TITLE 5.

REPRESENTATION

1. What is representation and misrepresentation?

2. What is the intention when a representative is made?
3. When representations are made?
4. How are representations interpreted?
5. What are the kinds of representation?
6. When can you consider a representation as a mere expression of opinion?
7. Once a representation has been made, can you alter or withdraw it?
8. Discuss the effects:
a. Information obtained from third persons?
b. Information obtained from the agent of the insured?
c. Information obtained from the agent of the insurer?
9. What is the effect if representation is false?
10. What is the difference if there is a collusion between the insured and the insurer’s agent?
11. How will you determine the materiality of representation?
12. Distinguish concealment from misrepresentation.
13. What is incontestability clause?
14. What are the requisites to consider in an incontestability clause?
15. What will happen if the policy becomes incontestable?
16. What are the possible defenses against the application of the incontestability clause?

1. What is representation and misrepresentation?

Under the Insurance Code, representation pertains to a statement made by the insured
at the time of, or prior to, the issuance of the policy, relative to the risk to be insured, as to an
existing or past fact or state of facts, or concerning a future happening, to give information to
the insurer and otherwise induce him to enter into the insurance contract.
Upon the other hand, misrepresentation, as defined by the same Code, is a statement as
a fact of something which is untrue, which the insured stated with knowledge that is untrue and
with an intent to deceive, or which he states positively as true without knowing it to be true and
which has a tendency to mislead, and where such fact in either case is material to the risk.

2. What is the intention when a representative is made?

The representations are made to influence the insurer to accept the risk. It being merely
collateral inducements to the contract, which means that representations may be
communicated in any manner whatsoever that is intelligible. However, they are not part of the
contract unless expressly made.

3. When representations are made?

Under Section 37 of the Insurance Code, it provides that a representation may be made
at the time of, or before, issuance of the policy.
4. How are representations interpreted?

Representations are construed liberally in favor of the insured, and are required to be
only substantially true.

5. What are the kinds of representation?

The kinds of representation are:

a. Oral or written;
b. Made at the time of issuing the policy or before; and
c. Affirmative or promissory

An affirmative representation is any allegation as to the existence of a fact when the

contract begins. On one hand, a promissory representation is any promise to be fulfilled after
the contract has come into existence or any statement concerning what is to happen during the
existence of the insurance.

6. When can you consider a representation as a mere expression of opinion?

A representation can be considered as a mere expression of opinion when it is an oral

representation as to future event or condition, over which the insured has no control, with
reference to property or life insured, and such will avoid a contract only when made in bad faith.

7. Once a representation has been made, can you alter or withdraw it?

Under the Insurance Code, a representation may be altered or withdrawn before the
insurance is effected, but not afterwards.

8. Discuss the effects:

a. Information obtained from third persons?
b. Information obtained from the agent of the insured?
c. Information obtained from the agent of the insurer?

The following are the effects of information according to where they are obtained, thus:

a. Information obtained from third persons?

The insured is given discretion to communicate to the insurer what he knows of
a matter of which he has no personal knowledge. If the representation turns out to be
false, he is not responsible therefore, provided that he gives explanation that he does so
on the information of others.

b. Information obtained from the agent of the insured/insurer?

If the information proceeds from an agent of the insured, whose duty is in the
ordinary course of business to communicate such information to his principal, and it was
possible for the agent under such circumstances in the exercise of due diligence to have
made such communication before the making of the contract, the insured will be liable
for the truth.
 c. Information obtained from the agent of the insurer?
It must be borne in mind that the same principle applies to the insurer though in
the nature of the things, the question does not occur so frequently.

9. What is the effect if representation is false?

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.

