Within a month, he had smoked all 24 of these great cigars and without even having made his first premium payment on the policy, the lawyer filed a claim against the insurance company.
The insurance company refused to pay citing the obvious reason that the lawyer had consumed the cigars in the normal fashion.
Rather than endure the lengthy and expensive appeal process, the insurance company accepted the ruling and agreed to pay the lawyer $15,000 for the cost of 24 cigars lost in the fires.
They are contracts of utmost good faith obliging both the insurer and the insured to conform to a high standard of conduct, especially regarding the disclosure of material facts affecting appreciation of the risk to be covered.
Most risks of an ordinary consumer type are highly standardised, such as motor coverage, home-owners’, and life insurance packages but, they still require full disclosure by the insured in answering the standard questionnaire.
