My Notes (Insurance)

CONTRACT OF INSURANCE An agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event. (Sec. 2, par. 2, IC)
officials EO 250 (July 25, 1987) increases, integrates and rationalizes the insurance benefits of barangay official sunder RA 4898 and members of Sangguniang Panlalawigan, Sangguniang Panlungsod, and Sangguniang Bayan under PD 1147. The insurance benefits are extended by the GSIS. RA 3591 (as amended) establishes the Philippine Deposit Insurance Corporation which insures the deposits of all banks which are entitled to the benefits of insurance under this Act Generally Accepted Principles of US

Laws Governing Insurance

Insurance Code of 1978 The law on insurance is contained now in the Insurance Code of 1978 (PD # 1460, as amended) and special laws and partly, in the pertinent provisions of the Civil Code. The Insurance Code primarily governs the different types of insurance contracts and those engaged in insurance business in the Philippines. It took effect on June 11, 1978, the date of its promulgation without prejudice, however, to the effectivity dates of various laws, decrees and executive orders which have so far amended the provisions of the Insurance Code of the Philippines (PD 612) Civil Code The provisions of the Civil Code dealing on insurance are found in articles 739 and 2012 (void donations), Article 2011 (applicability of the Civil Code), Articles 2021-2027 (life annuity contracts), Article 2186 (compulsory motor vehicle liability insurance), and Article 2207 (right of subrogation). Special laws The Insurance Code of 1978 (PD 1460) The Revised Government Service Insurance Act of 1977 (PD 1146, as amended), with respect to insurance of government employees The Social Security Act of 1954 (RA 1161, as amended) with respect to insurance of employees in private employment Others insofar as the Civil Code is concerned, the Code of Commerce is considered a special law RA 656 (as amended by PD 245), known as the Property Insurance Law, dealing with government Property RA 4898 (as amended by RA 5756) providing life, disability and accident insurance coverage to barangay

What is the principle behind insurance? Insurance is based upon the principle of aiding another from a loss caused by an unfortunate event. What do Civil Code Provisions say? Art. 2011. The contract of insurance is governed by special laws. Matters not expressly provided for in such special laws shall be regulated by this Code. Art. 2012. Any person who is forbidden from receiving any donation under Art. 739 cannot be named beneficiary of a life insurance policy by a person who cannot make any donation to him, according to said article. Art. 2021. The aleatory contract of life annuity binds the debtor to pay an annual pension or income during the life of one or more determinate persons in consideration of a capital consisting of money or other property, whose ownership is transferred to him at once with the burden of income. Art. 2022. The annuity may be constituted upon the life of the person who gives the capital, upon that of a third person, or upon the lives of various persons, all of whom must be living at the time the annuity is established.

My Notes (Insurance)
It may also be constituted in favor of the person or persons upon whose life or lives the contract is entered into, or in favor of another or other persons. Art. 2023. Life annuity shall be void if constituted upon the life of a person who was already dead at the time the contract was entered into, or who was at the that time suffering from an illness which caused his death within twenty days following said date. Art. 2024. The lack of payment of the income due does not authorize the recipient of the life annuity to demand the reimbursement of the capital or to retake possession of the property alienated, unless there is a stipulation to the contrary; he shall have only a right judicially to claim the payment of the income in arrears and to require a security for the future income, unless there is a stipulation to the contrary. Art. 2025. The income corresponding to the year in which the person enjoying it dies shall be pain in proportion to the days during which he lived; if the income should be paid by installments in advance, the whole amount of the installment which began to run during his life shall be paid. Art. 2026. He who constitutes an annuity by gratuitous title upon his property, may provide at the time the annuity is established that the same shall not be subject to execution or attachment on account of the obligations of the recipient of the annuity. If the annuity was constituted in fraud of creditors, the latter may ask for execution or attachment of the property. Art. 2027. No annuity shall be claimed without first proving the existence of the person upon whose life the annuity is constituted. How do we construe the provisions of the Insurance Code (IC)? Since our present IC is based mainly on the Insurance Act, which in turn was taken verbatim from the law of California (except for Chap V, which was taken from the law of NY), the courts should follow in fundamental points, at least, the construction placed by California Courts on California law (and the construction placed by the NY Courts on NY law). This is in accordance with the well settled rule in statutory construction that when a statute has been adopted from some other state or country, and said statute has previously been construed by the courts of such state or country, the statute is usually deemed to have been adopted with the construction so given. * Where there is Ambiguity or Doubt As a general rule, contracts of insurance are to be construed liberally in favor of the insured and strictly against the insurer, resolving all ambiguities against the latter, so as to effect its dominant purpose of indemnity or payment to the insured, especially were a forfeiture is involved. *Where Terms are Clear If such terms are clear and certain, they must be taken in their plain and ordinary sense CASE: Ty vs. First National Facts: Ty was a mechanic foreman in the Broadway Cotton Factory. A fire broke out which totally destroyed the factory. As Ty was fighting his way out of the factory, he injured his left hand, causing temporary total disability due to fractures o his index, middle, and fourth fingers. He filed a notice of accident and claim to recover indemnity from First National Surety assurance Co. Inc., pursuant to his insurance policy which provides: the loss of a hand shall mean the loss by amputation through the bones of the wrist The insurance company rejected Tys claim saying that since there was no severance by amputation of the hand, the disability suffered by him was not covered under the policy. Held: The insurance company is not liable to indemnify Ty. We cannot go beyond the clear and express conditions of the insurance policies, all of which define partial disability as loss of either hand by amputation through the bones of the wrist There was no amputation in this case. The agreement contained in the insurance policies is the law between the parties. An interpretation that would include the mere fracture or other temporary disability not covered by the policies would certainly be unwarranted.

