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does not affect the arms-length nature of the agreement, and cannot be used to find a general fiduciary relationship. The insurance contract, as noted above, imposes certain specific obligations on its parties. These obligations, however, do not import general fiduciary duties into each and every
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Insurance is a contract of speculation... The special facts, upon which the contingent chance is to be computed, lie most commonly in the knowledge of the insured only: the under-writer trusts to his representation, and proceeds upon confidence that he does not keep back any circumstances in his
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knowledge, to mislead the under-writer into a belief that the circumstance does not exist... Good faith forbids either party by concealing what he privately knows, to draw the other into a bargain from his ignorance of that fact, and his believing the contrary.
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and claim handling costs, and must rely on an insurer's absolute transparency and candor. In return, a reinsurer must appropriately investigate and reimburse an insurer's good faith claim payments, following the fortunes of the cedent.
113:, and such utmost good faith is considered the foundation of reinsurance, which is an essential component of the modern insurance marketplace. In order to make reinsurance affordable, a reinsurer cannot duplicate costly insurer
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in his dealings with his principal; and if he acts adversely to his employer in any part of the transaction ... it amounts to such a fraud upon the principal, as to forfeit any right to compensation for services."
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that he transfers to the insurer (which may, in turn, be sold onto a reinsurer), while at the same time the insurer must make sure that the potential contract fits the needs of, and benefits, the insured.
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Mendoza, Marcos
Antonio (2014). "Reinsurance as Governance: Governmental Risk Management Pools as a Case Study in the Governance Role Played by Reinsurance Institutions".
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insurance relationship. Before such fiduciary obligations can be imported there must be specific circumstances in the relationship that call for their imposition.
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395:"Chapter 6, Claims: an overview of the US tort of 'bad faith' — a common law approach to regulating insurer claims and settlements"
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so that the contract may accurately reflect the actual risk being undertaken. The principles underlying this rule were stated by
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of the insurance contract. During the mid-20th century, American courts expanded it much farther into a post-formation
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The fact that a contract is one of utmost good faith does not mean, however, that it gives rise to a general
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held that a broker could not recover commissions from his employer, holding that "An agent is held to
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than from parties to most other contracts, in order to ensure the disclosure of all material
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contracts (between reinsurers and insurers/cedents) require the highest level of utmost
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Therefore, the insured must reveal the exact nature and potential of the
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in the insurance proposal. This contrasts with the legal doctrine
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Uberrima Fides And
Concealment in the Marine Policy Application
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Research
Handbook on International Insurance Law and Regulation
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401:. Cheltenham: Edward Elgar Publishing. pp. 120–145.
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Midlige, Suzanne; Re, Robert; Hoffman, William (2011).
317:"Commercial Agency and the Duty to Act in Good Faith"
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