TITLE 7 Warranties

8/16/2019 TITLE 7 Warranties

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2/39

WarrantyA state#ent or pro#ise $y t%e insure&

containe& in t%e policy itsel' or incorporate& inor attac%e& to it $y proper re'erence( t%e'alsity or non'ul)ll#ent o' *%ic% an&regar&less o' *%et%er or not t%e insurer %assu+ere& loss or pre,u&ice as a result o' t%e'alsity or non'ul)ll#ent( ren&ers t%e policyvoi&a$le at t%e election o' t%e insurer.

Contract o' insurance ren&ere& voi&a$le$ase& only on t%e *arranty

-arranty #ay also $e #a&e $y t%e insurer


3/39

Section 67A warranty is either expressed orimplied.


4/39

Express vs. Implied

WarrantyExpress Warranty an agree#ent containe& in

t%e policy or clearly incorporate& t%erein as partt%ereo' *%ere$y t%e insure& stipulates t%at certain

'acts relating to t%e ris are or s%all $e true orcertain acts relating to t%e sa#e su$,ects %ave $eenor s%all $e &one.

Implied Warranty is a *arranty *%ic% 'ro# t%e

very nature o' t%e contract or 'ro# t%e general tenoro' t%e *or&s alt%oug% no e/press *arranty is#entione&( is necessarily e#$o&ie& in t%e policy asa part t%ereo' an& *%ic% $in&s t%e insure& as t%oug%e/presse& in t%e contract.


5/39

A!rmative vs. "romissory

WarrantyA!rmative Warranty is one *%ic% asserts

t%e e/istence o' a 'act or con&ition at t%e ti#eit is #a&e. 0%e *arranty is continuing i' it isone t%at #ust $e satis)e& &uring t%e entirecoverage perio& o' t%e insurance.

"romissory Warranty is one *%ere t%einsure& stipulates t%at certain 'acts orcon&itions pertaining to t%e ris s%all e/ist ort%at certain t%ings *it% re'erence t%ereto s%all$e &one or o#itte&.


6/39

Section 6#A warranty may relate to the past$ thepresent$ the %&t&re$ or to any or

all o% these.


7/39

0i#e to *%ic% *arranty

re'ers!A0 !RN0 F0RA stipulation int%e policy t%att%e insure&never su+ere&any %eartail#ent

A stipulation t%at a$uil&ing isoccupie& as a&*elling is a*arranty t%atrelates to t%epresent

-%ere t%e insure&#aes a stipulationt%at %e *oul&e#ploy a*atc%#an( orinstall appliances'or e/tinguis%ing)res( or t%at %e

*oul& not store oreep 'or sale%azar&ous goo&s int%e $uil&inginsure& &uring t%e

pen&ency o' t%epolicy.


8/39

Section 6'No partic&lar %orm o% words isnecessary to create a warranty.


9/39

Intention o% parties

(overns 0%e use o' t%e *or& *arranty &oes not necessarily

constitute a *arranty nor is t%e use o' suc% *or&not necessarily constitute a *arranty.

-%et%er suc% state#ent #a&e $y t%e insure& int%e policy is a *arranty &epen&s upon t%eintention o' t%e parties in regar& t%ereto.

In case o' &ou$t( a state#ent *ill $e construe& as

a representation rat%er t%an a *arranty especiallyi' suc% state#ent is containe& in any instru#entot%er t%an t%e policy .

0%e parties #ust inten& a state#ent to $e a

*arranty 'or it to $e part o' t%e contract.


10/39

Warranties vs.

Representations-ARRAN0I R!RN0A0INConsi&ere& parts o' t%econtract

Collateral in&uce#ents

Al*ays *ritten on t%e 'ace o't%e policy( actually or $yre'erence

5ay $e *ritten in a totally&isconnecte& paper or #ay$e oral

5ust $e strictly co#plie&*it%

u$stantial trut% only isre6uire&

Falsity or non'ul)ll#ent o' a*arranty operates as a$reac% o' contract

Falsity ren&ers t%e policyvoi&a$le or rescissi$le on t%egroun& o' 'rau&

!resu#e& #aterial Insurer #ust s%o* t%e#ateriality o' a

representation in or&er to


11/39

Section 7)Witho&t pre*&dice to Section +,$ everyexpress warranty$ made at or -e%ore theexec&tion o% a policy$ m&st -e

contained in the policy itsel% $ orin another instr&ment si(ned-y the ins&red and re%erred to in thepolicy as main( a part o% it.


