Insurance Reviewer Richard Allan A.

Lim
GeneralProvisions contracts,agreementsortransactionsorthatnoseparate
Sec. 1. This Decree shall be known as "The Insurance ordirectconsiderationisreceivedtherefore,shallnotbe
Code". deemedconclusivetoshowthatthemakingthereofdoes
1. Lawsgoverninginsurance not constitute the doing or transacting of an insurance
a. InsuranceCodeof1978 business.
b. Civil Code (Art. 739, 20112012, 20212027, (3)Asusedinthiscode,theterm"Commissioner"means
2186,2207) the"InsuranceCommissioner".
c. Speciallaws 1. Insuranceisariskdistributingbusinessbecausetherisk
i. InsuranceCodeof1978 thatwouldbesufferedbytheinsuredbecomesdistributed
ii. Revised Government Insurance Act of amongtheinsuredthroughthepaymentofpremiums
1977 2. Insurancecontractis:
iii. SocialSecurityActof1954 a. Apromisemadebyoneperson
d. Otherlaws b. To pay another money, or any other thing of
i. R.A.656 value
ii. R.A.4898 c. Uponthehappeningofafortuitousevenbeyond
iii. E.O.250 thecontroloftheparty
iv. R.A.3591 d. Inwhichthepromiseehasaninterestapartfrom
2. Subrogation thecontract
a. Isthelegalsubstitutionwheretheinsurerafter 3. Characteristicsofcontractofinsurance
paying the amount covered by the insurance a. Consensual
policy,stepsintotheshoesoftheinsuredthus b. Voluntary
availinghimselfoftherightsofthelatter. c. Aleatory (depends on happening of contingent
b. Thepurposeistomakethepersonliableforthe event)
loss responsible and to prevent double d. Executed to the insured after payment of
indemnificationoftheinsured premium and executory on the part of insurer
c. Appliesonlytopropertyinsurance untilthepaymentoftheloss
e. Conditional
Sec.2.Whenever usedinthisCode,thefollowingterms f. Contractofindemnity
shallhavetherespectivemeaningshereinaftersetforthor g. Personalcontract
indicated,unlessthecontextotherwiserequires: h. Propertyinlegalcontemplation
(1)A"contractofinsurance"isanagreementwherebyone 4. Insurancecontractvs.ordinarycontract
undertakes for a consideration to indemnify another a. Insured possesses an interest of some kind
againstloss,damageorliabilityarisingfromanunknown capableofpecuniaryestimationcalledinsurable
orcontingentevent. interest
A contract of suretyship shall be deemed to be an b. Insuredissubjecttoariskoflossthroughthe
insurancecontract,withinthemeaningofthisCode,only destructionorimpairmentofthatinterestbythe
happeningofthedesignatedperil
ifmadebyasurety whoorwhich,assuch,isdoingan
c. Insurerassumestheriskofloss
insurancebusinessashereinafterprovided.
d. Such assumption of risk is part of a general
(2) The term "doing an insurance business" or
scheme todistributetheactual lossesamonga
"transactinganinsurancebusiness",withinthemeaning largegroupofpersonsbearingasimilarrisk
ofthisCode,shallinclude: e. Aconsiderationfortheinsurerspromise,where
(a) making or proposing to make, as insurer, any theinsuredpaysaratablecontributioncalleda
insurancecontract; premium
(b)makingorproposingtomake,assurety,anycontract 5. Copingwithrisk
ofsuretyshipasavocationandnotasmerelyincidentalto a. Limitingtheprobabilityofloss
anyotherlegitimatebusinessoractivityofthesurety; b. Limitingtheeffectsofloss
(c) doing any kind of business, including a reinsurance c. Selfinsurance
business,specificallyrecognizedasconstitutingthedoing d. Ignoringtherisk
ofaninsurancebusinesswithinthemeaningofthisCode; e. Transferringtherisktoanother
6. Classificationsofinsurance
(d) doing or proposing to do any business in substance
a. Lifeinsurance
equivalenttoanyoftheforegoinginamannerdesignedto
i. Individuallife
evadetheprovisionsofthisCode. ii. Grouplife
IntheapplicationoftheprovisionsofthisCodethefact iii. Industriallife
that no profit is derived from the making of insurance b. Nonlife
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 Insurance Reviewer Richard Allan A. Lim
i. Marine Sec. 4. The preceding section does not authorize an
ii. Fire insurancefororagainstthedrawingofanylottery,orfor
iii. Casualty oragainstanychanceorticketinalotterydrawingaprize.
