SUBCHAPTER XI-CASUALTY INSURANCE 3551. Liability on casualty risks; required provisions in policies. 3552. Remedy of injured party after recovering judgment; defenses. Subchapter I-General Provisions 8 3241. Scope of chapter All kinds of insurance, other than marine insurance, are subject to this chapter. § 3242. Definition of insurance Insurance is a contract whereby one undertakes to indemnify another against loss, damage, or liability, arising from an unknown or contingent event. § 3243. Insurer and insured The person who undertakes to indemnify another by a contract of insurance is called the insurer, and the person indemnified is called the insured. 83244. Time for exercising right of rescission Whenever a right to rescind a contract of insurance is given to the insurer by this chapter, the right may be exercised at any time previous to the commencement of an action on the contract. Subchapter II-Events Subject to Insurance 8 3261. Events generally Except as provided in this subchapter, any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest, or create a liability against him, may be insured against, subject to the provisions of this chapter. § 3262. Lottery A lottery or its outcome shall not be insured against. § 3263. Gaming or wager A policy executed by way of gaming or wagering is void. Subchapter III-Parties to Contract 83281. Capacity to insure Any person capable of making a contract may be an insurer, subject to the restrictions imposed by special statutes upon foreign corporation, nonresidents, and others. § 3282. Capacity to be insured Any person except a public enemy may be insured. § 3283. Effect of loss payable clause or assignment to mortgagee Unless the policy otherwise provides, where a mortgagor of property effects insurance in his own name providing that the loss shall be payable to the mortgagee, or assigns a policy of insurance to a mortgagee, the insurance is deemed to be upon the interest of the mortgagor and the mortgagor does not cease to be a party to the original contract. § 3284. Same; acts of parties In the case of a loss payable clause or assignment referred to by section 3283 of this title, any act of the mortgagor, prior to the loss and which would otherwise avoid the insurance, will have the same effect, although the property is in the hands of the mortgagee; but any act which, under the contract of insurance, is to be performed by the mortgagor, may be performed by the mortgagee therein named, with the same effect as if it had been performed by the mortgagor. § 3285. Insurer's consent to transfer; effect of mortgagor's acts If an insurer assents to the transfer of an insurance from a mortgagor to a mortgagee, and, at the time of his assent, imposes further obligations on the assignee, the acts of the mortgagor cannot affect the rights of the assignee. Subchapter IV-Insurable Interest § 3301. Definition of insurable interest Every interest in property, or any relation thereto, or liability in respect thereof, of such a nature that a contemplated peril might directly damnify the insured is an insurable interest. § 3302. Property interests An insurable interest in property may consist in an: (1) existing interest; (2) inchoate interest founded on an existing interest; or (3) expectancy, coupled with an existing interest in that out of which the expectancy arises. § 3303. Contingent or expectant interests A mere contingent or expectant interest in a thing, not founded on an actual right to the thing, nor upon a valid contract for it, is not insurable. § 3304. Measure of interest Except in the case of a property held by the insured as a carrier or depositary, the measure of an insurable interest in property is the extent to which the insured might be damnified by loss or injury thereof. § 3305. Interest of carrier or depositary A carrier or depositary of any kind has an insurable interest in a thing held by him as such, to the extent of its value. § 3306. Lack of insurable interest If the insured has no insurable interest, the contract is void. § 3307. When insurable interest must exist An interest insured must exist when the insurance takes effect, and when the loss occurs, but need not exist in the meantime; and interest in the life or health of a person insured must exist when the insurance takes effect, but need not exist thereafter or when the loss occurs. § 3308. Waiver of requirement void Every stipulation in a policy of insurance for the payment of loss whether the person insured has or has not an interest in the property insured, or that the policy shall be received as proof of such interest, is void. § 3309. Effect of transfer Except in the cases specified by sections 3310-3312 of this title, and in the cases of life and disability insurance, a change of interest in any part of a thing insured, unaccompanied by a corresponding change of interest in the insurance, suspends the insurance to an equivalent extent, until the interest in the thing and the interest in the insurance are vested in the same person. § 3310. Change of interest after loss A change of interest in a subject insured, after the occurrence of an injury which results in a loss, does not affect the right of the insured to indemnity for the loss. § 3311. Change of interest in separate subject A change of interest in one or more of several distinct subjects, separately insured by one policy, does not avoid the insurance as to the others. § 