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4.
Insurance Code
In the absence of applicable provision in the
Insurance Code, the Civil Code applies
Special Laws
a. Insurance Code of 1978
b. Revised Government Service Insurance Act
of 1977 (PD 1146, as amended)
c. Social Security Act of 1954 (RA 1161, as
amended)
Others insofar as the Civil Code is concerned, the
Code of Commerce is considered a special law.
a. Property Insurance Law (PD 245)
b. Life, Disability and Accident Insurance
coverage to barangay officials (RA 4898 as
amended by RA 5756)
c. Increases, integrates and rationalizes the
insurance benefits of barangay officials
under RA 4898 (EO 250)
d. Philippine Deposit Insurance Corporation
(RA 3591), which insures the deposits of all
INSURANCE
SURETYSHIP:
Suretyship is an agreement whereby a party called
the surety, guarantees the performance by another
party (called principal or obligor) of an obligation in
rd
favor of a 3 party (obligee).
Also defined as: a person binds himself solidarily
with the principal debtor for the fulfillment of an
obligation.
INSURANCE
3.
Ex.)
Q: A borrowed money from the Bank of Commerce. His
cousin, B, acted as a surety for the payment of the load.
Was Bs contract of suretyship deemed to be a contract
of insurance?
A: It must be qualified.
1. No. If B, acting as a surety did not appear that it
is his vocation, and it was merely an isolated
transaction incidental to the legitimate activity
of B.
2. Yes. If it was Bs vocation to act as surety and
therefore, the suretyship contract was part of
the general scheme to distribute losses among a
large group of persons bearing the same risk,
then such contract is deemed to be a contract of
insurance.
INSURANCE
c.
INSURANCE BY A MINOR:
A person 18-above may enter into any kind of
insurance contract.
A minor cannot enter into a contract of insurance,
however if he does, such contract is Voidble.
The insurance company with which a minor
contracted cannot raise the defense of minority
(incapacity to contract), thus, the contract is
Voidable at the option of the insured.
INSURABLE RISK:
The risks that may be insured may either be:
a. Insurance against damage
b. Insurance against liability
Said risks may be insured against events which are
contingent or unknown, whether part or future.
WHEN INSURER IS LIABLE FOR PAST EVENT:
Past events causing the loss must be: (a) unknown to
both parties; (b) must be expressly stipulated
Such stipulation including a prior loss within the
coverage of the policy is usually expressed by the
use of the phrase lost or not lost
INSURANCE
1.
2.
3.
INSURANCE
INSURANCE
an
the
the
the
INSURANCE
ABSENCE OF DESIGNATION:
INSURANCE
EXISTING INTEREST:
Existing interest in property is the legal or equitable
title on the property.
INCHOATE INTEREST:
It is an interest which has not yet ripened, such as
the interest of a stockholder in the property of the
corporation which he owns stocks. (an interest in
real estate which is not a present interest)
EXPECTANCY:
Expectancy to be insurable must be coupled with an
existing interest or founded on an actual right to the
thing or upon any valid contact for it, otherwise, it
does not constitute insurable interest.
PROPERTY
1. Insurable interest is
based
on
LIFE
2.
INSURANCE
PECUNIARY
INTEREST
3.
5.
Insurable interest is
limited to the actual
amount of damage
4.
6.
pecuniary one, as in
case
of
consanguinity
or
affinity
Interest need exist
only at the time the
insurance
takes
effect
XPN:
when
insurance was taken
by the creditor on
the life of the
debtor (loss must
also exist)
There is no limit on
the amount of
insurable interest
XPN:
creditordebtor relationship
Reason: required to
prevent speculative
insurances which are
against public policy
Property
Life
CONTRACT OF INDEMNITY:
Insurance is a contract of indemnity, hence, measure
of insurable interest is the extent who which the
insured might be damnified by the loss or injury of
the property insured. It only applies to property
insurance.
10
INSURANCE
2.
3.
4.
5.
6.
7.
A purchaser of the insured property cannot recover from the
insurer in a case of loss, unless and until the policy is
transferred to him.
