Insurance Notes : Marine Insurance 1r2d2

Warranties 1. Warranty of Seaworthiness 2. Warranty that the ship has documents of neutrality or nationality 3. Warranty against improper deviation 4. Warranty of legality of voyage Seaworthiness. The ship must be seaworthy at the inception of the voyage. A finding of otherwise precludes the insured from recovery. Sec. 113. In every marine insurance upon a ship or freight, or freightage, or upon any thing which is the subject of marine insurance, a warranty is implied that the ship is seaworthy. A ship is seaworthy if it can withstand the rigors of the voyage, and that it is properly laden, provided with competent crew and equipped with appropriate appurtenances and equipment. Sec. 114. A ship is seaworthy when reasonably fit to perform the service and to encounter the ordinary perils of the voyage contemplated by the parties to the policy. Sec. 115. An implied warranty of seaworthiness is complied with if the ship be seaworthy at the time of the of commencement of the risk, except in the following cases: (a) When the insurance is made for a specified length of time, the implied warranty is not complied with unless the ship be seaworthy at the

commencement of every voyage it undertakes during that time; (b) When the insurance is upon the cargo which, by the of the policy, description of the voyage, or established custom of the trade, is to be transhipped at an intermediate port, the implied warranty is not complied with unless each vessel upon which the cargo is shipped, or transhipped, be seaworthy at the commencement of each particular voyage. Sec. 116. A warranty of seaworthiness extends not only to the condition of the structure of the ship itself, but requires that it be properly laden, and provided with a competent master, a sufficient number of competent officers and seamen, and the requisite appurtenances and equipment, such as ballasts, cables and anchors, cordage and sails, food, water, fuel and lights, and other necessary or proper stores and implements for the voyage. A ship may be seaworthy for the purpose of insurance upon the ship and yet be unseaworthy for purposes of insurance upon the cargo. The shipper has the obligation to find a common carrier that would transport his cargo competently. Sec. 119. A ship which is seaworthy for the purpose of an insurance upon the ship may, nevertheless, by reason of being unfitted to receive the cargo, be unseaworthy for the purpose of the insurance upon the cargo.

1 Notes on Warranties from : Timoteo Aquino’s Insurance Laws “Amat Victoria Curam” By: Felipe S.R. RSI Petitor Aequi

Waiver. The warranty of seaworthiness is waived if the insurer paid the insured the value of the lost cargoes. This does not mean however that the waiver of the warranty for insurance purposes that the insurer can no longer raise the fact that the vessel is not seaworthy when insurer will exercise its right of subrogation agains the party who is at fault. The vessel must be seaworthy when Sec. 115. An implied warranty of seaworthiness is complied with if the ship be seaworthy at the time of the of commencement of the risk, except in the following cases: (a) When the insurance is made for a specified length of time, the implied warranty is not complied with unless the ship be seaworthy at the commencement of every voyage it undertakes during that time; (b) When the insurance is upon the cargo which, by the of the policy, description of the voyage, or established custom of the trade, is to be transhipped at an intermediate port, the implied warranty is not complied with unless each vessel upon which the cargo is shipped, or transhipped, be seaworthy at the commencement of each particular voyage.

portion, the ship is seaworthy with reference to that portion. 1. Voyage policy – at the commencement of the voyage 2. Time policy - at the commencement of every voyage commenced during a specified time 3. Port policy – at the time the vessel is exposed to any risk at the port 4. Cargo policy and the goods are to be transshipped – at the commencement of each particular voyage. Generally it is only the commencement of the voyage that is the reckoning point to determined if the implied warranty of seaworthiness is complied with. IF the vessel becomes unseaworthy during the voyage, there is no breach of warranty. Except. Sec. 118. When the ship becomes unseaworthy during the voyage to which an insurance relates, an unreasonable delay in repairing the defect exonerates the insurer on ship or shipowner's interest from liability from any loss arising therefrom. EG. If ship is damaged and the ship owner does not have it fixed at once.

