What is a material fact in relation to contracts of insurance?

A material fact in relation to contracts of insurance refers to any information that could influence an insurer's decision to accept a risk or determine the terms of coverage. When a proposer applies for insurance, they must disclose any material facts that could affect the insurer's assessment of the risk. This information is crucial because if an insurer is unaware of a material fact, they may either underprice the risk or agree to insure a situation that they would not have covered had they known the whole truth.

For instance, if an applicant for health insurance has a pre-existing condition and fails to disclose it, this is a material fact that could lead to the insurer declining a claim later on, based on the principle of utmost good faith (or "uberrima fides"). Therefore, understanding material facts is essential because they form the basis upon which insurers evaluate risks and premiums.

The other aspects—such as contractual capacity, proximate cause, and subrogation—are important in the insurance context but do not define what a material fact is. Contractual capacity revolves around whether an individual has the legal ability to enter a contract, proximate cause deals with the primary cause of loss, and subrogation is the right of insurers to pursue recoveries after a claim is