How Ethical Doctrines from the Beginning of the Written Word to the Present Resulted in the Incorporation of the Covenant of Good Faith
New Book from Barry Zalma
The Compact Book on Ethics for the Insurance Professional
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Posted on October 8, 2022 by Barry Zalma
How Ethical Doctrines from the Beginning of the Written Word to the Present Resulted in the Incorporation of the Covenant of Good Faith
Every Person Involved in the Business of Insurance Must Act Ethically in the Business of Insurance
Insurance is, by definition, a business of the utmost good faith. This means that both parties to the contract of insurance must act fairly and in good faith to each other and do nothing that will deprive the other of the benefits the contract of insurance promised.
Without the covenant of good faith and fair dealing, and ethical people who work in the insurance industry applying and fulfilling the covenant, effective insurance to spread the risk of loss to a large community of insurance professionals, is impossible. One cannot act fairly and in good faith without being a person with a well-formed ethical compass.
In 1776, Lord Mansfield acting as an appellate judge serving in the House of Lords of Britain (the predecessor of the United Kingdom) for the first time referred to the covenant of good faith and fair dealing. In the case designated: Carter v. Boehm S.C. 1 Bl. Burr 1906, 11th May 1766. 593, 3 Lord Mansfield in the British House of Lords stated the rule of uberrimae fide (Latin for utmost good faith).
Ethics & Ethical Behavior are Essential to Every Insurance Professional
Good faith forbids either party by concealing what he privately knows, to draw the other into a bargain, from his ignorance of that fact, and his believing the contrary.
Insurers, when deciding to insure or not insure a risk, rely on the information provided to them by the insured. As Lord Mansfield instructed, the insured must provide the information requested thoroughly, honestly and in good faith.
The implied covenant is simply stated by explaining that no party to a contract of insurance 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 contract of insurance. It not only applied to claims by an insurer, a first party property insured, a third party liability policy insured, the insurer, the insurer’s employees, underwriters, and claims personnel.
Since at least 1766, the business of insurance is a business of the utmost good faith. Each party to a contract of insurance must deal with each other ethically. This book will consider and explain different 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 policy of insurance requires a complete understanding of ethics and ethical behavior. For Example, the California Supreme Court noted that: “In every insurance contract there is an implied covenant of good faith and fair dealing that neither party will do anything which will injure the right of the other to receive the benefits of the agreement.” [Gruenberg v. Aetna Insurance Co., 9 Cal.3d. 566, 108 Cal. Rptr. 480 (1973)].
The covenant is mutual, and the principles of good faith and fair dealing impose an affirmative obligation on the insured to cooperate as much as it requires the insurer to treat the insured fairly with regard to every claim presented.
This is a duty imposed by tradition, by the need to deal fairly and by court precedent and statutory law, not one arising from the terms of the contract itself.
The duty to deal fairly and in good faith is nonconsensual in origin rather than consensual. It is an unwritten, but essential part of every insurance contract.
It is imposed 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 of the insurance business.
Without the covenant of good faith and fair dealing, and ethical people who work in the insurance industry applying and fulfilling the covenant, effective insurance to spread the risk of loss to a large community of insurance professionals, is impossible. One cannot act fairly and in good faith without being a person with a well-formed ethical compass.
In 1776, Lord Mansfield acting as an appellate judge serving in the House of Lords of Britain (the predecessor of the United Kingdom) for the first time referred to the covenant of good faith and fair dealing. In the case designated: Carter v. Boehm S.C. 1 Bl. Burr 1906, 11th 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 that fact, and his believing the contrary.
Insurers, when deciding to insure or not insure a risk, when deciding to honor or reject a claim, rely on the information provided to them by the insured. As Lord Mansfield instructed, the insured must provide the information requested thoroughly, honestly and in good faith.
The implied covenant of good faith and fair dealing imposes obligations on all parties to the contract of insurance. It not only applied to claims by an insurer, a first party property insured, a third party liability policy insured, the insurer, the insurer’s employees, underwriters, and claims personnel.Since at least 1766, the business of insurance is a business of the utmost good faith. Each party to a contract of insurance must deal with each other ethically.
What is The Purpose of the Book
This book considers and explains different 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 & Fair Dealing.
The Tort of Bad Faith
The Ethical Insurance Professional
Applying Ethics to the Work of the Insurance Professional
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 Breach
The general duty of good faith and fair dealing incorporated by reference into every policy of insurance requires a complete understanding of ethics and ethical behavior.
It is imposed 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 of the insurance business.
The book is available as a Kindle book, a Paperback or a Hardcover
Who Needs This Book?
If you employ people in the business of insurance your business will be improved if every one of your employees reads and applies the ethical concepts described in the book.
If you are an insurance claims professional, an adjuster, supervisor, claims manager, defense counsel, or insurance coverage counsel the 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.
The Author
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, 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 handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com
and [email protected] and receive videos limited to subscribers of Excellence in Claims Handling 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, The Tort of Bad Faith, available here. The new book is available as a Kindle book, a paperback or as a hard cover.
Write to Mr. Zalma at [email protected]; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com.
Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library
Interpleader Protects All Claimants Against Life Policy and the Insurer
Who’s on First to Get Life Insurance Proceeds
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Go to X @bzalma; Go to Barry Zalma videos at Rumble.com at https://lnkd.in/gRthzSnT; Go to Barry Zalma on YouTube- https://lnkd.in/g2hGv88; Go to the Insurance Claims Library – https://lnkd.in/gwEYk.