Sec. 117. Where different portions of the voyage contemplated by a policy differ in respect to the things requisite to make the ship seaworthy therefor, a warranty of seaworthiness is complied with if, at the commencement of each 2 Notes on Warranties from : Timoteo Aquino’s Insurance Laws “Amat Victoria Curam” By: Felipe S.R. RSI Petitor Aequi

DOCUMENTS OF NATIONALITY OR NEUTRALITY Sec. 120. Where the nationality or neutrality of a ship or cargo is expressly warranted, it is implied that the ship will carry the requisite documents to show such nationality or neutrality and that it will not carry any documents which cast reasonable suspicion thereon. 1. The vessel has the requisite documents of nationality or neutrality if nationality or neutrality is expressly warranted and 2. The vessel will not carry documents that will cast reasonable suspicion of its nationality or neutrality if nationality or neutrality is expressly warranted. Nationality or neutrality is NOT impliedly warranted. It is the presence of documents and absence of documents that will cast suspicion that are impliedly warranted. However the implied warranties flow from the express warrant of neutrality or nationality. LEGALITY There is an implied warranty that the adventure is a lawful one and that so far as the insured can control the matter the adventure shall be carried out in a lawful manner.. IF an integral voyage is illegal in any respect at its commencement, no insurance can legally be effected on any part of it, though such part, taken by itself would be illegal.

VOYAGE AND DEVIATION ROUTE. Sec. 121. When the voyage contemplated by a marine insurance policy is described by the places of beginning and ending, the voyage insured in one which conforms to the course of sailing fixed by mercantile usage between those places. Sec. 122. If the course of sailing is not fixed by mercantile usage, the voyage insured by a marine insurance policy is that way between the places specified, which to a master of ordinary skill and discretion, would mean the most natural, direct and advantageous. The course shall be determined in the ff. order. 1. Course agreed upon by the parties 2. If nothing agreed upon then one that conforms to the course of sailing fixed by mercantile usage 3. IF there is no mercantile usage one which a master of ordinary skill and discretion would find to be the most natural, direct and advantageous. DEVIATION Sec. 123. Deviation is a departure from the course of the voyage insured, mentioned in the last two sections, or an unreasonable delay in pursuing the


voyage or the commencement of an entirely different voyage. 1. Departure from the course of the voyage insure mentioned in the last two sections 2. Unreasonable delay in pursuing the voyage or the commencement of an entirely different voyage

consequence of the happening or one or more of the accidents or misfortune insured against by the marine insurer. Kinds. 1. Total 2. Partial Every loss which is not total is partial. Sec. 127. A loss may be either total or partial.

Deviation is proper when. Sec. 124. A deviation is proper: (CAGG) (a) When caused by circumstances over which neither the master nor the owner of the ship has any control; (b) When necessary to comply with a warranty, or to avoid a peril, whether or not the peril is insured against; (c) When made in good faith, and upon reasonable grounds of belief in its necessity to avoid a peril; or (d) When made in good faith, for the purpose of saving human life or relieving another vessel in distress. Sec. 125. Every deviation not specified in the last section is improper. Sec. 126. An insurer is not liable for any loss happening to the thing insured subsequent to an improper deviation.

Sec. 128. Every loss which is not total is partial. Sec. 129. A total loss may be either actual or constructive. Sec. 130. An actual total loss is cause by: (a) A total destruction of the thing insured; (b) The irretrievable loss of the thing by sinking, or by being broken up; (c) Any damage to the thing which renders it valueless to the owner for the purpose for which he held it; or (d) Any other event which effectively deprives the owner of the possession, at the port of destination, of the thing insured. Sec. 131. A constructive total loss is one which gives to a person insured a right to abandon, under Section one hundred thirty-nine.

