Test of Materiality in Insurance

Section 31.  Materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due, in forming his estimate of the disadvantages of the proposed contract, or in making his inquiries.

What is the test of materiality?

The test is simply:  IF the knowledge of a fact would cause the insurer to reject the risk , or to accept it only at a higher premium rate, that fact is material, though it may not even remotely contribute to the contingency upon which the insurer would become liable, or in any wise affect the risk.

What is the principal question that must be asked?

The principal question in determining whether the concealment is material is:  Was the insurer misled or deceived into entering a contract, obligation or in fixing the premium of insurance by a withholding of material information or facts within the insured’s actual or presumed knowledge? If so, then the contract is avoided, even if the cause of the loss which subsequently occurred be unconnected with the fact concealed.