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Doctrine of Utmost Good Faith

Posted by snowie , Monday, April 19, 2010 1:20 PM

“Uberrimae fidei” is a Latin phrase meaning for utmost good faith. It is the name of a legal doctrine which governs insurance contracts. This means that all parties to an insurance contract must deal in good faith, making a full declaration of material facts in the insurance proposal. This opposites with the legal doctrine of caveat emptor (let the buyer beware), which stated in the previous post.

It is a fundamental requirement of the parties to a transaction or contractual agreement. The doctrine of utmost good faith is a minimum standard that requires both the buyer and seller in a transaction to act honestly toward each other and to not mislead or refrain from providing critical information to the other party.

In the insurance market, the doctrine of utmost good faith requires that the party seeking insurance discloses all relevant personal information. According to Invesropedia explanation, it given and example of if you are applying for a life insurance, you are required to disclose any previous health problems you may have had. Likewise, the insurance agent selling you the coverage must disclose the critical information you need to know about your contract and its terms.