In Brazil, utmost good-faith of the parties is an essential of the contracting and performance of insurance agreements. The duty of good faith implies the proper maintenance of the insured property whilst the policy is in effect, supplying accurate, complete and reliable information to the insurance company, amongst others.
Failure to comply with the maintenance requirements of the insured property may lead to different effects:
- In the case of intentional or malicious failure to correctly maintain the insured object e.g. the property, the insured loses the right to indemnity under the policy.
- In case the risks are not intentionally increased, but arise only from improper maintenance, local law and regulations provide that the insurance company has the right to terminate the contract, or with prior written consent of the insured, reduce the coverage or to adjust the premium according to the new situation.
The consent of the insured is necessary for the insurance company to modify the premium and/or the conditions of coverage, re-establishing the technical-actuarial balance of the policy. Such consent may be previously obtained in the insurance agreement.