Plain version: silence is bad enough; deliberately hiding the truth to fool the insurer is worse. And lying on insurance forms can be a crime, not just a contract problem.

Section 338: an intentional and fraudulent omission, on the part of one insured, to communicate information of matters proving or tending to prove the falsity of a warranty entitles the insurer to rescind. Example: a business policy contains a warranty that a central alarm is in service. The owner knows it has been disconnected and, to keep the insurer from finding out, deliberately tells no one.

Contrast with §333: silence about a risk excluded by a warranty is excused only when the fact is not otherwise material. That exception does not protect a fraudulent omission like the one in §338.

Section 1871.2: forms used to apply for a policy, amend coverage, furnish underwriting information, or give notice of or make a claim must carry a printed warning. It says that any person who knowingly presents false or fraudulent information to obtain or amend insurance coverage, or to make a claim for the payment of a loss, is guilty of a crime and may be subject to fines and confinement in state prison. The section does not apply to contracts of reinsurance.