The Implied Covenant of Good Faith & Fair Dealing
Ethics is a process of systematically applying, using, defending and recommending concepts of right and wrong behavior.
Ethical behavior is required of both parties to a contract of insurance for the system to work. If any party to the insurance contract acts unethically the ability of insurance to work effectively and profitably will fail.
Ethics is the essence of insurance. Since insurance was first created it has been a business of utmost good faith. As a result, the insured and the insurer are expected to treat each other ethically.
Insurance was created to spread risk from individuals to multitudes. Spreading the risk in a fair, ethical and honorable manner from one person to many is the basis upon which a system of insurance was founded. The insurance contract since modern insurance was first created was founded on the concept of Uberrimae Fidei.
The Latin phrase Uberrimae Fidei is used to express the principle that a contract of insurance must be made in perfect good faith, with neither the insurer nor the insured concealing nothing from the other. In the case of insurance both the insured and the insurer must observe the most perfect good faith towards each other so that the insurer understands the risk it is asked to take and the insured understands the risks accepted by the insurer.
Insurers and reinsurers are dependent on “utmost good faith [which] may be viewed as a legal rule but also as a tradition honored by ceding insurers and reinsurers in their ongoing commercial relationships.
© 2020 – Barry Zalma
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and email@example.com.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.
Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts
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