LOSS – means the injury or damage sustained by the insured in 4 Notes on Warranties from : Timoteo Aquino’s Insurance Laws “Amat Victoria Curam” By: Felipe S.R. RSI Petitor Aequi

There is total loss of the vessel if it is rendered valueless to the owner. To render it valueless to the owner, it is not necessary that there should be an actual or total loss or destruction of all the different parts of the entire vessel. There is total loss of the ship when she has sustained such extensive damage that it would not be reasonably practical to repair her. Constructive Total Lost Also called commercial total loss or conventional total laws, based on arithmetic computation fixed by law. Sec. 139. A person insured by a contract of marine insurance may abandon the thing insured, or any particular portion thereof separately valued by the policy, or otherwise separately insured, and recover for a total loss thereof, when the cause of the loss is a peril insured against: (a) If more than three-fourths thereof in value is actually lost, or would have to be expended to recover it from the peril;

not take under the circumstances; or (d) If the thing insured, being cargo or freightage, and the voyage cannot be performed, nor another ship procured by the master, within a reasonable time and with reasonable diligence, to forward the cargo, without incurring the like expense or risk mentioned in the preceding subparagraph. But freightage cannot in any case be abandoned unless the ship is also abandoned. Presumed actual total loss 1. Continued absence of the ship for a considerable length of time 2. The vessel has not been heard of Sec. 132. An actual loss may be presumed from the continued absence of a ship without being heard of. The length of time which is sufficient to raise this presumption depends on the circumstances of the case. Reshipment –

(b) If it is injured to such an extent as to reduce its value more than three-fourths; (c) If the thing insured is a ship, and the contemplated voyage cannot be lawfully performed without incurring either an expense to the insured of more than three-fourths the value of the thing abandoned or a risk which a prudent man would

Sec. 133. When a ship is prevented, at an intermediate port, from completing the voyage, by the perils insured against, the liability of a marine insurer on the cargo continues after they are thus reshipped. Nothing in this section shall prevent an insurer from requiring an additional if the hazard be increased by this extension of liability.


Sec. 134. In addition to the liability mentioned in the last section, a marine insurer is bound for damages, expenses of discharging, storage, reshipment, extra freightage, and all other expenses incurred in saving cargo reshipped pursuant to the last section, up to the amount insured. Nothing in this or in the preceding section shall render a marine insurer liable for any amount in excess of the insured value or, if there be none, of the insurable value. Rules 1. If goods are reshipped, the insurance over the goods continue until they are thus reshipped 2. The insurer may require the additional if the hazard is increased by this extension of liability 3. The marine insurer is bound to pay for damages, expenses of discharging, storage, reshipment, extra freightage, and all other expenses incurred in saving the cargo reshipped pursuant to the last section up to the amount insured 4. The marine insurer shall not be liable for any amount in excess of the insured value, if there be none, the insurable value.

and the abandonment is made in favor of the persons to whom the carrier is liable. In marine insurance there is a need for constructive total loss and the abandonment is made in favor of the insurer. REQUISITES Sec. 140. An abandonment must be neither partial nor conditional. Sec. 141. An abandonment must be made within a reasonable time after receipt of reliable information of the loss, but where the information is of a doubtful character, the insured is entitled to a reasonable time to make inquiry. Sec. 142. Where the information upon which an abandonment has been made proves incorrect, or the thing insured was so far restored when the abandonment was made that there was then in fact no total loss, the abandonment becomes ineffectual. Sec. 143. Abandonment is made by giving notice thereof to the insurer, which may be done orally, or in writing; Provided, That if the notice be done orally, a written notice of such abandonment shall be submitted within seven days from such oral notice.

ABANDONMENT. Abandonment different from abandonment in Maritime law. Under the limited liability rule in maritime law, there is no need for constructive total loss of the vessel

Sec. 144. A notice of abandonment must be explicit, and must specify the particular cause of the abandonment, but need state only enough to show that there is probable cause therefor, and need not be accompanied with proof of interest or of loss.


Sec. 145. An abandonment can be sustained only upon the cause specified in the notice thereof. Thus requisites are. (ACNRFOE) 1. There must be an actual relinquishment by the person insured of his interest in the thing insured. 2. There must be constructive total loss 3. The abandonment be neither partial nor conditional 4. It must be made within a reasonable time after receipt of reliable information of the loss 5. It must be factual 6. It must be made by giving notice therof to the insurer which may be done orally or in writing (if orally, written in 7 days) 7. The notice of abandonment must be explicit and must specify the particular cause of abandonment. EFFECTS OF ABANDONMENT Sec. 146. An abandonment is equivalent to a transfer by the insured of his interest to the insurer, with all the chances of recovery and indemnity. Sec. 147. If a marine insurer pays for a loss as if it were an actual total loss, he is entitled to whatever may remain of the thing insured, or its proceeds or

