20 Insurance 323to396

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INSURANCE
I. INTRODUCTION A. Origin and Growth of Insurance 1. Mutua insurance as o d as societ! itse f Insurance is based upon the principle of aiding another from a loss caused by an unfortunate event. Some writers have maintained that mutual assistance is as old as society itself. It seems that benevolent societies organized for the purpose of extending aid to their unfortunate members from a fund contributed by all, have been in existence from the earliest times. They existed among the Egyptians, the Chinese, the indus, and the !omans and are "nown to have been established among the #ree"s as early as the third century before Christ. The origin of the modern mercantile insurance contract appears to have been the transaction evidenced by the bottomry or respondentia bond, together with the practice of $general average% contribution. In the latter, the owners of cargo benefited by the deliberate sacrifice of some goods to save the others from a sea peril, contributed to pay the losses suffered by such sacrifice. In the former, the lender on bottomry was repaid only if the vessel sub&ect of the loan arrived safely at its destination. ". Origin of #resent da! insurance attri$uted to %erchants of Ita ian cities The practice of insurance as we "now it today, as an important agency in promoting commercial and industrial transactions, is relatively of modern invention. Its origin is to be found in the mutual agreements among merchants of the Italian cities in the early middle ages engaged in common shipping ventures for distributing among the mutual contractors, the loss falling upon any one by reason of the perils of navigation. It is thus apparent that in its early forms, the law of insurance was derived from the maritime law and as such, was part of the general law merchant, and intentional in its character.
&. De'e o#%ent of insurance in Eng and 'rom Italy, the practice of insuring commercial ventures against disaster rapidly extended to other maritime States of Europe. The Italian merchants coming from the flourishing commercial centers in (orthern Italy, and generally "nown as )ombards, founded trading houses in )ondon in the *+ th Century and brought with them the custom if insuring against hazards of trade. ,ll -uestions of insurance, however, were determined in accordance with the customs of merchants, and by merchant courts, or rather, the custom of submitting all contracts involving mercantile rights to courts of merchants established among themselves. It was not until the middle of the *. th Century that the common law courts of England began to ta"e ade-uate cognizance of insurance cases with the passage in */0* of the first English Insurance ,ct by which a special court was established for the trial of marine insurance controversies. In *12/, with the appointment of )ord 3ansfield as Chief 4ustice of the Court of 5ing6s 7ench, there came a new era in the common law with reference to -uestions involving the law merchant. In the s"illful hands of this great &udge who is properly called the $'ather of English Commercial )aw,% the essential principles of the law merchant were incorporated into the common8law system of England and the common8law courts thereby rendered competent to determine all -uestions involving insurance. )loyd6s of )ondon is "nown to have triggered the early development of insurance. It began as a *1th Century coffeehouse catering to merchants, vessel owners, ban"ers and the first underwriters. It is "nown that )loyd6s coffeehouse, an inn "ept by one Edward )loyd on Tower Street in )ondon, was, as early as */.., a popular resort for seafaring men and merchants engaged in foreign trade. It became the custom among those who gathered at )loyd6s to ma"e their gathering an occasion for arranging their mutual contracts of insurance against the sea perils to which their ventures were exposed. The method employed in ma"ing such insurance contracts was for the person desiring the insurance to pass around among the company assembled a slip upon which was written a description of the vessel and its cargo, with the name of the master and the character of his crew, and the voyage contemplated. Those desiring to become insurers of the ventures so described would write beneath the description on this slip their
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names or initials, and opposite thereto the amount which each was willing to shoulder. The term $underwriter% was believed to have originated from such a practice. *. De'e o#%ent of insurance in the United States In general, the development of the several "inds of insurance has followed the same lines in the Anited States as in England. owever, the insurance industry of the Anited States has grown to such an extent that which the exception of ocean marine insurance, the English practices and the English decisions have little influence on insurance in the Anited States. +. De'e o#%ent of insurance in the ,hi i##ines Insurance in the >hilippines is rather a young institution. >rior to the *B th century, insurance, in its modern sense, did not exist. <uring the pre8Spanish times, when the political unit was then the family, if a member of the family died or suffered any other misfortune, it was borne by the family. Chen communities, such as the barangays developed, the assistance was extended accordingly. Even now, this practice of furnishing some form of assistance to bereaved members of the family of someone who dies still exists. Eventually, mutual benefit societies and fraternal associations were organized for the purpose of rendering assistance, in money or in "ind, to their members. It may be that what wor"ed much against the early development of insurance in the >hilippines, aside from economic reasons, that is, low per capita income of the people, was the fatalistic philosophy behind our oft8-uoted expression $bahala na.% Insurance, in its present concept, was first introduced in the >hilippines sometime in *.+B when )loyd6s of )ondon appointed Stracham, 3urray D Co., Inc. as its representative here. Sometime in *BEB, the Anion Insurance Society of Canton appointed !ussell D Sturgis as its agent in 3anila. The business transacted in the >hilippines then was limited to non8life insurance. It was only in *.B. that life insurance was introduced in this country with the entry of Sun )ife ,ssurance of Canada in the local mar"et. The first domestic non8life insurance company, the =e" Tong )in 'ire and 3arine Insurance Company, was organized on 4une ., *B0/, while the first domestic life insurance company, the Insular )ife ,ssurance Co., )td., was organized in *B*0. In *B20, reinsurance was introduced with !einsurance Company of the Frient writing treaties for both life and non8life. The first wor"men6s compensation >ool was organized in *B2* as the !oyal #roup Incorporated. In *BGB, a government agency was formed to handle insurance affairs. The Insular Treasurer was appointed Commissioner ex8officio. Social insurance was established in *BE/ with the enactment of C.,. (o. *./ which created the #overnment Service Insurance System H#SISI which started operations in *BE1. The ,ct covers government employees. It was followed much later in *B2G by !.,. J **/* which provides for the organization of the Social Security System HSSSI covering employees of the private sector.
-. .aws on Insurance 1. Sources of Insurance .aw in the ,hi i##ines <uring the Spanish period, all the provisions concerning insurance in the >hilippines were found in Title 1 of 7oo" + and Section E of Title E of 7oo" E of the Code of Commerce, and in Chapters + and G of Title *+ of 7oo" G of the old Civil Code of *..B. Chen ,ct J +G+1, enacted on <ecember **, *B*G, otherwise "nown as the Insurance ,ct, too" effect on 4uly * *B*2 during the ,merican !egime, the provisions of the Code of Commerce on insurance were expressly repealed. Ang Giok vs. Springfields Facts: Ang Giok insured the contents of his warehouse with three insurance companies for 60K. The warehouse and its contents were destroyed by fire while the policies were in force. The plaintiff instituted action in the CF of !anila against one of the insurers to reco"er a proportional part of the loss coming to #$% &'0. (). Four special defenses were interposed by the insurer% one being planted on a "iolation of warranty F fi*ing the amount of ha+ardous goods which might be stored in the insured building. ,ecurely pasted on the left hand margin of the policy reading in part as follows- . t is agreed that during the currency of this policy no ha+ardous goods be stored in the building/e*ceeding in all 0 percent of the total "alue of the whole merchandise contained in said warehouse.1 Held: The rider or slip containing said warranty F attached to the policy in 2uestion and referred to therein as making part of the two forms pro"ided in
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said ,ection 6( of the nsurance 3aw. The law says that e"ery e*press warranty must be .contained in the policy itself.1 The word .contained%1 according to the dictionaries% means included% enclosed% embraced% comprehended etc. 4hen therefore% the courts speak of a rider attached to the policy% and thus embodied therein% or of a warranty incorporated into the policy% it is belie"ed that the phrase 1contained in the policy itself1 must necessarily include such ride and warranty. As to the alternati"e relating to .another instrument1 as here used could not mean a mere slip of paper like a rider% but something akin to the policy itself. The word instrument has a well defined definition in California% and as used in the Codes in"ariably means some written paper or instrument signed and deli"ered by one person to another% transferring the title to% or gi"ing a lien% on property% or gi"ing a right to debt or duty. The rider% warranty F% is contained in the policy itself% because by the contract agreed to by the parties is made to form part of the same% but is not another instrument signed by the insured and referred to in the policy as forming a part of it. The rider is therefore "alid and binding. Gercio vs. Sunlife Facts: 5n 6anuary &)&0% the ,un 3ife assurance Co.% of Canada issued a 708year endowment policy on the life of 9ilario Gercio. The insurance company agreed to insure the life of Gercio for #7% 000% to be paid to him on February &% &)00% or if the insured should die before said date% then to his wife% should she sur"i"e him: otherwise% to the e*ecutors% administrators% or assigns of the insured. The policy did not include any pro"ision reser"ing to the insured the right too change the beneficiary. 4hen the policy was issued% Andrea ;ialcita was the lawful wife of 9ilario. n &)&)% she was con"icted of adultery. n &)70% a decree of di"orce was issued in a ci"il case completely dissol"ing the bonds of matrimony between Gercio and ;ialcita. n &)77% Fercio formally notified ,un 3ife that he had re"oked his donation in fa"or of ;ialcita% and that he had designated in her stead his present wife% Adela Garcia de Gercio% as the beneficiary of the policy. Gercio re2uested ,un 3ife to eliminate ;ialcita as beneficiary. This the insurance company has refuse to do and still refuses to do. Held: The Code of Commerce% the Ci"il Code or the nsurance Act does not contain any pro"ision either permitting or prohibiting the insured to change the beneficiary. 4e must perforce conclude that whether the case be considered in the light of the Code of Commerce% the Ci"il Code% or the nsurance Act% the deficiencies in the law will ha"e to be supplemented by the general principles pre"ailing on the sub<ect. To that end% we ha"e gathered the rules which follow from the best considered American authorities. n adopting these rules% we do so with the purpose of ha"ing the #hilippine 3aw of nsurance conform as nearly as possible to the modern 3aw of nsurance as found in the =nited ,tates. The beneficiary has an absolute "ested interest in the policy from the date of its issuance and deli"ery. ,o when a policy of life insurance is taken out by the husband in which the wife is named the beneficiary% she has a subsisting interest in the policy. 4hen >A 0$6% otherwise known as the Ci"il Code of the #hilippines% took effect on August 00% &)(0% those pro"isions of the old Ci"il Code on insurance were also e*pressly repealed. #residential ?ecree @ 6&7% as amended% which ordained and instituted the nsurance Code of the #hilippines% was promulgated on ?ecember &$% &)'A during the period of martial law. t repealed Act @ 7A7'% as amended. Before #residential ?ecree 6&7% amendments to the Act were made by #?s @ 60% &70% 0&'. #residential ?ecree @ &A60% consolidated all insurance laws into a single code known as the nsurance Code of &)'$. Basically% it reenacted #residential ?ecree @ 6&7% as amended. t has been amended by #residential ?ecree @ &$&A and Batas #ambansa Blg. $'A.
". .aws Go'erning Insurance Insurance Code of *B1. The law on insurance is contained now in the Insurance Code of *B1. H>< J *G/0, as amendedI 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 >hilippines. It too" effect on 4une **, *B1., the date of its promulgation $without pre&udice, 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 >hilippines H>< /*+I% Civil Code The provisions of the Civil Code dealing on insurance are found in articles 1EB and +0*+ Hvoid donationsI, ,rticle +0** Happlicability of the Civil CodeI, ,rticles +0+*8+0+1 Hlife annuity contractsI, ,rticle +*./ Hcompulsory motor vehicle liability insuranceI, and ,rticle ++01 Hright of subrogationI.
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Special laws I. The Insurance Code of *B1. H>< *G/0I II. The !evised #overnment Service Insurance ,ct of *B11 H>< **G/, as amendedI, with respect to insurance of government employees III. The Social Security ,ct of *B2G H!, **/*, as amendedI with respect to insurance of employees in private employment Fthers K insofar as the Civil Code is concerned, the Code of Commerce is considered a special law I. !, /2/ Has amended by >< +G2I, "nown as the $>roperty Insurance )aw,% dealing with government property II. !, G.B. Has amended by !, 212/I providing life, disability and accident insurance coverage to barangay officials III. EF +20 H4uly +2, *B.1I increases, integrates and rationalizes the insurance benefits of barangay official sunder !, G.B. and members of Sangguniang >anlalawigan, Sangguniang >anlungsod, and Sangguniang 7ayan under >< **G1. The insurance benefits are extended by the #SIS. I@. !, E2B* Has amendedI establishes the >hilippine <eposit Insurance Corporation which insures the deposits of all ban"s which are entitled to the benefits of insurance under this ,ct II. T/E CONTRACT O0 INSURANCE A. Definitions 1Section "2 Insurance Code Sec. +. Chenever used in this Code, the following terms shall have the respective meanings hereinafter set forth or indicated, unless the context otherwise re-uiresL H*I , Mcontract of insuranceM is an agreement whereby one underta"es for a consideration to indemnify another against loss, damage or liability arising from an un"nown or contingent event. , contract of suretyship shall be deemed to be an insurance contract, within the meaning of this Code, only if made by a surety who or which, as such, is doing an insurance business as hereinafter provided. H+I The term Mdoing an insurance businessM or Mtransacting an insurance businessM, within the meaning of this Code, shall include HaI ma"ing or proposing to ma"e, as insurer, any insurance contractN HbI ma"ing or proposing to ma"e, as surety, any contract of suretyship as a vocation and not as merely incidental to any other legitimate business or activity of the suretyN HcI doing any "ind of business, including a reinsurance business, specifically recognized as constituting the doing of an insurance business within the meaning of this CodeN HdI doing or proposing to do any business in substance e-uivalent to any of the foregoing in a manner designed to evade the provisions of this Code. In the application of the provisions of this Code the fact that no profit is derived from the ma"ing of insurance contracts, agreements or transactions or that no separate or direct consideration is received therefore, shall not be deemed conclusive to show that the ma"ing thereof does not constitute the doing or transacting of an insurance business. HEI ,s used in this MCommissionerM means CommissionerM. code, the term the MInsurance
1. 3Contract of Insurance4 ,n agreement whereby one underta"es for a consideration to indemnify another against loss, damages or liability arising from an un"nown or contingent event ". 3Doing an Insurance -usiness4
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3a"ing or proposing to ma"e, as insurer, any insurance contract 3a"ing or proposing to ma"e, as surety, any contract of surety ship as a vocation <oing any "ing of business, including a reinsurance business, specifically recognized as constituting the doing of an insurance business with the meaning of this Code <oing or proposing to do any business in substance e-uivalent to any of the foregoing It is not compulsory and the parties may incorporate such terms and conditions as they may deem convenient which will be binding provided they do not contravene any provision of law and are not opposed to public policy o Though generally a voluntary contract, the carrying of insurance, particularly liability insurance, may be re-uired by law in certain circumstances such as for motor vehicles, or employees Hlabor Code ,rt. */.8*.GI or as a condition to granting a license to conduct a business or calling affecting public safety or welfare o Social insurance for members of #SIS and for employees of the private sector covered by the SSS is also established by law
-. E e%ents 1. Insura$ e interest The insured has an insurable interest in the thing or the life of the insured ". Ris5 of .oss or Da%age 6 Designated ,eri as Cause The happening of the designated events, either un"nown or contingent, past or future, will sub&ect such interest to some loss, whether in the form of in&ury, damage, or liability &. Consideration7 ,re%iu% The insurer underta"es to assume the ris" of such a loss for a consideration called the premium to be paid by the insured
&. A eator! ,rt. +0*0. 7y an aleatory contract, one of the parties or both reciprocally bind themselves to give or to do something in consideration of what the other shall give or do upon the happening of an event which is uncertain, or which is to occur at an indeterminate time. It depends upon some contingent event (ot a contract of chance although the event against the occurrence of which it is intended to provide may never occur It means one of the parties or both reciprocally bind themselves to give or to do something in consideration of what the other shall give or do upon the happening of the event which is uncertain, or which is to occur at an indefinite time Each party must ta"e a ris" o Insurer 8 being compelled upon the happening of the contingency, to pay the entire sum agreed upon o Insured K parting with the amount re-uired as premium without receiving anything in case the contingency does not happen except what is ordinarily termed $protection%
*. Ris5 Distri$uting Sche%e This assumption of ris" is part of a general scheme to distribute the loss among a large number of persons exposed to similar ris"s
C. Characteristics6Nature of Insurance Contracts 1. Consensua >erfected by the meeting of the minds of the parties If an application for insurance has not been either accepted or re&ected, there is no contract as yet ". 8o untar!
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which is itself is a valuable consideration *. E)ecutor! 9insurer: and e)ecuted 9insured: Executory on the part of the insurer in the sense that it is not executed until payment for a loss It is executed as to the insured after payment of the premium It is a unilateral contract imposing legal duties only on the insurer who promises to indemnify in case of loss +. Conditiona It is sub&ect to conditions the principal one of which is the happening of the event insured against The contract usually includes many other conditions, such as payment of premium or performance of some other act, which must be complied with as precedent to the right of the insured to claim benefit under it ;. A contract of inde%nit! 9non< ife insurance: The promise of the insurer is to ma"e good only the loss of the insured ,ny contract that contemplates a possible gain to the insured by the happening of any event upon which the liability of the insurer becomes fixed is contrary to the nature of insurance (o person may secure insurance upon property in which he has no interest. If the insured has no insurable interest, the contract is void and unenforceable as being contrary to public policy because it affords a temptation to the insured to wish or bring about the happening of the loss =. An in'est%ent 9 ife insurance: 3easure of economic security for the insured during life, and beneficiary after death 'inancial assistance during financial crisis )iability of insurer is face value of the policy and not the earning capacity of the insured at the time of death >. A #ersona contract Each party having in view the credit, character and conduct of another ,s a rule, the insured cannot assign, before the happening of the loss, his rights under a property policy without the consent of the insurer. The obligation of the insurer to pay does not attach or run with the property whether it be real property or personal o If a person whose property is insured sells it to another, the buyer cannot be his successor in the contract of insurance unless, of course, the sale is with the consent of the insurer or unless by express stipulation of the parties, the contract is made to run with the property of the transferee o Chere the insurance is $on account of the owner% or $for whom it may concern% or where $the loss is payable to bearer,% the subse-uent transferees or owners become by the terms of the contract, the real parties to the contract of insurance. ,ll insurance contracts share a common trait of $personal8ness% o >ersonal insurance Hincludes life, health, accident, and disability insuranceI K applies only to a particular individual, and it is not possible, for example, for the insured unilaterally declaring that his health insurance policy shall now be deemed to cover the health of someone else o )iability insurance K each person purchases coverage for his own Hor a group of related personsI potential liability to others. The insurer prices the coverage depending on the characteristics and traits of the particular insured o >roperty insurance 8 the insurance is on the insured6s interest in the property, not on the property itself. It is the damage to the personal interest not the property that is being reimbursed o )ife insurance K #E(E!,))= ,SSI#(,7)E as they are in the nature of property and do
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not represent a personal agreement between insured and insurer ?. A contract of Adhesion >olicy is presented to the insured already in its printed form $Ta"e it or leave it% 1@. Of highest degree of good faith Each party is en&oined by law to deal with each other in good faith <isclosure or the duty to disclose @iolation of the duty gives the other party the right to rescind the contract D. Contracts for Contingent Ser'icesA ,re<need , ans and Si%i ar Arrange%ents 1. Contracts for Contingent ,ersona Ser'ices It dies not necessarily follow that a contract containing the abovementioned elements would be an insurance contact The primary purpose of the parties ma"ing the contract may negate the existence of an insurance contract o , law firm which enters into contracts with clients in consideration of periodical payments, where it promises to represent such clients in all suits for or against them, is not engaged in an insurance business. Its contracts are simply for the purpose of rendering personal services o , contract by which a consideration of a stipulated amount, agrees at its own expense to defend a physician against all suits for damages for malpractice is one of insurance, and the corporation will be deemed as engaged in the business of insurance o Anli"e the lawyer6s retainer contract, the essential purpose of such a contract is not to render personal services, but to indemnify against loss or damage resulting from the defense of actions for malpractice. o , corporation which enters into contracts with car owners and agrees to engage and pay for the services of a lawyer to handle any damage case arising from collision of their cars, is engaged in the insurance business and must therefore comply with the laws relative to the transaction of insurance business and should be licensed as such before it can lawfully transact such business Such contracts do not provide for the payment of any sum directly to the contractee, but it does provide for the relief of the contractee from the expenses of employing an attorney It would be immaterial that the contract states on its face that it is not a contract of insurance, for the nature of the contract cannot be changed by such a declaration ". Contracts with Contingent Incidenta -enefit In the case of Attorne! Genera e) re Mon5 's. C.E. Osgood Co. , the defendant company was engaged in the business of selling household furniture on the installment plan. Ander the contracts with its customers, although delivery would be made at the time of the contract, title to the furniture would not pass until all payments have been completed. Said contracts also provided that should the buyer die before full payment of the agreed price, the unpaid balance would be remitted to the extent of O200. The Insurance Commissioner, through the ,tty. #en., claiming that this last provision made it an insurance contract brought suit to restrain the defendant from pursuing its business without first securing the proper license. The Court upheld the ,ttorney #eneral6s contention and issued an in&unction holding that the contract had all the elements of an insurance contract. Chether this clause in the contract is ancillary to defendant6s chief business or is mainly for advertising ends was held irrelevant in view of the prohibition against the ma"ing of insurance contracts by companies not authorized by law. It would seem, however, that the purpose of the stipulation, ta"en with its effects in case of the death of the buyer, did not warrant a holding that the furniture company should first secure a license to engage in the insurance business.
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,lthough all the elements of an insurance contract may seem to be present, yet the furniture buyer and?or his heirs did not, under the circumstances, need the protection which the law aims to give the insuring public by the re-uirement of a prior license. 'irst of all, when the buyer purchased the furniture, he must have seen and examined it and must have believed that it was worth the amount he agreed to pay for it. Secondly, the furniture was delivered to him at the time of the contract and used by him thereafter. Apon his death, his heirs continued en&oying the use of the furniture. Therefore, the buyer and?or his heirs stood to lose nothing by the -uestioned stipulation, and if at all, stood to gain by it. &. ,re<need , ans Philamcare Health Systems vs. CA Ratio: ,ection 0 of the nsurance Code states that any contingent or unknown e"ent% whether past or future% which may damnify a person ha"ing an insurable interest against him% may be insured against. C"ery person has an insurable interest in the life and health of himself. ,ection &0 pro"idesC"ery person has an insurable interest in the life and health D&E for himself% of his spouse and of his children: D7E of any person on whom he depends wholly or in part for education or support% or in whom he has a pecuniary interest: D0E of any person under a legal obligation to him for the payment of the money% respecting property or ser"ice% of which death or illness might delay or pre"ent the performance: and DAE of any person upon whose life any estate or interest "ested in him depends. n the case at bar% the insurable interest of respondentFs husband in obtaining the health care agreement was on his own health. The health care agreement was in the nature of non8life insurance% which is primarily a contract of indemnity. 5nce the member incurs hospital% medical or any other e*pense arising from sickness% in<ury or other stipulated contingent% the health care pro"ider must pay for the same to the e*tent agreed upon under the contracts. E. C assification under the Code 1. .ife 8 defined as a mutual agreement by which a party agrees to pay a given sum on the happening of a particular event contingent on the duration of human life, in consideration of the payment of a smaller sum immediately, or in periodical payments by the other party aI Individual life Sec. *1B. )ife insurance is insurance on human lives and insurance appertaining thereto or connected therewith.
Sec. *.0. ,n insurance upon life may be made payable on the death of the person, or on his surviving a specified period, or otherwise contingently on the continuance or cessation of life. Every contract or pledge for the payment of endowments or annuities shall be considered a life insurance contract for purpose of this Code In the absence of a &udicial guardian, the father, or in the latterPs absence or incapacity, the mother, or any minor, who is an insured or a beneficiary under a contract of life, health or accident insurance, may exercise, in behalf of said minor, any right under the policy, without necessity of court authority or the giving of a bond, where the interest of the minor in the particular act involved does not exceed twenty thousand pesos. Such right may include, but shall not be limited to, obtaining a policy loan, surrendering the policy, receiving the proceeds of the policy, and giving the minorPs consent to any transaction on the policy.
Sec. *.*. , policy of insurance upon life or health may pass by transfer, will or succession to any person, whether he has an insurable interest or not, and such person may recover upon it whatever the insured might have recovered.
Sec. *.+. (otice to an insurer of a transfer or be-uest thereof is not necessary to preserve the validity of a policy of insurance upon life or health, unless thereby expressly re-uired.
Sec. *.E. Anless the interest of a person insured is susceptible of exact pecuniary measurement, the measure of indemnity under a policy of insurance upon life or health is the sum fixed in the policy.
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Insurance on human lives and insurance appertaining thereto or connected therewith 3ade payable on the death of a person, or on his surviving a specified period, or otherwise contingently on the continuance or cessation of life
Sec. ++B.The term Mindustrial life insuranceM as used in this Code shall mean that form of life insurance under which the premiums are payable either monthly or oftener, if the face amount of insurance provided in any policy is not more than five hundred times that of the current statutory minimum daily wage in the City of 3anila, and if the words Mindustrial policyM are printed upon the policy as part of the descriptive matter. ,n industrial life policy shall not lapse for non8 payment of premium if such non8payment was due to the failure of the company to send its representative or agent to the insured at the residence of the insured or at some other place indicated by him for the purpose of collecting such premiumN >rovided, That the provisions of this paragraph shall not apply when the premium on the policy remains unpaid for a period of three months or twelve wee"s after the grace period has expired.
bI #roup life Sec. 20.The policy shall be in printed form which may contain blan" spacesN and any word, phrase, clause, mar", sign, symbol, signature, number, or word necessary to complete the contract of insurance shall be written on the blan" spaces provided therein. ,ny rider, clause, warranty or endorsement purporting to be part of the contract of insurance and which is pasted or attached to said policy is not binding on the insured, unless the descriptive title or name of the rider, clause, warranty or endorsement is also mentioned and written on the blan" spaces provided in the policy. Anless applied for by the insured or owner, any rider, clause, warranty or endorsement issued after the original policy shall be countersigned by the insured or owner, which countersignature shall be ta"en as his agreement to the contents of such rider, clause, warranty or endorsement. #roup insurance and group annuity policies, however, may be typewritten and need not be in printed form. 3ay be typewritten and need not be in printed form 3embers usually a cohesive group o >ay a uniform premium o Asually no medical examination o (ormally re-uires a specified number of persons insured before policy is issued
'orm of life insurance under which the premiums are payable either monthly or oftener 'ace amount of insurance provided in any policy is not more than five hundred times that of the current statutory minimum daily wage in the City of 3anila Shall not lapse for non8payment of premium if such non8payment was due to the failure of the company to send its representative or agent to the insured at the residence of the insured or at some other place indicated by him for the purpose of collecting such premium o This shall not apply when the premium on the policy remains unpaid for a period of three months or twelve wee"s after the grace period has expired.
". Non< ife K include policies covering ris"s to which property may be exposed, as well as those which cover the ris" of liability to third persons. It covers a specified period of time Hnot more than * yearI and has a definite period of coverage. aI 3arine Sec. BB.3arine Insurance includesL H*I toL Insurance against loss of or damage
cI Industrial life
HaI @essels, craft, aircraft, vehicles, goods, freights, cargoes, merchandise, effects, disbursements, profits, moneys, securities, choses in action, evidences of debts, valuable papers, bottomry, and respondentia interests
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and all other "inds of property and interests therein, in respect to, appertaining to or in connection with any and all ris"s or perils of navigation, transit or transportation, or while being assembled, pac"ed, crated, baled, compressed or similarly prepared for shipment or while awaiting shipment, or during any delays, storage, transhipment, or reshipment incident thereto, including war ris"s, marine builderPs ris"s, and all personal property floater ris"sN HbI >erson or property in connection with or appertaining to a marine, inland marine, transit or transportation insurance, including liability for loss of or damage arising out of or in connection with the construction, repair, operation, maintenance or use of the sub&ect matter of such insurance Hbut not including life insurance or surety bonds nor insurance against loss by reason of bodily in&ury to any person arising out of ownership, maintenance, or use of automobilesIN HcI >recious stones, &ewels, &ewelry, precious metals, whether in course of transportation or otherwiseN HdI 7ridges, tunnels and other instrumentalities of transportation and communication Hexcluding buildings, their furniture and furnishings, fixed contents and supplies held in storageIN piers, wharves, doc"s and slips, and other aids to navigation and transportation, including dry doc"s and marine railways, dams and appurtenant facilities for the control of waterways. H+I M3arine protection and indemnity insurance,M meaning insurance against, or against legal liability of the insured for loss, damage, or expense incident to ownership, operation, chartering, maintenance, use, repair, or construction of any vessel, craft or instrumentality in use of ocean or inland waterways, including liability of the insured for personal in&ury, illness or death or for loss of or damage to the property of another person. Fcean marine insurance K an insurance against ris" connected with navigation, to which a ship, cargo, freightage, profits or other insurable interest in movable property, may be exposed during a certain voyage or a fixed period of time Inland marine insurance K it is of comparatively recent origin and covers primarily the land or over the land transportation perils of property shipped by railroads, motor truc"s, airplanes, and other means of transportation. It also covers ris"s of la"e, river, or other inland waterway transportation and other waterborne perils outside of those ris"s that fall definitely within the ocean marine category bI 'ire Sec. */1. ,s used in this Code, the term Mfire insuranceM shall include insurance against loss by fire, lightning, windstorm, tornado or earth-ua"e and other allied ris"s, when such ris"s are covered by extension to fire insurance policies or under separate policies. Insurance against loss by fire, lightning, windstorm, tornado or earth-ua"e and other allied ris"s, when such ris"s are covered by extension to fire insurance policies or under separate policies
cI Casualty or )iability Insurance Sec. *1G. Casualty insurance is insurance covering loss or liability arising from accident or mishap, excluding certain types of loss which by law or custom are considered as falling exclusively within the scope of other types of insurance such as fire or marine. It includes, but is not limited to, employerPs liability insurance, motor vehicle liability insurance, plate glassinsurance, burglary and theft insurance, personal accident and health insurance as written by non8life insurance companies, and other substantially similar "inds of insurance. Insurance covering loss or liability arising from accident or mishap, excluding certain types of loss which by law or custom are considered as falling exclusively within the scope of other types of insurance such as fire or marine Includes, but is not limited to, employer6s liability insurance, motor vehicle liability insurance, plate glass insurance, burglary and theft insurance, personal accident and health insurance as written by non8life insurance companies, and other substantially similar "inds of insurance
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dI Suretyship Sec. *12. , contract of suretyship is an agreement whereby a party called the surety guarantees the performance by another party called the principal or obligor of an obligation or underta"ing in favor of a third party called the obligee. It includes official recognizances, stipulations, bonds or underta"ings issued by any company by virtue of and under the provisions of ,ct (o. 2E/, as amended by ,ct (o. ++0/. The ultimate payment of the insurance proceeds is as certain as death itself bI )imited payment plan The terms of which the premiums are payable only during a limited period of years, usually ten, fifteen, or twenty Chen the specified number of premium payments have been made, the insurance is fully paid for It is li"e whole life policies in that it is payable only at the death of the insured If the insured should die within the specified period, his beneficiary is entitled to all the proceeds of the policy without any liability for the unpaid premiums 7ecause of the limited number of payments to be made by the insured, the premiums are proportionately higher cI Term plan Fne which provides coverage only of the insured dies during a limited period It is an insurance for a fixed or a specific term, such as two, five, or ten years If the insured dies within the period specified, the policy is paid to the beneficiary If he survives the period, the contract terminates The premium paid is levied during the specified terms and increases with each renewal term or the amount of the coverage declines, and this is because as a person ages, the ris" of death increases The premium is lower than in the case of whole life policies because of the possibility that the insurer may not be obliged to pay anything in proceeds whatsoever if the insured survives the term dI >ure endowment plan Insured pays premium for a specified period and should he survive the period, the insurance company pays him the face value of the policy If he should die within the period the insurance company is released from any liability and unless provided in the contract, need not reimburse any part of the premiums paid eI Endowment plan The terms of which the insurer binds himself to pay a fixed sum to the
Sec. *1/. The liability of the surety or sureties shall be &oint and several with the obligor and shall be limited to the amount of the bond. It is determined strictly by the terms of the contract of suretyship in relation to the principal contract between the obligor and the obligee. H,s amended by >residential <ecree (o. *G22I
Sec. *1.. >ertinent provisions of the Civil Code of the >hilippines shall be applied in a suppletory character whenever necessary in interpreting the provisions of a contract of suretyship. ,n agreement whereby a surety guarantees the performance by the principal or obligor of an obligation or underta"ing in favor of a third party or obligee Includes official recognizances, stipulations, bonds or underta"ings issued by nay company by virtue of ,ct J 2E/, as amended by ,ct J ++0/ , contract of suretyship shall be deemed to be an insurance contract, only if made by a surety who or which is doing an insurance business
&. 8ariations in .ife Insurance Contracts aI Chole life plan The terms of which the insured is re-uired to pay a certain fixed premium annually or at more fre-uent intervals throughout life and the beneficiary is entitled to receive payment under the policy only after the death of the insured
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insured if he survives for a specified period Hmaturity date stated in the policyI, or if he dies within such period, to some other person indicated The premium is higher because the cash values of the policy grow more rapidly. This "ind of policy differs from the limited payment life policy in that in the case of the latter, the policy is paid only upon the death of the insured The insured stands a chance of being paid the proceeds of the policy while still alive The proceeds on maturity can be paid either in a lump sum or as an annuity ,ny ambiguity in the insurance contract should, therefore, be resolves in favor of the beneficiary , policy of insurance which contains exceptions or conditions tending to wor" a forfeiture of the policy shall be interpreted most favorably toward those against whom they are intended to operate and most strictly against the insurance company or the party for whose benefit they are inserted Chere restrictive provisions are open to two interpretations, that which is most favorable to the insured is adopted. )imitations of liability must be construed in such a way as to preclude the insurer from non compliance with its obligations
0. Construction 6 Inter#retation of Insurance Contracts 1. Bhere there is A%$iguit! or Dou$t Insurance is, in its nature, complex and difficult for the layman to understand ,s 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 ,n insurance contract should be so interpreted as to carry out the purpose for which the parties entered into the contract which is to insure against ris" of loss, damage or liability on the part of the insured , policy of insurance is a contract of adhesion, that is, most of the terms of the contracts do not result from mutual negotiation between the parties as they are prescribed by the insurer in final printed forms which the insured may re&ect or to which he may adhere if he chooses but which he cannot change The insurer is under the duty to ma"e its meaning clear if it desires to limit or restrict the operation of the general provisions of its contract by special proviso, exception or exemption
". Bhere Ter%s are C ear The cardinal principle of insurance law of interpreting insurance contracts favorably to the insured is applicable only in cases of doubt, not when the intention of the policy is clear or the language is sufficiently clear to convey the meaning of the parties The court is bound to adhere to the insurance contract as the authentic expression of the intention of the parties, and it must be construed and enforced according to the sense and meaning of the terms which the parties themselves have used. If such terms are clear and certain, they must be ta"en in their plain and ordinary sense The terms of an unambiguous insurance policy cannot be enlarged or diminished by &udicial construction since the court cannot ma"e a new contract for the parties where they themselves have employed express and unambiguous words Fbligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith &. .itera or Strict Inter#retation First ue!on City "nsurance vs. CA Facts: ?el >osario fell off a ?e ?ios !arikina Transportation Co. nc. bus. ?el >osario was brought to the hospital and stayed there for A0 days. The cost for the hospitali+ation amounted to #6)%AAA while unearned salary due to confinement amounted to #'%(00. ?el >osario filed a complaint against ?!TC and its insurance company% First Gue+on City nsurance Company.
