State RegulationsCA specific✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
Under CIC §338, if an insured intentionally and fraudulently omits to communicate information that proves or tends to prove the falsity of a warranty in the policy, the insurer is entitled to:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
CIC §338 provides that an intentional and fraudulent omission on the part of the insured — failing to communicate information that proves or tends to prove the falsity of a warranty — entitles the insurer to rescind. Rescission unwinds the contract, returning the parties to their pre-contract positions. The statute targets the specific combination of a fraudulent omission that touches a warranty; the insurer's remedy is cancellation, not a partial benefit reduction or a monetary penalty.
Why the other options are wrong
- B) Section 338 does not authorize a one-half benefit reduction; the remedy is rescission of the entire policy.
- C) The statute does not create a suspension remedy; the insurer may rescind, which terminates the contract.
- D) No premium-based penalty is authorized by Section 338; the remedy is rescission.
Memory hook
Fraudulent silence about a warranty = rescission. The omission proves the warranty false.