c. Contractsofsuretyshipandbonding 1. Elementsofalottery
a. Consideration
Chapter1 b. Prizes
THECONTRACTOFINSURANCE c. Chance
Title1 2. Insuranceisnotawageringcontract
WHATMAYBEINSURED Insurance Gambling
Sec.3.Anycontingentorunknownevent,whetherpastor Distrubute possible loss due Gainthroughchance
future,whichmaydamnifyapersonhavinganinsurable tochance
interest,orcreatealiabilityagainsthim,maybeinsured Avoidsmisfortune Courtsfortune
against,subjecttotheprovisionsofthischapter. Equalizefortune Increases inequality of
Theconsentofthehusbandisnotnecessaryforthevalidity fortune
ofaninsurancepolicytakenoutbyamarriedwomanon Onegainsbutnottheexpense One gains at the expense of
herlifeorthatofherchildren. oftheother theother
Any minor of the age of eighteen years or more, may, Makingawagercreatesrisk Alreadyfacingriskandseeks
notwithstanding such minority, contract for life, health toavoidit
andaccidentinsurance,withanyinsurancecompanyduly Promise to give to the other upon occurrence of specified
event
authorizedtodobusinessinthePhilippines,providedthe
insurance is taken on his own life and the beneficiary
Sec.5.Allkindsofinsurancearesubjecttotheprovisions
appointed is the minor's estate or the minor's father,
ofthischaptersofarastheprovisionscanapply.
mother,husband,wife,child,brotherorsister.
Themarriedwomanortheminorhereinallowedtotake
Title2
out an insurance policy may exercise all the rights and
PARTIESTOTHECONTRACT
privilegesofanownerunderapolicy.
Sec. 6. Every person, partnership, association, or
All rights, title and interest in the policy of insurance
corporationdulyauthorizedtotransactinsurancebusiness
takenoutbyanoriginalowneronthelifeorhealthofa
aselsewhereprovidedinthiscode,maybeaninsurer.
minorshallautomaticallyvestintheminoruponthedeath
1. Partiestothecontractofinsurance
oftheoriginalowner,unlessotherwiseprovidedforinthe
a. Insurertheonewhoassumesoracceptstherisk
policy. of loss and undertakes for a consideration to
1. Requisitesofacontractofinsurance indemnify the insured or to pay him a certain
a. A subject matter which the insured has an sumonthehappeningofaspecifiedcontingency
insurableinterest orevent
b. Eventorperilinsuredagainstwhichmaybeany b. Insuredthepersoninwhosefavorthecontractis
futurecontingenteventorunknownevent,past operativeandwhoisindemnifiedagainst,oristo
orfuture,andadurationfortherisk receiveacertainsumuponthehappeningofthe
c. A promise to pay indemnify in a fixed or specifiedcontingencyorevent
ascertainableamount 2. Whomaybeaninsurer
d. A consideration for the promise, known as a a. Foreignordomesticinsurancecorporation
premium b. Individual,partnershiporassociation
e. Ameetingofthemindsuponalltheforegoing
essentials Sec.7.Anyoneexceptapublicenemymaybeinsured.
2. UnderSec.3,par.1,thecontingencyorunknownevent 1. Capacity of party insured (both must not be a public
mustbeofsuchthatitshappeningwill enemy)
a. Damnify or cause loss to a person having a. Naturalperson
insurableinterest i. Mustbecompetenttomakeacontract
b. Createliabilityasagainsthim ii. Mustpossessaninsurableinterestinthe
3. Theunknowneventmaybepastorfutureandtheinsurer subjectoftheinsurance
isliableforafortuitouseventifitistheeventorperil b. Juridicalpersons
insuredagainstandthatistheproximatecauseoftheloss 2. PublicenemyisanynationwithwhomthePhilippinesis
4. Amarriedwomanmaytakeoutaninterestonthelifeof atwarandincludeseverycitizenorsubjectofthesame
herhusband,asshehasaninsurableinterestonthelatter nation
(Sec.10),orevenonherownseparateproperty.

