Communication in Good Faith of All Material Facts - Contract of Insurance

Section 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.

According to Sec. 28, what are the matters that must be communicated by the party to the other?

This section makes it the duty of each party to a contract of insurance to communicate in good faith all facts that are material to the contract within his knowledge when:

1.       the party with the duty to communicate makes no warranty; and

2.       the other party has no means of ascertaining the facts

Any exceptions to the duty to communicate?

Those falling under Sec. 30.

What is the test to determine whether or not one must communicate the facts to the other party?

The test is: If the applicant is aware of the existence of some circumstance which he knows would influence the insurer in acting upon his application, GOOD FAITH requires him to disclose that circumstance, though unasked.

Problem.

If A consulted Dr. B for treatment of syphilis and gonorrhea when must A disclose the fact?

He must disclose such fact even if not inquired into, if such fact is material to the risk assumed by the insurer.

In the problem above, how will A know if the fact is material or not?

The fact must be related to the insurance applied for.  In the above example, such fact is material in cases of life or health insurance and may even be material up to a certain extent for accident insurance.  It is far-fetched to require disclosing such information if he is applying for fire or marine insurance.

What if the insurer with reasonable diligence could have known or discovered such facts for himself, can the Insured be excused for his concealment and deny the remedy of rescission to the insurer?

NO. The effect of the material concealment cannot be avoided by the allegation that the insurer could have known and discovered a fact which the insured had concealed.  An allegation like this implies that there is an obligation on the part of the insurance company to verify all the statements made by the insured in his application.   No such obligation exists on the part of the insurer.  The insurer has the right to rely upon the statements of the insured for he knows the facts and the insurer does not.

What is deemed material?

See sec. 31.