In the ff. cases a transfer of the interest in the insured carries
with it a transfer of the policy:
1. Where by express stipulation of the parties, the
policy is made to run with the subject-matter, or the
contract is so framed as to attach the risk
inseparably to the property, as where the insurance
is on account of the owners, or for whom it may
concern or where the loss is payable to the bearer.
2. A change of the interest, by will or by succession, on
death of the insured passes the interest in the
insurance to the person taking his interest in the
thing insured.
3. Transfer of the interest by one of several partners,
joint owners, or owners in common who are jointly
insured, to the others.
11
INSURANCE
CONCEALMENT
Section 26.A neglect to communicate that which a party
knows and ought to communicate, is called concealment.
Note: the omission is on the part of the insured and the party
entitled to rescind is the insurer.
Section 30. Neither party to a contract of insurance is bound
to communicate information of the matters following,
except in answer to the inquiries of the other:
a) Those which the other knows;
b) Those which, in the exercise of the ordinary care,
the other ought to know, and of which the former
has no reason to suppose him ignorant;
c) Those of which the other waives communication;
12
INSURANCE
De Leons:
The right to information of material facts may be waived:
1) Expressly, by the terms of insurance or
2) Impliedly- by neglect to make inquiry as to the facts
already communicated.
A waiver is a type of estoppel.
13
INSURANCE
KINDS:
a) Affirmative which is an affirmation of a fact existing
when the contract begins, or
b) Promissory which is a statement by the insured
concerning what is to happen during the term of the
insurance.
14
INSURANCE
There is false rep: f it is true at the time it was made but false
at the time the contract takes effect.
Section 43. When a person insured has no personal
knowledge of a fact, he may nevertheless repeat
information which he has upon the subject, and which he
believes to be true, with the explanation that he does so on
the information of others; or may submit the information, in
its whole extent, to the insurer; and neither case is he
15
INSURANCE
Concealment
-The insured withholds info
of material facts from the
insurer
Misrepresentation
-the
insured
makes
erroneous statements of
facts with teh intent of
inducing the insurer to enter
into contract of insurance.
-The
materiality
is
determined by the same
rules as applied in case of
misrepresentation.
-same
Failure to communicate
material facts to the others,
he is guilty of concealment
and the info he gives in
compliance with his duty to
reveal facts is representation.
The passive
modification of a contract of insurance as to its original
formation.
The provisions of Section 26 to 35 (concealment) and
Sections 36 to 48 (representations) apply not only to the
original formation but also to the modification of the same
during the time it is in force.
16
INSURANCE
to
17
INSURANCE
THE POLICY
-Necessity for the riders, etc- It saves the trouble and expense
of making an entirely new contract.
-Rule on case of conflict between a rider, etc and printed
stipulations-the rider prevails, as being more
deliberate expression of the agreement of the
contracting parties.
Restriction on the use of rider under Insurance Code:
Section 226: states that no rider, etc shall be attached to,
printed or stamped upon a policy of insurance unless
the form of such rider, etc has been approved by the
Insurance Commissioner.
18
INSURANCE
Section 53
Q: Whose interest is insured?
A: All persons specifically named as persons insured in a
policy insuring against loss of or damage to property are
covered or protected by the policy
Where several persons have distinct interest in the same
property, the insurance taken by one in his own right does
not insure the interest of the other.
2.
By a preliminary contracts of present insurancethe insurer insures the subject matter usually by
what is known as the binding slip or binder or cover
noten the contract to be effective until the formal
policy is issued or the risk rejected.
By a preliminary executory contract of insurance,
the insurer makes a contract to insure the subject
matter at some subsequent time which may be
definite or indefinite. Under this, the right acquired
by the insured is merely to demand the delivery of
the policy in accordance with the terms agreed upon
and the obligation assumed by the insurer is to
deliver such policy.
19
INSURANCE
Section 55
Insurance procured by Partner. When a partner takes a policy
on the partnership property in his own name, it is deemed to
include his separate interest alone, unless the terms of the
policy should be such as are applicable to the joint or
common interest.
