Utmost Good faith

Question 1

How is the insurer supposed to exercise utmost good faith?

Answer 1

He cannot and should not make false promises during negotiations and withhold important information

Question 2

What is utmost good faith?

Answer 2

Refers to the positive duty on the part of the proposer to reveal all important information as regards to the subject matter, and on the part of the insurer to not make false promises and to also reveal important information that could influence the proposer from entering the contract

Question 3

Who is regarded as the proposer?

Answer 3

The potential insured

Question 4

Failure to reveal information even if not asked for gives the aggrieved party the right to regard the contract as?

Answer 4

Void

Question 5

What are material facts?

Answer 5

every circumstance or information, which would influence the insurers judgement in assessing the risk.

Question 6

What are the facts that must be disclosed?

Answer 6

I. Facts that show that the subject matter is more exposed to risks than normal
ii. External factors that could exacerbate or worsen the risk e.g. the building is located next to a warehouse storing explosive material.
iii. Internal factors that could exacerbate the loss e.g. there is no segregation of hazardous goods from non-hazardous goods in the storage facility.
iv. History of Insurance (a) Details of previous losses and claims (b) if any other Insurance Company has earlier declined to insure the property and the special condition imposed by the other insurers; if any.
v. Th existence of other insurance contracts
vi. Full facts relating to the description of the subject matter of Insurance

Question 7

Facts that do not need to be disclosed?

Answer 7

Facts of Law: Every one is deemed to know the law. Overloading of goods carrying vehicles is legally banned. The transporter can not take excuse that he was not aware of this provision.

Facts which lessen the Risk: The existence of a good fire fighting system in the building.

Facts of Common Knowledge: e.g type of property to be insured, location, color

Facts which could be reasonably discovered: For e.g. the previous history of claims which the Insurer is supposed to have in his record.

Facts which the insurers representative fails to notice:
In burglary and fire Insurance it is often the practice of Insurance companies to depute surveyors to inspect the premises and in case the surveyor fails to notice hazardous features and provided the details are not withheld by the Insured or concealed by him them the Insured cannot be penalized.

Fact’s covered by the policy conditions

Question 8

The duty of disclosure remains in force from when till when?

Answer 8

Throughout the negotiation stage till the contract is finalized

Question 9

In what case does the disclosure reoccur?

Answer 9

In the case of the renewing of a contract

Question 10

Legal renewal of a contract is usually regarded as ?

Answer 10

A fresh contract

Question 11

When renewing a contract, there would have to be a duty of disclosure because?

Answer 11

Because there could be a change in material facts

Question 12

In what case would there be no duty of disclosure?

Answer 12

In the case of Long Term Insurance Business (when coverage is for a longer period of time)

Question 13

In the case where Utmost Good Faith is breached as a result of Non-Disclosure done intentionally, it is called?

Answer 13

Concealment

Question 14

_______ misrepresentation arises when the proposer intentionally distorts the known information to defraud the insurer

Answer 14

intentional

Question 15

Non-Disclosure as a breach of UGF can be in two forms?

Answer 15

Innocent or Fraudulent

Question 16

Innocent Misrepresentation?

Answer 16

Occurs when the proposer states a facts he believes is right but ends up being wrong

Question 17

Explain innocent non-disclosure

Answer 17

Situation where the proposer doesn’t disclose a fact because that he believes it’s not important or he does not know the fact

Question 18

Let’s say that an insured person applies for a homeowner’s insurance policy and provides information about the value of their home. They indicate that the home is worth $300,000 based on their own estimate and the local real estate market. Based on this information, the insurer issues the policy and sets the premium.

However, it later comes to light that the home is actually worth $500,000 based on a professional appraisal. What cause of breach?

Answer 18

Innocent misrepresentation

Question 19

Let’s say that an insured person applies for a life insurance policy and provides information about their medical history. They indicate that they have never had any major health issues or been diagnosed with any serious illnesses. Based on this information, the insurer issues the policy and sets the premium.

However, it later comes to light that the insured person had a minor heart condition that they were not aware of at the time of the application. The condition was not serious and did not require any treatment, but it should have been disclosed to the insurer.
What type of breach of utmost good faith is this?

Answer 19

Innocent Non-disclosure

Question 20

Let’s say that an insured person applies for a life insurance policy and provides information about their smoking habits. They indicate that they are a non-smoker and have never smoked in their life. Based on this information, the insurer issues the policy and sets the premium.

However, it later comes to light that the insured person is actually a heavy smoker. What type of breach of Utmost Good Faith is this?

Answer 20

Intentional Misrepresentation

Question 21

Let’s say that an insured person applies for a homeowner’s insurance policy and provides information about their home. They indicate that the home has never experienced any water damage or flooding. Based on this information, the insurer issues the policy and sets the premium for it

However, it later comes to light that the home had experienced water damage in the past due to a leaky roof. The insured person did not disclose this information because the damage was minor and had been repaired.
What type of breach is this? and explain

Answer 21

Innocent non disclosure because they didn’t think the info was important

Question 22

When Misrepresentation is intentional it is said to be?

Answer 22

Fraudulent

Question 23

What happens When the breach is innocent but it is material to the fact?

Answer 23

the insurer may impose a penalty in the form of additional Premium.

Question 24

What happens Where the breach is found to be innocent and is not material?

Answer 24

It is ignored

Question 25

In case the breach caused deliberately is discovered at the time of claim, what happens?

Answer 25

The insurer will not pay the claim

Question 26

Once the breach has been noticed, the contract would be considered ____?

Answer 26

Void

Question 27

In the case of intentional non-disclosure or misrepresentation during negotiation, the contract would become ___?

Answer 27

Void