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 Insurance Reviewer
a. Duringwartime,aprivatecorporationisdeemed
anenemyiftheyarecontrolledbyenemyaliens
b. Effectofwar
i. Propertyinsuranceceasestobevalidas
soon as insured becomes a public
enemy
ii. Lifeinsurancetheinsurancecontractis
abrogatedandtheinsuredisentitledto
thecashorreservevaluewhichisthe
excess of the premiums paid over the
actual risk carried during the years
whenthepolicyhasbeeninforce
c. The termination of war does not revive the
contracthencetheinsurerisnotliableevenifthe
lossissufferedbytheinsuredattheendofthe
war.
Sec. 8. Unless the policy otherwise provides, where a
mortgagorofpropertyeffectsinsuranceinhisownname
providingthatthelossshallbepayabletothemortgagee,
or assigns a policy of insurance to a mortgagee, the
insurance is deemed to be upon the interest of the
mortgagor,whodoesnotceasetobeapartytotheoriginal
contract,andanyactofhis,priortotheloss,whichwould
otherwiseavoidtheinsurance,willhavethesameeffect,
althoughthepropertyisinthehandsofthemortgagee,but
anyactwhich,underthecontract ofinsurance,istobe
performed by the mortgagor, may be performed by the
mortgageethereinnamed,withthesameeffectasifithad
beenperformedbythemortgagor.
1. The mortgagor and the mortgagee have a separate
insurableinterestinthepropertymortgaged.Hence,the
insurancetakenbyoneinhisownnameandinhisown
favordoesnotinuretothebenefitoftheother
2. Mortgagorhasaninsurableinteresttotheextentofthe
value of the property, even though the mortgage debt
equals such value. The reason is that the loss or
destructionofthepropertymortgageddoesnotextinguish
themortgagedebt
3. Mortgageehasaninsurableinterestinthepropertytothe
extentofthedebtsecured,aswhatheisinsuringishis
owninterestinthelien
4. Themortgagorcannotrecoverbeyondthefullamountof
hislossandthemortgageecannotrecoverinexcessofhis
creditatthetimeofthelossnorthevalueoftheproperty
insured
Sec.9.Ifaninsurerassentstothetransferofaninsurance
fromamortgagortoamortgagee,and,atthetimeofhis
assent,imposesfurtherobligationontheassignee,making
anewcontractwithhim,theactofthemortgagorcannot
affecttherightsofsaidassignee.
1. Firepolicybeforeitbecomesafixedliabilitycannotbe
subjecttoassignment,asitisapersonalcontractinthe
absenceofacontraryprovision
For personal use only. Unauthorized distribution prohibited
Richard Allan A. Lim
2. Marine policy is assignable without insurers consent
unlessthereisarequirementofconsentoftheinsurer
3. Insurersconsentisrequiredincasualtypolicy
4. In life insurance, the policy may be assigned beore or
afterthelossoccurs,regardlessofwhethertheassignee
has aninsurable interest inthelife oftheinsured. But
assignmenttoonewhohasnoinsurableinterestshallnot
beupheld.
Title3
INSURABLEINTEREST
Sec.10.Everypersonhasaninsurableinterestinthelife
andhealth:
(a)Ofhimself,ofhisspouseandofhischildren;
(b)Ofanypersononwhomhedependswhollyorinpart
foreducationorsupport,orinwhomhehasapecuniary
interest;
(c)Ofanypersonunderalegalobligationtohimforthe
paymentofmoney,orrespectingpropertyorservices,of
which death or illness might delay or prevent the
performance;and
(d)Ofanypersonuponwhoselifeanyestateorinterest
vestedinhimdepends.
1. Twogeneralclassesoflifeinsurance
a. Insuranceupononeslife(Sec10(a))
b. Insuranceuponthelifeofanother(Sec.10ato
d)
2. Thefollowinghaveaninsurableinterestinthelifeofeach
other
a. Spouses
b. Legitimateascendantsanddescendants
c. Parents and their legitimate children and the
illegitimatechildrenofthelatter
d. Parents and their illegitimate children and the
legitimateorillegitimatechildrenofthelatter
e. Legitimate brothers or sisters, whether full or
halfblood
3. Underourlaw,theremustbeanexpectationofpecuniary
benefit inthelifeoftheinsuredinordertosustainthe
insurance, which means a risk of actual monetary loss
fromhisdeath
Sec. 11. The insured shall have the right to change the
beneficiary he designated in the policy, unless he has
expresslywaivedthisrightinsaidpolicy.
