An insurance contract is said to be a contract of utmost good faith, because:
Each party assumes that they can rely on the statements of the other party
An insurance contract is considered a contract of utmost good faith because both the insured and the insurer are expected to act with complete honesty and transparency. This means that both parties are required to disclose all relevant information related to the insurance policy and the insured object.
The insured is expected to provide honest and complete information about the object that they want to insure, including its value, condition and any other relevant information that could affect the insurance company’s decision on whether or not to accept the risk. If the insured fails to provide accurate information, they risk having their policy voided or cancelled, and they may not be able to collect on any claims that they submit.
The insurer, on the other hand, is expected to provide complete and accurate information about the coverage that they are offering. This includes the terms and conditions of the policy, any exclusions and limitations, and the process for submitting a claim. If the insurer fails to provide accurate information, they risk being sued for breach of contract.
Overall, the principle of utmost good faith is intended to ensure that both parties to an insurance contract act honestly and transparently, in order to prevent any misunderstandings or disputes from arising later on.
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