salvage, as if there had been a formal abandonment. Sec. 148. Upon an abandonment, acts done in good faith by those who were agents of the insured in respect to the thing insured, subsequent to the loss, are at the risk of the insurer and for his benefit. Sec. 149. Where notice of abandonment is properly given, the rights of the insured are not prejudiced by the fact that the insurer refuses to accept the abandonment. Sec. 150. The acceptance of an abandonment may be either express or implied from the conduct of the insurer. The mere silence of the insurer for an unreasonable length of time after notice shall be construed as an acceptance. Sec. 151. The acceptance of an abandonment, whether express or implied, is conclusive upon the parties, and its the loss and the sufficiency of the abandonment. Sec. 152. An abandonment once made and accepted is irrevocable, unless the ground upon which it was made proves to be unfounded. Sec. 153. On an accepted abandonment of a ship, freightage earned previous to the loss belongs to the insurer of said freightage; but freightage subsequently earned belongs to the insurer of the ship. ACCEPTANCE OF ABANDONMENT . If the requisites are complied with for


a valid abandonment, the insurer may not reject the abandonment. REVOCATION . Generally is irrevocable except when the ground proves to be unfounded, as in the case where there is in fact no constructive total loss. Sec. 142. Where the information upon which an abandonment has been made proves incorrect, or the thing insured was so far restored when the abandonment was made that there was then in fact no total loss, the abandonment becomes ineffectual. Sec. 152. An abandonment once made and accepted is irrevocable, unless the ground upon which it was made proves to be unfounded. FAILURE TO ABANDON. If the insured fails to abandon, he may still be indemnified for the actual value of the loss. Sec. 155. If a person insured omits to abandon, he may nevertheless recover his actual loss. MEASURE OF INDENMNITY The amount of indemnity in marine insurance is affected by the type of policy involved. VALUED POLICY. In a valued policy, the valuation is conclusive upon the parties except when there is fraud when the valuation was fixed. Sec. 156. A valuation in a policy of marine insurance in conclusive

between the parties thereto in the adjustment of either a partial or total loss, if the insured has some interest at risk, and there is no fraud on his part; except that when a thing has been hypothecated by bottomry or respondentia, before its insurance, and without the knowledge of the person actually procuring the insurance, he may show the real value. But a valuation fraudulent in fact, entitles the insurer to rescind the contract. Sec. 156. A valuation in a policy of marine insurance in conclusive between the parties thereto in the adjustment of either a partial or total loss, if the insured has some interest at risk, and there is no fraud on his part; except that when a thing has been hypothecated by bottomry or respondentia, before its insurance, and without the knowledge of the person actually procuring the insurance, he may show the real value. But a valuation fraudulent in fact, entitles the insurer to rescind the contract. Sec. 157. A marine insurer is liable upon a partial loss, only for such proportion of the amount insured by him as the loss bears to the value of the whole interest of the insured in the property insured. Sec. 158. Where profits are separately insured in a contract of marine insurance, the insured is entitled to recover, in case of loss, a proportion of such profits equivalent to the proportion which the value of the


property lost bears to the value of the whole. Sec. 159. In case of a valued policy of marine insurance on freightage or cargo, if a part only of the subject is exposed to the risk, the evaluation applies only in proportion to such part. Sec. 160. When profits are valued and insured by a contract of marine insurance, a loss of them is conclusively presumed from a loss of the property out of which they are expected to arise, and the valuation fixes their amount. Open policy. In a valued policy, there is no conclusive value that is fixed therein. The determination of the value of the thing insured is governed by the ff provisions. Sec. 161. In estimating a loss under an open policy of marine insurance the following rules are to be observed:

the fluctuation of the market at the port of destination, or to expenses incurred on the way or on arrival; (c) The value of freightage is the gross freightage, exclusive of primage, without reference to the cost of earning it; and (d) The cost of insurance is in each case to be added to the value thus estimated. *primage- Primage (adopted from the Fr. primage, from prime, recompense, Lat. praemium, reward), a commercial term signifying originally a small customary payment over and above the freight made to the master of the ship for his care and trouble. It is now generally included in the freight, as an additional percentage. It varies according to the usages of different ports and particular trades. CO-INSURANCE CLAUSE

(a) The value of a ship is its value at the beginning of the risk, including all articles or charges which add to its permanent value or which are necessary to prepare it for the voyage insured;

Sec. 157. A marine insurer is liable upon a partial loss, only for such proportion of the amount insured by him as the loss bears to the value of the whole interest of the insured in the property insured.

