INSURANCE LAW

DEVICES USED FOR ACERTAINING AND

CONTROLLING RISKS AND LOSS
• Concealment
• Representation
• Exceptions
• Warranties
• Condition
• RISK- chance of loss, or the possibility of
the occurrence of a loss, based on known
and unknown factors
• PERIL – the contingent or unknown event
which may cause a loss that one insures
against. Its existence creates the risk and
its occurrence results to loss
• HAZARD- condition or factor, tangible or
intangible, which may create or increase
the chance of loss from a given peril
 4 PRIMARY CONCERNS OF THE
PARTIES TO AN INSURANCE CONTRACT
1. Determine if loss occurs, and if so, the
Amount thereof (CONDITION)
2. Control of risk to guard against increase
of risk (WARRANTIES AND CONDITIONS)
3. Correct estimation of risk which enables
insurer to determine if he will approve
the policy application and if so at what
premium rate (CONCEALMENT AND
REPRESENTATION
 4 PRIMARY CONCERNS OF THE
PARTIES TO AN INSURANCE CONTRACT
4. Precise delimitation of the risk which
determines the extent of the contingent
duty to pay undertaken by the insurer
(EXCEPTION)
 CONCEALMENT
Neglect to communicate that which a party
knows and ought to communicate
• Party concealing is duty bound to
disclose a material fact which he neglects
to do so
• Other party has no means of ascertaining
the fact concealed
• Party concealing makes no warranty as to
the fact concealed
• Party concealing knows such fact
• Concealment takes place at the time
contract was entered into, not afterwards
The duty of disclosure ends with the
completion and effectivity of the contract.
Failure to communicate info acquired after
the effectivity of the policy will not be a
ground to rescind the contract . Info is no
longer material as it will no longer
influence the other party to enter into such
contract (Agos v Phil Am Life Insurance)
Materiality is determined not by the event,
but solely by the probable and reasonable
influence of the facts upon the party to
whom the communication is due, in
forming his estimate of the advantages of
the proposed contract or in making his
inquiries
• Insured need not die of the disease he
had failed to disclose to the insurer. It is
sufficient that his non-disclosure misled
the insurer in forming his estimates of
the risks of the proposed insurance
policy or in making inquiries (Sunlife vs
CA)
 Materiality:
Ordinary vs Marine Insurance
ORDINARY INS MARINE INSURANCE
FACT OF FACT OF CONCEALMENT IN
CONCEALMENT BY ANY OF THE MATTERS
INSURED GIVES ENUMERATED IN SEC 112 OF
THE INSURER THE INSURANCE CODE DOES NOT
RIGHT TO RESCIND VITIATE THE ENTIRE CONTRACT.
THE CONTRACT OF INSURER IS EXONERATED ONLY
INSURANCE IF THE FACT CONCEALED IS THE
CAUSE OF THE LOSS.
OTHERWISE, INSURER WILL
 Materiality:
Ordinary vs Marine Insurance
ORDINARY INS MARINE INSURANCE
BELIEF AND BELIEF AND EXPECTATIONS OF
EXPECTATION OF THIRD PERSONS NEED TO BE
THIRD PERSONS DISCLOSED IF RELATING TO
NEED NOT BE MATERIAL FACTS
DISCLOSED
RULES on concealment are more strict in
marine insurance due to the difference in the
character of the property and the greater facility
the insurer possesses in obtaining information
as to its conditions and surrounding
circumstances which are often insured when
absent or afloat
 EFFECT OF CONCEALMENT
• By the insured – contract becomes voidable at
the insurer’s option (recession of contract)
• By the insurer – contract becomes voidable at
the insured’s option as the duty of utmost
good faith is breached by concealment
Reason: contractual duty of disclosure
imposed by utmost good faith is not
required of the insured alone, but is
imposed with equal stringency upon the
insurer since the insurer’s dominant
bargaining position carries with it a stricter
responsibility
• Burden of proof- party claiming the
existence of concealment must prove
that there was knowledge of the fact
concealed on the part of the party
charged with concealment
• Good faith not a defense – concealment
whether intentional or unintentional
entitles the injured party to rescind the
contract of insurance
 MATTERS THAT NEED NOT BE DISCLOSED
IN THE ABSENCE OF I NQUIRIES
• Those which prove or tend to prove the
existence of a risk excluded by a warranty, and
which are not otherwise material
• Those which the other knows
• Those of which the other waives
communication
• Those which, in the exercise of ordinary care,
the other ought to know and of which, the
former has no reason to suppose him ignorant
• Those which relate to a risk excepted from the
policy and which are not otherwise material
• Information of the nature or amount of the
interest of one insured except as prescribed
by sec 51 of the Code.
