Uberrima fides is a Latin phrase meaning "utmost good faith

Good faith

In philosophy, the concept of Good faith—Latin bona fides “good faith”, bona fide “in good faith”—denotes sincere, honest intention or belief, regardless of the outcome of an action; the opposed concepts are bad faith, mala fides and perfidy...

" (literally, "most abundant faith"). It is the name of a legal doctrine which governs insurance contract

Insurance contract

In insurance, the insurance policy is a contract between the insurer and the insured, known as the policyholder, which determines the claims which the insurer is legally required to pay. In exchange for payment, known as the premium, the insurer pays for damages to the insured which are caused by...

s. This means that all parties to an insurance contract must deal in good faith, making a full declaration of all material facts

Fact

A fact is something that has really occurred or is actually the case. The usual test for a statement of fact is verifiability, that is whether it can be shown to correspond to experience. Standard reference works are often used to check facts...

 in the insurance proposal. This contrasts with the legal doctrine caveat emptor

Caveat emptor

Caveat emptor is Latin for "Let the buyer beware". Generally, caveat emptor is the property law doctrine that controls the sale of real property after the date of closing.- Explanation :...

(let the buyer beware). Uberrimae fidei is the motto of Lloyd's of London

Lloyd's of London

Lloyd's, also known as Lloyd's of London, is a British insurance and reinsurance market. It serves as a partially mutualised marketplace where multiple financial backers, underwriters, or members, whether individuals or corporations, come together to pool and spread risk...

.

Insurance contracts

Thus the insured must reveal the exact nature and potential of the risk

Risk

Risk is the potential that a chosen action or activity will lead to a loss . The notion implies that a choice having an influence on the outcome exists . Potential losses themselves may also be called "risks"...

s that he transfers to the insurer, while at the same time the insurer must make sure that the potential contract fits the needs of, and benefits, the assured.

A higher duty is exacted from parties to an insurance contract than from parties to most other contracts in order to ensure the disclosure of all material facts so that the contract may accurately reflect the actual risk being undertaken. The principles underlying this rule were stated by Lord Mansfield

William Murray, 1st Earl of Mansfield

William Murray, 1st Earl of Mansfield, SL, PC was a British barrister, politician and judge noted for his reform of English law. Born to Scottish nobility, he was educated in Perth, Scotland before moving to London at the age of 13 to take up a place at Westminster School...

 in the leading and often quoted case of Carter v Boehm

Carter v Boehm

Carter v Boehm 3 Burr 1905 is a landmark English contract law case, in which Lord Mansfield established the duty of utmost good faith or uberrimae fidei in insurance contracts.-Facts:...

(1766) 97 ER 1162, 1164,

"Insurance is a contract of speculation... The special facts, upon which the contingent chance is to be computed, lie most commonly in the knowledge of the insured only: the under-writer trusts to his representation, and proceeds upon confidence that he does not keep back any circumstances in his knowledge, to mislead the under-writer into a belief that the circumstance does not exist... Good faith forbids either party by concealing what he privately knows, to draw the other into a bargain from his ignorance of that fact, and his believing the contrary.

Fiduciary duties

The fact that a contract is one of utmost good faith does not however mean that it gives rise to a general fiduciary relationship. The relationship between insured and insurer is not akin to the relationship between, say, guardian

Legal guardian

A legal guardian is a person who has the legal authority to care for the personal and property interests of another person, called a ward. Usually, a person has the status of guardian because the ward is incapable of caring for his or her own interests due to infancy, incapacity, or disability...

 and ward

Ward (law)

In law, a ward is someone placed under the protection of a legal guardian. A court may take responsibility for the legal protection of an individual, usually either a child or incapacitated person, in which case the ward is known as a ward of the court, or a ward of the state, in the United States,...

, principal and agent

Agency (law)

The law of agency is an area of commercial law dealing with a contractual or quasi-contractual, or non-contractual set of relationships when a person, called the agent, is authorized to act on behalf of another to create a legal relationship with a third party...

, or trustee

Trustee

Trustee is a legal term which, in its broadest sense, can refer to any person who holds property, authority, or a position of trust or responsibility for the benefit of another...

 and beneficiary

Beneficiary

A beneficiary in the broadest sense is a natural person or other legal entity who receives money or other benefits from a benefactor. For example: The beneficiary of a life insurance policy, is the person who receives the payment of the amount of insurance after the death of the insured...

. In these latter instances, the inherent character of the relationship is such that the law has traditionally imported general fiduciary obligations. The insurer-insured relationship is contractual; the parties are parties to an arms-length agreement. The principle of uberrima fides does not affect the arms-length nature of the agreement, and cannot be used to find a general fiduciary relationship. The insurance contract, as noted above, imposes certain specific obligations on its parties. These obligations, however, do not import general fiduciary duties into each and every insurance relationship. Before such fiduciary obligations can be imported there must be specific circumstances in the relationship that call for their imposition.

See also

• Adverse selection
  Adverse selection
  Adverse selection, anti-selection, or negative selection is a term used in economics, insurance, statistics, and risk management. It refers to a market process in which "bad" results occur when buyers and sellers have asymmetric information : the "bad" products or services are more likely to be...
  
  
• English contract law
  English contract law
  English contract law is a body of law regulating contracts in England and Wales. With its roots in the lex mercatoria and the activism of the judiciary during the industrial revolution, it shares a heritage with countries across the Commonwealth , and the United States...
  
  
• Insurance bad faith
  Insurance bad faith
  Insurance bad faith is a legal term of art that describes a tort claim that an insured person may have against an insurance company for its bad acts. Under the law of most jurisdictions in the United States, insurance companies owe a duty of good faith and fair dealing to the persons they insure...
  
   - distantly-related American cause of action
• Implied covenant of good faith and fair dealing
  Implied covenant of good faith and fair dealing
  In contract law, the implied covenant of good faith and fair dealing is a general presumption that the parties to a contract will deal with each other honestly, fairly, and in good faith, so as to not destroy the right of the other party or parties to receive the benefits of the contract...
  
   - good faith obligation in the law of contract
  Contract
  A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
  
  s

External links

• Uberrima Fides And Concealment in the Marine Policy Application from the Maritime Law Association of the United States
• New Hampshire Ins. v. C'Est Moi, Inc.