(b) The value of the cargo is its actual cost to the insured, when laden on board, or where the cost cannot be ascertained, its market value at the time and place of lading, adding the charges incurred in purchasing and placing it on board, but without reference to any loss incurred in raising money for its purchase, or to any drawback on its exportation, or to

There is always co-insurance in marine insurance Requisites 1. There must be partial loss 2. There is under-insurance, meaning the insurance coverage is less than the value of the property insured.


Formula Amount of partial loss x Amt of insurance = SI Amount of insurance

lost bears to the value of the whole. Thus formula Value of lost property/value of property x Expected profits = liability.

SI= Share of insurer Partial Loss of cargo. Sec. 157 applies only to marine insurance. If in fire, there must be stipulation If in freightage or cargo, if only part is exposed to risk, valuation applies only in proportion to such part. PROFITS. May be valued policy Sec. 160. When profits are valued and insured by a contract of marine insurance, a loss of them is conclusively presumed from a loss of the property out of which they are expected to arise, and the valuation fixes their amount. 1. If shipowner insured the profits that he expects from the sale of the goods that he is transporting in his ship for a particular voyage. If the profits are fixed at 1M, the insurer is liable for such amount upon the total loss of the goods in transit. The amount fixed in the policy as the profits is conclusively presumed to be the amount of the profits which were lost. 2. However, when profits are separately insured in a contract of marine insurance, the insured is entitled to recover, in case of loss, a proportion of such profits equivalent to the proportion which the value of the property

Sec. 162. If cargo insured against partial loss arrives at the port of destination in a damaged condition, the loss of the insured is deemed to be the same proportion of the value which the market price at that port, of the thing so damaged, bears to the market price it would have brought if sound. SUE AND LABOR CLAUSE. Requires the insured and his representative to take all reasonable steps that are necessary to limit or reduce an imminent loss. Indemnity will be given by the insurer for such efforet, Sec. 163. A marine insurer is liable for all the expenses attendant upon a loss which forces the ship into port to be repaired; and where it is stipulated in the policy that the insured shall labor for the recovery of the property, the insurer is liable for the expense incurred thereby, such expense, in either case, being in addition to a total loss, if that afterwards occurs. APPLICATION OF OLD MATERIALS. If old materials are to be applied towards payment of the new, in case of partial loss of the ship or its equipment. Unless otherwise stated in


the policy, a marine insurer is liable only for two-thirds of the remaining cost of repairs after such deduction, except that anchors must be paid in full. AVERAGES. Averages are all extraordinary or accidental expenses which may be incurred during the voyage in order to preserve the vessel, the cargo or both and any damage or deterioration which the vessel may suffer from the time it puts to sea from port of departure until it casts anchor in the port of destination as well as those suffered by the merchandise from the time they are loaded in the port of shipment until they are loaded. FREE FROM PARTICULAR AVERAGE CLAUSE (FPA). Clause which limits liability in case of partial loss. Particular average also known as simple average. Sec. 136. Where it has been agreed that an insurance upon a particular thing, or class of things, shall be free from particular average, a marine insurer is not liable for any particular average loss not depriving the insured of the possession, at the port of destination, of the whole of such thing, or class of things, even though it becomes entirely worthless; but such insurer is liable for his proportion of all general average loss assessed upon the thing insured. FPAAC- American conditions – a particular average is not payable unless the loss is caused by the

