In Good Faith

“Honesty of intention, and freedom from knowledge of circumstances which ought to put the holder upon inquiry. An honest intention to abstain from taking any unconscientious advantage of another, even through technicalities of law, together with absence of all information, notice, or benefit or belief of facts which render transaction unconscientious.” (Black’s Law Dictionary).

“A term that generally describes honest dealing. Depending on the exact setting, good faith may require an honest belief or purpose, faithful performance of duties, observance of fair dealing standards, or an absence of fraudulent intent” (Cornell Law School).

“Honest intent to fulfill a promise to act or to act without taking an unfair advantage over another person. Absence of intent to defraud someone.” (Nolo’s Law Dictionary).

Example Sentence

Jill’s insurance company kept to their policy of defending her against the accident claims of Harry, thus they acted in good faith.

Case Study

The Wilson’s car accident proved fatal for Mr. Wilson, and Mrs. Wilson was left badly injured and widowed. Despite the enormous costs they would have to pay, the other driver’s insurance company acted in good faith. They investigated the claim made by the Wilson’s against their insured driver, evaluated its validity, and offered a reasonable settlement. It cost the company a large sum, but they knew that they were bound to act in good faith because of the contract they had made with their insured driver.

Other Important Information

When an insurance company pays their client’s expenses, they subrogate the right to sue the wrongdoer. This payment is done in good faith (Utah Auto Law).

Utah’s Good Samaritan Act provides some immunity from liability when a person freely, and in good faith, seeks to provide emergency care near a car accident. The person would only be held liable for his actions or non-actions if they were “grossly negligent or caused the emergency” (Utah Code).

Your insurance company has a right to settle your claim with the other party, and if done in good faith, then “the amount of the settlement is deductible from the limits of liability specified under Section 31A-22-304” (Utah Code). Your insurance company is also obligated, in good faith, to defend you against “any claim or suit seeking damages which would be payable under the policy” (Utah Code).

The Utah Supreme Court also specified that “the covenant of good faith and fair dealing” is inherent in all contracts and imposes on both parties a “duty to bargain or settle in good faith” (Christiansen v. Farmers Insurance). This means that the insurance company must investigate and evaluate the validity and merits of the claim and respond quickly and reasonably in settling or rejecting the claim. Insurance companies must also treat their client as a lay person not a legal expert. The Court also ruled that insurance companies do not have complete control over whether they will cover the insured person or how much they can pursue an uninsured person (State Farm v. Green & Murray).

However, the Court also ruled that insurance companies do not have any covenant of good faith with third party groups affected by accidents, such as spouses not on the same insurance policy (see Sperry v. Sperry & Black v. Allstate Insurance). But, attorney fees can be awarded if the insurance company fails to act in good faith (Lieber v. ITT Hartford Insurance). The person insured also must act in good faith in seeking to only incur reasonable expenses in correcting any injuries to body or property (Pennington v. Allstate Insurance).

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