1. Beneficiaryreferstothepersondesignatedinthecontract
oflife,healthoraccidentinsuranceastheonewhoisto
receivethebenefitswhichbecomepayable,accordingto
thetermsofthecontractatthedeathoftheinsured
2. Beneficiarymaybe:
a. Theinsuredhimself
b. Thirdpersonwhopaidaconsideration
c. Thirdpersonthoughmerebountyoftheinsured
3. Limitationsontheappointmentofabeneficiary
a. Article2012oftheNCCwhere thosewhoare
forbidden to receive donations under Art. 739
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 Insurance Reviewer
cannot be made beneficiaries in contract of
insurance
b. Art.739NCC
i. Thosemadebetweenpersonswhowere
guilty of adultery and concubinage at
thetimeofthedonation
ii. Those made between persons found
guiltyofthesamecriminaloffense,in
considerationthereof
iii. Those made to a public officer or his
wife,descendants, andascendants,by
reasonofhisoffice.
4. Therighttochangebeneficiaryceasesuponthedeathof
theinsuredandcannotbeexercisedbyhisassigneesor
personalrepresentatives.
5. If beneficiary dies before the insured, the interest or
proceedsshouldgototheestateoftheinsured
6. Designationofbeneficiaries
a. Children
b. Husband,wifeorwidow
c. Husband/wifeandchildren
d. Family
e. Heirsorlegalheirs
f. Estateorlegalheirs
Sec.12.Theinterest ofabeneficiaryinalife insurance
policy shall be forfeited when the beneficiary is the
principal, accomplice, or accessory in willfully bringing
aboutthedeathoftheinsured;inwhichevent,thenearest
relative oftheinsuredshallreceivetheproceedsofsaid
insuranceifnototherwisedisqualified.
1. Nearestrelativesoftheinsuredinorderofenumeration
a. Legitimatechildren
b. Parents
c. Grandparentsorascendantsofnearestdegree
d. Theillegitimatechildren
e. Survivingpouse
f. Collateralrelatives
i. Siblingsoffullblood
ii. Siblingsofhalfblood
iii. Niecesandnephews
g. Indefaultoftheabove,thestateshallreceivethe
same
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
directlydamnifytheinsured,isaninsurableinterest.
1. Insurableinterestmaybe
a. Inthepropertyitself(ownership_
b. Any relation thereto (interest of a trustee or a
commissionagent)
c. Liabilityinrespectthereof(Interestofacarrier
ordepositoryofgoods)
Sec.14.Aninsurableinterestinpropertymayconsistin:
For personal use only. Unauthorized distribution prohibited
Richard Allan A. Lim
(a)Anexistinginterest;
(b)Aninchoateinterestfoundedonanexistinginterest;or
(c)Anexpectancy,coupledwithanexistinginterestinthat
outofwhichtheexpectancyarises.
1. Existinginterest
a. Legaltitletrusteeofpropertynotyetdelivered,
mortgagorofpropertymortgaged,lessor
b. Equitable title purchaser of property before
delivery or has performed conditions of sale,
mortgagor of property before the expiration of
periodofredemptionbutaftertheforeclosure
2. Inchoateinterestfoundedonanexistinginterest
a. Stockholderhasinchoateinterestintheproperty
ofthecorporation inwhichheownssharesof
stock
3. Expectancycoupledwithanexistinginterest
a. Farmerhasanexpectancyonthecropsgrowing
onhisownland,oronhisowncropsontheland
growingonanothersland.
Sec. 15. A carrier or depository of any kind has an
insurableinterestin athingheldbyhimassuch,tothe
extentofhisliabilitybutnottoexceedthevaluethereof.
1. A person having qualified property in chattels has an
insurableinterestinthepropertyasmaybesubjectina
validcontractofinsurance
Sec. 16. A mere contingent or expectant interest in
anything,notfoundedonanactualrighttothething,nor
uponanyvalidcontractforit,isnotinsurable.
1. A mere hope or expectancy may be frustrated by the
happening of some event uncoupled with any present
legalrightwillnotsupportacontractofinsurance
2. A son cannot insure the property he expects to inherit
fromhisfatherashisinterestismerelyanexpectancy
3. UndertheFC,parents,spousesandchildrencaninsure
thelifeofeachotherduetoamutualobligationtosupport
eachother
4. A general unsecured creditor cannot insure specific
propertyofthedebtorwhoisstillalive,buthecaninsure
them after the death of the debtor since the personal
liabilityceases.Hemayalsohavetheminsuredoncehe
receivesafavorablejudgmentbuthemustshowthatthe
debtorhasnootherpropertyinordersatisfythejudgment
Sec.17.Themeasureofaninsurableinterestinpropertyis
theextenttowhichtheinsuredmightbedamnifiedbyloss
orinjurythereof.
