THAT DEPENDS. A representation of an expectation, intention, belief or judgment of the insured, while false, will NOT avoid the insurance policy if there is NO actual fraud that results in the acceptance of the risk or its assumption at a lower premium rate, and this is also the rule, although the statement is important for the risk. In such a case, the insurer is not entitled to rely on such a declaration, but is required to carry out additional investigations. A false statement on the part of the insured makes the insurance contract questionable at the choice of the insurer, although this does not cancel the policy from the outset. 1) If the policy expressly provides that the insured house will be used as a warehouse, any assurance given by the insured prior to the issuance of the policy that the house was only used as a residence is NOT a defense in the action for the recovery of the insurance amount. The insurer must prove both the importance of the insured`s opinion and his intention to deceive. If the presentation is a fact, the insurer only has to prove its lie and materiality. The intention to deceive is already suspected. (2) The insured`s assurance that the last time the ship was in dry dock, six months ago, would NOT satisfy the implied warranty that the ship is seaworthy. Extreme good faith is usually divided into 3 components: insurance, obfuscation and guarantees. Section 38. The language of a representation must be interpreted in accordance with the same rules as the language of the contract in general. Section 39.
A representation of the future should be seen as a promise, unless it appears to be simply a declaration of faith or expectation. 1. An applicant for fire insurance for a building has verbally promised that the building will be occupied. The provisions of this Chapter shall apply both to the amendment of an insurance contract and to its original condition. Misrepresentation and obfuscation are common strategies used by people with higher risks and lead to adverse selection by insurance companies, which increases premiums for everyone else. A promissory note declaration is any promise that must be fulfilled after the conclusion of the contract or any statement of what should happen during the existence of the insurance. This is any statement concerning the existence or absence of a fact at the time of the beginning of the contract. An example would be if the insured indicates that the house that is the subject of the insurance is only used for residential purposes. Any misrepresentation of the essential part of the fact would render the contract voidable.
It is necessary to understand the difference between representation and warranty, and in this regard it is very likely that it will make a mistake. It is the duty to provide the insurer with all the information on the risk that is useful to him to assess its nature and decide whether to assume it or not. This information may be provided orally or in writing in documents not related to the contract, such as in the application or in the examiner`s report. Sometimes it can appear in the directive itself. In most jurisdictions, an insurance company can also invalidate a contract if there is an innocent misrepresentation of a material fact. Section 40. A representation cannot qualify an explicit provision in an insurance contract, but it can qualify an implied warranty. Second, it is an obligation of the insured that is inserted into the policy, but NOT specifically a guarantee called promissory note representation.
In such a case, however, it is simply an enforceable contractual condition and not an appropriate representation. A promissory note commitment is therefore essentially a condition or guarantee. Such an error would indeed be fatal, especially since a breach of the guarantee or representation would have a different impact on the insurance contract. A guarantee is a promise made by the insurance applicant to do certain things or meet certain requirements, or it is a statement of fact confirmed by the insurance applicant. The guarantee becomes an integral part of the insurance contract. If the insured violates the coverage, the insurer can cancel the contract and refuse to pay a claim. An affirmative guarantee is a statement of fact that resembles a representation, while a promissory note guarantee is a promise to do something or that something will be done in a certain way. An express warranty is expressly stated in the contract, while an implied warranty is presumed. The materiality of a representation is determined by the same rule as the materiality of an obfuscation.
A statement is false if the facts do not conform to their assertions or provisions. Section 42. The performance must be presumed to refer to the effective date of the contract. The principle of good faith also makes it easier to apply for insurance, as most insurance companies do not verify the facts before issuing the policy. Since losses are rare, it is more economical to investigate a loss when it actually occurs. If an important fact listed in the insurance application is false or has not been disclosed, the insurance company can usually cancel the contract and refuse to pay the claims. For insurance claimants, honesty is therefore the best policy, as dishonesty cannot result in compensation for losses even if premiums have been paid. NO. Misrepresentation is an active form of obfuscation.
If a statement is incorrect on an important point, whether affirmative or guilty, the aggrieved party has the right to terminate the contract as soon as the representation becomes false. The information forms the basis of the contract concluded. It describes, marks and defines the risk taken. Therefore, the falsity of any representation will necessarily circumvent the contract. If it is material, then the representation must be essentially true. Such a presentation may cover both tangible and intangible facts. Section 37. Insurance can be given at or before the policy is issued. First, there was a parol or verbal promise made as part of the insurance, but NOT included in the policy. Failure to comply with such a promise can be proven by the insurer not to defend against a lawsuit on the policy, but to prove that the promise was made with fraudulent intent and serves to derail the insurance.
An oral account of a future event or condition over which the insured has no control over property or life policyholders is considered a mere expression of opinion that voids a contract ONLY if it is entered into in bad faith. Declarations are the statements of the insured on the insurance application. Many of these returns are answers to questions about whether the claimant is insurable and how much should be charged. For example, auto insurance insurers will ask you how far you go to work, whether you`ve had any accidents or quotes, and other things that can measure risk. Years ago, when a coverage was violated, even a little, it allowed the insurer to cancel the contract and refuse coverage, which reduced the value of the insurance and resulted in significant financial losses of the insured for a minor breach of coverage, often due to facts that were not important. Since then, States and courts have reduced the harshness of the doctrine: declarations of application are considered as assurances and not as guarantees; a guarantee is not breached if the increase in risk is temporary or minor; In some States, there is no breach of coverage unless it increases the risk of an insurable loss, and some States require that the breach of coverage actually contributed to the loss. There is NO misrepresentation if the representation was true at the time of entry into force of the contract, although it was false at the time of the conclusion of the contract. The insurer relied on an essential representation when issuing the policy.
If the truth was known, the insurer would not have issued the policy or would have issued it with different terms and would likely have charged higher premiums. However, the insurance company cannot challenge a claim for misrepresentation unless it can prove that the plaintiff lied and intended to deceive the company – not because he simply expressed an opinion that later turned out to be false. Obfuscation is closely related to misrepresentation – it is the failure to disclose important information. However, before an insurance company can refuse to pay for the concealment, it must prove that the conclusion of the insurance contract is the time when the representation must be assumed. A veil is a negative act, that is, it is the failure to do something that is required, while the representation is positive, since the insured voluntarily reports such facts. Obfuscation usually takes place before the conclusion of the insurance contract, while at the time of the issuance of the contract, insurance can be given. Section 36. The representation may be made orally or in writing. False statements after a claim can also invalidate an insurance contract. A common example of this type of misrepresentation is when the insured suffers the loss of property but files a claim for much more than the property was actually worth.
Article 41 provides: “Representation may be modified or withdrawn before the insurance is taken out, but not thereafter.” Insurance is a statement of fact made by the insured at or before the policy is issued in order to provide the insurer with information and to induce it to conclude the insurance contract. An insurance contract may be contested by the insurer if an insurance relates only to the time of conclusion of the contract. We have already said that promissory notes of the conditions that exist after the conclusion of the contract are conditions or guarantees and not insurance (see comments under § 39). .