TITLE 7 - WARRANTIES

Warranty presumed affirmative

Section 67
Unless the contrary intention appears courts will presume
A warranty is either expressed or
implied. that the warranty is merely affirmative

Answer YES to the question: Will you keep your book of

accounts in an iron safe or secure in another building?
Warranty held a promissory warranty breach of which precluded
recovery
Statement or promise by the insured cited in the policy
incorporated in it by proper reference.

o Untruth or non-fulfillment of which & without Section 68

any reference to whether the insurer was in
fact prejudiced by such untruth or non A warranty may relate to the past, the present, the
fulfillment policy is voidable future, or to any or all of these.

May also be made by the insurer

Kinds of warranties Time to which the warranty refers

1.) Express Warranty In case of promissory warranty refer only to future events

o Insured stipulates the certain facts relating to Provision employ the term warranty in general
the risk shall be true or certain acts relating to
the same subject shall be done

o Agreement contained in the policy or Section 69

incorporated therein as part
No particular form of words is necessary to create a
warranty.
2.) Implied Warranty

o Very nature of the contract or from the

general tender of the words, although NO
express warranty is mentioned necessarily
embodied in the policy as a part thereof &
which binds the insured as though expressed
in the contract
Intention of parties governs
Warranty does NOT necessarily constitute a warranty
nor is the issue of such word necessary to constitute a
warranty.

o It is only in marine insurance that Whether a statement made by the insured in the policy is a
the law provides for implied warranty depends upon the intention of the parties.
warranties.
In case of doubt Statement will be construed as
3.) Affirmative Warranty representation rather than a warranty especially if such
statement is contained in any instrument other that the policy
o Asserts the existence of a fact or condition at like an application which is collateral merely to the contract
the time it is made. of insurance

o Continuing if it is one that must be
satisfied during the entire coverage period of
insurance
4.) Promissory Warranty
o Insured stipulates that certain facts or
conditions pertaining to the risk shall exist or
that certain things with reference shall be
done or omitted.
Parties must intent a statement to be warranty & it must be
included as a part of the contract
Gratuitous answers written in the application, that is,
answers NOT responsive to any questions asked NOT
warranties even though the policy makes a statement in the
application warranties

o NOT frequently called executory

o Nature of condition subsequent

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TITLE 7 - WARRANTIES

Warranties distinguished in the application
WARRANTIES
Considered parts of the contract
Always written in the face of the
policy, actually or by reference
Strictly complied
o Case of Ang Giok Chip vs. Springfield Fire &
Mutual Insurance Co. - Whether a warranty
contained in a rider to the policy is null and
REPRESENTATION void on the ground that the rider was NOT
signed by the insured & not referred to in the
policy as making a part of it.
Collateral inducements to it
a.) Another instrument construed as excluding
Maybe written in a totally a rider
disconnected paper or may be oral Rider attached to a policy is a part
of the contract to the same extent
& with like effect as if actually
Substantial truth
embodied

Falsity or non-fulfillment breach Falsity void on the ground of It need NOT be signed by the
of contract fraud insured nor referred to in the policy
as making a part of it.

Presumed material Must show the materiality of a

Another instrument could NOT
representation in order to defeat
an action on the policy mean a mere slip of paper like a
rider but something akin to the
policy itself.
o Which in section 49 is
Before a representation will be considered a warranty defined as a written
must be expressly included or incorporated by clear instrument in which a
reference in the policy & the contract must clearly show that contract of insurance is
the parties intended that the rights of the insured would set forth
depend on the truth or fulfillment of the warranty
b.) Dissenting Opinion
Statement is true ordinarily immaterial whether it is a
warranty or a representation Justice Villareal stated It would be
an absurdity if Section 70 were
construed as requiring that an
express warranty be contained only
Section 70 in the policy & referred to as
making a part thereof for the
Without prejudice to section fifty-one, every express
protection of the insured &
warranty, made at or before the execution of a policy,
permitting such express warranty
must be contained in the policy itself, or in another
instrument signed by the insured and referred to in be contained in a piece of paper &
the policy as making a part of it. not signed by the insured but
simply attached to the policy, thus
opening the door to fraud- it being
i=easy to detach such rider or slip
change it with another which is
Express warranty, where contained
precisely what the law is trying to
prevent
1.) In a policy itself, or another instrument

o Stipulation may be considered a warranty Section 71

NOT only clearly shown that the parties
intended as such BUT it must also form part:
o Of the contract itself
o Signed by the insured
A statement in a policy of matter relating to the
person or thing insured, or to the risk, as a fact, is
an express warranty thereof.