vessel’s being stranded, sunk, burnt on fire or collision FPAEC- English conditions. Not payable unless the carrying vessel has been stranded, sunk or burnt in collision. If any of those perils occurs, the FPAEC is breached and the particular average caused by the peril of the sea or any other insured peril during the voyage will be covered even if there is no causal connection between the stranding, sinking, burning or collision and the particular average loss. SIMPLE PARTICULAR AVERAGE. All expenses and damages caused to vessel or her cargo which have not inured to the common benefit and profit of all the person interested in the vessl and her cargo. If not general, then it is particular. Not so deliberate. Such as victuals and wages of the crew when stranded GENERAL AVERAGE. Shall include all damages and expenses which are deliberately caused in order to save the vessel, its cargo or both at the same time for real and known risk. Requisites. 1. There must be common danger 2. For the common safety, part of the vessel or of the cargo or both is sacrificed deliberately. 3. From the expenses or damages caused follows the successful saving of the vessel and cargo 4. The expenses or damages have been incurred or inflicted after


taking proper legal steps and authority.

the contributing value of the thing insured.

Common danger- Well, must be coming from the danger that arises from the accidents of the sea, dispositions of authority or faults of men. Must be imminent.

Formula.

It must be VOLUNTARY SACRIFICE. Jettisoning of goods in order to save the ship. It must be deliberate, not destroyed because of circumstances without fault of the captain, or fortuitous event.

Sec. 165. When a person insured by a contract of marine insurance has a demand against others for contribution, he may claim the whole loss from the insurer, subrogating him to his own right to contribution. But no such claim can be made upon the insurer after the separation of the interests liable to the contribution, nor when the insured, having the right and opportunity to enforce the contribution from others, has neglected or waived the exercise of that right.

There must be Successful Saving and proper legal steps should be taken. Who will PAY GENERAL AVERAGE. Those who benefited from the sacrifice. Code of Commerce Article 812 all persons having interest in the vessel and cargo at the time of the occurrence of the average shall contribute. Art. 859 of the code of commerce imposes statutory obligation on part of marine insurer to shoulder the share pertaining to the property that it insured. Sec. 164. A marine insurer is liable for a loss falling upon the insured, through a contribution in respect to the thing insured, required to be made by him towards a general average loss called for by a peril insured against; provided, that the liability of the insurer shall be limited to the proportion of contribution attaching to his policy value where this is less than

Amount of insurance/value of property insured x GA contribution of insured = amount paid

Insurer must pay for the lost but is subrogated to the rights of insured and collect from those who benefited in the average. Insurer cannot recover if. 1. There is separation of interest liable to contribution 2. Insured neglects to claim contribution when he already has opportunity to enforce the same 3. Insured waives the right to claim contribution FIRE INSURANCE Shall include insurance against lost by FLEW TO 1. Fire


2. 3. 4. 5. 6.

Lightning Earthquake Windstorm Tornado Other Allied risks

Fire – oxidation of a degree that is sufficient to produce a visible flame. Hostile fire only. Meaning fire out of control. Friendly fire is when fire is controlled,. Lightning. May be provided that discharge of atmospheric electricity may be insured against. If fire results, the loss is compensable because fire is the immediate cause so long as lightning is not an excepted peril. WINDSTORM. 75 miles per hour. However, since evidence of velocity is hard to get. Then if wind is such a force as to cause damage it is deemed a windstorm and the resulting losses are covered. Earthquake. Covered by separate policy, because it increases the risk and cost. Always an exclusion PROPERTY INSURED. Must be adequately described in policy. In construing words used to describe property , the greates liberality is shown by the courts in giving effect to the insurance. Courts are inclined to consider that the policy covers any building which the parties manifestly intended to insure however inaccurate the description may be.

ALTERATIOn. Sec. 168. An alteration in the use or condition of a thing insured from that to which it is limited by the policy made without the consent of the insurer, by means within the control of the insured, and increasing the risks, entitles an insurer to rescind a contract of fire insurance. Sec. 169. An alteration in the use or condition of a thing insured from that to which it is limited by the policy, which does not increase the risk, does not affect a contract of fire insurance Thus the rules. (ULWCI) 1. The alteration is on the use or condition of the thing insured 2. The use or condition of the thing insured is limited in the policy 3. The alteration is without consent of insurer 4. The alteration is within the control of the insured 5. The alteration increases the risk. Mere negligence temporarily endangering the property does not violate the law. SUBSEQUENT ACTS OF THE INSURED. Contract not affected by any act of the insured executed subsequent to the execution of the policy., which does not violate its provisions, even if it increases the risk and is the cuase of the loss.


