Question

An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated?

1) Adhesion
2) Consideration
3) Good faith
4) Representation

Answer 1

The insurer not paying a legitimate claim violates the principle of Good faith, which is foundational to the trust between the insured and the insurer in an insurance contract.

Step-by-step explanation:

When an insurer fails to pay a legitimate claim that is under the scope of the policy, the principle of Good faith has been violated. In the context of insurance, good faith, or uberrima fides, refers to the assumption that both parties in the insurance contract will act honestly and not mislead or withhold critical information from one another. This includes the insurer's obligation to pay out claims that are covered under the policy. When an insurer neglects to fulfill this obligation without a legitimate reason, it undermines the very principle of trust and can be considered a breach of the insurance contract.