CONCEALMENT

SEC. 26 A NEGLECT TO COMMUNICATE THAT WHICH A PARTY KNOWS AND OUGHT TO COMMUNICATE IS CALLED CONCEALMENT Concealment Defined: -Neglect to communicate that which a party KNOWS and OUGHT to know A. The duty to disclose is required because insurance contracts are described as contracts UBBERIMAE FIDAE , means most abundant good faith, as per Lords Mansfield : Insurance is a contract upon speculation. Special Facts which the contingent chance is to computed, LIES MOST Commonly in the KNOWLEDGE OF THE INSURED only. Underwriters trust his representation, and proceeds upon the CONFIDENCE that he does not keep back circumstances in his KNOWLEDGE, to mislead the underwriter into a belief that the circumstances does not exist and to induce him to estimate the risqu as if it did not exists B. To be guilty of CONCEALMENT, it would be at the TIME OF KNOWLEDGE at the time of the effectivity of the policy. C. Known changes in the conditions material to the risks which occur between the openings of the negotiation for insurance of the policy must be revealed. REQUISITES OF CONCEALMENT: Read together with Sec 28, there can be no concealment unless: 1. A party knows the fact which he neglects to communicate or disclose to the other; 2. The fact concealed is material to the risk; 3. Such party is duty bound to disclose such fact to the others; and 4. Such party makes no warranty of the fact concealed Note: When a warranty is made of the fact concealed, the non-disclosure of such facts is not concealment but constitutes a violation of warranty (Title 7) SEC. 27 A CONCEALMENT WHETHER INTENTIONAL OR UNINTENTIONAL ENTITLES THE INJURED PARTY TO RESCIND THE CONTRACT OF INSURANCE. A. This rule is consistent with the definition of concealment, as negligence to communicate that which a party knows and ought to communicate. B. Insurers Duty to answer all the questions concerning facts material to the risk. C. Effect of Concealment a policy will be vitiated by the suppression of known facts by a party and the insurer may rescind a policy on the ground of concealment. The insurer need not prove the fraud in order to rescind the contract on the ground of concealment. The duty of communication is violated by the fact of concealment, even when there is no intention to deceive.

D. Basis of the Rule it misleads or deceives the insurer into accepting the risk, or accepting it at the rate of premium agreed upon. E. Insurer relying upon the belief that the assured will disclose every material fact within his actual or presumed knowledge is misled into a belief that the circumstances withheld does not exist, and he is thereby induced to estimate the risk upon a false basis that does not exist. F. Every concealment, whether arising from accident, negligence, inadvertence, or mistake, if material, will be equally fatal to the contract as if it were intentional or fraudulent. G. The Supreme Court held that materiality of the information withheld does not depend on the state of the mind of the insured. Neither does it depend on the actual physical events which ensue. Good Faith is no defense in concealment. H. As a rule, failure on the part of the insured to disclose conditions affecting the risk, of which he is aware, makes the contract voidable at the insurers option. I. The reason insurance policies are contracts of UTMOST GOOD FAITH. J. The duty to observe good faith are not for the insured alone, but equally so for the insurer; in fact, it is more for the latter, since his dominant bargaining position carries with it stricter responsibility. 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. This section makes it the duty of each party to a contract of insurance to communicate in good faith all facts within his knowledge only when: 1. They are material to the contracts ( sec 31, 34, 35 ) 2. The other has not the means of ascertaining the said facts ( sec 30, 32, 33) 3. As to which the party with the duty to communicate makes no warranty ( sec 6776 ) THE TEST IS: If the applicant is aware of the existence of some circumstances which he knows would influence the insurer acting upon his application, good faith requires him to disclose the circumstance, though unasked. INSURERS INVESTIGATION : The fact that the insurer makes investigation of its own relative to the insurability of the applicant does not absolve the latter from speaking the truth or lessen the right of the insurer to rely on the insureds statement as to his physical condition, especially where the investigation failed to disclose falsity or any suspicious circumstances.