Obligations of the insured in the insurance contract: declaration of the state of the risk

By: Abg. Jorge Lince Manrique

The insurance contract, like any other legal business regulated by our legislation, entails and stipulates a series of charges or obligations that must be strictly complied with, whether they are required before the contract is perfected -negotiation stage or previous phase- during the term of the contract, as well as for its execution, which in the case of the insurance contract is the stage in which the accident occurred, the insured requires the insurer to pay the compensation due.

The burdens or obligations emanate mainly from two sources: the Law and the contract.

The Commercial Code, the legal body that regulates the insurance contract, in its article 710, prescribes the following:

Art. 710. – The insurance applicant is obliged to objectively declare the state of risk, prior to the completion of the insurance contract, according to the questionnaire proposed by the insurer, and in accordance with the law.

Compliance with this obligation is limited to revealing facts or circumstances that, being effectively known by the applicant, could have influenced the insurer’s decision to accept or not the contract, or to do so with more onerous or different stipulations. Reluctance or falsity regarding the applicant’s statement renders the insurance contract null and void, with the exception provided for life insurance in the case of inaccuracy in the statement of the insured’s age.

Unless the intent or bad faith of the applicant is proven in the statement on the risk status, if the insurer does not request additional information to that contained in the statement on the risk status provided by the applicant, it cannot allege errors, reluctance, inaccuracies or circumstances not indicated in the application. Without prejudice to the criminal actions contemplated in the Comprehensive Organic Criminal Code, if the fact constitutes a crime.

Knowing the existence of defects in the applicant’s declaration in terms of risk or concealment of circumstances that aggravate him, the insurer has the right to initiate the pertinent actions either to terminate the insurance contract or to request its declaration of nullity . If the insurer, before perfecting the contract, knew or should have known the concealed circumstances, or if it later accepts them, the nullity referred to in this article is understood as sanitized.

The transcribed article constitutes or contains the description of one of the obligations or charges for the insured, one of the most important or relevant in insurance law, which is the objective statement of risk.

In general, there is only one burden that the Law imposes on the insured in the pre-contractual stage: the insured is obliged to objectively and honestly declare the state of the risk; that is, it has the obligation to reveal to the insurance company the intrinsic conditions of the insured object, the nature of its state, the real physical conditions that characterize it, as well as the exogenous factors that surround it, since eventually these particularities are the ones that They will define and determine the conditions under which the insurer will take charge of the proposed risks. According to writer J. Efrén Ossa G.: “the insurer cannot assume the risks, without first knowing their extent, that is, the degree of danger that they contain. And the natural source of this knowledge is none other, cannot be (if it is considered that the degree of risk responds to a complex of circumstances of an objective and subjective order), than the policyholder himself, who ordinarily must be assumed to be in direct contact with with the insurable relationship.”

Although the insurer is assisted by other methods to investigate the real situation of the risk status, such as inspections, the formulation of questionnaires and even the execution of medical examinations in life insurance, it is indisputable that the objective declaration of the risk status constitutes the most relevant example of the implementation of the principle of good faith, of uberma bona fidei , which adorns and distinguishes the insurance contract. The declaration of the state of the risk is of such importance that it must inspire the consent of the insurer to take the risks under its responsibility.

Ways of making the declaration of the state of risk

Now, it is important to determine how this declaration of the state of the risk should be made, since, depending on the form used, the ability of the insurance company to allege the reluctance or falsity of that declaration and therefore allege the termination or nullity of the insurance contract, a penalty established in the same Law to punish reluctance or falsehood in the declaration of the state of the risk.

Both in the theory and in the practice of the insurance activity, the objective declaration of the state of risk can be elaborated in several ways: firstly, there is the directed declaration, in which the insurance company proposes a questionnaire or form to the insurer; printed model, where the questions and data are usually arranged and ordered in such a way that the insured is provided with the consignment of the particulars required. However, it must be considered that these forms are prepared and contain general data that regularly pertains to the risks underwritten by insurance companies according to the branches in which they operate, therefore, this form does not exempt the insured from declaring any any other circumstance that had not been considered in the proposed questionnaire. The insured cannot avoid making his statement in a truthful, objective, responsible manner, that is, in good faith.

Second, the declaration can be spontaneous. This is not done subject to a questionnaire proposed by the insurer, but rather comes from the declaration of the state of the risk that the insured prepares in the insurance application that is presented to the insurer, a request that must be detailed and contain the necessary specifications. for the insurer’s decision.

Finally, there may be a way to declare the state of the risk that involves filling out a form proposed by the insurance company, but that also requires the insured to spontaneously declare circumstances not provided for in the questionnaire. This case regularly arises when the insured submits the insurance application through an insurance producer advisor. Let us remember that insurance can be contracted directly by the insured or through an intermediary, who has the obligation to advise them clearly and technique in order to obtain the best insurance conditions.

Conclusion

Our legislation, in article 710 transcribed above, would seem to follow the direction of the declaration directed by establishing that the insured must declare the state of the risk “according to the questionnaire proposed by the insurer”, however, in our opinion, this is not determining, and much less constitutes an obligation for the insurance company; if so, the rule would be clearer or more forceful and should stipulate “according to the questionnaire that MUST be proposed by the insurer”. Furthermore, the same rule then states that the declaration must be made in accordance with the Law, that is, in an objective and transparent manner.

Having said the above, it is of great importance for the insured to comply with the burden of objective declaration of risk, especially the declaration of those circumstances that would lead the insurer to stipulate more onerous conditions; not only because if you do not observe this rule you run the risk of losing the rights that emanate from the policy, but also because, in addition, the insurance contract is based on a base of technical calculations, by which an error induced by reluctance or Falsehood in the declaration about the risk assumed would shake the structure on which the economic principles of insurance are based.