the full disclosure of relevant information. The insurer agrees to share the risk of loss with the policyholder. This makes it critical for the policyholder to disclose all pertinent information.


The doctrine of good faith requires that both parties to an insurance contract are honest about disclosing all relevant information. As applied to the insurance company, this means providing honest information on the following:

  • Terms
  • Premium figures
  • Coverage limitations

Non-disclosure of relevant information could constitute a breach of contract. 

Applicants must be truthful when disclosing all requested pertinent personal information. If you're applying for car insurance, you'll be required to disclose information such as the following:

  • Prior accidents
  • Past traffic tickets
  • Your residence location
  • Annual income
  • Level of educational attainment

If you're applying for life insurance, you will be asked to provide information about your health background and family history. The doctrine of the utmost good faith requires that you honestly provide all material information.

A representation is material if the insurer relies on it in making decisions about the applicant. A misrepresentation is a false or untrue material statement. If the insurer finds that the applicant intentionally and knowingly misrepresented information, the insurer can void any resulting insurance contract.


Concealment is closely related to misrepresentation. A misrepresentation is a false or misleading statement of material fact. Concealment refers to the intentional omission of material information.

An insurer can void an insurance contract or deny payment on a claim due to concealment. Both of the following must be true:

  1. The insured knew that there was an important fact concerning that insurance policy
  2. The insured  withheld that fact with the intent to defraud the insurer on purpose

If guilty of both conditions, the insured would breach the contract.


Another element of the requirement for the utmost good faith is warranties. Warranties are promises by an insurance applicant to do certain things or satisfy specific requirements. Warranties become part of the insurance contract. They can be express or implied. An insurer may have grounds to void an insurance contract if the insured's acts constitute a breach of warranty.

Get Legal Help With Insurance Issues

The onus is on both the policyholder and the insurance company to act in good faith. If the conduct of a party to an insurance contract has fallen below the requirements of good faith, legal remedies may be available to you. An excellent first step is speaking to an attorney experienced in insurance law.

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