Proximate Cause
Is that which, in a natural and continuous
LOSS
Baguilat, Kayla
Espiritu, Nadine
Galano, Faith Alexis
Section 85. An agreement not to transfer the claim
of the insured against the insurer after the loss has
happened, is void if made before the loss except as
otherwise provided in the case of life insurance.
Claim
 May be defined as a demand for
the satisfaction of a loss suffered
within the purview of an insured
policy
 It may be made by the party
insured, the insurer with the right
of subrogation, or a non-party but
with a right against the insured.
Section 86. Unless otherwise provided by the
policy, an insurer is liable for a loss of which a peril
insured against was the proximate cause, although
a peril not contemplated by the contract may have
been a remote cause of the loss; but he is not liable
for a loss of which the peril insured against was only
a remote cause.
Loss
May be defined as the injury, damage or
liability sustained by the insured in consequence of
the happening of one or more of the perils against
which the insurer, in consideration of the premium,
has undertaken to indemnify the insured.
Scope of Loss
 The word “loss” in insurance law
embraces bodily injury, including
death, or property damage or
destruction.
 It includes loss of income or
profits and legal liability to a third
party.
Remote cause
Is defined as that cause which some
independent force merely took advantage of to
accomplish something which is not the natural
effect thereof
 The insurer will not be liable if the
peril insured against is a mere
remote cause
sequence, unbroken by any new independent cause,
produces an event and without which the event
would not have occurred.
Examples:
(1) If fire causes an explosion which results in
a loss, fire is the proximate cause of the
loss while explosion is the immediate
cause. The insurer is liable where either
peril is covered by the policy.
(2) If a house is insured against fire and it is
damaged by the falling of a wall of a
neighboring building (a peril not
contemplated by the contract) which is on
fire, the fire is the proximate cause
although no part of the insured house is
actually on fire
(3) Even if the fire results only after the fall of
the building and as a consequence of such,
nevertheless, the damage, so far as it is
attributable to the fire and not merely to
the falling of the building, is a loss by fire.
Here, the fire is the immediate cause of the
loss.
(4) If, however, the fall of the building,
although it occurs after a fire, is not result
of the fire, the loss is not covered by the
policy. In this case, fire is just the remote
cause of the loss for which an insurer is
NOT liable.
Hostile and Friendly fires
1. When fire is friendly fire- so long as a fire
burns in a place where it was intended to
burn,and ought to be, it is to be regarded
as merely agency for the accomplishment of
some purpose and not as a hostile peril.
2. When fire a hostile fire- it is hostile when it
occurs outside of the usual confines or
begins as a friendly fire and becomes
hostile by escaping from the place where it
ought to be to some place where it ought
not to be.
Section 87. An insurer is liable where the thing
insured is rescued from a peril insured against
that would otherwise have caused a loss, if in the
course of such rescue, the thing is exposed to
peril not insured against, which permanently
deprives the insured of its possession, in whole
or in part; or where a loss is caused by efforts to
rescue the thing insured from a peril insured
against.
1. Where the loss took place while being
rescued from the peril
The insurer is liable where the insured is
permanently deprived of the possession, in whole or
in part, of the thing insured against provided the
said property would have been lost by the peril
insured against had there been no attempt to rescue
it.
Example:
Loss of goods by theft during the removal of the
goods to save them from loss by fire is covered by a
policy against fire.
Note:
The policy against fire may contain a stipulation
exempting the insurer from any other liability for
any kind of loss besides loss by fire.
2. Where the loss is caused by efforts to
rescue the thing insured from a peril
insured against
It is the efforts to rescue the thing that caused the
loss.
Example:
Damages to goods by being trampled on or thrown
about in the efforts to put out the fire are covered by
the policy of insurance.
The insurer is also liable for loss caused by
preparing the goods for removal from the premises
although they are not actually carried out if at the
time the work of removal is begun, the property is in
such danger of fire that a reasonably prudent man
would attempt to protect it.
Example:
Damage to the insured property caused by water
during attempt to save it from fire is generally
regarded as resulting directly from the fire itself and
as making the insurer liable therefor.
Note: the insured is bound to exercise a reasonable
degree of care in removing the goods.
Section 88. Where a peril is especially excepted
in a contract of insurance, a loss, which would
not have occurred but for such peril, is thereby
excepted although the immediate cause of the
loss was a peril which was not excepted.
Where proximate cause is an excepted peril
The insurer is not liable if the proximate cause of the
loss is a peril excepted from the policy although the
immediate cause is a peril not excepted.
Example:
In fire insurance, if an explosion occurs first and
causes a fire which results in a loss, the insurer is
not liable.
