What principle does utmost good faith enforce in insurance?

The principle of utmost good faith, often referred to as "uberrima fides," is a fundamental concept in insurance that requires the insured to disclose all material information relevant to the insurance policy. This obligation ensures that the insurer can adequately assess the risk and determine appropriate coverage and premiums. Material information refers to anything that could influence the insurer's decision-making process regarding the acceptance or terms of the insurance contract.

In the context of insurance, if the insured fails to disclose pertinent information—be it previous claims, health conditions, or any other relevant risk factors—the insurer may face challenges when processing a claim or determining coverage. This principle plays a crucial role in maintaining trust and integrity between the insurer and the insured, as it is essential for the overall functionality and stability of the insurance market. Thus, ensuring that the insured is forthcoming with all necessary details aligns with the foundational goals of insurance, which include protecting all parties involved in the transaction.