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Sec. 1
What is the principle behind insurance? Insurance is based upon the principle of aiding another from a loss caused by an unfortunate event. . Laws applicable to insurance in the order of priority: a. b. Insurance Code 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). General Principles prevailing on the subject in the US
c.
* 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 Judicial Construction can not alter terms Insurance is a contract of adhesion Policy is presented to the insured already in its printed form Take it or leave it Sec. 2 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) Elements of Insurance: a. b. c. d. existence of an insurable interest;] risk of loss; assumption of risk; general scheme to distribute losses; and
e. payment of premiums Note: If only a, b, and c are present, it is not a contract of insurance but a risk shifting device. Test to Determine Existence of IC 1. Exact Nature of Agreement 2. Nature of promise 3. Act required to be performed Characteristics of IC 1. 2. Personal Executory upon payment of premium
Contract of Suretyship deemed to be an insurance contract within the meaning of the Insurance Code, only if made by a surety who or which, as such, is doing an insurance business Definition of doing an insurance business: a. b. c. d. making or proposing to make, as insurer, any insurance contract; making or proposing to make as a surety, any contract of suretyship as a vocation doing reinsurance business; doing or proposing to do any business in the substance equivalent to any of the
and not merely incidental to any other legitimate business or activity of the surety;
Sec.3
What may be insured? (a) any contingent or unknown event, whether past or future, which may damnify a person
having an insurable interest; or (b) any contingent or unknown event, whether past or future, which may create a liability
against the person insured. Effect of Death Of Policys Original Owner- Sec 3 par 5 Sec.4 Sec.5 Sec.6 Prohibition Against Gambling Gambling seeks fortune; Insurance avoids misfortune Application of IC Parties to a contract of Insurance: a. b. c. Sec.7 insurer party who assumes the risk or undertakes to indemnify the insured or to pay insured person in whose favor the contract is operative, and who is indemnified beneficiary may or may not be the same as the insured a certain sum on the happening of a specified contingency against, or is to receive a certain sum upon the happening of a specified contingency
Anyone except a public enemy may be insured. What are the requisites in order that a person may be insured in a contact of insurance? There are 3 requisites namely: a) He must be competent to enter into a contract. b) He must possess an insurable interest in the subject of insurance. c) He must NOT be a public enemy. What is a public enemy? It is a nation with whom the Philippines is at war, and it includes every citizen or subject of such nation.
1. basis
at the time the policy takes effect and at the time of the loss
A carrier or depository of any kind has an insurable interest in a thing held by him as such, to the extent of his liability but not to exceed the value thereof. A mere contingent or expectant interest in anything, not founded on an actual right to the thing, nor upon any valid contract for it, is not insurable. The measure of an insurable interest in the property is the extent to which the insured might be damnified by loss or injury thereof. NO insurable interest = NO contract of Insurance. When must insurable interest exist? In case of life insurance at the time the insurance takes effect. In case of property insurance, at the time the insurance takes effect AND at the time of the loss, but it need not exist in the meantime. What is the general rule embodied in this section? The General Rule is that the mere transfer of the thing insured does not transfer the policy but suspends it until the same person becomes the owner of both the policy and the thing insured. The term change of interest in this section means absolute transfer of the property insured such as the conveyance of the property insured by means of an absolute deed of sale. What are the exceptions to the general rule? The exceptions, where a change of interest does NOT suspend the insurance are: 1. Life, health and accident insurance (Sec. 20) 2. Change of interest in the thing insured occurs after the injury which results in a loss (Sec. 21) 3. Change of interest in one or more of several things separately insured by one
Sec.16
Sec.17
Sec.18 Sec.19
Sec.20-24
Sec. 25
VOID Stipulations eg. Gambling stipulation This section avoids two types of stipulations in an insurance policy. What are they? 1. Stipulation for the payment of loss WON the person insured has any interest in the subject matter of the insurance (exception: life insurance) 2. Stipulation that the policy will be received as proof of insurable interest
Sec. 26
A neglect to communicate that which a party knows and ought to communicate is called concealment. What are the requisites of concealment? There can be no concealment unless: 1) A party knows the fact which he neglects to communicate or disclose to the other; 2) Such party concealing duty bound to disclose such fact to the other 3) Such party concealing makes no warranty of the fact concealed; and The other party has no means of ascertaining the fact concealed Uberrimae fidae- Utmost good faith; absence of any concealment upon principle of doctrines of warranties, representation and concealment.
Sec. 27
What is the effect of concealment? Entitlement to rescind the contract WON intentional or not. Each party to a contract of insurance must communicate to the other, in good faith, all facts within his knowledge which are material to the contract and as to which he makes no warranty, and which the other has not the means of ascertaining. According to Sec. 28, what are the matters that must be communicated by the party to the other? This section makes it the duty of each party to a contract of insurance to communicate in good faith all facts that are material to the contract within his knowledge when: 1. the party with the duty to communicate makes no warranty; and 2. the other party has no means of ascertaining the facts Any exceptions to the duty to communicate? Those falling under Sec. 30. What is the test to determine whether or not one must communicate the facts to the other party? The test is: If the applicant is aware of the existence of some circumstance which he knows would influence the insurer in acting upon his application, GOOD FAITH requires him to disclose that circumstance, though unasked.
Sec. 28
Sec, 29 What type of concealment is referred to here? The type of concealment referred to here, relates to the falsity of a warranty. Unlike the ordinary concealment provided for in Sec. 27, the non-disclosure under this section must be intentional and fraudulent in order that the contract may be rescinded. What is an example of this kind of concealment? In every contract of marine insurance, there is an implied warranty of seaworthiness of the
Sec. 32
Sec. 35
Sec. 36
Sec. 43
Sec. 47
What does this section mean? This section means that the provisions of Sec. 26 to 35 governing concealment and Sec. 36-48 governing representation apply NOT ONLY to the original formation of the contract but also to a modification of the same during the time it is in force Whenever a right to rescind a contract of insurance is given to the insurer by any provision of this chapter, such right must be exercised previous to the commencement of an action on the contract. After a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of two years from the date of its issue or of its last reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindable by reason of the fraudulent concealment or misrepresentation of the insured or his agent. What is an Incontestability Clause? Incontestability clauses are those clauses in life insurance policies stipulating that the policy shall be incontestable after a stated period. Sec. 48 par. 2 now requires that the incontestability of a life insurance policy starts after the lapse of the 2 years that the insurance was in force during the life time of the insured. What is the reason for this incontestability? As to the Insurer The insurer is given a reasonable opportunity to investigate the statements which the applicant makes in procuring his policy and that after the definite period, the insurer should not be permitted to question the validity of the policy, either by affirmative action, or by defense to a suit brought on the life policy by the beneficiary. As to the insured. Such clauses give assurance to the policy holder that his beneficiaries would receive payment without question as to the validity of the policy or the existence of the coverage once the period of contestability passes. It is designed to protect the policyholder or
Sec. 48