o Referred to in the policy as making

a part of it. Express warranty regarding person, thing or risk

- Mere reference alone is 1.) Statement must refer to a fact

NOT sufficient to give o Statement in the policy relating to the person or
this effect thing insured or to the risk must be a fact and NOT
2.) Valid of construed in a rider as an opinion or belief to constitute an express
warranty

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TITLE 7 - WARRANTIES
2.) Where statement in the nature of an opinion
o Statement in the policy which is from the very
nature of the subject matter of the inquiry can
ONLY be an expression of an opinion is NOT a
warranty of its truthfulness.
o If such statement is deemed a warranty is merely
a limited warranty as to the honesty and good faith
of the insured ~~ a warranty that the statement is
his honest opinion or judgement
Section 72
A statement in a policy which imparts that it is
intended to do or not to do a thing which materially
affects the risk, is a warranty that such act or
omission shall take place.
Warranty of facts or omissions which materially affect the risk
Refer to a promissory warranty
Breach of promises or agreements as to the future acts will
NOT avoid a policy unless the promises are material to the
risk
Act or omission is material to the risk if it increases the risk
& under the law ONLY substantial increase of the risk works
forfeiture of the policy which is avoided for increase in
hazard
Section 73
When, before the time arrives for the performance of
a warranty relating to the future, a loss insured
against happens, or performance becomes unlawful at
the place of the contract, or impossible, the omission
to fulfill the warranty does not avoid the policy.
When breach of warranty does not avoid policy
General Rule Violation of a warranty avoids a contract of
insurance.
Section 73 refers to those warranties relating to the future,
provides 3 exceptions:
1.) When loss occurs before the time for performance
2.) When performance becomes unlawful
3.) When performance becomes impossible
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When insured barred by waiver or estoppel
Breach of warranty operates to discharge the insurer from
liability unless the insurer is liable because of waiver of the
warranty or an estoppel
Doctrines of waiver & warranty 2 devices which frequently
have been used to modify the harsh operation of the rules on
concealment & warranty
1.) Omission to fulfill a warranty or condition will likewise be
excused where there is a waiver on the part of the insurer
Waiver
Intentional relinquishment of a known right.
May be express or implied
If implied from conduct mainly, said conduct must be clearly
indicative of a clear intent of the insurer to waive its right
under the policy
o Failure on the part of the insurer to assert
forfeiture upon breach of warranty or condition,
after knowledge thereof, amounts to a waiver or
estoppel.
2.) Under estoppel insurer is precluded = some action or
inaction on its part, from relying on an otherwise valid
defense as against the insured who has been induced to
enter into the contract by the insurers representation or
conduct.
o The ground of estoppel is that it would e
against equity & good conscience for the
insurer to assert such defense
o Estoppel is different from waiver but the
result is much the same
{page 231 example}
Section 74
The violation of a material warranty, or other
material provision of a policy, on the part of
either party thereto, entitles the other to rescind.
Right to rescind for violation of a material warranty
1.) Rescission by the insured
o Violation of the terms of a contract of insurance
entitles either party to terminate the contractual
relations
TITLE 7 - WARRANTIES
o Insured can sue for rescission for
breach of contract due to the refusal of
the insurer to grant a loan applied for
although this was expressly agreed
upon in the policy & he can recover the
full amount of the premiums paid by him
up to the to the filing of the action
2.) Rescission by the insurer
o Right of the insurer to rescind exist even though
the violation was NOT direct cause of the loss
o Thus, fire policy insurance requires the
insured to give notice of the existence of
other insurance policies over the same
property insured non-disclosure is a
violation of a material warranty which
entitles the insurer to rescind
o Insurer is entitled to rescind a contract of
insurance for violation of a warranty only if said
warranty is material.
o If not , the breach will NOT avoid the
policy
Section 75
A policy may declare that a violation of specified
provisions thereof shall avoid it, otherwise the
breach of an immaterial provision does not avoid
the policy.
When violation of immaterial provisions shall avoid the policy
Every warranty is conclusively presumed material [American
Jurisprudence]
o Warranty as to any fact will preclude any inquiry
as to the materiality of that fact Need only to be
false
Breach of any provision which is NOT material will NOT
avoid the policy
The parties may however expressly stipulates that the
violation of a particular provision [ although immaterial] in
the policy shall avoid it
o Such stipulation, the parties convert an immaterial
warranty into a material one
o Thus, a stipulation against procuring additional
insurance without the insurers consent although
immaterial to the risk insured against, will avoid a
fire insurance policy which declares that such
violation shall avoid it
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Such stipulation or condition has
been upheld as valid & as a
warranty no other insurance exist
To constitute a violation The
other insurance must be upon the
same subject-matter, the same
interest therein and the same risk
Section 76
A breach of warranty without fraud merely
exonerates an insurer from the time that it occurs,
or where it is broken in its inception, prevents the
policy from attaching to the risk.
Effect of breach warranty by the insured
Breach under section 76 is one without fraud
Fraud is not essential in order that the insurer may be
entitled to rescind a contract of insurance on the ground of
breach of warranty
Falsity, NOT fraud, is the basis of liability on a warranty
1.) Without fraud
o No Fraud:
Policy is avoided ONLY from the
time of breach
Insured is entitled to the return of
the premium paid at a pro rata rate
from the time of breach occurs
AFTER the inception of the
contract
To all premiums if its broken
during the inception of the contract
o Contract is void ab initio
& NEVER becomes
binding
2.) With fraud
Policy is avoided ab initio
Insured is NOT entitled to the return of the
premium paid
Conditions in insurance policy
Condition
Event signifying in its broadest sense either an occurrence
or non-occurrence that alters the previously existing legal
relations of the parties to the contract
TITLE 7 - WARRANTIES

