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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
Misrepresentation as a defense of the insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the insurer. (The Insular Assurance Co., Ltd. vs, The Heirs of Jose Alvarez, G.R. No. 210156, October 3, 2018)
Material misrepresentation occurs when the insured fails to provide a full and accurate response to a specific question posed by the insurer during the application process. This means that if the insured withholds or inaccurately represents information relevant to the insurance coverage being sought, it can significantly impact the underwriting decision and the terms of the policy.
For instance, if an insurance application asks about a pre-existing medical condition, and the insured either fails to disclose it or provides incomplete or misleading information, it can be considered a material misrepresentation. This is because such information is crucial in assessing the risk associated with insuring the individual.
In such cases, the insurer relies on the completeness and accuracy of the information provided by the insured to make an informed decision about issuing the policy. If critical information is omitted or distorted, it can lead to an incorrect assessment of risk, potentially resulting in inadequate coverage or inappropriate premium rates.
Representation When Deemed False
The Insurance Code of the Philippines says:
SECTION 43. A representation is to be deemed false when the facts fail to correspond with its assertions or stipulations.
SECTION 44. If 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.
Guilty of Misrepresentation vis-à-vis Fraudulent Intent Must be Proved
The fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the contract. Misrepresentation as a defense of the insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the insurer. (The Insular Assurance Co., Ltd. vs, The Heirs of Jose Alvarez, G.R. No. 210156, October 3, 2018)
Misrepresentation in insurance contracts hinges on two key elements: the nature of the false information provided and the kind of falsehood involved. These distinctions are crucial in determining the gravity of the misrepresentation.
Firstly, the “type of misrepresentation” refers to whether the false statement was made intentionally or unintentionally. This differentiation is pivotal, as an unintentional error or omission may be considered innocent, whereas an intentional falsehood suggests a deliberate attempt to deceive.
Secondly, the “kind of falsity committed” pertains to the substance of the false statement. It assesses whether the misrepresented information is of material significance to the insurance contract. Materiality refers to the extent to which the false statement could influence the insurer’s decision to issue the policy, set premiums, or determine coverage terms.
In addition to these factors, establishing “fraudulent intent” is crucial in cases of misrepresentation. This requires demonstrating that the insured person deliberately provided false information with the intention to deceive the insurer. It is a higher threshold to meet, as it necessitates evidence of a conscious effort to mislead.
Entitlement to a Return of Premium
A person insured is entitled to a return of the premium when the contract is voidable, on account of the fraud or misrepresentation of the insurer, or of his agent or on account of facts, the existence of which the insured was ignorant without his fault; or when, by any default of the insured other than actual fraud, the insurer never incurred any liability under the policy. (Section 75, Insurance Code of the Philippines)
Read also: What are the grounds for the rescission of an insurance contract?
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