WARRANTIES
insured or to the change of the
By: Rowena T. Buenaventura
And Nilo Tiangzon
Sec. 67. - A warranty is either express or
implied
Expressed warranty: Terms that are
specifically stated in the policy contract.
Reason of warranties
Implied warranty: Terms are presumed.
What are Warranties?
Warranty - It is a statement or promise by the
insured contained in the policy itself or
KINDS of Warranties
incorporated in or attached to it by proper
reference, the falsity or nonfulfillment of
which and regardless of whether or not the
insurer has suffered loss or prejudice as a
result of the falsity or nonfulfillment, renders
the policy voidable at the election of the
insurer
However, a warranty may also be made by the
insurer (Sec. 74)
Other definitions of warranties:
These are promises that statements
made by an insured or put down in
their proposal form are true, or that a
particular state of affairs regarding
their risks exists either at present or in
the future.
There are statements that affect the
validity of the contract and if shown
to be false or breached, can render
the policy contract void.
Warranties can also be inserted or
attached to a policy to eliminate
specific potential increases of hazard
during the policy term owing to
actions of the insured, or conditions
of property.
Purpose of warranties
The goal of warranties is to eliminate
potentially increasing hazards which
may either be due to the acts of the
condition of the property.
The principle of utmost good faith
simplifies applications processing. It
enables the insurance company to
investigate the loss only as it actually
occurs.
The insurer took into consideration
the condition of the property at the
time of effectivity of the policy
Express warranty: is an agreement
contained in the policy whereby the
insured stipulates that certain facts
relating to the risk are of shall be true,
or certain acts relating to the same
subject have been or shall done;
Implied warranty: is a warranty which
from the very nature of the contract
or from the general tenor of the
words, although no express warranty
is mentioned is necessarily embodied
in the policy as a part thereof and
which binds the insured as though
expressed in the contract
Affirmative warranty: one which
asserts the existence of a fact or
condition at the time it is made. The
warranty is continuing if it is one that
must be satisfied during the entire
coverage of the insurance
Ex: Life Insurance: I am not
or have been diagnosed with
a terminal illness
Promissory warranty: 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. It is a statement about
future facts or about facts that will
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 continue to be true throughout the
term of the policy.
Ex: Fire insurance: This
property will not be used for
the mixing of explosives.
Examples of Warranties
Life insurance: The applicant declares
that he is in good health and does not
have a terminal illness.
Marine insurance: For the warranty
of seaworthiness, the insured has to
promise that the ship that is sent to
sea is in a seaworthy state, otherwise,
the insurance company is not liable
for any loss attributable to
unseaworthiness.
Fire insurance: The insurance shall not
store flammable materials within the
premises of the insured property.
Warranty presumed affirmative
Unless the contrary intention appears,
the courts will presume that the
warranty is merely affirmative.
Ex. Where the policy describes the
property as being a two-storey
structure used as a residence there is
no warranty that such structure would
continue to be used as such.
Sec. 68. A warranty may relate to the past,
the present, the future, or to any or all of
these.
Any breach in the warranty at any time
can void the coverage.
The insurer is discharged from liability
even where a warranty has only been
breached for a short period of time and
the breach has been cured at the time of
loss.
In the case of promissory warranty, the
same may refer only to future events.
Ex. 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.
Example: Fire insurance policy warranty on
storing of flammable materials. For
Christmas and New Year, you stored some
firecrackers inside your house, which is
insured against fire. All these firecrackers
were used up on New Years Eve. Come
February, your house burns down due to
faulty electrical wiring. Can you be denied
the claim?
Yes, the insurance company
can deny your claim since there was a
breach of the warranty in the past.
Sec. 69. No particular form of words is
necessary to create a warranty
Intention of the parties governs- 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
especially if such statement is contained in
any instrument other than the policy.
Example: An applicants statement
that he is not afflicted with a specified
disease, or that he is in good health, is
presumed to be a representation and
if but a representation, is held to be
merely a statement of opinion. Its
incorrectness does not invalidate the
contract unless the opinion was
fraudulently given.
Warranties vs. Representation
WARRANTY REPRESENTATION
AS TO NATURE
Part of the contract Mere collateral inducement
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AS TO FORM Ex: the statement of the insured of his
age, purpose for which property is
Written on the face of May be written in a totally insured is used for dwelling, etc.
the policy, actually or disconnected paper or may be oral
by reference Where statement in the nature of an opinion.-
a statement in the policy which, from the very
AS TO MATERIALITY nature of the subject matter of the inquiry,
can only be an expression of an opinion is not
Presumed material Must be proved to be material strictly speaking, a warranty of its
truthfulness.
AS TO COMPLIANCE
Ex. Where the answers in an application are
Must be strictly Requires only substantial compliance qualified by the words, the above is near
complied with correct as I remember, to the best of my
knowledge and belief etc.
AS TO EFFECT OF FALSITY/NON-FULFILLMENT
Sec. 72. A statement in a policy which
Falsity or non-fulfillment Falsity renders the policy void on the imparts that it is intended to do or not to do
operates as a breach of ground of fraud a thing which materially affects the risk, is a
contract warranty that such act or omission shall take
place.
Sec. 70. Without prejudice to section 51,
every express warranty, made at or before Sec. 72 refers to a promissory
the execution of a policy, must be contained warranty. Breach of promises or
in the policy itself, or in another instrument agreement as to future acts will not
signed by the insured and referred to in the avoid a policy unless the promises are
policy as making a part of it. material to the risk

