THIS IS EXCERPT ONE FROM A LECTURE ON
INSURANCE COMPANY BAD FAITH
GIVEN BY ATTORNEY SCOTT MARKS
Free consultation - 888-638-2693

The Los Angeles Personal injury attorneys of The Marks Law Firm specialize in Representing Those Experiencing Insurance Company Bad Faith Problems. Mr. Marks has achieved superior results in serious personal injury cases and is a particularly effective insurance bad faith attorney.

There are a number of key decisions and an Insurance Code statute which govern this specialized area of law and can be of great assistance to the policyholder. This covers item #3 of Mr. Mark’s lecture:

3. The Applicant For Insurance Has a Duty to Disclose Only that Which the applicant in Good Faith Believes is Material to Their Health.

Our Supreme Court has repeatedly held that questions on an insurance application concerning illness or disease are deemed under the law to be construed as referring to serious ailments that undermine the applicant’s general health. Hence failure to disclose Aminor indispositions@ on an insurance policy are not deemed to be material misrepresentations as a matter of law. Ransom v. Penn Mut. Life Ins. Co. (1954) 43 Cal.2d 420, 427; Thompson v. Occidental Life Ins. Co. (1973) 9 Cal.3d 904, 916.

As such, an applicant need only those disclose conditions that he or she, acting in good faith, believes material to his or her health. This is a subjective test. Whether a hypothetical reasonable person would recognize their importance is not the test:
“(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.”(emphasis added)

The rationale behind these exceptions is simple and straight-forward. It would be “patently unfair to allow the insurer to avoid its obligations under the policy on the basis of information that the applicant did not know, or alternatively, did not fully understand.@ Miller v. Republic Nat’l Life Ins. Co. (9th Cir. 1986) 789 F.2d 1336, 1340 (applying Calif. law)

See also, Telford vs. New York Life Insurance Company (1937) 9 Cal. 2d 903: The failure of an applicant to disclose physical conditions of which he or she is ignorant of, does not provide a ground for a carrier to rescind the policy. Cohen vs. Penn. Mutual Life Insurance Company (1957) 48 Cal. 2d 720; Pierre vs. Metropolitan Life Insurance Company (1937) 22 Cal. App. 2nd 346.

See also, Section 332. Required disclosures. Each party to a contract of insurance shall communicate to the other, in good faith, all facts within his knowledge which are or which he believes to be material to the contract and as to which he makes no warranty, and which the other has not the means of ascertaining. [emphasis added].

In Jefferson Standard Life Ins. Co. v. Anderson (1965) 236 CA2d 905, 909 the applicant for a life insurance policy denied any history of heart disease. After the policy was in force for a little over a year, he died of arteriosclerosis. During its investigation the carrier discovered that its policyholder had consulted with a physician five years earlier for an unrelated condition, facial paralysis, but the physician diagnosed the condition as temporary and the symptoms went away. The facial paralysis was a symptom of arteriosclerosis. However, there was no evidence that the policyholder was aware of the connection between facial paralysis and this specific heart condition. In determining that the carrier’s recission was unlawful, the Court held, Even assuming [the Insured] was suffering from (arteriosclerosis] at the time he answered the questions in the application he had no knowledge thereof. [Emphasis added].

Query: Although never clearly answered in the case law, it would appear that an applicant who has innocently forgotten they suffer from a medical condition and hence fails to discloses that condition on the application, may rely upon that lack of present knowledge@ as a defense in a recission case.