Explosion: proximate cause
Fire: immediate cause
However, if fire occurs first then explosion
consequently happens, the insurer is liable.
Fire: proximate cause
Explosion: immediate cause
Note: the insurer/insurance company has the
burden of proving that the loss is caused by the
risks excepted.
Section 89. An insurer is not liable for a loss
caused by the willful act or through the
connivance of the insured; but he is not
exonerated by the negligence of the insured, or
of the insurance agents or others.
Rationale: It is to protect the insured against the
consequences of his own negligence and that of his
agents. Thus, it is a basic rule in insurance that the
carelessness and negligence of the insured or his
agents constitute no defense on the part of the
insurer.
Effects of Gross Negligence
1. Insurer liable (Ordinary negligence)
The insurer is not relieved from liability by
the mere fact that the loss was caused by
the negligence of the insured or of his
agents.
Example:
a.) A, whose life was insured, drank
whiskey which contained wood
alcohol. His negligence in drinking
whiskey was no defense in an
action on the policy for his death
resulting from consumption of
wood alcohol contained in the
beverage.
b.) Lim was covered by a personal
accident insurance. The insured
was playing with his hand gun,
from which he had previously
removed the magazine during the
birthday party of his mother. As
Lim’s secretary was watching
television, Lim stood infront of her
and pointed the gun on her. She
pushed it aside and said it might
be loaded. He assured her it was
not and then pointed it to his
temple. The next moment there
was an explosion and Lim
slumped to the floor dead.
The insurer was liable as the
cause of Lim’s death was
accidental. But it should not
prevent his widow from recovering
from the insurance policy he
obtained precisely against
accident. There is nothing in the
policy that relieves the insurer of
 the responsibility to pay the
indemnity agreed upon if the
insuredis shown to have
contributed to his own accident.
2. Insurer not liable (Gross negligence)
The insurer is relieved from liability when
such negligence was of such gross
character as to amount to misconduct or
wrongful acts.
Example:
The insured was not allowed to recover in a
marine insurance policy covering a barge
which ran aground because of the strong
waves brought about by the bad weather.
The court found that there was blatant
negligence on the part of the employees of
the insured when the operator of the tug
boat immediately left the barge at the wharf
despite the looming bad weather.
Negligence was likewise exhibited by the
representative of the insured who did not
heed the request that the barge be moved
to a more secure place. The court found
that the prudent thing to do, as was done
by the other sea vessels at the wharf during
the time in question was to transfer the
vessel to a safer wharf. Only the subject
vessel was left at the wharf.
Willful Act or Connivance
The law deprives the insured of his right to
recover the loss caused by his willful act or
connivance with others to suppress a
public menace.
Example:
When the insured intentionally burned his
house which was insured against fire, the
insurer is not liable.
Effect of Fraudulent Claim
Fraud in the statement of loss operates to
defeat the recovery upon any part of the
policy for the policy is avoided by any false
and material misrepresentation in the
statement of loss and all benefits under the
policy are forfeited.
Example:
The formal claim of the insured after the
occurrence of the loss stated that
Php190,000.00 worth of goods were lost
due to fire. Impartial witnesses, however,
attested that the value of the goods lost
was only Php50,000.00.
The insured may not recover from the
insurer. The difference between a formal
claim under the oath of approximately
Php190,000.00 alleged as the loss due to
fire, and Php50,000.00, the top figure for
the loss conceded by impartial witnesses, is
so great to indicate false statement made
intentionally and willfully. A false and
material statement made with intent to
deceive or defraud avoids an insurance
policy.
Fraud Must Be Proven
While it is an established doctrine that a
false material statement made in the notice
or proof of loss with intent to defraud or
deceive would discharge the insurer from
liability, however, fraud could not be
presumed but must be proven by clear and
convincing evidence.
Example:
Yatsil obtained several policies against the
fire covering stock of general merchandise.
The insured stocks were in a mezzanine 60
centimeters on its narrowest side and 2 ½
meters on its widest side. The stocks were
burned. The insured filed a claim for the
loss and asserted that the value of the
burned merchandise was Php22,700.00.
The insurer, on the other hand, contended
that the insured forfeited its right to cover
on the policies because it grossly
exaggerated its claim in a fraudulent
manner. The insurer argued that the
insured’s place was too small to hold goods
worth Php22,700.00 and the merchandise
could not have been worth more than Php
1000.00.
Was the insurer liable?
The difference in the valuation of the loss
as claimed by the insured and as otherwise
averred by the insurer, did not itself
warrant a finding of fraud in the estimate
of loss. Fraud cannot be presumed but
must be established by clear and
convincing evidence. And since there was
no clear evidence of fraud, the insurer was
liable.