On The Principle Of Utmost Good Faith In Insurance

Principle of Good Faith is the fundamental principle that all the civil activities should comply with. It is a principle so important in civil law that it is lauded as the utmost guiding principle or Emperor Principle in civil law, especially in obligation law. Principle of Good Faith demands people attach much importance to their own credit, abide by their commitments and pursue their interests without prejudice to others'or social interests. Good Faith is the inherent requirement for all the contracts'effectiveness and there's no exception to insurance contracts. However, on account of the particularity of insurance relationship, insurance contracts demand far more good faith than other contracts. Then it is established that insurance contracts should adhere to the Principle of Utmost Good Faith in every country's theory and practice. Principle of Utmost Good Faith is not independent legal principle but a rigid formation of general Principle of Good Faith. Principle of Utmost Good Faith can be defined as follows: during the conclusion and duration of insurance contract, the parties to the insurance contract shall in accordance with law supply to the other party all the materially important facts which may influence the other party's decision in whether to contract and how to contract, and absolutely abide by the agreements and promises in the contract; otherwise, on the ground of this the aggrieved party shall be entitled to declaring the contract null and void or non-performing the agreed duties or liabilities under the contract, and to claiming to the other party for damages. Principle of Utmost Good Faith includes the fundamental contents of disclosure, guarantee, waiver and estoppel. In early insurance contracts and related laws disclosure and guarantee are only binding upon the applicant for insurance and the assured, while in modern insurance contracts and related laws they are commonly binding upon all the parties related to the insurance contract including the applicant for insurance, insurer, and so on. Provisions on waiver and estoppel are mainly binding upon the insurers. Principle of Utmost Good Faith doesn't only stay in the general provisions of principle in the General Provisions of Insurance Law. More importantly, as a key, special and unique principle in the Insurance Law, it runs through the Insurance Law, commands the insurance legislation, guides the insurance judicature, is the most fundamental behavior principle that all the parties related to the insurance contract must observe in the insurance activities, and applies to all the links of the insurance contract such as conclusion, performance, rescission, claim settlement, clause interpretation and dispute settlement of the insurance contract. The Insurance Law as amended in 2002 improves the position of Principle of Good Faith, makes a series of concrete provisions for insurance parties'compliance with the Principle of Utmost Good Faith during the conclusion and duration of the insurance contract, which jointly constitute the connotation of the Principle of Utmost Good Faith in the Insurance Law of our country. The Principle of Utmost Good Faith is the cornerstone on which the insurance industry relies for existence and development. Other countries'insurance legislation is more concrete and perfect than ours not only in theory but also in the Insurance Law and judicial practice. Provisions on the Principle of Utmost Good Faith and its concrete regulations in our country's insurance legislation still remain to be perfected in the hope of entrusting to the Principle of Utmost Good Faith deserved position in China's insurance laws and regulations.