Misrepresentation and insurance

Making a false statement when purchased insurance may have significant consequences on the compensation of a possible disaster. Update on sanctions and the risk to the author of a false declaration.
Misrepresentation and insurance

Legislation

Given the cost represents the annual insurance premium of a car or home insurance, it can sometimes be tempting for an insured to address a partially misrepresentation or incomplete to reduce the amount of dues to pay.
Examples for car insurance: do not mention a conviction for driving with a BAC above the legal limit or, to a lesser extent, say that the car is parked overnight in a private garage while it is parked on the road public, etc.

But Article L. 113-2 of the Insurance Code is yet formal: "the insured must accurately answer questions posed by the insurer". Since it is based on what his answers assessed the risk and what set the premium. Any misrepresentation by the insured therefore has important consequences in law. And both in regard to automobile insurance contracts, home insurance or mortgage insurance.

Lying and bad faith

If the insurer proves that the insured has willfully made a false statement and that bad faith does not allow him to precisely assess the risk, the court may pronounce the nullity of the contract.

In this case, the insurer retains all premiums already paid and can reclaim all allowances paid for previous losses.

Error and good faith

When evidence of the bad faith of the insured is not paid, Article L. 113-9 of the Insurance Code applies.

  • If the inaccuracy is discovered before the accident, the insurer may terminate the contract by returning to his client the portion of the premium corresponding to the period where it will do more. It can also keep the contract, while increasing the amount of the contribution, provided that the insured agrees. Otherwise, the contract will be terminated.
  • If the inaccuracy is discovered after the accident, the insurer reduced the amount of compensation in proportion to the premium paid and that which should have been if the proposal had been properly performed ("proportional reduction").

In motor insurance, the victims are compensated, but the insurer may request both the driver responsible not only responsible subscriber of the accident it is owed by application of the proportional reduction.

Photo credits: 123RF - Ion Chiosea
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