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Held: The insurance companyFs liability should be limited to #&7%000 only. The insurance policy clearly placed the ma*imum limit of First Gue+on CityFs liability for damages arising from death or bodily at #&7%000 per passenger and its ma*imum liability per accident at #(0%000. This means that the insurerFs ma*imum liability for any single accident will not e*ceed (0K regardless of the number of the passengers killed or in<ured. #y vs. First $ational 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 in<ured his left hand% causing temporary total disability due to fractures o his inde*% middle% and fourth fingers. 9e filed a notice of accident and claim to reco"er indemnity from First Hational ,urety I assurance Co. nc.% pursuant to his insurance policy which pro"ides- ./the loss of a hand shall mean the loss by amputation through the bones of the wrist/1 The insurance company re<ected TyFs claim saying that since there was no se"erance by amputation of the hand% the disability suffered by him was not co"ered under the policy. Held: The insurance company is not liable to indemnify Ty. 4e cannot go beyond the clear and e*press conditions of the insurance policies% all of which define partial disability as loss of either hand by .amputation through the bones of the wrist1 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 co"ered by the policies would certainly be unwarranted. %isamis &um'er vs. Capital "nc. Facts: !isamis 3umber Corporation% insured its motor car for the amount of #&A%000. The insured car% passed o"er a water whole which the dri"er did not see because an oncoming car did not dim its lights. The car was later towed and repaired by !orosi !otors at a total cost of #007.7'. Capital nsurance refused to pay for the total cost of towage and repairs. Held: The insurance company is not liable for the payment of the repairs in e*cess of #&(0. The insurance policy stipulated in paragraph A that if the insured authori+es the repair% the liability of the insurer is limited to #&(0. The literal meaning of this stipulation must control% it being the actual contract% e*pressly and plainly pro"ided for in the policy. The policy is also drew out not only the limits of the insurerFs liability but also the mechanics that the insured had to follow to be entitled to full indemnity of repairs. The option to undertake the repairs is accorded to the insurance company per paragraph 7. The said company was depri"ed of the option because the insured took it upon itself to ha"e the repairs made% and only notified the insurer when the repairs were done. As a conse2uence% paragraph A% which limits the companyFs liability to #&(0 applies. Sun "nsurance vs. CA Facts: Tan took from ,un nsurance a property insurance worth 000K to insure his interest in the electrical supply store of his brother housed in a building in loilo City. Four days after% the building was burned down including the insured store. 4hen Tan filed a claim with the insurance company% the same was denied% after which he asked for reconsideration which was again denied. t is stipulated in the insurance policy that any action should be filed with the nsurance Commission or any court of competent <urisdiction within &7 months after receipt by the insured of a re<ection of his claim and failure to do so would constitute abandonment of claim and can no longer be reco"erable. Held: The &78month prescripti"e period commenced upon receipt by Tan of the re<ectionJdenial of his claim by ,un nsurance and does not stop upon filing of the motion for reconsideration. The words of the pro"isions in the insurance policy is clear and free from any doubt or ambiguity whatsoe"er and thus must be taken and understood in its plain% ordinary and popular sense. Fortune "nsurance vs. CA Facts: An armored car of #roducers Bank% while in the process of transferring cash in the sum of '7(K% was robbed of the said cash. After an in"estigation by police authorities% the dri"er and the guard were charged with Kiolation of #? (07% the Anti89ighway >obbery 3aw. ?emands were made by the bank upon the insurance company to pay the amount of '7(K% but the latter refused to pay as the loss is e*cluded from the co"erage of the insurance policy which reads- . The company shall not be liable under this policy in respect of . . . any loss caused by any dishonest% fraudulent or criminal act of the insured or any officer% employee% partner% director% trustee or authori+ed representati"e of the insured whether acting alone or in con<unction with others/1 Held: The insurance company is not liable. t is clear that insofar as Fortune is concerned% it was its intention to e*clude and e*empt from protection and co"erage losses arising from dishonest% fraudulent% or criminal acts of persons granted or ha"ing unrestricted access to the bankFs money or payroll. 4hen it used the term .employee%1 it must ha"e in mind any person who 2ualifies as such as generally and e2ui"ocally understood% or <urisprudentially established in light of the determination of the C>8CC relationship. t is settled that the terms of the policy constitute the measure of the insurerFs liability. n the absence of statutory prohibition to the contrary% insurance companies ha"e the same rights as indi"iduals to limit their liability and to impose whate"er
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conditions they deem best upon their obligations not inconsistent with public policy *. .i$era Inter#retationA Reasona$ e E)#ectations Fieldman(s "nc. vs. )da. *e Songco Facts: ,ongco owned a pri"ate <eepney. 9e was induced by an agent of FieldmenFs nsurance to apply for a Common CarrierFs nsurance #olicy% which is applicable to public utility "ehicles. The policy pro"ides.the company will% sub<ect to the limits of liability and under terms of this policy% indemnify the insured in the e"ent of accident caused by or arising out of the use of motor "ehicle against all sums which will become liable to pay in respect of death or bodily in<ury to any fare8paying passenger.1 ?uring the effecti"ity of the policy% the insured "ehicle collided with another car killing ,ongcoFs son and wounding his wife. Held: ?octrine of estoppel applies. After leading ,ongco to belie"e that he could 2ualify under the common carrier policy and to enter into the contract of insurance paying the premiums due% FieldmenFs cannot be permitted to change its stand. Also% e*cept for the fact that the "ictims were not fare8paying passengers% their status as beneficiaries under the policy is recogni+ed. C"en assuming there was an ambiguity% ambiguities or obscurities must be strictly interpreted against the party that caused them. This rigid application of the rule of ambiguities has become necessary in "iew of current business practices. %alayan "ns. vs. CA Facts: TKC !arketing Corp. was the ownerJconsignee of some 0%&$).&'& metric tons of soya bean meal which was loaded on board the ship !K Al Ka+iemah. ,aid cargo was insured against the risk of loss by !alayan nsurance Corporation. 4hile the "essel was docked in ,outh Africa on ,eptember &)$) enroute to !anila% the ci"il authorities arrested and detained it because of a lawsuit on a 2uestion of ownership and possession. TKC notified the insurance company of the arrest of the "essel and made a formal claim for the amount of =,I)&6%$$6.66. !alayan replied that the arrest of the "essel by ci"il authority was not a peril co"ered by the policies. Held: !alayan insurance should be held liable for the payment of the insurance claim. ,ince what was also e*cluded in the deleted F.C. L ,. Clause was MarrestM occasioned by ordinary <udicial process% logically% such MarrestM would now become a co"ered risk under subsection &.& of ,ection & of the nstitute 4ar Clauses% regardless of whether or not said MarrestM by ci"il authorities occurred in a state of war. t has been held that a strained interpretation which is unnatural and forced% as to lead to an absurd conclusion or to render the policy nonsensical% should% by all means% be a"oided. 3ikewise% it must be borne in mind that such contracts are in"ariably prepared by the companies and must be accepted by the insured in the form in which they are written. C*ceptions to the general co"erage are construed most strongly against the company. C"en an e*press e*ception in a policy is to be construed against the underwriters by whom the policy is framed% and for whose benefit the e*ception is introduced. +estern Guaranty vs. CA Facts: ?e ?ios Transportation nc. Figured in an accident when it struck >odrigue+ who was crossing the pedestrian lane on Airport >oad. The dri"er ignored the stop signal gi"en by a traffic enforcer. >odrigue+ was thrown to the ground and hit her head and resulted to her face getting permanently disfigured. ?e ?ios Transportation filed a complaint against 4estern Guaranty since they were insured by 4estern under a !aster #olicy which pro"ided protection against third party liability. Held: 4estern Guaranty is liable to pay for the damage caused to the "ictim including loss of earnings% moral damages and attorneyFs fees. The ,chedule of ndemnities does not purport to limit or e*hausti"ely enumerate the species of bodily in<ury to the list found in the ,chedule of ndemnities since an accident may result to an in<ury to internal organs not necessarily to a loss of limb Damputation of the leg% arm% finger% handE but such in<uries are certainly co"ered by the !aster #lan since they constituted bodily in<uries. Also% the ,chedule of ndemnities also does not purport to restrict the kind of damages that may be paid by the insurer once liability has arisen% under the 3iability to Third #arty clause% and does not say that the limit is sub<ect to the list indicated in the ,chedule of ndemnities. All other types of damages may be awarded against the insurer once liability is shown to ha"e arisen. A contract of insurance is a contract of adhesion and must be construed strictly against the party which prepared the contract. ua Chee Gan vs. &a, -nion Facts: This case in"ol"ed a claim on a fire insurance policy which contained a pro"ision as to the installation of fire hydrants the number of which depended on the height of the e*ternal wall perimeter of the bodega that was insured. 4hen it was determined that the bodega should ha"e ele"en fire hydrants in the compund as re2uired by the terms of the policy% instead of only two that it had% the claim under the policy was resisted on that ground. Held: The said de"iation from the terms of the policy did not pre"ent the claim under the same. 4e are in agreement with the trial Court that the appellant is barred by wai"er Dor rather estoppelE to claim "iolation of the so called fire hydrants warranty% for the reason that knowing fully that the number of hydrants demanded therein ne"er
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e*isted from the "ery beginning% the appellant ne"ertheless issued the policies in 2uestion sub<ect to such warranty% and recei"ed the corresponding premiums. t would be perilously recei"ed the corresponding premiums. t would be perilously close to conni"ing at fraud upon the insured to allow the appellant to claim now as "oid ab initio the policies that it had issue to the plaintiff without warning of their fatal defect% of which it was informed% and after it had misled the defendant into belie"ing that the policies were effecti"e. 4hen the policy contains a condition which renders it "oidable at its inception% and this result is known to the insurer% it will be presumed to ha"e intended to wai"e the conditions and to e*ecute a binding contract% rather than to ha"e decei"ed the insured into thinking he is insured when in fact he is not% and to ha"e taken his money without consideration. The insurance company is liable on the insurance contract. *el Rosario vs. ./uita'le "nsurance Facts: The insurer has bound itself under the policy to pay #&%00080%000 as indemnity for the death of the insured for bodily in<ury% the policy containing specific amounts that may be reco"ered. The policy% howe"er% does not positi"ely state any definiti"e amount that may be reco"erable in case of death by drowning% although it is a ground for reco"ery apart from death for bodily in<ury. Held: There is an ambiguity in this respect in the policy% which ambiguity must be interpreted in fa"or of the insured and strictly against the insurer to allow a greater indemnity% that is% #0%000. Geagonia vs. CA Facts: Geagonia is the owner of HormanNs !art located in the public market of ,an Francisco% Agusan del ,ur. 9e obtained from the pri"ate respondent% Country Bankers nsurance Corporation. The policy contained the following condition- ./0. The insured shall gi"e notice to the Company of any insurance or insurances already effected% or which may subse2uently be effected% co"ering any of the property or properties consisting of stocks in trade/1 Fire of accidental origin broke out at the public market of ,an Francisco% Agusan del ,ur. GeagoniaFs insured stocks8in8trade were completely destroyed prompting him to file with CB C a claim under the policy. The company denied the claim and the basis of which was the petitionerNs alleged "iolation of Condition 0 of the policy. Held: Geagonia is not precluded from reco"ering from Country Bankers. Condition 0 of the policy is a condition which is not proscribed by law. ts incorporation in the policy is allowed by ,ection '( of the nsurance Code which pro"ides that MOaP policy may declare that a "iolation of specified pro"isions thereof shall a"oid it% otherwise the breach of an immaterial pro"ision does not a"oid the policy.M ts "iolation would thus a"oid the policy. 9owe"er% in order to constitute a "iolation% the other insurance must be upon the same sub<ect matter% the same interest therein% and the same risk. As to a mortgaged property% the mortgagor and the mortgagee ha"e each an independent insurable interest therein and both interests may be co"ered by one policy% or each may take out a separate policy co"ering his interest% either at the same or at separate times. . t is a cardinal principle of law that forfeitures are not fa"ored and that any construction which would result in the forfeiture of the policy benefits for the person claiming% will be a"oided% if it is possible to construe the policy in a manner which would permit reco"ery% as% for e*ample% by finding a wai"er for such forfeiture. #ro"isions% conditions or e*ceptions in policies which tend to work a forfeiture of insurance policies should be construed most strictly against those for whose benefits they are inserted% and most fa"orably toward those against whom they are intended to operate. Sun "nsurance vs. CA Facts: ,un nsurance issued a #ersonal Accident #olicy to 3im with a face "alue of 700K. Two months later he was dead with a bullet wound on his head. 3imFs death was caused when he was playing with his handgun which accidentally fired. 9is wife sought payment on the policy but her claim was re<ected. The contention of ,un nsurance was that 3im willfully e*posed himself to needless peril and thus remo"ed himself from the co"erage of the insurance policy. =nder the e*ceptions clause of the policy% the insurance company shall not be liable when the insured person attempting to commit suicide or willfully e*posing himself to needless peril e*cept in an attempt to sa"e human life. Held: The cause of 3imFs death was an accident within the limits set forth in the policy and therefore not e*empt from the liability of the insurer. The definition of an accident is .an e"ent which happens without any human agency or% if happening through human agency% an e"ent which under the circumstances% is unusual to and not e*pected by the person to whom it happens/1 Contrary to the contention of ,un nsurance% 3im did not intentionally e*pose himself to danger% as testified by his secretary% he remo"ed the maga+ine of the gun to ensure that it would not fire and pointed it to his temple in the belief that it is safe to do so. Ri!al Surety vs. CA Facts: >i+al ,urety issued a fire insurance policy for Transworld Knitting !ills. A fire broke out in the compound of Transworld% ra+ing the middle portion of the four8span building and partly gutting the left and right sections. t also destroyed the two8storey anne* building where fun and amusement machines and spare parts were stored. Transworld filed insurance claim with >i+al but to no a"ail. >i+alFs contention is that the policy co"ered only the contents of the four8span building
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which was only partly burned and not the damage caused to the two8storey anne* building. Held: The anne* building and the contents are co"ered under the policy. The so called .anne*1 formed an integral and inseparable part of the four8span building. t was a Opermanent structure which ad<oined the A8storey building described in the policy and conse2uently% the things stored therein were co"ered by the insurer. Considering that the anne* was already e*isting when the insurance policy was contracted% >i+al should ha"e specifically e*cluded it from the co"erage of the fire insurance if it wanted to but it did not. ?oubt should be resol"ed against >i+al who drafted the insurance policy contract. This is because the insured usually has no "oice in the selection or arrangement of the words employed and that the language of the contract is selected with great care and deliberation by e*perts and legal ad"isers employed by% and acting e*clusi"ely in the interest of the insurance companies. Bh! Tort Theor! 8 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 Hwhen it applies to get license to be in the insurance businessI, to act w? reasonable promptness in either re&ecting 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.
III. ,ER0ECTION O0 T/E CONTRACT O0 INSURANCE A. Offer and Acce#tanceA consensua it! ,pplicant usually ma"es 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. ,pproval of the application by the insurer is necessary to perfect contract. If madeL 8 w? payment of premium K policy becomes effective 8 w?o payment K effective upon payment of premium *. <elay in ,cceptanceN Tort Theory Situation where applicant submits application for insurance, but due to negligence of company, w?c ta"es an unreasonably long time before processing the application, the applicant dies before the application is processed, thus, the contract is not perfected. !E3E<=L Insurer liable for da%ages HTort TheoryI in the amount of the face value of the policy, w?c is given to the estate of the deceased applicant. Hnot to beneficiary because contract not perfected. ,lso, no contractual liability also bec. no contactI
+. <elivery of the >olicy De i'er! K the act of putting the insurance policy K the physical document K into the possession of the insured. Individual life insurance contracts usually stipulate thatL *I >remium be paid and +I >olicy be delivered to the insured while he is alive and in good health. Concurrence of both is necessary. Hsee >erez v C, caseI ,ctual delivery of the policy is not essential unless the parties have so agreed in clear language. Constructive delivery may be sufficient. HSee @da. <e Sindayen caseI Co( 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. CF( <elivery to agent is delivery to insured is a -uestion over w?c there has been many conflicting opinions. Effect of <eliveryL *I Chere delivery is conditional K (on8 performance of Condition precedent prevents contract fr ta"ing effect +I Chere delivery is unconditional K <elivery corresponding terms of application consummates the contract and policy delivered becomes final contract bet the parties EI Chere premium still unpaid after unconditional delivery K >olicy 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. Pere! v CA FACT,- #ere+% already pre"iously insured with BF 3ifeman nsurance Co. applied for additional
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co"erage. 9e paid premium and was issued a receipt by the agent of BF 3ifeman. 9owe"er% he died before his application papers were transmitted to the head office of BF 3ifeman. ,,=C- 45H the insurance policy was perfected 9C3?- Ho. There was no acceptance of the offer. The perfection of the contract was conditioned upon compliance with the pro"ision in the application form wJc stated that perfection only lies when the applicant pays and the premium and recei"es and accepts the policy while still in good health. Thus% the assent of BF 3ife was not gi"en when it merely recei"ed the application form of #ere+ in its pro"incial office. Also% deli"ery to #ere+ would be impossible as he is already dead. ,o long as an application for insurance has not been accepted or re<ected by the insurer% it is merely an offer or proposal to make a contract. The contract to be binding from date of application must ha"e been a completed contract that lea"es nothing to be done% passed upon or determined% before it shall take effect.. )da. *e Sindayen v "nsular &ife Assurance Co. FACT, ?ec. &)07 Arturo ,indayen had partially paid his agent the first premium for a life insurance policy. Agent and ,indayen agreed that policy% when and if issued% should be deli"ered to ,indayenFs aunt who will complete the payment of the first annual premium. 6an. &6% &)00 Q agent recei"ed appro"ed policy and deli"ered it to ,indayenFs aunt on 6an. &$. 9owe"er% before the policy was gi"en to Arturo himself% he died on 6an. &). ,,=C- 45H nsular 3ife assumed the risk co"ered by ,indayenFs policy 9C3?- RC,. ?eli"ery to the insured in person is not necessary% and may be made by mail or duly constituted agent Din this case% ,indayenFs auntE. nsurance company is bound by the acts of its agent. n this case% the agent is not a mere automaton and is "ested wJ some discretion in deciding 45H the condition as to the health of the applicant has been complied with. 5nce he decides that it has and deli"ers the policy% then% in the absence of fraud% the insurance company is estopped from claiming the policy has no effect. .nri/ue! v Sun &ife Assurance Co. FACT,- 9errer applied for insurance and paid the premium% howe"er% he died before he recei"ed the notice of acceptance Dof his applicationE sent by ,un 3ife from its !ontreal head office. ,,=C- 45H the insurance contract was perfected wJo the notice of acceptance coming to the knowledge of the applicant 9C3?- H5. =nder the CC% Consent is shown by the concurrence of offer and acceptance. An acceptance shall not bind the person making the offer e*cept from the time it came to his knowledge. -. ,re%iu% ,a!%ent Sec. 11 D1.N /G Sec. == ,n Insurer is entitled to payment of the premium as soon as the thing insured is exposed to the peril insured against. (otwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid, except in the case of a life or an industrial life policy whenever the grace period provision applies. ,re%iu% K the agreed price for assuming and carrying the ris", that is, the consideration paid an insurer for underta"ing to indemnify the insured against the specified peril.
SI!L CF!ST SECTIF( of the Insurance Code. This is the cash<and<carr! provision Hsee below for explanation whyI Chy it raises several -uestions HCamposIL 88Is it intended to apply to all classes of insurance, or does the word $thing% limit it to property insuranceQ ,s to exception, it only applies to life policies w?in the grace period w?c does not support the theory that it applies only to property insurance. 8 ,s to grace period, grace period in life insurance applies only to premiums subse-uent to the first, therefore, how can this be an exception to the ruleQ 8 Cith respect to non8life policies, the first sentence gives the insurer the right to demand the payment of the premium as soon as the $thing insured is exposed to peril insured against% This assumes the contract is binding even before the payment of the premium meaning the contract is perfected when the applicant6s offer is accepted by the insurer. This assumption is inconsistent w? the next sentence w?c says that no policy can be binding w?o premium payment. 8 ,lso, Sec. 11 and 1. seem contradictory. 8 owever, Sir says above does not apply to life insurance because )ife Insurance lapses upon non8payment. >resent provision came from Sec 1+ of the old Insurance Code. owever, Sec. 11 has omitted the portion of Sec. 1+ w?c permitted credit extension of the premium due Hmeaning, extension of period to pay the premiumI. ,pparently, the intention is to put the contract of insurance on a 3cash< and<carr! $asis4 meaning the premium must be paid in cash as a condition
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precedent for a non8life insurance policy to be valid and binding, and an agreement to grant the insured credit extension of the premium is void. owever, Makati Tuscany v CA and the second UCPB case says otherwise. ence, credit extension agreements may be valid. *. +. E. G. ERCE>TIF(S to Sec. 11L In the case of a life or an industrial policy whenever the grace period provision applies HSec. 11I ,rticle 1. Hsee belowI ,greement to grant the insured credit extension for the payment of the premium Chen there is an agreement allowing the insured to pay premium in installment and partial payment has been made at the time of the loss HSee Makati Tuscany v CA) HdI discovery of willful or rec"less acts or omissions increasing the hazard insured againstN HeI physical changes in the property insured which result in the property becoming uninsurableN or HfI a determination by the Commissioner that the continuation of the policy would violate or would place the insurer in violation of this Code Cancellation K right to rescind, abandon or cancel a contract of insurance, termination of policy before its expiration. >remium referred to in /GHaI refers to payment $after effective date of the policy% because Sec. 11 ordains that insurance policy is valid and binding unless and until premium has been paid. Conditions under w?c above exercisedL *I >rior notice of cancellation to insured +I (otice must be based on the occurrence, after the defective date of the policy, of one or more of the grounds mentioned EI It must be in writing, mailed or delivered to the named insured at the address shown in the policy GI It must state w?c of the ground set forth is relied upon. #i'ay v CA FACT, Fortune 3ife issued a fire insurance policy in fa"or of Tibay on a bldg in !akati% together wJ all their personal effects therein. Kioleta paid part of the total premium. 7 mos. Afer% a fire completely destroyed the bldg. 7 days after the fire% Tibay paid the balance of the premium. Fortune denied TibayFs claim for "iolation of ,ec'' of nsurance Code. ,,=C 45H a fire insurance policy is already "alid% binding and enforceable upon mere partial payment of premium 9C3? H5 ,ec. '' applies. ,ince acceptance of partial payment is not mentioned among the e*ceptions pro"ided in ,ec '' and '$ of the nsurance Code% no policy of insurance can e"er pretend to be efficacious until premium has been fully paid. 8 The policy contained a condition wJc said that .The policy including any renewal thereof is not in force until the premium has been fully paid * * *1 Clearly% the #olicy pro"ides for payment of premium in full. ? ,,CHT D !#TE The insurance co"erage should become effecti"e from the day that the partial payment is accepted by the insurer% any stipulation in the policy to the contrary notwithstanding. #artial payment is enough to establish the <uridical relation between the two parties. The law does not
Sec. => ,n ac"nowledgment in a policy or contract of insurance of receipt of premium is conclusive evidence of its payment, so far as to ma"e the policy binding, notwithstanding any stipulation therein that it shall not be binding until the premium is actually paid
Effect of ac"nowledgment of receipt of premium in property K Insurer cannot deny the truth of the receipt of the premium even if it is unpaid. )aw established a legal fiction of payment Hprima facie evidence of paymentI. Thus insurer presumed to have waived the condition of prepayment. SC has decided that above is an exception to Sec. 11
Sec. ;* (o policy of insurance other than life shall be cancelled by the insurer except upon prior notice thereof to the insured, and no notice of cancellation shall be effective unless it is based on the occurrence, after the effective date of the policy, of one or more of the followingL HaI non8payment of premiumN HbI conviction of a crime arising out of acts increasing the hazard insured againstN HcI discovery of fraud or material misrepresentation
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re2uire a specific amount of premium payment in order to create the <uridical tie. 8 f the contract is automatically cancelled upon the non8payment in full by the insured% then the efficacy of the contract will be fully dependent on his will. This "iolates the principle of mutuality of contracts. %akati #uscany v CA FACT, American 9ome Assurance DA9ACE issued in fa"or or !akati Tuscany an insurance policy on the latterFs bldg for & year. t was renewed o"er the course of 0 years. n &)$7% the total premiums were paid in four installments but in &)$0% Tuscany paid only 7 installments and refused to pay the remaining balance. >eason for discontinuationpolicy contained a reser"ation wherein .Acceptance of payment by A9AC will not wai"e any of the company rights to deny liability on any claim under the policy arising before such payments or after the e*piration of the credit clause of the policy% and ,ub<ect to no loss prior to premium payment. f there be any loss% such is not co"ered.1 A9AC filed a suit to reco"er the remaining balance. !akati Tuscany filed counterclaim for the total amount of premiums it had paid during the pre"ious years. ,,=C 45H payment by installment of premiums due on an insurance policy in"alidates the contract of insurance 9C3? H5 The policies are "alid e"en if the premiums paid in installments because the records clearly show that the two parties intended the policies to be binding and effecti"e notwithstanding the staggered payment of the premiums. Te acceptance of the installment payments o"er the period of 0 years speak loudly of intention of insurer to honor the policies it issued to !akati Tuscany. 8 ,ec '' merely prohibits the parties from stipulating that the policy is "alid e"en if premiums were not paid% but it does not e*pressly prohibit an agreement granting credit e*tensions. ,ec. '$ also allows the insurer to wai"e the condition of full payment by acknowledging in the policy that there has been receipt of premium despite the fact that premium is actually unpaid. f the Code allows a wai"er when no actual payment has been made% then a wai"er should also be allowed in this case where the insurer has already acknowledged receipt of partial payment. H5TC- Difference with Tibay case: In Tibay, there was an express stipulation w/c said that payment shall be made in full. In this case, the policy was binding because of the prior agreement to allow installment payments, hence full payment under Sec.77 deemed wai ed. Areola v CA Actually% donFt know how this case is in any way remotely connected to ,ec. '' or '$ wJc was not cited in the case so therefore di ko na sasama. -CP0 Gen. "ns. v %asagana #elemart FACT, !asagan Telemart obtained insurance policies on its properties from =C#B. The policies had the effecti"ity term of !ay &))& Q !ay &))7. 5n 6une &))7% !asaganFs properties were ra+ed by a fire. 5n the same day% !asagana tenedered% and =C#B accepted renewal premium payments. The ne*t day% !asagana filed a claim for the burned insured bldgs. =C#B re<ected the claims on the ground that the polices e*prired on !ay &))7 and were not renewed for another term and that the fire took place before the tender of premium payment under the renewed policy. DHote- This is a motion for reconsideration from pre"ious ,C decision declaring that there was no renewal of the policy and that =C#B not liableE ,,=C 45H ,ec '' of the nsurance Code must be strictly applied despite its practice of granting a 608)0 day credit term for payment of premium 9C3? H5 There are e*ceptions to ,ec ''a.E The first is pro"ided by ,ec. '' itself and that is% in case of a life or industrial life policy whene"er the grace period applies b.E ,ec '$- An acknowledgment in a policy or contract of insurance of the receipt of premium is conclusi"e e"idence of its payment% so far as to make the policy binding% notwithstanding any stipulation therein that it shall not be binding until premium is actually paid. c.E ,ec. ''may not apply if the parties ha"e agreed to the payment in installments of the premium and partial payment has been made at the time of the loss. d.E The insurer may grant credit e*tension for the payment of the premium e.E t would be un<ust and ine2uitable if reco"ery on the policy would not be permitted against =C#B% wJc consistently granted the 608)0 day credit term for the payment of the premiums despite its full awareness of ,ec. ''. Cstoppel bars it from taking refuge under the action% since !asagana relied on good faith on such a practice ? ,,CHT DKitugE8Cstoppel cannot create a contract of insurance neither can it be in"oked to create a #> !A>R 3 AB 3 TR. ,o essential is the premium payment to the creation of the "inculum <uris that it would be doubtful to ha"e that payment "alidly e*cused e"en for a fortuitous e"ent ? ,,CHT D #ardoE 8 !asagana tried to pay the o"erdue premiums before gi"ing written notice that a fire has ra+ed the property. This shows the fraudulent character of the claim. Failure to gi"e notice is was a material misrepresentation affecting the risk insured against. 8 Cstoppel cannot gi"e "alidity to an act that is prohibited by law or against public policy. Actual
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payment of premiums is a condition precedent to the "alidity of an insurance contract other than the insurance policy. Any agreement to the contrary is K5 ? as against the law and public policy. C. ,re%iu% defau t in ife insurance 9Sec ""=2 h C D:A o#tionsA a#sed #o ic!
Sec. ""= In the case of individual life or endowment insurance, the policy shall contain in substance the following conditionsL x x x HhI , table showing in figures cash surrender values and paid8up options available under the policy each year upon default in premium payments, during at least twenty years of the policy beginning with the year in which the values and options first become available, together with a provision that in the event of the failure of the policy8holder to elect one of the said options within the time specified in the policy, one of the said options shall automatically ta"e effect and no policyholder shall ever forfeit his right to same by reason of his failure to so elect.
Contract not binding until first periodical premium payment. ,fter first payment, insured under no legal obligation to pay subse-uent premium. Insurance Code grants grace period within which to pay subse-uent premiums. If policy becomes a claim during the grace period but before overdue premium is paid, overdue may be deducted from proceeds of policy 'ailure to pay w?in grace period S automatic lapse ExceptionL Insured has paid three full annual premiums. Entitled to the following O#tions u#on defau tL
x x x
x x x
x x x
x x x
H&I, provision that the policy shall be entitled to have the policy reinstated at any time within E years from the date of default of premium payment unless tha cash surrender value has been duly paid, or the extension period has expired, upon production of evidence of insurablility satisfactory to the company and upon payment of all overdue premiums and any indebtedness to the company upon said policy, with interest rate not exceeding that which would have been applicable to said premiums and indebtedness in athe policy years prior to reinstatement x x x
*I Cash Surrender Value The amount the insured is entitled to receive if he surrenders the policy and releases his claims upon it. It is the portion of reserve on a life policy (ature of CS@L >remium is uniform throughout lifetime of policy, so during the earlier years of the policy, the premium charges will be more than the actual cost of the protection against the ris" in order to meet the higher cost of ris" during the latter years of the policy when the insured is older. !eserve @alue 8 Surrender Charge S Cash Surrender @alue The more premiums he has paid, the greater will be the CS@ but the value is always a lesser sum than the total amt of premiums paid. CS@ is the amount company holds in trust for insured deliverable upon demand. E''ECTL Surrender policyN terminates the contract of insurance +I !tended "nsurance E''ECTL >olicy continues in force from date of default, for a #eriod either stated or e-ual to the amount of the cash surrender value, ta"en as a single premium, will purchase. ,lso called $term insurance.% <epends on availability of CS@. <uring extended periodL If insured dies, beneficiary can recover face amount of policy. Insured can also reinstate the policy w?in this period. 7eyond extended periodL If he survives (o benefits. e cannot even reinstate the policy by paying past premiumsN has to purchase new policy 7etter option if insured not in good health or geriatric EI Paid#up "nsurance
NON<.I0E H!efer to Sec.11I Seems to say that policy is in effect as soon as the thing is exposed to ris" even if the premium has not been paid yet. Chere contract covers a period of * year, there would normally be only one premium payment for the period. If parties agreed to pay in installments, and there is a failure to pay any installment when it falls due insurer mayL cancel policy after due notice compel the payment of installments .I0E Intended to be in force f or a period longer than a yearN involves several periodical premium payments Hannual, semi8annual, etcI
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A%ount of Insurance that the CS@, applied as a single premium, can purchase. E''ECTL >olicy continues in force from date of default for the whole period and under the same conditions of the original contract w?o further payment of premiums. owever, in case of death of insured, he may recover only the $paid8 up% value of the policy w?c is much less than the original amount agreed upon. HIn other words, na8reduce yung original insurance contract to one with a lower valueI 7etter option if insured is still young and in good health because unli"e extended insurance, he may later reinstate policy if he wishes. E. pay all bac" premiums and all his indebtedness to the insurance company G. CS@ has not been duly paid nor the extension period expired Insurability K does not mean that insured is in good health. Fther factors affect insurability li"e nature of wor", age, etc. ,pplication for reinstatement must be filed during the insured6s lifetime.
Fther EffectL /I &orfeiture K ,bsolute forfeiture of all insured rights. #enerally not favored. <ue to liberal spirit in the conduct of life insurance, insurers instead, give the insurer the benefit of the reserve value of the policy. D. 0or% and contents of #o ic! Sec. *? The written instrument in which a contract of insurance is set forth is called a policy insurance. Sec. +@ The policy shall be in printed form which may contain blan" spacesN and any word, phrase, clause, mar", sign, symbol, signature, number, or word necessary to complete the contract of insurance shall be written on the blan" spaces provided therein. ,ny rider, clause, warranty, or endorsement purporting to be part of the contract of insurance and which is pasted or attached to said policy is not binding on the insured, unless the descriptive title or name of the rider, clause, warranty, or endorsement is also mentioned and written on the blac" spaces provided in the policy. Anless applied for by the insured or owner, any rider, clause, warranty or endorsement issued after the original policy shall be countersigned by the insured or owner, which countersignature shall be ta"en as his agreement to the contents of such rider, clause, warranty, or endorsement. #roup insurance and group annuity policies, however, may be typewritten and need not be in printed form. Sec +1. , policy of insurance must specifyL HaI The #arties between whom the contract is madeN HbI The a%ount to be insured except in the cases of open or running policiesN HcI The #re%iu%, or if the insurance is of a character where the exact premium is only determinable upon the termination of the contract, a statement of the basis and
GI Automatic Premium $oan Apon default, insurer ends6ad'ances to the insured without any need of application on his part, a%ount necessar! to #a! o'erdue #re%iu%, but not to exceed the CS@ of the policy. Fnly applies if re-uested in writing by the insured either in the application or at any time before the expiration of the grace period. E''ECTL Insurance continues in force for period covered by the payment. ,fter period, if insured still does not resume paying his premiums, policy lapses, unless there remains CS@. If there is still CS@, auto premium loan continues until it is exhausted. ,dvantageous to the insured because it helps to continue the contract and all its features in full force and effect. Insured under no legal obligation to repay $loan% 2I %einstatement HSec &I E''ECTL <oes not create a new contract, merely !E@I@ES the old policy. Thus, insurer cannot re-uire higher premium than amount stipulated in the contract. !e-uired by Insurance Code for every individual and industrial life policy (ot re-uired that E annual premiums have been paid !ETAISITESL *. exercised w?in E years from default +. insured must present evidence of insurability satisfactory to the company
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HdI HeI rates upon which the final premium is to be determinedN The #ro#ert! or ife insuredN The interest of the insured in property insured, if he is not he absolute owner thereofN The ris5s insured againstN and The #eriod during which the insurance is to continue The Insurance Code does not re-uire a particular form for the validity of the contract. owever, the policy must contain the enumeration in ,rt. 2* Hsee aboveI The policy is different from the contract itself. ,o ic! 8 written instrument embodying the terms and stipulations of a contract of insurance. (ot essential to the validity of the contract as long as all the essential elements for the existence of contract are present. HConsent, ob&ect, consideration, competent partiesI 8 3ust be in printed form, w? blan" spaces to accommodate any word, phrase, clause, mar" sign, symbol, signature, number or word necessary to complete the contract. Fther stipulations not re-uired by law may be included as long as they are not prohibited or inconsistent with the law. 3issing provisions re-uired does not void policy. 3issing provisions will be read into the policy and will substitute those w?c are in conflict w? the law. Stipulations not in the exact terms of the statute, if more favorable to the insured, will be enforced. SI! Hon oral contractsIL In some &urisdictions of the AS, oral contract is valid, provided that all the terms are agreed upon. In our Insurance Code, although written form not re-uired for validity, some provisions say that a >!I(TE< >F)IC= is best evidence of contract. SC has not ruled categorically on this matter. Rider K a printed or typed stipulation contained on a slip of paper attached to the policy and forming an integral part of the policy. To be bindingL 83ust be attached?pasted to the policy 8 <escriptive title or name of the rider, clause, warranty, or endorsement is mentioned and written on the blan" spaces provided in the policy. Countersignature by insured #eneral !uleL (ot necessary if rider attached to the policy when issued. ExceptionL (ecessary when added ,'TE! policy is issued. !E,SF(L To prevent an insurer from adding or inserting provisions w?o the consent of the insured. In case of conflict between rider and printed stipulation, the rider prevails as being a more deliberate expression of the agreement of the contracting parties. Barrant! K inserted or attached to a policy to eliminate specific potential increases of hazard during the policy term owing toL *I actions of the insured or +I condition of the property. C ause K an agreement between the insurer and the insured on certain matters relating to the liability of the insurer in case of loss. Endorse%ent K any provision added to an insurance contract altering its scope or application. Ex. Endorsements extending the perils covered. 3ost times, they are merely typewritten additions to the contract, changing its amount, rate, or term.
HfI HgI
+. Cover (otes or binding receipts Sec +". Cover notes may be issued to bind insurance temporarily pending the issuance of the policy. Cithin sixty days after issue of a cover note, a policy shall be issued in lieu thereof, including within its terms the identical insurance bound under the cover note and the premium therefore. Cover notes may be extended or renewed beyond such sixty days with the written approval of the Commissioner if he determines that such extension is not contrary to and is not for the purpose of violating any provisions of this Code. The Commissioner may promulgate rules and regulations
*. !iders, clauses, endorsements If parties wish to include special stipulations, may attach riders, endorsements, warranties.
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governing such violation and may be such rules and regulations dispense with the re-uirement of written approval by him in the case of extension in compliance with such rules and regulations HnI Cover notes?7inders K a written memorandum intended to give temporary protection Hto insuredI pending the the investigation of the ris" by the insurer, or until the issue of the formal policy, provided it is later determined that the applicant was insurable at the time it was given. It is a binding contract and has full force and effect during its duration. )aw re-uires that policy be issued /0 days after cover note is issued. It may be cancelled by either party by giving, Hat leastI a 18day prior notice to other party. Insurer not obliged to give cover notes but many do so in order to gain goodwill. Asually contain only the bare essentials of an insurance contractL i.e. the name of the parties, ris" insured against, amount of insurance, premium, property?life insured. 3ay be extended?renewed beyond /0 days w? the written approval of the Insurance Commission. maximum limit of the insurer6s liability Hi.e. face valueI in case of destruction by the peril insured against. 8 Insurer only pays the actual cash value of the property as determined at the time of loss. 8a ued ,o ic! 8 Fne in which the parties expressly agree on the value of the sub&ect matter of the insurance. 8Two valuesL *I 'ace value of the policy w?c is the max amt insurer pays in case of loss +I @alue of the thing insured 8 In the absence of fraud or mista"e, the agreed value of the thing insured will be paid in case of total loss of the property, unless the insurance is for a lower amount 8 In case of loss, parties may claim that value of insured property is more or less than agreed upon. Running ,o ic! 8 Intended to provide indemnity for property w?c cannot well be covered by a valued policy because of its fre-uent change of location and -uantity, or for property of such a nature as not to admit of a gross valuation. ,lso denotes insurance over a class of property rather than any particular thing. Ex. Insurance over constantly changing stoc" of goods 8 In reality, these are open policies. 8 Contemplates successive insurances. I8. ,ARTIES Essential !e-uisites for a person to be a party in an insurance contractLL *. 3ust be CF3>ETE(T to enter Hhas capacityI +. 3ust possess I(SA!,7)E I(TE!EST E. 3ust (FT be a >A7)IC E(E3= A. Insurer Sec. ;. Every person, partnership, association, or corporation duly authorized to transact insurance business as elsewhere provided in this Code, may be an insurer. HaI Sec 1>* 'or purposes of this Code, the term $insurer% or $insurance company% shall include all individuals, partnerships, associations, or corporations, including government8owned or controlled corporations or entities, engaged as principals in the insurance business, excepting mutual benefit associations. Anless the
E. Fpen and @alued >olicies Hnon8lifeI

