In what scenario might concealment become a liability?

Concealment in insurance becomes a liability when an individual fails to disclose a known fact that significantly affects the risk being assessed by the insurer. This is because insurance relies heavily on the principle of utmost good faith, meaning that both the insured and the insurer are expected to act honestly and disclose all material facts pertinent to the insurance policy.

When a known fact that influences the insurer’s decision to provide coverage or set premiums is hidden, it can lead to adverse selection, where the insurer is unaware of a greater risk they are taking on. This not only affects the insurer's ability to evaluate the risk accurately but can also impact the financial viability of the coverage provided.

In contrast, failing to disclose trivial facts does not typically affect the risk assessment process and is unlikely to be considered concealment. Similarly, if the insurer cannot find relevant information independently or if there is an error that leads to inaccurate information, it does not constitute a liability for concealment by the insured as the awareness and intent behind the omissions differ significantly. Thus, option C accurately reflects the circumstances under which concealment can become an issue within the insurance context.