Final answer:
The principle of utmost good faith sets the standard for conduct in the contractual relationship between the insurer and insured.
Step-by-step explanation:
The principle of law that sets the standard for conduct in the contractual relationship between the insurer and insured is known as the principle of utmost good faith. This principle requires both parties to act honestly, fairly, and with good faith in their dealings with each other. It establishes a duty of full disclosure for the insured to provide all relevant information to the insurer, and a duty of fair dealing for the insurer to handle the claim promptly and in good faith.