18.

RECOVERABLE LOSSES

RECOVERABLE LOSSES

1. Loss of which a peril insured against is the proximate cause, although a peril not
contemplated by the contract may have been a remote cause, but the insurer is not
liable for a loss of which the peril insured against was only a remote cause. 1

1.1 The proximate cause is that which, in a natural and continuous sequence,
unbroken by any efficient intervening cause, produces an injury and without which the
injury would not have occurred.

1.2 Recognizing that there are problems in determining probable cause, note the
following principles: (a) if there is a single cause which is an insured peril, clearly it
is the proximate cause and there is liability. As when: Insurance is against fire and the
property insured is burned or insurance covers accidental death and the insured dies in
an accident (b) if there are concurrent causes or those happening together, with no
excluded perils, there is liability if one of the causes is an insured peril, the others may
be ignored. As when: in accident insurance where the insured has a heart disease. He
is involved in an accident that causes injuries, which coupled with his weak heart
causes his death. The proximate cause is the accident. The insurer is liable (c) if there
are concurrent causes with an excepted peril or when the insured peril and excepted
peril operate together to produce the loss, the claim will be outside the scope of the
policy. As when: no liability in a claim for property stolen by rioters under a burglary
policy, if the policy excludes riot risks (d) but, if the results of the operation of the
insured peril can be clearly separated from the effects of the excepted peril, the insurer
is liable. As when: a personal accident policy will cover death by accident although the
insured was suffering from a disease excluded by the policy (e) where several causes
operate one after the other, and the original cause happens to be a peril insured
against, there is liability. As when: the insured is injured in an accident, he scratches an
open wound, which gets infected, which ultimately results in death, there is liability on
the accident insurance policy but if the direct chain of events can be traced to an
excepted peril there is no liability. As when: an earthquake, if excepted, causes a fire
that spreads, all resulting fire damage is deemed caused by an excepted peril but again,
if the chain of events is broken by the intervention of a new an independent cause,
liability will depend upon whether the new cause is an insured or excepted peril. As
when: the insured is treated in the hospital for an accident but while there he contracts
a disease, the disease is the proximate cause, there will be no liability under the
accident policy. However, if death by disease is covered, then the insurer is liable.

2. Loss caused by efforts to rescue the thing insured from a peril insured against
that would otherwise have caused a loss, if during such rescue, the thing is exposed to
peril not insured against, which permanently deprives the insured of its possession, in

1
Section 86, Insurance Code
whole or in part, or where a loss is caused by efforts to rescue the thing insured from a
peril insured against.2

2.1 Here the principle of proximate cause is extended to loss incurred while saving
the thing insured.

2.2 As when: the thing insured is water damaged due to efforts to put out a fire, the
fire being a peril insured against or theft by 3rd persons while the goods are brought out
in the course of rescuing them from a fire, which is the peril insured against but there is
no liability for loss if the goods are left out and are lost as the same is now due to lack of
reasonable care and vigilance or while removing the contents of a burning house, they
were stolen or they were broken or damaged, theft or breakage not ordinarily being
perils insured against.

3. Where a peril is especially excepted in a contract of insurance, a loss, which

would not have occurred but for such peril, is thereby excepted although the immediate
cause of the loss was a peril which was not excepted. 3

3.1 The immediate cause is the cause or condition nearest the time and place of the
injury.

3.2 The insurer will be liable if both the immediate cause and the proximate cause
are not excepted. If the proximate cause is excepted and the immediate cause is not,
the insurer is not liable.

3.3 As when: a factory is insured against fire, but it excepts loss through explosion. If
an explosion occurs and results into a fire that creates a loss, the insurer is not liable. If
a fire occurs first, then an explosion is caused, the insurer is liable.

4. An insurer is not liable for a loss caused by the willful act or through the
connivance of the insured; but he is not exonerated by the negligence of the insured, or
of the insured’s agent or others.4

4.1 Consequently, if the insured was merely negligent, the insurer is still liable as one
of the principal reasons for procuring insurance is to protect himself against the
consequences of his own negligence or that of his agents.

4.2 As when: the insured carelessly used kerosene in lighting a stove, causing his
house to catch fire, the insurer is liable for loss but if the negligence is so gross to be
sufficient basis for fraudulent intent, it can amount to a willful act.

2
Section 85, Insurance Code
3
Section 86, Insurance Code
4
Section 87, Insurance Code
TRANSFER OF CLAIMS

1. An agreement not to transfer the claim of the insured after the loss happens is
void if made before the loss except as otherwise provided in case of life insurance. 5

2. This means that the insured has an absolute right to transfer his claim against
the insurer after the loss occurs, what is prohibited is a transfer prior to the loss. This is
so because such a stipulation after the loss occurs shall hinder the transmission of
property. Neither does it affect the insurer as its liability is already fixed and what is
assigned is the money claim or chose of action, not the contract itself.

3. The exception is Section 173 that provides that the transfer of a fire insurance
policy to any person or company who acts as an agent for or otherwise represents the
issuing company is prohibited and is void insofar as it affects other creditors of the
insured.

5
Section 83, Insurance Code