Sec +?. , policy is either open, valued or running. Sec ;@. ,n open policy is one in which the value of the thing insured is not agreed upon, but is left to be ascertained in case of loss.
Sec ;1. , valued policy is one which expresses on its face an agreement that the thing insured shall be valued at a specified sum. Sec. ;". , running policy is one which contemplates successive insurances, and which provides that the ob&ect of the policy may be from time to time defined, especially as to the sub&ects of insurance, by additional statements or indorsements. 5inds of insurance policiesL O#en or Un'a ued ,o ic! 8 Fne in which a certain agree sum is written on the face of the policy not as the value of the property insured, butas the
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context otherwise re-uires, the term shall also include professional reinsurers, defined in Section +.0. $<omestic company% shall include companies formed, organized or existing under the laws of the >hilippines. $'oreign company% when used without limitation shall include companies formed, organized, or existing under any laws other than those in the >hilippines. Sec 1>+ Corporations formed or organized to save any person or persons or other corporations harmless from loss, damage, or liability arising from any un"nown or future or contingent event, or to indemnify or to compensate any person or persons or other corporations for any such loss, damage, or liability, or to guarantee the performance of or compliance with contractual obligations or the payment of debts or others shall be "nown as $insurance corporations% The provisions of the Corporation )aw H7> 7lg /.I shall apply to all insurance corporations now or hereafter engaged in business in the >hilippines insofar as they do not conflict with the provisions of this Chapter. Insurer K party who assumes or accepts the ris" of loss and underta"es for a consideration to indemnify the insured or to pay him a certain sum on the happening of a specified contingency or event. Summary of *.G and *.2L *.GL Chat term $insurer% includes *.2L Chat $Insurance Corporations% are !egulated by the StateL To engage in the business of insurance, re-uired to get certificate of authority from the Insurance Commissioner, and must possess sufficient capital assets. HCill not include other re-uirements, medyo technical. Ce only need to "now defn of insurer and insurance corporationsI 7an"ing institutions are not allowed to engage in insurance business H#eneral 7an"ing ,ct *1EI intended to include him can claim the benefit under the policy. RA ;>@? 8 )owered the age of E3,(CI>,TIF( ,(< ,#E F' 3,4F!IT= Art. "&*. Emancipation ta"es place by the attainment of ma&ority. Anless otherwise provided, ma&ority commences at the age of eighteen years. Has amended by !, /.0BI Art. "&;. Emancipation for any cause shall terminate parental authority over the person and property of the child who shall then be -ualified and responsible for all acts of civil life, save the exceptions established by existing laws in special cases. x x x Has amended by !, /.0BI Art. 11@ 90a%i ! CodeI The spouses retain the ownership, possession, administration and en&oyment of their exclusive properties. Either spouse may, during the marriage, transfer the administration of his or her exclusive property to the other by means of a public instrument, which shall be recorded in the registry of property of the place the property is located. H*E1a, */.a, */BaI Art. 111 90a%i ! Code: , spouse of age may mortgage, encumber, alienate or otherwise dispose of his or her exclusive property, without the consent of the other spouse, and appear alone in court to litigate with regard to the same. HnI Art. 1&?@ 9Ci'i Code:. The following contracts are voidable or annullable, even though there may have been no damage to the contracting partiesL H*I Those where one of the parties is incapable of giving consent to a contractN H+I Those where the consent is vitiated by mista"e, violence, intimidation, undue influence or fraud. These contracts are binding, unless they are annulled by a proper action in court. They are susceptible of ratification. Insured K the party in whose favor the contract is operative and who is indemnified against, or is to receive a certain sum upon the happening of a specified contingency or event. e is the
-. Insured Sec. = ,nyone except a public enemy must be insured Sec. +; Chen the description of the insured in a policy is so general that it may comprehend any person or any class of persons, only he who can show that it was
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person whose loss is the occasion for the payment of the proceeds by the insurer. ,s in all other contracts, only persons who have the capacity to enter into a contract may be insured. >olicy must specify the parties between whom the contract is made. HSec. 2*I ,u$ ic ene%! K citizen or sub&ect of a nation at war with the >hilippines. <oes not include robbers, thieves, criminals, 3ilagros 3alayas. a private corporation may be deemed an enemy corporation if controlled by enemy aliens. Art. "@1" 9Ci'i Code: ,ny person who is forbidden from receiving any donation under ,rticle 1EB cannot be named beneficiary of a life insurance policy by the person who cannot ma"e any donation to him, according to said article. HnI Art. =&? 9Ci'i Code: The following donations shall be voidL H*I Those made between persons who were guilty of adultery or concubinage at the time of the donationN H+I Those made between persons found guilty of the same criminal offense, in consideration thereofN HEI Those made to a public officer or his wife, descedants and ascendants, by reason of his office. In the case referred to in (o. *, the action for declaration of nullity may be brought by the spouse of the donor or doneeN and the guilt of the donor and donee may be proved by preponderance of evidence in the same action. HnI In the first case Hadultery? concubinageI, no need of criminal conviction to void policy. Enough if there is a preponderance of evidence. In the second case however, the CC uses the words $found guilty% hence criminal conviction necessary. >ublic Enemies also dis-ualified from being beneficiary. "nsular &ife Assurance Co v .'rado FACT, Cbrado took out a life insurance policy and named his common8law partner% Carponia% his beneficiary. =pon his death% his lawful wife also filed a claim wJ nsular 3ife as the widow. >TC dis2ualified Carponia from claiming benefits under the policy ,,=C- 45H Carponia dis2ualified from claiming insurance proceeds because of her illicit relation with the insured. 9C3?- RC,. D,C applied CCE ,ince the nsurance Code does not contain any specific pro"ision on rules respecting who may be named beneficiary% the CC will apply. Art 70&7 states that .any person forbidden from recei"ing donations under Art '0) cannot be named beneficiary of a life insurance policy1 Art. '0) declares "oid donations made between persons who are guilty of adultery or concubinage at the time of the donation. 9ence%
C. -eneficiaries !efers to the person who designated in a contract of life, health or accident insurance as the one who is to receive the benefits which become payable, according to the terms of the contract, upon the death of the insured. Cords used in designating the beneficiaries of a life policy will not be given their technical significance but will be construed broadly. Chosen exclusively by insured who may designate anyone Hirrespective of lac" of insurable interestI so long as s?he not dis-ualified by law. >roceeds of life insurance policy become the exclusive property of the beneficiary upon the death of the insured. Cestui Eue 'ie < >erson on whose life the policy was ta"en. < 3ust be a ris" acceptable to the insurer *. Change Sec 11 The insured shall have the right to change the beneficiary he designated in the policy, unless he has expressly waived this right in said policy. If right not waived, insured has the power the power to change the beneficiary w?o his consent because beneficiary has no vested right but only an expectancy over the proceeds of the insurance. !ight must be exercised specifically in the manner provided in the policy. >ower to change beneficiary ceases at insured6s death and cannot be exercised by his personal representatives or assignees. +. Statutory )imitations on life insurance
92
Carponia is dis2ualified from being named a beneficiary. )da. de Consuegra v GS"S FACT,6ose Consuegra contracted two marriages% to ?ia+ and Berdin. After his death% the proceeds of his life insurance wJ the G, , went to Berdin. 9owe"er% he was also entitled to retirement benefits to which he did not designate any beneficiary. ,,=C- 45H Berdin should be considered the sole beneficiary of the retirement benefits being the beneficiary of the life insurance policy 9C3?H5. 3ife nsurance and retirement insurance are separate and distinct funds. 3ife nsurance is paid to whoe"er is named the beneficiary and may not necessarily be the heir of the insured. >etirement benefits on the other hand% are primarily intended for the benefit of the ee Q to pro"ide for his old age% incapacity% etc. f the ee reaches the age retirement% he gets the benefits e"en to the e*clusion of the beneficiary named in the policy. The beneficiary of the retirement insurance can only claim the proceeds of the retirement insurance if the ee dies before retirement. F there is no beneficiary designated in the policy% benefits will accrue to the estate% hence ?ia+ is also entitled to the retirement benefits. *el )al v *el )al FACT,- #laintiff and ?efendant are siblings. #rior to their fatherFs death% he took out a life insurance policy and made the ?ef the sole beneficiary. ,,=C- 45H the insurance proceeds belong e*clusi"ely to the ?CF who was the sole beneficiary 9C3?- RC, The proceeds of an insurance policy belong e*clusi"ely to the beneficiary and not to the estate of the person whose life was insured% and that such proceeds are the separate and indi"idual property of the beneficiary. Insura$ e interest K , person is said to have an insurable interest in the sub&ect matter insured where he has a relation or connection with, or concern in it that he will derive pecuniary benefit or advantage from its preservation and will suffer pecuniary loss or damage from its destruction, termination, or in&ury by the happening of the event insured against. Essential element of an insurance contract. (ot legally possible to waive re-uirement <eveloped to meet two ob&ectionsL *I That insurance is a wagering contract +I That insurance creates the temptation of bringing about the event insured against in order to collect the policy 'ifference (et)een life and non#life insurance *pertainin+ to interestIL .I0E 8 basically a contract of I(@EST3E(TN can only recover face amount of the policy NON<.I0E K based on principle of I(<E3(IT= for exact pecuniary valueN can only recover on the policy the value of the actual loss -. Insura$ e Interest in ife6hea th Sec 1@ Every person has an insurable interest in thelife and healthL aI Ff himself, of his spouse and of his childrenN bI Fn any person on whom he depends wholly or in part for education or support, or in whom he has a pecuniary interestN cI Ff any person under a legal obligation to him for the payment of money, or respecting property or services of which death or illness might delay or prevent the performance, and dI Ff any person upon whose life any estate or interest vested in him depends. >erson may ta"e out insurance on own life or someone else6s life provided insurable interest exists. Cestui Eue 'ie must consent. 1. In oneFs own ife6hea th Sec 11 The insured shall have the right to change the beneficiary he designated in the policy, unless he has expressly waived this right in said policy.
8. INSURA-.E INTEREST A. Definition and ,ur#ose Sec "1 , change on interest in a thing insured, after the occurrence of an in&ury which results in a loss does not affect the right of the insured to indemnity for the loss. Sec "+ Every stipulation in a policy of insurances for the payment of loss whether the person insured has or has not any interest n the property insured, or that the policy shall be received as proof of such interest, and every policy executed by way of gaining or wagering, is void.
93
Sec 1" The interest of a beneficiary in a life insurance policy shall be forfeited when the beneficiary is the principal, accomplice, or accessory in willfully bringing about the death of the insured, in which event, the nearest relative of the insured shall receive the proceeds of said insurance if not otherwise dis-ualified. Insured is the cestui Eue 'ie The nearest relative of the insured shall receive the proceeds of said insurance if not otherwise dis-ualified #E(E!,) !A)EL 7eneficiary is the choice of the insured regardless of Co( beneficiary has an insurable interest in insured6s life ,ssumptionL Insured would not designate as his beneficiary a person whom he would not trust with his own life ERCE>TIF(S Caiver Irrevocable beneficiary Hright to proceed vestsI ". In the ife6hea th of others Art 1?+ 90a%i ! Code:. Sub&ect to the provisions of the succeeding articles, the following are obliged to support each other to the whole extent set forth in the preceding articleL H*I The spousesN H+I )egitimate ascendants and descendantsN HEI >arents and their legitimate children and the legitimate and illegitimate children of the latterN HGI >arents and their illegitimate children and the legitimate and illegitimate children of the latterN and H2I )egitimate brothers and sisters, whether of full or half8blood H+B*aI Insured is not the cestui Eue 'ie $ut is the $eneficiar! Chen person names himself the beneficiary in a policy ta"en out on the life of another, he must have insurable interest in the life of the other person Hhis interest must show some pecuniary interestI 3ere love and affection (FT insurable interest CESTUI GUE 8IE7 person upon whose life insurance is ta"en out on 3ust agree ot the ta"ing out of insurance (o law saving you don6t need his consent public policy demands consent be obtained ExceptionL >arent ta"ing policy out on minor child (o amount of consent can ma"e up for lac" on surable interest
C.OSE RE.ATI8ES Spouse and children Hminor or not, married or unmarried dependent or notI 8 )aw presumes natural affection existing between spouses, parents and children. Thus, )aw recognizes a parent6s insurable interest in child6s life but is silent as to whether or not a child has insurable interest in the parent6s life. 8 Child entitled to support re-uired by law, whether or not he?she is financially independent sufficient to constitute pecuniary interest. ,ther close relatives Hbrothers and sistersI not expressly covered by law 7lood relationship or relationship by affinity is I33,TE!I,) when relative is source of support Hwhere no legal obligation existsI There is insurable interest both ways OT/ER RE.ATI8ES and STRANGERS o 3ust prove that he has some pecuniary interest in the life of the cestui -ue vie otherwise policy is void o 3ere relationship will not suffice o The re-uirements of insurable interest cannot be circumvented by an agreement between the insured Hcestui -ue vieI and a Erd person who has no interest, whereby the latter, having induced the insured to ta"e out a policy, promises to pay of premiums is the policy is assigned to him.
The intention to ta"e out policy is clearly not to insure life but rather to circumvent the re-uirement Is different from ta"ing a policy out on self and then later assigning it to someone who has no insurable interest, because law allows policy to transfer whether or not there is insurable interest
Sec 1>1 , policy of insurance upon life or health may pass by transfer, will or succession to any person, whether he has an insurable interest or not, and such person may recover
94
upon it whatever the insured might have recovered. Sec 1>" (otice to an insurer of a transfer or be-uest thereof is not necessary to preserve the validity of a policy of insurance upon life or health, unless thereby expressly re-uired. 7est forms of self compelled saving <enying right to self would be to diminishing value of contract. COMMERCIA. or CONTRACT RE.ATIONS Creditor may ta"e out insurance on life of his debtor 8 Interest exist death or debtor may prevent payment or delay payment 8 Is a contract of indemnity 8 !ecovery limited to amount owed by debtor to creditor Sec 1>& Anless the interest of a person insured is susceptible of exact pecuniary measurement, the measure of indemnity under a policy of insurance upon life or health is the sum fixed in the policy. <ebtor may insure self and name creditor as beneficiary 8 Creditor is entitled to full proceeds of policy &ust as any other beneficiary when debtor dies even if his credit is much less. <ebtor assigns policy to creditor as collateral security Creditor can only recover amount of his credit 7alance will go to designated beneficiary Sec 1? ,n interest in property insured must exist when the insurance ta"es effect, and when the loss occurs, but need not exist in the meantime6 and interest in the life or health of a person insured must exist when the insurance ta"es effect, but need not exist thereafter or when the loss occurs. #E(E!,) !A)EL insurable interest must exist only at inception 8 >olicy not indemnifying loss but rather giving financial security to insured or to beneficiaries 8 )aw gives insured the right to convert policy into cash by selling it to a Erd person who doesn6t have any insurable interest in his life. 8 >olicy is an investment ERCE>TIF(S Hcases where interest of the insured is capable of exact pecuniary benefitI *. Creditor who ta"es insurance out on life of <ebtor to secure debt 8 Fnce debt has been paid insurable interest disappears 8 (o liability to pay proceeds because there is not longer anything to indemnify 8 If debt already been paid should be denied recovery on the policy 8 <ebtor should have the right to ta"e over the policy from creditor after the termination of relationship prevent the premium paid from going to waste. Company ta"es out insurance on life of employee 8 Employee leaves company 8 >olicy is to indemnify employee for losses upon death of employee not resigning 8 Company cannot recover on life of employee who has already left?resigned K there is nothing to indemnify 8 !elationship slightly different because no esact pecuniary value dan be given. 7AT same principle holds that the cannot recover.
+.
EM,.OHER6-USINESS ASSOCIATE 3ay ta"e out policy on life of business partner 8 Interest exists death of partner results in interruption of operations which can lead to financial losses. 'irm may ta"e out policy on officers?employees 8 Services are valuable to the business 8 >roceeds of policy not taxable income because it serves as indemnity to the employee for the loss the business suffers upon the death of the valued officer of employee.
&. Ti%e when it shou d e)ist
C. In #ro#ert! 1. Definition
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Sec 1& Every interest in property, whether real or personal, or any relation thereto, or liability in respect therof, of such nature that a contemplated peril might directly damnify the insured, is an insurable interest. Contract of inde%nit! 8 measure or insurable interest in property is the extent to which the insured might be indemnified by loss or in&ury. ". In what it %a! consist of Sec 1* ,n insurable interest in property may consist inL aI an existing interestN bI ,n inchoate interest founded on an existing interestN or cI ,n expectancy, coupled with an existing interest in that out of which the expectancy arises Sec 1; , 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. Insurable interest deemed to exist as long as such interest, relation or liability is of such nature that a contemplated part might directly damnifty the insured Even without legal or e-uitable title as long as it can be shown that the insured will be benefited by property6s continued existence or wil suffer pecuniary loss by its destruction. 'F!3S F! I(SA!,7)E I(TE!EST *I. I(TE!EST in the property itself, whether such property be real or personal ex. Fwnership of or a lien on property +I. any !E),TIF( to such property ex. interest of a commission agent on goods he is selling EI. )I,7I)IT= in respect thereof ex. interest of carrier on cargo which he ought to carry safely to destination (,TA!E F' I(SA!,7)E I(TE!EST ,n e)isting interest may arise from legal title Hex. mortgagor of the property mortgagedN lessor of the property leasedN assignee of property for the benefit of creditors, etc.I may also be from e-uitable title Hex. >urchaser of property before deliveryN builders in the building under construction or upon completion of buildingI ,n inchoate interest founded on an existing interest - must be founded on an existing contract Ex. , stoc"holder has an inchoate interest in the property of the corporation w?c is founded on an existing interest arising from his ownership shares. - , partner has an insurable interest in the firm6s property which will support a separate policy for his benefit ,n e)#ectanc!, coupled with an existing interest in that out of which the expectancy arises 8 such must be coupled with an existing interest in that our of which such expectancy arises. Ex. 'armer insuring future crops if it be grown on land owned by him at the time of the issuance of the policy &. Measure of interest in #ro#ert! Sec 1+ , carrier or depository of any "ind 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. Sec 1= , mere contingent or expectant interest in anything, not founded on an actual right to the thing, not upon any valid contract for it, is not insurable.
Other Interests STFC5 F)<E!?>,!T(E! to 'I!3 8 as sufficient interest in property of corporation 8 Interest does not rise to the dignity of a title yet he stands in such a relation to such corporate property to vest him with an inchoate right to dividends in case of profits and to share in the assets upon li-uidation 8 Interest not measured by value of what is destroyed 8 Interest is to share in the distribution of the proceeds only after payment of corporation6s debts 8 3ust prove actual in&ury, otherwise cannot recover more than nominal damages #E(E!,) C!E<ITF! (o insurable interest in the property of the debtor
96
(o right to posses, no lien , no relation that would cause him direct damage Cannot ta"e out policy on debtor6s property Cannot recover as appointee or beneficiary on policy ta"en out by debtor which results in a loss does not affect the right of the insured to indemnify for the loss insured of the policy, after fire may sell remains of property without pre&udicing his right to recovery H++I , change of interest I( F(E F! 3F!E SE@E!,) <ISTI(CT T I(#S, SE>,!,TE)= I(SA!E< by one policy does not avoid the insurance as to the others. Single fire policy covers several pieces of furniture and appliances, insurance value of each on indicated, sale of one item will not prevent insured from recovering on items he did not sell H+EI , change on interest by CI)) or SACESSIF( on the death of the insured, does not avoid an insurance and his interest in the insurance passes to the person ta"ing his interest in the thing insured 'ire insurance on building owned by father, father dies, son inherits building and the fire insurance H+GI , transfer of interest by one of SE@E!,) >,!T(E!S, 4FI(T FC(E!S, or FC(E!S I( CF33F( C F ,!E 4FI(T)= I(SA!E< to the others, does not avoid an insurance even though it has been agreed that the insurance shall cease upon an alienation of the thing insured
,c-uiring co8owner has the same interest, interest merely increases upon ac-uiring other co8owners interest ,lthough there may be a stipulation that insurance ceases upon alienation )aw allows policy to be framed in such a way that it will inure to the benefit of whomever during the continuance of the ris" may become owner of the interest insured. Sale of property will not suspend the policy or render it ineffective.
4A<#E3E(T C!E<ITF! Sufficient interest in debtor6s property because given right to levy Hgeneral lienI In order to recover must show debtor has no other property with which to satisfy debt 3ay insure debtor6s property due to pecuniary interest 3F!T#,#E C!E<ITF! as insurable interest Hgeneral lienI <irect pre&udice if there is loss !ecognized by insurance Code HSEC.I
G. Chen it should exist Sec 1? ,n interest in property insured must exist when the insurance ta"es effect, and when the loss occurs, but need not exist in the meantimeN and interest in the life or health of a person insured must exist when the insurance ta"es effect, but need not exist thereafter or when the loss occurs. #E(E!,) !A)EL Interest must exist at inception and at time of loss, but not in the meantime >!F>E!T= must exist when the insurance ta"es effect and when the loss occurs but not exist in the meantime. (ature of contract as indemnity 3ere transfer of thing does not carry transfer of policy <oesn6t own it anymore cannot recover (ew owner not a party to contract cannot recover Can recover if valid assignment to buyer made, notation of contract Transfer suspends the contract until same person owns thing and policy ERCE>TIF( H+*I ,C ,(#E I( I(TE!EST I( , T I(# I(SA!E<. ,fter occurrence of an in&ury
2. Special >rovisions on mortgagor and mortgagee