The policy procured by an agent/partner in his name alone
will not include the interest of the principal/co-partners
because the policy 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 and also
because an insurance is a personal contract.
Valued
The parties have stipulated in the
policy that the thing insured is
valued at a specified time
Proof of value of the thing
insured after the loss is no longer
necessary
Section 56
General description of the insured, it may comprehend any
person or any class of persons, the person claiming the
proceeds of the policy must prove that such description was
intended to include him.
Section 63
Limitation of action by agreement. Parties may validly agree
that an action on the policy should be brought within a
limited period of time, provided that such period is not less
than one year from the time the cause of action accrues. If
the period agreed upon should be less than one year from the
time the cause of action accrues, such agreement is VOID.
Section 57
XPN to Sec 20. When the policy is framed to inure to the
benefit of whomsoever, during the continuance of the risk,
may become the owner of the interest insured, the transfer
of the property will not suspend the insurance and, instead,
the insurance is deemed transferred together with the
property.
Section 58
The transfer of thing insured does not transfer the policy, but
suspends it until the same person becomes the owner of both
the policy and the thing insured.
Kinds of Policy
When no period for bringing the action has been agreed upon
in the policy, or when such agreement is void, the insured
may bring the action within the prescriptive period provided
for in the Civil Code.
10 years- written
6 years- oral contract
In case the claim was denied by the insurer but the insured
filed a petition for reconsideration, the prescriptive period
should be counted from the date the claims was denied at
the first instance and from the denial of the petition for
reconsideration.
Prescription in compulsory motor vehicle insurance is
counted from denial of the claim and not from the date of
accident.
20
INSURANCE
Section 64
The cancellation of policies by the insurer upon prior notice
and should be based on the occurrence of the following, after
the effective date of policy, otherwise the same would be
ineffective:
a. Non-payment of premium
b. Conviction of a crime arising out of facts increasing the
hazard insured against
c. Discovery of fraud or material misinterpretation
d. Discovery of willful or reckless acts or omissions increasing
the hazard insured against
e. Physical changes in the property insured which result in the
property becoming uninsurable
f. A determination by the Commissioner that the continuation
of the policy would violate or would place the insurer in
violation of the Code.
Affirmative
Consist of statements in
the policy of some fact or
state of things at, or
previous to, the time of
making the policy.
Section 65
Notice should be in writing, mailed or delivered to the named
insured at the address shown in the policy stating the
grounds:
a. grounds under Sec 64
b. that, upon written request of the name insured, the insurer
will furnish the facts on which the cancellation is based.
When noticed mailed but not received, is ineffective, there
must be an actual receipt of the notice of cancellation.
Personal notice is necessary, notice must be sent to the
insured himself, if not the cancellation is not valid.
Promissory
Refers to the happening of
some future event, or the
performance of some act in
the future.
Express
Implied
Construction of Warranties
Is strictly construed against the insurer and is reasonably
interpreted in favor of the insured. The reasonableness is to
be ascertained in the light of the factual considerations.
No particular form of words is necessary to create a warranty.
Section 66
The insured is given the option to renew property insurance
by the payment of the premium due on the effective date of
renewal unless at least forty-five days prior to the end of the
Section 70
21
INSURANCE
Section 74
Violation of a material warranty, or any other material
provision of the policy, entitles the other party to rescind the
contract. A causal connection between the violation and the
loss is not necessary.
Section 75
GR: A violation of immaterial provision shall not avoid the
policy.
XPN: The parties may stipulate that a violation of any
provision of the policy, material or immaterial, shall avoid it,
thereby converting an immaterial provision in a policy into a
material provision.
Velasco v Apostol
The policy is not valid and binding unless and until the
premium is paid. If the insurer wants to favor the insured by
making the policy binding notwithstanding the non-payment
of premium, a mere credit agreement would not be
sufficient.
Remedy: For the insurer to acknowledge in the policy that
premiums were paid although they were not, in which case
the policy becomes binding because such acknowledgement
is a conclusive evidence of payment of premium.
