Chapter II. Insurance Contracts
Section 2. Basic Provisions
Except where otherwise provided in this Act, an insurance contract shall specify the following particulars:
1. Names and domiciles of the contracting parties.
2. The subject matter insured.
3. The type of risk insured.
4. The date and hour from which the insurance liability commences and the period of insurance.
5. The insured amount.
6. The premium.
7. Causes for voidance of contract or loss of rights.
8. The date the contract is entered into.
(Notification for Modification and Reinstatement of an Insurance Contract)
When an insurance contract is modified or a suspended contract is reinstated, failure by the insurer to reject the modification or reinstatement within 10 days from receipt of notification shall be deemed acceptance. However, where this Act has special provisions for insurance of the person, such provisions shall govern.
(Rescission of the Contract for Failing to Provide a Notification)
Except when due to a force majeure event, the failure of a party to an insurance contract to provide a required notification of any matter to another party, whether intentional or unintentional, may be cause for rescission of the contract by the other party.
(Obligation to Notify the Insurer of the Occurrence of Risk)
When a proposer, insured, or beneficiary experiences an event for which the insurer bears insurance liability, such party shall notify the insurer within five days from becoming aware of the occurrence, except where otherwise provided in this Act or stipulated in the contract.
(Obligation to Notify the Insurer of Increased Risk)
A proposer required to serve notice of circumstances that increase risk as stated in the insurance contract shall notify the insurer upon becoming aware of the circumstances.
If the increase in risk is caused by an act of the proposer or the insured, and the risk is increased to the extent that the premium should be increased or the contract terminated, the proposer or the insured shall serve prior notice to the insurer.
If the increase in risk is not caused by an act of the proposer or the insured, the proposer or the insured shall notify the insurer within 10 days of becoming aware of the increase in risk.
When risk is diminished, the insured may request the insurer to adjust the premium.
(Effect of Increased Risk)
In the event of circumstances referred to in the preceding article, the insurer may terminate the contract or propose revision of the premium. If the proposer does not agree to the premium adjustment, the contract is terminated forthwith. However, where the contract is terminated on account of circumstances stated in paragraph 2 of the preceding article, the insurer may also claim compensation if it has sustained any loss.
An insurer that continues to accept the premium after becoming aware of an increase in risk, or that pays a claim after occurrence of the risk, or that otherwise expresses intent to maintain the contract, loses the rights stated in the preceding paragraph.
(Exception from Obligation to Notify the Insurer of Increased Risk)
The provisions of Article 59 does not apply to an increase in risk under any of the following circumstances:
1. Where the occurrence of damage does not affect the burden of the insurer.
2. Where the act is done to protect the interests of the insurer.
3. Where the act is done to fulfill a moral obligation.
(Free of Obligation of Notification)
A party shall be free of obligation of notification with regard to any matter enumerated below:
1. A matter of which the other party is aware.
2. A matter of which the other party should be aware by paying normal attention or for which it would have no excuse for being unaware.
3. A matter of which the other party has stated that no notice need be served.
(Liability for Failing to Notice)
A proposer or an insured who fails to serve notice within the time limit stated in Article 58 or Article 59, paragraph 3 shall be liable for loss sustained by the insurer as a result.
(Proposer’s Obligation to Make Truthful Representations)
At the time a contract is entered into, the proposer shall make truthful representations in response to the written inquiries of the insurer.
If the proposer has made any concealment, nondisclosure, or misrepresentation, and such concealment, nondisclosure, or misrepresentation is sufficient to alter or diminish the insurer's estimation of the risk to be undertaken, the insurer may rescind the contract; the same shall apply after the risk has occurred, provided that this provision does not apply where the proposer proves that the occurrence of the risk was not based upon any fact that it did or did not represent.
The right to rescind as stated in the preceding paragraph shall be extinguished if not exercised within one month of the time the insurer knows of the cause for rescission. Once two years have elapsed after the contract is entered into, the contract may not be rescinded even if cause for rescission exists.
(Statute of Time Limitations)
Any right arising out of an insurance contract shall be extinguished if not exercised within two years from the day when it becomes possible to exercise the right. If any of the following circumstances exists, the two-year time period commences as set forth in the following subparagraphs:
1. If there is concealment, non-disclosure, or misrepresentation on the part of the proposer or insured in the disclosure of risk, the period commences from the day on which the insurer becomes aware of the situation.
2. If, after a risk occurs, an interested party can prove that its lack of awareness was not due to negligence, the period will begin from the day on which it becomes aware of the situation.
3. If the claim of a proposer or insured against an insurer arises out of the claim of a third party, the period will begin from the day on which the proposer or insured is presented with the third-party claim.