Representations

REPRESENTATIONS WHAT IS A REPRESENTATION 1. A representation is an oral or written statement of a fact or a condition affecting the risk made by the insured to the insurance company, tending to induce the insurer to take the risk.1 2. It is made at the same time as or before the issuance of a policy since it is an inducement to entering a contract.2 2.1 It can also be made after the issuance of the policy when the purpose thereof is to induce the insurer to modify an existing insurance contract, as the provisions likewise apply to a modification. Note that the rule is the same when it comes to concealment. 3. The language of a representation is to be interpreted by the same rules as the language of contracts in general.3 4. The rules as laid down will apply likewise to a modification of a contract of insurance as to its original formations.4 FORMS AND KINDS OF A REPRESENTATION 1. Representations may be oral or written. 1.1 They can be affirmative when it is an affirmation of a fact existing when the contract begins. As when the insured states that he is of good health at the time of the contract. 1.2 They can be promissory when it is a statement by the insured concerning what is to happen during the term of the insurance. As when the insured will install additional fire extinguishers at a stipulated future date. A representation as to the future is to be deemed a promise unless it was merely a statement of belief or expectation. 2. A representation does not form part of the contract as an express provision thereof as it is a collateral inducement to the same. 2.1 While it does not form part of the contract, it may qualify an implied warranty.5 As when under Section 113, it is implied that a ship is seaworthy. A representation by the 1 Section 36, Insurance Code 2 Section 37, Insurance Code 3 Section 38, Insurance Code 4 Section 47, Insurance Code 5 Section 40, Insurance Code insured that its communication system is defective will qualify the warranty. Hence, insured can still recover in case of loss. CAN A REPRESENTATION BE WITHDRAWN OR ALTERED 1. A representation can be withdrawn if the insurance has not yet been effected and the insured has not yet been induced to issue the policy. If withdrawn or altered afterwards, the contract can be rescinded as the insurer has already been led to issue the policy.6 TO WHAT DATE DOES A REPRESENTATION REFER 1. It must be presumed to refer to the date on which the contract goes into effect.7 2. There is no false representation if it is true at the time the contract takes effect although false at the time it is made. As when the insured states at application that vessel is in satisfactory operating condition but is really undergoing maintenance, there is no false representation if at issuance the vessel has completed maintenance. 2.1 Conversely, there is a false representation, if it is true at the time, it is made but false at the time the contract takes effect. As when: insured states that he has never been affected with pneumonia at application, but if in the meantime, he is afflicted with pneumonia before the policy takes effect, and he does not disclose, there is a false representation. WHEN A REPRESENTATION IS SAID TO BE FALSE 1. A representation is said to be false when the facts fail to correspond with its assertions or stipulations.8 MUST THE INSURED COMMUNICATE INFORMATION OF WHICH HE HAS NO PERSONAL KNOWLEDGE BUT MERELY RECEIVES THE SAME FROM OTHERS 1. When a person has no personal knowledge of a fact, he may or may not communicate such information to the insurer. If he does communicate, he is not responsible for its truth.9 Hence, there can be no misrepresentation. 2. However, when the information material to the transaction was acquired by an agent of the insured, the same must be communicated, as knowledge of the agent is also knowledge of the principal. As when: a ship captain is aware of a defect that affects the seaworthiness, that defect must be communicated as the ship captain is under obligation to disclose it to the owner. 6 Section 41, Insurance Code 7 Section 42, Insurance Code 8 Section 44, Insurance Code 9 Section 43, Insurance Code EFFECT OF MISREPRESENTATION ON A MATERIAL POINT 1. If it is false on a material point, whether affirmative or promissory, the injured party is entitled to rescind the contract from the time the representation becomes false. 2. However, the right to rescind is considered waived by the acceptance of premium payments despite knowledge of the ground to rescind. 10 As when: insurer was aware of the lack of extinguishers required by the policy. 2.1 There is no waiver, if the insurer had no knowledge of the ground at the time of the acceptance of the premium.11 HOW MATERIALITY IS DETERMINED 1. The materiality of a representation is determined like in concealment. 12 That is the probable and reasonable influence of the facts upon the party to whom the representation is made in forming his estimate of the advantage/disadvantages of the contract or in making inquiries. 10 Section 45, Insurance Code 11 Stokes vs. Malayan, 127 SCRA 766 12 Section 46, Insurance Code