CACI No. 2308. Affirmative Defense - Misrepresentation or Concealment in Insurance Application

Judicial Council of California Civil Jury Instructions (2023 edition)

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2308.Affirmative Defense - Misrepresentation or Concealment in
Insurance Application
[Name of insurer] claims that no insurance contract was created because
[name of insured] [concealed an important fact/made a false
representation] in [his/her/nonbinary pronoun/its] application for
insurance. To establish this defense, [name of insurer] must prove all of
the following:
1. That [name of insured] submitted an application for insurance
with [name of insurer];
2. That in the application for insurance [name of insured], whether
intentionally or unintentionally, [failed to state/represented] that
[insert omission or alleged misrepresentation];
3. [That the application asked for that information;]
4. That [name of insured] knew that [specify facts that were
misrepresented or omitted]; and
5. That [name of insurer] would not have issued the insurance policy
if [name of insured] had stated the true facts in the application.
New September 2003; Revised April 2004, October 2004, June 2015, May 2020
Directions for Use
This instruction presents an insurers affirmative defense to a claim for coverage.
The defense is based on a misrepresentation or omission made by the insured in the
application for the insurance. (See Douglas v. Fid. Nat’l Ins. Co. (2014) 229
Cal.App.4th 392, 408 [177 Cal.Rptr.3d 271].) If the policy at issue is a standard fire
insurance policy, replace “intentionally or unintentionally” in element 2 with
“willfully.” (See Ins. Code, § 2071.) Otherwise, the insurer is not required to prove
an intent to deceive; negligence or inadvertence is enough if the misrepresentation
or omission is material. (Douglas, supra, 229 Cal.App.4th at p. 408.) Element 5
expresses materiality.
Element 3 applies only if plaintiff omitted information, not if the plaintiff
misrepresented information.
While no intent to mislead is required, the insured must know the facts that
constitute the omission or misrepresentation (see element 4). For example, if the
application does not disclose that property on which insurance is sought is being
used commercially, the applicant must have known that the property is being used
commercially. (See Ins. Code, § 332.) It is not a defense, however, if the insured
gave incorrect or incomplete responses on the application because the insured failed
to appreciate the significance of some information known to him or her. (See
Thompson v. Occidental Life Insurance Co. of California (1973) 9 Cal.3d 904, 916
[109 Cal.Rptr. 473, 513 P.2d 353].)
If it is alleged that omission occurred in circumstances other than a written
application, this instruction should be modified accordingly.
Sources and Authority
Rescission of Contract. Civil Code section 1689(b)(1).
Time of Insurers Rescission of Policy. Insurance Code section 650.
Concealment by Failure to Communicate. Insurance Code section 330.
Concealment Entitles Insurer to Rescind. Insurance Code section 331.
Duty to Communicate in Good Faith. Insurance Code section 332.
Materiality. Insurance Code section 334.
Intentional Omission of Information Tending to Prove Falsity. Insurance Code
section 338.
False Representation: Time for Rescission. Insurance Code section 359.
“It is well established that material misrepresentations or concealment of
material facts in an application for insurance entitle an insurer to rescind an
insurance policy, even if the misrepresentations are not intentionally made.
Additionally, ‘[a] misrepresentation or concealment of a material fact in an
insurance application also establishes a complete defense in an action on the
policy. [Citations.] As with rescission, an insurer seeking to invalidate a policy
based on a material misrepresentation or concealment as a defense need not
show an intent to deceive. [Citations.]’ (Douglas, supra, 229 Cal.App.4th at p.
408, internal citations omitted.)
“When the [automobile] insurer fails . . . to conduct . . . a reasonable
investigation [of insurability] it cannot assert . . . a right of rescission” under
section 650 of the Insurance Code as an affirmative defense to an action by an
injured third party. (Barrera v. State Farm Mutual Automobile Insurance Co.
(1969) 71 Cal.2d 659, 678 [79 Cal.Rptr. 106, 456 P.2d 674].)
“[A]n insurer has a right to know all that the applicant for insurance knows
regarding the state of his health and medical history. Material misrepresentation
or concealment of such facts [is] grounds for rescission of the policy, and an
actual intent to deceive need not be shown. Materiality is determined solely by
the probable and reasonable effect [that] truthful answers would have had upon
the insurer. The fact that the insurer has demanded answers to specific questions
