2. The principle of utmost good faith means a higher
degree of honesty is imposed on both parties to an
insurance contract
This principle has its historical roots in ocean marine
insurance
The principle imposes a more higher degree of
honesty on the applicant for insurance
3. The principle of utmost good faith is supported
by three important legal doctrines as follows:
Representations
Concealment
warranty
4. Representations:
The statements made by the applicant for insurance.
That’s tell the true facts about the insured and/or the
subject matter.
（ 1 ） In life insurance, the applicant should be asked
questions concerning the insured’s age, height,
occupation, state of health, family history, and other
relevant questions.
（ 2 ） In property insurance, such information as
quality, quantity, location, value, so on should be stated.
（ 3) Increase in hazard
5. Representations:
An Insurance contract is voidable at the insurer’s option if the
presentation is ：
(1) Material (the true facts not fitting for the required
conditions by the insurer. )
(2) False (not true facts, or misleading)
(3) Relied on by the insurer (at specified /adjusted premium)
(4) Innocent misrepresentation （ unintentional ）
6. Concealment:
It is intentional failure for the applicant to
reveal a material fact to the insurer. That is the
applicant deliberately withholds material
information from the insurer.
The legal affect of a material concealment is:
The contract is voidable at the insurer’s option.
7. warranty:
It is a statement of fact or a promise made by the insured,
which is part of the insurance contract and must be true if
the insurer is to be liable under the contract. Examples:
Not drunk driving
Locking the door
Fire extinguisher
Any breach of the warranty allows the insurer to deny
payment of a claim.
8. Against the responsibilities of Representation:
The insurer may not take the responsibility
due to such reasons as: negligence, mis-
represent the facts, or conceal the facts
deliberately .
The legal effect of breaking the utmost good
faith principle is that the insurer will deny the
loss claim.
9. Definition of the principle of proximate cause
In many cases, a loss is caused by several reasons, not a
single one. Thus, the principle of proximate cause is
used in the insurance contract.
It means among several causes, the insurer tries to
examine whether the most effective and decisive cause
is under the coverage of the insurance contract. If yes,
the insurer pay the sum of insurance amount; otherwise,
will not pay.
10. Means the DIRECT, DOMINANT or effective cause of
which the loss is the natural consequence.
It is the cause which is most closely connected with the
loss, not necessarily in time but in efficiency.
11. Example:
An insured sustained an accident while hunting.
Due to shock and weakness, he was unable to walk
and whilst lying on wet ground, he contracted cold
which developed into pneumonia causing death
ultimately.
The proximate cause was considered to be the
accident and not the pneumonia, the disease, which
was only a remote cause. The claim was payable
under personal accident policy.
12. The principle of utmost good faith means that a higher
degree of honesty is imposed on both parties to an
insurance contract.
The legal doctrine of representations, concealment and
warranty support the principle of utmost good faith .
There are several derived principles from the principle
of indemnity .
