From the insurance department Belzuz Abogados, S.L.P. as experts in insurance and civil liability, this duty should be understood not as a merely formal requirement, but as a legal mechanism for the exchange of information between the parties to the contract, designed to balance a structural asymmetry in the knowledge of risk. The correct definition of this obligation is crucial for the proper formation of contractual consent, as well as for the subsequent performance of the insurance contract.
This article analyses the legal framework of Article 10 of the Insurance Act, its scope of interpretation and the legal consequences arising from its breach, whilst also incorporating the main lines of case law that have helped to shape its content in practice.
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Basis of the duty to disclose risk
The duty to disclose risk is based on the principle of good faith set out in Article 7 of the Civil Code, a principle which takes on particular significance in the context of insurance contracts. This is due to the very nature of the contract, characterised by the existence of an information asymmetry between the parties, in which one party knows or is able to ascertain the circumstances of the risk with greater precision, whilst the other party relies essentially on that information for its proper assessment.
In this regard, Article 10 of the Insurance Contracts Act does not introduce an isolated obligation, but rather formalises a structural requirement of the insurance contract: the need for relevant information to be shared fairly and fully prior to the conclusion of the contract. This exchange of information not only enables the correct determination of the premium, but also conditions the insurer’s own contractual intent.
From a practical perspective, experience in analysing disputes arising from the under-declaration of risk shows that the quality of pre-contractual information is one of the most significant factors in the subsequent stability of the contract and in reducing interpretative disputes.
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Regulatory framework of Article 10 of the LCS
Article 10 of the LCS provides that the policyholder must disclose to the insurer, in accordance with the questionnaire submitted by the latter, all circumstances known to them that may influence the assessment of the risk.
Three structural elements emerge from this wording that define the scope of the duty.
Firstly, the duty is conditioned by the insurer’s prior questionnaire. This element is key, as it defines the objective scope of the information required. There is, therefore, no unlimited duty of disclosure, but rather a duty structured according to the questions asked, which provides legal certainty to the contracting process.
Secondly, the duty relates to circumstances known to the policyholder. This criterion introduces a subjective component that has been clarified by case law, in the sense of requiring not only actual knowledge, but also such knowledge as may reasonably be attributed given the declarant’s position and the nature of the risk.
Thirdly, the information must be relevant to the assessment of the risk. This indeterminate legal concept has been repeatedly interpreted by the courts, who understand it to encompass any circumstance that could influence the decision to take out the policy or the financial terms of the insurance.
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The questionnaire as a defining element of the duty
The risk declaration questionnaire forms the central pillar of Article 10 of the Insurance Contracts Act (LCS). Its function is not merely instrumental, but rather it acts as a defining element of the scope of the duty of disclosure.
Case law has consistently established that the policyholder cannot be held liable for the omission of information that has not been expressly requested in a clear, precise and comprehensible manner. This doctrine has reinforced the requirement for high-quality drafting of questionnaires, particularly in cases where the risk presents greater technical complexity.
However, this delimitation does not remove the obligation to answer the questions truthfully and completely. The system is therefore based on a balance between the insurer’s initiative to provide information through the questionnaire and the policyholder’s duty of good faith in their answers.
In legal practice, this point is particularly relevant, as a large proportion of disputes concerning risk disclosure centre precisely on the interpretation of the scope of the questions asked and the adequacy of the answers provided.
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Legal nature and function of the duty in the insurance contract
The duty to disclose risk is of a pre-contractual nature, although its effects have a direct bearing on the validity and effectiveness of the insurance contract. It is not an ancillary obligation, but a structural element of the contract itself.
Its function is twofold. On the one hand, it enables the proper assessment of risk and the correct formulation of the contractual terms. On the other hand, it contributes to the stability of the insurance system, preventing situations where incomplete or inaccurate information distorts the technical balance of the contract.
From a technical-legal perspective, this duty acts as a mechanism to correct information asymmetry, ensuring that the contractual decision is made on a sufficiently informed basis. In practice, its proper application has a direct influence on the quality of the underwriting process and on the reduction of subsequent disputes.
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Breach of the duty of disclosure: legal regime
A breach of the duty to disclose risk may be intentional or negligent, giving rise to different legal consequences.
Where there is fraud or bad faith, that is, where relevant information is deliberately concealed or manipulated, the legal system establishes a particularly severe regime. In such cases, the insurer may be released from its obligation to pay compensation in the event of a claim, without prejudice to any additional consequences that may arise from the fraudulent conduct.
Conversely, where the inaccuracy or omission is attributable to fault or negligence, the legal regime is geared towards correcting the contractual imbalance. In such cases, the regulations permit:
- Amendment of the contract to adjust the terms of the risk.
- A proportional reduction in the benefit payable in the event of a claim.
- Termination of the contract if the new terms are not accepted.
This tiered system reflects a clear commitment to proportionality, linking the legal consequences to the degree of culpability of the policyholder’s conduct.
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Case-law interpretation and the evolution of judicial criteria
Case law has played an essential role in defining the scope of Article 10 of the Insurance Contracts Act (LCS), consolidating an interpretation geared towards balance between the parties to the contract.
In particular, the requirement for clarity, precision and specificity in risk questionnaires has been reinforced, whilst the possibility of basing breaches on omissions not expressly requested has been limited. This development has had a significant impact on contractual practice, necessitating a review of the standards for drafting questionnaires and the management of pre-contractual information.
Drawing on its experience in analysing this type of dispute, Belzuz Abogados, S.L.P. , as experts in insurance and civil liability, has observed how this line of case law has helped to reinforce the importance of the pre-contractual phase as a key element in conflict prevention, placing greater emphasis on the quality of the exchange of information prior to contracting.
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Practical relevance of Article 10 of the Insurance Contracts Act
In the practice of insurance contracts, Article 10 of the LCS has a cross-cutting impact that affects both the contract formation phase and its subsequent performance.
In the pre-contractual phase, the correct structuring of the questionnaire and the proper interpretation of the responses are decisive factors for the appropriate assessment of the risk. An imprecise or insufficient formulation can lead to significant interpretative difficulties at a later stage.
During the performance phase, the detection of any inconsistencies or inaccuracies in the initial declaration may give rise to complex disputes, in which it is essential to assess not only the existence of the omission but also its actual relevance to the configuration of the insured risk.
In this context, a proper understanding of Article 10 of the Insurance Contracts Act proves to be an essential element for the correct management of the insurance contract and for reducing disputes arising from its execution.
Conclusion
The duty to disclose risk provided for in Article 10 of the Insurance Contracts Act constitutes a structural element of the insurance contract, essential for ensuring the proper formation of contractual consent and the technical balance of the contract. Its regulatory framework, based on the principle of good faith and the delimiting role of the questionnaire, reflects the need to establish an effective and legally secure system of information exchange.
From the insurance department of Belzuz Abogados, S.L.P., as experts in insurance and civil liability, the correct interpretation of this provision is essential for a comprehensive understanding of the insurance contract, insofar as it enables the prevention of disputes, improves the quality of the underwriting process and provides greater legal certainty to the contractual relationship as a whole.