Sec > Anless the policy otherwise provides, where a mortgagor of property effects insurance in his own name providing that the loss shall be payable to the mortgagee, or assigns a policy of insurance to a mortgagee, the insurance is deemed to be upon the interest of the mortgagor, who does not cease to be a party to the original contract, and any of his , prior to the loss which would otherwise avoid the insurance, will have the same effect, although the property is in the hands of the mortgagee, but any act which , under the contract of insurance, is to be performed by the mortgagor, may be performed by the mortgagee therein named, with the same effect as it had bee performed by the mortgagee.
97
Sec ? If an insurer assents to the transfer of an insurance from a mortgagor to a mortgagee, and at the time of this assent imposes further obligations on the assignee, ma"ing a new contract with him, the acts of the mortgagor cannot affect the rights of said assignee. H.I where a mortgagor of property effects insurance in his own name providing that the loss shall be payable to the mortgagee, or assigns a policy of insurance to a mortgagee, the insurance is deemed to be upon the interest of the mortgagor, who does not cease to be a party to the original contract any act of mortgagor , prior to the loss, which would otherwise avoid the insurance will have the same effect, although the property is in the hands of the mortgagee any act which, under the contract of insurance, is to be performed by the mortgagor, may be performed by the mortgagee therein named with the same effect as if it had been performed by he mortgagor a. Separate insurable interestN extent thereof may separately mortgage same property since interest is different mortgagorL owns property mortgageeL credit property b. Insurance by mortgagor for the benefit of mortgagee )oss payable to mortgageeN excess proceeds go to mortgagor mortgagorL interest is in the value of the propertyN the property itself even if event does not happen, it does not extinguish the mortgage agreement mortgageeL interest is the value of the loan or credit 8 in case subse-uently assigned to mortgagee any act of mortgagor can render void the policy before the event happens c. Insurance ta"en by mortgagee )oss payable to him, collects upon happening of loss 3ortgagor has not part in insurance proceeds Apon loss, 3ortgagor not released from obligation to pay 8 Insurer subrogates mortgagee6s right and can collect from him Covers only mortgagees interest d. $Fpen mortgage clause% and $union mortgage% O#en Mortgage HSec .I K mortgage that can be paid8off to maturity w?o penaltyN mortgagee is the beneficiary for insurance ta"en by mortgagor )enders generally do not li"e open mortgages because the early pay8off reduces the interest they earn ,cts of mortgagor invalidates the insurance Union Mortgage K standard mortgage clause 3ortgagee may perform the acts of mortgagor Clause included wherein the insurance interest of mortgagee shall not be invalidated by any act of the mortgagor or owner of property at the time. >rotects mortgagee6s interest from invalidation due to mortgagor6s acts /. Change of interestN instances of automatic transfer of interest Sec "1 , change on interest in a thing insured, after the occurrence of an in&ury which results in a loss does not affect the right of the insured to indemnity for the loss. Sec "" , change of interest in one or more of several distinct things, separately insured by one policy, does not affect the right of the insured to indemnity for the loss. Sec "& , change of interest, by will or succession, on the death of the insured, does not avoid an insuranceN and his interest in the insurance passes to the person ta"ing his interest in the thing insured. Sec "* , transfer of interest by one of several partners, &oint owners, or owners in common, who are &ointly insured, to the others, does not avoid an insurance even though it has been agreed that the insurance shall cease upon an alienation of the thing insured. Sec +& The insurance proceeds shall be applied exclusively to the proper interest of the person in whose name or for whose benefit it is made unless otherwise specified in the policy.
98
Sec += , policy may be so framed that it will insure to the benefit of whomever, during the continuance of the ris", may become the owner of the interest insured. #E(E!,) !A)E H In the cases of life, accident, and health insuranceI change of interest suspends insurance 88 Sec +0 ERCE>TIF( 888 Sec +* 8 +G 1. Several interestsN double insurance Hcf. over insuranceI Sec ?& , double insurance exists where the same person is insured by several insurers separately in respect in the same sub&ect and interest. >rohibition against additional insurance K Chen a policy contain s a prohibition against additional insurance on the property insured without the insurer6s consent, such provision being valid and reasonable, a violation thereof by the insured avoids the policy. HSta. ,na vs. Commercial Anion ,ssurance Co. 22 >hil E+BI. Sec ?* Chere this insured is over insured by double insuranceL
HaI The insured, unless the policy otherwise provides, may claim payment from the insurers in such order as he may select, up to the amount for which the insurers are severally liable under their respective contractsN HbI Chere the policy under which the insured claims is a valued is a valued policy, the insured must give credit as against, the valuation for any sum received by him under any other policy without regard to the actual value of the sub&ect matter insured. HcI Chere the policy under which the insured claims is an unvalued policy he must give credit , as against the full insurable value, for any sum received by him under any other policy. HdI Chere the insured receives any sum in excess of the valuation in the case of valued policies, and the insurable value in the case of unvalued policies, and the insurable value in the case of unvalued policies, he must hold such sum in trust for the insurers, according to their right of contribution among themselves. HeI Each insurer is bound, as between himself and the other insurers, to contribute ratably to the loss in proportion to the amount for which he is liable under the contract.
<FA7)E I(SA!,(CE K when one gets several policies to cover against the same danger?peril 8 exists where the same person is insured by several insurers separately in respect to the same sub&ect and interest8 may recover from insurer, insurer who pays may collect from other insurers F@E! I(SA!,(CE K when amount insured is over the value of the property the insured is over insured by double insurance The insured may claim payment from the insurers in such order as he may select, up to the amount for which the insurers are severally liable under their respective contracts. @alued policy K the insured must give credit as against the valuation for any sum received by him under any other policy without regard to the actual value of the sub&ect matter insured. Anvalued policy K he must give credit, as against the full insurable value, for any sum received by him under any policy Insured receives any sum in excess K he must hold such sum in trust for the insurers, according to their right of contribution among themselves. Each insurer is bound as between himself and the other insurers, to contribute !,7T,7)= to the loss in proportion to the amount for which he is liable under the contract. Cannot get above value of property minus that of proceeds from other policies Cannot be more than loss because that would be wagering
8I. CONCEA.MENT2 MISRE,RESENTATION C -REAC/ O0 BARRANTIES , contract of insurance isL
99
UBERRIMAE FIDAE 8 , CF(T!,CT F' AT3FST #FF< ',IT G. specified ris"s that otherwise could have been included under the general language describing the ris" assumed. ERECATF!= C,!!,(TIES D CF(<ITIF(S ,re used to enable the insurer to rescind the contract in case subse-uent events increased the ris" to such an extent that he is no longer willing to bear. That is, underta"ings that certain conditions should or should not exist in the future. CF(<ITIF(S >!ECE<E(T Ased by the insurer to protect himself against fraudulent claims of lossN these are conditions re-uiring immediate notice of loss or in&ury and detailed proofs of loss within a limited period.
* ,RIMARH CONCERNS O0 ,ARTIES TO AN INSURANCE CONTRACT
*.
+.
E.
G.
Correct estimation of the ris" which enables the insurer to decide whether he is willing to assume it, and if so at what rate of premium The precise delimitation of the ris" which determines the extent of the contingent duty to pay underta"en by the insurer Control of the ris" after it is assumed as will enable the insurer to guard against the increase of the ris" because of change in conditions <etermining whether a lost occurred and if so, the amount of such loss. AND
2.
CF(CE,)3E(T DE8ICES 0OR ASCERTAINING CONTRO..ING RISI AND .OSS *. Sec. +/. , neglect to communicate that which a party "nows and ought to communicate, is called a concealment. ReEuisites of concea %ent7 *. , party "nows the fact which he neglects to communicate or disclose to the other +. the fact concealed is material to the ris" E. such party is duty bound to disclose such fact to the other G. the other party has not the means of ascertaining the fact concealed 2. such party ma"es no warranty of the fact concealed. *"f a )arranty is made of the fact concealed, the non# disclosure of such fact is not concealment (ut constitutes a violation of the )arranty) Sec. +1. , concealment whether intentional or unintentional, entitles the in&ured party to rescind a contract of insurance. H,s amended by 7> 7lg. .1GI The effect of concealment on the part of the insured ma"es the contract @FI<,7)E at the insurer6s option Insurer (EE< (FT >!F@E '!,A< in order to rescind a contract on the grounds of concealment.
CF(CE,)3E(T D !E>!ESE(T,TIF( <eveloped for the purpose of enabling the insurer to secure the same information with respect to the ris" that was possessed by the applicant for insurance so that he may be e-ually capable of forming a &ust estimate of its -uality. ,''I!3,TI@E C,!!,(TIES D CF(<ITIF(S <eals with conditions existing at the inception of the contract, and operates to ma"e more definite and certain the general words used to describe the ris" the insurer undertoo" to bear. It involve facts the existence of which shows the ris" to be greater than that intended to be assumed and operates to create in the insurer the power to extinguish, if he so desires, the legal relations already created. Ex.. Chere an insured is re-uired to warrant something and when found guilty of concealment or misrepresentation, operates to void the contract. ERC>ETIF(S 3a"es more definite the coverage indicated by the general description of the ris" by excluding certain
+.
E.
100
The duty of communication is independent of the intention and is violated by the mere fact of concealment even when there is no design to deceive. Section +1 must be read in relation to Section +B. HaI Those which the other "nowsN HbI Those which, in the exercise of ordinary care, the other ought to "now, and of which the former has no reason to suppose him ignorantN HcI Those of which the other waives communicationN HdI Those which prove or tend to prove the existence of a ris" excluded by a warranty, and which are not otherwise materialN and HeI Those which relate to a ris" excepted from the policy, and which are not otherwise material. Sec. E+. Each party to a contract of insurance is bound to "now all the general causes which are open to his in-uiry, e-ually with that of the other, and which may affect the political or material perils contemplatedN and all general usages of trade. Sec. EE. The right to information of material facts may be waived, either by the terms of insurance or by neglect to ma"e in-uiries as to such facts where they are distinctly implied in other facts of which information is communicated. Sec. EG. Information of the nature or amount of the interest of one insured need not be communicated unless in answer to an in-uire, except as prescribed by section 2*. (either party to a contract of insurance is bound to communicate, even upon in-uiry, information of his own &udgment upon the matters in -uestion. Sections E0, E+ K E2 pertains to matters which need not be disclosed Exception found in Sec. E0 last phrase of first sentenceL $except in answer to the in-uiries of the other%
Sec. +. Each party to a contract of insurance must communicate to the other, in good faith, all facts within his "nowledge which are material to the contract, and which the other has not the means of ascertaining, and as to which he ma"es no warranty 3atters that 3ust 7e Communicated Even in the ,bsence of In-uiryL *. 3atters material to the contract +. 3atters which the other has not the means of ascertaining the said facts E. 3atters as to which the party with the duty to communicate ma"es no warranty. TEST7 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 re uires him to disclose that circumstance, though unasked! Sec. +B. ,n intentional and fraudulent omission, on the part of one insured, to communicate information of matters proving or tending to prove the falsity of a warranty, entitles the insured to rescind. Bhen 0raudu ent Intent Necessar!7 Ander section +B, concealment relates to the falsity of a warranty. 'or the section to operate it is necessary that the nondisclosure be intentional and fraudulent before the contract may be rescinded. The concealment refers to matters proving or tending to prove the falsity of the warranty. (EE< (FT 7E
3,TTE!S C IC <ISC)FSE<
Sec. E0. (either party to a contract of insurance is bound to communicate information of the mattes following, except in answer to the in-uiries of the othersL
Matters Bhich Need Not -e Disc osedL *. 3attes already "nown to the insurer +. 3atters of which the insurer waives communication K he is in estoppel. E. 3atters that concern only ris"s excepted, either expressly or by warranty, from the liability assumed under the policy. UUImportant (oteL The undisclosed fact must (FT 7E
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G. 2. /. 3,TE!I,) otherwise the insured is still bound to ma"e disclosure. Information of the nature or amount of the interest of one insured except if in-uired upon by the insurer. 3atters each party are bound to "now such as public events, general information etc. The right to information of material fact may be waived either expressly, by the terms of insurance or impliedly by neglecting to ma"e in-uiry as to the facts already communicated. If the interest of the insured to the property being insured is absolute then there is no necessity to disclose the extent of his interest, if not then he is re-uired to disclose under Section 2* 3atters of opinion. MISRE,RESENTATION Sec. E/. , representation may be oral or written Re#resentation7 , factual statement made by the insured at the time of or prior to the formation of the insurance contract. The information given to the insurer induces him to enter into the contract. The insurer may also ma"e representation. Misre#resentation7 Is a statement of fact which is untrue Chich the insured states with "nowledge that it is untrue and with an intent to deceive or which he states positively as true without "nowing it to be true and which has a tendency to mislead. Chere such fact in either case is material to the ris". Distinguish fro% Concea %ent In concealment, the insured maintains silence when he ought to spea", while in misrepresentation, the insured ma"es a statement of fact which is not true K acti#e form of concealment!
1.
..
MATERIA.ITH Sec. E*. 3ateriality is to be determined not by the event, but solely by the probable and reasonable influence of the fact upon the party to whom the communication is due, in forming his estimate of the disadvantages of the proposed contract, or in ma"ing his in-uiries. Test of Materia it!7 "he effect which the knowledge of the fact in uestion would ha#e on the making of the contract! "o $e material, a fact need not increase the risk or contri$ute to an% loss or damage suffered! I" I& &UFFI'IE(" IF ")E *(+,-EDE +F I" ,+U-D I(F-UE('E ")E .AR"/ I( MA*I(0 ")E '+("RA'"! Concealment must ta"e place at the time the contract is entered into in order that the policy may be avoided. Information obtained after the perfection of the contract is no longer necessary to be disclosed by the insured, even if the policy has not been issued HUUException is when the contract is to b e effective only upon the issuance of the policy K the insured is still duty bound to disclose to the insurer any material fact which comes to his "nowledge.I The duty of disclosure ends with the completion and effectivity of the contract.
Sec. E1. , representation may be made at the time of, or before, issuance of the policy HaI Sec. E.. The language of a representation is to be interpreted by the same rules as the language of contracts in general. Construction of Re#resentationsL o Construed liberally in favor of the insured and are re-uired to be only substantially true. Sec. EB. , representation as to the future is to be deemed a promise, unless it appears that I was merely a statement of belief or expectation. Iinds of Re#resentation7 *. Fral or Critten HSec. E/I +. 3ade at the time of issuing the policy or before HSec. E1I
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E.,ffirmative or promissory HSec. EB D G+I Affir%ati'e Re#resentationL Is any allegation as to the existence or non8existence of a fact when the contract begins. ,ro%issor! Re#resentationL Is any promise to be fulfilled after the contract has come into existence or any statement concerning what is to happen during the existence of the insurance. , promise representation is substantially a condition or warranty. Bhen Re#resentation Dee%ed a Mere E)#ression of O#inion7 ,n oral representation as to a future even or condition, over which the insured has no control, with reference to property or life insured, will be deemed a mere expression of opinion which will avoid a contract only when made in bad faith. Sec. G0. , representation cannot -ualify an express provision in a contract of insuranceN but it may -ualify an implied warranty , representation cannot -ualify an express provision or an express warranty in a contract of insurance because a representation is not a part of the contract but only a collateral inducement to it. It may however -ualify an implied warranty. If it is true at the time it was made?represented but false at the time the contract ta"es effect.
Sec. GE. Chen a person insured has no personal "nowledge of a fact, he may nevertheless repeat information which he has upon the sub&ect, and which he believes to be true, with the explanation that he does so on the information of othersN or he may submit the information, in its whole extent, to the insurerN and in neither case is he responsible for its truth, unless it proceeds from an agent of the insured, whose duty is to give the information. ,rt. GG. , representation is to be deemed false when the facts fail to correspond with its assertions or stipulations. Sec. GG defines misrepresentation !epresentations are not re-uired to be literally true Hunli"e warrantiesIN they need only be SA7ST,(TI,))= T!AE
Sec. G2. If a representation is false in a material point, whether affirmative or promissory, the in&ured party is entitled to rescind the contract from the time when the representation becomes false. The right to rescind granted by this Code to the insurer is waived by the acceptance of premium payments despite "nowledge of the grounds for rescission. H,s amended by 7> 7lg. G1GI 'raud or intent to misrepresent facts not essential to entitle the in&ured party to rescind a contract of insurance on the ground of false representation. To be deemed false, it is sufficient if the representation fails to correspond with the facts in a material point. 7ut the right to rescind is deemed waived if the insurer accepts the premium payments despite "nowledge of the ground for rescission.
Sec. G*. , representation may be altered or withdrawn before the insurance is effected, but not afterwards. Sec. G+. , representation must be presumed to refer to the date on which the contract goes in effect. NO 0A.SE RE,RESENTATION I07 If it is true at the time the contract ta"es effect although false at the time it was made?represented. T/ERE IS 0A.SE RE,RESENTATION I07
Sec. G/. The materiality of a representation is determined by the same rules as the materiality of a concealment.
CONCEA.MENT 's. MISRE,RESENTATION
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CONCEA.MENT Cithhold information of material facts from the insurer MISRE,RESENTATION Insured ma"es erroneous statements of facts with the intent of inducing the insurer to enter into the insurance contract
<etermined by the same rules In&ured party has right to rescind
to estimate the probable risk he presented as a sub<ect of life insurance% had he disclosed it% it may be reasonably assumed that the insurer would ha"e made further in2uires and would ha"e probably refused to issue a non8medical insurance policy or at the "ery least re2uired a higher premium for the same co"erage. !ateriality is the probable and reasonable influence of the facts upon the party to whom the communication should ha"e been made% in assessing the risk in"ol"ed% in making or omitting to make further in2uires and in accepting the application for insurance. 1u v CA Facts: The insured applied for a life insurance with pri"ate respondent insurance company. 9e concealed a materialJimportant fact in his application form when he failed to disclose that he had consulted a doctor prior to his application and that he was suffering from certain symptoms. nsured died and his brother% the petitioner in the case filed a claim which was denied by the insurer. Ratio: The insured is guilty of concealment as the fact which he failed to disclose to the insurance company depri"ed the respondent of the opportunity to make the necessary in2uiry as to the nature of his past illness so that it may form its estimate relati"e to the appro"al of his application. .A neglect to communicate that which a party knows and ought to communicate% is called concealment1 and .4hether intentional or unintentional% the concealment entitles the insurer to rescind the contract of insurance1. nsurer is relie"ed from liability. Pacific 0anking v CA Facts: The insured% #aramount is in the business of shirt manufacturing% it took out a fire insurance policy with 5riental nsurance for 6&K. Because of itFs indebtedness to #acific Banking Corp.% the policy was endorsed to #acific as mortgageeJtrustor. The property insured was gutted by fire. #acific made a claim on the insurance policy which was denied by 5riental because it appeared that #aramount failed to disclose co8insurance with 0 other insurance companies Donly declared 0 othersE in "iolation of #olicy Condition @ 0. Ratio: By reason of the unre"ealed co8 insurances% the insured had been guilty of a false declaration: a clear misrepresentation and a "ital one because where the insured had been asked to re"eal but did not% that was deception. 9ad the insurer known that there were many co8insurers% it could ha"e hesitated or plainly desisted from entering into such contract. 9ence% the insured was guilty of clear fraud. The insurance policy against fire e*pressly re2uired that notice should be gi"en by the insured of other insurance upon the same property% the total absence of such notices nullifies the policy. .guaras v Great .astern
Sec. G1. The provisions of this chapter apply as well to a modification of a contract of insurance as to its original formation.
$g v Asian Crusaders Facts: The insured applied for a 708year endowment insurance on his life and named his wife as beneficiary. =pon application he ga"e information regarding a pre"ious operation Dthat a tumor was taken outE. nsured died of li"er cancer. The insurer denied the claim of the beneficiary claiming misrepresentation since the operation which the insured undertook was for .peptic ulcer1 and not remo"al of a tumor. Ratio: Concealment e*ist where the insured had knowledge of a fact material to the risk% and honesty% good faith and fair dealing re2uires that he should communicate it to the insurer% but he intentionally withhold the same. The insured informed the medical e*aminer that the tumor he was operated on was associated with ulcer of the stomach. n the absence of e"idence that the insured had sufficient medical knowledge as to enable him to distinguish between .peptic ulcer1 and tumor1 his statement was an e*pression made in good faith of his belief as to the nature of his ailment and operation. f the operation and ailment of the insured had such an important bearing on the assumption of risk by the insurer% it should ha"e made further in2uires on the matter or re2uired copies of the hospital records before appro"ing the application. As pro"ided by ,ection 07 where the right to material information may be wai"ed ./by neglect to make in2uires as to such facts where they are distinctly implied in other facts of which information is communicated1 Canilang v CA Facts: The insured failed to disclose to the insurer that he was diagnosed to be suffering from .sinus tachycardia1 and that he had consulted with a doctor. 9e died of congesti"e heart failure. 9is wife% as the beneficiary filed a claim with the insurer who denied the same. Ratio: The information the insured failed to disclose was material to the ability of the insurer
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Facts: The insured applied for a life insurance policy with defendant and named beneficiary his mother8in8law% the petitioner in the case. nsured falsely answered 2uestions on the application form regarding his health and medical history. Also% when he the insurance companyFs physician conducted a physical e*amination% another person pretending to be the insured was presented. nsured died of intestinal occlusion. Ratio: The insured permitted fraud to be committed against the insurance company in the fact that he allowed a healthy and robust person to substitute in his place since he knew that he was in bad health. t is immaterial the cause of death since at the time he applied for the insurance on his life he was affected by a malady that would ha"e been sufficient cause for the re<ection of his application by the insurance company. The contract of insurance is null and "oid because it is false% fraudulent and illegal. Great Pacific &ife v CA 234445 Facts: A group life insurance was e*ecuted between Gre#a3ife and ?B# for mortgagors of ?B# to the amount of debt to ?B#. The insured in this case was one such mortgagor to ?B#. Gre#a3ife granted insurance and a couple of months later% insured died of .massi"e cerebral hemorrhage1. =pon ?B#Fs claim Gre#a3ife denied claiming non8disclosure of insured that he was suffering from hypertension at the time of application for the insurance based on the testimony of a doctor who declared that the cause of death was .possible hypertension se"eral years ago1 Ratio: Gre#a3ife failed to establish that the insured concealed a material fact as the medical findings were not conclusi"e since the doctor who ga"e the testimony did not conduct an autopsy on the insured nor had he any knowledge of insuredFs pre"ious hospital confinements. The death certificate only stated that hypertension as .possible cause of death1. Concealment e*ist where the assured had knowledge of a fact material to the risk% and honesty% good faith and fair dealing re2uires that he should communicate it to the assurer% but he intentionally withholds the same. Fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the contract. !isrepresentation as a defense of the insurer to a"oid liability is an affirmati"e defense and the duty to establish such defense rests upon the insurer. .dillon v %anila 0ankers &ife Facts: The insured applied for a )08day insurance co"erage against accident and in<uries. ,he clearly indicated in the application form that her date of birth was 6uly &&% &)0A Dwhich made her almost 6( at the time of applicationE. The insurer accepted her premium payment and issued her a certificate of insurance. =nder the insurance policy% there contained a pro"ision which e*cludes the company from any liability to pay claims when the insured is under &6 or o"er 60. nsured died of a "ehicular accident during the effecti"ity of the insurance co"erage. Ratio: The insurer is deemed estopped from claiming that the insured is dis2ualified. ,he did not conceal nor misrepresent her age and the insurance corporation has been gi"en sufficient information to know that the insured is o"er 60 years of age% yet they continued to accept the premium payment and issued her the policy. $e, &ife .nterprise v Court of Appeals Facts: The insured contracted 0 insurance policies from 0 different insurance companies for the stocks8in8trade of Hew 3ife Cnterprises. t was undisputed that the plaintiff failed to indicate any co8insurance in any of the three policies. 4hen the building occupied by the insured enterprise was gutted and the stocks8in8trade insured against were burned% the plaintiff filed claims with the 0 insurers which were all denied. The reason was that the insured "iolated the terms of policy in relation to co8insurance. Ratio: The terms of the contract are clear and unambiguous. The insured is specifically re2uired to disclose to the insurer any other insurance and its particulars which he may ha"e effected on the same sub<ect. The e*cuse of the plaintiff that the agent of the insurance company was aware of the other insurers or that he failed to read the terms of the policies cannot be accepted when the words and language of the documents are clear and plain or readily understandable by an ordinary reader. There is absolute no room for interpretation or construction and the courts are not allowed to make contracts for the parties. The parties must abide by the terms of the contract because such terms constitute the measure of the insurerFs liability and compliance therewith is a condition precedent to the insuredFs right to reco"ery from the insurer. American Home v CA Facts: The insured took out a fire insurance policy to co"er the stocks8in8trade of his business from the plaintiff insurer. 4hen a fire gutted the business% he filed a claim against plaintiff insurer and se"eral other insurance companies for which he also had a policy for the same stocks8in8trade. The plaintiff insurer refused payment claiming that the insured "iolated the policy in se"eral instances Q for our purposes the "iolation was the failure of the insured to disclose co8insurance. 9owe"er% during trial% the trial court found that although the insured failed to disclose co8insurance% the loss ad<uster of the insurance company had pre"ious knowledge of the co8insurance prior to the claim. Ratio: The insurer is estopped from claiming e*emption from liability due to the "iolation of the policy on non8disclosure. t cannot be said that petitioner was decei"ed by respondent by the latterFs non8disclosure of the other insurance
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contracts when petitioner actually had prior knowledge as petitionerFs loss ad<uster had known all along of the other e*isting insurance contracts. The loss ad<uster being an employee of petitioner is deemed a representati"e of the latter whose awareness of the other insurance contracts binds the petitioner and thus there was no "iolation of the .other insurance1 clause by the respondent and petitioner is liable to pay its share of the loss. 3ife insurance policy wording that pro"ides a time limit on the insurerFs right to dispute a policyFs "alidity based on material misstatements in the application. ncontestability means that after the re2uisites are shown to e*ist% the insurer shall be estopped from contesting the policy or setting up any defense% e*cept as is allowed% on the ground of public policy cancelled before commencement of the suite, operates to rescind a contract of insurance .ife ,o ic! The defense is available only during the first two years of a life insurance policy. Fr upon the first two years after reinstatement. ReEuisites ,o icies7 *. +. for Incontesta$i it! of .ife
Sec. G.. Chenever 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. ,fter 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. Grounds for RescissionL *. Concealment +. 'alse representation misrepresentation E. 7reach of Carranty
The policy is a life insurance policy. It is payable on the death of the insured E. It has been in force during the lifetime of the insured for at least two years from its date of issue or of its last reinstatement UUThe period of two years for contesting a life insurance policy by the insurer may be shortened but it cannot be extended by stipulation. Sec. ++1 In the case of individual life or endowment insurance, the policy shall contain in substance the following conditionsL HbI , provision that the policy shall be incontestable after it shall have been in force during the lifetime of the insured for a period of two years from its date of issue as shown in the policy, or date of approval of last reinstatement, except for non8payment of premium and except for violation of the conditions of the policy relating to military or naval service in time of war.
Bhen Insurer Must E)ercise Right to Rescind7 Non<.ife ,o ic! 3ust be exercised prior to the commencement of an action on the contract. The insurer is no longer entitled to rescind a contract of insurance after the insured has filed an action to collect the amount of the insurance. UU owever, it has been held that where any of the material representations is false, the insurer6s tender of the premiums and notice that the policy is
Defenses Not -arred $! Incontesta$ e C ause7 *. That the person ta"ing the insurance lac"ed insurable interest as re-uired by law. +. That the cause of the death of the insured is an excepted ris". E. That the premiums have not been paid. G. That the conditions of the policy relating to military or naval service have been violated. 2. That the fraud is of a particularly vicious type, as where the policy was ta"en out in furtherance of a scheme to murder the insured, or where the insured substitutes another person for the medical examination, or where the beneficiary feloniously "ills the insured.
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/. That the beneficiary failed to furnish proof of death or to comply with any conditions imposed by the policy after the loss has happened. That the action was not brought within the time specified. +. I%# ied Barrant! 9%arine insurance on !: is a warranty which from the very nature of the contract or from the general tenor of the words, although no express warranty is mentioned, is necessarily embodied in the policy as a part thereof and which binds the insured as thorugh expressed in the contract. HThere is an implied warranty that the ship is seaworthy when the policy attachesI Affir%ati'e Barrant! 9Sec. ;>: is one which asserts the existence of a fact or condition at the time it is made ,ro%issor! warrant! or E)ecutor! Barrant! 9Sec. =" C =&: is one where the insured stipulates that certain facts or conditions pertaining to the ris" shall exist or that certain things with reference thereto shall be done or omitted. It is in the nature of a condition subse-uent.
1.
Argente v +est Coast &ife "ns. Co. Facts: The insured spouses signed an application for <oint insurance which was accepted by the insurer. The wife died of cerebral apople*y a couple of month after the effecti"ity of the policy. 4hen the husband filed a claim% the insurer denied the claim due to fraud and misrepresentation of the insured. t appeared that the answers the spouses ga"e in their medical e*aminations with regard to their health and pre"ious illnesses and medical attendance were untrue. Ratio: The spouses were guilty of concealment. As to the issue of the application of section A' Dnow sec. A$E on the time the insurer must e*ercise the right to rescind% the court held that a failure to e*ercise the right of rescission cannot pre<udice any defense to the action which the concealment may furnish. 4here any of the material representations are false% the insurerFs tender of the premium and notice that the policy is cancelled% before the commencement of suit thereon% operate to rescind the contract of insurance% and are a sufficient compliance with the law. BARRANTIES Is a statement or promise set forth in the policy itself or incorporated in it by proper reference, the untruth or non8fulfillment of which in any respect and without reference to whether the insurer was in fact pre&udiced by such untruth or non8 fulfillment, renders the policy voidable by the insurer.
E.
G.
11-arranties are either affirmative or promissory and e!pressed or implied . so it comes in pairs you can have an implied affirmative )arranty or an e!pressed affirmative )arranty// 11A )arranty is presumed to (e affirmative unless the contrary intention appears
