Section 1.

This Decree shall be known as The Insurance

Code.

o
o

Sources of Insurance Law in the Philippines

1.
Title VII of Book II and Section III of Title III of Book
Three of the Code of Commerce (Spanish Period)
2.
Chapters II and IV of Title XII of Book IV of the Old
Civil Code (Spanish Period)
3.
Insurance Act (Act No 2427) (American Regime)
4.
Civil Code of the Philippines
5.
Pres. Decree No 612 The Insurance Code

During Martial Law

Promulgated and became effective on

December 18, 1974
6.
Pres. Decree No 1460 The Insurance Code of
1978

consolidated all Insurance laws

issued and took effect on June 11, 1978

7.
RA No 10607 An act strengthening the Insurance
industry, further amending Presidential Decree No.
612

Effected substantial amendments to

many provisions in the Insurance Code

Deleted former section 250

Added new provisions ie Sections 78, 84,

187-189, 251, 280, 374 377, 423, 428436

From 424 sections, the code now

contains 448 sections
Laws Governing Insurance
1.
Insurance Code of 1978
2.
Civil Code

Insurance
contracts
are
primarily
governed by the insurance Code, but if it
does not specifically provide for a
particular matter in question, the
provisions of the Civil Code on contracts
and special law shall govern

3.

Special

Article 739 and 2012 on void

donations
Article 2011 applicability of the Civil
Code
Article 2021 2027 life annuity
contracts
Article 2186 compulsory motor
vehicle liability insurance
Article 2207 insurers right of
subrogation
Laws
The Insurance Code as amended
The
Revised
Government
Service
Insurance Act of 1977 (insurance of
government employees)
The Social Security Act of 1954 as
amended
(insurance
of
private
employees)
Property Insurance Law
RA 4898
as amended by RA 5756,
Executive Order 250, (barangay officials)
RA 3591 as amended establishing the
Philippine Deposit Insurance Corporation

Section. 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.

An insurance Contract is a contract

Elements:

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b)

Subject matter thing insured

Consideration premium paid by the
insured
***amount is based on the probability
of loss and extent of liability for which
the insurer may become liable under
the contract
o
Object and Purpose transfer and
distribution of risk of loss, damage or
liability arising from an unknown or a
contingent
event
through
the
payment of a consideration by the
insured to the insurer under a legally
binding contract to reimburse the
insured for the loss suffered on the
happening of the stipulated event
There must be offer and acceptance in parties
must have legal capacity to enter into a contract
To be enforceable, all requisites of a binding
contract must be present
Nature and Characteristics
(1)
Consensual perfected by the
meeting of the minds
(2)
Voluntary
where
parties may
incorporate terms and conditions which
they deem convenient. It is not
compulsory
(3)
Aleatory depends on a contingent
event. 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
(4)
Unilateral contract imposes legal
duties only on the insurer who promises
to indemnify in case of loss
(5)Conditional it is subject to conditions,,
principla of which is the happening of the
event insured against
(6)Contract of indemnity the promise of
the insurer which is to make good only
the loss of the insured
(7)Personal contract between the insured
and the insurer
GR: the insured cannot assign before the
happening of the loss his rights under a
property policy to others without the
consent of the insurer
(8)Contract is considered risk-distributing
where it serves to distribute or spread
the risk of financial or economic loss
faced by the insured among as many as
possible of those who are subject to the
same or similar kinds of risks
(9)Uberrima Fides requires good faith in
relating to others
5 basic Elements of a Contract of Insurance
a.
The insured possesses an interest of
some kind susceptible of pecuniary
estimation known as insurable interest
b.
The insured is subject to risk of loss
through the destruction or impairment of
that interest by the happening of that
designated peril
c.
The insurer assumes the risk of loss
d.
Such assumption of risk is part of a
general scheme to distribute actual
losses among a large group or
substantial number of persons bearing a
similar risk
e.
As consideration for the insurers
promise, the insured makes a ratable
contribution called premium to a general
insurance fund.
the nature of an insurance contract is determined
through the principal object and purpose test
if the principla object and purpose is
indemnity, the contract constitutes insurance,
but if it is service risk transfer and distribution
being merely incidental, then the arrangement is
not insurance and therefore not subject to laws
regulating insurance

The term doing an insurance business or transacting

an insurance business, within the meaning of this
Code, shall include:

(2)

Making or proposing to make, as insurer, any

insurance contract;

(3)

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)

(5)

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.
CHAPTER I
THE CONTRACT OF INSURANCE
TITLE 1
WHAT MAY BE INSURED
Section 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.
Requisites of a Contract of Insurance:
1.
A subject matter in which the insured has an insurable
interest

Anything that has an appreciable pecuniary

value which is subject to loss or deterioration
or of which one may be deprived of
2.
Event or peril insured against which may be any (future)
contingent or unknown event, past or future, and a
duration for the risk thereof

Contingency or unknown event must be such

that its happening will (1)damnify or cause loss

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4.
5.

to a person having an insurable interest; or (2)

create a liability against him

Unknown event may be a past or future event

A promise to pay or indemnify in a fixed or ascertainable
amount
A consideration for the promise, known as the premium
A meeting of the minds of the parties upon all the
foregoing essentials
Insurance entered by a minor is merely voidable, thus valid
until annulled in a proper action in court by the minor or his
legal representative
Insurer cannot escape liability by pleading minority as a
defense because persons who are capable cannot allege
the incapacity of those whom they contrated
If contract however is fair, absent fraud and undue
influence, the minor cannot recover premiums paid if he
cannot return the benefits received

Section. 4. The preceding section does not authorize an

insurance for or against the drawing of any lottery, or for or
against any chance or ticket in a lottery drawing a prize.
Section. 5. All kinds of insurance are subject to the provisions
of this chapter so far as the provisions can apply.
TITLE 2
PARTIES TO THE CONTRACT
Section. 6. Every corporation, partnership, or association,
duly authorized to transact insurance business as elsewhere
provided in this Code, may be an insurer.
Parties to an Insurance Contract
1.
Insurer the one who assumes the risk
2.
Insured the person in whose favor the contract is
operative and who is indemnified against
3.
Beneficiary the persons to whom proceeds are given

Section 7. Anyone except a public enemy may be insured.

Section 8. Unless 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
act 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 if it had been performed by
the mortgagor.
Section 9. If an insurer assents to the transfer of an
insurance from a mortgagor to a mortgagee, and, at the time
of his assent, imposes further obligations on the assignee,
making a new contract with him, the acts of the mortgagor
cannot affect the rights of said assignee.
There is a need for an insurable interest over that which is insured else
it will be considered a wagering which is illegal. Such requirement
however does not apply to industrial life insurace