Representation

INSURANCE

Atty. Nelita Jesusa A. Bacaling

TITLE 5 Insurance Code:       REPRESENTATION

Sec. 36 A representation may be Oral or Written

Sec 36 merely states the form by which a representation may be made.

What is representation?

“It is a statement made by the insured at the time of or before the issuance of a policy, relative to the risk to be insured, as to an existing or past fact or concerning a future event, that in either case would induce the insurer to enter into a contract of insurance.”

What is misrepresentation?

“it is a statement

1) of a fact which is untrue

2) which the insured stated with the knowledge that it is untrue with the intention to deceive or without knowing it to be true which has the tendency to deceive;

3) In either case is material to the risk.

Sec. 37. A representation may be made at the time of, or before, issuance of the policy.

Sec. 38. The language of a representation is to be interpreted by the same rules as the language of contracts in general.

Sec. 39. A representation as to the future is to be deemed a promise unless it appears that it was merely a statement of belief or expectation.

            A promissory representation – is representation as to a fact that will be fulfilled or will exist in the future.

            Examples. 1. The insured submits himself to annual physical examination and is willing to submit results while this policy is in effect.

                               2. The property insured will be free from all hazardous substances while the contract is in effect.

            -“unless it appears that it was merely a statement of belief or expectation.”

            Example:        1. The property insured is in an area observed to be flood-free;

                                    2. State the state of your health within the next few years:

“I will most likely remain healthy within the next five to ten years.”

Sec. 40. A representation cannot qualify an express provision in a contract of insurance, but it may qualify an implied warranty.

            Example: 1. A) Contract provision: the insured hereby undertakes not to engage in any extreme sports activities while this policy is in effect.

                                 B) Representation:       “The insured has never engaged and will not engage in any extreme sport activities, unless his present engagement as a dragon boat team member will be classified as an extreme sport in the future.”

                                    -the qualification in “B” will not qualify “A”

                        2. A) Implied Warranty:        General good health of the person insured.

                            B) Have you been suffering from any lingering ailment for the past 5 years”” ANS: No, except for allergic reactions to some kind of food suffered since childhood.”

                                    - This statement in “B” will qualify the general warranty in “A.”

Sec. 41. A representation may be altered or withdrawn before the insurance is effected but not afterwards.

Sec. 42. A representation must be presumed to refer to the date on which the contract goes in effect.

            Even if not true when a statement was made, but true when the contract becomes effective, there is no misrepresentation.

There is misrepresentation if the statement was true when it was uttered but untrue when the contract takes into effect.

Sec. 43. When a person insured has no personal knowledge of a fact, he may nevertheless repeat information which he has upon the subject, and which he believes to be true, with the explanation that he does so on the information of others; or he may submit the information, in its whole extent, to the insurer, and in neither case is he responsible for its truth, unless it proceeds from an agent of the insured whose duty it is to give the information.

1.     3^rd-hand information may be given with a qualification that the same is only gathered from 3^rd parties, because he does not have personal knowledge, but which he believes is true.

2.     The provision specifically states that the insurer cannot use this as an excuse when the information proceeds from his own agent who is expected to have first hand knowledge over the veracity or truthfulness of the information given.

           

Sec. 44. A representation is to be deemed false when the facts fail to correspond with its assertions or stipulations.

            This is the definition of a misrepresentation.

            Unlike in warranties, representations are not required to be literally true or true in all material respects. It is required only that it be substantially true. Except in marine insurance because in marine insurance, representations of parties are the declarations relied upon by the insurer whether to enter into an insurance contract or not.

            The test whether a representation is substantially true is whether or not the insurer would not have changed its decision had the exact truth been revealed.

Examples:

1)     have you been confined due to personal ailment for the past 7 years? If the answer is no despite confinement due to childbirth, there is no misrepresentation because this is substantially true given that this kind of confinement is not due to “personal ailment”

2)     If the applicant is asked, are you in good health?         If the answer is yes, there is no misrepresentation even if the applicant is found out to be suffering from an illness he does not know of at the time when the questions was asked.

Sec. 45. A representation is false in a material point whether affirmative or promissory, the injured party is entitled to rescind the contract from the time when the representation becomes false.

Sec. 46. The materiality of a representation is determined by the same rules as materiality of concealment.

Sec. 47. The provisions of this chapter apply as well to modification of a contract of insurance as to its original formation.

Sec. 48.          Whenever a right to rescind a contract of insurance is given to the insurer by any provision of this chapter, such right must be exercised previous to the commencement of an action on the contract.

            After a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of two (2) years from the date of its issue or of its last reinstatement, the insurer cannot prove that the policy is void ab inito or is rescindable by reason of the fraudulent concealment or misrepresentation of the insured or his agent.