Utmost Good Faith Must Prevail

But that is what the policyholder expects and often what is believes it has been sold. That leaves it open for the professional claims handler to use professional judgement as to how strictly to interpret the policy; to the letter, which often crosses the boundary of acting in good faith, or to the spirit of a contract of insurance issued in “good faith”?

It is interesting to note that the new Insurance Act (2015) retains reference to “good faith” despite, at Part 5, it reminding the reader that reference to the doctrine of Utmost Good Faith, referred to in the Marine Insurance Act (1906), has been “modified to the extent required by the provisions of this act….”

Insurance Act (2015)

Clause 14 - Good faith

  1. .....................
  2. Any rule of law to the effect that a contract of insurance is a contract based on the utmost good faith is modified to the extent required by the provisions of this Act and the Consumer Insurance (Disclosure and Representations) Act 2012.
  3. .....................

However, whilst the principle of Utmost Good Faith no longer applies, the new Act still requires Good Faith to be the underlying principle in which every representation is made by the proposer/ insured to the insurer. (See below)

Insurance Act (2015)

A fair presentation of the risk is one -

  1. ....................
  2. ....................
  3. in which every material representation as to a matter of fact is substantially correct, and every material representation as to a matter of expectation or belief is made in good faith.

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