3312. Transfer of interest between partners In the case of partners, joint owners, or owners in common, who are jointly insured, a transfer of interest by one to another thereof does not avoid insurance, even though it has been agreed that the insurance shall cease upon an alienation of the subject insured. § 3313. Transfer of subject matter The mere transfer of subject matter insured does not transfer the policy, but suspends it until the same person becomes the owner of both the policy and the subject matter insured. Subchapter V-Concealment and Representations Article A-Concealment § 3331. Definition of concealment Neglect to communicate that which a party knows, and ought to communicate, is concealment. § 3332. Effect of concealment Concealment, whether intentional or unintentional, entitles the injured party to rescind insurance. § 3333. Required disclosure Each party to a contract of insurance must 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 party has not the means of ascertaining. § 3334. Required inquiry Except in answer to the inquiries of the other, neither party to a contract of insurance is bound to communicate information of matters: (1) which the other knows; (2) which, in the exercise of ordinary care, the other ought to know, and of which the former has no reason to suppose him ignorant; (3) of which the other waives communication; (4) which prove or tend to prove the existence of a risk excluded by a warranty, and which are not otherwise material; and (5) which relate to a risk excepted from the policy, and which are not otherwise material. § 3335. Test of materiality 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. § 3336. Presumed knowledge Each party to a contract of insurance is bound to know all the: (1) general causes which are open to his inquiry equally with that of the other, and which may affect either the political or material perils contemplated; and (2) general usages of trade. § 3337. Waiver of communication The right to information of material facts may be waived, either by: (1) the terms of the insurance; or (2) neglect to make inquiries as to such facts, where they are distinctly implied in other facts of which information is communicated. § 3338. Interest of insured Information of the nature or amount of the interest of one insured need not be communicated unless in answer to an inquiry, except as prescribed by section 3392 of this title. § 3339. Fraudulent concealment An intentional and fraudulent omission, on the part of one insured, to communicate information of matters proving or tending to prove the falsity of a warranty, entitles the insurer to rescind. § 3340. Matters of opinion Neither party to a contract of insurance is bound to communicate, even upon inquiry, information of his own judgment upon the matters in question. Article B-Representations § 3351. Oral or written A representation may be oral or written. § 3352. Time of making A representation may be made at the time of, or before, issuance of the policy. 83353. Rules of interpretation The language of a representation is to be interpreted by the same rules as those applied to contracts in general. § 3354. Representation as to future A representation as to the future is a promise, unless it is merely a statement of a belief or an expectation. 83355. Effect upon policy A representation can not qualify an express provision in a contract of insurance; but it may qualify an implied warranty. § 3356. Alteration or withdrawal A representation may be altered or withdrawn before the insurance is effected, but not afterwards. § 3357. Time intended by representation The completion of the contract of insurance is the time to which a representation must be presumed to refer. § 3358. Representation upon hearsay When a person insured has no personal knowledge of a fact, he may nevertheless repeat information which he has upon the subject, and which he believes to be true, with the explanation that he does so on the information of others; or he may submit the information, in its whole extent, to the insurer. In either case, he is not responsible for its truth, unless it proceeds from an agent of the insured, whose duty it is to give the information. 83359. Falsity A representation is false when the facts fail to correspond with its assertions or stipulations. § 3360. Effect of material false representation If a representation is false in a material point, whether affirmative or promissory, the injured party may rescind the contract from the time when the representation becomes false. 8 3361. Materiality The materiality of a representation is determined by the same rule as the materiality of a concealment. Article C-Miscellaneous Provisions 3371. Application of subchapter This subchapter applies as well to a modification of a contract of insurance as to its original formation. Subchapter VI-The Policy Article A-General Provisions 3391. Definition of policy of insurance The written instrument, in which a contract of insurance is set forth, is called a policy of insurance. 83392. Required contents of policy A policy of insurance must specify: (1) the parties between whom the contract is made; (2) the property or life insured; (3) the interest of the insured in property insured, if he is not the absolute owner thereof; (4) the risks insured against; (5) the period during which the insurance is to continue; and (6) either: (A) the rate of premium; or |