10. What is the difference if there is a collusion between the insured and the insurer’s agent?

The following are the differences, to wit:

a. Collusion with the insured

Collusion between the agent of the agent and the insured in mispresenting the
facts will vitiate the policy even though the agent is acting within the apparent scope of
his authority. When there is collusion, the agent thereby ceases to represent his
principal, and represents himself; so the insurer is not estopped from avoiding the
policy.

b. Collusion with principal of agent

Likewise, where the insured merely signed the application form and made the
agent of the insurer fill the same for him, it was held that by doing so, the insured made
the agent of the insurer his own agent. But where the insurer required its medical
examiner to put the questions and fill out the answers in his own handwriting, the
writer of the application is not the agent of the insured. The insurer is liable when its
agent writes a false answer into the application without the knowledge of the insured.

11. How will you determine the materiality of representation?

The materiality of the representation 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 representation
is made, in forming his estimates of the disadvantages of the proposed contract or in making his
inquiries.

12. Distinguish concealment from misrepresentation.

The following are the differences between concealment and misrepresentation, thus:

a. In concealment, the insured withholds information of material facts from the insurer,
whereas in misrepresentation, the insured makes erroneous statements of facts with
the intent of inducing the insurer to enter into the insurance contract.
b. The materiality of a concealment is determined by the same rules as applied in cases of
misrepresentation.
c. A concealment on the part of the insured has the same effect as a misrepresentation
and gives the insurer a right to rescind the contract.
 d. Whether intentional or not, the injured party is entitled to rescind a contract of
insurance on ground of concealment or false representation.
e. Since the contract of insurance is said to be one of utmost good faith on the part of both
parties to the agreement, the rules on concealment and representation apply likewise
to the insurer.

13. What is incontestability clause?

This pertains to clauses in life insurance policies stipulating that the policy shall be
incontestable after a stated period are in general use, and are now required by statutes in force.
They create a kind of contractual statute of limitations on certain defenses that may be raised
by the insurer. Further to this, incontestability means that after the requisites are shown to
exist, the insurer shall be estopped from contesting the policy or setting up any defense, except
as is allowed, on the ground of public policy.

14. What are the requisites to consider in an incontestability clause?

Under our law, in order that the insurance shall be incontestable, the following
requisites must be present:

a. The policy is a life insurance policy;

b. It is payable on the death of the insured; and
c. It has been in force during the lifetime of the insured for at least two (2) years from its
date of issue or of its last reinstatement. The period of two (2) years for contesting a life
insurance policy by the insurer may be shortened but it cannot be extended by
stipulation. The phrase "during the lifetime" simply means that the policy is no longer
considered in force after the insured has died. The key phrase is "for a period of two
years."

15. What will happen if the policy becomes incontestable?

When a policy of life insurance becomes incontestable, the insurer may not refuse to
pay the same by claiming that:
a) the policy is void ab initio; or
b) it is rescissible by reason of the fraudulent concealment of the insured or his agent,
no matter how patent or well-founded; or
c) it is rescissible by reason of the fraudulent misrepresentations of the insured or his
agent.

16. What are the possible defenses against the application of the incontestability clause?

The incontestability of a policy under the law is not absolute; otherwise, a beneficiary of
any person who had procured a life policy more than two years before his death would
automatically be entitled to the proceeds upon that person's death. Incontestability only
deprives the insurer of those defenses which arise in connection with the formation and
operation of the policy prior to loss.
The insurer may still contest the policy by way of defense to a suit brought upon the
policy or by action to rescind the same, on any of the following grounds:
a) That the person taking the insurance lacked insurable interest as required by law;
b) That the cause of the death of the insured is an excepted risk;
c) That the premiums have not been paid;
d) That the conditions of the policy relating to military or naval service have been violated;
e) That the fraud is of a particularly vicious type, as where the policy was taken out in
furtherance of a scheme to murder the insured, or where the insured substitutes
another person for the medical examination, or where the beneficiary feloniously kills
the insured;
f) That the beneficiary failed to furnish proof of death or to comply with any condition
imposed by the policy after the loss has happened; or
g) That the action was not brought within the time specified.