Section 76
The effect of a breach of warranty without fraud depends on
the time such breach is committed.
a. At effectivity of the policy- prevents the policy from
attaching to the risk
- the insurer is not liable from the beginning.
b. after effectivity of the policy- the insurer is exempted from
liability for losses incurred after such breach.
Title 8: Premium
GR: The payment of premium is a condition precedent to, and
essential for, the efficacy of the contract. Unless the premium
22
INSURANCE
Section 78
When a policy was issued with an acknowledgement that
premiums were paid, such acknowledgement is conclusive to
make the policy binding although the policy contained a
stipulation that it shall not be binding until the premiums are
paid. In such case, the insurer cannot deny the payment of
the loss to the insured on the ground of non-payment of
premiums.
23
INSURANCE
Q: To whom returned?
A: To the insured that paid the premium
2. In life insurance
Because it is indivisible.
3. When the insured is guilty of fraud or misrepresentation
Title 9: Loss
Section 83
While a prohibition against the transfer of the interest
insured before the loss is binding, an agreement not to
transfer the claim of the insured against the insured after the
loss has happened is void.
The prohibition against the transfer of the claim after the loss
is against public policy since the rights of the parties are fixed
after the loss and the assignment is merely a transfer of
action against the insurer.
SECTION 87
GR: insurer is not liable for a loss caused by the wilful act or
through the connivance of the insured
XPN: liable even when due to negligence of the insured, or of
the insureds agent or others
XPN to XPN: negligence is so gross
24
INSURANCE
SECTION 91
Waiver of delay in the presentation to an insurer of
notice/proof of loss
1. Where delay was caused by an act of the insurer
2. Where the insurer failed to object to the delay
promptly and specifically upon such ground
Purpose of Notice:
So that insurer may make proper investigation and
take such action as may be necessary to protect its
interest
In marine insurance, to afford carrier reasonable
opportunity and facilities to check the validity of
claims while facts are still fresh
* Stipulating the period for filing a claim is valid UNLESS the
intent is to give insured less than a reasonable time within
which to file
ARBITRATION
PROOF OF LOSS evidence given to the insurer of the
occurrence of the loss and the data necessary to determine
liability & the amount thereof.
Substantial compliance with the requirements is
sufficient.
SUBROGATION
Substitution of the insured in the place insurer upon
payment of the insurance claim so that the latter
rd
succeeds to the rights of the former against a 3
party with respect to any loss covered by the policy.
Limitation: cannot recover more than what the
insured may recover from the wrongdoer
Based on the principle of natural justice to afford
relief to those required to pay a legal obligation
which ought to have been met by another person
Arises from the very nature of insurance as contract
of indemnity
Lack of capacity of the insured to sue does not affect
the capacity of insurer to sue
Discretionary
25
INSURANCE
2.
3.
4.
OVER-INSURANCE
- one insurer is sufficient
- insurance taken is always
more than the amount of
insurable interest
DOUBLE INSURANCE
- there are several insurers
- total amount of policies
taken need not exceed the
value of the insurable
interest
SHARE OF INSURER =
INSURERS POLICY
------------------------ X AMT OF LOSS
TOTAL AMOUNT OF
POLICIES ISSUED
SECTION 95:
rd
nd
SECTION 94.
26
INSURANCE
REINSURANCE POLICY
- contract of indemnity one
insurer makes with another
st
to protect the 1 insurer
from risk it had already
assumed
- upon execution of
reinsurance policy, premiums
are paid
SECTION 98
GR: Original insured has no interest in a contract of
reinsurance
XPN:
a. Contract of insurance is made directly for the benefit
of the reinsureds policy holder
b. Reinsurer assumes and agrees to perform
reinsureds contract
REQUISITES: (1) original insured accepted such benefit &
(2) communicated his acceptance to the reinsurer before
being revoked
REINSURANCE TREATY
- mere agreement between 2
insurance companies
whereby one agrees to cede
& the other to accept
reinsurance business
pursuant to provisions of the
treaty
REINSURANCE
- insurer becomes insured
- subj.matter insurers risk
-different risk and interest
Coverage:
Sec. 99 Other marine insurance risks not connected with
marine navigation:
a. Insurance against loss of or damage to aircraft.