Note: However, a policy of insurance must
specify the interest of the insured in
property insured, if he is not the absolute
owner thereof like mortgagee. But there is
no need to disclose the interest in the
property insured if it is absolute
 MATTERS THAT NEED NOT BE DISCLOSED
EVEN IN ANSWER TO INQUIRIES
• Information of his own Judgment except
marine insurance
• General causes which are open to his
inquiry, equally with the other, and all
general usages of trade
 MATTERS THAT MUST BE DISCLOSED
EVEN IN THE ABSENCE OF INQUIRY
• Those which the other has no means of
ascertaining
• Those material to the contract
• Those which the party with the duty to
communicate makes No warranty
 Proof of fraud in concealment
• Insurer need not prove fraud in order to
rescind the contract on the ground of
concealment except falsity of warranty
which must be intentional and fraudulent
for the contract to be rescinded
Reason: If it were necessary for the insurance
company to show actual fraud on the part of
the insured, then it is plain that it would be
impossible for it to protect itself and its honest
policyholders against fraudulent and improper
claims. It would be wholly at the mercy of
anyone who wished to apply for insurance, as
it would be impossible to show actual fraud
except in the extreme cases (Saturnino v Phil
Am Life insurance)
Exception: falsity of warranty must be
intentional and fraudulent for the contract to
be rescinded
 WAIVER OF INFORMATION
• EXPRESS- buy the terms of the contract
• IMPLIED – failure to make an inquiry as to
such facts, where they are distinctly implied in
other facts from which information is
communicated
 REPRESENTATION
• Oral or written statement made by the insured
(or insurer) at the time of or prior to the
issuance of the policy, relative to the risk to be
insured, as to an existing or past fact or state
of facts, or concerning a future happening, to
give information to the insurer and otherwise,
induce him to enter into the insurance
contract
Kinds of Representation
AS to Form:
• Oral
• Written
AS to time when representation may be made
• At the time of issuing the policy
• Before issuing the policy
AS to NATURE
• Affirmative – any allegation as to the existence
or non-existence of fact when the contract
begins
• Promissory- any promise to be fulfilled after
the contract has come into existence or any
statement concerning what is to happen
during the existence of the insurance
• Representation must be presumed to refer to
the date on which the contract goes into
effect
• Thus, no false representation if it is true at the
time the contract takes effect although false at
the time it was made
• There is false representation if it is true at the
time it was made but false at the time the
contract takes effect
NOTE: statements promissory of
conditions to exist subsequent to the
completion of the contract may be
conditions or warranties. They cannot be
representations.
• Representation, not being part of the contract
may be withdrawn or altered before the
contract actually takes effect but not
afterwards since the insurer has already been
led by the representation in assuming the risk
contemplated in the contract
• Representations are construed liberally in
favor of the insured and are required to be
only substantially true
• Although false, representation of the
expectation, intention, belief, opinion or
judgement of the insured will not avoid the
policy if there is no actual fraud in inducing
the acceptance of the risk, or if it is accepted
at a lower rate of premium. This is likewise the
rule although the statement is material to the
risk, if the statement is obviously of the
foregoing character,
since in such case, the insurer is not justified in
relying upon such statement, but is obligated to
make further inquiry. Xxxx (Philamcare vs CA)
 Information obtained from third
persons
Gen Rule: insured is given discretion to
communicate to the insurer what he knows of a
matter of which he has no personal knowledge.