1. Evenifthevalueoftheinsuranceisgreater,theindemnity
would be the value of the property as stated in the
indemnityrule
Sec. 18. No contract or policy of insurance on property
shallbeenforceableexceptforthebenefitofsomeperson
havinganinsurableinterestinthepropertyinsured.
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 Insurance Reviewer
1. Aninsurancetakenoutbyapersonagainstthepropertyin
whichhehasnoinsurableinterestisvoid
2. Itisnotnecessarythatthebeneficiaryhasaninsurable
interestinthelifeoftheinsured
3. Thedoctrineofwaiverorestoppeldoesnotapplysince
thepublichasaninterestinthematterindependentofthe
consentorconcrrenceoftheparties
4. Example:Xtookoutaninsurancepolicyforfireoverthe
merchandise he has in the property of Y without the
consent of Y deemed automatically transferred and
assignedtoYisvoid.
5. Measureofliabilityorindemnityininsurance
a. Marine insurance the maximum indemnity
whichhemightobtainexceptinvaluedpolicies
where the valuation of the thing insured is
conclusivebetweenparties.
b. Liabilityinsurancetheinsurerspromisetopay
topaytheproceedsofthepolicyonbehalfofthe
insuredtoathirdpersononwhomtheinsuredis
liable
c. Life insurance the amount the insurer himself
boundtopay
d. Personal accident insurance the loss sustained
bythepersonwhoeffectedthepolicy
Sec.19.Aninterestinpropertyinsuredmustexistwhen
theinsurancetakeseffect,andwhenthelossoccurs,but
notexistinthemeantime;andinterestinthelifeorhealth
ofapersoninsuredmustexistwhentheinsurancetakes
effect, but need not exist thereafter or when the loss
occurs.
1. In life insurance, the insurable interest requirement is
satisfiediftheinsurableinterestexistsatthetimeofthe
procurementofthepolicy,evenifitceasedtoexistathe
timeoftheinsuredsdeath
2. Itissufficientthattheinsurableinterestexistsatthetime
oftheattachment
3. Insurableinterest
Life Property
Unlimited Limitedtovalueofproperty
Neednotexistatthetimeof SeeSec.19
loss
Benefit to be derived from Does not afford a sufficient
thecontinuedexistenceoflife insurable interest unless
neednohaveanylegalbases expectation has a basis of
whatever legalright
Sec. 20. Except in the cases specified in the next four
sections, and in the cases of life, accident, and health
insurance, a change of interest in any part of a thing
insured unaccompanied by a corresponding change in
interest in the insurance, suspends the insurance to an
equivalentextent, until theinterest inthethingandthe
interestintheinsurancearevestedinthesameperson.
For personal use only. Unauthorized distribution prohibited
Richard Allan A. Lim
1. Reason isthat toprovide against changes which might
supplyamotivetodestroyorlessentheinterest ofthe
insuredinprotectingit
2. Referstoanabsolutetransferofproperty
3. Exceptions
a. Inlife,healthandaccidentinsurance
b. SeeSec21to24
Sec.21.Achangeininterestinathinginsured,afterthe
occurrenceofaninjurywhichresultsinaloss,doesnot
affecttherightoftheinsuredtoindemnityfortheloss.
1. After the loss happened, the liability of the insurer
becomesfixed,itisabsoluteandcannotbedelimitedby
agreement
2. Theinsuredhastheabsoluterighttotransfer thething
insuredaftertheoccurrenceoftheloss
Sec.22.Achangeofinterestinoneormoreseveraldistinct
things,separatelyinsuredbyonepolicy,doesnotavoidthe
insuranceastotheothers.
1. If the things are insured separately in one policy, the
contractisdivisibleandtheviolationofaconditiondoes
notaffecttheothers.
2. Thedivisibilityofthecontractdependsupontheintention
andlanguageoftheparty
Sec.23.Achangeoninterest,bywillorsuccession,onthe
deathoftheinsured,doesnotavoidaninsurance;andhis
interest intheinsurancepassestothepersontakinghis
interestinthethinginsured.
