Under Colombian law, utmost good-faith must guide the elaboration and enforcement of all contracts. This is especially important for the insurance contract, where a higher level of good-faith or “uberrima bona fides” is required. All parties involved in an insurance contract should act diligently, both in the pre-contractual stage and during the life of the contract (Constitutional Court, sentence C 232 of 1997).
During the pre-contractual stage of the insurance contract, the policyholder has a duty to disclose any facts or circumstances that can affect the insured risk. Therefore, inaccurate or incomplete declarations can have the following consequences:
- The contract will be partially annulled and the insurer can keep the premium
- If a loss has taken place, the indemnity payable can be proportionally reduced.
Insureds acting in bad faith when notifying claims can lose their right to indemnity (section 1078 Commerce Code). However, neither statutory nor case law establish the legal consequences of the insured’s negligence.