Aircraft- any contrivance now known or hereafter
invented, used, or designed for navigation of, or flight in the
air.
SECTION 96
Obligation of insurer when obtained reinsurance:
GR: communicate all the representations of (1) original
incurred and (2) knowledge and facts material to the risk
Otherwise, policy will be avoided
XPN: no obli under automatic reinsurance treaties an
automatic and self-executing contract so any knowledge
cannot influence in deciding WON to enter into treaty
SECTION 97
Reinsurance is presumed to be a contract of indemnity not
merely against damage
27
INSURANCE
Insurable Interest
Sec. 101
Bottomry or respondentia- a loan in which under any
condition whatever, the repayment of the sum loaned, and of
the premium stipulated, depends upon the safe arrival in port
of the goods on which it is made or of the price they may
receive in case of accident.
A loan with things exposed to maritime risks as
collaterals to be paid if the collaterals are safely
transported and the lender shall lose his money if
the latter are lost.
All Risk Policy- all risks whatsoever and covering all losses by
an accidental cause of any kind. In marine insurance, it is
28
INSURANCE
Effect: Insurer will still be liable if the cause of the loss is not
the fact concealed but will be exempted from liability should
the fact concealed be the cause of the loss.
Representation
Sec. 111 Misrepresentation in Marine Insurance
To entitle the insurer to rescind the contract, it must
be intentionally false in any material respect, or in
respect of any fact on which the character and
nature of the risk depends.
Implied Warranties
I. the ship is seaworthy
II. No improper deviation from the agreed voyage will be
made
III. The vessel will not engage in illegal venture, and
IV. Where the nationality or neutrality of a ship or cargo is
expressly warranted, it is implied that the ship will carry the
requisite documents which casts reasonable suspicion
thereon. (Sec 120)
Sec 114
Seaworthiness depends on circumstances.
Reasonable fitness to perform the service and to encounter
the ordinary perils of the voyage contemplated by the parties
is required to satisfy the warranty of seaworthiness.
Effect of Violation of Implied Warranty of Seaworthiness
The insurer will not be liable for a loss occasioned thereby
whether such fact was known to the insured or not.
Waiver of Implied Warranties by the Insurer
It could only be done in writing, in the policy and in the
clearest language. And where the policy stipulates that the
29
INSURANCE
Sec. 126. An insurer is not liable for any loss happening to the
thing insured subsequent to an improper deviation.
30
INSURANCE
Kinds of Averages
1. SIMPLE OR PARTICULAR Average
o Includes all the expenses and damages
caused to the vessel or to her cargo which
have not inured to the common benefit and
profit of all persons interested in the vessel
and her cargo
o It is partial loss caused by a peril insured
against, which is not a general average loss
2. GENERAL or GROSS Average
o Includes all the damages and expenses
which are deliberately caused in order to
save the vessel, its cargo, or both, from real
and known risk.
o All persons having an interest in the vessel
and cargo at the same time of the
occurrence of the average shall contribute
to the average
31
INSURANCE
Sec. 142.
WhenAbandonment becomes ineffectual:
a. information upon which an abandonment has been
made proves incorrect
b. the thing insured was so far restored when the
abandonment was made that there was then in fact
no total loss
Sec. 139.
What to abandon:
a. the thing insured
b. any particular portion of the thing insuredseparately
valued by the policy
c. any particular portion of the thing insuredseparately
insured
32
INSURANCE
MEASURE OF INDEMNITY
ACCEPTANCE OF AN ABANDONMENT :
a. may be either express or implied from the conduct
of the insurer. Mere silence of insurer for an
unreasonable length of time after notice is an
acceptance (Sec. 150)
b. conclusive upon the parties (sec. 151)
c. admits the loss and the sufficiency of the
abandonment (sec. 151)
d. irrevocable UNLESS the ground upon which it was
made proves to be unfounded. (sec. 152)
e. On an accepted abandonment of a ship, freightage
earned previous to the loss belongs to the insurer of
said freightage; but freightage subsequently earned
belongs to the insurer of the ship. (sec. 153)
Requisites:
1. insurance taken is less than the actual value of the
thing insured (UNDER-INSURANCE) and
2. loss is partial
Effect:
proportionate division of risk between the insured
and the insurer
o 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 insure in the property
insured.
