Point I. On Insurance

I. Notion. Insurance is a contract by which someone, the insurer, for a certain price obliges himself to compensate someone, the insured, for an uncertain damage or ceasing profit. It is said uncertain, that is, for each party.

II. Form. The form of the contract is to be drawn from the civil code; likewise those things which are required for proof of the contract.

III. Just price. The just price is that which is proportioned both to the value of the things and to their danger. Today, because of competition among diverse companies, the price can commonly be held as just.

IV. Obligations of the insured. The insured is bound: 1° not to insure a thing which he knows has already perished; 2° to manifest the true value and danger, or to leave them to be investigated; 3° to take care that, in view of the insurance, he not watch over the thing more negligently; 4° not to ask compensation for damage for which, with attention paid to the conditions tacitly or explicitly admitted, compensation is not owed; nor compensation greater than just. Nevertheless, provided that he is free from fraud, he can accept a greater compensation if arbitrators, to whose judgment the parties submitted themselves, have established it, because there is an aleatory agreement; likewise that which the agents of the company, after the matter has been investigated, bring, because it can be held as a liberal donation; for it is in the interest of the company to show itself liberal.

V. Obligations of the insurer. These are for the most part clear from the nature of the thing and the terms of the contract. He is especially bound to compensate damage insofar as that damage is the object of the insurance. Hence he is also bound, unless it was otherwise agreed, to compensation if the damage has occurred from the fault, even theological fault, of a third party; but not if it has occurred from the theological fault of the insured. In the former case, however, the insurer succeeds to the rights of the insured against the one causing the damage.

If part of the insured thing has perished, the insurer is bound only to compensate part of the damage in proportion to the insured value; except if they agreed about compensating the whole damage.

VI. Species of insurance. Insurance can be extended to things of any kind, for example insurance against fires, against damage to crops, against damages that will follow from the death of someone, against dangers of the sea, of carriage, etc. Concerning insurance against damages arising from the death of someone, or life insurance, certain things must be noted.

1. Life insurance can be accomplished in a twofold way, namely: 1° so that after the death of the one whose life is insured, for example a husband, the insurer pays a certain sum to a third party, for example the wife; 2° so that the insurer pays a certain sum after some person has reached a certain age; but if he dies before that age, the insurer is held to nothing or only to part of the sum.

2. The insured, when questioned about diseases and defects, is bound to respond if he wishes to enter into the contract; if he is not questioned, he is not bound to manifest them, because it is permissible to presume that the company either compensates itself by a greater premium, or acts thus for this end, that it may attract men.

Question. What is to be said both about the validity of the contract and about the obligation of the insured, if the latter did not manifest the things which he ought to have manifested?

Response 1. If there is question of concealing a matter of lesser moment, the contract is valid; but the insured is bound, if the matter concealed is worthy of note, to supplement the premium that was paid at less than the just amount.

Response 2. If there is question of concealing a grave matter, it is disputed. Some hold the contract as valid, because the object of the insurer's consent and the object of the present contract differ only qualitatively, for example a healthy body and a sickly body; otherwise than if there were question of a man who was already not living but dead; in a word, there is no substantial error. Nevertheless, the contract seems invalid, because the object of consent, at least morally speaking, seems diverse from the object of the present contract (n. 837). Whatever the case may be, if the contract is held as valid, the insured is nevertheless bound to supplement the premium that was paid at less than the just amount.