In the context of forming an insurance contract, the principle that the insurer must rely on the statements in the application and the insured must trust the insurer to pay valid claims is called?

The principle that the insurer must rely on the statements in the application, while the insured trusts the insurer to pay valid claims, is known as utmost good faith. This principle is fundamental in insurance contracts, reflecting the obligation of both parties to act honestly and not withhold information. The insured is required to provide truthful and complete information when applying for coverage, and in return, the insurer is expected to handle claims fairly and fulfill its promises as outlined in the contract. This mutual trust ensures that both parties engage with each other in good faith, which is essential for the effective functioning of insurance agreements. Utmost good faith protects against the potential for one party to exploit the lack of transparency or honesty, thus maintaining the integrity of the insurance relationship.