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FIRE INSURANCE

A contract by which the insurer for a consideration agrees to indemnify the insured against
loss of, or damage to, property by hostile fire, including loss by lightning, windstorm, tornado
or earthquake and other allied risks, when such risks are covered by extension to fire
insurance policies or under separate policies. (Sec. 167)

Prerequisites to recovery:
1. Notice of loss must be immediately given, unless delay is waived expressly or impliedly by the
insurer
2. Proof of loss according to best evidence obtainable. Delay may also be waived expressly or
impliedly by the insurer

HOSTILE FIRE- One that escapes from the place where it was intended to burn and ought to be.
- Insurer is liable

FRIENDLY FIRE- One that burns in a place where it was intended to burn and ought to be
- Insurer is not liable

Measure of Indemnity
1. Open policy: only the expense necessary to replace the thing lost or injured in the condition it was
at the time of the injury
2. Valued policy: the parties are bound by the valuation, in the absence of fraud or mistake
Note: It is very crucial to determine whether a marine vessel is covered by a marine insurance or fire
insurance. The determination is important for 2 reasons:
1. Rules on constructive total loss and abandonment applies only to marine insurance;
2. Rule on co-insurance applies primarily to marine insurance;
3. Rule on co-insurance applies to fire insurance only if expressly agreed upon. (Commercial Law
Reviewer, Aguedo Agbayani, 1988 ed.)
ALTERATION AS A SPECIAL GROUND FOR RESCISSION BY INSURER
Requisites:
1. The use or condition of the thing is specifically limited or stipulated in the policy;
2. Such use or condition as limited by the policy is altered;
3. The alteration is made without the consent of the insurer;
4. The alteration is made by means within the control of the insured;
5. The alteration increases the risk; (Sec. 168) and
6. There must be a violation of a policy provision. (Sec. 170)
Fall-of-building clause
A clause in a fire insurance policy that if the building or any part thereof falls, except as a
result of fire, all insurance by the policy shall immediately cease.
Option to rebuild clause
A clause giving the insurer the option to reinstate or replace the property damaged or
destroyed or any part thereof, instead of paying the amount of the loss or the damage.
The insurer, after electing to rebuild, cannot be compelled to perform this undertaking by
specific performance because this is an obligation to do, not to give. Remedy: Art. 1167, NCC.
XVIII. CASUALTY OR ACCIDENT INSURANCE
Insurance covering loss or liability arising from accident or mishap, excluding those falling
under other types of insurance such as fire or marine. (Sec. 174)
Classifications:
1. Insurance against specified perils which may affect the person and/or property of the insured.
(accident or health insurance)

Examples: personal accident, robbery/theft insurance


2. Insurance against specified perils which may give rise to liability on the part of the insured for
claims for injuries to or damage to property of others. (third party liability insurance)
Insurable interest is based on the interest of the insured in the safety of persons, and their
property, who may maintain an action against him in case of their injury or destruction,
respectively.
Examples: workmens compensation, motor vehicle liability
In a third party liability (TPL) insurance contract, the insurer assumes the obligation by paying
the injured third party to whom the insured is liable. Prior payment by the insured to the third
person is not necessary in order that the obligation may arise. The moment the insured
becomes liable to third persons, the insured acquires an interest in the insurance contract
which may be garnished like any other credit. (Perla Comapnia de Seguro, Inc vs. Ramolete,
205 SCRA 487)
Aside from compulsory motor vehicle liability insurance, the Insurance Code contains no other
provisions applicable to casualty insurance. Therefore, such casualty insurance are governed
by the general provisions applicable to all types of insurance, and outside of such statutory
provisions, the rights and obligations of the parties must be determined by their contract,
taking into consideration its purpose and always in accordance with the general principles of
insurance law.

In burglary, robbery and theft insurance, the opportunity to defraud the insurer the moral
hazard is so great that insurer have found it necessary to fill up the policies with many
restrictions designed to reduce the hazard. Persons frequently excluded are those in the
insureds service and employment. The purpose of the exception is to guard against liability
should theft be committed by one having unrestricted access to the property. (Fortune
Insurance vs. CA, 244 SCRA 208)

Right of a third party injured to sue the insurer


1. Indemnity against liability A third party injured can directly sue the insurer.
2. Indemnity for actual loss or reimbursement after actual payment by the insured A third party has
no cause of action against the insurer (Sec. 53, Bonifacio Bros. v. Mora, 20 SCRA 261).

The insurer is not solidarily liable with the insured. The insurers liability is based on contract;
that of the insured is based on torts. Furthermore, the insurers liability is limited by the
amount of the insurance coverage (Pan Malayan Insurance Corporation v. CA, 184 SCRA 54).

