A: Any allegation as to the existence or non‐
existence of a fact when the contract begins. (e.g. the statement of the insured that the house to be insured is used only for residential purposes is an affirmative representation). Q: What is a promissory representation?
A: Any promise to be fulfilled after the contract
has come into existence or any statement concerning what is to happen during the existence of the insurance.
Q: When should representation be made?
A: At the time of, or before, issuance of the
policy. (Sec. 37)
Q: What is misrepresentation?
A: It is an affirmative defense. To avoid liability,
the insurer has the duty to establish such a defense by satisfactory and convincing evidence.
(Ng Gan Zee v. Asian Crusader Life Assn. Corp., G.R. No. L‐ 30685, May 30, 1983)
Note: In the absence of evidence that the insured has sufficient medical knowledge to enable him to do distinguish between “peptic ulcer” and “tumor”, the statement of deceased that said tumor was “associated with ulcer of the stomach” should be considered an expression in good faith. Fraudulent intent of insured must be established to entitle insurer to rescind the insurance contract. Misrepresentation, as a defense of insurer, is an affirmative defense which must be proved. (Ng Gan Zee v. Asian Crusader Life Assn. Corp., G.R. No. L‐ 30685, May 30, 1983)
Q: What are the requisites of a false representation (misrepresentation)?
A:
1. The insured stated a fact which is
untrue;
2. Such fact was stated with knowledge that it is untrue and with intent to deceive or which he states positively as true without knowing it to be true and which has a tendency to mislead; 3. Such fact in either case is material to
the risk.
Note: A representation cannot qualify an express provision in a contract of insurance but it may qualify an implied warranty. A representation as to the future is to be deemed a promise unless it
appears that it was merely a statement of belief or an expectation that is susceptible to present, actual knowledge. The statement of an erroneous opinion, belief or information, or of an unfulfilled intention, will not avoid the contract of insurance, unless fraudulent.
Q: What is the test of materiality?
A: It is to be determined not by the event, but
solely by the probable and reasonable influence of the facts upon the party to whom the representation is made, in forming his estimates of the disadvantages of the proposed contract or in making his inquiries (similar with concealment). (Sec. 46) Q: What are the effects of misrepresentation? A:
1. It renders the insurance contract voidable at the option of the insurer, although the policy is not thereby rendered void ab initio. The injured party entitled to rescind from the time when the representation becomes false;
2. When the insurer accepted the payment of premium with the knowledge of the ground for rescission, there is waiver of such right;
3. There is no waiver of the right of rescission if the insurer had no knowledge of the ground therefore at the time of acceptance of premium payment.
Q: What is the effect of collusion between the insurer’s agent and the insured?
A: It vitiates the policy even though the agent is
acting within the apparent scope of his authority. The agent ceases to represent his principal. He, thus, represents himself; so the insurer is not estopped from avoiding the policy.
Q: What are the characteristics of representation? A: 1. Not a part of the contract but merely a collateral inducement to it 2. Oral or written
3. Made at the time of, or before issuing the policy and not after
4. Altered or withdrawn before the insurance is effected but not afterwards 5. Must be presumed to refer to the date the contract goes into effect. (Sec. 42)
Q: What are the similarities of concealment and representation?
A:
1. Refer to the same subject matter and both take place before the contract is entered.
2. Concealment or representation prior to loss or death gives rise to the same remedy; that is rescission or cancellation.
3. The test of materiality is the same.
(Secs. 31, 46)
4. The rules of concealment and representation are the same with life and non‐life insurance. 5. Whether intentional or not, the injured party is entitled to rescind a contract of insurance on ground of concealment or false representation. 6. Since the contract of insurance is said to be one of utmost good faith on the part of both parties to the agreement, the rules on concealment and representation apply likewise to the insurer.
Q: How does concealment differ from misrepresentation?
A: In concealment, the insured withholds the
information of material facts from the insurer, whereas in misrepresentation, the insured makes erroneous statements of facts with the intent of inducing the insurer to enter into the insurance contract.
Q: How is concealment and misrepresentation applied in case of loss or death?
A:
GR: If the concealment or misrepresentation
is discovered before loss or death, the insurer can cancel the policy. If the discovery is after loss or death, the insurer can refuse to pay.
XPN: The incontestability clause under
paragraph 2 of Section 48.
XPN to XPN:
1. Non‐payment of premiums. (Secs. 77,
22 [b], 228 [b], 203 [b])
2. Violation of condition. (Secs. 227 [b],
228 [b])
3. No insurable interest
4. Cause of death was excepted or not covered
5. Fraud of a vicious type
6. Proof of death was not given. (Sec. 242) 7. That the conditions of the policy
relating to military or naval service.
(Secs. 227 [b], 228 [b])
8. That the action was not bought within the time specified. (Sec. 62)
Q: What is the remedy of the injured party in case of misrepresentation?
A: If there is misrepresentation, the injured party
is entitled to rescind from the time when the representation becomes false. Q: When should the right to rescind the contract be exercised? A: The right to rescind must be exercised previous
to the commencement of an action on the contract. (the action referred to is that to collect a claim on the contract)
Q. What is Omission?
A. The failure to communicate information of
matters proving or tending to prove the falsity of warranty. Q. What is the effect of Omission? A. The contract of insurance may be rescinded. Q. In case of Omission, who is entitled to rescind the contract? A. The insurer is entitled to rescind the contract. C. BREACH OF WARRANTIES Q: What are warranties?
A: Statements or promises by the insured set
forth in the policy itself or incorporated in it by proper reference, the untruth or non‐fulfillment of which in any respect, and without reference to whether the insurer was in fact prejudiced by such untruth or non‐fulfillment render the policy voidable by the insurer.
Q: What is the purpose of warranties?
A: To eliminate potentially increasing moral or
physical hazards which may either be due to the acts of the insured or to the change of the condition of the property.