If the representation turns out to be false, he is
not responsible therefor, provided he gives
explanation that he does so on the info of others
• Information obtained from others, if false, not
responsible for false representation
• Exception: when information proceeds from
an agent of the insured, whose duty is, in the
ordinary course of business, to communicate
such info to his principal and it was possible
for the agent under such circumstances in the
exercise of due diligence to have made such
communication before making of the contract,
the insured will be liable for the truth
Note: where the insured merely signed the
application form and made the agent of
the insurer file the same for her, the
insured made the agent of the insurer as
her own agent
 FALSE REPRESENTATION: REQUISITES
• Insured stated a fact which is untrue
• With knowledge that it is untrue and with
intent to deceive or which he states positively
as true without knowing it to be true and
which has a tendency to mislead
• Such fact in either case is material to the risk
 REPRESENTION:
ORDINARY VS MARINE INSURANCE
ORDINARY MARINE
Representations are Substantial truth of a
not required to be representation is not
literally true; they sufficient
need only be
substantially true
 REPRESENTION:
ORDINARY VS MARINE INSURANCE
ORDINARY MARINE
In order to avoid a Insured is required
policy, a to state the exact
representation relied and whole truth in
upon must be false relation to all matter
in a substantial or that he represents,
material respect or upon inquiry
discloses or assumes
to disclose
 EFFECT OF MISREPRESENTATION
• Injured party is entitled to rescind the contract
from the time the representation becomes
false
• The 2nd sentence of sec. 45 re: waiver of right
to rescind of the insurer upon acceptance of
premium payments despite discovery of fraud
has been dleted by RA 10607
 CHARACTERISTICS OF
MISREPRESENTATION
• Refers to date the contract goes into effect
• May be altered or withdrawn before the
insurance is effected but not afterwards
• Made at the time of, or before issuing the
policy and not after except if insured wants
the insurer to make a modification of the
policy
• Oral or written
• Not a part of the contract but merely a
collateral inducement
Concealment vs Misrepresentation
• In concealment, insured withholds info of
material facts from insurer while in
misrepresentation, insured makes erroneous
statements of facts with the intent of inducing
the insurer to enter into the insurance
contract
• Same rules apply to determine materiality
• In both, gives insurer the right to rescind the
contract, intentional or not
 WARRANTY
• Statement or promise by the insured (or
insurer) contained in the policy itself or
incorporated in or attached to it by proper
reference, the falsity or non-fulfilment of
which and regardless of whether or not the
insurer has suffered loss or prejudice as a
result of the falsity or non-fulfilment, renders
the policy voidable at the election of the
insurer.
