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Principles of Risk Management and Insurance, 13th Edition by Michael McNamara, George E. Rejda

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Principle of Utmost Good Faith

An insurance contract is based on the principle of utmost good faiththat is, a higher degree of honesty is imposed on both parties to an insurance contract than is imposed on parties to other contracts. This principle has its historical roots in ocean marine insurance. An ocean marine underwriter had to place great faith in statements made by the applicant for insurance concerning the cargo to be shipped. The property to be insured may not have been visually inspected, and the contract may have been formed in a location far removed from the cargo and ship. Thus, the ­principle of utmost good faith imposed a high degree of honesty on the applicant for insurance.

The principle of utmost good faith is supported by ...

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