My Notes (Insurance)
Insurance is a contract of adhesion
Policy is presented to the insured already in its printed form Take it or leave it Individual life insurance contracts usually stipulate that: Premium be paid and Policy be delivered to the insured while he is alive and in good health. Concurrence of both is necessary. (see Perez v CA case) Actual delivery of the policy is not essential unless the parties have so agreed in clear language. Constructive delivery may be sufficient. (See Vda. De Sindayen case) WoN policy was delivered after its issuance depends not upon manual possession by the insured but rather upon the intention of the parties as manifested in their acts or agreements. WON Delivery to agent is delivery to insured is a question over w/c there has been many conflicting opinions. Effect of Delivery: Where delivery is conditional Non-performance of Condition precedent prevents contract from taking effect Where delivery is unconditional if corresponding terms of application, ordinarily consummates the contract and policy as delivered becomes final contract between the parties. Where parties so intend, insurance becomes effective at the same time as delivery Where premium still unpaid after unconditional delivery Policy will lapse if premium unpaid at time and manner specified in the policy, in the absence of any clear agreement that insurer will extend credit. Insurer cannot be presumed to have extended credit from the mere fact of unconditional delivery of the policy w/o prepayment of premium, and even if such presumption may be inferred, there must be a clear and express acceptance by insured of the insurers offer to extend credit. Perez v CA Facts: Perez, already previously insured with BF Lifeman Insurance Co. applied for additional coverage. He paid premium and was issued a receipt by the agent of BF Lifeman. However, he died before his application papers were transmitted to the head office of BF Lifeman. Issue: WON the insurance policy was perfected Held: No. There was no acceptance of the offer. The perfection of the contract was conditioned upon compliance with the provision in the application form w/c stated that perfection only lies when the applicant pays and the premium and receives and accepts the policy while still in good health. Thus, the assent of BF Life was not given when it merely received the

Perfection of the Contract of Insurance

Offer and Acceptance; consensuality Applicant usually makes the offer to the insurer. Submission of application, even w/ payment is a mere offer on the part of the applicant, it does not bind the insurer. Approval of the application by the insurer is necessary to perfect contract. If made: - w/ payment of premium policy becomes effective - w/o payment effective upon payment of premium i. Delay in Acceptance; Tort Theory Situation where applicant submits application for insurance, but due to negligence of company, w/c takes an unreasonably long time before processing the application, the applicant dies before the application is processed, thus, the contract is not perfected. REMEDY: Insurer liable for damages (Tort Theory) in the amount of the face value of the policy, w/c is given to the estate of the deceased applicant. (not to beneficiary because contract not perfected. Also, no contractual liability also bec. no contact) Why Tort Theory - because Insurance business is affected w/ public interest. It is thus, the duty of insurer, w/c derives its authority to act as such from the State (when it applies to get license to be in the insurance business), to act w/ reasonable promptness in either rejecting or accepting the application. In case of unreasonable delay and applicant dies, applicant would have been deprived of opportunity to secure insurance from another source. ii. Delivery of the Policy Delivery the act of putting the insurance policy the physical document into the possession of the insured.

My Notes (Insurance)
application form of Perez in its provincial office. Also, delivery to Perez would be impossible as he is already dead. So long as an application for insurance has not been accepted or rejected by the insurer, it is merely an offer or proposal to make a contract. The contract to be binding from date of application must have been a completed contract that leaves nothing to be done, passed upon or determined, before it shall take effect. Vda. De Sindayen v Insular Life Assurance Co. FACTS Dec. 1932 Arturo Sindayen had partially paid his agent the first premium for a life insurance policy. Agent and Sindayen agreed that policy, when and if issued, should be delivered to Sindayens aunt who will complete the payment of the first annual premium. Jan. 16, 1933 agent received approved policy and delivered it to Sindayens aunt on Jan. 18. However, before the policy was given to Arturo himself, he died on Jan. 19. ISSUE: WON Insular Life assumed the risk covered by Sindayens policy HELD: YES. Delivery to the insured in person is not necessary, and may be made by mail or duly constituted agent (in this case, Sindayens aunt). Insurance company is bound by the acts of its agent. In this case, the agent is not a mere automaton and is vested w/ some discretion in deciding WON the condition as to the health of the applicant has been complied with. Once he decides that it has and delivers the policy, then, in the absence of fraud, the insurance company is estopped from claiming the policy has no effect. Enriquez v Sun Life Assurance Co. Facts: Herrer applied for insurance and paid the premium, however, he died before he received the notice of acceptance (of his application) sent by Sun Life from its Montreal head office. Issue: WON the insurance contract was perfected w/o the notice of acceptance coming to the knowledge of the applicant Held: NO. Under the CC, Consent is shown by the concurrence of offer and acceptance. An acceptance shall not bind the person making the offer except from the time it came to his knowledge.