• May relate to the past, present and future or
any or all of these
PURPOSE: To eliminate potentially
increasing hazards which may either
be due to the acts of the insured or to
the change of the condition of the
property

REASON: insurer took into

consideration the condition of the
property at the time of effectivity of
the policy
 KINDS
• EXPRESS- agreement expressed in a policy
• IMPLIED- no express warranty is mentioned
but necessarily embodied in the policy as a
part thereof and which binds the insured as
though expressed in the contract
• Affirmative- 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
• Promissory- 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
• Promissory (ex. Seaworthiness of the
vessel; non-deviation from the agreed
voyage or non-indulgence in illegal
ventures
• NOTE: UNLESS the contrary intention
appears, the courts will presume that the
warranty is merely affirmative
 EFFECTS OF BREACH OF WARRANTY-
IF MATERIAL
• MATERIAL- violation of material warranty or of
material provision of a policy will entitle the
other party to rescind the contract; except if
the performance becomes unlawful at the
place of the contract; loss occurs before the
time arrives for the performance of the
warranty; and performance becomes
impossible
• NOTE: The right of the insurer to rescind
exists even though the violation was not
the direct cause of the loss
 Breach of warranty by insured
• In order that the insurer may be entitled
to rescind a contract of insurance on the
ground of breach of warranty, fraud is
not essential. Falsity, not fraud, is the
basis of liability on warranty
• Falsity not fraud is the basis of liability on a
warranty
• With fraud- policy is avoided ab initio; insured
is not entitled to the return of premium paid
• Without fraud- policy is avoided only from the
time of breach; insured is entitled to return of
premium pro rata if it occurs after inception
of contract; return to all premiums if broken
during the inception of the contract, in this
case contract is void ab initio
 EFFECT OF BREACH OF WARRANTY-
IF IMMATERIAL
• IMMATERIAL – will not avoid the policy
except if there is express provision to the
contrary (ex. Other insurance clause
violated, premium not paid, warranty
clause violated, insured vehicle not a
common carrier)
 Warranty vs Representation
• Warranty is part of the contract while
representation is a mere collateral inducement
• Warranty is written on the policy or by reference;
representation maybe written in the policy or
may be oral
• Warranty must be complied; representation
requires only substantial truth and compliance
• Warranty-falsity or non-fulfilment operates as
breach of contract; representation -falsity on the
ground of fraud renders policy void
 EXCEPTION/EXCLUSION
• Provision in an insurance policy that indicates
what is denied coverage
• Insurer has the burden of proving that the loss
comes within the purview of the exception or
limitation
 CONDITION
• 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
• Non performance of which , although in form
executed by the parties and delivered, does
not spring the contract into life
• Limitation to the attachment of the risk
 Kinds of Conditions
1. 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 (i.e condition
that the policy shall not take effect until the
delivery and payment of the first premium
during the good health of the applicant )
2. Condition subsequent – pertains to the
contract of insurance after the risk has
attached and during the existence thereof
(ex. Condition requiring notice and proof of
loss in case of loss upon an insurance
against fire)
CONDITION WARRANTY
Limitation to the Not a limitation to the
attachment of risk attachment of risk
Non-performance of Breach does not
which, although in suspend or defeat the
form executed by the operation of the
parties and delivered, contract
does not spring the
contract into life
Occurrence of breach Occurrence of breach
temporarily renders the temporarily renders the
entire contract entire contract
voidable voidable
• Breach of warranty or condition renders
the contract voidable at the option of the
insurer; but if he so elects, he may waive
his privilege and power to rescind by the
mere expression of an intention to do so.
In that event his liability under the policy
continues as before
• If the policy contains a warranted
statement that 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
a CONDITION.
• If the policy provides that “this
company shall not be liable for any
loss while the insured building is
vacant or unoccupied”, this
statement is an EXCEPTION
 RESCISSION; GROUNDS
• Breach of material warranty
• False representation
• Breach of a condition subsequent
• Alteration of the thing insured
• Concealment
 INCONTESTABILITY CLAUSE
• Precludes the insurer from raising the defense
of false representations or concealment of
material facts insofar as health and previous
diseases are concerned if the issuance has
been in force for at least 2 years during the
insured’s lifetime (Tan vs CA)
REQUISITES OF INCONTESTABILITY
• Must be a life insurance policy
• Must be payable on the death of the insured,
and
• It must be in force during the lifetime of the
insured for at least two years from its date of
issue or of its last reinstatement (may be
shortened but it cannot be extended by
stipulation)
 DEFENSES NOT BARRED BY
INCONTESTABILITY CLAUSE
• Beneficiary fails to furnish proof of death or to
comply with any conditions imposed by the
policy after the loss has happened
• Premiums have not been paid
• Cause of death of insured is an excepted risk
• Person taking the insurance lacks insurable
interest,
• Etc….
