In Ethics & Fraud Investigation insurance expert witness Barry Zalma writes:
Ethical underwriters and claims persons should not use technicalities to reach a decision on a policy or a loss. Rather, the ethical underwriter or claims person must apply the facts to the issue raised and provide the indemnity promised. Similarly, the insured must also clearly, fairly, and completely advise the underwriter of all of the facts known, or that he should know, that would be material to the decision of the insurer to accept or reject the risk. The California Court of Appeal explained the situation as follows:
An insurance company is entitled to determine for itself what risks it will accept, and therefore to know all the facts relative to the applicant’s physical condition. It has the unquestioned right to select those whom it will insure and to rely upon him who would be insured for such information as it desires as a basis for its determination to the end that a wise discrimination may be exercised in selecting its risks. (Emphasis added) [Robinson v. Occidental Life Ins. Co. (1955) 131 Cal. App. 2d 581, 586 [281 P.2d 39].]