Sec. /.. , warranty may relate to the past, the present, the future, or to any or all of these.
Sec. /B. (o particular form of words is necessary to create a warranty.
Sec. /1. , warranty is either expressed or implied. Iinds of Barranties7 *. E)#ress Barrant! 9Sec ;= C =1: is an agreement contained in the policy or clearly incorporated whereby the insured stipulates that certain facts relating to the ris" are or shall be true or certain acts relating to the same sub&ect have been or shall be done.
Barranties ' Re#resentation BARRANTH Considered part of the contract ,lways written on the face of the policy, actually or by reference 3ust be strictly complied with 'alsity or non8 RE,RESENTATION Collateral inducement to the contract 3ay be written in a totally disconnected paper or may be oral Fnly substantial truth is re-uired. 'alsity of a
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fulfillment of a warranty operates as a breach of contract >resumed material representation renders the policy void on the ground of fraud. Insurer must show the materiality of a representation in order to defeat an action on the policy. Chen 7reach of Carranty does not ,void >olicyL *. Chen loss occurs before time for performance +. Chen performance becomes unlawful E. Chen performance becomes impossible Hlegal D physical impossibilityI G. Chen insurer waives the warranty, impliedly or expressly.
MATERIA.ITH and 0RAUD IN BARRANTH
Sec. 10. Cithout pre&udice to section fifty8 one, every express warranty, made at or before the execution of a policy, must be contained in the policy itself, or in another instrument signed by the insured and referred to in the policy as ma"ing a part of it. In order that a stipulation may be considered a warranty, it must not only be clearly shown that the parties intended it as such but it must also forma a part of the contract itself or if contained in another instrument, it must be signed by the insured and referred to in the policy as ma"ing a part of it. 3ere reference alone is not sufficient to give this effect.
Sec. 1G. The violation of a material warranty, or other material provision of a policy, on the part of either party thereto, entitles the other to rescind. Sec. 12. violation of avoid it, immaterial policy. , policy may declare that a specified provision thereof shall otherwise the breach of an provision does not avoid the
Sec. 1/. , breach of warranty without fraud, merely exonerates an insurer from the time that it occurs, or where it is bro"en in its inception, prevents the policy from attaching to the ris". 'raud is not essential to entitle the insurer to rescind a contract for breach of warranty. 'alsity, not fraud is the basis of liability in warranty. If the breach of the warranty was BIT/OUT 0RAUD K insured is entitled toL *. !eturn of premium paid at a pro8 rata rate from the time of breach if it occurs after the inception of the contract +. To all the premiums if it is bro"en during the inception of the contract. In this case the contract is void ab initio and never became binding. If the breach of the warranty was BIT/ 0RAUD K policy is void ab initio and the insured is not entitled to the return of the premium paid
Sec. 1*. , statement in a policy, of a matter relating to the person or thing insured, or to the ris", as a fact, is an express warranty thereof. Sec. 1+. , statement in a policy, which imports that it is intended to do or not to do a thing which materially affects the ris", is a warranty that such act or omission shall ta"e place. Section 1+ refers to promissory warranty. 7each of promises or agreements as to future acts will not avoid a policy unless the promises are material to the ris".
Sec. 1E. Chen, before the time arrives for the performance of a warranty relating to the future, a loss insured against happens, or performance becomes unlawful at the place of the contract, or impossible, the omission to fulfill the warranty does not avoid the policy.
BARRANTIES IN 0IRE INSURANCE Sec. */1. ,s used in this Code, the term $fire insurance% shall include insurance
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against loss by fire, lightning, windstorm, tornado or earth-ua"e and other allied ris"s, when such ris"s are covered by extension to fire insurance policies or under separate policies. HaI , fire insurance is a contract of indemnity by which the insurer, for consideration, agrees to indemnify the insured against loss of, or damage to, property by fire. ris5 shou d ha'e cause or contri$uted to the oss2 it is necessar! that the increase $e of a su$stantia character. Sec. *10. , contract of fire insurance is not affected by any act of the insured subse-uent to the execution of the policy, which does not violate its provisions, even though it increases the ris" and is the cause of a loss. If the policy does not contain any prohibition limiting the use or condition of the thing insured, an alteration in said use or condition does not constitute a violation of the policy. The contract is not affected by such alteration even though it increases the ris" and is the cause of the loss.
Sec. */.. ,n alteration in the use or condition of a thing insured from that to which it is limited by the policy made without the consent of the insurer, by means within the control of the insured, and increasing the ris", entitles an insurer to rescind a contract of fire insurance. Sec. */B. ,n alteration in the use or condition of a thing insured from that to which it is limited by the policy, which does not increase the ris", does not affect a contract of fire insurance. !e-uisites ,lteration to Entitle Insurer to !escindL *. The use or condition of the thing is specifically limited or stipulated in the policy. +. Such use or condition as limited by the policy is altered. E. The alteration is made without the consent of the insurer G. The alteration is made by means within the control of the insured 2. The alteration increases the ris". Increase of !is" or azard in #eneral Increase of hazard ta"es place whenever the insured property is put to some new use, and the new use increases the chance of loss. 3ere negligent acts temporarily endangering the property will not violate the policy Temporary acts or conditions which have ceased prior to the occurrence of the loss will also not violate the policy. 0or sec. 1;> to o#erate2 entit ing the insurer the right to rescind2 there %ust $e an actua increase of ris5 and whi e it is not necessar! that the increased
Sec. *1*. If there is no valuation in the policy, the measure of indemnity in an insurance against fire is the expense it would be to the insured at the time of the commencement of the fire to replace the thing lost of in&ured in the condition in which it was at the time of the in&uryN but if there is a valuation in a policy of fire insurance, the effect shall be the same as in a policy of marine insurance. Sec. *1+. Chenever the insured desires to have a valuation named in his policy, insuring any building or structure against fire, he may re-uire such building or structure to be examined by an independent appraiser and the value of the insured6s interest therein may then be fixed as between the insurer and the insured. The cost of such examination shall be paid for by the insured. , clause shall be inserted in such policy stating substantially that the value of the insured6s interest in such building or structure has been thus fixed. In the absence of any change increasing the ris" without the consent of the insurer or of fraud on the part of the insured, then in case of a total loss under such policy, the whole amount so insured upon the insured6s interest in such building or structure, as stated in the policy upon which the insurers have received a premium, shall be paid, and in case of a partial loss, the full amount of the partial loss shall be so paid, and in case there are two or more policies covering the insured6s interest therein, each policy shall contribute pro rata to the payment of such whole or partial loss.
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7ut in no case the insurer be re-uired to pay more than the amount thus stated in such policy. This section shall not prevent the parties from stipulating in such policies concerning the repairing, rebuilding or replacing of buildings or structures wholly or partially damaged or destroyed. small amount of insurance, and thereby reduce premium payments the insurers often insert as a rider to the standard fire policy a so called $co8insurance% clause which results in reducing the recovery in case of partial loss to but a portion of the sum named in the policy though in case of total loss, the insurer is liable for the amount named in the policy. Sec. *1E. (o policy of fire insurance shall be pledged, hypothecated, or transferred to any person, firm or company who acts as agent for or otherwise represent the issuing company, and any such pledge, hypothecation, or transfer hereafter made shall be void and of no effect insofar as it may affect other creditors of the insured. Effect of , edge of 0ire Insurance ,o ic! ,fter a loss has occurred, the insured 3,= pledge, hypotheticate or transfer a fire insurance policy or rights thereunder. This right however is sub&ect to the prohibition of Section *1E. Pioneer v 1ap Facts: The insured was the owner of a store selling bags and footwear% she took out a fire insurance from petitioner insurance company co"ering her stocks% office furniture% fi*tures and fittings of e"ery kind and description. A condition was set which re2uired the insured to disclose to the insurer of any insurance or insurances .already effected% or which may be subse2uently effected1. t further stipulated that ./unless such notice be gi"en and the particulars of such insurance or insurances be stated in or endorsed on this #olicy by or on behalf of the Company before the occurrence of any loss or damage% all benefits under this #olicy shall be forfeited1. The insured failed to inform the insurer of another co8insurance. Fire broke out% gutted the store of insured. =pon filing of claim% petitioner insurance company denied the claim for "iolation of condition in the policy. Ratio: By the plain terms of the policy% other insurance without the consent of petitioner would ipso facto a"oid the contract. t re2uired not affirmati"e act of election on the part of the company to make operati"e the clause a"oiding the contract% where"er the specified conditions occur. ts obligation ceases% unless% being informed of the fact% it consented to the additional insurance. Furthermore% the court 2uoting 6ustice Bengson DGen nsurance L ,urety Corp " Hg 9uaE said that ./and considering the terms of the policy which re2uired the insured to declare other insurances% the statement in 2uestion must be
Measure of Inde%nit! Under an O#en ,o ic! Entitled to recover amount of actual loss sustained Hburden of establishing the amount of loss is upon the insuredI Measure of Inde%nit! Under a 8a ued ,o ic! The valuation in the policy of fire insurance is conclusive between the parties in the ad&ustment of either partial or total loss if the insured has an insurable interest and was not guilty of fraud In case of total loss, the insured can recover the whole amount so insured as stated in the policy Hthe valuated amountI In case of partial loss, the full amount of the partial loss Hbut should not exceed the valuated amountI Total loss exist when the result of the fire is such as to render the property wholly unfit for use. If the thing is insured under two or more policies, each policy shall contribute pro8rata to the payment of such whole or partial loss. The insured is not a co8insurer under a fire insurance policy in the absence of stipulation unli"e in marine insurance. Co<Insurance C ause Is a clause re-uiring the insured to maintain insurance to an amount e-ual to a specified percentage of the value of the insured property under penalty of becoming co8 insurer to the extent of such deficiency. 3any property owners realizing the possibility of total destruction is slight, merely ta"e out a small percentage of the value of the building or goods. To prevent the insured from ta"ing out such
110
deemed to be a statement D4A>>AHTRE binding on both insurer and insured% that there were no other insurance on the property/.the annotation then% must be deemed to be a warranty that the property was not insured by any other policy. Kiolation thereof entitled the insured to rescind.1 defendant insurance company who denied the claim. Ratio: The insured is guilty of concealment and thus relie"es the insurer from paying the claim. The insured knew that he had suffered from a number of ailment before subscribing the application% yet he concealed them and omitted the hospital where he was confined as well as the name of his physician who treated him. The concealment and false statement constituted fraud% since this caused the defendant insurer to accept the risk when it would ha"e otherwise refused. ,uch concealment of the insured rendered the policy null and "oid Das held also in Argente " 4est CoastE. Filipna cia de Seguros v $ava Facts: 5n February &)0)% plaintiff Ha"a and defendant Filipinas 3ife Assurance entered into &' separate contracts of life insurance for which the insured issued &' life insurance policies for which the insurer issued &' life insurance policies% one of said policies ha"ing a face "alue of #&0%000 while the rest a face "alue of #(%000 each% or a total of #)0K. Cach and e"ery policy contains a policy loan clause. 5n April &)A$% plaintiff applied for a loan of #(%000 in line with the loan clause but defendants refused citing certain regulations issed by the nsurance Commissioner on !ay &)A6. Held: ?efendantFs refusal to gi"e the loan applied for by the plaintiff "iolated the loan clause embodied in each of the life insurance policies. This "iolation of the loan clause in the policy entitled plaintiff to rescind all policies under ,ection 6) of the nsurance Act% which pro"ides- .the "iolation of a material warranty% or other material pro"ision of a policy% on the part of either party thereto% entitles the other to rescind.1 5ur nsurance 3aw does not contain an e*press pro"ision as to what the court should do in cases of rescission of an insurance policy under ,ection 6)% the pro"ision that should apply is that embodied in Art. &7)( of the old ci"il code% as postulated in Art. &6 of the same Code% which pro"ides that on matters which are not go"erned by special laws the pro"ision of said Code shall supplement its deficiency. The CA was correct in ordering defendant to refund to plaintiff all premiums paid by him up to the filing of the action amounting to #0A%6AA.60. GROUNDS AND EJERCISE O0 RIG/T O0 RESCISSION Sec. G.. Chenever 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. ,fter a policy of life insurance made payable
1oung v %idland #e6tile "nsurance Facts: The insured% an owner of a candy and fruit store took out a fire insurance policy from the defendant insurance company to insure his residence and his bodega. =nder the policy% a condition was set as Mwarranty BM which stipulates that no ha+ardous goods be stored or kept for sale and no ha+ardous trade or process shall be carried in the building. ?uring the enforcement of the insurance policy% the insured kept 0 bo*es of fire crackers. ,ometime later a fire broke out which partially destroyed the building but it appeared that the fire crackers were not the cause of the fire as they were found in an area not burned. =pon claim insurer denied payment. Ratio: The terms of the contract constitute the measure of the insurerNs liability. f the contract has been terminated by a "iolation of its terms on the part of the insured% there can be no reco"ery. Compliance with the terms of the contract is a condition precedent to the right of reco"ery. A "iolation of the terms of a contract of insurance% by either party% will constitute the basis for a termination of the contractual relations% at the election of the other Din this case the insurerE. The right to terminate the contractual relations e*ist e"en though the "iolation was not the direct cause of the loss% since the deposit of the .ha+ardous goods1 in the building insured was a "iolation of the terms of the contract. The insurer is relie"ed from his liability since the deposit of the ha+ardous materials created a new risk not included in the terms of the contract. The insurer had neither been paid% nor had he entered into a contract to co"er the increased risk. EJCE,TIONS6C EJC.USION Intends to limit the liability of the insurer under certain circumstances.
%usngi v +est Coast "nsurance Co. "nc. Facts: The insured took out two life insurance policies with defendant insurer designating as his beneficiaries the plaintiffs in the case. n his application the insured untruthfully answered 2uestions regarding his health particularly about ha"ing consulted any physician regarding an illness or ailment. t appeared that prior to his application for insurance% the insured had been treated for a number of ailments including peptic ulcer% TB etc. The insured died% and upon his death his beneficiaries filed a claim with
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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. Sec. /E. , condition, stipulation, or agreement, in any policy of insurance, limiting the time for commencing an action thereunder to a period of less than one year from the time when the cause of action accrues is void. Bhen Cause of Action Accrues The right of the insured to the payment of his loss accrues from the happening of the loss. The cause of action in an insurance contract does not accure A(TI) T E I(SA!E<6S C),I3 IS 'I(,))= !E4ECTE< 7= T E I(SA!E!, because before such final re&ection ,there is no real necessity for binging suit. The period is to be computed not from the time the loss actually occurs but from the time when the insured has a right to bring an action against the insurer. UUCause of ,ction K re-uires as essential elements not only a legal right of the plaintiff and a correlative obligation of the defendant but also $,( ,CT F! F3ISSIF( F' T E <E'E(<,(T I( @IF),TIF( F' S,I< )E#,) !I# T%, the cause of action in favor of the insured does not accrue until the insurer refuses expressly or impliedly to comply with his duty to pay the amount of the loss. Sec. /G. (o policy of insurance other than life shall be cancelled by the insurer except upon prior notice thereof to the insured and no notice of cancellation shall be effective unless it is based on the occurrence , after the effective date of the policy, of one or more of the followingL HaI non payment of premiumN HbI conviction of a crime arising out of acts increasing the hazard insured against HcI discovery of fraud or material misrepresentationN HdI discovery of willful or rec"less acts or omissions increasing the hazard insured againstN HeI physical changes in the property insured which results in the property becoming uninsurableN or HfI a determination by the Commissioner that the continuation of the policy would violate or would place the insurer in violation of this Code. Sec. /2. ,ll notices of cancellation mentioned in the preceding section shall be in writing, mailed or delivered to the named insured at the address shown in the policy and shall stateL HaI which of the grounds set forth in section /G is relied uponN and HbI that, upon written re-uest of the named insured, the insurer will furnish the facts on which the cancellation is based. 0or% and Sufficienc! of Notice of Cance ation *. There must be prior notice of cancellation to the insured. +. The notice must be based on the occurrence , after the effective of the policy, of one or more of the grounds mentioned in section /G. E. It must be in writing, mailed or delivered to the named insured at the address shown in the policy. G. It must state which of the grounds set forth is relied upon Sec. *10. , contract of fire insurance is not affected by any act of the insured subse-uent to the execution of the policy, which does not violate its provisions, even though it increases the ris" and is the cause of a loss. Sec. ++1 In the case of individual life or endowment insurance, the policy shall contain in substance the following conditionsL HbI , provision that the policy shall be incontestable after it shall have been in force during the lifetime of the insured for a period of two years from its date of issue as shown in the policy, or date of approval of last reinstatement, except for non8payment of premium and except for violation of the
112
conditions of the policy relating to military or naval service in time of war. Sec. E.0. (o cancellation of the policy shall be valid unless written notice thereof is given to the land transportation operator or owner of the vehicle and to the )and Transportation Commission at least fifteen days prior to the intended effective date thereof. Apon receipt of such notice, the )and Transportation Commission, unless it receives evidence of a new valid insurance or guaranty in cash or surety bond as prescribed in this Chapter, or an endorsement of revival of the cancelled one, shall order the immediate confiscation of the plates of the motor vehicle covered by such cancelled policy. The same may be reissued only upon presentation of a new insurance policy or that a guaranty in cash or surety bond has been made or posted with the Commissioner and which meets the re-uirements of this chapter, or an endorsement or revival of the cancelled one. H,s amended by >< (o. *G22I or use of the sub&ect matter of such insurance Hbut not including life insurance or surety bonds nor insurance against loss by reason of bodily in&ury to any person arising out of ownership, maintenance, or use of automobilesIN HcI >recious stones, &ewels, &ewelry, precious metals, whether in course of transportation or otherwiseN HdI 7ridges, tunnels and other instrumentalities of transportation and communication Hexcluding buildings, their furniture and furnishings, fixed contents and supplies held in storageIN piers, wharves, doc"s and slips, and other aids to navigation and transportation, including dry doc"s and marine railways, dams and appurtenant facilities for the control of waterways. H+I M3arine protection and indemnity insurance,M meaning insurance against, or against legal liability of the insured for loss, damage, or expense incident to ownership, operation, chartering, maintenance, use, repair, or construction of any vessel, craft or instrumentality in use of ocean or inland waterways, including liability of the insured for personal in&ury, illness or death or for loss of or damage to the property of another person. 1. 3Na'igationa E)#osure4 1 $asic conce#t in defininition. <ean says that since the IC HInsurance CodeI does not really define what marine insurance is, most important is to &ust point out that (,@I#,TIF(,) ER>FSA!E is the common thread that runs through the enumeration in Sec. BB !elated to (avigation of the ship Definition of %arine insurance under the IC and under the Insurance Act 9.aw w6c IC a%ended: CamposL the IC gives the terms of marine insurance a very wide coverage including property exposed to ris"s not connected with navigation. The simple clear definition in the I, was betterL Marine insurance is an insurance a+ainst risks connected )ith navi+ation to )hich a ship, car+o, frei+hta+e, profits, or other insura(le interest in mova(le property may (e e!posed durin+ a certain voya+e or a fi!ed period of time/
MARINE INSURANCE
A. DE0INITION Sec. BB.3arine Insurance includesL H*I Insurance against loss of or damage toL HaI @essels, craft, aircraft, vehicles, goods, freights, cargoes, merchandise, effects, disbursements, profits, moneys, securities, choses in action, evidences of debts, valuable papers, bottomry, and respondentia interests and all other "inds of property and interests therein, in respect to, appertaining to or in connection with any and all ris"s or perils of navigation, transit or transportation, or while being assembled, pac"ed, crated, baled, compressed or similarly prepared for shipment or while awaiting shipment, or during any delays, storage, transhipment, or reshipment incident thereto, including war ris"s, marine builderPs ris"s, and all personal property floater ris"sN HbI >erson or property in connection with or appertaining to a marine, inland marine, transit or transportation insurance, including liability for loss of or damage arising out of or in connection with the construction, repair, operation, maintenance
Insurance Act 9o d
Insurance Code
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definition: 3arine insurance covers all "inds of movable property, but it operated only is such property is exposed to ris"s connected with navigation. 9#resent defFn: Covers property exposed to ris"s of navigation and even those exposed to ris"s not connected with navigation, li"e ris"s connected with all other means of transportation, including overland and perhaps even air transportaion. passenger at the completion of the voyage unless expressly provided. Ris5s which %a! $e insured against Insurer is liable for all losses >!FRI3,TE)= caused by the perils covered by the marine policy Asually enumerated ". 3,eri s of the Sea4 and 3,eri s of the Shi#4 o ,eri of the Sea includes only casualties arising from the 'io ent action of the elements and does not co'er ordinar! wear and tear li"e the silent, natural and gradual action of the elements on the vessel itself, or other damage usually incident to the voyage. 'ortuitous and unusual 3ust be connected with maritime navigation It is a relative term and the meaning ma y vary with the circumstances. ,eri of the Shi# 8 )oss which in the ordinary course of events results fromL The Natura and inevitable action of the sea. Ordinar! Bear and Tear fo the ship The neg igent fai ure of the shi#Fs owner to provide the vessel with proper e-uipment to convey the cargo under ordinar! conditions -arratr! 8 willful and intentional act on the part of the master or crew, in pursuance of some unlawful or fraudulent purpose, without the consent of the owner, and to the pre&udice of his interestN (either honest error or &udgment nor mere negligence. 3ay be covered by policy Ta5ing at sea2 arrests2 restraints2 and detain%ents of a 5ings2 #rinces and #eo# e 8 extraordinary acts by a sovereign authority in time of war, or under other unusual international conditions li"e bloc"ades and embargoes. ,cts done in the course of regular proceedings not included Hi.e. vessel libeled and detained for non8payment
Criticism of IC def6nL It6s confusing impractical and unrealistic to apply provision intended specifically and only for ris"s of navigation Hw?c came down to us from the usages and customs of merchantsI to ris"s connected with land and air transportation. IC definition also didn6t serve any legal purpose by widening the scope of the definition since most of the special provisions in the IC relating to marine insurance can properly apply only to ships or other property exposed to navigational ris"s. Everything covered by the new definition would anyway be necessarily governed by the general provisions of the IC, even if the old definition had &ust been retained.
,ro#ert! co'ered $! %arine #o ic! , marine policy may cover any property or interest therein which may be sub&ected to the ris"s of navigation. <efinition in policy may be modified or enlarged by riders, warranties, or indorsements attached to the policy. Term $goods and merchandise% usually found in a marine policy includes all articles which are carried on the ship for CF33E!CI,) purposes. H<oes not incl ex. Clothing of crew, food, etcI. Expected profits from the sale of such goods may also be protected. 0reight or 0reightage K all benefits derived by the owner, either from chartering Hborrowing the entire shipI of the ship or its employment for the carriage of his own goods or those of others. This is not covered unless e!pressly stated in the policy/ 'reight Insurance doesn6t cover passage money payable by
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of debtI since there is nothing fortuitous about the situation. Includes not only $arrests% caused by political acts of a seizing state but also by ordinary legal processes such as a lawsuit on ownership and possession of goods. Hsee 3alayan Insurance Corp v C, caseI A other #eri s2 osses and %isfortunes 8 covers ris"s which are of li"e "ind with the particular ris"s which are enumerated in the preceding part of the same clause of the contract Facts TKC !arketing was the ownerJconsignee of soya bean meal shipped from Bra+il to !anila. t was insured by !alayan nsurance. 4hile the "essel was in ,outh Africa it was arrested and detained due to a lawsuit 2uestioning its ownership and possession. As a result% TKC !arketing filed a claim with !alayan for the non8deli"ery of the cargo. Issue 4oH the arrest of the "essel by the ci"il authority was a peril of the sea Held The .arrest1 caused by ordinary <udicial process is deemed included among the co"ered risks. D?ecision detailed the history of the .Free from Capture and ,ei+ure1 clauseE Although the Free from Capture and ,ei+ure1 clause was originally inserted in marine policies to protect against risks of war% its interpretation in recent years to include sei+ure or detention by ci"il authorities seems consistent with the general purposes of the clause. Filipino %erchants "nsurance Co v CA Facts A shipment of fishmeal insured by Filipino !erchants Co. was found to be damaged upon its unloading in the #ort of !anila. The ownerJconsignee filed action to reco"er the amount represented by the damages based on the .all risks1 clause of the policy but Fil.!erchants refused claiming that there must be some casualty or accidental cause to which the loss is attributable. Held An .all risks policy1 should be read literally Dnot technicallyE as meaning all risks whatsoe"er and co"ering all losses by an accidental cause of any kind. t has e"ol"ed to grant a greater protection than that afforded by the .perils1 clause in order to assure that no loss can happen through the incident of a cause neither insured against nor creating liability in the ship. The insured under an all risks policy has the initial burden of pro"ing that the cargo was damaged when unloaded from the "essel% thereafter% the burden then shifts to the insurer to show the e*ception to the co"erage. =nder this policy it is sufficient to show that there was damage occasioned by some accidental cause of any kind and there is no necessity to point to any particular cause. -. INSURA-.E INTEREST Sec. *00. The owner of a ship has in all cases an insurable interest in it, even when it has been chartered by one who covenants to pay him its value in case of lossL >rovided, That in this case the insurer shall be liable for only that part of the loss which the insured cannot recover from the charterer. Fwner of @essel has insurable interest in the vessel even if he has mortgaged it. owever, if ship is chartered and charterer agrees to pay
&a Ra!on Social 7Go #iaoco y Hermanos8 v -nion "nsurance Society of Canton &td. Facts- A drain pipe passing through the hold where the insured rice was stowed had become corroded in course of time% wJc created a hole in the pipe. An attempt was made to cement the hole and co"er it with a strip of iron but due to the loading of the ship% this part of the pipe was submerged in water during the trip and was washed out. 4ater flowed into the hold and damaged the rice. Issue- 45H the insurer was liable Held- H5. A loss which in the ordinary course of e"ents% results from the natural and ine"itable action of the sea% from the ordinary wear and tear of the ship% or from the negligent failure of the shipFs owner to pro"ide the "essel with proper e2uipment to con"ey the cargo under ordinary conditions% is not a peril of the sea% but rather a .peril of the ship.1 n such a case% the remedy of the insured shipper or consignee is not against the insurer but against the shipowner. Cathay "nsurance v CA Facts: >emington ndustrial ,ales filed for the reco"ery of losses incurred due to the rusting of steel pipes it imported from 6apan while it was in transit. Cathay nsurance refused payment claiming that the rusting was not due to a peril of the sea since it was not a casualty which could not be foreseen. Held: There is no 2uestion that rusting of steel pipes in the course of "oyage is a .peril of the sea1 in "iew of the toll on the cargo by wind% water and salt conditions. D9AHG3AB5S But in any case% the ,C decided through constructionE 4e would fail to obser"e a cardinal rule in the interpretation of contracts% namely% that any ambiguity therein should be construed against the issuerJdrafter% namely% the insurer. %alayan "nsurance Corp v CA
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him its value in case of loss, it is only liable for that part of the loss which the insured cannot recover from the charterer. Sec. *0*. The insurable interest of the owner of the ship hypothecated by bottomry is only the excess of its value over the amount secured by bottomry. Sec. *0+. 'reightage, in the sense of a policy of marine insurance, signifies all the benefits derived by the owner, either from the chartering of the ship or its employment for the carriage of his own goods or those of others. Sec. *0E. The owner of a ship has an insurable interest in expected freightage which according to the ordinary and probable course of things he would have earned but for the intervention of a peril insured against or other peril incident to the voyage. Sec. *0G. The interest mentioned in the last section exists, in case of a charter party, when the ship has bro"en ground on In Shi# -otto%r! .oan K one given on the security of the ship, on condition that the loan be repaid only if the ship arrives safely at the port of destinationN money given in advanceN is ship sin"s, bottomry loan extinguished and owner doesn6t have to pay it. 7ottomry loans and marine insurance can share protection and coverage of same ris"sN but cannot coextend with each other. Chere a vessel is hypothecated by way of bottomry, the owner has an insurable interest only in the excess of the vessel6s value over the amount of the bottomry loan. This is so because when the vessel bottomed is lost, the owner need
In Shi#
the chartered voyage. If a price is to be paid for the carriage of goods it exists when they are actually on board, or there is some contract for putting them on board, and both ship and goods are ready for the specified voyage. Sec. *02. Fne who has an interest in the thing from which profits are expected to proceed has an insurable interest in the profits. Sec. *0/. The charterer of a ship has an insurable interest in it, to the extent that he is liable to be damnified by its loss. ,s with other insurances, marine insurance is invalid unless supported by an insurable interest.
not pay the loan and is therefore benefited to the extent of the amount of the load obtained and the loss he actually suffers is only the difference bet the actual value of the vessel and the bottomry. C. CONCEA.MENT
Sec. *01. In marine insurance each party is bound to communicate, in addition to what is re-uired by section twenty8eight, a the infor%ation which he #ossesses, material to the ris", except such as is mentioned in Section thirty, and to state the exact and whole truth in relation to all matters that he represents, or upon in-uiry discloses or assumes to disclose.
Sec. *0.. In marine insurance, information of the belief or expectation of a third person, in reference to a material fact, is material.
In 0reightage
In Goods Shi##ed and ,rofits Interest in goods ship carries to the extent that he may be liable for their loss, but (FT TF ERCEE< T E @,)AE thereof
Owner of the Shi#
8 as insurable interest in ,)) cases even if the ship has been chartered by one who has agreed to pay, its value in case of loss. In this case, insurer6s Hof the ship ownerI liability is limited to the part of the loss which insured cannot recover from the charterer. 8 If ship is sub&ected to bottomry loan, Fwner6s interest is only in excess of value over amount secured by bottomry.
8 as insurable interest in expected freightage w?c accdg to the ordinary and probable course of things he would have earned but for the intervention of a peril insured against or other peril incident to the voyage 8 If 'reight is >ayable upon the Completion of voyage8 FC(E! has insurable interest
Charterer 6 3ay ta"e out3alaya. policy ectures; as insurable interest in 'reight >,I< in ,<@,(CE K 97obbie:Sta3aria. #rinting ; 93iles Shi##er covering insurable interest, goods since they willci'( suffer or Shipper has 94apee:<e)eon.#o i( aw; 9,scheia:=umul. re%( aw; 9>aul:Sorino?4udy:!ipol. aw ; 9 Charterer ya:!afael?3ac:3acapagal. cri%( aw; which can be only to the damage in case of loss insurable interest 9@ivian:Tan?4ustin:3endoza. a$or( aw; 93iguel:<e4esus. ega (ethics ; 9)ianne:#ervasio. co%%( aw ; 9Ces:Sicangco?!owena:!omero. ta)( aw; be extent that he may damnified by the loss
9)orybeth:7aldrias.head; 9(ayna:3alayang.de#ut!; 9<ionne:Sanchez.acads; 94am:4acob.design;