 POLICY OF INSURANCE
• Written instrument in which a contract of
insurance is set forth
• Not necessary for the perfection of the
contract, it being consensual in nature
• Written instrument evidencing the contract of
insurance
• Cannot be issued or delivered unless in the
form previously approved by the insurance
commission
 Contents of POlicy
• Rate of premium
• Risk insured against
• Amount of insurance except open or running
policies
• Parties
• Property or life insured
• Interest of the insured in the property of
which he is not the absolute owner
• Duration of the insurance
 KINDS OF INSURANCE POLICY
• OPEN POLICY- the value of the thing insured
is not agreed upon and the amount of the
insurance merely represents the insurer’s
maximum liability; value of such thing shall be
determined at the time of the loss
• VALUED POLICY- expresses on its face
agreement that the thing insured shall be
valued at a specified sum
• RUNNING POLICY – contemplates successive
insurances and which provides that the object
of the policy may be from time to time
defined, especially as to the subjects of
insurance, by additional statements or
endorsements
• Delivery of policy(actual or constructive), is
important because it is evidence of the
making of a contract and of its terms; it is
communication of the insurer’s acceptance of
the insured’s offer; and it may affect the term
of the coverage
 PAPERS ATTACHED TO THE POLICY
• WARRANTY
• RIDER – attachment that modifies the
condition of the policy by expanding or
restricting its benefits or excluding certain
conditions from coverage; prevails over the
agreement in the policy
• ENDORSEMENT – any provision added to an
insurance contract altering its scope or
application
• CLAUSE – agreement between parties on
certain matters relating to the liability of the
insurer in case of loss
• No rider, clause, warranty, or endorsement
shall be attached to, printed or stamped upon
such policy, certificate or contract unless the
Form of such application, rider, etc, has been
approved by the Commissioner
• Rider, clause, etc is attached to the policy
• If not applied for by the insured or owner, the
rider, clause, etc shall be countersigned by the
insured
• The descriptive title or name of the rider, et is
mentioned and written on the blank spaces
provided in the original printed policy form
• Rider, etc pasted or attached to the policy is
considered part of the policy or contract of
insurance
 COVER NOTE
• A concise and temporary written contract
issued by the insurer through its duly
authorized agent embodying the principal
terms of an expected policy of insurance
• Intended to give temporary written contract
issued by the insurer through its agent
embodying the principal terms of an expected
policy of insurance
• Valid for 60 days after which the policy must
be issued
• Period may be extended or renewed beyond
60 days with written approval of the
commissioner
• Not treated as separate policies but should be
integrated to the regular policies subsequently
issued so that the premiums on regular
policies include the consideration for the
cover note
 CANCELLATION OF NON-LIFE POLICY
Insurer has the right to cancel a policy (unilateral) of
insurance other than life- Grounds are,
• Policy would violate the Insurance code
• Conviction of a crime out of acts increasing the
hazard insured against
• Willful and reckless acts or omissions increasing
the risk insured against
• Physical changes in the property insured making
it uninsurable
• Discovery of other insurance coverage that
makes the total insurance in excess of the
value of the property insured
• Non-payment of premiums
• Fraud or material misrepresentation
 PREMIUM
• Agreed price for assuming and carrying the
risk, i.e the consideration paid to an insurer
for undertaking to indemnify the insured
against a specified peril
• No insurance policy issued or renewal is valid
and binding until actual payment of the
premium. Any agreement to the contrary is
void (Cash and Carry Rule)
 EFFECTS OF NON-PAYMENT OF
PREMIUM
• First Premium- prevents the contract from
becoming binding notwithstanding the
acceptance of the application or the issuance
of the policy unless waived
• Subsequent premium – does not affect the
validity of the contract unless, by express
stipulation, it is provided that the policy shall
in that event be suspended or shall lapse
• Non-payment of the balance of the premium
due does not produce the cancellation of the
contract
 Defenses available for Non-Payment
• Fortuitous event
• Condition, conduct or default of insurer
• Payment of premium by check- insurer is
liable –payment was honored and official
receipt was issued 4 days after the fire. Any
insurance company which delivers a policy or
contract of insurance to an insurance agent
shall be deemed to have authorized the latter
to receive on its behalf payment of any
premium xxxx
It is bound by agent’s akcnowledgment of
receipt of payment (Sec. 306).