1. SeeArt.777NCC
Sec.24.Atransferofinterestbyoneofseveralpartners,
joint owners, or owners in common, who are jointly
insured,totheothers,doesnotavoidaninsuranceeven
thoughithasbeenagreedthattheinsuranceshallcease
uponanalienationofthethinginsured.
1. The transfer to others who are jointly insured will not
avoidtheinsuranceevenifthereisastipulationtothe
contrary
a. Thetransferdoesnotaffecttherisksincethereis
no new party brought into contractual
relationshipwiththeinsurer.
b. Exceptions
i. Withouttheconsentoftheinsurerand
thereisastipulationorconditionthatin
caseofanysale,transferorchangeof
title of any property insured by the
company, or any individual interest,
suchinsurancewillceaseandbevoid
2. Thealienationortransfertoathirdpersonwillavlidthe
policy, butthesaleofapartnerofhisinterestdoesnot
affecttheinsuranceoftheothers
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 Insurance Reviewer
Sec.25.Everystipulationinapolicyofinsuranceforthe
paymentoflosswhetherthepersoninsuredhasorhasnot
any interest in the property insured, or that the policy
shallbereceivedasproofofsuchinterest,andeverypolicy
executedbywayofgamingorwagering,isvoid.
1. Apolicyissuedthepersonwithoutinterestinthesubject
matterofthewagerpolicyorcontractisvoid.
2. Whetherornotdependsonthecontractofinsuranceor
thestipulationstherein
3.
Title4
CONCEALMENT
Sec. 26. A neglect to communicate that which a party
knowsandoughttocommunicate,iscalledaconcealment.
1. Inhighlyaleatorycontractssuchasinsurance,theparties
havefourprimaryconcerns:
a. Correctestimationofrisktodeterminewhether
toassumeitornot,andtodeterminetheamount
ofpremium
b. Precise determinationofriskwhichdetermines
the extent of the contingent duty to pay
undertakenbytheinsurer
c. Suchcontroloftheriskafteritisassumedaswill
enabletheinsurertoguardagainsttheincreased
riskbecauseofchangeinconditions
d. Determiningwhetherornotalossoccurredand
ifso,theamountoflossincurred
2. Devicesforascertainingriskandloss
a. Devices of concealment (Sec. 26) and
representation(Sec.36)
b. Warranties(Sec.67,68)
c. Exceptions
d. Executorycontracts(Sec.68)
e. Conditionsprecedent
3. Requisitesofconcealment
a. A party knows a fact which he neglects to
communicateordisclosetotheother
b. Suchpartyconcealingisdutyboundtodisclose
suchfacttotheother
c. Suchpartyconcealingmakesnowarrantyofthe
factconcealed
d. That the other party has not the means of
ascertainingthefactconcealed
Sec. 27. A concealment whether intentional or
unintentional entitles the injured party to rescind a
contract of insurance. (As amended by Batasang
PambansaBlg.874)
1. Effectofconcealment
a. Bytheinsuredofwhichheisawarecontract
voidable at the insurers option as they are
contractsofutmostgoodfaith
b. By the insurer the contractual duty to diclose
evenmorestringentlysinceheyareinagreater
positiontobargain
For personal use only. Unauthorized distribution prohibited
Richard Allan A. Lim
2. Theinsurerneednotprovefraudinordertorescindthe
contract on the ground of concealment to protect an
insurerfromfraudulentclaims
Sec. 28. Each party to a contract of insurance must
communicatedtotheother,ingoodfaith,allfactswithin
hisknowledgewhicharematerialtothecontractandasto
whichhemakesnowarranty,andwhichtheotherhasnot
themeansofascertaining.
1. Themattersthatmustbecommunicatedevenifthereisan
absenceofinquiry
a. Thosethatarematerialtothecontract(Sec.31,
34,35)
b. Those which the other party has no means of
ascertainingthesaidfacts(Sec.30,32,33)
c. As to which the party with the duty to
communicatemakesnowarranty(Sec.6776)
2. Theeffectofmaterialconcealmentcannotbeavoidedby
mere allegation that the insurer could have known and
discovered theillnessordiseasewhichtheinsured had
concealed.
Sec. 29. An 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,entitlestheinsurertorescind.
1. Refers to the falsity of a warranty and must be
intentionalandfraudulentinorderthatacontractmaybe
rescinded, and that is a omission on the part of the
insured.
