Utmost good faith is an insurance-law principle that expects both parties to be honest and to disclose material facts when an insurance contract is formed and, in some contexts, when it is administered. The idea exists because insurers price and accept risk based on information the insured knows, and insureds rely on insurers to explain and apply coverage fairly.
The strength and mechanics of the doctrine vary by jurisdiction and line of business. It is especially prominent in certain specialty lines (for example, marine insurance), but the underlying duty of truthful disclosure shows up broadly through misrepresentation and concealment rules.
What “material fact” means in underwriting terms
A fact is generally material if it would influence an insurer’s decision to:
- accept or decline the risk
- set premium, limits, or exclusions
- require inspections, warranties, or endorsements