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Sec. *0B. , person insured by a contract of marine insurance is presumed to have "nowledge, at the time of insuring, of a prior loss, if the information might possibly have reached him in the usual mode of transmission and at the usual rate of communication. Sec. **0. , concealment in a marine insurance, in respect to any of the following matters, does not vitiate the entire contract, but merely exonerates the insurer from a loss resulting from the ris" concealedL HaI The national character of the insuredN HbI The liability of the thing insured to capture and detentionN HcI The liability to seizure from breach of foreign laws of tradeN HdI The want of necessary documentsN HeI The use of false and simulated papers. RE,RESENTATION Sec. ***. 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 ris" depends, the insurer may rescind the entire contract. Sec. **+. The eventual falsity of a representation as to expectation does not, in the absence of fraud, avoid a contract of marine insurance. H(oteL Cill be void if there is fraudI S#ecia Ru e in Marine Insurance Substantial truth of any material statement is (FT sufficient )aw re-uires the insured to state the exact and whole truth in relation to all matters that he represents, or upon in-uiry, discloses or assumes to disclose. <ue to nature of contract Ru es on Concea %ent and Misre#resentation are STRICTER in %arine Insurance. Bh!K 'ailure to disclose any material fact or circumstance which in law or fact is within, or which ought to be within the "nowledge of one party and of which the other has no actual or presumptive "nowledge. 'ailure to disclose the ff. will give the insurer the right to rescincd H(o more liabilityI. 3aterial facts within "nowledge of party A infor%ation he #osessess which are material to ris", except as is mentioned in Sec. E0 Hcf with Sec. +. which only re-uire communication of facts which are material to the contract as to which he ma"es no warrantyI 7eliefs and expectations of Erd persons in reference to a material fact.
Sec. +..Each party to a contract of insurance must communicated to the other, in good faith, all facts within his "nowledge which are material to the contract and as to which he ma"es no warranty, and which the other has not the means of ascertaining. Sec. E0. (either party to a contract of insurance is bound to communicate information of the matters following, except in answer to the in-uiries of the otherL HaI Those which the other "nowsN HbI Those which, in the exercise of ordinary care, the other ought to "now, and of which the former has no reason to suppose him ignorantN HcI Those of which the other waives communicationN HdI Those which prove or tend to prove the existence of a ris" excluded by a warranty, and which are not otherwise materialN and HeI Those which relate to a ris" excepted from the policy and which are not otherwise material. TEST of Materia it!7 Chether the concealed fact caused the loss and not its probable influence on the other party in deciding whether or not to enter the contract. Inow edge of #rior oss is #resu%ed. Reason7 Tuic"ness in the transmission of news by means of modern communication. Re#resentations7 Insured must state the exact and whole truth in relation to all matters that he represents of upon in-uiry discloses or assumes to disclose. 0a se re#resentations7 *. ,ny misrepresentation of a material fact made with fraudu ent intent
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The character and nature of the ris5 de#ends on the fact %isre#resented Effect7 Insurer may !ESCI(< the contract E)ce#tion7 Eventual falsity of a representation as to expectation, in the absence of fraud, does not avoid the contract. Coast,ise v CA Facts: #ag8Asa ,ales had molasses transported from Hegros to !anila using Coastwise 3ighterage CorpFs open barges. 9owe"er% one of the barges sank when it hit an unknown sunken ob<ect while approaching !anila Bay #ort. Because of this% #ag8Asa re<ected the shipment as a total loss and #hil. General nsurance Company paid for the loss. #hilGen then filed an action against Coastwise 3ighterage seeking to reco"er the amount it paid #ag8asa. Coastwise claims that it was unaware of the hidden danger in its path% thus it became impossible for Coastwise to a"oid it% e"en with the e*ercise of e*traordinary diligence. Held: CoastwiseFs assertion is belied by the e"idence. The patron of the "essel which sank admitted that he was not licensed thus% it cannot safely claim to ha"e e*ercised e*traordinary diligence by placing a person whose na"igational skills are 2uestionable at the helm of the "essel wJc met the accident. 3ogically% a person wJo license to na"igate lacks not <ust the skill to do so% but also the familiarity with the usual and safe routes taken by seasoned and legally authori+ed persons. +. be seaworthy at the commencement of every voyage it underta"es during that timeN HbI Chen the insurance is upon the cargo which, by the terms of the policy, description of the voyage, or established custom of the trade, is to be transhipped at an intermediate port, the implied warranty is not complied with unless each vessel upon which the cargo is shipped, or transhipped, be seaworthy at the commencement of each particular voyage. Sec. **/. , warranty of seaworthiness extends not only to the condition of the structure of the ship itself, but re-uires that it be properly laden, and provided with a competent master, a sufficient number of competent officers and seamen, and the re-uisite appurtenances and e-uipment, such as ballasts, cables and anchors, cordage and sails, food, water, fuel and lights, and other necessary or proper stores and implements for the voyage. Sec. **1. Chere different portions of the voyage contemplated by a policy differ in respect to the things re-uisite to ma"e the ship seaworthy therefor, a warranty of seaworthiness is complied with if, at the commencement of each portion, the ship is seaworthy with reference to that portion. Sec. **.. Chen the ship becomes unseaworthy during the voyage to which an insurance relates, an unreasonable delay in repairing the defect exonerates the insurer on ship or shipownerPs interest from liability from any loss arising therefrom. Sec. **B. , ship which is seaworthy for the purpose of an insurance upon the ship may, nevertheless, by reason of being unfitted to receive the cargo, be unseaworthy for the purpose of the insurance upon the cargo. Sec. *+0. Chere the nationality or neutrality of a ship or cargo is expressly warranted, it is implied that the ship will carry the re-uisite documents to show such nationality or neutrality and that it will not carry any documents which cast reasonable suspicion thereon. I%# ied warranties in %arine insurance a: Seaworthiness $: De'iation c: Other I%# ied Barranties7 < Carr! the reEuisite docu%ents to show nationa it! or neutra it! < Not engage in an! i ega 'enture
D. IM,.IED BARRANTIES Sec. **E. In every marine insurance upon a ship or freight, or freightage, or upon any thing which is the sub&ect of marine insurance, a warranty is implied that the ship is seaworthy. Sec. **G. , ship is seaworthy when reasonably fit to perform the service and to encounter the ordinary perils of the voyage contemplated by the parties to the policy. Sec. **2. ,n implied warranty of seaworthiness is complied with if the ship be seaworthy at the time of the of commencement of the ris", except in the following casesL HaI Chen the insurance is made for a specified length of time, the implied warranty is not complied with unless the ship
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#eneral provisions on warranties also apply to marine insurance F()= marine insurance has I3>)IE< C,!!,(TIES provided by law anymore responsible for future deficiencyI. ExceptionsL Secs. **2a, **2b, **1 H**2aI In case of TIME policy K insurance made for a specified length of time, ship must be seaworthy at the co%%ence%ent of e'er! 'o!age she may underta"e H**2bI in case of Cargo policy K Insurance is upon the cargo which by the terms of the policy, description of the voyage, or established custom of the trade, is to be transshipped at an intermediate portN each 'esse upon which the cargo is shipped must be seaworthy at the commencement of each particular voyage H**1I In case of 8o!age policy contemplating a voyage in different stages K ship must be seaworthy at the commencement of each portion.
a: Seaworthiness7 Meaning Ship is sea)orthy )hen reasona(ly fit to perform the services and to encounter the ordinary perils of the voya+e contemplated (y the parties to the policy/ (FT absolute guarantee that vessel will safely meet all possible perils CI!CA3ST,(CES determine CF( vessel is reasonably seaworthy Seaworthiness extends not only to condition of ship6s structure, but re-uires 8 ship to be properly laden 8 competent master 8 sufficient number of competent officers 8 re-uisite appurtenances and e-uipment Hballasts, cables, anchors, cordage, sails, food, water, fuel, lights, necessary?proper stores and implements for the voyage Nature of Shi# K must be in a fit state as to repair, e-uipment, crew and in all other respects to perform the voyage insured and encounter the ordinary perilsN suitable condition to carry cargo Nature of 8o!age K determines CF( vessel is well8fitted Nature of Ser'ice K nature of cargo should be determinedN the vessel should be reasonable capable of safely carrying the cargo to the port of destination. Bhen warrant! dee%ed co%# ied withA e)ce#tions Implied warranty of seaworthiness is deemed complied with if ship is seaworthy ,T T E TI3E F' T E CF33E(CE3E(T F' T E !IS5N Chat matters is that at the start of the voyage insured, ship is seaworthy. ,ssured ma"es no warranty that vessel will continue to be seaworthy, or that the crew won6t be negligent 8 >rinciple 7ehind thisL If vessel, crew, and e-uipment be originally sufficient, the assured has done all that he contracted to do Hnot
Due di igence not a defense Carranty precludes any defense that insured had exercised due diligence to ma"e the ship seaworthy. S I> 3AST ,CTA,))= 7E SE,CF!T = Seaworthiness as to cargo Ship may be seaworthy for purpose of insurance on the ship, but may still be unseaworthy for purpose of insurance of the cargo Hex. Ship with porthole only * foot above waterline may be fit to travel the sea, but not fit to carry wheat or rice because water will go into the ship via the porthole and damage the cargoI Ro/ue v "AC Facts: !anila Bay 3ighterage Corp% a common carrier% entered into a contract wJ >o2ue whereby !anila Bay 3ighterage would carry on board its barge >o2ueFs logs from #alawan to !anila. The logs were insured by #ioneer nsurance. 9owe"er% the barge sank. t was found that the barge was not seaworthy Done of the hatches was left open% there was a leak in the bargeE. #ioneer refused to pay damages because of the breach of the implied warranty on seaworthiness. >o2ueFs defense is that as a mere shipper of cargo% they ha"e no control of the ship therefore seaworthiness has nothing to do with the matter of insurance o"er the logs. Issue: 45H the implied warranty of seaworthiness also applies to marine insurance on cargo.
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Held: RC, For e"ery contract of insurance which is a sub<ect of marine insurance% a warranty is implied that the ship will be seaworthy. ,ince the law pro"ides for an implied warranty of seaworthiness in e"ery contract of marine insurance% it becomes the obligation of a cargo owner to look for a reliable common carrier which keeps its "essels in seaworthy condition. The shipper of the cargo may ha"e no control o"er the "essel but he has full control in the choice of the common carrier that will transport his goods. *elsan #ransport v CA Facts: Calte* entered into a contract of affreightment with ?elasan Transport 3ines to transport Calte*Fs fuel oil from its refinery to different parts of the country. 9owe"er% the ship to ;amboanga which was insured by American 9ome Corp. sank. American 9ome paid Calte* representing the insured "alue of the lost cargo. American 9ome% e*ercising its right of subrogation% demanded of ?elsan the same amt it paid to Calte* but ?elsan refused. t was found that the chief mate of the "essel was not 2ualified under the #hil. !erchant !arine >ules. Issue: 45H the payment made by American 9ome to Calte* amounted to admission that the "essel was seaworthy Held: H5. The payment made by American 9ome operates as a wai"er of its right to enforce the term of the implied warranty against Calte* under the insurance policy. 9owe"er% the same cannot be "alidly interpreted as an automatic admission of the "esselFs seaworthiness by American home as to foreclose recourse against ?elsan for any liability under its contractual obligation as a common carrier. The fact of payment grants the pri"ate respondent subrogatory right wJc enables it to e*ercise legal remedies that would otherwise be a"ailable to Calte* as owner of the lost cargo.. $: 8o!age and De'iation Sec. *+*. Chen the voyage contemplated by a marine insurance policy is described by the places of beginning and ending, the voyage insured in one which conforms to the course of sailing fixed by mercantile usage between those places. Sec. *++. If the course of sailing is not fixed by mercantile usage, the voyage insured by a marine insurance policy is that way between the places specified, which to a master of ordinary s"ill and discretion, would mean the most natural, direct and advantageous. Sec. *+E. <eviation is a departure from the course of the voyage insured, mentioned in the last two sections, or an unreasonable delay in pursuing the voyage or the commencement of an entirely different voyage. Sec. *+G. , deviation is properL HaI Chen caused by circumstances over which neither the master nor the owner of the ship has any controlN HbI Chen necessary to comply with a warranty, or to avoid a peril, whether or not the peril is insured againstN HcI Chen made in good faith, and upon reasonable grounds of belief in its necessity to avoid a perilN or HdI Chen made in good faith, for the purpose of saving human life or relieving another vessel in distress. Sec. *+2. Every deviation not specified in the last section is improper. Sec. *+/. ,n insurer is not liable for any loss happening to the thing insured subse-uent to an improper deviation. Bhat 8o!age Insured ,o ic! Bhat shi# %ust do (amesL @essel insured 3AST *.>orts of foloow course depature S>ECI'IE< +. >orts of destination E. Intermediate ports of call (amesL *. @oyage insured is *. >orts of the one which departure conforms to course +. >orts of of sailing fixed by destination 8 mercantile usage Several routes between ports HSec. to destination *+*I +. if not fixed by mercantile usage, course between ports specified which to a master of ordinary s"ill and discretion would be most natural, direct, and advantageous HSec. *++I Ru e7 'ixed !oute Asual Custom <iscretionary Hmost naturalI
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De'iation HSec. *+EI
<eparture from course of ship Anreasonable delay in pursuing voyage Commencement of entirely different voyage
,ro#er and I%#ro#er De'iation >!F>E! deviation K those allowed by law HSec. *+GI I3>!F>E! deviation K all other deviation not mentioned in Sec.*+GN any loss suffered by thing insured subse-uent to improper deviation exonerates insurer from liability, regardless of whether deviation increased ris" or not C = does improper deviation exonerateQ 7ecause insured novated contract without consent of insurerV TESTL CF( deviation was proper or not HNOT CF( ris" was increased or diminishedI De'iation to re#air da%aged shi# If during voyage, vessel becomes so damaged as to render it unsafe without undergoing repairs, insurer is not relieved by deviation from the ship6s course in order to ma"e the nearest port for such repairs Hcan fall under $avoid peril%I 3aster must consider distance, facilities of port, -uic"ness new material can be procured, etc. Hnot necessarily nearest port, but must be most proper port for repairI. Fnce repair is made, ship must pursue new course without deviation in shortest and most expeditious manner Hotherwise, this is deviation and will absolve insurerI Bai'er of warrant! against i%#ro#er de'iation <one by expressly permitting waiver in policy $at a >!E3IA3 to be hereafter arranged,% provided <AE (FTICE be given by insured upon recipt of advice of such deviation. !e-uirementL ER>!ESSE< in policy. >!E3IA3 paid, (FTIC given c: Other I%# ied Barranties Chen (ationality or (eutrality of ship or cargo is expressly warranted, it6s implied ship will carry re-uisite documents showing nationality or neutrality and will not
carry documents that will cause reasonable suspicion (ationality 8 doesn6t mean that the ship was built in such country, but that the property belongs to a sub&ect therof (eutrality K property insured belongs to neutrals Implied that ship will not engage in any venture which is illegal under the laws of the country where contract is made or before whose courts -uestion may comeN C,((FT be waived since rule of public policy.
8II. .OSS Iinds co'ered2 Actua and Constructi'e .oss Sec. *+1. , loss may be either total or partial. Sec. *+.. partial. Every loss which is not total is
Sec. *+B. , total loss may be either actual or constructive. Sec. *E0. ,n actual total loss is cause byL HaI , total destruction of the thing insuredN HbI The irretrievable loss of the thing by sin"ing, or by being bro"en upN HcI ,ny damage to the thing which renders it valueless to the owner for the purpose for which he held itN or HdI ,ny other event which effectively deprives the owner of the possession, at the port of destination, of the thing insured. Sec. *E*. , constructive total loss is one which gives to a person insured a right to abandon, under Section one hundred thirty8 nine. Sec. *E+. ,n actual loss may be presumed from the continued absence of a ship without being heard of. The length of time which is sufficient to raise this presumption depends on the circumstances of the case. Sec. *EE. Chen a ship is prevented, at an intermediate port, from completing the
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voyage, by the perils insured against, the liability of a marine insurer on the cargo continues after they are thus reshipped. (othing in this section shall prevent an insurer from re-uiring an additional premium if the hazard be increased by this extension of liability. Sec. *EG. In addition to the liability mentioned in the last section, a marine insurer is bound for damages, expenses of discharging, storage, reshipment, extra freightage, and all other expenses incurred in saving cargo reshipped pursuant to the last section, up to the amount insured. (othing in this or in the preceding section shall render a marine insurer liable for any amount in excess of the insured value or, if there be none, of the insurable value. Sec. *E2. Apon an actual total loss, a person insured is entitled to payment without notice of abandonment. Sec. *E/. Chere it has been agreed that an insurance upon a particular thing, or class of things, shall be free from particular average, a marine insurer is not liable for any particular average loss not depriving the insured of the possession, at the port of destination, of the whole of such thing, or class of things, even though it becomes entirely worthlessN but such insurer is liable for his proportion of all general average loss assessed upon the thing insured. Sec. *E1. ,n insurance confined in terms to an actual loss does not cover a constructive total loss, but covers any loss, which necessarily results in depriving the insured of the possession, at the port of destination, of the entire thing insured. )oss by sin"ing may not be irretrievable, but there6s still actual total loss if thing becomes valueless to owner for purpose for which he held it TFT,) )FSS is cost of !ET!IE@,) e-ual to or more than original value G. ,ny other event which effectively deprives owner of possession, at the port of destination of thing insured. >resumed from continued absence of ship without being heard of Hfor length of time sufficient to raise such presumptionI Insured has ,7SF)ATE right to claim whole amount of insurance even without notice of abandonment. Fnce he receives amount, it ta"es the place of the vessel and must be used to pay for any damage for which it be held liable.
$. Constructi'e 9or Technica : tota ossA A$andon%ent 9refer to the ne)t few sections: #ives the insured the right to abandon the thing insured by relin-uishing to the insurer his interest in such a thing, entitling him to recover for a total loss thereof !ight to abandon granted by law if the peril insured against causes a loss of more than W the value of the thing insured. Insurer ac-uires all rights over the thing insured If abandonment is not proper or properly made, the insurer would still be liable as upon the ,ctual total loss, deducting from the amount any proceeds from the thing insured which may have come to the hands of the insured. I0 8OHAGE CANFT -E COM,.ETED HSee Sec. *EEI In Insurance ,ct HSec.*+/I, if ship is prevented from leaving an intermediate port by perils insured against, the master must ma"e every exertion to procure, in the same or contiguous port, another ship for the purpose of conveying the cargo to its destination and the liability of a marine insurer theron continues after they are thus reshipped. owever, such an obligation was deleted from the Insurance Code. Campos says that this may be either an unintentional omission?error or
IINDS of .OSS 1: Tota Hmay be actual or constructiveI ": ,artia Hrefer to gen. and part averageI TOTA. .OSS 9an! oss not tota is #artia : a. Actua Tota .oss *. Total destruction thing insured +. Irretrievable loss of thing by sin"ing or by being bro"en up E. ,ny damage to thing which renders it valueless to owner for the purpose for which the owner held it
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*. intentional. In any case, in case of reshi#%ent2 the insurer is ia$ e7 'or any loss which may ta"e place on goods until they are reshipped if voyage cannot be completed in any insurance upon cargo K insurer may re-uired additional premium if the hazard be increased by the extension of liability HSec. *EEI Insurer also liable for expenses necessary to complete the transportaion of cargo reshippedN damages, expenses of discharging, storage, reshipment, extra freiathage, and all other expenses incurred in saving cargo reshipped K such liability, however, cannot exceed the amount of insurance HSec *EGI part of that will go to the pro8rata damage to save the ma&ority Ex. Entering another port for repairs, rehandling of cargo, and &ettisoning of goods to lighten vessel in case of danger of shipwrec" #ives rise to right of owner to contribution form those benefited thereby or from insurer .ia$i it! of Insurer7 If owner is insured, he has the alternative of see"ing from his insurer, subrogating the latter to his said right of contribution. e loses this alternative, however, if he neglects or waives his right to such contribution E)ce#tion7 There can be no recovery for general average loss against the insurerL *. ,fter the separation of the interests liable to the contribution +. Chen the insured has neglected or waived his right to contribution. ReEuisites for Gen. A'e to e)ist *. There must be common danger to ship and cargo +. 'or common safety, part of the vessel or cargo is sacrificed deliberately E. 'rom the expenses or damages caused follows the saving of the vessel and cargo G. That the expenses or damages should have been incurred or inflicted after ta"ing the proper legal steps.
+.
.IA-I.ITH O0 INSURER IN CASE O0 A8ERAGE A'erage K any extraordinary or accidental expenses incurred during the voyage for the preservation of the vessel, cargo or both and all damages to the vessel and cargo from the time it is loaded and the voyage commenced util it ends and the cargo unloaded Two 5ind of A'erages 9Under Ad%ira t! .aw:7 a. ,articu ar A'erage K partial loss caused by the peril insured against which is not a general average loss out of the ordinary use of the thing (ot everyone benefits. Not intentiona ! caused to prevent a common danger Insurer liable for the particular average unless policy excludes it. )iability is limited to the proportion of the contribution attaching to his policy value where this is less than the contributing value of the thing insured. $. Genera A'erage K common benefit Hto everyoneI INTENTIONA. damage to save the ma&ority thing Hsomething is sacrificed. ,pplies only when it is SUCCESS0U. "ncludes all dama+es and e!penses )hich are deli(erately caused in order to save the vessel, its car+o or (oth at the same time, from a real and kno)n risk Therefore, when everyone benefits, everyone has to spend for it, so the person whose cargo was sacrificed cannot recover everything because
Philippine %anufacturing Co v "nsurance Society of Canton &td. Facts: The insured "essel owned by #hil. !anufacturing Co. sand due to a typhoon. ?espite the offer of #hil !an. To abandon the "essel as an absolute total loss% the insurer% ns. ,ociety of Canton refused it and re2uired that the ship be sal"aged. After se"eral futile attempts% the ship was finally raised about two months later and was repaired. The cost of sal"age and repair was substantially e2ual to the original cost of the "essel. Issue: 45H nsurance ,ociety can be held for total loss of the "essel e"en after its reco"ery Held: RC,. nsurer liable for total loss because while the ship was in the bottom of the sea% it was of no "alue to the owner. To render it "alueless to the insured% it is no necessary that there be an actual or total loss or destruction of all the different parts of the entire "essel.
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Choa v CA Facts: Choa imported some lactose crystals from 9olland. The goods were insured with Filipino !erchants against all risks. =pon arri"al in !anila% it was found that out of the 600 bags% A00 were in bad order. Choa filed a claim for the loss but Fil. !er re<ected. Issue: 45H an .all risks1 co"erage co"ers only losses occasioned by fortuitous e"ents Held: H5. An all risk insurance policy insures against all cause of concei"able loss or damage e*cept as otherwise e*cluded in the policy or due to fraud. The terms of the policy are clear and re2uire no interpretation. An .all risks1 pro"ision creates a special type of insurance wJc e*tends co"erage to risks not usually contemplated and a"oids putting upon the insured the burden of establishing that insurer can a"oid co"erage upon demonstrating that a specific pro"ision e*pressly e*cludes the loss from co"erage. A'oiti! Shipping v PH"&A%G.$ Facts: !arindu2ue !ining ndustrial Crop had shipped from the =, a shipment of one skid carton parts for "al"es. 4hen cargo arri"ed in !anila% it was deposited in the office of Aboiti+ ,hipping Corp for transshipment to Honoc sland. 9owe"er% before it was transshipped% said cargo was pilfered. !arindu2ue filed a claim against Aboiti+ in the amount of the pilfered cargo. t also filed for the same amount against #hilippine American General nsurance Co D#hil8 AmE% its insurer. Issue: 45H Aboiti+ should be held liable for the pilfered cargo. Held: RC,. The 2uestioned shipment is co"ered by a continuing open insurance co"erage from the time it was loaded in the =, to the time it was deli"ered to the possession of Aboiti+ in its !anila office. Aboiti+Fs contention is that it could not be held liable for the pilferage as it was stolen e"en before it was loaded on the "essel. This is untenable as the logs were in its possession before it was pilfered. 9riental Assurance v CA Facts: #anama ,awmill Co had logs shipped from #alawan aboard the barges of Transpacific Towage nc. t was insured with 5riental Assurance Corp and loaded on 7 barges. 9owe"er% during the "oyage% A)' pieces of the ()$ pieces loaded on one of the barges was lost. Issue: 45H #anama can demand payment for constructi"e loss of the logs on one of the barges Held: H5. The logs in"ol"ed% although placed in two barges% were not separately "alued by the policy% nor separately insured. >esultantly% the logs lost in the barge in relation to the total number of logs loaded on the same barge can not be made the basis for determining constructi"e total loss. The logs ha"ing been insured as one inseparate unit% the correct basis for determining the e*istence of constructi"e total loss is the totality of the shipment of logs. D5F the &%70$ logs% only A)' pieces were lost or A&T therefore it cannot fall under constructi"e total lossE Pan %alayan "nsurance v CA Facts: The barge carrying a shipment of certified rice seeds to Kampuchea sank. The owner of the rice seeds% the Food and Agricultural 5rgani+ation of the =.H. DFA5E filed its claim under a marine insurance policy with #an !alayan. 3ater% it was informed by 3u+on ,te"edoring Corporation% the carrier% that the shipment was reco"ered% hence FA5 filed a claim wJ 3u+on ,te"edoring for compensation fo damages of its cargo. Issue: 4oH FA5 can reco"er for total loss e"en if some of the rice seeds was reco"ered. Held: RC,. The complete physical destruction of the sub<ect matter is not essential t oconstitute an actual total loss. ,uch a loss may e*ist where the form and specie of the thing is destroyed although the materials which it consisted still e*ist. 5f the 0A%&77 bags of rice seeds shipped% 7'%)77 bags were determined to be lostJdamaged D'$T of cargo damagedE.
8III. A-ANDONMENT ReEuisites and Conditions Sec. *E.. ,bandonment, in marine insurance, is the act of the insured by which, after a constructive total loss, he declares the relin-uishment to the insurer of his interest in the thing insured. Sec. *EB. , person insured by a contract of marine insurance may abandon the thing insured, or any particular portion thereof separately valued by the policy, or otherwise separately insured, and recover for a total loss thereof, when the cause of the loss is a peril insured againstL HaI If more than three8fourths thereof in value is actually lost, or would have to be expended to recover it from the perilN HbI If it is in&ured to such an extent as to reduce its value more than three8fourthsN HcI If the thing insured is a ship, and the contemplated voyage cannot be lawfully performed without incurring either an expense to the insured of more than three8fourths the value of the thing abandoned or a ris" which a prudent man would not ta"e under the circumstancesN or HdI If the thing insured, being cargo or freightage, and the voyage cannot be performed, nor another ship procured by the master, within a reasonable time and with reasonable diligence, to forward the cargo,
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without incurring the li"e expense or ris" mentioned in the preceding sub8paragraph. 7ut freightage cannot in any case be abandoned unless the ship is also abandoned. Sec. *G0. ,n abandonment must be neither partial nor conditional. Sec. *G*. ,n abandonment must be made within a reasonable time after receipt of reliable information of the loss, but where the information is of a doubtful character, the insured is entitled to a reasonable time to ma"e in-uiry. Sec. *G+. Chere the information upon which an abandonment has been made proves incorrect, or the thing insured was so far restored when the abandonment was made that there was then in fact no total loss, the abandonment becomes ineffectual. Sec. *GE. ,bandonment is made by giving notice thereof to the insurer, which may be done orally, or in writingN >rovided, That if the notice be done orally, a written notice of such abandonment shall be submitted within seven days from such oral notice. Sec. *GG. , notice of abandonment must be explicit, and must specify the particular cause of the abandonment, but need state only enough to show that there is probable cause therefor, and need not be accompanied with proof of interest or of loss. Sec. *G2. ,n abandonment can be sustained only upon the cause specified in the notice thereof. Sec. *G/. ,n abandonment is e-uivalent to a transfer by the insured of his interest to the insurer, with all the chances of recovery and indemnity. Sec. *G1. If a marine insurer pays for a loss as if it were an actual total loss, he is entitled to whatever may remain of the thing insured, or its proceeds or salvage, as if there had been a formal abandonment. Sec. *G.. Apon an abandonment, acts done in good faith by those who were agents of the insured in respect to the thing insured, subse-uent to the loss, are at the ris" of the insurer and for his benefit. Sec. *GB. Chere notice of abandonment is properly given, the rights of the insured are not pre&udiced by the fact that the insurer refuses to accept the abandonment. Sec. *20. The acceptance of an abandonment may be either express or implied from the conduct of the insurer. The mere silence of the insurer for an unreasonable length of time after notice shall be construed as an acceptance. Sec. *2*. The acceptance of an abandonment, whether express or implied, is conclusive upon the parties, and admits the loss and the sufficiency of the abandonment. Sec. *2+. ,n abandonment once made and accepted is irrevocable, unless the ground upon which it was made proves to be unfounded. Sec. *2E. Fn an accepted abandonment of a ship, freightage earned previous to the loss belongs to the insurer of said freightageN but freightage subse-uently earned belongs to the insurer of the ship. Sec. *2G. If an insurer refuses to accept a valid abandonment, he is liable as upon actual total loss, deducting from the amount any proceeds of the thing insured which may have come to the hands of the insured. Sec. *22. If a person insured omits to abandon, he may nevertheless recover his actual loss. A-ANDONMENT !ight to abandon is granted by law to the insured if peril insured against causes a loss of more than W the thing insured, or where its value is reduced by more than W Re%e%$er7 12L loss S Constructive )oss which entitles reco'er! of the full amount in the policy. <oes not mean that recovery is only up to 12X. Bhen Constructi'e TOTA. oss e)ists7 M Ru e HSec. *EBI
*.
If more than W thereof in value is actually lost, or would have to be expended to recover from peril
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+. E. If it is in&ured to such an extent as to reduce its value more than W I' the thing insured is a ship, and the contemplated voyage can6t be lawfully performed w?o incurring either an expense to the insured or more than W the value of the thing abandoned or a ris" which a prudent man would not ta"e under the circumstances If the thing insured, being cargo or freightage, and the voyage can6t be performed, nor another ship procured by the master, within a reasonable time and with reasonable diligence, to fowrwarGd the cargo, without incurring the li"e expense or ris" mentioned in the preceding sub8 paragraph. 7ut freightage cannot in any case be abandoned unless the ship is also abandoned. +. There must be constructive total loss H*EBI. ,ny particular portion of the thing insured separately valued by the policy may be separately abandoned as it is deemed separately insured It must be total and absolute H*G0I It must be within a reasonable time after the receipt of reliable information of the loss H*G*I It must be factual H*G+I It must be made by giving notice thereof to the insurer which may be done orally or in writing H*GEI (otice must be explicit and must specify the particular cause of the abandonment H*GGI
E. G. 2. /. 1.
G.
Notice of A$andon%ent7
3ay be done F!,))= but written notice must be submitted within 1 days from such oral notice 3ust be explicit Specifies particular cause of abandonment, although it need state only enough to show that there is probable cause therefore
ReEuire%ents7
*. There must be actual relin-uishment by the person insured of his interest in the thing insured H*E.I
Ineffecti'e a$andon%ent ,bandonment E-uivalent to transfer by the can be insured of his interest to the sustained insurer, with all the chances of only upon recovery and indemnity cause I' proper and notice is properly specified given, refusa to acce#t If cause is a$andon%ent does not unfounded pre&udice insured. Insured still and info upon liable for actual total loss, minus which it was amount any proceeds of thing made proves insured which may have come to incorrect the hands of the insured. Thing insured I' insurer acce#ts was so far abandonment, it6s conclusive restored between the parties and admits when the the loss and the sufficiency of abandonment the abandonment was made Irrevocable unless grounds that there prove to be unfounded was in fact no total loss
ACCE,TANCE Express or Implied from conduct of insurer 3ere silence for unreasonable length of time may be deemed acceptance
NO ,7,(8<F(8
3E(T
Insured still entitled to recover actual loss Same rule applies where abandon8ment wasn6t proper or where it wasn6t properly made
IJ. MEASURE O0 INDEMNITH2 O#en and 8a ued ,o ic!

