19.

NOTICE, PROOF OF LOSS AND SUBROGATION

GIVNING OF NOTICE OF LOSS

1. In case of loss upon an insurance against fire, an insurer is exonerated, if written

notice thereof be not given him by the 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 notice of loss. 1

2. The meaning of without unnecessary delay is within a reasonable time,

depending on circumstances of a peculiar case, although courts have construed the
requirement liberally in favor of the insured.

2.1 Note the specific application to fire insurance due to the nature of the loss and
urgent need to determine the cause thereof. The longer the period that lapses from the
time of loss, the greater is the opportunity of the insured to tamper with the evidence in
preparation for a fraudulent claim.

PROOF OF LOSS

1. If the policy requires Preliminary Proof of Loss or evidence given the insurer of
the occurrence of the loss, its particulars, and data necessary to enable it to determine
liability and the amount thereof, it is not necessary that the insured give such proof as
may or would be sufficient in a court of justice. What is sufficient is the best evidence
that he has in his power at that time.2

2. If in the giving of preliminary proof of loss, a certification or testimony of a third

person other than the insured is required, it is sufficient for the insured to use
reasonable diligence to procure it. In case of refusal to give it, the insured can 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. Once shown or
given, the requirement may be dispensed with. 3

WHEN DEFECTS IN THE NOTICE OR PROOF OF LOSS IS WAIVED BY THE

INSURER

1. When the insurer fails to specify to the insured any defect which the insured can
remedy without unnecessary delay. 4 As when: It is required to be sworn to but is
accepted by the insurer

1
Section 90, RA 10607
2
Now Section 90, RA 10607
3
Now Section 94, RA 10607
4
Now Section 92, RA 10607
2. When the insurer denies liability on a ground other than the defect in the notice
or proof of loss. As when: denial of claim is based on nullity of the contract.

WHEN DELAY IN THE GIVING OF NOTICE IS WAIVED

1. If it is caused by any act of the insurer. As when: the insurer accepts payment of
the premium with full knowledge that the premises have been lost or damaged will be
estopped from claiming delay in the giving of notice of loss.

2. If the insurer omits to make an objection promptly and specifically on that ground.
5
As when: despite a delay, the insurer does not object

SUBROGATION AFTER PAYMENT OF LOSS

1. In property insurance, after the insured has received payment from the insurer of
the loss covered by the policy, the insurance company is subrogated to the rights of the
insured against the wrongdoer or the person who has violated the contract.

1.1 The right of subrogation accrues upon payment of the insurance claim.

1.2 Note that subrogation takes effect by operation of law and does not require the
consent of the wrongdoer.6

2. Subrogation has two aspects: (a) the insured cannot make a profit from his loss
and that for any profit he does make, he is accountable in equity to his insurer, and (b)
the right of the insurer who has indemnified his insured to step into the shoes of the
insured and in his name pursue any right of action available to the insured which may
diminish the loss insured against.

2.1 The purposes of these two aspects are the same, that is, to prevent unjust
enrichment.

2.2 If property worth PHP 200,000.00 but insured for PHP 100,000.00 is lost and the
insured recovers PHP 100,000.00 from the insurer and another PHP 100,000 from the
wrongdoer, or after receiving PHP 100,000.00 from the insurer, he receives additional
amounts from the wrongdoer for consequential damages not covered by insurance,
what effect will the excess payments have on subrogation? The key is determining
whether the insured is unjustly enriched. In the first situation, the insured must account
for the amount received from the wrongdoer because of being the insurer for the portion
of the property value not covered by insurance, thus, the liability of the insurer is only for
half of the loss. He is unjustly enriched as he assumed liability for half of the actual loss
but will not actually suffer the loss. In the second situation, the additional amounts
involve uninsured losses that would not have any bearing on the insurance coverage.

5
Now Section 93, RA 10607
6
Fireman’s Fire Insurance vs. Jamilla and Company, 70 SCRA 328
The insured in this case cannot be said to have been unjustly enriched unless he
receives full compensation for his uninsured losses.7

3. There is no subrogation in (a) life insurance as it is not a contract of indemnity (b)

when proximate cause of the loss is the insured himself (c) when the insurer pays to the
insured a loss not covered by the policy.

3.1 The insured is no longer entitled to collect from the wrongdoer if the amount that
he received from the insurer has fully compensated for the loss.

4. If the insured releases the wrongdoer from liability before payment by the insurer,
the insured destroys his right to collect from the insurer. 8 If the insured releases the
wrongdoer after receiving payment from the insurer, the insurer can recover from the
insured the proceeds paid.9

4.1 Subrogation is discretionary on the part of the insurer. It may or may not exercise
the right.10 Hence, no one can force it to exercise the right even if it has paid the
insured.

7
Based on Napier v. Hunter, 2 W.L.R. 42 (1993)
8
Sy Keng vs. Queensland Insurance Co. Ltd., 54 OG 351
9
Manila Mahogany Mfg. Corp. vs. Court of Appeals, 154 SCRA 651
10
FF Cruz & Co. vs. Court of Appeals, 164 SCRA 731