What should a company do when it is aware of material facts before an insurance contract?

When a company is aware of material facts before entering into an insurance contract, it is imperative for it to disclose those facts to the insurer. This obligation is rooted in the principle of utmost good faith, also known as "uberrima fides," which governs insurance contracts. This principle requires both parties to act honestly and not withhold information that could influence the decision-making process of the other party.

Specifically, material facts are those that would affect the insurer’s assessment of risk or the premium to be charged. Failing to disclose such material facts could lead to the insurer either mispricing the policy or potentially offering coverage that they would not have provided had they been fully informed. If undisclosed material facts are later discovered, the insurer may have grounds to void the contract or refuse claims based on misrepresentation or non-disclosure.

The other options—keeping the information confidential, waiting for the insurer to discover the facts, or disclosing only if asked—do not align with the legal and ethical obligations inherent in the insurance relationship. They potentially put the company at risk of breaching the contract, which could lead to severe repercussions, including denial of coverage or claims. Therefore, disclosing material facts is the correct course of action to ensure transparency and maintain