State Statutes Relating to Warranties

Because of the hardship and injustice which the technical enforcement of the common law rule pertaining to warranties might sometimes cause, and also largely because there was a time when certain insurance companies took undue advantage of warranties in their policies as a means of bringing about a technical forfeiture of the contract, a considerable number of states have passed statutes "which protect the insured against technical avoidance of the contract because of statements which he may have made, unless the same relate to a matter material to the risk or were made with fraudulent intent. In other words such statutes make warranties representations. In some instances the statutes go so far as to provide that there shall be no forfeiture unless the violation of the policy condition occasioned the loss or resulted in materially increasing the risk.

At a recent date seven states had statutes which, while differing in their wording, amounted in substance to the New York statute: "All statements purporting to be made by the insured shall in the absence of fraud be deemed representations and not warranties." Twenty-one states have passed statutes which aim to guard against technical forfeitures by providing that misrepresentations shall not nullify the contract unless made in matters material to the risk. These statutes usually read to the following effect: "No written or oral misrepresentation, or warranty therein made, in the negotiation of a contract or policy of life insurance, or in the application therefore or proof of loss thereunder shall defeat or void the policy, or prevent its attaching, unless the matter misrepresented increases the risk of loss."

Statutory provisions, such as those referred to in the preceding paragraph, have been declared constitutional and obligatory by both the United States Supreme Court,9 and various state supreme courts, and therefore control all policies issued subsequently to the enactment of the law. They are supported by many writers on the ground that most policy-holders are ignorant of the true significance of warranties, and that many may thus incur a technical forfeiture of the contract through inadvertent misstatements in their applications.