12/39

/press -arrantyIn or&er t%at a stipulation #ay $e consi&ere&

a *arranty( it #ust not only $e clearly s%o*nt%at t%e parties inten&e& it as suc% $ut it #ustalso 'or# part o' t%e contract itsel' or i'containe& in anot%er instru#ent( it #ust $esigne& $y t%e insure& an& re'erre& to in t%epolicy as #aing a part o' it. 5ere re'erence

alone is not su7cient to give t%is e+ect.


13/39

An( /io 0hip vs. Sprin(1eld2ire and 3&t&al Ins&rance 0o.

+6 "hil. 47+ 5,'4,It *as %el& t%at a ri&er attac%e& to a policy is

part o' t%e contract( to t%e sa#e e/tent an&*it% t%e lie e+ect as i' actually insure& norre'erre& to in t%e policy as #aing part o' it.

Anot%er instru#ent( as use& in ec. 89 coul&not #ean a #ere slip o' paper lie a ri&er( $utso#et%ing ain to t%e policy itsel'( *%ic% inec. 4 is &e)ne& as a *ritten instru#ent in*%ic% a contract o' insurance is set 'ort%.


14/39

Section 7,A statement in a policy$ o% a matterrelatin( to the person or thin( ins&red$ or

to the ris$ as %act$ is an expresswarranty thereo%.


15/39

Express warranty re(ardin(

person$ thin($ or ris 1; tate#ent #ust re'er to a 'act

0%e state#ent in t%e policy relating to t%e person ort%ing insure&( or to t%e ris( #ust $e as a 'act an&

not as an opinion( or $elie'( to constitute an e/press*arranty

Example:

0%e state#ent o' t%e insure& as to %is age( or t%e

purpose 'or *%ic% t%e property insure& is use& lie'or &*elling( or t%at certain acts s%all not $e &one(lie storing %azar&ous goo&s( is an e/press *arranty(t%e 'alsity or $reac% o' *%ic% *oul& avoi& t%e policy.


16/39

Express warranty re(ardin(

person$ thin($ or ris 2; -%ere state#ent in t%e nature o' an opinion

A state#ent in t%e policy *%ic%( 'ro# t%e nature o' t%esu$,ect #atter o' t%e in6uiry( can only $e an e/pression

o' an opinion is not( strictly speaing( a *arranty o' itstrut%'ulness.

Example:

-%ere t%e ans*ers in an application are 6uali)e& $y*or&s


17/39

Section 78A statement in a policy$ which imparts

that it is intended to do or not to do

a thin( which materially a9ects the ris$ isa warranty that s&ch act oromission shall tae place.


18/39

"romissory Warrantyis a *arranty t%at 'acts *ill continue to $e as state& all t%roug%t%e policy perio&. uc% a *arranty assures t%at a 'act orcon&ition is an& *ill re#ain to $e true. A 'ailure o' t%e pro#issory*arranty provi&es t%e insurer *it% a &e'ense to a clai# un&er t%e

insurance policy.Breac% o' pro#ises or agree#ent as to 'uture acts *ill not avoi&a policy unless t%e pro#ises are #aterial to t%e ris

Example:

a; I' it is stipulate& in a policy re6uiring o*ner occupancy t%at

t%e %ouse s%all not $e occupie& $y a tenant( t%ere is a*arranty t%at suc% con&ition s%all not tae place.

$; I' it is agree& t%at t%e insure& s%all not store in>a##a$le#aterials o' any in&( t%ere is a *arranty t%at suc% act *ill not$e co##itte&.


19/39

Section 74When$ -e%ore the time arrives %or theper%ormance o% a warranty relatin( to the%&t&re$ a loss ins&red a(ainst happens$ orper%ormance -ecomes &nlaw%&l at theplace o% the contract$ or impossi-le$ the

omission to %&l1ll the warranty

does not avoid the policy.


