Utmost Good Faith

Utmost good faith is a common law principle (sometimes called Uberrimae Fidei). The principle means that every person who enters into a contract of insurance has a legal obligation to act with utmost good faith towards the company offering the insurance. A person must, therefore, always be honest and accurate in the information they give to the insurance company. The insurance company also has a responsibility to act with good faith in all its dealings with the insured.

Fraudulent claims
A breach of the duty of good faith in relation to lodging a claim can arise in a number of ways. These include:

  • When a claim is lodged for an event that has not happened, or for an item that has not been lost or damaged.
  • When a false statement is made relating to the circumstances leading to the loss itself, or relating to what happened after the loss.

The law in New Zealand relating to the effect of a false claim for one or more items on a claim which would otherwise be valid in itself, is well established. For example, an insured loses all right to a claim on an item or property where they have knowingly made a false statement of loss, in addition to this they lose all right to any other part of that claim which was sustained, even under other policies

Does the value of claims make a difference?
The value of the items falsely claimed relative to the entire claim cannot save the insured who acts with proven intent to defraud.

False statements
The law related to making a false statements about any aspect of a claim is well settled. A false statement is one made with knowledge that it is untrue, or a statement made recklessly, without care as to whether it is true or not.

Does a false statement exclude liability under a policy?
A false statement entitles the insurer to decline the claim. It does not matter if the insurer subsequently finds out the truth, either as a result of its own investigations or as the result of a later admission by the insured. Making an untruthful statement is a circumstance which excludes liability under the policy

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