The Implied Covenant of Good Faith and Fair Dealing
The principle mantra in the insurance world is “Conduct business in the utmost good faith (uberrima fides).” The first reported decision acknowledging the need for utmost good faith in insurance was stated in the British House of Lords by Lord Mansfield in 1766. He made clear that the duty of good faith is not unilateral but rests upon both the insured and the insurer. This is still the law followed in England; it was adopted by United States appellate courts that recognize the covenant of good faith. The duty to deal with one another in good faith in all insurance transactions exists during every moment of the insurance transaction, from the negotiation for the contract, throughout its term, to its conclusion.
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