20/39

The omission to %&l1ll thepromissory warranty does not

avoid the policy when:1; Loss occurs BFR ti#e arrives 'or per'or#ance o' t%e

pro#issory *arranty ?ec. 83;@

2; !er'or#ance $eco#es NLA-FL $e'ore ti#e arrives 'or

per'or#ance o' t%e pro#issory *arranty ?ec. 83;@3; !er'or#ance $eco#es I5!IBL $e'ore ti#e arrives 'or

per'or#ance o' t%e pro#issory *arranty@

Note: Failure to co#ply *it% a pro#issory *arranty #ay$e &ue not only to legal i#possi$ility $ut also to p%ysical

i#possi$ility ?see Art. 12( Civil Co&e; Another Exception : -aiver or estoppel.

Breac% o' *arranty operates to &isc%arge t%e insurer 'ro#lia$ility unless t%e insurer is lia$le $ecause o' a *aiver o' t%e*arranty or estoppel.


21/39

Section 7;The violation o% a materialwarranty$ or other material

provision o% a policy$ on the part o%either party thereto$ entitles theother to rescind.


22/39

E22E0T ER theins&red or ins&rer$ entitles the other toRES0IN.

The right of the insurer to rescind underSection 74 exists even though the violation wasnot the direct cause of the loss.


23/39

=reach o% material warranty

may either -e:,Witho&t %ra&d

a I% -reach witho&t %ra&d is made -y theins&red a%ter the inception o% the contract$

the ins&rer will -e exonerated %rom the timeit occ&rsB

- I% -reach witho&t %ra&d is made d&rin( theinception$ it prevent the policy %rom tain(

e9ect.8With %ra&d: The policy is avoided a- initio

EC0E"TI


24/39

Exceptions:1; Loss occurs BFR ti#e arrives 'or per'or#ance o' t%e

pro#issory *arranty ?ec. 83;@

2; !er'or#ance $eco#es NLA-FL $e'ore ti#e arrives 'orper'or#ance o' t%e pro#issory *arranty ?ec. 83;@

3; !er'or#ance $eco#es I5!IBL $e'ore ti#e arrives 'orper'or#ance o' t%e pro#issory *arranty@

Note: Failure to co#ply *it% a pro#issory *arranty #ay$e &ue not only to legal i#possi$ility $ut also to p%ysical

i#possi$ility ?see Art. 12( Civil Co&e; Another Exception : -aiver or estoppel.

Breac% o' *arranty operates to &isc%arge t%e insurer 'ro#lia$ility unless t%e insurer is lia$le $ecause o' a *aiver o' t%e*arranty or estoppel.


25/39

"hilippine /&aranty 0o./.R. No. L87'48


26/39

Section 7+A policy may declare that a violation o%speci1ed provisions thereo% shall avoid it$otherwise the -reach o% an immaterialprovision does not avoid the policy.


27/39

E22E0T


28/39

Warranties in 2ire Ins&rance,Dse o% condition o% a thin( ins&red is

limited -y the policyB

8Ins&red alters the &se o% conditionwitho&t the consent o% the ins&rerB

4Alteration is -y means within the controlo% the ins&redB

;Alteration increased the ris 5increase o%haGard or chance o% lossB

+Alteration is act&al and s&-stantial 5Sec.,6#


29/39

Warranties in 2ire Ins&ranceNotes:

,A condition in the policy which reF&ires ins&redto disclose to the ins&rer o% any ins&rance that$

i% violated -y the ins&red$ wo&ld ipso factoavoid the contract 5"ioneer v. ?ap$ ,'7;

8Ins&rer is -arred -y waiver 5or estoppel toclaim violation o% the socalled hydrantswarranty when$ despite nowin( %&lly that only8 1re hydrants existed 5o&t o% the ,, hydrantsreF&ired$ it is still iss&ed the ins&rance policiesand received the premi&ms 5H&a 0hee /an v.Law Dnion$ ,'++


30/39

Section 76A -reach o% warranty witho&t %ra&dmerely exonerates an ins&rer%rom the time that it occ&rs$ or where it is-roen in its inception$ prevents the policy%rom attachin( to the ris.


