Concealment, warranty, and representations

Three different problems

Concealment concerns a fact left out. A representation is a statement made in negotiating insurance. A warranty is a contractual assurance about the insured person, property, or risk. Identify which kind of communication is involved before deciding its legal effect.

Concealment and materiality

California Insurance Code section 330 defines concealment as neglecting to communicate something a party knows and ought to communicate. Section 332 requires each party to communicate known material facts in good faith when the other lacks the means of ascertaining them and no warranty is made about them. Under California section 331, concealment can support rescission whether intentional or unintentional. Unintentional concealment does not mean failing to disclose a fact the party never knew.

Materiality looks forward from contract formation, not backward from the loss. Under California section 334, ask about the fact's probable and reasonable influence on the recipient's assessment of the proposed contract or inquiries. An undisclosed fact need not cause the eventual loss to matter. Section 333 recognizes disclosure exceptions, including facts already known to the other party, except when answering that party's inquiries.

Representations

California sections 350 and 351 permit oral or written representations before or at policy issuance. Under sections 355 and 356, a representation may be corrected or withdrawn before insurance is effected, and is presumed to refer to contract completion. A false statement does not match the facts. Sections 359 and 360 connect rescission to falsity in a material point and use the same materiality rule as concealment. Section 353 distinguishes a promise about the future from a mere belief or expectation.

Warranties

California sections 440 through 444 recognize express and implied warranties, require no special wording, and allow warranties about the past, present, or future. An express warranty made before or at execution belongs in the policy or a signed instrument incorporated by reference. Under section 445, a policy statement of intent to perform an act materially affecting the risk is a warranty of performance.

California section 447 allows rescission for violation of a material warranty or other material policy provision. Do not assume every breach erases coverage from the beginning: section 449 distinguishes a nonfraudulent breach arising later from one existing at inception. Section 446 also excuses failure to perform a future warranty when an insured loss occurs before performance is due, or performance becomes unlawful or impossible before then.

These are general contract rules; product-specific protections and policy provisions can affect their application. Rescission seeks to undo the contract, while cancellation ordinarily ends coverage prospectively.

For an exam problem, classify the conduct, test materiality where required, and identify the remedy without assuming that every mistake is fraud.