Sec. *2/. , valuation in a policy of marine insurance in conclusive between the parties thereto in the ad&ustment of either a partial or total loss, if the insured has some interest at ris", and there is no fraud on his partN except that when a thing has been hypothecated by bottomry or respondentia, before its insurance, and without the "nowledge of the person actually procuring the insurance, he may show the real value. 7ut a valuation fraudulent in fact, entitles the insurer to rescind the contract.
126
HcI The value of freightage is the gross freightage, exclusive of primage, without reference to the cost of earning itN and HdI The cost of insurance is in each case to be added to the value thus estimated.
Sec. */+. If cargo insured against partial loss arrives at the port of destination in a damaged condition, the loss of the insured is deemed to be the same proportion of the value which the mar"et price at that port, of the thing so damaged, bears to the mar"et price it would have brought if sound. Sec. */E. , marine insurer is liable for all the expenses attendant upon a loss which forces the ship into port to be repairedN and where it is stipulated in the policy that the insured shall labor for the recovery of the property, the insurer is liable for the expense incurred thereby, such expense, in either case, being in addition to a total loss, if that afterwards occurs. Sec. */G. , marine insurer is liable for a loss falling upon the insured, through a contribution in respect to the thing insured, re-uired to be made by him towards a general average loss called for by a peril insured againstN provided, that the liability of the insurer shall be limited to the proportion of contribution attaching to his policy value where this is less than the contributing value of the thing insured. Sec. */2. Chen a person insured by a contract of marine insurance has a demand against others for contribution, he may claim the whole loss from the insurer, subrogating him to his own right to contribution. 7ut no such claim can be made upon the insurer after the separation of the interests liable to the contribution, nor when the insured, having the right and opportunity to enforce the contribution from others, has neglected or waived the exercise of that right. Sec. *//. In the case of a partial loss of ship or its e-uipment, the old materials are to be applied towards payment for the new. Anless otherwise stipulated in the policy, a marine insurer is liable for only two8thirds of the remaining cost of repairs after such deduction, except that anchors must be paid in full. A. 8a ued ,o ic!
Sec. *21. , marine insurer is liable upon a partial loss, only for such proportion of the amount insured by him as the loss bears to the value of the whole interest of the insured in the property insured. Sec. *2.. Chere profits are separately insured in a contract of marine insurance, the insured is entitled to recover, in case of loss, a proportion of such profits e-uivalent to the proportion which the value of the property lost bears to the value of the whole. Sec. *2B. In case of a valued policy of marine insurance on freightage or cargo, if a part only of the sub&ect is exposed to the ris", the evaluation applies only in proportion to such part. Sec. */0. Chen profits are valued and insured by a contract of marine insurance, a loss of them is conclusively presumed from a loss of the property out of which they are expected to arise, and the valuation fixes their amount. Sec. */*. In estimating a loss under an open policy of marine insurance the following rules are to be observedL HaI The value of a ship is its value at the beginning of the ris", including all articles or charges which add to its permanent value or which are necessary to prepare it for the voyage insuredN HbI The value of the cargo is its actual cost to the insured, when laden on board, or where the cost cannot be ascertained, its mar"et value at the time and place of lading, adding the charges incurred in purchasing and placing it on board, but without reference to any loss incurred in raising money for its purchase, or to any drawbac" on its exportation, or to the fluctuation of the mar"et at the port of destination, or to expenses incurred on the way or on arrivalN
@aluation fixes in advance the value of the property and thus avoids the necessity of proving its actual value in case of loss @aluation is conclusive between the parties in the ad&ustment of either a total or partial loss. ExceptionL If there is '!,A< on the part of the insured, insurer would have the right to !ESCISSIF(
127

