Under California Insurance Code Section 330, 'concealment' is defined as:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Section 330 of the California Insurance Code defines concealment as a neglect to communicate that which a party knows and ought to communicate to the other party. Because insurance is a contract of utmost good faith, the applicant must voluntarily disclose material facts that the insurer cannot easily discover, rather than remaining silent and answering only the questions asked. Concealment can be intentional or unintentional, and either kind can be sufficient to support rescission when it involves a material fact. The duty exists so that the insurer has the full picture of the risk before deciding whether to accept it and what premium to charge. The concealment doctrine applies in California life and health insurance as a core principle of the application process.
Why the other options are wrong
- B) A knowingly false statement is a misrepresentation or fraud, whereas concealment is a failure to speak, the withholding of a known material fact. The two doctrines are closely related but distinct: misrepresentation involves affirmative false statements, while concealment involves silence or omission where disclosure was required.
- C) Refusing to pay a covered claim is a claims-handling dispute between the insurer and the insured after a loss occurs. It has nothing to do with concealment, which concerns the applicant's duty to disclose material facts at the time the insurance contract is being formed.
- D) Late payment of a premium may cause a policy to lapse or be reinstated on certain conditions, but it is a matter of premium payment and policy status. Concealment concerns the disclosure of material facts at the time of contracting, which is a completely different obligation.
Memory hook
Concealment is hiding what you know you should tell the insurer.