~ REPRESENTATION ~

SEC.36

Representation – a statement made by the insured at the time of, or prior to, the issuance of policy.

Representation contains the risk to be insured, statement of previous or existing facts or a future happening which informs and induces the insurer to enter into the insurance contract.

FORM AND NATURE OF REPRESENTATION

The person applying for insurance is duty-bound to provide all the pertinent information to enable the insurer to intelligently decide whether or not to assume the insurance contract whether orally or in writing.

SEC.37

• This is precisely because the representation is a condition precedent for the execution of the contract.

• The representations made after the execution of the contract could not have influenced either party to enter into the contract.

SEC.38

• Representations are liberally construed in favor of the insured, while warranties under Sec.67 must be literally true otherwise the contract will fail.

SEC.39

KINDS OF REPRESENTATION

• Affirmative representation- is any allegation as to the existence or non-existence of a fact when the contract begins

• Promissory representation- is any promise to be fulfilled after the contract has come to existence or any statement concerning what is to happen during the existence of the insurance

SEC.40

Effect of representation on express provisions of policy

A representation cannot qualify an express provision or an express warranty in a contract of insurance because a representation is not a part of the contract but only a collateral inducement to it.

SEC.41

When representation may be altered or withdrawn

A representation, not being part of the contract of insurance, may be altered or withdrawn before the contract actually takes effect but not afterwards since the insurer has already been led by representation in assuming the risk contemplated in the contract.

SEC.42

TIME TO WHICH REPRESENTATION REFERS

Representation refer only to the time of making the contract.

SEC.43

EFFECT WHERE INFORMATION OBTAINED FROM THIRD PERSONS

Under this section, the insured is given discretion to communicate to the insurer what he knows of a matter of which he has no personal knowledge.

SEC.44

WHEN REPRESENTATION DEEMED FALSE

Unlike in the case of warranties (Sec.67), representations are not required to be literally true; they need only be substantially true.

The insurer generally relies to a large degree on the statements of the applicant regarding the risk.

Section 45:

Effect of Misrepresentation: Insurance maybe avoided where the insured made false statements as to matters that are material to the risk for the purpose of obtaining the insurance and thereby induce the insurance company to issue the policy.

To constitute Misrepresentation: The statement must be subtantially untrue. Thus, the policy cannot be avoided where the statements are substantially true although not strictly and literally true.It is sufficient if the representation fails to correspond with the facts.

Collusion with the insured

- Collusion between the agent and the insured in misrepresenting the facts will vitiate the policy even though the agent is acting within the apparent scope of his authority.

- When there is collusion, the agent thereby ceases to represent his principal , and represents himself; so the insurer is not estopped from avoiding the policy.

Principal of Agent

- Where the insurer required its medical examiner to put the questions and fill out the answers in his own handwriting, the writer of the application is not the agent of the insured.

- The insurer is liable when its agent writes a false answer into the application without the knowledge of the insured.

Section 46.

• What is the test of materiality?

The materiality of the representation 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.

• Who determines materiality?

It is a judicial question. It is NOT left to the insurance company to say after the loss has occurred that it would or would not have issued the policy had an answer been truly given. The matter misrepresented must be of that character which the court can say would reasonably affect the insurer’s judgment.

SEC. 47-48

INCONTESTABLE CLAUSES

Requisites for Incontestability

1) The policy is a life insurance policy;

2) It is payable on the death of the insured; and

3) It has been in force during the lifetime of the insured for at least two (2) years from its date of issue or of its last reinstatement.

EFFECT WHEN POLICY BECOMES INCONTESTABLE

When a policy of life insurance becomes incontestable, the insurer may not refuse to pay the same by claiming that:

1) The policy is void ab initio; or

2) It is rescissible by reason of the fraudulent concealment of the insured or his agent, no matter how patent or well-founded;

3) It is rescissible by reason of the fraudulent misrepresentations of the insured or his agent.

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