Sec.30.Neitherpartytoacontractofinsuranceisbound
to communicate information of the matters following,
exceptinanswertotheinquiriesoftheother:
(a)Thosewhichtheotherknows;
(b)Thosewhich,intheexerciseofordinarycare,theother
oughttoknow,andofwhichtheformerhasnoreasonto
supposehimignorant;
(c)Thoseofwhichtheotherwaivescommunication;
(d)Thosewhichproveortendtoprovetheexistenceofa
riskexcludedbyawarranty,andwhicharenototherwise
material;and
(e)Thosewhichrelatetoariskexceptedfromthepolicy
andwhicharenototherwisematerial.
1. Asageneralrule,mattersmadesubjectofinquirymustbe
deemedmaterial,eventhoughotherwisetheymightnobe
soregarded,andtheinsuredisrequiredtomakeafulland
truedisclosuretoquestionsasked
2. Whennodutytodisclose
a. Alreadyknowntotheinsurer(30a)oroughtto
beknowntotheinsurerorhisagent(30b,32)
b. Riskexemptedfrompolicy(30d,e)
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 Insurance Reviewer
c. Natureoramountofinsuredsinterestunlessin
answertoaninquiryexceptasprescribedbySec.
51.
Sec.31.Materialityistobedeterminednotbytheevent,
butsolelybytheprobableandreasonableinfluenceofthe
factsuponthepartytowhomthecommunicationisdue,in
forminghisestimateofthedisadvantagesoftheproposed
contract,orinmakinghisinquiries.
1. To be material, a fact need not increase the risk or
contributetoanylossordamagesuffered,itissufficientif
theknowledgeofitwouldinfluencethepartiesinmaking
acontract
a. Atthetimethecontractbecomescompleteand
binding
2. Theinsuredcannotbeguiltyofconcealment wherethe
factconcealedisnotmaterial.
Sec.32.Eachpartytoacontractofinsuranceisboundto
knowallthegeneralcauseswhichareopentohisinquiry,
equallywiththatoftheother,andwhichmayaffectthe
politicalormaterial perilscontemplated;andallgeneral
usagesoftrade.
1. Hence,theinsuredneednotcommunicatepublicevents
likewar
Sec.33.Therighttoinformationofmaterialfactsmaybe
waived,eitherbythetermsoftheinsuranceorbyneglect
tomakeinquiryastosuchfacts,wheretheyaredistinctly
implied in other facts of which information is
communicated.
Sec. 34. Information of the nature or amount of the
interestofoneinsuredneednotbecommunicatedunlessin
answertoaninquiry,exceptasprescribedbysectionfifty
one.
1. UnderSec.51(e),itisrequiredinthepolicyofinsurance
mustspecifytheinterestoftheinsuredintheproperty
insured,ifheisnottheabsoluteownerhereofsothatthe
insured may determine the extent of the insureds
insurableinterest/
2. Butthereisnoneedtodisclosetheinterestintheproprety
insuredifnotabsolute
Sec.35.Neitherpartytoacontractofinsuranceisbound
to communicate, even upon inquiry, information of his
ownjudgmentuponthemattersinquestion.
Title5
REPRESENTATION
Sec.36.Arepresentationmaybeoralorwritten.
1. Representations
For personal use only. Unauthorized distribution prohibited
Richard Allan A. Lim
a. Arefactualstatementsmadebytheinsuredatthe
timeof,orpriorto,theissuance ofthepolicy
(Sec.37)togiveinformationtotheinsurerand
otherwiseinducehimtoenterintoacontractof
insurance
b. Inducementstoenterintocontract
2. Misrepresentationsininsuranceisastatement
a. Asafactofsomethingwhichisuntrue
b. Whichtheinsuredstatedwithhisknowledgethat
it is untrue and with an intent to deceive, or
which he states positively as true without
knowingittobetrueandwhichhasatendency
tomislead
c. Wheresuchfactineithercaseismaterialtothe
risk
Sec.37.Arepresentationmaybemadeatthetimeof,or
before,issuanceofthepolicy.
Sec. 38. The language of a representation is to be
interpretedbythesamerulesasthelanguageofcontracts
ingeneral.
1. Representations are liberally construed in favor of the
insuredandarerequiredtobeonlysubstantiallytrue
Sec.39.Arepresentationastothefutureistobedeemeda
promise,unlessitappearsthatitwasmerelyastatementof
belieforexpectation.
