Page 33 - M1_Insurance Introduction Notes
P. 33
Hence the contracts of insurance are referred to
as contracts of utmost good faith. Since these
contracts are based on prediction of an event
(known as a contingency), they are called as
contingent contracts. The prediction depends on
complete disclosure being made of all facts that
would impact the risk. The proposer in insurance
thus has a legal obligation (legal duty) to disclose
everything and all material facts that are relevant
to the subject-matter of insurance.
A material Fact - A material fact is one which
would affect the judgment of a prudent insurer in
deciding whether to accept the risk and if so, at
what rate or premium and subject to what terms
and conditions.
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