Utmost Good Faith

Utmost good faith or Uberrimae fidei to use its Latin phrase is the requirement that the party seeking insurance discloses all relevant personal information to the insurer. For example if an insurance applicant is suffering from an underlying health issue and does not disclose this when applying for life insurance, the applicant is not fulfilling his duty of utmost good faith. The duty of good faith is central to and regulates all aspects of the contract of insurance (NIBA). According to Allen’s Arthur Robinson the duty of utmost good faith “requires the insured to act honestly when dealing with the insurer”. In essence, it is the sole duty of the applicant to disclose all relevant information with regards to their health or their personal situation to the insurance company. A quote that sums this up is “The underwriter knows nothing and the man who comes to ask him to insure knows everything (Rozanes v Bowen 1928). If the applicant fails to fulfil utmost good faith, then there are major repercussions when looking to make a claim. The doctrine first arose at common law in Carter v Boehm (1766) 3 Burr 1905. In this case it was ruled that “insurance is a contract of speculation and that the special facts lie most commonly in the knowledge only; the underwriter trust to his representation”.

I completely agree with the statement that “utmost good faith is the cornerstone upon which all insurance policies rest”. In my opinion utmost good faith is the basic foundation for any insurance policy and if the duty is not fulfilled, then an insurance claim is rendered useless. All facts and information material to the risk must be disclosed. A fact is material if it would influence the judgement of a reasonable and prudent insurer on deciding whether to take on the risk. A prime example of this is the case of Chariot Inns v. Assicurazioni Generali Spa and Coyle Hamilton Philips (1981). In this case the presiding judge Keane. J divided the facts into two kinds, the first