Under California law, if an insured breaches a warranty that is material to the risk, the legal consequence is that the insurer:

Why A is correct

A warranty is a promise that a fact or state of affairs is true, and under California law (CIC Sections 440-449, especially Section 447) the breach of a warranty that is material to the risk entitles the insurer to rescind the contract — that is, treat it as void. Warranties may be express or implied, and unlike representations, a warranty breach does not require intent; strict compliance may be required.

Why the other options are wrong

• B) Rescission, not a premium refund with continuation, is the remedy; the contract is avoided and unearned premium is generally returned as part of the rescission accounting.
• C) Paying the claim and cancelling prospectively is not the law; a material warranty breach avoids the contract entirely.
• D) Rescission, not a damages action, is the insurer's remedy for breach of warranty under Section 447.

Memory hook

Warranty = a promise that must hold. Break it — even innocently — and the insurer can void the whole deal.

Why A is correct

Section 447 provides that the violation of a material warranty or other material provision of a policy, by either party, entitles the other to rescind. Rescission voids the contract as though it never existed. Because warranties are statements of fact or promises that must be literally true, a material breach gives the injured party the right to cancel the agreement entirely.

Why the other options are wrong

• B) Section 447 creates no remedy of doubled benefits; that is not a rescission remedy.
• C) Extending the policy period is not a statutory remedy for a warranty breach.
• D) Penalties are not provided by Section 447; the remedy is rescission of the contract.

Memory hook

Break a material warranty and the contract can be unwound like it never existed.