Florida 2-20 General Lines Agent (Property, Casualty, Commercial Lines and Florida Law)General InsuranceMedium
A Florida General Lines Agent is explaining the concept of 'utmost good faith' to a new client. Which of the following actions by an applicant for insurance would be considered a breach of the principle of utmost good faith?
- AProviding an estimated value for personal property that is slightly higher than its actual cash value.
- BFailing to read the entire insurance policy document before signing the application.
- CForgetting to disclose a minor speeding ticket from five years ago on the application.
- DIntentionally failing to disclose a previous felony conviction when applying for a fidelity bond.
Show answer & explanationAnswer & explanation
Correct answer: D. Intentionally failing to disclose a previous felony conviction when applying for a fidelity bond.
Utmost good faith requires both parties to an insurance contract to act with the highest degree of honesty and to disclose all material facts. Intentionally concealing a previous felony conviction, especially for a fidelity bond where honesty is critical, is a clear breach of this principle.
Why the other options are wrong
- A. An estimated value, unless intentionally fraudulent, is generally not considered a breach of utmost good faith.
- B. While advisable, failing to read the entire policy is not a breach of utmost good faith on the applicant's part, as the insurer is still bound by its terms.
- C. A minor, old speeding ticket might not be considered a material fact or a deliberate concealment.
Utmost Good Faith
A legal principle in insurance contracts requiring both the insured and the insurer to act with complete honesty and to disclose all material facts.
- Higher standard than ordinary commercial contracts.
- Requires full and fair disclosure of all information relevant to the risk.
- Breach by the insured can lead to policy voidance or denial of claims.
Memory trick: Utmost good faith is 'trust' between both parties, like a secret handshake.