The Implied Covenant of Good Faith & Fair Dealing

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thics 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.