31/39

1.Without any fraud, the policy is avoided onlyfrom the time of the breach and the insured isentitled to:

i. Return of premium paid at a pro rata rate from thetime of breach if it occurs after the inception of thecontract or

ii. to all the premiums if it is bro!en durin" theinception of the contract. #n this case, the contract isvoid ab initio and never becomes bindin".

Where there is fraud, the policy is void ab initio,and the insured is not entitled to the return ofthe premium paid.


32/39

"RDENTIAL /DARANTEE and ASSDRAN0E IN0.$5"etitioner

vs.

TRANSASIA S>I""IN/ LINES$ IN0.$ 5Respondent


33/39

0%e Facts!lainti+ 0RANAIAD is t%e o*ner o' t%e

vessel 5E" Asia orea. In consi&eration o'pay#ent o' pre#iu#s( &e'en&ant

!RGN0IALD insure& 5E" Asia orea 'orlossE&a#age o' t%e %ull an& #ac%inery arising'ro# perils( inter alia( o' )re an& e/plosion 'ort%e su# o' !49 5illion.


34/39

n cto$er 2H( 13( *%ile t%e policy *as in'orce( a )re $roe out *%ile 5E" Asia orea*asD un&ergoing repairs at t%e port o' Ce$u.

n cto$er 2( 13 plainti+ 0RANAIAD)le& its notice o' clai# 'or &a#age sustaine&$y t%e vessel.

In a letter &ate& 21 April 18 &e'en&ant!RGN0IALD &enie& plainti+s clai#


35/39

-%y *as it &enie&JKA'ter a care'ul revie* an& evaluation o' your

clai# arising 'ro# t%e a$ovecaptione&inci&ent( it %as $een ascertaine& t%at you are

in $reac% o' policy con&itions( a#ong t%e#K-ARRAN0G "L CLAG ANG CLA5AIN0AINGK.


36/39

Issue-EN !RGN0IAL 'aile& to esta$lis% t%at 0RANAIA violate& an& $reac%e& t%e policycon&ition on -ARRAN0G "L CLAG

ANG CLA 5AIN0AING( as containe& in t%esu$,ect insurance contract.


37/39

el&-e sustain t%e )n&ings o' t%e Court o'

Appeals t%at !RGN0IAL *as not success'ulin &isc%arging t%e $ur&en o' evi&ence t%at

0RANAIA $reac%e& t%e su$,ect policycon&ition on CLAG ANG CLA5AIN0AING.


38/39

RationaleAs 'oun& $y t%e Court o' Appeals an& as

supporte& $y t%e recor&s( Bureau "eritas is aclassi)cation society recognize& in t%e #arine

in&ustry. As it is un&ispute& t%at 0RANAIA*as properly classe& at t%e ti#e t%e contracto' insurance *as entere& into( t%us( it$eco#es incu#$ent upon !RGN0IAL to

s%o* evi&ence t%at t%e status o' 0RANAIAas $eing properly CLAG $y Bureau "eritas%a& s%i'te& in violation o' t%e *arranty.n'ortunately( !RGN0IAL 'aile& to support

t%e allegation.


39/39

n sec. 84 It is generally accepte& t%at KaD *arranty is a state#ent orpro#ise set 'ort% in t%e policy( or $y re'erence incorporate&t%erein( t%e untrut% or non'ul)ll#ent o' *%ic% in anyrespect( an& *it%out re'erence to *%et%er t%e insurer *as in

'act pre,u&ice& $y suc% untrut% or non'ul)ll#ent( ren&erst%e policy voi&a$le $y t%e insurer.K o*ever( it is si#ilarlyin&u$ita$le t%at 'or t%e $reac% o' a *arranty to avoi& apolicy( t%e sa#e #ust $e &uly s%o*n $y t%e party allegingt%e sa#e. -e cannot sustain an allegation t%at is

un'oun&e&. Conse6uently( !RGN0IAL( not %aving s%o*nt%at 0RANAIA $reac%e& t%e *arranty con&ition( CLAGANG CLA 5AIN0AING( it re#ains t%at 0RANAIA #ust$e allo*e& to recover its rig%t'ul clai#s on t%e policy.

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TITLE 7 Warranties

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