H. Loss; Notice and Proof

R.A. No. 10607, Sections 85-89

Loss in insurance law embraces injury or damage.

I. Notice and Proof of Loss

R.A. No. 10607, Sections 90-94¹

"NOTICE OF LOSS

"Section 90. 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. For other non-life insurance, the Commissioner may specify the period for the submission of the notice of loss.

"Section 91. 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 the time.

"Section 92. All defects in a notice of loss, or in preliminary proof thereof, which the insured might remedy, and which the insurer omits to specify to him, without unnecessary delay, as grounds of objection, are waived.

"Section 93. Delay in the presentation to an insurer of notice or proof of loss is waived if caused by any act of him, or if he omits to take objection promptly and specifically upon that ground.

"Section 94. If the policy requires, by way of preliminary proof of loss, the certificate or testimony of a person other than the insured, it is sufficient for the insured to use reasonable diligence to procure it, and in case of the refusal of such person to give it, then to furnish reasonable evidence to the insurer that such refusal was not induced by any just grounds of disbelief in the facts necessary to be certified or testified.

Notice and Proof of Loss

This refers to the formal notice given the insurer by the insured or claimant under a policy of the occurrence of the loss insured against.

Its purpose is to apprise the insurance company so that it may make proper investigation and take such action as may be necessary to protect its interest.

Requisites

Recovery upon a loss requires that:

• The insured must have insurable interest in the subject matter;
• The interest is covered by the policy;
• There be a loss; and
• The loss must be one for which the insurer is liable;
• Notice and proof of loss must be given if policy is fire insurance or when the same is stipulated in the policy.

Failure to Give Notice

In fire insurance, an insurer is exonerated, if notice of loss is not given to him by an insured or some person entitled to the benefit of the insurance, without unnecessary delay [Sec. 90]².

In other types of insurance, the general rule is that failure to give notice will not exonerate the insurer. The exception is if there is a stipulation in the policy requiring the insured to do so.

However, it has been held that formal notice of loss is not necessary if the insurer has actual notice of loss [Fidelity Phoenix Insurance v. Friedman, 174 SW 215]³ but there is also a ruling to the contrary [Col. Sav. Bank v. American Surety, 87 P 118]⁴.

1. Remote Cause<br>

An event preceding another in a causal chain, but separated from it by other events.

Form

In case of loss as regards fire insurance, there must be a written notice thereof [Sec. 90]⁵. But as to other non-life insurance policies, the law does not provide for a necessity of written notice [De Leon].

The notice of loss may be in the form of an informal or provisional claim containing a minimum of information, as distinguished from a formal claim which contains the full details of the loss, computations of the amounts claimed, and supporting evidence, together with a demand or request for payment [De Leon].

2. Proximate Cause<br>

That cause, which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and without which the result would not have occurred [Vda. De Bataclan v. Medina, G.R. No. L-10126, 22 October 1957]⁶.

Time for Giving Notice

Notice of loss must be given within reasonable time [Bachrach v. British American Assurance Company, G.R. No. L-5715, 20 December 1910]⁷.

For compulsory motor vehicle insurance, the notice must be given within six months from the date of the accident [Sec. 397]⁸.

For other non-life insurance, the Commissioner may specify the period for the submission of the notice of loss [Sec. 90]⁹.

3. Immediate Cause

The cause, not the proximate cause, which immediately precedes the loss.

Proof of Loss

It is the formal evidence given to the insurance 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 [De Leon].

Its purpose is to give the insurer information by which he may determine the extent of his liability but also to afford him a means of detecting any fraud that may have been practiced upon him, and to operate as a check upon extravagant claims.

Like a notice of loss, in the absence of any stipulation in the policy, proof may be given orally or in writing.

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 the time [Sec. 91]¹⁰.

Liability

Rules for Recovery

General Rule: Timely compliance with the notice and proof of loss is a condition precedent to the right to recover if the policy is fire insurance, or when the same is stipulated in the policy [Sec. 90]¹⁴.

Exceptions:

• For both notice and proof of loss, defects or delay in the presentation of notice may be waived:
• Defects in a notice or proof of loss may be waived when such defects, which the insured might remedy, are not specified without unnecessary delay to him as grounds of objection by the insurer [Sec. 92]¹⁵.
• Delay in presentation to an insurer of notice or proof of loss is waived if caused by any act of his, or if he omits to take objection promptly and specifically upon that ground [Sec. 93]¹⁶.
• For notice of loss, a formal notice of loss is not necessary if the insurer has actual notice of loss.

Loss

Loss may be total (actual or constructive) or partial.

• Total Loss

Actual Loss

Actual total loss exists when the subject matter of the insurance is wholly destroyed or lost or when it is so damaged that it no longer exists in its original character [Vance].

Actual loss is caused by:

• A total destruction of the thing insured;
• The irretrievable loss of the thing by sinking, or by being broken up;
• Any damage to the thing which renders it valueless to the owner for the purpose for which he held it;
• Any other event which effectively deprives the owner of the possession, at the port of destination of the thing insured [Sec. 132]¹⁷.

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 [Sec. 132]¹⁸.

Constructive Loss

Constructive total loss or “technical total loss” is one in which the loss, although not actually total, is of such character that the insured is entitled, if he thinks fit, to treat it as total by abandonment [45 CJS 1150].

Three rules exist as to determining when there is a constructive total loss:

• English rule

There is constructive total loss when the subject matter of the insurance, while still existent in specie, is so damaged as not to be worth, when repaired, the cost of the repairs.

• American rule

There is constructive total loss when it is so damaged that the costs of repairs would exceed one-half of the value of the thing as acquired (also known as the “fifty percent rule”).

• Philippine rule

The insured may not abandon the thing insured unless the loss or damage is more than three-fourths of its value [De Leon].

A person insured by a contract of marine insurance may abandon the thing insured and recover for a total loss thereof when the cause of the loss is a peril insured against—

• If more than 3⁄4 thereof in value is actually lost, or would have to be expended to recover it from the peril;
• If it is injured to such an extent as to reduce its value by more than 3⁄4;
• 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 3⁄4 the value of the thing abandoned or a risk which a prudent man would not take under the circumstances; or
• If the thing insured is 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 either an expense to the insured of more than 3⁄4 the value of the thing abandoned or a risk which a prudent man would not take under the circumstances [Sec. 141]¹⁹.

Note: Freightage cannot, in any case, be abandoned, unless the ship is also abandoned.