What does “Good Faith” mean in insurance?
Both parties must act honestly during negotiations and disclose material facts clearly.
What did CIDRA 2012 change for consumers?
Removed duty to volunteer info.
Introduced duty to take reasonable care not to misrepresent.
Consumers must answer insurer’s questions truthfully.
What is banned under CIDRA?
Basis of contract clauses.
What did IA 2015 change for commercial insurance?
Abolished automatic right to void policy for breach of good faith.
Introduced duty of fair presentation.
What is the duty of fair presentation?
Commercial insured must:
Disclose every material circumstance they know or ought to know.
Present info clearly.
Give enough info for insurer to ask more questions.
What is a material circumstance?
Anything that would influence a prudent insurer’s decision on whether to take the risk and on what terms.
Circumstances that do NOT need to be disclosed?
Info that reduces risk.
Info insurer knows or ought to know.
Info waived by insurer.
Spent convictions.
Remedies under CIDRA for deliberate/reckless misrepresentation?
Avoid contract.
Refuse all claims.
Keep premiums (unless unfair).
Remedies under IA 2015 for breach of fair presentation?
Deliberate/reckless: avoid contract, refuse claims, keep premium.
Not deliberate/reckless:
If insurer wouldn’t insure: avoid, return premium.
If insurer would insure on different terms: apply those terms.
If premium would be higher: reduce claim proportionately.
Breach of warranty under IA 2015?
No automatic termination. Liability is suspended during breach and resumes when remedied.
