Insurance Law Contracts unlike other contracts are one of Utmost Good Faith as the Insurer undertakes to indemnify all the risk and prospective losses of the Insured. The only method of ascertainment of Risk, which he so promises to make good, is the account of facts and circumstance as presented and deposed, by the Insured and Insurer stands alien as well ignorant to the situation and resultant risk in the present state of things. So, the duty cast upon Insured to observe good faith in Insurance contracts supersedes the general duty to observe good faith in all other types of Contracts in practice. We refer this as ‘Utmost good faith’. Therefore, not just the present state of things but all the events and occurrences that can increase the Risk in future are to be mentioned at the time of execution of the policy.
Additionally as the law stands today this duty of disclosure and observing good faith is one of continuing nature and doesn’t cease to be in force post formation of policy.
This comment will argue that the position of law with respect to ‘utmost good- faith’ in context of Fraudulent Claims by way of Exaggerated Claims and Fraudulent Claims through Fraudulent Devices to promote insured’s interest is an area of ambiguity and merits its own special treatment vis-à-vis blatant breaches of ‘uberrimæ fidei’. Three situations may arise when we talk of ‘Utmost Good-faith’ breaches.