WARRANTIES

It is a statement or promise stated in the policy or incorporated therein by reference, whereby the INSURED
expressly or impliedly (Section 67) contracts as to the past, present or future (Section 68) existence of certain facts
conditions or circumstances the LITERAL TRUTH of which is essential to the validity of the contract. Examples: AS
TO PAST That he never had a heart ailment, AS TO THE PRESENT That he is in good health/ That house is being
utilized as a residence. AS TO THE FUTURE That insured will not store explosives
FORM
No particular form of words is necessary to create a warranty (Section 69). What is essential is what the parties
intend a statement to be, and if so intended as a warranty it must be included as part of the contract. NOTE:(1) Whether
a warranty is constituted or not depends upon the intention of the parties, the nature of the contract, or the words used
thereto (2) In case of doubt, the statement is presumed to be a representation not a warranty.
WHAT ARE THE KINDS OF WARRANTIES
1.
Affirmative those that relate to matters that exist AT or BEFORE the issuance of the policy. Example: that
vessel is equipped of a competent crew.
2.
Promissory those where the insured promises or undertakes that certain matters shall exist or will be done
or will be omitted after the policy takes effect. It is a statement in the policy, which imports 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 take place (Section 72).
Example: That a house shall not be leased out. That the insureds premises will be fenced.
NOTE that unless the contrary intention appears, the courts will presume that the warranty is merely an affirmative
warranty. Example: A description of the property as being a two storey residence- there is no promissory warranty that
it will be maintained as a residence OR there is a statement that there is a security guard on duty at night is not a
promissory warranty that a security guard will be maintained.
3.
Express a statement in a policy of a matter relating to the person or thing insured, or to the risk as a fact
(Section 71) and where the assertion or promise is clearly set forth in the policy or incorporated therein by reference.
They can be affirmative or promissory warranties.
AN EXPRESS WARRANTY MADE AT OR BEFORE THE EXECUTION OF THE POLICY SHOULD BE
CONTAINED (a) in the policy itself. (b) in another instrument signed by the insured and referred to in the policy as
making a part of it (Section 70). This includes a RIDER - it is a part of the policy, it need not be signed unless the rider
was issued after the original policy took effect.
4.
Implied where the assertion or promise is not expressly set forth in the policy but because of the general
tenor of the terms of the policy or from the very nature of the insurance contract, a warranty is necessarily inferred or
understood. Note that the law only provides for implied warranties in contracts of marine insurance. See Sections 113
(seaworthiness) and 126 (deviation).
EFFECT OF VIOLATION OF A WARRANTY
The violation of a material warranty, or other material provision of the policy, on the part of either party thereto,
entitles the other to rescind (Section 74) Note that the insured can exercise the right also when the insurer violates a
warranty, like when it refuses to grant a loan on the policy. BUT as far as the insured, NOTE ALSO that (1) while 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 (Section 75). MEANING- ORDINARILY A BREACH OF AN
IMMATERIAL PROVISION DOES NOT AVOID A POLICY, however, if stipulated that any breach avoids the policy,
the policy is avoided. (2) a breach of warranty without fraud, merely exonerates an insurer from the time it occurs, or
where it is broken at its inception, prevents the policy from attaching to the risk (Section 76). MEANING- that if the
breach is without fraud- the policy is avoided only from the time of the breach, prior to the breach it is still effective.
Consequently, the insured is entitled to a pro-rate return of the premium paid under Section 79 (b) or all premiums,
if the breach occurs at the inception of the contract, as such is void ab initio and had never become binding.
NOTE that a CAUSAL CONNECTION between the violation of the warranty is not necessary So, even if the violation
did not contribute to the loss the other party may still rescind. Example: A insured building against fire. A warranty
stated that no hazardous goods would be stored.A stored fireworks. The building was burned and the fireworks were
discovered stored in the area not affected by the fire. The Insurer was not held liable as the storage had increased the
risk (Young v. Midland Textile Ins. 30 PHIL 617)

THE NON-PERFORMANCE OF A PROMISSORY WARRANTY DOES NOT AVOID THE POLICY WHEN BEFORE
THE ARRIVAL OF THE TIME FOR PERFORMANCE
(1) the loss insured against happens. Example: There is a warranty that a firewall will be constructed, but fire occurs
before the period for compliance (2) the performance becomes unlawful at the place of the contract. Example: A law
or ordinance prohibits the construction of the specified firewall (3) the performance becomes impossible. Example: A
severe lack of materials to construct. (Section 73)
DISTINGUISHING IT FROM REPRESENTATIONS.
1.

A warranty is part of the contract, while a representation is merely a collateral inducement thereto.

2.
A warranty is expressly set forth in the policy or incorporated therein by reference while a representation may
be oral or written in another statement.
3.

A warranty must be strictly and literally performed while a representation must be substantially true.

4.

A warranty is presumed material while a representation must be shown to be so.

5.
A breach of warranty is a breach of the contract itself while a (mis) representation is ground to rescind the
contract.