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The Compact Book of Ethics for the Insurance Professional



Insurance is by definition a business of utmost good faith. This means that both parties to the insurance contract must act fairly and in good faith towards each other and not do anything that will deprive the other of the benefits promised by the insurance contract.

Without the covenant of good faith and fair dealing, and ethical people working in the insurance industry who enforce and fulfill the covenant, effective insurance to spread the risk of loss to a large group of insurance professionals is impossible. You cannot act fairly and in good faith without being a person with a well-formed ethical compass.

In 1776 Lord Mansfield as a Chief Justice serving in the House of Lords of Britain (the predecessor of Great Britain) referred for the first time to the Covenant of Good Faith and Fair Settlement. In the given case: Carter v. Boehm SC 1 Bl. Burr 1906, 11 May 1766. 593, 3 Lord Mansfield in the British House of Lords stated the rule of uberrimae fide (Latin for utmost good faith).

Ethics and ethical behavior are essential for all insurance professionals

Good faith forbids either party, by concealing what he privately knows, to draw the other into a bargain, from his ignorance of this fact and his belief to the contrary.

Insurers, when deciding whether or not to insure a risk, rely on the information provided to them by the insured. According to Lord Mansfield’s instructions, the insured must provide the information requested carefully, honestly and in good faith.
The implied covenant is simply stated by declaring that neither party to an insurance contract should do anything to deprive the other of the benefits of the contract.

The implied covenant of good faith and fair dealing imposes obligations on all parties to the insurance contract. It was not limited to claims by an insurer, a first-party insured property, an insured third-party liability policy, the insurer, the insurer’s employees, the insurer and claims personnel.

Since at least 1766, the insurance business has been a business of utmost good faith. Each party to an insurance contract must deal with each other ethically. This book will consider and explain various ethical concepts from the Code of Hammurabi more than 3000 years ago to modern ethical philosophers.

The general duty of good faith and fair dealing incorporated by reference into every insurance policy requires a full understanding of ethics and ethical conduct. For example, the California Supreme Court noted that: “In every contract of insurance there is an implied covenant of good faith and fair dealing that neither party will do anything to prejudice the right of the other to partake of the benefits of the contract.” [Gruenberg v. Aetna Insurance Co., 9 Cal.3d. 566, 108 Cal. Rptr. 480 (1973)].

The bond is mutual, and the principles of good faith and fair dealing impose a positive duty of cooperation on the insured as much as it requires the insurer to treat the insured fairly with respect to any claim presented.
This is an obligation imposed by tradition, by the need to act fairly and by court precedent and statutory law, not an obligation arising from the terms of the contract itself.

The duty to act fairly and in good faith is nonconsensual rather than consensual in origin. It is an unwritten, but essential part of every insurance contract.

It is enforced to fulfill the spirit, as well as the letter, of the insurance relationship and the implied covenant of good faith and fair dealing.

The Covenant of Good Faith and Fair Dealing is a statement of the ethical basis for the insurance business.

Without the covenant of good faith and fair dealing, and ethical people working in the insurance industry who enforce and fulfill the covenant, effective insurance to spread the risk of loss to a large group of insurance professionals is impossible. You cannot act fairly and in good faith without being a person with a well-formed ethical compass.
In 1776 Lord Mansfield as a Chief Justice serving in the House of Lords of Britain (the predecessor of Great Britain) referred for the first time to the Covenant of Good Faith and Fair Settlement. In the given case: Carter v. Boehm SC 1 Bl. Burr 1906, 11 May 1766. 593, 3 Lord Mansfield in the British House of Lords stated the rule of uberrimae fide (Latin for utmost good faith):

Good faith forbids either party, by concealing what he privately knows, to draw the other into a bargain, from his ignorance of this fact and his belief to the contrary.

Insurers, when they decide to insure or not insure a risk, when they decide to admit or deny a claim, rely on the information provided to them by the insured. According to Lord Mansfield’s instructions, the insured must provide the information requested carefully, honestly and in good faith.

The implied covenant of good faith and fair dealing imposes obligations on all parties to the insurance contract. It was not limited to claims by an insurer, a first party property insured, an insured liability policy, the insurer, the insurer’s employees, the insurer and claims personnel. Since at least 1766, the insurance business has been a business of the insurance company. utmost good faith. Each party to an insurance contract must deal with each other ethically.

What is the purpose of the book

This book considers and explains various ethical concepts from the Code of Hammurabi more than 3000 years ago to modern ethical philosophers.

The book covers at least:

  • What is insurance?
  • Ethics & ethical behavior.
  • Ethical insurance
  • The development of the implied covenant of good faith and fair dealing.
  • Bad faith damages
  • The Ethical Insurance Specialist
  • Applying ethics to the insurance expert’s work
  • Sarbanes Oxley & the Ethical Insurance Professional
  • What happens when a Cort creates an ethical conflict when none exists?
  • Ethics and insurance fraud
  • Ethics in the insurance industry
  • Case studies of ethical crime

The general duty of good faith and fair dealing incorporated by reference into every insurance policy requires a full understanding of ethics and ethical conduct. For example, the California Supreme Court noted that: “In every contract of insurance there is an implied covenant of good faith and fair dealing that neither party will do anything to prejudice the right of the other to partake of the benefits of the contract.” [Gruenberg v. Aetna Insurance Co., 9 Cal.3d. 566, 108 Cal. Rptr. 480 (1973)].

The bond is mutual, and the principles of good faith and fair dealing impose a positive duty of cooperation on the insured as much as it requires the insurer to treat the insured fairly with respect to any claim presented.

This is an obligation imposed by tradition, by the need to act fairly and by court practice and statutory law, not necessarily an obligation arising from the terms of the contract itself.

The duty to act fairly and in good faith is nonconsensual rather than consensual in origin. It is an unwritten, but essential part of every insurance contract.

It is enforced to fulfill the spirit, as well as the letter, of the insurance relationship and the implied covenant of good faith and fair dealing.

The Covenant of Good Faith and Fair Dealing is a statement of the ethical basis for the insurance business.

The book is available as a Kindle book, Paperback or Hardcover

Who needs this book?

If you employ people in the insurance industry, your business will improve if each of your employees reads and applies the ethical concepts described in the book.

If you are an insurance claims professional, an adjuster, supervisor, claims adjuster, defense attorney, or insurance coverage attorney, this book will provide the knowledge necessary to apply the ethical concepts described in this book.

If you are a person insured or about to be insured, you need this book to understand your ethical obligations to the insurer and the insurer’s ethical obligations to you.

Barry Zalma, Esq., CFE, now limits his practice to serving as an insurance consultant specializing in insurance coverage, insurance claims management, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims attorney and more than 54 years in the insurance industry. He can be reached at http://www.zalma.com and zalma@zalma.com. Subscribe and receive videos limited to Excellence in Claims Handling subscribers at locals.com https://zalmaoninsurance.locals.com/subscribe.Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome.

Now available Barry Zalma’s newest book, Bad faith damages, available here. The new book is available as a Kindle book, paperback or as a hardcover.

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published on https://zalma.substack.com. Go to the Zalma On Insurance podcast at https://anchor.fm/barry-zalma; Follow Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos on Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to Insurance Claims Library – https://zalma.com/blog/insurance-claims-library




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