Under California law, a fact is considered material if it:
Select an option to reveal the answer and the full 3-part explanation — free, no signup.
Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Materiality is measured by the effect a fact would have on the insurer's decision-making. A fact is material if a reasonable insurer would attach importance to it in deciding whether to accept the risk or what premium to charge. The test is prospective and objective, based on the influence the fact would have on underwriting, not on whether the loss would have happened anyway or on what the applicant happened to think. Material misstatements or concealments give the insurer grounds to rescind the policy, so materiality is a central concept in the application process.
Why the other options are wrong
- B) Materiality is judged at the time of underwriting, not retroactively after a loss occurs. The outcome of the loss does not change whether a fact was material. Hindsight cannot change materiality; what matters is the influence the fact had on the insurer at the time of underwriting.
- C) The applicant's own belief about importance is not the standard. The test is what a reasonable insurer would consider important. The applicant's subjective view is irrelevant; the objective standard is what a reasonable insurer would decide.
- D) Typography has nothing to do with materiality. The concept concerns the substance of the fact and its effect on underwriting. Formatting choices like capital letters have no bearing on whether a fact is material to the risk.
Memory hook
Material = would it change the insurer's mind? Ask the reasonable insurer, not the applicant, not the outcome.