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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 –
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  When breach of warranty does not avoid policyGR: Validation of a warranty avoids a contract of insuranceEXECPT:1.   When loss occurs before time for performance.2.   When performance becomes unlawful.3.   When performance becomes impossible.-   Either legal impossibility or physical impossibilityWhere insurer ------ by waiver or estoppel-   Breach of warranty operates to discharge the insurer frim liability unless the insurer is liablebecause 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 beimplied from conduct, said conduct must be clearly indicative of the intent to waive rights under thepolicy by the insurer.Under estoppel, the insurer is precluded because of some action or inaction on its part, from relying onan otherwise valid defense as against the insured who has been included to enter into the contract by the insurer’s representation or conduct. It would be against equity and good conscience for insurer toassert such defense.Right to rescind for violation of a material warrantyA.   Rescission by insured  –   Violation of the terms of a contract of insurance entitles either party to terminate thecontractual relation. If breach of contract is due to the refusal of the insurer to grant aloan 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 ismaterial. (sec. 74). Furthermore, the right of rescission east even though the violationwas not the direct cause of the loss.  When violation of immaterial provision avoid policyGR: 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 policywill avoid it. (sec. 75)Effects of breach of warranty by insuredDepends on whether there is fraud.A.   Without fraud  – the policy is avoided only from the time of breach (sec. 76) and insured isentitled 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, thecontract 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 altersthe previously existing legal relatives of the parties to the contract.2 Kinds of Condition1.   Condition precedent  – the happening of some event or performance of some act after the termsof 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 thepolicy, but to the contract of insurance after the risk has attached and during the existencethereof.  Effect Warranties Conditions1.)   Does notsuspend/defect theoperation of thecontract; affords theremedy expresslyprovided in contract /law.-   Does not necessarilyhave the effect.1.)   In condition precedentnon-performance of which contract doesnot spring into life.-   Limitation toattachment of risk.Nature2.)   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 riskwhich the insurer declares himself unwilling to undertake.Warranty Condition ExceptionsBinding Force of contract-   Occurrence of breach, even if temporary,renders theentire contractvoidable.-   Such breachmay not haveaffected therisk orcontributed tothe loss inanyway.-   Occurrence of an exceptedperil, does notaffect thebinding forceof the contract.-   If lossoccurred, fallsoutside thecoverage of the policy andinsurer liable, if no lessoccurred, thecontractrelative remainunchanged.Liability when there iswaiver-   Insurer doesnot becameliable for anyexcepted lossby waiverunless suchwaiver arrivedto a new  contract onvaluableconsiderationPremium  – the agreed price for assuming and carrying the risk  – the consideration paid an insurerfor 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, notseverable, or divisible, as to items insured.Assessment:Sum specifically levied by mutual insurance companies, upon a fixed and definite plan, to playlosses and expresses.Premiums Assessments-   Contributes from all members of theinsuring organization to make good thelosses of individual members.-   Levied and paid to meet anticipatedlosses.-   Payment is not enforceable against theinsured.-   Not a debt.-   Contributes from all members of theinsuring organization to make good thelosses of individual members.-   Collected to meet actual losses.-   Unless otherwise agreed, are legallyenforceable once levied.-   Properly levied, unless otherwiseagreed, considered a debt.Payment of premium ordinarilyNot a debt or obligation1.)   In fire, casualty and marine insurance, the premium becomes a debt as soon as the riskattaches.-   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 insurancein the series that it can no longer be enforced.
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