Express Warranty, where contained. The act of omission is material to the

risk if it increase the risk, and under
In a policy itself, or another
the law, only substantial increase of
instrument.- In order that a
risk works forfeiture of the policy
stipulation may be considered a
which is avoided for increase in hazard
warranty, it must form part of the
contract itself or if contained in Ex:
another instrument, it must be signed
a) if it is stipulated in a policy requiring owner
by the insured and referred to in the
occupancy that the house shall not be
policy as making a part of it.
occupied by a tenant, there is a warranty that
Sec. 71. A statement in a policy of matter such condition shall not take place.
relating to the person or thing insured, or to
b) if it is agreed that the insured shall not
the risk, as a fact, is an express warranty
store inflammable materials of any kind, there
thereof.
is warranty that such act will not be
Statement must refer to a fact- the committed.
statement in the policy relating to the
Sec. 73. When, before the time arrives for the
person or thing insured, or to the risk,
performance of a warranty relating to the
must be as a fact and not as an
future, a loss insured against happens, or
opinion or belief, to constitute and
performance becomes unlawful at the place
express warranty.
of the contract, or impossible, the omission

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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.
Exception: Section 73 which refers to those
warranties relating to the future provides 3
exceptions:
a) When loss occurs before time for
performance
Ex. If the insured warrants that within five (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 insured having complied with the
warranty, the policy is not avoided by the
failure to perform said warranty.
b) When performance becomes unlawful
Ex. The policy contains an express warranty
that the insured house which at the time was
rented to tenants shall cease to be rented and
shall be used as private dwelling for the family
of the insured within 3 months from the date
of the policy. Subsequently, a law was passed
prohibiting the ejectment of tenants without
fixed period of lease within a period of one (1)
year in view of an existing emergency. When
the loss occurs after three (3) months, the
insured has not yet complied with the
warranty. In this case, the omission to fulfil
said warranty does not avoid the policy.
c) When performance becomes impossible
failure to comply with a promissory warranty
may be due not only to legal impossibility but
also to physical impossibility.
Ex. If the insured warrants to change the party
wall of his house to concrete within a certain
period and before the date arrives, no cement
is available for private use without the fault of
the insured and subsequently the loss
happens, the non-performance of the
warranty does not also avoid the policy.
Sec. 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.
Effects of Breach of Warranty If Material :
General Rule- The violation of the
terms of a contract of insurance
entitles either party to terminate the
contractual relations.
Recission by the insured- Thus, the
insured can sue for recission 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 and he can recover
full amount of the premiums paid by
him
Recission by the insurer- Under Sec.
74, the insurer is entitled to rescind
the contract of insurance for violation
of a warranty only if said warranty is
MATERIAL; otherwise, the breach
thereof will no avoid policy (Sec. 75).
The right of the insurer to rescind
exists even though the violation was
not the direct cause of the loss.
Ex. Where a fire policy requires the
insured to give notice of the existence
of other insurance policies over the
same property insured, the non-
disclosure thereof is a violation of a
material warranty which entitles the
insurer to rescind.
Sec. 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.
Violation of Immaterial Provision
General Rule: The breach of any
provision which is not material will
not avoid the policy
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 Exception: When the policy expressly
provides or declares that a violation
thereof will avoid it.