in an application for insurance is in itself usually sufficient to establish
materiality as a matter of law.” (Thompson, supra, 9 Cal.3d at pp. 915-916,
internal citations omitted.)
“[A]lthough an insurer generally ‘has the right to rely on the applicant’s answers
without verifying their accuracy[,] . . . [¶] . . . [t]he insurer cannot rely on
answers given where the applicant-insured was misled by vague or ambiguous
questions.’ (Duarte v. Pacific Specialty Ins. Co. (2017) 13 Cal.App.5th 45, 54
[220 Cal.Rptr.3d 170], original italics.)
“[I]f the applicant for insurance had no present knowledge of the facts sought, or
failed to appreciate the significance of information related to him, his incorrect
or incomplete responses would not constitute grounds for rescission. Moreover,
‘[questions] concerning illness or disease do not relate to minor indispositions
but are to be construed as referring to serious ailments which undermine the
general health.’ Finally, as the misrepresentation must be a material one,
‘incorrect answer on an insurance application does not give rise to the defense of
fraud where the true facts, if known, would not have made the contract less
desirable to the insurer.’ And the trier of fact is not required to believe the ‘post
mortem’ testimony of an insurers agents that insurance would have been refused
had the true facts been disclosed.” (Thompson, supra, 9 Cal.3d at p. 916, internal
citations omitted.)
“[T]he burden of proving misrepresentation [for purposes of rescission] rests
upon the insurer.” (Thompson, supra, 9 Cal.3d at p. 919.)
“To prevail, the insurer must prove that the insured made a material ‘false
representation’ in an insurance application. ‘A representation is false when the
facts fail to correspond with its assertions or stipulations.’ The test for
materiality of the misrepresentation or concealment is the same as it is for
rescission, ‘a misrepresentation or concealment is material if a truthful statement
would have affected the insurers underwriting decision.’ (Douglas, supra, 229
Cal.App.4th at p. 408, internal citations omitted.)
“The materiality of a representation made in an application for a contract of
insurance is determined by a subjective standard (i.e., its effect on the particular
insurer to whom it was made) and rescission will be allowed even though the
misrepresentation was the result of negligence or the product of innocence. On
the other hand, in order to void a policy based upon the insured’s violation of
the standard fraud and concealment clause . . . , the false statement must have
been knowingly and wilfully made with the intent (express or implied) of
deceiving the insurer. The materiality of the statement will be determined by the
objective standard of its effect upon a reasonable insurer.” (Cummings v. Fire
Insurance Exchange (1988) 202 Cal.App.3d 1407, 1415, fn.7 [249 Cal.Rptr.
568], original italics, internal citation omitted.)
“The insurer is not required to show a causal relationship between the material
misrepresentation or concealment of material fact and the nature of the claim.”
(Duarte, supra, 13 Cal.App.5th at p. 53.)
“Cancellation and rescission are not synonymous. One is prospective, while the
other is retroactive.” (Fireman’s Fund American Insurance Co. v. Escobedo
(1978) 80 Cal.App.3d 610, 619 [145 Cal.Rptr. 785].)
“[U]pon a rescission of a policy of insurance, based upon a material concealment
or misrepresentation, all rights of the insured thereunder (except the right to
recover any consideration paid in the purchase of the policy) are
extinguished . . . .” (Imperial Casualty & Indemnity Co. v. Sogomonian (1988)
198 Cal.App.3d 169, 184 [243 Cal.Rptr. 639].)
“The consequence of rescission is not only the termination of further liability,
but also the restoration of the parties to their former positions by requiring each
to return whatever consideration has been received. . . . [T]his would require the
refund by [the insurer] of any premiums and the repayment by the defendants of
any proceed advance which they may have received.” (Imperial Casualty &
Indemnity Co., supra, 198 Cal.App.3d at p. 184, internal citation omitted.)
Secondary Sources
Croskey et al., California Practice Guide: Insurance Litigation, Ch. 5-F, Rescission
by Insurer, ¶¶ 5:143-5:146, 5:153-5:159.1, 5:160-5:287, 15:241-15:256 (The Rutter
2 California Liability Insurance Practice: Claims & Litigation (Cont.Ed.Bar)
Rescission and Reformation, §§ 21.2-21.12, 21.35-21.37
2 California Insurance Law & Practice, Ch. 8, The Insurance Contract, § 8.10[1]
(Matthew Bender)
2 California Uninsured Motorist Law, Ch. 24, Bad Faith in Uninsured Motorist
Law, § 24.40 (Matthew Bender)
26 California Forms of Pleading and Practice, Ch. 308, Insurance, § 308.18
(Matthew Bender)
12 California Points and Authorities, Ch. 120, Insurance, §§ 120.250, 120.251,
120.260 (Matthew Bender)

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