When breach of warranty does not avoid policy

GR: Validation of a warranty avoids a contract of insurance EXECPT: 1. When loss occurs before time for performance. 2. When performance becomes unlawful. 3. When performance becomes impossible. Either legal impossibility or physical impossibility

Where insurer ------ by waiver or estoppel Breach of warranty operates to discharge the insurer frim liability unless the insurer is liable because of a waiver of the warranty or an estoppel.

Waiver an intentional relinquishment of a known right, can be express or implied. If waiver is to be implied from conduct, said conduct must be clearly indicative of the intent to waive rights under the policy by the insurer. Under 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 included to enter into the contract by the insurers representation or conduct. It would be against equity and good conscience for insurer to assert such defense. Right to rescind for violation of a material warranty A. Rescission by insured Violation of the terms of a contract of insurance entitles either party to terminate the contractual relation. If breach of contract is due to the refusal of the insurer to grant a loan applied for although this was expressly agreed upon in the policy.

B. Rescission by insurer The insurer is entitled for rescission for violation of a warranty only if said warranty is material. (sec. 74). Furthermore, the right of rescission east even though the violation was not the direct cause of the loss.

When violation of immaterial provision avoid policy GR: Only material violations of warranty entitle the insurer to rescind the contract. Except: 1. Parties expressly stipulate that violation of a particular provision (even immaterial) in the policy will avoid it. (sec. 75) Effects of breach of warranty by insured Depends on whether there is fraud. A. Without fraud the policy is avoided only from the time of breach (sec. 76) and insured is entitled to : 1.) Return of premium paid at a pro rata rate from time of breach. 2.) To all premiums if it is broken during the inception of the contract. In the latter case, the contract is void ----------- and never becomes binding. B. With fraud The policy is avoided ------ and insured is not entitled to return of premium paid. Condition an event signifying in its broadest sense either in occurrence or non-occurrence that alters the previously existing legal relatives of the parties to the contract. 2 Kinds of Condition 1. Condition precedent the happening of some event or performance of some act after the terms of the contract have been agreed upon, before the contract shall be binding on the parties. 2. Conditional subsequent pertains not to the attachment of the risk and the inception of the policy, but to the contract of insurance after the risk has attached and during the existence thereof.

Effect

Nature

Warranties Conditions 1.) Does not 1.) In condition precedent suspend/defect the non-performance of operation of the which contract does contract; affords the not spring into life. remedy expressly - Limitation to provided in contract / attachment of risk. law. - Does not necessarily have the effect. 2.)

Exceptions inserted in the contract of insurance for purpose of withdrawing from the coverage of the policy, as delimited by the general language describing the risk assumed, some specific risk which the insurer declares himself unwilling to undertake.

Warranty Binding contract Force of Occurrence of breach, even if temporary, renders the entire contract voidable. Such breach may not have affected the risk or contributed to the loss in anyway.

Condition -

Exceptions Occurrence of an excepted peril, does not affect the binding force of the contract. If loss occurred, falls outside the coverage of the policy and insurer liable, if no less occurred, the contract relative remain unchanged. Insurer does not became liable for any excepted loss by waiver unless such waiver arrived to a new

Liability when there is waiver

contract on valuable consideration

Premium the agreed price for assuming and carrying the risk the consideration paid an insurer for undertaking to indemnify the insured against a specified peril. Note: When only one premium is paid for several thing not separately valued or separately insured, making for only one cause or consideration, the insurance contract is entire or indivisible, not severable, or divisible, as to items insured. Assessment: Sum specifically levied by mutual insurance companies, upon a fixed and definite plan, to play losses and expresses. Premiums Assessments - Contributes from all members of the - Contributes from all members of the insuring organization to make good the insuring organization to make good the losses of individual members. losses of individual members. - Levied and paid to meet anticipated - Collected to meet actual losses. losses. - Unless otherwise agreed, are legally - Payment is not enforceable against the enforceable once levied. insured. - Properly levied, unless otherwise - Not a debt. agreed, considered a debt.

Payment of premium ordinarily Not a debt or obligation 1.) In fire, casualty and marine insurance, the premium becomes a debt as soon as the risk attaches. The phrase the thing insured is exposed to the peril insured against assumes that the contract is perfected which takes place when applicants offer is accepted by the insurer. Nonpayment of the premium due does not produce the cancellation of the contract of insurance in the series that it can no longer be enforced.

Possible Situations A. Balance of premium not paid Effect: Insurer can still demand either specific performance that is payment of the premium or rescission. Having chosen specific performance, the policy is not cancelled and the contract perfected, they can demand from each other performance of obligation they have with each other. B. No premium paid Effect: Insurer cannot recover premium because the continuance/existence of his obligation is condition upon the payment of premium, so that no recovery can be had upon a lapsed policy, the contractual relations have ceased. Insurer has a valid define against recovery by the insured from the peril. C. Partially paid, and paid after loss occurred Effect: Phoenix doctrine: The insurer demanding the remainder (balance) without any other pre condition to its enforceability, the insurer showed his intention to continue with existing contrast at insurance. (Waiver of pre payment in full by insures) Tibay doctrine: The policy is not enforceable until the premium has been paid in full and daily acknowledge. I.E. as expressly agreed upon the contract, full payment must be made before the risk occurs for the policy to be considered effective and in force. Note: ------------------------2.) In life insurance Premium becomes a debt only when in the case if the first premium, the contract has become binding, and in the case of subsequent premiums, when the insurer has continued the insurance after maturity of the premium, in consideration of the insured expressed or implied promise to pay. Effect of nonpayment of premium GR: Rules applicable to payment of money obligation applies to payment of premiums. The time has specified for payment is of the essence of the contract.