-. O#en ,o ic! )oss is estimated in accordance with certain rules laid down in the code Hrefer to table belowI Cost of insurance must be added to the value of ship, cargo, or freightage as the case may be owever, maximum recovery may only be up to the face value of the policy B/AT Shi# 8A.UE in O,EN ,O.ICH @alue at beginning of ris" Hincl all articles which add to its permanent value or which are necessary to prepare if for the voyage insuredI ,ctual cost when laden on board. I' actual cost can6t be determined, mar"et value at time and place of lading, >)AS expenses incurred in purchasing and placing them on board #ross freightage without reference to cost of earning it
insured, even in the absence of any agreement to that effect. owever, law does not prevent parties from stipulating otherwise <ifference with 'ire InsuranceL ,o ic! shou d e)#ress ! #ro'ide for co< insurance otherwise, insurer is liable for the full amount of the partial loss. In marine insurance, co8insurance is mandated by law. Example of Co8InsuranceL ShipL O*00 3 InsuranceL O.03 )ossL O203 Chat does insured getQ OG03 8 only gets proportion
E. Other E)#enses Chargea$ e to Insurer If ship has to ma"e port for repairs, marine insurer must bear the attendant expenses Insurer also liable for expenses for recovery of the property if policy imposed upon the insured the duty of such recovery, such expenses being additional to total loss 0. 0ranchise C ause 'ranchise S <esignated >ercentage Sometimes, policy on cargo may provide that unless damage reaches a designated percentage of the value of such cargo, no amount will be paid by insurer. If loss reaches such percentage, insured will be entitled to full amount of loss G. Bhere #rofits are insured If profits are separately insured, insurer6s liability in case of loss is the proportion of such profits which the value of the property lost bears to the value of the whole. If policy is valued, loss of such profits is conclusively presumed from a loss of the property out of which they are expected to arise, and the valuation fixes their amount.
Cargo
0reightage
C. Tota .oss In case of o#en #o ic!7 @alue of total loss will be computed in rules stated above Insurer liable for total loss, but it can6t exceed face amount of policy In case of 'a ued #o ic!7 Insurer must pay valuation fixed in the policy without any right to argue against its correctness except on basis of fraud )iability can6t exceed amount in policy D. ,artia .ossA Co<Insurance In both open and valued policies, in case of partial loss, the insured is deemed $! aw as co8insurer if the value of the insurance is less tha the value of the property or interest
J. C.AIMS SETT.EMENT C SU-ROGATION NOTICE AND ,ROO0 O0 .OSS Title *0 K (otice and >roof of )oss
128
Sec. ... In case of loss upon an insurance against fire, an insurer is exonerated, if notice thereof be not given to him by an insured, or some person entitled to the benefit of the insurance, without unnecessary delay. Sec. .B. Chen a preliminary proof of loss is re-uired by a policy, the insured is not bound to give such proofs as would be necessary in a court of &usticeN but it is sufficient for him to give the best evidenceE which he has in his power at the time. (otice of )oss K the formal notice given the insurer by the insured or claimant under a policy of the occurrence of the loss insured against. The purpose is to apprise the insurance company so that it may ma"e proper investigation and ta"e such action as may be necessary to protect its interest. It is necessary as the insurer cannot be liable to pay a claim unless he receives notice of that claim. Ander Sec. .. insurer is exonerated if notice of loss is not given to the insurer by the insured or by the person entitled to the benefit without unnecessary delay. It has been held however that formal notice of loss is not necessary if insurer has actual notice of loss already. >roof of )oss K is the formal evidence given the insurance company by the insured or claimant under a policy of the occurrence of the loss, the particulars and the data necessary to enable the company to determine its liability and the amount. Is not tantamount to proof or evidence under the law on evidence. >roof of loss is distinct from notice of loss and intended toL *. give the insurer information by which he may determine the extent of his liability +. afford him a means of detecting any fraud that may have been practiced upon him. The law does not stipulate any re-uirement as to the form in which notice or proof of loss must be given. owever according to <e )eon, it is advisable to give the
notice in writing for the protection of the insured or his beneficiary. Sec. B0. ,ll defects in a notice of lossN or in preliminary proof thereof, which the insured might remedy, and which the insurer omits to specify to him, without unnecessary delay, as grounds of ob&ection, are waived. Sec. B*. <elay in the presentation to an insurer of notice or proof of loss is waived if caused by any act of him, or if he omits to ta"e ob&ection promptly and specifically upon that ground
Chen delay in presentation of notice or proof of loss is deemed waivedL
*. +.
7y an act of the insurer 7y failure to ta"e ob&ection promptly and specifically upon that ground.
Sec. B+. If the policy re-uires, by way of preliminary proof of loss, the certificate or testimony of a person other than the insured, it is sufficient for the insured to use reasonable diligence to procure it, and in case of the refusal of such person to give it, then to furnish reasonable evidence to the insurer that such refusal was not induced by any &ust grounds of disbelief in the facts necessary to be certified or testified.
Certificate or Testimony of >erson other than Insured as >reliminary >roof
3ay be re-uired by the policy Sufficient that he insured use reasonable diligence to procure it If person refuses to give it, it is sufficient to furnish reasonable evidence to the insurer that such refusal was not induced by any grounds of <IS7E)IE' in the facts necessary to be certified.
Phil. Am. &ife v CA : Pulido Facts: The insured Florence #ulido took out a non8medical life insurance policy from #hilamlife in the amount of &00K and the policy was issued on Feb. &&% &)$). ,he died on ,ept. &0% &))& and her beneficiary% her sister Cli+a #ulido filed a claim which was denied by #hilamlife on the ground of fraud claiming that at the time the insured applied for the policy% she was already actually dead. Ratio: There was no fraud% the death certificates and notes by the municipal health officer prepared in the regular performance of duties are prima
129
facie e"idence of facts. A duly8registered death certificate is considered a public document and the entries found therein are presumed correct% unless the party who contests its accuracy can produce positi"e e"idence to establish otherwise which in the case at bar #hilamlife failed to do. GUIDE.INES ON C.AIMS SETT.EMENT Title ** K Claims Settlement Sec. +G*. H*I (o insurance company doing business in the >hilippines shall refuse, without &ust cause, to pay or settle claims arising under coverages provided by its policies, nor shall any such company engage unfair claim settlement practices. ,ny of the following acts by an insurance company, if committed without &ust cause and performed with such fre-uency as to indicate a general business practice, shall constitute unfair claim settlement practiceL HaI "nowingly misrepresenting to claimants pertinent facts or policy provisions relating to coverages at issueN HbI failing to ac"nowledge with reasonable promptness pertinent communications with respect to claims arising under its policiesN HcI failing to adopt and implement reasonable standards for the prompt investigation of claims arising under its policiesN HdI not attempting in good faith to effectuate prompt, fair and e-uitable settlement of claims submitted in which liability has become reasonably clearN or HeI compelling policyholders to institute suits to recover amounts due under its polices by offering without &ustifiable reason substantially less than the amounts ultimately recovered in suites brought by them. H+I Evidence as to the numbers and types of valid and &ustifiable complaints to the Commissioner against an insurance company, and the Commissioner6s complaint experience with other insurance companies writing similar lines of insurance shall be admissible in evidence in an administrative or &udicial proceeding brought under this section. HEI If it is found, after notice and an opportunity to be heard, that an insurance company has violated this section, each instance of non compliance with paragraph H*I may be treated as a separate violation of this section and shall be considered sufficient cause for the suspension or revocation of the company6s certificate of authority.
Sec. +G+. The proceeds of a life insurance policy shall be paid immediately upon maturity of the policy, unless such proceeds are made payable in installments or as an annuity, in which case the installments, or annuities shall be paid as they become dueL >rovided, however, That in the case of a policy maturing by the death of the insured, the proceeds thereof shall be paid within sixty days after presentation of the claim and filing of the proof of the death of the insured. !efusal or failure to pay the claim within the time prescribed herein will entitle the beneficiary to collect interest on the proceeds of the policy for the duration of the delay at the rate of twice the ceiling prescribed by the 3onetary 7oard, unless such failure or refusal to pay is based on the ground that the claim is fraudulent. The proceeds of the policy maturing by the death of the insured payable to the beneficiary shall include the discounted value of all premiums paid in advance of their due dates, but are not due and payable at maturity. Sec. +GE. The amount of any loss or damage for which an insurer may be liable, under any policy other than life insurance policy, shall be paid within thirty days after proof of loss is received by the insurer and ascertainment of the loss or damage is made either by agreement between the insured and the insurer or by arbitrationN but if such ascertainment is not had or made within sixty days after such receipt by the insurer of the proof of loss, then the loss or damage shall be paid within ninety days after such receipt. !efusal or failure to pay the loss or damage within the time prescribed herein will entitle the assured to collect interest on the proceeds
130
of the policy for the duration of the delay at the rate of twice the ceiling prescribed by the 3onetary 7oard, unless such failure or refusal to pay is based on the ground that the claim is fraudulent. Sec. +GG. In case of any litigation for the enforcement of any policy or contact of insurance, it shall be the duty of the Commissioner or the Court, as the case may be, to ma"e a finding as to whether the payment of the claim of the insured has unreasonably denied or withheldN and in the affirmative case, the insurance company shall be ad&udged to pay damages which shall consist of attorney6s fees and other expenses incurred by the insured person by reasons of such unreasonable denial or withholding of payment plus interest of twice the ceiling prescribed by the 3onetary 7oard of the amount of the claim due the insured, from the date following the time prescribed in Section two hundred forty8two or in Section two hundred forty8three, as the case may be, until the claim is fully satisfiedN >rovided, That the failure to pay any such claim within the time prescribed in said section shall be considered prima facie evidence of unreasonable delay in payment.
polices by offering without &ustifiable reason substantially less than the amounts ultimately recovered in suites brought by them. Ci'i Code Ru es ,resu%#tion of Death on
,rt. EB0. ,fter an absence of seven years, it being un"nown whether or not the absentee still lives, he shall be presumed dead for all purposes except for those of succession. The absentee shall not be presumed dead for the purpose of opening his succession till after an absence of ten years. If he disappeared after the age of seventy8five years, an absence of five years shall be sufficient in order that his succession may be opened. HnI ,rt. EB*. The following shall be presumed dead for all purposes, including the division of the estate among the heirsL H*I , person on board a vessel lost during a sea voyage, or an aeroplane which is missing, who has not been heard of for four years since the loss of the vessel or aeroplaneN H+I , person in the armed forces who has ta"en part in war, and has been missing for four yearsN HEI , person who has been in danger of death under other circumstances and his existence has not been "nown for four years. HnI ,rt. EB+. If the absentee appears, or without appearing his existence is proved, he shall recover his property in the condition in which it may be found, and the price of any property that may have been alienated or the property ac-uired therewithN but he cannot claim either fruits or rents. H*BGI &ondres v $ational &ife "nsurance Co. Facts: Hational 3ife issued a life insurance policy on the life of 6ose C. 3ondres in the amount of #hp0%000.00 on April &A% &)A0 Dduring the war periodE. 9e died on Feb. '% &)A(. 9is beneficiary filed a claim which Hational denied claiming that there was a lack of proof of death and a slew of other special defenses% including the payment should be made based on the Ballantyne scales. Ratio: Hational must pay the beneficiary of the insured the amount of the policy D0%000.00E as the agreement was that the obligation will be made in the currency pre"ailing at the end of the stipulated period which in this case is the #hilippine currency. The
UN0AIR C.AIMS SETT.EMENT Sec. +G* H*I provides instances of unfair claims settlement done by an insurance companyL HaI "nowingly misrepresenting to claimants pertinent facts or policy provisions relating to coverages at issueN HbI failing to ac"nowledge with reasonable promptness pertinent communications with respect to claims arising under its policiesN HcI failing to adopt and implement reasonable standards for the prompt investigation of claims arising under its policiesN HdI not attempting in good faith to effectuate prompt, fair and e-uitable settlement of claims submitted in which liability has become reasonably clearN or HeI compelling policyholders to institute suits to recover amounts due under its
131
proof of death was substantially made by the claimant and was not properly dispro"ed by Hational. Ratio: The award made by the TC of double interest is <ustified under ,ections 7A0 and 7AA of the nsurance Code which pro"ides that .,ec. 7A0. / >efusal or failure to pay the loss or damage within the time prescribed herein will entitle the assured to collect interest on the proceeds of the policy for the duration of the delay at the rate of t,ice the ceiling prescri'ed 'y the %onetary 0oard /1 and .,ec. 7AA. n case of any litigation for the enforcement of any policy or contract of insurance% it shall be the duty of the Commissioner or the Court< as the case may 'e to make a finding as to ,hether the payment of the claim of the insured has 'een unreasona'ly denied or ,ithheld : and in the affirmati"e case% the insurance company shall be ad<usted to pay damages ,hich shall consist of attorney(s fees and other e6penses incurred 'y the insured person 'y reason of such unreasona'le denial or ,ithholding of payment plus interest of t,ice the ceiling prescri'ed 'y the %onetary 0oard of the amount of claim due the insured=8. $oda v Cru!>Arnaldo Facts: Hoda obtained from ;enith 7 fire insurance policies for 7 of his properties. Both was destroyed by fire. 4hen Hoda filed a claim% it was denied by ;enith due to premiums not paid and the other one was settled only for &(KVV. C denied Hoda to claim full amount due to insufficient proof of the "alue of his losses. Ratio: Hoda was able to pro"e sufficient losses% since the document offered by Hoda were offered by ;enith itself to proof the amount of itFs liability being &J6th of the total loss only. Thus could "ery well be considered as an admission of its liability up to the amount recommended. Finman General v CA Facts: =, #9 3 obtained a fire insurance policy from F H!AH. The property insured was loss due to fire and =, #9 3 filed a claim. 9.9. Bayne was appointed by F H!AH to undertake e"aluation. =, #9 3 submitted all the re2uired proof of losses substantially. ?espite all these% F H!AH refused to pay =, #9 3F, claim due to failure to comply with Condition &0 of the policy. TC and CA rule din fa"or of =, #9 3 and ordered F H!AH to pay V double the interest D7ATE Ratio: ,ubstantial compliance% not strict compliance with the re2uirements will be deemed sufficient. The double interest of 7AT is authori+ed by ,ections 7A0 and 7AA of the nsurance Code. *elsan #ransport v CA 2supra5
Fernande! v $ational &ife "nsurance Co. Facts: Hational insured the life of 6uan Fernande+ for the period of 6uly &(% &)A to 6uly &A% &)A(. 6uan died on Ho". 7% &)AA. 9is beneficiaries filed their claim ' years after his death or on Aug. &% &)(7. The dispute is 45H the Ballantyne scale is applicable in computing the amount which should be paid to the beneficiaries. The CF rendered <udgment that Hational should pay the proceed of #9p (00.00 Ballantyne scale applicable. Ratio: CF correct. Ballantyne scale is applicable since in life insurance% the policy matures upon the e*piration of the term set forth therein Q in this case upon the death of 6uan. The obligation of Hational arose as of that date and not at the time of the claim. ,ince the Hational could ha"e paid his obligation at any time during the 6apanese occupation. #ayment after liberation must be ad<usted in accordance with the Ballantyne schedule. #io ;he Chio v CA : .astern Assurance Facts: Tio Khe Chio imported fishmeal. These were insured with Castern Assurance. The "essel used to ship the fishmeal was Far Castern ,hipping Co. 4hen the goods reached !anila% they were found to be damaged Q and therefore useless. The issue is 45H the interest to be paid by Castern Assurance is &7T or 6TU Ratio: 6T only% as ,ec. 7A0 and 7AA of the nsurance Code is not applicable to the case as these pro"isions apply only when the court finds an unreasonable delay or refusal in the payment of the claims. The applicable law according to ,C is Art. 770) of the Ci"il Code which stipulates that in the absence of stipulation the legal interest applicable is 6T Cathay v CA Facts: 3ugay insured against fire with the 6 insurance companies named as petitioner in this case for the total sum of A million her printing press which was ra+ed by fire on ?ecember &(% &)$7. ,he filed a claim submitting all the re2uired proof of loss. After nearly &0 months of waiting for her claim to be paid she filed a suit to collect her claim. After the trial on the merits% the TC rendered <udgment in fa"or of 3ugay and directed the 6 insurance companies to pay their share in the insurance and further made them pay plaintiff interest at the rate of 7* the ceiling being prescribed by the !onetary board from the time when the case was filed. =pon appeal to the CA% the CA affirmed the decision of the TC.
C.AIMS 3aturity
.I0E INSURANCE *. Apon death of the person insuredN +. Apon his surviving a specific period E. Ftherwise contingently on the continuance or cessation of life HSec. *.0I #E(E!,) !A)EL Immediately upon maturity of policy. ERCE>TIF(L If payable in I(ST,))3E(TS or as an ,((AIT=, when such installments or annuities become due I' 3,TA!IT= IS A>F( <E,T L Cithin /0 days after presentation of claim and filing of proof of death of insured.
132
NON<.I0E INSURANCE Apon happening of event insured against Event must occur within the period specified in policy, otherwise insurer has no liablity
<elivery of >roceeds
Cithin E0 days after H*I >roof of loss is received by insurerN and H+I ,scertainment of loss or damage is made either by agreement between the insured and insurer or by arbitration If ascertainment not made within /0 days after such receipt by insurer of proof of loss, loss or damage shall be paid within B0 days after such receipt.
Effect of !efusal or 'ailure to pay claim within time prescribedL In case of litigation, it is the duty of the Commissioner or the Court to determine CF( claim has been unreasonably denied of withheld.
Entitles beneficiary to collect interest on the proceeds of policy for the duration of the delay at rate of twice ceiling prescribed by the monetary board Hunless refusal to pay is (ased on +round that claim in fraudulent) In case damages awarded, this includes attorney6s fees and other expenses incurred due to delay Hplus the interestI
Entitles beneficiary to collect interest on the proceeds of policy for the duration of the delay at rate of twice ceiling prescribed by the monetary board Hunless refusal to pay is (ased on +round that claim in fraudulent) In case damages awarded, this includes attorney6s fees and other expenses incurred due to delay Hplus the interestI
'ailure to pay any such claim within the time prescribed shall be considered prima facie evidence of unreasonable delay in payment.
,RESCRI,TION O0 ACTION Title / K The >olicy Sec. /E. , condition, stipulation, or agreement in any policy of insurance, limiting the time for commencing an action thereunder to a period of less than one year from the time when the cause of action accrues, is void.
, clause in an insurance policy to the effect that an action upon the policy by the insured must be brought within a certain period is @,)I< and will prevail over the general low on limitations of actions. FCE@E!, if the period fixed is less than one year from the time the cause of action accrues, it is @FI<.
Cause of ,ction K The violation of a legal right committed "nowinglyN ,n act or omission of one party in violation of the legal right?s of the other.
!e-uisites?Essential ElementsL
133
*. +. E.
, legal right of the plaintiff , correlative obligation of the defendant ,n act or omission of the defendant in violation of the legal right of plaintiff. The cause of action in an insurance policy therefore does not accrue until the insurer refuses expressly or impliedly to comply with his duty to pay the amount of the loss.
The Insurance Co%%issioner Ad%inistrati'e and AdDudicator! ,owers Sec. G*/. The Commissioner shall have the power to ad&udicate claims and complaints involving any loss, damage or liability for which in insurer may be answerable under any "ind of policy or contract of insurance, or for which such insurer may be liable under a contract of suretyship, or for which a reinsurer may be sued under any contract of reinsurance it may have entered intoN or for which a mutual benefit association may be held liable under the membership certificates it has issued to its members, where the amount of any such loss, damage or liability, excluding interest, cost and attorneyPs fees, being claimed or sued upon any "ind of insurance, bond, reinsurance contract, or membership certificate does not exceed in any single claim one hundred thousand pesos. The insurer or surety may, in the same action file a counterclaim against the insured or the obligee. The insurer or surety may also file a cross8claim against a party for any claim arising out of the transaction or occurrence that is the sub&ect matter of the original action or of a counterclaim therein. Cith leave of the Commissioner, an insurer or surety may file a third8party complaint against its reinsurers for indemnification, contribution, subrogation or any other relief, in respect of the transaction that is the sub&ect matter of the original action filed with the Commissioner. The party filing an action pursuant to the provisions of this section thereby submits his person to the &urisdiction of the Commissioner. The Commissioner shall ac-uire &urisdiction over the person of the impleaded party or parties in accordance with and pursuant to the provisions of the !ules of Court. The authority to ad&udicate granted to the Commissioner under this section shall be concurrent with that of the civil courts, but the filing of a complaint with the Commissioner shall preclude the civil courts from ta"ing cognizance of a suit involving the same sub&ect matter. ,ny decision, order or ruling rendered by the Commissioner after a hearing shall have the force and effect of a &udgment. ,ny party may appeal from a final order, ruling or decision of the Commissioner by filing with the Commissioner within thirty days from receipt of copy of such order, ruling or decision a notice of appeal to the Intermediate ,ppellate Court in the manner provided for in the !ules of Court for appeals from the !egional Trial Court to the
Compulsory 3otor @ehicle )iability Insurance Sec. E.G. ,ny person having any claim upon the policy issued pursuant to this chapter shall, without any unnecessary delay, present to the insurance company concerned a written notice of claim setting forth the nature, extent and duration of the in&uries sustained as certified by a duly licensed physician. (otice of claim must be filed within six months from date of the accident, otherwise, the claim shall be deemed waived. ,ction or suit for recovery of damage due to loss or in&ury must be brought, in proper cases, with the Commissioner or the Courts within one year from the denial of the claim, otherwise the claimant6s right of action shall prescribe H,s amended by >< (o. *.*G and 7> 7lg. .1G.I
Civil Code K >rescription ,rt. **GG. The following action must be brought within ten years from the time the right of action accruesL H*I Apon a written contractN H+I Apon an obligation created by law HEI Apon a &udgment. HnI
#eneral !ules on >rescriptionL
*0 =ears HCCI Sti#u ation in the contract HSec. /EI K a clause in an insurance policy limiting the period for which an action upon the policy bay be brought is valid provided it be not less than one year. Motor 8ehic e Insurance 1 Fne H*I year only
Exceptions to the #eneral !uleL
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Intermediate ,ppellate Court. H,s amended by 7atas >ambansa 7lg. .1GI. ,s soon as a decision, order or ruling has become final and executory, the Commissioner shall motu proprio or on motion of the interested party, issue a writ of execution re-uiring the sheriff or the proper officer to whom it is directed to execute said decision, order or award, pursuant to !ule thirty8nine of the !ules of Court. 'or the purpose of any proceeding under this section, the Commissioner, or any officer thereof designated by him, empowered to administer oaths and affirmation, subpoena witnesses, compel their attendance, ta"e evidence, and re-uire the production of any boo"s, papers, documents, or contracts or other records which are relevant or material to the in-uiry. In case of contumacy by, or refusal to obey a subpoena issued to any person, the Commissioner may invo"e the aid of any court of first instance within the &urisdiction of which such proceeding is carried on, where such person resides or carries on his own business, in re-uiring the attendance and testimony of witnesses and the production of boo"s, papers, documents, contracts or other records. ,nd such court may issue an order re-uiring such person to appear before the Commissioner, or officer designated by the Commissioner, there to produce records, if so ordered or to give testimony touching the matter in -uestion. ,ny failure to obey such order of the court may be published by such court as a contempt thereof. , full and complete record shall be "ept of all proceedings had before the commissioner, or the officers thereof designated by him, and all testimony shall be ta"en down and transcribed by a stenographer appointed by the Commissioner. , transcribed copy of the evidence and proceeding, or any specific part thereof, of any hearing ta"en by a stenographer appointed by the Commissioner, being certified by such stenographer to be a true and correct transcript of the testimony on this hearing of a particular witness, or of a specific proof thereof, carefully compared by him from his original notes, and to be a correct statement of evidence and proceeding had in such hearing so purporting to be ta"en and subscribed, may be received as evidence by the Commissioner and by any court with the same effect as if such stenographer were present and testified to the facts so certified. H,s amended by >residential <ecree (o. *G22I. Nurisdiction of Insurance Co%%ission Includes the following as long as any SI(#)E C),I3 does (FT ERCEE< *00,000.00L H*I Claims and complaints involving liability of insurer under any "ind of policy or contract H+I Suretyship HEI !einsurance HGI 3utual 7enefit membership certificates Re ation to RTC7 The !TC and IC have concurrent &urisdiction. FCE@E!, filling a complaint with the IC >!EC)A<ES civil courts from ta"ing cognizance of suit involving the same sub&ect. &ope! v Filipinas Facts: 3ope+ insured with FC, his Biederman truck tractor and 4inter 4eils trailer from loss or damages. t appeared that 3ope+ concealed some material fact with regard to 2uestions asked by FC,. The "ehicles figured in an accident. 3ope+ filed a claim which FC, denied. 3ope+ filed a complaint with C less than 7 months after the denial and a complaint with the Court &' months after the denial when FC, told the C that it refused to sub<ect itself to arbitration. FC, claimed prescription. Ratio: The right of action has prescribed. There is nothing in the nsurance 3aw% nor in any of its allied 3egislations which empower the C to ad<udicate on disputes relating to an insurance companyFs liability to an insured under a policy issued by the insurer to an insured. The "alidity of an insuredFs claim under a specific policy% its amount% and all such other matters as might in"ol"e the interpretation and construction of the insurance policy% are issues which only a regular court of <ustice may resol"e and thus the complaint filed by 3ope+ with the C could not ha"e been an action or suit. The prescription period started to run on August 7$% &)60 when FC, re<ected the claim of 3ope+ and the commencement of an action was filed only on ,eptember &)% &)6&with the CF of !anila% nearly &' months after the claim was re<ected. Thus the action has already prescribed. Finman v "nocencio Facts: #an #acific obtained a surety bond from Finman in compliance with #5CA rules. nocencio et.al filed complaint against #an #acific. #5CA ordered #an #acific and Finman <ointly and se"erally to pay the claim of nocencio et.al. Ratio: #5CA has <urisdiction o"er the surety bonds as it is a well settled doctrine that the conditions of a bond specified in the statute pro"iding for the submission of a bond are built into
135
all bonds tendered under that statue e"en through not printed therein. Finman may be held liable% if it is solidarily liable with #an #acific under the terms of the bond% it must follow that it is also liable to both nocencio et.al and #5CA. sorry guys donFt get how prescription figures into this caseSSS .agle Star v Chin 1u Facts: Chin Ru consigned &A bales of underwear. nsured with Cagle ,tar. =pon arri"al to !anila% A bales were lost and 0 were damages. Chin Ru filed claim for the lost and damages bales against he carrier and then with the insurer. Both denied liability. Ratio: Action has not prescribed under ,ec. 6&8 A% the period of prescription starts to run when the cause of action accrues and the cause of action accrues only upon the re<ection of the insurer of the claim and not upon the filing of the claim. ACCFA v Alpha "ns Facts: FAC5!A took out a fidelity bond of #hp(%000.00 to insure its funds from Alpha nsurance which it later assigned to ACCFA. The funds were misappropriated upon which ACCFA immediately notified Alpha of the loss and presented proof of loss within the period fi*ed% but despite repeated demands% the surety company refused and failed to pay. t filed a suit against Alpha. Alpha mo"ed to dismiss claiming that ACCFAFs right of action has prescribed since it filed an action one year after it filed its notice of loss 88 claiming that ACCFAFs right of action accrued upon submission of notice of loss as stipulated under Condition $ of the contract. Ratio: The action does not accrue until the party obligated refuses% e*pressly or implied to comply with its duty Din this case refusal of Alpha to pay the amount of the bondE. The year for instituting the action in court must be reckoned from the time of Alpha refused to comply with its bond and not from the creditorFs filling of the claim of loss Dsince the creditor does not know yet upon filling that the claim would be denied or refusedE. Therefore% condition @$ which re2uired action to be filed within one year from the filling of the claim for loss contradicts the public policy e*pressed in ,ec. 6&8A of the #hilippine nsurance Act and is thus null and "oid Ang v Fulton Facts: Ang insured his property against fire for & year with Fulton through its agent #aramount. . &7.7'.&)'0 88 ,tore was destroyed through fire D0 days later% Ang filed claimE &.&0.&)(( Q Ang charged with arson% ac2uitted A.6.&)(6 Q Fulton denied AngFs claim A.&).&)(6 Q Ang recei"ed Fulton denial (.&)(6 Q Ang instituted claim against #aramount which was dismissed wJo pre<udice on ).&)(' (.(.&)($ Q Ang instituted present action against Fulton. According to CF % action not yet prescirbed Ratio: Action already prescribed. The action of Ang against #aramount does not ha"e any legal effect e*cept that of notifying the agent and ser"es no other purpose. t did not stop the prescription from running. The filing of a claim within one year after re<ection is a condition precedent to the liability of the insurer Q a resolutory cause% the purpose of which is to terminate all liabilities in case action is not filed within the said period. #ravellers "nsurance v CA Facts: A '$ year old woman was hit by a ta*i cab% died. 9er son DKicenteE filed a claim against the owner of the 3ady 3o"e ta*i cab% the dri"er and Tra"ellers as the compulsory insurer Ratio: Tra"ellers cannot be held <ointly and se"erally liable with the owner and dri"er of the 3ady 3o"e ta*i cab as Kicente failed to attach a copy of the insurance contract to his complaint% there could be no basis to apprise the real nature and pecuniary limits of Tra"ellers liability. Further% he also failed to file a written notice of claim with Tra"eller% which is an indispensable re2uirement thus his cause of action did not accrue. Sun "nsurance v CA 2supra5
SU-ROGATION Civil Code >rovisions Fbligations D Contracts K Extinguishment of Fbligations ,rt. *+E/. The creditor is not bound to accept payment or performance by a third person who has no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary. Choever pays for another may demand from the debtor what he has paid, except that if he paid without the "nowledge or against the will of the debtor, he can recover only insofar as the payment has been beneficial to the debtor H**2.aI <amages ,rt. ++01. If the plaintiff6s property has been insured, and he has received indemnity from the insurance company for the in&ury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not fully cover the in&ury or loss, the aggrieved party shall be
136
entitled to recover the deficiency from the person causing the loss or in&ury. ,ccording to sir K there is only subrogation in property insurance. If insured gets amount of policy not as payment but as a )F,(, repayable to the extent of any recovery from the Erd party responsible, there can be no subrogation.
Conce#t7 >rocess of legal substitution Hinsurer steps into shoes of insuredI !easonL ETAIT= K to prevent the insured from receiving more than his actual loss, while at the same time ma"es the person who caused loss legally responsible. .oss Due to Brongfu Act or -reach of Contract $! Third ,erson2 NOT A,,.IC.A-.E TO .I0E INSURANCE. Fptions available to insured when through wrongful act or breach of contract committed by Erd person, insured property suffers lossL H*I Collect from insurer K if insurer pays, insurer subrogates insured under Civil Code o !ight of subrogation exist even if no express agreement recognizing it since it6s under the CC o ,rises only after insurer pays insured. H+I <emand payment from wrongdoer Since )ife Insurance is not contract of I(<E3(IT=, subrogation obviously cannot apply. Bhen Ma! .ia$i it! to Su$rogee $e .i%ited7 7ill of )ading HSt. >aul v 3acondrayI Contributory (egligence HTabacalera v ('SI Effect of 8o untar! ,a!%ent !ight of Subrogation does not exist in favor of mere volunteer If insurer has right to rescind, but still pays insured, there is still subrogation K the Erd party has no privity. Chere the insurer pays the insured for a loss or liability which is not a ris" covered by the policy, it will be considered as a volunteer with no right of subrogation. FCE@E!, insurer may still recover under ,rt. *+E/ of the Civil Code K to the extent that the debtor had been benefited.
In Case of Genera A'erages7 *. <emand contributions directly from different persons liable. +. Clam whole loss from the insurer K insurer subrogates right of contribution.
Coastwise ' CA 9su#ra: Mag ana ' Conco acion 9su#ra: Ce'u Shipyard v +illaim &ines Facts: 4illiam 3ines% nc contracted the ser"ices of C,C4 for its ships annual dry8docking and repairs. The "essel was insured with #rudential for A( million for hull and machinery. The co"erage included an .Additional #erils1 clause co"ering loss of or damage to the "essel through the negligence of ship repairman. The "essel caught fire and sank resulting to its e"entual total loss. #rudential paid 4illiam 3ines the total amount of the insurance policy and sued C,C4% as subrogee to the rights of 4illiam 3ines. Ratio: ,ince it has already been resol"ed that the cause of the fire which gutted !K !anila City was the negligence act of C,C4% the proof of payment made by #rudential to 4illiam 3ines% nc operated to properly subrogate #rudential to the rights of 4illiam 3ines under Art. 770' of the Ci"il Code Pioneer "nsurance v CA Facts: 6acob 3im purchased 7 aircrafts from 6?A using funds from Bormaheco% the Cer"antes and !aglana. nsured it with #ioneer as surety. 3im failed to pay% #ioneer paid D#ioneer reinsured the surety with an unnamed reinsurerE and collected from the reinsurer. Also foreclosed aircraft% sold it and collected proceeds. Ratio: #ioneer no longer has any claim since it has already collected the proceeds of the reinsurance on its bond. =nder the principle of Art. 770' of the CC% the reinsurer% on payment of a loss ac2uires the same rights by subrogation as are ac2uired in similar cases where the original insurer pays a loss. %anila %ahogany v CA Facts: !anila !ahogany insured its !ercede+ Ben+ with ;enith. Car was bumped and damaged by ,!C truck. ;enith paid !ahogany in amicable settlement. ;enith then demanded reimbursement from ,!C% but it appeared that ,!C already paid !ahogany e"idenced by a >elease of Claim. Ratio: By the act of !anila !ahogany issuing a release claim to ,!C% the right of ;enith against ,!C is nullified since the insurer can be subrogated
137
to only such rights as the insured may ha"e% should the insured% after recei"ing payment from the insurer% release the wrongdoer who causes the loss% the insurer loses his rights against him. But in such a case the insurer will be entitled to reco"er from the insured whate"er it has paid% unless it was made with the consent of the insurer. Pan %alayan v CA : Fa'ie Facts: The dri"er of Crlinda Fabie hit the insured !itsubishi Colt 3ancer owned by the Canlubang Automoti"e >esources Corporation. The "ehicle was insured with #AH!A3AR who paid the amount insured under the .own damage1 co"erage1 of the insurance policy. #AH!A3AR then demanded from Fabie the payment of whate"er amount it paid claiming that they were subrogated to the rights of Canlubang. Ratio: Art. 770' of the Ci"il Code apply in the case at bar% under the principle of subrogation. f the insured property is destroyed or damaged through the fault or negligence of a party other than the assured% then the insurer% upon payment to the assured will be subrogated to the rights of the assured to reco"er from the wrongdoer to the e*tent that the insurer has been obligated to pay. #ayment by the insurer to the assured operates as an e2uitable assignment to the former of all remedies which the latter may ha"e against the third party whose negligence or wrongful act caused the loss. The right of subrogation is not dependent upon% nor does it grow out of% any pri"ity of contract or upon written assignment of claim. t accrues simply upon payment of the insurance claim. Fireman(s Fund v ?amila : Co. Facts: Firestone loss some properties due to the acts of its employees and the security guards pro"ided by the security agency of 6amila L Co. FiremanFs Fund% the insurer of Firestone paid the loss and proceeded against 6amila and 6amilaFs insurer First Gue+on City ns. Co. Both denied liability% TC dismissed complaint due to no cause of action. Ratio: Firestone no longer has cause of action since it has already been paid by FiremanFs Fund. FiremanFs Fund howe"er has a cause of action as this falls under Art. 770' under the doctrine of subrogation. #a'acalera v $orth Front Shipping Facts: ,acks of corn grain "alued at o"er 0! were consigned to >F! under a bill of lading and insured with Tabacalera et al. The "essel was owned by Horth Front. #rior to lea"ing port% the "essel was inspected and was deemed fit to carry merchandise. 4hen it arri"ed% it ad"ised >F! who did not immediately commence unloading without any apparent reason. 4hen unloaded% there was shortage and the rest were moldy% rancid and unfit for its purpose. >F! re<ected cargo and demanded from Horth Front payment for damages which was denied. Tabacalera et.al paid% then sued Horth Front. TC and CA dismissed case. Ratio: Horth #oint is liable since it is a common carrier and as such is re2uired to obser"e e*traordinary diligence in its "igilance o"er the goods it transports. 4hen goods placed in its care are lost or damaged% the carrier is presumed to ha"e been at fault or to ha"e acted negligently. Horth Front has burden of pro"ing it obser"ed e*traordinary diligence in order to a"oid responsibility which it failed to do. 9owe"er since >F! was guilty of contributory negligence% they should share at least A0T of the loss. Horth #oint ordered to pay Tabacalera et al 60T of the total amount it paid to >F!. Philamgen v CA Facts: Coca8Cola Bottlers #hilippines% nc. DCCB# E loaded on board .!K Asilda1 '%(00 cases of &8liter Coke to be transported from ;amboanga City to Cebu City. The "essel was owned and operated by FC3!AH. The shipment was insured with #9 3A!GCH. The "essel sank. CCB# filed a claim with FC3!AH for reco"ery of damages which was denied and thus CCB# filed an insurance claim with #9 3A!GCH which paid its claim for #9p'((%7(0.00. Claiming its right of subrogation% #9 3A!GCH sought recourse against FC3!AH who disclaimed any liability from the lost. Ratio: Clearly falls under Art. 770' of the Ci"il Code. The payment by the assurer to the assured operates as an e2uitable assignment to the assurer of all the remedies which the assured may ha"e against the third party whose negligence or wrongful act caused the loss. The right of subrogation is not dependent upon% nor does it grow out of any pri"ity of contract. t accrues simply upon payment by the insurance company of the insurance claim. St Paul v %acondray Facts: 4inthrop #roducts consigned to 4inthrop ,tearns drugs and medicines Dfrom HR to !laE through !acondray L Co. nsured with ,t. #aul Fire. Arrastre ser"ices pro"ided by !la. #ort ,er"ices. =pon arri"al to !anila one drum and se"eral cartons arri"ed in bad condition. 4inthrop ,tearms filed a claim for damages. ,t. #aul paid claim. ,t. #aul then proceeded against the Arrastre ,er"ice who resisted action which claimed it deli"ered goods in same condition it recei"ed from the carrier D!acondrayE. !acondray denied liability claiming liability ceased upon discharge of goods from shipFs tackle. Hotethere is a bill of lading which stipulated that the amount of the liability should only be Php&KVV% but ,t. #aul paid amount -S@&kVV Ratio: ,t. #aul should recei"e the amount according to the bill of lading. The purpose of the bill of lading is to pro"ide for the rights and liabilities of the parties. The stipulation in the bill of lading limiting the common carrierFs liability to the "alue of the goods appearing in the bill is "alid and binding. ,t. #aul after paying the claim of the insured for damages under the policy is subrogated merely to the rights of the assured as subrogee% it can reco"er only the amount that is reco"erable by the latter. ,ince the
138
right of 4inthrop in case of loss or damage to the goods is limited or restricted by the pro"ision in the bill of lading% a suit by ,t. #aul as subrogee is necessarily sub<ect to like limitations and restrictions. G.
REINSURANCE Title *+ K !einsurance Sec. B2. , contract of reinsurance is one by which an insurer procures a third person to insure him against loss or liability by reason of such original insurance. Definition of Reinsurance It is a contract whereby one party, the reinsurer, agrees to indemnify another, the reinsured, either in whole or in part, against loss or liability which the latter may sustain or incur during a separate and original contract of insurance with a third party, the original insured. Rationa e of Reinsurance It is one type of liability insurance. It represents a further extension of the fundamental idea of insurance, that is, distribution among many of the ris"s resting upon one. Chere an insurer desires to entirely relieve himself of liability under contracts made and reinsures all his ris"s. Contracts?treaties of reinsurance are plainly beneficial to the public inasmuch as they promote both efficiency and stability in the conduct of the insurance business. -enefits of Reinsurance to the Insured *. It gives insurance companies greater financial stability and thus ma"es the insured6s individual policy more reliable. If a large amount of insurance is needed, the insured may obtain it without negotiating with numerous companies. It enables the insured to obtain protection promptly, without the delay that would be re-uired to
2.
divide and distribute the amount among many companies. ,ll the insurance can be written under identical contract provisions, whereas otherwise these might vary with the different companies among whom the insurance is divided. Small companies are encouraged to divide large exposures for safety and enabled to accept a wide variety of applicants.
Reinsurance ' Dou$ e Insurance Distinguished Reinsurance Insurer becomes the insured, insofar as the reinsurer is concerned The sub&ect of the insurance is the original insurer6s ris" Insurance of a different interest Friginal insured has no interest in the contract of reinsurance which is independent of the original contract of insurance Consent of the original insured is not necessary Dou$ e Insurance Insurer remains as the insurer
The sub&ect of the insurance is the property being insured Insurance of the same interest Insured is the party in interest in all the contracts
The insured has to give his consent.
Sec. B/. Chere an insurer obtains reinsurance, except under automatic reinsurance treaties, he must communicate all the representations of the original insured, and also all the "nowledge and information he possesses, whether previously or subse-uently ac-uired, which are material to the ris". The reinsured has the duty to disclose all material facts to the reinsurer, the duty imposed is similar to persons see"ing an original insurance K that of the strictest good faith.
+.
E.
Chen called T!E,TIES K where the insurer insures all or a substantial portion of its ris" with one insurer Auto%atic Reinsurance Treaties K the ceding company HreinsuredI is bound to cede and the reinsurer is obligated to accept a fixed
share of the ris" which has to be reinsured under the contract. 0acu tati'e Reinsurance Treaties K there is no obligation either to cede or to accept participation in the ris" insured, each party having a free choice. istoryL In the *B206s, domestic insurer6s ceded ris"s to foreign reinsurers because there was no reinsurance company in the >hilippines. ,lthough, today even when there are domestic reinsurance companies operating in the country, domestic ris"s are still ceded to foreign reinsurance companies since the >hilippines is a C,),3IT= >!F(E country. )imitation Code limits ris" which a non8life insurer may retain on any one sub&ect of insurance to +0X of its net worth. ,ny reinsurance ceded by it is deducted in determining the ris" retained.
139
be affected by any defense which the reinsurer may have against the original insurer. o (o novation which discharges original policy K original policy remains in full force and original insured has right to demand that all its terms and conditions be complied with. If insured agreed with insurer and reinsurer that he will loo" only to reinsurer for indemnity in case of loss o (ovation discharged original insurer o Technically not a reinsurance.
Sec. B1. , reinsurance is presumed to be a contract of indemnity against liability, and not merely against damage. Sec. B.. The original insured has no interest in a contract of reinsurance. !elationship of insured to reinsurer #eneral !ule Friginal insured has (F I(TE!EST in the reinsurance contract Chatever the reinsurer pays the insurer upon the happening of the loss becomes part of the insurer6s assets, and all its creditors share e-ual rights with the insured to demand payment from such funds. ExceptionsL Contract may expressly bind the reinsurer to pay directly to the original owner any loss for which the original insurer may be liable. o Insured may choose to sue either insurer, reinsurer or 7FT . owever, total recovery cannot be more than the actual loss. o )iability of reinsurer to original insured would not
Philam v Auditor Facts: #hilamlife had a reinsurance treaty with A >C5 with an agreement to pay reinsurance premiums on an annual basis. The Central Bank collected foreign e*change margin on the remittances of #hilamlife to A >C5. #hilamlife filed for refund contending that the reinsurance premiums remitted were paid pursuant to the reinsurance treaty and therefore were pre8e*isting obligations e*pressly e*empt fro the margin fee. Ratio: #hilamlife is not entitled to refund. >einsurance treaties and reinsurance policies are not one and the same. >einsurance treaties are contracts F5> insurance while reinsurance policies are contracts 5F insurance. #hilamlifeFs obligation to remit reinsurance premiums becomes fi*ed and definite only upon the e*ecution of the reinsurance policy% because it is only after a reinsurance policy is made that payment of reinsurance premiums may be e*acted as it is only after #hilamlife seeks to remit the reinsurance premiums that the obligation to pay the margin fee arises. Fieldman(s v Asian Surety Facts: FieldmanFs and Asian entered into a reinsurance treaty wherein Asian will cede to FieldmenFs a specified portion of the amount of insurance underwritten by A, AH. The contract stipulates that if either party wishes to terminate or cancel the agreement% they must gi"e at least 0 moths notice by registered mail to the other party and the cancellation was to take effect as of the 0&st of ?ecember of the year in which the notice was gi"en. ,ometime in ,eptember &)6& FieldmenFs ga"e notice to Asian which Asian did not reply to% FieldmenFs ga"e 7 other notices. ?uring this time% one of the reinsurance contracts Q G, , property was ra+ed by fire. Asian filed a claim with FieldmenFs who denied liability pointing out that they ha"e already terminated the reinsurance treaty. Ratio: The Facultati"e85bligatory >einsurance Treaty Fire Dpart of the reinsurance contractJtreatyE
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pro"ides that .in the e ent of termination of this !greement x x x, the liability of the "ieldmen#s under current cessions shall continue in full force and effect until their natural expiry x x x.1 and .$n the termination of this !greement from any cause whate er, the liability of the %&I'S(%&% )"ieldmen#s* under any current cession including any amounts due to be ceded under the terms of this !greement which are not cancelled in the ordinary course of business shall continue in full force until their expiry unless the COMPANY (Asian) shall prior to the !"st of #ece$%er next follo&in' such notice elect to &ithdra& the existin' cessions.1 Thus insofar as the 7 reinsurance agreements as concerned% the e*press stipulations did not ipso facto terminate all reinsurance cessions. ,uch cessions continued to be in full force until their respecti"e dates of e*piration. ,ince it was under one of said agreements% namely% the Facultati"e 5bligatory >einsurance Treaty8Fire% that the reinsurance cessions corresponding to the G, , policy had been made% F C3?!CHF, cannot a"oid liability which arouse by reason of the burning of the insured property. Co/uia v Fieldmen(s "nsurance Facts: FieldmenFs issued to !anila Rellow Ta*icab a common carrier accident insurance policy which will .indemnify the insured in the e"ent of accident caused by or arising out of the use of !otor Kehicle against all sums which the insured will become legally liable to pay in respect of- death or bodily in<ury to any fare8 paying passenger including the dri"er% conductor andJor inspector/1 4hile policy was in force% Carlito Co2uia dri"ing the insured "ehicle met an accident and died. 9is heirs field complaint against FieldmenFs Ratio: 9eirs of Co2uia ha"e cause of action against FieldmenFs under Art. &0&& of the Ci"il Dcontracts pour autruiE. This rule is the e*ception to the general rule that only parties to a contract may bring an action. =nder this e*ception% third parties may demand the enforcement of the contract which was made for his benefit.

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67

E. Fpen and @alued >olicies Hnon8lifeI

&. Ti%e when it shou d e)ist

2. Special >rovisions on mortgagor and mortgagee

8I. CONCEA.MENT2 MISRE,RESENTATION C -REAC/ O0 BARRANTIES , contract of insurance isL

* ,RIMARH CONCERNS O0 ,ARTIES TO AN INSURANCE CONTRACT

CONCEA.MENT 's. MISRE,RESENTATION

<etermined by the same rules In&ured party has right to rescind

Sec. /B. (o particular form of words is necessary to create a warranty.

Owner of the Shi#

9)orybeth:7aldrias.head; 9(ayna:3alayang.de#ut!; 9<ionne:Sanchez.acads; 94am:4acob.design;

IJ. MEASURE O0 INDEMNITH2 O#en and 8a ued ,o ic!

Exceptions to the #eneral !uleL

The insured has to give his consent.

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