Utmost good faith (uberrima fides)
The principle that both parties to an insurance contract owe each other heightened candor and fair dealing, and the foundation of the duty to disclose the risk.
Good faith weighs more heavily in insurance than in the general law of contract. The common law tradition speaks of utmost good faith, uberrima fides: both parties owe each other heightened candor and fair dealing. The reason lies in the nature of the contract, which rests on chance and carries an information asymmetry. The insured knows its risk better than the insurer, and the insurer knows the drafting and scope of cover better than the insured. For the insured, this means the duty to disclose the circumstances of the risk fairly and accurately, and breach carries heavy penalties. For the insurer, it means a duty of clarity and fair dealing in drafting the contract, informing the insured and handling claims; ambiguous clauses are generally read against the party that drafted them. In French civil law, this rests on the general requirement of contractual good faith, reinforced by the rules specific to the insurance code. In cyber, where the underwriting questionnaire is central, the insured's good faith about the real state of its security has become a major ground for litigation.
Textbook case: an insurer drafts an ambiguous exclusion clause and tries to invoke it against an insured acting in good faith. In line with the principle, the court resolves the ambiguity in favor of the insured, against the insurer that drafted the clause.
utmost good faith, uberrima fides, duty of fair presentation
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