In an insurance contract, what does 'utmost good faith' require from both parties?

The principle of 'utmost good faith,' known as "uberrima fides," is a fundamental concept in insurance contracts that requires both parties—the insurer and the insured—to act honestly and transparently with one another. This principle emphasizes that both parties must not conceal or deceive one another about any material facts that could impact the policy or the underwriting process.

In an insurance context, it means that the insured should disclose all relevant information related to their risk profile, and the insurer must provide clear and accurate information regarding the terms and conditions of the policy. Failure to adhere to this principle can lead to misunderstandings, disputes, or even the voiding of the contract if one party is found to have acted in bad faith.

While agreeing on all terms in writing, having mutual financial interests, and negotiating in good faith are important aspects of the insurance process, they do not capture the core essence of 'utmost good faith' as it pertains specifically to truthful disclosure and the duty not to deceive. The requirement for honesty and disclosure is what sets 'utmost good faith' apart from these other considerations.