INTENTIONAL vs. ACCIDENTAL AS USED IN INSURANCE POLICIES


1. Intentional Implies the exercise of the reasoning faculties, consciousness and volition. Where a
provision of the policy excludes intentional injury, it is the intention of the person inflicting the injury
that is controlling. If the injuries suffered by the insured clearly resulted from the intentional act of
the third person, the insurer is relieve from liability as stipulated. (Biagtan v. the Insular Life Assurance
Co. Ltd., 44 SCRA 58, 1972)
2. Accidental That which happens by chance or fortuitously, without intention or design, which is
unexpected, unusual and unforeseen.
NO ACTION CLAUSE
A requirement in a policy of liability insurance which provides that suit and final judgment be first
obtained against the insured; that only thereafter can the person injured recover on the policy.
(Guingon vs. Del Monte, 20 SCRA 1043)
XIX. COMPULSORY MOTOR VEHICLE LIABILITY INSURANCE (CMVLI)
A species of compulsory insurance that provides for protection coverage that will answer for
legal liability for losses and damages for bodily injuries or property damage that may be
sustained by another arising from the use and operation of motor vehicle by its owner.
Purpose: To give immediate financial assistance to victims of motor vehicle accidents and/or
their dependents, especially if they are poor regardless of the financial capability of motor
vehicle owners or operators responsible for the accident sustained (Shafer v. Judge, RTC, 167
SCRA 386).
Claimants/victims may be a passenger or a 3rd party
It applies to all vehicles whether public and private vehicles.
Note: It is the only compulsory insurance coverage under the Insurance Code.
Method of coverage
1. Insurance policy
2. Surety bond

3. Cash deposit
Passenger Any fare-paying person being transported and conveyed in and by a motor vehicle for
transportation of passengers for compensation, including persons expressly authorized by law or by the
vehicles operator or his agents to ride without fare. (Sec. 373[b])
Third Party Any person other than the passenger, excluding a member of the household or a member
of the family within the second degree of consanguinity or affinity, of a motor vehicle owner or land
transportation operator, or his employee in respect of death or bodily injury arising out of and in the
course of employment. (Sec. 373[c])
No-Fault Clause
A clause that allows the victim (injured person or heirs of the deceased) to an option to file a
claim for death or injury without the necessity of proving fault or negligence of any kind.
Purpose: To guarantee compensation or indemnity to injured persons in motor vehicle
accidents.
Rules:
1. Total indemnity - maximum of P5,000
2. Proofs of loss a.
Police report of accident;
b.
Death certificate and evidence sufficient to establish proper payee;
c.
Medical report and evidence of medical or hospital disbursement.
3. Claim may be made against one motor
vehicle only
4. Proper insurer from which to claim a. In case of an occupant: Insurer of the vehicle in which the occupant is riding, mounting or
dismounting from;
b. In any other case: Insurer of the directly offending vehicle. (Sec. 378)

The claimant is not free to choose from which insurer he will claim the no fault indemnity as
the law makes it mandatory that the claim shall lie against the insurer of the vehicle in which
the occupant is riding, mounting or dismounting from. That said vehicle might not be the one
that caused the accident is of no moment since the law itself provides that the party paying
may recover against the owner of the vehicle responsible for the accident. (Perla Compania de
Seguros, Inc. v. Ancheta, 169 SCRA 144)

This no-fault claim does not apply to property damage. If the total indemnity claim exceeds
P5,000 and there is controversy in respect thereto, the finding of fault may be availed of by
the insurer only as to the excess. The first P5,000 shall be paid without regard to fault. (Prof.
De Leon, p. 716)

The essence of the no-fault indemnity insurance is to provide victims of vehicular accidents or
their heirs immediate compensation although in limited amount, pending final determination
of who is responsible for the accident and liable for the victims injuries or death. (Ibid.)

SPECIAL CLAUSES
A. Authorized Driver Clause
A clause which aims to indemnify the insured owner against loss or damage to the car but limits
the use of the insured vehicle to the insured himself or any person who drives on his order or
with his permission (Villacorta v. Insurance Commissioner)
The requirement that the person driving the insured vehicle is permitted in accordance with
the licensing laws or other laws or regulations to drive the motor vehicle (licensed driver) is
applicable only if the person driving is other than the insured.
B. Theft Clause
A clause which includes theft as among the risks insured against.
Where the car is unlawfully and wrongfully taken without the owners consent or knowledge,
such taking constitutes theft, and thus, it is the theft clause and not the authorized driver
clause that should apply (Palermo v. Pyramids Ins., 161 SCRA 677).
C. Cooperation Clause

A clause which provides in essence that the insured shall give all such information and
assistance as the insurer may require, usually requiring attendance at trials or hearings.
XX. SURETYSHIP
An agreement whereby a surety guarantees the performance by the principal or obligor of an
obligation or undertaking in favor of an obligee. (Sec. 175)
It is essentially a credit accommodation.

It is considered an insurance contract if it is executed by the surety as a vocation, and not


incidentally. (Sec. 20
When the contract is primarily drawn up by 1 party, the benefit of doubt goes to the other
party (insured/obligee) in case of an ambiguity following the rule in contracts of adhesion.
Suretyship, especially in fidelity bonding, is thus treated like non-life insurance in some
respects.

Nature of liability of surety


1. Solidary;
2. Limited to the amount of the bond;
3. It is determined strictly by the terms of the contract of suretyship in relation to the principal
contract between the obligor and the obligee. (Sec. 176)

SURETYSHIP

PROPERTY INSURANCE

Accessory contract
3 parties: surety, obligor and obligee
Credit accommodation
Surety can recover from principal
Bond can be cancelled only with consent of
obligee, Commissioner or court

Principal contract
2 parties: insurer and insured
Contract of indemnity

Requires acceptance of obligee to be valid

Insurer has no such right; only right of subrogation

May be cancelled unilaterally either by insured or insurer


on grounds provided by law
No need of acceptance by any third party

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