An acknowledgment in a policy of the receipt of
premium is conclusive evidence of its payment,
so far as to make the policy binding,
notwithstanding any stipulation therein that it
shall not be binding until the premium is
actually paid (Sec 78)(American Home vs Chua)
• Payments of Premium through Agent; Effect
The insurance company is liable for damages to
the insured for having cancelled the policy for
alleged failure to pay the premium, when in fact
premium had been paid to the agent of insurer
who failed to remit the same xxxxxxx even if
policy was reinstated later (Areola vs CA)
 Non payment of premium
• Non payment of premium does not merely
suspend but puts an end to an insurance
contract since time of payment is peculiarly of
the essence of the contract (Valenzuela v CA)
• Partial payment of premium would not make
the insurance coverage effective (Tibay vs CA)
• Payment of premium is a condition precedent
to and essential for, the efficaciousness of the
insurance contract xxx exceptions
1. Life or industrial (health) insurance when a
grace period applies
2. When insurer makes a written
acknowledgment of receipt of premium ---
conclusive evidence of premium payment
(Southsea vs CA)
 Other admitted exceptions
• Government employees pay their insurance
premiums through salary deductions
• Parties agreed payment of premiums by
instalment and partial payment has been
made at the time of the loss (Makati v CA)
• There is agreement to grant the insured credit
extension and the loss occurs before the
expiration of the credit term (UCPB v
Masagana)
 RETURN OF PREMIUMS TO INSURED
• Contract is voidable due to fraud or
misrepresentation of the insurer or his agents
(sec 82)
• Recession is granted due to the insurer’s
breach of contract (Sec 74)
• If the thing insured was never exposed to the
risks insured against (Sec 80)
• Contract is voidable because of facts which
the insured was ignorant without his fault
(Sec82)
• Insurer never incurred liability (sec 82)
• Insurance is void because it is illegal and the
parties in pari delicto
 PRO-RATA RETURN TO INSURED
• Insurance is for a definite period and the
insured surrenders his policy before the
termination thereof
• When there is over insurance
 DEVICES IN LIFE INSURANCE
• Cash surrender value – the amount the insurer
agrees to pay to the holder of the policy if he
surrenders it and releases his claim upon it
• Paid Up Insurance – no more payments are
required and consist of insurance for life in
such an amount as the sum available
therefore, considered as a single and final
premium xxx
• Automatic loan clause – stipulation in the
policy providing that upon default in payment
of premium, the same shall be paid from the
loan value of the policy until that value is
consumed
• Grace Period – after payment of first
premium, insured is entitled to a grace period
of thirty days within which to pay the
succeeding premiums
• Reinstatement – provision that the holder of
the policy shall be entitled to reinstatement of
the contract at any time within three years
from the date of default in the payment of the
premium unless
 LOSS
• 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.
