Representation and Misrepresentation in

Insurance

Section 36. A representation may be oral or written.

What is a representation?
A representation is a factual statement made by the insured at the time of, or prior to,
the issuance of the policy to give, information to the insurer and otherwise induce him to
enter into the insurance contract.

What is the difference between a representation and

concealment?
A concealment is a negative act, meaning it is the failure to do something which is
required while representation is positive act as the insured volunteers such
facts.  Concealment usually occurs prior to making of the  insurance contract, while
a representation may be made at the time of the issuance of the contract.

What is a misrepresentation?
A Misrepresentation is a statement:

1.       As a fact of something which is untrue

2.       Which the insured stated with knowledge that it is untrue and with an intent to
deceive or which he states as true without knowing it to be true and which has the
tendency to mislead; and

3.       Where such fact in either case is material to the risk.

What is the effect of a misrepresentation?

A misrepresentation by the insured renders the insurance contract voidable at the
option of the insurer, although the policy is not thereby rendered void ab initio.
Is misrepresentation synonymous with concealment?
NO.  Misrepresentation is an active form of concealment.

What is the duty of the person applying for insurance?

It is duty to give the insurer all such information concerning the risk as will be of use to
the latter in estimating its character and in determining whether or not to assume it. 
This information may be given orally or written in papers not connected with the contract
such as in the application or examiner’s report.  Sometimes, it may appear on the policy
itself.

Why is such information important?

The information forms the basis of the contract as made.  It describes, marks out and
defines the risk assumed.   Hence the untruthfulness of any representation will
necessarily avoid the contract.

Example of misrepresentations such that the insurer

avoids any liability to the insured
If the insurer was made to believe that he was insuring a brick house when in truth and
in fact, the house was made of nipa, or when the insurer insured a man of thirty and it
turns out that the man who dies was a 130.

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

Section  41 provides that “A representation may be altered or withdrawn before the

insurance is effected, but not afterwards.”
Section 38.  The language of a representation is to be interpreted by the same rules as
the language of contracts in general.

How are misrepresentations construed?

They are construed liberally in favor of the insured.

Must the representations be literally true?

No.  It is sufficient that they be substantially true.

How can a representation be substantially true and not

literally true?
De Leon cites two examples:

If one is asked if he drinks, the question will be construed as referring to habitual use. 
So if you drink only when there is an occasion, they you can say NO.

If you are asked if you had any illnesses,  local disease or injury in any organ, you can
still say NO even if three weeks before you were suffering from LBM because you ate
one kaing of avocados.

Section 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.

What are the different kinds of representations?

They may either be:

1.       Oral or written;

2.       Made at the time of the issuance of the policy or before;

3.       Affirmative or promissory

What is an affirmative representation?
It is any allegation as to the existence or non-existence of a fact when the contract
begins.  An example would be when the insured states that the house subject of the
insurance is used only for residential purposes.

What is a promissory representation?

A promissory representation is 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.

What is the nature of a promissory representation?

First, it used to indicate a parol or oral promise made in connection with the insurance,
but NOT incorporated in the policy.  The non-performance of such a promise CANNOT
be shown by the insurer in defense to an action on the policy, but proof that the promise
was made with fraudulent intent and will serve to defeat the insurance.

Second, it is an undertaking by the insured, inserted in the policy, but NOT specifically
made a warranty, is called a promissory representation.  It is however in such a case
merely an executory term of the contract, and not properly a representation.  A
promissory representation, is therefore, substantially a condition or a warranty.

Examples of promissory representations

1.       An applicant for fire insurance on a building orally promised that the building will
be occupied.

2.       An applicant for fire insurance on a building orally promised to install two fire
extinguishers within the bldg.

3.       A TV hostess saying “Will be back.. promise.. saranghameda po…”

Does a false representation based on an opinion or
expectation avoid the policy?
IT DEPENDS.  A representation of an expectation, intention, belief opinion or judgment
of the insured, although false, will NOT avoid the policy of insurance if there is NO
actual fraud in inducing the acceptance of the risk or its acceptance at a lower rate of
premium and this is likewise the rule although the statement is material to the risk.  In
such a case, the insurer is not justified in relying upon such statement but is obligated to
make further inquiry.

What must the insurer then to do to avoid liability?

The insurer must prove both the materiality of the insured’s opinion and the latter’s
intent to deceive.  If the representation is one of fact, all the insurer needs to prove is its
falsity and materiality.  The intent to deceive is already presumed.

When is a representation deemed a mere expression of

opinion?
An oral representation as to a future event, or condition over which the insured has no
control, with reference to property or life insured will be deemed a mere expression of
opinion, which will avoid a contract ONLY when made in bad faith.

Section 40.  A representation cannot qualify an express provision in a contract of

insurance, but it may qualify an implied warranty.

Why is it that a representation cannot qualify an express

provision in a contract of insurance?
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.
Examples
1)       If the policy expressly provides that the house insured is used as a warehouse,
any representation made by the insured prior to the issuance of the policy to the effect
that the house was used only as a residence is NOT a defense in the action for the
recovery of the amount of the insurance.

2)       The representation of the insured to the effect that the last time the vessel was
drydocked was six months ago would NOT qualify the implied warranty that the vessel
is seaworthy.

Section 41.  A representation may be altered or withdrawn before the insurance is

effected, but not afterwards.

What is the reason for this provision?

As representations induce the insurer in assuming the risk insured against and in
issuing the insurance policy, it is but logical that representations may not be altered or
withdrawn after the insurance is affected.

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

To what time does representation refer?

Representations refer only to the time of making the contract.  We earlier said that
promissory statements of conditions that exist subsequent to the completion of the
contract are conditions or warranties and not representations (See annotations under
Sec. 39).  But now, we refer ONLY to conditions represented as ALREADY EXISTING. 
These conditions must exist during the making of the contract.
When is there false representation?
There is NO false representation if the representation was true at the time the contract
takes effect, although it became false at the time it was made.

There is false representation if although the representation was true at the time it was
made, it subsequently became false at the time the contract took effect.