Interpleader Protects All Claimants Against Life Policy and the Insurer
In Metropolitan Life Insurance Company v. Selena Sanchez, et al, No. 2:24-cv-03278-TLN-CSK, United States District Court, E.D. California (September 3, 2025) the USDC applied interpleader law.
Case Overview
This case involves an interpleader action brought by the Metropolitan Life Insurance Company (Plaintiff-in-Interpleader) against Selena Sanchez and other defendants (Defendants-in-Interpleader).
Key Points
Plaintiff-in-Interpleader’s Application:
The Plaintiff-in-Interpleader...
A Claim by Any Other Name is not a Claim
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It is Imperative that Insured Report Potential Claim to Insurers
Read the full article at https://lnkd.in/gfbwAsxw, See the full video at https://lnkd.in/gea_hgB3 and at https://lnkd.in/ghZ7gjxy, and at https://zalma.com/blog plus more than 5150 posts.
In Jeffrey B. Scott v. Certain Underwriters At Lloyd’s, London, Subscribing To Policy No. B0901li1837279, RLI Insurance Company, Certain Underwriters At Lloyds, London And The Insurance Company, Subscribing To Policy No. B0180fn2102430, No. 24-12441, United States Court of Appeals, Eleventh Circuit (August 25, 2025) the court explained the need for a claim to obtain coverage.
Case Background:
This appeal arises from a coverage dispute under a Directors & Officers (D&O) insurance policy. Jeffrey B. Scott, the plaintiff-appellant, was terminated from his role as CEO, President, and Secretary of Gemini Financial Holdings, LLC in October 2019. Following his termination, Scott threatened legal action against Gemini, and ...
A Claim by Any Other Name is not a Claim
Post 5182
It is Imperative that Insured Report Potential Claim to Insurers
Read the full article at https://lnkd.in/gfbwAsxw, See the full video at https://lnkd.in/gea_hgB3 and at https://lnkd.in/ghZ7gjxy, and at https://zalma.com/blog plus more than 5150 posts.
In Jeffrey B. Scott v. Certain Underwriters At Lloyd’s, London, Subscribing To Policy No. B0901li1837279, RLI Insurance Company, Certain Underwriters At Lloyds, London And The Insurance Company, Subscribing To Policy No. B0180fn2102430, No. 24-12441, United States Court of Appeals, Eleventh Circuit (August 25, 2025) the court explained the need for a claim to obtain coverage.
Case Background:
This appeal arises from a coverage dispute under a Directors & Officers (D&O) insurance policy. Jeffrey B. Scott, the plaintiff-appellant, was terminated from his role as CEO, President, and Secretary of Gemini Financial Holdings, LLC in October 2019. Following his termination, Scott threatened legal action against Gemini, and ...
Barry Zalma: Insurance Claims Expert Witness
Posted on September 3, 2025 by Barry Zalma
The Need for a Claims Handling Expert to Defend or Prove a Tort of Bad Faith Suit
© 2025 Barry Zalma, Esq., CFE
When I finished my three year enlistment in the US Army as a Special Agent of US Army Intelligence in 1967, I sought employment where I could use the investigative skills I learned in the Army. After some searching I was hired as a claims trainee by the Fireman’s Fund American Insurance Company. For five years, while attending law school at night while working full time as an insurance adjuster I became familiar with every aspect of the commercial insurance industry.
On January 2, 1972 I was admitted to the California Bar. I practiced law, specializing in insurance claims, insurance coverage and defense of claims against people insured and defense of insurance companies sued for breach of contract and breach of the implied covenant of good faith and fair dealing. After 45 years as an active lawyer, I asked that my license to practice law be declared inactive ...
The Need for a Claims Handling Expert to Defend or Prove a Tort of Bad Faith Suit
© 2025 Barry Zalma, Esq., CFE
When I finished my three year enlistment in the US Army as a Special Agent of US Army Intelligence in 1967, I sought employment where I could use the investigative skills I learned in the Army. After some searching I was hired as a claims trainee by the Fireman’s Fund American Insurance Company. For five years, while attending law school at night while working full time as an insurance adjuster I became familiar with every aspect of the commercial insurance industry.
On January 2, 1972 I was admitted to the California Bar. I practiced law, specializing in insurance claims, insurance coverage and defense of claims against people insured and defense of insurance companies sued for breach of contract and breach of the implied covenant of good faith and fair dealing. After 45 years as an active lawyer, I asked that my license to practice law be declared inactive and became a consultant and expert witness for lawyers representing insurers and lawyers ...
APPRAISAL AWARD SETS AMOUNT OF DAMAGES RECOVERED FROM INSURER
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It’s a Waste of Time to Sue Your Insurer if You Don’t Have Evidence
Evidence Required to Prove Breach of Contract
Read the full article at https://www.linkedin.com/pulse/evidence-required-prove-breach-contract-barry-zalma-esq-cfe-rfelc, see the full video at https://rumble.com/v6yd2z0-evidence-required-to-prove-breach-of-contract.html and at https://youtu.be/2ywEjs3hZsw, and at https://zalma.com/blog plus more than 5150 posts.
It’s a Waste of Time to Sue Your Insurer if You Don’t Have Evidence
In Debbie Beaty and Jonathan Hayes v. Homeowners Of America Insurance Company, No. 01-23-00844-CV, Court of Appeals of Texas, First District (August 26, 2025) Debbie Beaty and Jonathan Hayes filed a claim under their homeowner’s insurance policy with Homeowners of ...