Measure of indemnity depends if it is an open policy or valued policy. VAlUED POLICY. Valuation shall be fixed in policy and binding upon the parties. Valuation fraudulent in fact entitles insurer to rescind the contract. Sec. 172. Whenever the insured desires to have a valuation named in his policy, insuring any building or structure against fire, he may require such building or structure to be examined by an independent appraiser and the value of the insured's interest therein may then be fixed as between the insurer and the insured. The cost of such examination shall be paid for by the insured. A clause shall be inserted in such policy stating substantially that the value of the insured's interest in such building or structure has been thus fixed. In the absence of any change increasing the risk without the consent of the insurer or of fraud on the part of the insured, then in case of a total loss under such policy, the whole amount so insured upon the insured's interest in such building or structure, as stated in the policy upon which the insurers have received a , shall be paid, and in case of a partial loss the full amount of the partial loss shall be so paid, and in case there are two or more policies covering the insured's interest therein, each policy shall contribute pro rata to the payment of such whole or partial loss. But in no case shall the insurer be required to pay more than the amount thus stated in such policy.

This section shall not prevent the parties from stipulating in such policies concerning the repairing, rebuilding or replacing of buildings or structures wholly or partially damaged or destroyed. OPTION TO REBUILD CLAUSE. Parties may stipulate that the insurer may cause the repair, rebuilding or replacement of the building or structures wholly or partially destroyed or damaged. Operates as a wholesale check upon the insured in estimating the valued off the damaged goods. OPEN POLICY. There is no valuation in the policy, the measure of indemnity in an insurance agains fire is the expense it would be to the insured at the time of the commencement of the fire to replace the thing lost or injured in the condition in which at the time of the injury. INDIRECT LOSSES. 1. Financial loss due to the direct physical damage of physical property 2. Indirect or consequential losses arising out of the loss of use of the property. Consequential losses 1. Business interruption insurance – Insurer is liable for the loss suffered consisting of loss of earnings comprising of net profits that could have been


realized had the business continued. 2. Extra Expense insurance – Covers extraordinary expenses that may be incurred in an effort to avoid interruption of service. Covers additional expenses over and above the normal cost of doing business if necessitated by a afire or other insured peril at the described premises. 3. Rent insurance – protects the insured from loss of rent income Prohibition.

insured such that the insuraer will pay a fraction of each loss equal to the so called coinsurance apportionment ratio.

Sec. 173. No policy of fire insurance shall be pledged, hypothecated, or transferred to any person, firm or company who acts as agent for or otherwise represents the issuing company, and any such pledge, hypothecation, or transfer hereafter made shall be void and of no effect insofar as it may affect other creditors of the insured.

In case of war, there could be recovery if fire was purely an ordinary or accidental one.

NON ALIENATION CLAUSE. Fire insurance policy may not be transferred without consent of the insurer even if alienation is ALLOWED IN THE INSUREANCE POLICY. It is also required that the transferee has insurable interest over the insured property.

Formula Amount of insurance/value of property X amount of loss = Amount payable. EXCEPTIONs. May exclude different perils from coverage of policy such as war, insurrection, rebellion, invasion and other similar causes. Even theft clause.

Intentional Act. No liability to insurer. But insurer must prove that there was an intentional burning, by sufficient evidence. Warranty. Contract may have express warranties. Such as no inflammable substances, which must clearly be stated in the policy. However, even if there is a prohibition, it is not avoided when such keeping is incidental to business. Like in varnishes, in a company that makes furnitures.

CO INSURANCE . means the insured shall be paid only in proportion that the amount of insurance purchased bears to the minumun amount of tinsurance that the contract requires the insured to carry. Apportionment of losses between the insurer and its 15 Notes on Warranties from : Timoteo Aquino’s Insurance Laws “Amat Victoria Curam” By: Felipe S.R. RSI Petitor Aequi

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