1. Promussoryrepresentations
a. Usedtoindicateaparolororalpromisemadein
connection with the insurance but not
incorporatedinthepolicy
b. Anundertakingbytheinsured,insertedintothe
policyandisnotspecificallymadeawarranty.
2. Theremustbeactualfraudininducingtheacceptanceof
therisktoavoidthepolicyofinsurance
3. Astosuchrepresentations,thegoodfaithoftheinsured
furnishesthecriterionofturhfortheyareonlyfalsewhen
intention, opinion or belief as stated is not honestly
entertained.
Sec. 40. A representation cannot qualify an express
provisioninacontractofinsurance,butitmayqualifyan
impliedwarranty.
1. Representationisnotapartofthecontractbutmerelya
collateralinducementtoit,butitmayqualifyanimplied
warranty
Sec. 41. A representation may be altered or withdrawn
beforetheinsuranceiseffected,butnotafterwards.
1. Sinceinsurerwasinducedbysuchrepresentationtoenter
intothecontract
Sec.42.Arepresentationmustbepresumedtorefertothe
dateonwhichthecontractgoesintoeffect.
1. Thecontractiseffectiveuponagreementoftheparties
7
 Insurance Reviewer Richard Allan A. Lim
2. Statementspromissoryofconditionstoexistsubsequent information material from with intent to induce the
tothecompletionofthecontract maybeconditionsor insurer insurer to enter into the
warrantiesandarenotrepresentations. contract
Samerulesastodeterminingmateriality
Sec.43.Whenapersoninsuredhasnopersonalknowledge Givesinsurertherighttorescindthecontract
ofafact,hemayneverthelessrepeatinformationwhichhe Theinjuredpartyisentitledtorescindthecontract,whether
has upon the subject, and which he believes to be true, concealmentormisrepresentationisintentionalornot
withtheexplanationthathedoessoontheinformationof
others; or he may submit the information, in its whole Sec.47.Theprovisionsofthischapterapplyaswelltoa
extent,totheinsurer;andinneithercaseisheresponsible modificationofacontractofinsuranceastoitsoriginal
for its truth, unless it proceeds from an agent of the formation.
insured,whosedutyitistogivetheinformation.
1. If the representation turns out to be false, he is not
responsiblethereforeprovidedhegivesexplanationthat
hedoessoontheinformationoftheothers
2. If proceeds from the agent of the insured who has the
duty,theinsuredwillbeliable
3. Sameprincipleappliestoagentofinsurer

Sec.44.Arepresentationistobedeemedfalsewhenthe
factsfailtocorrespondwithitsassertionsorstipulations.
1. Coversmisrepresentations
2. Unlike warranties (67), they need not be actually true,
onlysubstantiallytrue.
3. Inordertoavoidthepolicy,therepresentationsmustbe
falseinamaterialandsubstantialaspect
4. Arepresentationissubstantiallytruewhenitistruein
everymaterialaspectoftherisk.
5. Inmarineinsurance,theexactandwholetruthisneeded.
6. Representationwrittenasapolicyeveninsuchformasto
admitofitbeingconstruedasanexecutoryagreementor
promissory representation will be construed as an
affirmativerepresentationofapresentfact(42)asmuch
aspossibletosavethepolicyfromavoidance

Sec. 45. If a representation is false in a material point,

whether affirmative or promissory, the injured party is
entitled to rescind the contract from the time when the
representationbecomesfalse.Therighttorescindgranted
bythisCodetotheinsureriswaivedbytheacceptanceof
premiumpaymentsdespiteknowledgeofthegroundfor
rescission.(AsamendedbyBatasangPambansaBlg.874).
1. Tobedeemedfalse,itissufficientiftherepresentation
failstocorrespondwiththefacts(44)atamaterialpoint
(45)astheyarethefoundationsofthecontract
2. Collusionofagentwithinsuredvitiatesthepolicy

Sec.46.Thematerialityofarepresentationisdetermined
bythesamerulesasthematerialityofaconcealment.
1. Test of materiality is by the probably and reasonable
influence of the facts upon the party to whom the
representationwasmade.
2. Concealmentvs.Misrepresentation
Concealment Misrepsentation
Insured withholds Makes erroneous statements
For personal use only. Unauthorized distribution prohibited 8