Breach of Utmost Good Faith

Breach of Utmost Good FaithAs we've already mentioned, insurance works on the principle of mutual trust. It is your responsibility to disclose all the relevant facts to your insurer. Normally, a breach of the principle of utmost good faith arises when you, whether deliberately or accidentally, fail to divulge these important facts. There are two kinds of non-disclosure:
An innocent non-disclosure relates to failing to supply the information you didn't know about.
Deliberate non-disclosure means providing incorrect material information intentionally. For example, suppose that you are unaware that your grandfather died from cancer and, therefore, you did not disclose this material fact in the family history questionnaire when applying for life insurance - this is innocent non-disclosure. However, if you knew about this material fact and purposely held it back from the insurer, you are guilty of fraudulent non-disclosure. Action Taken by Insurer Against a BreachWhen you supply inaccurate information with the intention to deceive, you insurance contract becomes void.
If this deliberate breach was discovered at the time of the claim, your insurance company will not pay the claim.
If the insurer considers the breach as innocent but significant to the risk, it may choose to punish you by collecting additional premiums.
In case of an innocent breach that is irrelevant to the risk, the insurer may decide to ignore the breach as if it had never occurred.