INSURANCE LAW: RA
10607
CONCEALMENT
SECS.26-35
DOCTRINE OF UBERAMAE FIDES :
FOUNDATION OF INSURANCE LAW
The doctrine of the utmost good faith—
sometimes referred to by its Latin name,
uberrimae fides—is a contractual legal doctrine
that requires contracting parties to act honestly
and not mislead or withhold any information that
is essential to the contract.
CONCEALMENT : DEFINED
“SEC. 26. A neglect to
communicate that which a
party knows and ought to
communicate, is called a
concealment.
Main contents of utmost good faith
principle
Concealment: It is intentional failure for the
applicant to reveal a material fact to the insurer.
That is the applicant deliberately withholds
material information from the insurer. The legal
affect of a material concealment is: The contract
is voidable at the insurer’s option (examples)
FOUR PRIMARY CONCERNS OF PARTIES
IN INSURANCE being an ALEATORY
CONTRACT
1. The correct estimation of the risk- which may enable the insurer to decide
if he is willing to assume it, and if so, the amount of premium;
2. The Precise delimitation of the risk which determines the extent of the
contingent duty to pay undertaken by the insurer;
3. Such control of the risk after it is assumed as will enable the insurer to
guard against the increase o the risk because of the change in conditions;
4. Determining whether the loss occurred and if so, the amount of such loss.
DEVICES OF CONTROLLING THE RISK OF
LOSS
1. CONCEALMENT- Secs.26-29
2. REPRESENTATIONS- particularly
Misrepresentations – Sec.36
3. WARRANTIES –Secs.67-68
REQUISITES OF CONCEALMENT-Sec.26
& 28
1. A party knows the fact which he neglects to communicate or
disclose to the other;
2. Such party concealing is duty bound to disclose such fact to the
other;
3. such party concealing makes no warranty of the fact concealed;
4. the other party has no means of ascertaining the fact concealed.
Effect of Concealment
Both to the Insured & Insurer
“SEC. 27. A concealment
whether intentional or
unintentional entitles the injured
party to rescind a contract of
insurance.
Under Sec.27, is proof of Fraud
required? Answer: No
1. Sec.27- Existence of Fraud - whether intention or not
- no proof required.
Reason: This is so because if proof of fraud is required, it would be impossible
for the injured party, usually insurer, to protect it self, and its honest policy
holders against fraudulent and improper claims.
2. Basis of Sec.27- if allowed, the insurer is mislead or deceived
into accepting the risk and determining the rate of the premium
agreed upon.
Example: In his application for insurance, D did not reveal
the fact that he was suffering from an ailment.
Rule:
1 Whether or not D was aware of the ailment, there is no concealment(Sec.26)
where the ailment is not material to the contract(Sec.31)
2. Whether or not D was aware of the ailment, there is concealment(Sec.26)
where the ailment is material to the contract(Sec.31);
A). If D was aware of the ailment, but honestly believe that it is not material,
the concealment is not fraudulent or intentional’
B) If D was aware of the ailment, there is fraudulent concealment where the
ailment is material, the D know or believe that it was material.
ROLE OF GOOD FAITH IN INSURANCE
“SEC. 28. Each party to a contract of insurance
must communicate to the other, in good faith, all
facts within his knowledge which are material to
the contract and as to which he makes no
warranty, and which the other has not the means
of ascertaining.
Matters that must be communicated even in the absence of
an inquiry. Duty of each party:
To communicate in good faith all facts within his
knowledge only when:
1) They are material to the contracts (Secs.31,34,35)
2). The other has not the means of ascertaining the said
facts (Secs.30,32,33)
3). As to which a party who has the duty to communicate
makes no warranty (Secs. 66-67)
TEST OF WHETHER OR NOT THERE IS
CONCEALMENT:
If the applicant is aware of the existence of
some circumstances which he knows would
influence the insurer in acting upon his
application, good faith requires him to
disclose that circumstance, though not
asked. (Prof. Vance- Op Cit.P.172)
REMEDY OF THE INSURER IN CASE OF
INTENTIONAL CONCEALMENT: RECISSION
“SEC. 29. An intentional and fraudulent
omission, on the part of one insured, to
communicate information of matters
proving or tending to prove the falsity of a
warranty, entitles the insurer to rescind.
WHAT ARE THOSE NEED NOT TO BE
COMMUNICATED?
“SEC. 30. Neither party to a contract of insurance is bound to communicate
information of the matters following, except in answer to the inquiries of the other:
“(a) Those which the other knows;
“(b) Those which, in the exercise of ordinary care, the other ought to know, and of
which the former has no reason to suppose him ignorant;
“(c) Those of which the other waives communication;
“(d) Those which prove or tend to prove the existence of a risk excluded by a warranty,
and which are not otherwise material; and
“(e) Those which relate to a risk excepted from the policy and which are not otherwise
material.
MATERIALITY IN INSURANCE
“SEC. 31. Materiality 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 communication is due, in forming
his estimate of the disadvantages of the proposed
contract, or in making his inquiries.
WHAT ARE THOSE TO BE
COMMUNICATED TO PARTIES?
“SEC. 32. Each party to a contract of insurance
is bound to know all the general causes which
are open to his inquiry, equally with that of the
other, and which may affect the political or
material perils contemplated; and all general
usages of trade.
“SEC. 33. The right to information of material facts may be waived, either by
the terms of insurance or by neglect to make inquiry as to such facts, where
they are distinctly implied in other facts of which information is
communicated.
“SEC. 34. Information of the nature or amount of the interest of one insured
need not be communicated unless in answer to an inquiry, except as
prescribed by Section 51.
“SEC. 35. Neither party to a contract of insurance is bound to communicate,
even upon inquiry, information of his own judgment upon the matters in
question.
