Utmost good faith Definition

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GLOSSARY

Published by a UU��ֱ�� Commercial expert

What does Utmost good faith mean?

Utmost good faith, or the principle of uberrima fides, is a term of art for insurance contracts. The common law duty of utmost good faith requires both parties to the contract to disclose all material facts. In practice, the onus of the obligations rests with the party being insured, the proposer, who must disclose all material facts known to it during preliminary negotiations for an insurance contract.

If a proposer fails to make full disclosure, the insurer is entitled to avoid the contract, including if the proposer makes an innocent misrepresentation of a material fact. If the insurer fails to make full disclosure, the proposer’s remedy is the return of the premium and not for breach of contract damages. Case law suggests a proposer/insured may have a claim in damages ‘in an exceptional case’. The common law duty of utmost good faith can be qualified by express contractual terms. These are more common in non-marine insurance contracts, where the amount of disclosure that would otherwise be required can be defined, regulated or limited.

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General principles of insurance contract law

What is insurance law?Insurance law can be split into three parts:•insurance contract law which governs the contractual relationship between insureds and insurers•the law of intermediaries which regulates insurance business which is transacted through agents (this is true for most insurance business)•insurance company law which is concerned with the financial soundness, probity and regulation of insurance companiesThis Practice Note largely deals with insurance contract law. For more information on insurance regulation, see: General matters relating to insurance regulation—overview.Reform of the insurance sectorFollowing several previous attempts, most notably in 1980 (see the Law Commission’s 1980 report for details), in January 2006 the Law Commission and Scottish Law Commission (together the Law Commissions) started consulting on reforming insurance contract law. Following the consultation, the Law Commissions’ work was broken into three sub-projects:•consumer insurance law reform: pre-contract disclosure and misrepresentation•insurance contract law reform: business disclosure, warranties, insurers’ remedies for fraudulent claims, and late payment•insurance contract law reform: insurable interestConsumer insurance law reform—pre-contract disclosure and misrepresentationAfter the 2006 consultation, there followed a series of statements...

Insurance & Reinsurance—new starter guide

Insurance & Reinsurance—new starter guide This new starter guide provides an introduction to insurance and reinsurance. The guide is aimed at trainee solicitors and those who are new to insurance and reinsurance as a practice area. It focuses on the key issues that arise and includes links to other resources and materials which provide more comprehensive information on the topics covered. What is insurance law? Insurance law can be split into three parts: • insurance contract law which governs the contractual relationship between insureds and insurers • the law of intermediaries which regulates insurance business which is transacted through agents (this is true for most insurance business) • insurance regulation and company law which is concerned with the financial soundness, probity and regulation of insurance companies For more information, see Practice Note: General principles of insurance contract law. Insurance policies are fundamentally contracts and the usual principles of contractual construction apply. For further guidance as to the nature of insurance contracts, see: Insurance contracts—overview and Practice Notes: • Identifying contracts of insurance...

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