{"id":352610,"date":"2017-06-05T14:16:49","date_gmt":"2017-06-05T19:16:49","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/consumer\/insurance\/the-doctrine-of-utmost-good-faith.html"},"modified":"2024-05-01T18:16:21","modified_gmt":"2024-05-01T23:16:21","slug":"the-doctrine-of-utmost-good-faith","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/consumer\/insurance\/the-doctrine-of-utmost-good-faith.html","title":{"rendered":"The Doctrine of Utmost Good Faith"},"content":{"rendered":"\n
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The Doctrine of Utmost Good Faith<\/h1>\n
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\n By Oni Harton, J.D.<\/a> | Legally reviewed by Melissa Bender, Esq.<\/a>\n | Last updated\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n

Many of us are familiar with insurance policies. Most have at least one type of insurance coverage<\/a>, 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.<\/p>\r\n

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.<\/p>\r\n

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.<\/p>\r\n

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.<\/p>\r\n

Insurance Contracts and Good Faith<\/h2>\r\n

The doctrine of the utmost good faith<\/a> is sometimes referred to by its Latin name, uberrimae fides<\/i><\/a> <\/i>or uberrimae fidei. <\/i>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.<\/p>\r\n

The Insurance Policy as a Contract<\/h3>\r\n

An insurance policy<\/a> 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.<\/p>\r\n

The Parties to a Contract<\/h3>\r\n

The parties to an insurance contract include the insurer. The insurer consists of a licensed insurance agent or broker. <\/p>\r\n

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.<\/p>\r\n

How the Doctrine of Utmost Good Faith Works<\/h2>\r\n

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.<\/p>\r\n

Representations<\/h3>\r\n

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:<\/p>\r\n