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Concealment in Marine Insurance

Difference as to: Ordinary Insurance Marine Insurance
If you have possession of material
You cannot conceal something which
Standard information and you do not disclose it, that
you are not aware of. (Knowledge)
may constitute concealment.
The opinion or belief of a third person The opinion or belief of a third person with
Opinion or belief
with respect to a material fact is not respect to a material fact is material that’s
of a third person
material and need not be communicated. why it needs to be communicated.
Concealment as to the following facts does
not result to rescission but only exonerates
the insurer if loss occurs:
a) The national character of the insured
b) Liability of the vessel to capture and
Qualification detention
Concealment always result rescission
Rescission c) Liability for seizure on account of
breach of foreign laws of trade.
d) The want of necessary documents.
e) The use of false or simulated

Illustration of Exoneration
Point B:
Point A: Vessel is released from detention Point C:
Vessel is detained because of a becuase the Maritime Lien was Vessel is lost due to peril of the sea:
Maritime Lien: Insurer exonerated settled: Insurer continues to be Insurer liale

*Comment of transcriber (chosera)*

Point A: One of the facts that must be communicated (letter B). At this point, if this fact was not communicated, the insurer is already exonerated. Meaning, the insurer will no
longer be liable if loss occurs due to the detention of the vessel BUT the insurance contract continues to be effective.
Point B: At this point, however, since the vessel was already released from detention by paying the Maritime Lien, the insurer continues to be liable. The insurer continues to
be liable because at the first place, the insurance contract was never rescinded or made ineffective.
Point C: Since the insurance contract is effective and a peril insured against happened, the insurer is liable.


Section 113. If a representation by a person insured by a contract of marine insurance, is intentionally false in any
material respect, or in respect of any fact on which the character and nature of the risk depends, the insurer may
rescind the entire contract.

In Marine Insurance, the rules in representation remain to be the same. Representation is an oral or written
statement of a fact, condition, or circumstance affecting the risk made by the insured to the insurance
company, tending to induce the insurer to take the risk. When representations become misrepresentations,
they result to rescission.

Section 114. The eventual falsity of a representation as to expectation does not, in the absence of fraud, avoid a
contract of marine insurance.

However, the eventual falsity of a representations based on expectation will not cause a rescission of a
contract. A representation can be made regarding actual facts or facts which may occur. But when we are
talking about facts which may occur, we have facts that will definitely be done or are represented as facts or
acts which will be undertaken. However, there can be representation simply considered as expectation.

1. Insured says “Six months after the validity of the contract, I will replace my navigation system.” If he doesn’t
do that, the representation is now false. Can there be rescission? Yes.
2. Insured says “If I am able to collect an amount due me from Pedro, then I will be able to replace my
navigation system six months from the date of the effectivity of the contract.” If this expectation turns out to be
false, this will not lead to rescission.

The two instances are talking of the same thing but the way the representation was worded is different, the
second instance was worded as an expectation. A representation as to an expectation which eventually
becomes false does not entitle the insurer to rescind. Simply because it is an expectation. There is no
assurance that it will or will not happen, it is simply an expectation.


Implied warranties are warranties that come about or come into existence simply because of the nature of the
insurance. Implied warranties only refer in marine insurance, no other form of insurance has implied

Four Types of Implied Warranties in Marine Insurance:

1. Warranty as to seaworthiness.

Seaworthiness is when a ship is reasonably fit to perform the service and to encounter the ordinary perils of the
voyage contemplated by the parties to the policy. (Section 116) However, seaworthiness is relative. Always judge
seaworthiness based on its definition.

When should a vessel be seaworthy?

General Rule: A vessel is required to be seaworthy at the commencement of the voyage. When the
voyage begins, the vessel must be seaworthy. (Section 117)
Exceptions: Special Rules on Seaworthiness:

a. If the insurance is for a specific period of time, then the vessel must be seaworthy at the
commencement of every voyage undertaken during that time. (Section 117a)

Example: Insurance is for one year, the vessel must be seaworthy at the commencement of every
voyage undertaken during that year.

b. If the insurance is upon cargo which by virtue of the contract or established customs of trade is
required to be shipped or transshipped, then the vessel on which it is shipped or eventually transshipped
must be seaworthy at the commencement of every voyage. (Section 117b)

Example: Cargo coming from Davao to be shipped to Manila. When the vessel starts it voyage from
Davao, the vessel must be seaworthy, upon arrival at Cagayan de Oro where the goods are to be
transferred, the vessel of which the cargo is transshipped must be seaworthy. When the cargo reaches
Cebu and it is again transferred on another vessel for the last leg to Manila, the vessel of which the cargo
is transshipped must be seaworthy at the commencement of the voyage from Cebu to Manila
c. When the part of the voyage differ in respect to what is required to make the vessel seaworthy
then the vessel must be seaworthy at the commencement of each portion of the voyage. (Section 119)

What is referred to in this rule is a voyage where there are changes insofar as the conditions for sailing
and navigation. Example: Voyage from Davao to Manila. The vessel commences its voyage from a river,
going out to the open sea, then before it reaches to its eventual destination it will have to re-enter a river.
For purposes of seaworthiness, the vessel must be seaworthy at the commencement of each portion of
that voyage.

Note: For purposes of seaworthiness, if a vessel later on becomes unseaworthy, the policy is not avoided
unless there is an unreasonable delay in repairing the defect. Again this is relative to be discusses next

2. Warranty that no improper deviation is going to be made.

3. Warranty that the vessel will carry the requisite documents to show its nationality or neutrality and that it
will not carry any document to cast reasonable suspicion on the vessel.

Section 122. 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.

When the insured says that “I am sailing under the flag of the Philippines,” there is a corresponding obligation
to carry the documents to show that he is sailing under the flag of the Philippines and that no document will be
carried to show or to indicate otherwise.

4. Warranty that the vessel will not engage in any unlawful venture.

No insured in its right mind will go to an insurance company to request insurance for a voyage that it will
undertake for the purpose of transporting prohibited drugs. Automatically, if the vessel undertakes an unlawful
venture, the contract is voided and the insurer is not liable.