 Loss is satisfied by
• Payment of loss
• Reinstatement (repair or restoration) of
the property lost or damaged
• Replacement (substitution) with another
or similar property
Requisites of recovery in case of LOSS

• Interest must be properly covered by the

policy
• There must be a loss
• Insured must have insurable interest in
the subject matter
• Loss must be proximately caused by the
peril
 When insurer is liable for loss
• Proximate cause is the peril insured
against
• Loss caused by a peril not insured against
to which the thing insured was exposed
in the course of rescuing the same from
the peril insured against
• Loss caused by efforts to rescue the thing
insured from a peril insured against
 When insurer is liable for loss
• Loss the immediate cause of which is the
peril insured against except where
proximate cause is an excepted peril
• Loss through the negligence of the
insured except where there was gross
negligence amounting to willful act
REASON: One of the purposes for taking
out insurance is to protect the insured
against the consequence of his own
negligence and that of his agents. Hence
carelessness and negligence of the insured
or his agents is not a defense on the part of
the insurer (FGU Insurance v CA)
 When INSURER is NOT Liable
• Loss by the insured’s willful act or gross
negligence
• Loss due to the connivance of the insured
(insurer is not liable for a loss caused by
intentional act of the insured or through his
connivance. Such loss is not within the
contemplation of a contract of insurance
because one of the requisites of which is that
the risk should not be subject to the control
of the parties
 When INSURER is NOT Liable
• Loss where the excepted peril is the proximate
cause
 Proximate cause
• That which in a natural and continuous
sequence, unbroken by any new
independent cause, produces an event
and without which the event would not
have occured
 Immediate cause
• Final act in a series of provocations
leading to a particular result or event,
directly producing such result without
the intervention of any further
provocation
 Burden of proof
• An except risk constitutes a defense by
the insurer because it has not assumed
that risk. The insurer has the burden of
proving that the loss comes within the
exception
 Notice of Loss
• Formal notice given by the insured or
claimant under a policy after the
occurrence of the policy insured against
 Purposes of Notice
• To be able to take such actions as may be
necessary to protect its interest from
fraud or imposition
• To apprise the insurance co with the
occurrence of the loss
• In case of property insurance, to prevent
further loss to the property
NOTE: Insurer cannot be held liable to pay
a claim unless he receives notice of that
claim. Under the law, if notice of loss is not
given to insurer by the person insured or
by the person entitled to the benefit of
insurance without unnecessary delay, or in
a timely manner, the insurer is exonerated
or discharged from liability even though
the loss is one the policy was designed to
protect against
 TIME OF GIVING NOTICE
• Must be given without unnecessary delay
or within a reasonable time
• Note: formal notice of loss is not
necessary if the insurer already has
actual notice.
 PROOF OF LOSS
• Formal evidence given to the company
by the insured or claimant under a policy
of the occurrence of the loss, the
particulars thereof and the data
necessary to enable the company to
determine its liability and the amount
thereof
• When a preliminary proof of loss is
required by a policy, the insured is not
bound to give such proof as would be
necessary in a court of justice, but it is
sufficient for him to give the best
evidence which he has in his power at
that time
NOTE: In case of loss upon an insurance
against fire, an insurer is exonerated , if
written notice thereof be not given to him
by an insured, or some person entitled to
the benefit of the insurance, without
unnecessary delay
 Purposes
• To afford the insurer a means of
detecting any fraud that may have been
practiced upon him
• To give the insurer information by which
he may determine the extent of his
liability
• To operate as a check upon extravagant
claims
 When delay in presentation of notice
or proof of loss is deemed waived
• If delay is caused by any act of the
insurer
• By failure to take objection promptly and
specifically upon that ground
 Defects in the Notice of Proof of Loss
are waived when the insurer
• Joins in the proceedings for determining
the amount of the loss by arbitration,
making no objections on account of
notice and preliminary proof
• Writes to the insured that he considers
the policy null and void as the furnishing
of notice or proof of loss would be
useless
 Defects in the Notice of Proof of Loss
are waived when the insurer
• Makes objection on any ground other
than formal defect in the preliminary
proof
• Recognizes his ability to pay the claim, or
• Denies all liability under the policy
 Test to determine whether the third
person may directly sue the insurer of
the wrongdoer
• Where the contract provides for
indemnity against liability to third
persons, then the latter to whom the
insured is liable, can directly sue the
insurer
• Where the insurance is for indemnity
against actual loss or payment, then third
persons cannot proceed against the
insurer, the contract being solely to
reimburse the insured for liability
actually discharged by him through
payment to third persons, said third
person’s recourse being, thus limited to
the insured alone