E.

ELEMENTS OF INSURANCE

[REPUBLIC ACT NO. 10607]

1. Insurable Interest
SEC. 10. Every person has an insurable interest in the life and health:
(a) Of himself, of his spouse and of his children;
(b) Of any person on whom he depends wholly or in part for education or support, or in whom he has a pecuniary interest;
(c) Of 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
(d) Of any person upon whose life any estate or interest vested in him depends.
SEC. 11. The insured shall have the right to change the beneficiary he designated in the policy, unless he has expressly wai ved this right in
said policy. Notwithstanding the foregoing, in the event the insured does not change the beneficiary during his lifetime, the designation
shall be deemed irrevocable.
SEC. 12. 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 such a case, the share forfeited shall pass on to the other beneficiaries,
unless otherwise disqualified. In the absence of other beneficiaries, the proceeds shall be paid in accordance with the policy contract. If
the policy contract is silent, the proceeds shall be paid to the estate of the insured.
SEC. 13. Every interest in property, whether real or personal, or any relation thereto, or liability in respect thereof, of such nature that a
contemplated peril might directly damnify the insured, is an insurable interest.
SEC. 14. An insurable interest in property may consist in:
(a) An existing interest;
(b) An inchoate interest founded on an existing interest; or
(c) An expectancy, coupled with an existing interest in that out of which the expectancy arises.

2. Risk of Loss
SEC. 3. Any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest, or create a
liability against him, may be insured against, subject to the provisions of this chapter.
The consent of the spouse is not necessary for the validity of an insurance policy taken out by a married person on his or her life or that of
his or her children.
All rights, title and interest in the policy of insurance taken out by an original owner on the life or health of the person insured shall
automatically vest in the latter upon the death of the original owner, unless otherwise provided for in the policy.

SEC. 51. A policy of insurance must specify:
xxx
(f) The risks insured against; and xxx

3. Assumption of Risk
SEC. 2. Whenever used in this Code, the following terms shall have the respective meanings hereinafter set forth or indicated, unless the
context otherwise requires:
(a) A contract of insurance is an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or
liability arising from an unknown or contingent event.
A 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.
(b) The term doing an insurance business or transacting an insurance business, within the meaning of this Code, shall include:
(1) Making or proposing to make, as insurer, any insurance contract;
(2) Making or proposing to make, as surety, any contract of suretyship as a vocation and not as merely incidental to any other legitimate
business or activity of the surety;
(3) Doing any kind of business, including a reinsurance business, specifically recognized as constituting the doing of an insurance business
within the meaning of this Code;
(4) Doing or proposing to do any business in substance equivalent 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 making of insurance contracts, agreements or
transactions or that no separate or direct consideration is received therefor, shall not be deemed conclusive to show that the making
thereof does not constitute the doing or transacting of an insurance business.
(c) As used in this Code, the term Commissioner means the Insurance Commissioner.

4. Distribution of Losses
Underlying concept in insurance: it deals with a scheme of distribution of risk/loss. An insurance contract has the following elements:
1. Insurable interest the insured possesses an interest of some kind susceptible of pecuniary estimation
2. Risk of loss the insured is subject to a risk of loss through the destruction or impairment of the above insurable interest by the happening
of designated perils
3. Assumption of risk the insurer assumes the risk of loss mentioned above
4. Scheme to distribute losses the said assumption of risk is a part of a general scheme (plan) to distribute actual losses among a large
group of persons bearing somewhat similar risks; and
5. Payment of premiums as consideration for the insurers promise to assume the risk and pay the losses from such risk, the insured makes
a ratable contribution, called a premium, to a general insurance fund. If you only have insurable interest, risk of loss and assumption of risk
of loss, you do not have a contract of insurance. It is a mere risk-distributing device. But if it has all of the five, it is a contract of insurance
whatever its name or form.

5. Premium
SEC. 77. An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the peril insured against.
Notwithstanding 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, or whenever under the broker and agency agreements with duly licensed intermediaries, a ninety (90)-day credit
extension is given. No credit extension to a duly licensed intermediary should exceed ninety (90) days from date of issuance of the policy.

CASES:
Gulf Resorts Inc. vs. Philippine Charter Insurance Corporation [G.R. No. 156167 May 16, 2005]
Facts: Gulf Resorts had its properties insured originally with the American Home Assurance Company (AHAC). In the first
4 policies issued, the risks of loss from earthquake shock were extended only to petitioners two swimming pools. Gulf Resorts also insured
with Phil Charter the properties covered by the AHAC policy. The wording and rates in the policy issued by Phil. Charter were copied from
the policy issued by AHAC. In 1990, an earthquake struck Luzon which damaged the properties of Gulf Resorts.

Gulf Resorts made a claim for damages on its properties, however, Phil. Charter denied it on the ground that its insurance policy only
afforded earthquake shock coverage to the two swimming pools of the resort. The trial court ruled in favor of Phil. Charter.

Issue: Whether or not the policy covers only the two swimming pools owned by Gulf Resorts and does not extend to all properties
damaged therein.

Held: YES. All the provisions and riders taken and interpreted together, indubitably show the intention of the parties to extend earthquake
shock coverage to the two swimming pools only. An insurance premium is the consideration paid an insurer for undertaking to indemnify
the insured against a specified peril. In the subject policy, no premium payments were made with regard to earthquake shock coverage
except on the two swimming pools. There is no mention of any premium payable for the other resort properties with regard to earthquake
shock. This is consistent with the history of Gulf Resorts insurance policies with AHAC.

Philamcare v CA G.R. No. 125678. March 18, 2002
Facts:
Ernani Trinos, applied for a health care coverage with Philamcare Health Systems, Inc. In the standard application form, he answered no
to a question if any of his family members ever consulted or been treated for high blood pressure, heart trouble, diabetes, cancer, liver
disease, asthma or peptic ulcer. The application was approved for a period of one year from March 1, 1988 to March 1,
1989. Accordingly, he was issued Health Care Agreement under which, Trinos was entitled to avail of hospitalization benefits, whether
ordinary or emergency, preventive health care and other out-patient services.

Trinos suffered a heart attack and was hospitalized. His wife made a claim for benefits under the health care agreement, however,
Philam denied it on the ground that the Health Care Agreement was void because there was a concealment regarding Trinos medical
history. Trinos subsequently died.
His wife filed an action for damages before the RTC. The RTC ruled in favor of Trinos. The CA affirmed the said ruling.

Issue: WON a health care agreement is not an insurance contract, hence the incontestability clause under the Insurance Code does
not apply.

Note:
Philam:
the agreement grants living benefits, such as medical check-ups and hospitalization so long as the member is alive within
1 year upon its effectivity.
only medical and hospitalization benefits are given under the agreement without any indemnification, unli ke in an
insurance contract where the insured is indemnified for his loss.
since Health Care Agreements are only for a period of one year, as compared to insurance contracts which last longer, the
incontestability clause does not apply, as the same requires an effectivity period of at least two years.
it is not an insurance company, which is governed by the Insurance Commission, but a Health Maintenance Organization
under the authority of the Department of Health.
Held:
The health care agreement is an insurance contract, in the nature of non-life insurance, which is primarily a contract of indemnity. Once
the member incurs hospital, medical or any other expense arising from sickness, injury or other stipulated contingent, the health care
provider must pay for the same to the extent agreed upon under the contract.

Under the title Claim procedures of expenses, Philam had twelve months from the date of issuance of the Agreement within which to
contest the membership of the patient if he had previous ailment of asthma, and six months from the issuance of the agreement if the
patient was sick of diabetes or hypertension. The periods having expired, the defense of concealment or misrepresentation no longer lie.