What Makes Auto Insurance Unique from other Types of Contract?

Auto InsuranceOne of the characteristics of an auto insurance policy that makes it unique from other type of contract is the principle of “uberrima fides”. The phrase is derived from a Latin maxim which means utmost good faith. From the word itself, gives you the cue that in contract of auto insurance, every party must act with their utmost good faith. This means that the applicant, as well as the car insurer, must disclose information that they find necessary to communicate with each other.

Consequently, any violation to the said principle will entitle the aggrieved party to rescind or annul the contract as well as the right to claim damages resulting from their failure to follow the said principle. However, it is noteworthy that only material or important information must be communicated.

Let us take Mr. John Doe as an applicant for example. He applies in an ABC Insurance company and he was able to get an insurance policy. However, Mr. John Doe failed to disclose the fact that his car’s engine has been damaged and repaired for several times. Under these circumstances, ABC Insurance Company will have the right to rescind the insurance contract because of his failure to disclose significant information. Assuming, from the same example, the applicant failed to disclose the color of his car seats, the company will not be entitled to rescind the contract on the ground that applicant failed to disclose the color of his car seat because such information is immaterial.