If, at the time of making the insurance contract the policyholder or the insured, by fraud or gross negligence, fails to disclose or not to misrepresent material facts, the insurer may terminate the contract within one month after it knew the non-disclosure or misrepresentation or within three years after the contract was made: Provided, That this shall not apply where at the time of making the insurance contract the insurer knew the nondisclosure or misrepresentation or by gross negligence failed to do so.
<Amended by Act No. 4470, Dec. 31, 1991>