The Insurance Law Contract As A Contract Of Good Faith: A Critique

Yashodhan Thakur, Alliance University, Bangalore & advocate at the Jammu, Kashmir and Ladakh High Court

Good faith as a contractual element of insurance law

Insurance law is a contract set between two parties, one being the insurer and the other being the insured. It is a contract since the insurer promises to pay the benefits to the insured or to any other third party (dependent) on his behalf. Therefore, insurance contact is treated as a contract with Uberrima fides.1 The contract of insurance includes various principles that are required to be followed, amongst which one of the main principles is the contract of good faith between the insurer and the insured. Good faith forbids either party from concealing (non-disclosure) what he privately knows, to draw the other into a bargain, from his ignorance of that fact and his believing the contrary2. If in case the principle of utmost good faith is not observed by either party then the contract may be avoided by the other party3 if it is seen that, (1) there has been a failure by the other party to disclose a material fact; or (2) that there has been on the part of the other party a misrepresentation, however innocently and honestly made, of a material fact.4