Insurers may impose whatever conditions they please upon
their obligations as long as they are not contrary to law,
morals, good customs, public order or public policy
1.) Condition precedent
o Thus, insurer who issues his policy covering a
certain store & its contents against loss or damage
by fire may cut down the meaning of contents by
excepting money and securities & restrict the peril
of fire by excepting fire caused by lightning

o Happening of some event or the performance of Exceptions distinguished from warranties and conditions
some act AFTER the terms of the contract have
been agreed upon, before the contract shall be Exceptions are easily distinguished from warranties and
binding upon the parties conditions

o Such as that the policy shall NOT take {page 236 example}
effect until the delivery & payment of the
first premium during the good health of Effects if breach on legal relations of parties
the applicant
1.) On binding force of contact
2.) Condition subsequent
o Occurrence of a breach or warranty or condition
o Pertains NOT to the attachment of the risk & the even though such breach be but temporary
inception of the policy BUT to the contract of renders the entire contract defeasible or voidable.
insurance after the risk has attached & during the
existence o Even though such breach may NOT
o Such condition requiring notice & proof have affected the risk or contributed to
of loss in case of loss upon an the loss in any way.
insurance against fire
Expected Peril such as vacancy
Warranties and Conditions distinguished in the insured house DOES
NOT in the least affect the binding
force of the contract
Warranty Condition
Loss happens DURING vacancy
falls outside the coverage of the
Does NOT suspend One WITHOUT the policy & insurer is NOT liable
or defeat the performance of which
operation of the the contract, No loss occurs House is
As to the effect contract although in form reoccupied contract relations of
executed by the the parties continue unchanged
But a breach affords parties & delivered
either the remedy DOES NOT spring
expressly provided in into life 2.) On liability where there is waiver
the contract or that
furnished by law Limitation to the o Insurer CANNOT, by a naked waiver, assume a
attachment of the risk non-existent duty

o Nor is the defense that the loss is excepted barred

As to nature
by the incontestable clause
Insured person contracts & warrants that if the representations made by
him in his application for insurance are NOT true policy shall be null o Breach of warranty or of condition may be waived
& void = such statements are not conditions precedent but rather of the WITHOUT consideration.
nature of a defeasance
o Insurer does NOT become liable for an
Promissory warranties usually regarded as conditions subsequent to
be performed after the policy has become a valid contract, non- excepted loss by the waiver amounts to
performance of which will work a defeasance a new contract on valuable
consideration

Exceptions in insurance policy

Exception are inserted in a contract of insurance for the

purpose of withdrawing from the coverage of the policy, as
delimited by the general language describing the risk
assumed, some specific risks which the insurer declares
himself unwilling to undertake
o