WHAT ARE WARRANTIES?

Statements or promises by the insured set forth in the policy itself or

incorporated in it by proper reference, the untruth or nonfulfillment of which in any
respect, and without reference to whether the insurer was in fact prejudiced by
such untruth or nonfulfillment render the policy voidable by the insurer.

WHAT IS THE PURPOSE OF WARRANTIES?

To eliminate potentially increasing moral or physical hazards which may either

be due to the acts of the insured or to the change of condition of the property.

WHAT IS THE BASIS OF WARRANTIES?

The insurer took into the consideration the condition of the property at the
time of effectivity of the policy.

SEC. 67. A WARRANTY IS EITHER EXPRESS OR IMPLIED.

1. EXPRESS- an agreement contained in the policy or clearly incorporated

therein as part thereof whereby the insured stipulates that certain facts
relating to the risk or shall be true or certain acts relating to the same subject
have been or shall be done.
2. IMPLIED- it is deemed included in the contract although not expressly
mentioned.

Peculiar only to marine insurance, and therefore is deemed included in the

contract, although not expressly mentioned:
a. That the ship will not deviate from the agreed voyage unless deviation is
proper;
b. That the ship will not engage in illegal venture;
c. Warranty of neutrality, that the ship will carry the requisite documents of
nationality or neutrality where such nationality or neutrality is warranted;
d. Presence of insurable interest;
e. That the ship is seaworthy at the time of the commencement of the
insurance contract.

A warranty may also be affirmative or promissory. AFFIRMATIVE WARRANTY is one

which asserts the existence of a fact or condition at the time it is made. While a
PROMISSORY WARRANTY is one where the insured stipulates that certain facts or
conditions pertaining to the risk shall exist or that certain things with reference
thereto shall be done or omitted. Unless the contrary intention appears, the courts
will presume that the warranty is merely affirmative.

SEC. 68. A WARRANTY MAY RELATE TO THE PAST, THE PRESENT, THE FUTURE OR TO ANY
OR ALL OF THESE.

In case of a promissory warranty, the same may refer only to events in the future.

E.G.

1. a stipulation in the policy that the insured never suffered any heart ailment is a
warranty that relates to the past, while a stipulation that a building is occupied as a
dwelling is a warranty that relates to the present.

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2. where the insured makes a stipulation that he would employ a watchman, or
install appliances for extinguishing fires, the warranty is one that relates to the future.

SEC. 69. NO PARTICULAR FORM OF WORDS IS NECESSARY TO CREATE A WARRANTY.

Whether a statement made by the insured in the policy is a warranty depends upon
the intention of the parties in regard thereto.

In case of doubt, a statement will be construed as a representation rather than a

warranty. The parties must intend a statement to be a warranty and it must be
included as part of the contract.

WHAT ARE THE DISTINCTIONS BETWEEN WARRANTY AND REPRESENTATION?

1. WARRANTIES are considered parts of the contract, while REPRESENTATIONS

are but collateral inducements to it;
2. WARRANTIES are always written on the face of the policy actually or by
reference, while REPRESENTATIONS may be written in a totally disconnected
paper or may be oral;
3. WARRANTIES must be strictly complied with while in REPRESENTATIONS,
substantial truth only is required;
4. The falsity or nonfulfillment of a WARRANTY operates as a breach of contract,
while the falsity of a REPRESENTATION renders the policy void on the ground
of fraud; and
5. WARRANTIES are presumed material, while the insurer must show the
materiality of a REPRESENTATION in order to defeat an action on the policy.

EXPRESS WARRANTY made at or before the execution of a policy, must be

contained in the policy itself or in another instrument signed by the insured and
referred to in the policy as making a part of it.

Therefore, in order that a stipulation may be considered a warranty, it must not only
be clearly shown that the parties intended it as such but it must also form a part of
the contract itself or if contained in another instrument, it must be signed by the
insured and referred to in the policy as making a part of it. Mere reference alone is
not sufficient to give this effect.

Case: ang Giok Chip vs. Springfield (56 Phil 375) it was held that a rider attached to
a policy is a part of the contract, to the same extent and with like effect as if
actually embodied therein. Consequently it need not be signed by the insured nor
referred to in the policy as making part of it.

SEC. 71. A STATEMENT IN A POLICY, OF A MATTER RELATING TO THE PERSON OR THING

INSURED, OR TO THE RISK, AS A FACT, IS AN EXPRESS WARRANTY THEREOF.

Under sec. 71, the statement in the policy relating to the person or thing insured, or
to the risk, must be as a fact and not as an opinion, or belief to constitute an express
warranty thereof.

A statement in the policy which from the very nature of the subject matter of the
inquiry, can only be an expression of an opinion is not strictly speaking, a warranty of
its truthfulness. Such a statement, if deemed a warranty at all, 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 judgment.

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SEC. 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 TAKES PLACE.

This refers to promissory warranty. Breach of promises or agreements as to future acts

will not avoid a policy unless the promises are material to the risk.

The act or omission is material to the risk if it increases the risk under the law, only
substantial increase of risk works forfeiture of the policy which is avoided for increase
in hazard.

WHERE INSUREER BARRED BY WAIVER OR ESTOPPEL

WAIVER- an intentional relinquishment of a known right. May be express or implied.

Failure on the part of the insurer to assert a forfeiture upon breach of warranty or
condition, after knowledge thereof amounts to a waiver or estoppel. If waiver is to
be implied from conduct mainly said conduct must be clearly indicative of a clear
intent of the insurer to waive its right under the policy. (Pioneer Insurance vs. Yap, 61
SCRA 426)

ESTOPPEL- the insurer is precluded because of 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.

SEE. QUA CHEE GAN vs. LAW UNION & ROCK INS. CO., 98 PHIL 85

FIELDMENS INSURANCE Co. INC., VS. VDA DE SONGCO, 25 SCRA 70

FAR EASTERN SURETY & INSURANCE Co. VS. VDA DE MISA 25 SCRA 662

WHAT ARE THE EFFECTS OF BREACH OF WARRANTY?

1. MATERIAL:
GR: violation of material warranty or of material provision of a policy will
entitle the other party to rescind the contract.
XPN:
a. loss occurs before the time of performance of the warranty;
example: if the insured warrants that within 5 days after the execution of
the contract he will install fire extinguishers in the insured premises and the
loss occurs on the second day without the insured having complied with
the warranty, the policy is not avoided by the failure to perform said
warranty.
b. The performance becomes unlawful at the place of the contract;
Example:
and
c. Performance becomes impossible. See art. 1266 civil code
2. IMMATERIAL
GR: it will not avoid a policy.
XPN: when the policy expressly provides or declares that a violation thereof
will avoid it.

For instance, an Other Insurance Clause which is a condition in the policy

requiring the insured to inform the insurer of any other insurance coverage of
the property. A violation of the clause by the insured will not constitute a

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breach unless there is an additional provision stating that the violation thereof
will avoid the policy.