Ex. A stipulation against procuring
additional insurance without insurers
consent although immaterial to risk
insured against (such as fire
insurance) will avoid a fire insurance
policy which declares that such
violation shall avoid it. Provided same
subject matter, same interest and
same risk.
Example: Fire insurance. Even if the
cause of the fire is faulty wiring, the
insurance company may deny the
claim on the grounds that the policy is
avoided because the policy expressly
declares that a violation thereof will
avoid it.
But, if there are no such stipulations,
the policy remains since there are no
specific provisions stated.
Sec. 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 of Warranty By the Insured
Fraud Not Essential for breach- In
order that the insurer may be entitled
to rescind a contract of insurance on
the ground of a breach of warranty,
FRAUD is NOT essentials, FALSITY, not
fraud, is the basis of liability on a
warranty.
Effect if without Fraud the policy is
avoided only from the time of breach
and the insured is entitled:
To the return of premium paid
at a pro rata rate from the
time of breach (Sec. 79) if it
occurs after the inception of
the contract
To all the premiums if it is
broken during the inception of
the contract. In this case, the
contract is void ab initio
Effect if with Fraud the policy is
avoided ab initio, and the insured is
not entitled to the return of the
premium paid.
Ex. Suppose the warranty stipulates
that the insured will not store
inflammable materials in the building
insured. If the policy was issued on
June 10, 2014 and the insured violates
the warranty on June 25, 2014, the
insurer is exonerated only from June
25, 2014. Consequently, the insurer is
liable for any loss arising before June
25 but not as to a loss occurring
thereafter. In this case, the insurer is
entitled to retain the premium up to
June 25, 2014 the time of the breach
If the insured, without fraud, makes a
false warranty at the time he signs the
contract, he cannot recover for any
loss arising thereafter because the
breach prevents the policy from
attaching the risk. The contract is void
ab initio but all the premiums should
be returned to the insured.
If the insured is guilty of fraud, he is
not entitled to the return of the
premiums paid.
Conditions in Insurance Policy
Condition it is an action that the insured
must take, or continue to take, for the
insurance policy to remain in force and the
insurance company to process a claim
Kinds of Conditions
a) Condition precedent calls for the
happening of some event or the performance
of some act after the terms of the contract
have been agreed upon, before the contract
shall be binding on the parties.
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 Ex. Condition that the policy
shall not take effect until the
delivery and payment of the
Exception vs. Warranties & Conditions
first premium during the good
health of the applicant
b) Condition subsequent pertains to the
contract of insurance after the risk has
attached and during the existence thereof.
Example: Condition requiring
notice and proof of loss in
case of loss upon an insurance
against fire.
Condition vs. Warranty
Condition Warranty
which the insurer declares himself
unwilling to undertake.
Illustration:
If the policy contains a warranted
statement the insured building is
occupied, the said statement is
WARRANTY.
If the policy states that this entire
policy shall be void if the insured
building be or becomes vacant or
unoccupied and so remained for more
than 10 days, the statement is
CONDITION.

If the policy provides that this

As to Risk Attachment company shall not be liable for any
loss while the insured building is
Limitation to the Not a limitation to the vacant or unoccupied, the statement
attachment of the risk attachment of the risk is an EXCEPTION

As to Effects of Breach

Condition precedent is Does not suspend or

one without the defeat the operation of
performance of which the contract
the contract, although
in form executed by
the parties and
delivered, does not
spring into life.

Exception in the insurance policy

Exception- it is a provision in an
insurance policy that indicates what is
denied coverage

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