33
INSURANCE
Loss
Liability of insurer = ____ X Insurance
Value
DRAWBACK
- allowance made by the
govt upon the duties due on
imported merchandise when
the importer re-exports it
- OR the refunding such
duties if already paid
PRIMAGE
- small allowance or
compensation payable to the
master or owner of the vessel
for the use of his cables and
ropes to discharge the goods,
and to the mariners for lading
and unlading
- not included in determining
the loss in marine open policy
34
INSURANCE
Sec. 164. A marine insurer is liable for a loss falling upon the
insured, through a contribution in respect to the thing
insured, required to be made by him towards a general
average loss called for by a peril insured against;
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.
FIRE INSURANCE
35
INSURANCE
Total
loss
Partial
loss
36
INSURANCE
7.
CASUALTY INSURANCE
2.
3.
4.
5.
6.
37
1.
2.
3.
INSURANCE
4.
5.
6.
7.
SURETYSHIP
SURETY
Is the insurer of the debt
Undertakes to pay if
principal does not pay
Does not have such right
the
GUARANTOR
Is the insurer of the
solvency of the debtor
Binds himself to pay if the
principal is unable to pay
Cannot be compelled to
pay the creditor unless the
latter has exhausted all the
property of the debtor and
has resorted o all the legal
remedies
against
the
debtor
The obligation of the
guarantor is secondary
38
INSURANCE
3.
a.
b.
39
INSURANCE
f.
b.
c.
d.
e.
ANNUITY
Payable during the lifetime
of the annuitant
Pays a single premium
The insurer undertakes to
pay annuities until the death
of the annuitant
LIFE INSURANCE
Payable upon the death of
the insured
Pays premium by instalment
The insurer pays a lump sum
upon death of the insured
40
INSURANCE
b.
2.
st
41
INSURANCE
ASSIGNMENT
Rest on contract
Must be supported by a
consideration
With the consent of the
beneficiary where the latter
was designated irrevocably
or even without consent of
the revocable beneficiary,
extinguishes the interest of
the beneficiary since the
assignment has the effect of
change of beneficiary
CHANGE OF BENEFICIARY
Exercise of a power of
appointmnet
Must not be based on a valid
consideration
42
INSURANCE
a.
b.
c.
Policy insurance
Guaranty in cash
Surety bond to indemnify the death or injured
rd
3 person or passenger
rd
Property damage to 3 parties is no longer included
in the compulsory motor vehicle liability insurance
Motor vehicle cannot be registered nor the
registration renewed with the LTO office unless such
motor vehicle is covered by insurance, cash deposit
or surety bond.
rd
43
INSURANCE
I. Private Cars
(a) Bantam
20k pesos
(b) Light
20k pesos
(c) Heavy
30k pesos
motorcyles,
: 50k pesos.
44
INSURANCE
NO FAULT INDEMNITY:
-
a.
b.
c.
c.
d.
b.
c.
rd
45
INSURANCE
46
INSURANCE
Section 384. Any 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 amount
of his loss, and/or the nature, extent and duration of the
injuries sustained as certified by a duly licensed physician.
Notice of claim must be filed within six months from date of
the accident, otherwise, the claim shall be deemed waived.
Action or suit for recovery of damage due to loss or injury
must be brought, in proper cases, with the Commissioner or
the Courts within one year from date of accident, otherwise,
the claimant's right of action shall prescribe. (As amended by
Presidential Decree 1814)
UNAUTHORIZED USE:
Unauthorized use of a motor vehicle for a joy-ride
constitutes theft and prior criminal conviction is not
necessary to enable the insured in a comprehensive
policy to recover from the insurer.
47
INSURANCE
b.
b.
JURISDICTION:
-
a.
48