Which statement best distinguishes a warranty from a representation in insurance law?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A warranty is an insured's promise that a certain fact is true or will remain true for the life of the policy, for example, that a building will be protected by a sprinkler system. A breach of a material warranty may allow the insurer to rescind the policy, because the promise goes to the very basis of the risk. A representation, by contrast, is a statement of fact made to induce the insurer to enter the contract. If a representation turns out to be false, it is actionable only when it is both false and material, meaning the insurer relied on it in deciding to issue the policy or set the premium. In California law, breach of a material warranty can void the policy, while a false representation must meet the materiality and reliance standards to support rescission.
Why the other options are wrong
- B) This statement is incorrect because it collapses the two doctrines. A representation need not be literally true to be actionable; it is actionable only when false and material, while a warranty is a promise whose material breach may void the policy regardless of the insured's intent.
- C) This reverses the rules. Warranties are promises that must be kept, so their breach may void the policy, whereas representations are statements of fact tested by their materiality and reliance when they prove false. The warranty requires performance; the representation requires truthfulness on material points.
- D) Both warranties and representations are made by the insured or the applicant, not by the insurer. The insurer is the party that relies on them in underwriting, but it is the applicant who makes these statements in the application and the policy process.
Memory hook
A warranty is a promise to keep; a representation is a fact to be tested.