INSURANCE REVIEWER (De Leon & Rodriguez) The fact that:

9 no profit is derived from the making of insurance contracts, or that

General Provisions 9 no separate or direct consideration is received therefore,
shall not be deemed conclusive to show that it does not constitute the doing or
SEC 1. This Decree shall be known as the Insurance Code of 1978. transacting of an insurance business.
GR: right to subrogation upon
3) "Commissioner" means the "Insurance Commissioner"
Notes: payment of of insurance claim by
9 Subrogation only applies to property insurance the insurer Notes:
9 Privity of contract is not essential in subrogation Ex: (1) policy doesnt cover any risk 9 It is a contract of indemnity for non-life insurance
9 Loss or injury must be covered by policy (2) thru the act of the insured or 9 Tebbets v Guarantee Co.: Insurance contract is determined by its nature
9 Insured can only recover once insurer (Pan Malayan Isurance vs and not by designation of the parties
9 Right of insurer against 3rd party is limited only to amount recoverable
CA) by Elements of contract of insurance:
the insured Principle of Imdemnity ! Subject matter = the thing insured
9 Insurer can be subrogated only to such rights as the insured may have ! Consideration = premiums based on probability of loss and extent of liability
9 Pan Malayan Insurance v. CA: where the insurer pays the insured the ! Object and purpose = transfer and distribution of risk of loss, damage
value of the lost goods without notifying the carrier who has in good faith or liability
settled the claim for loss of the insured, the settlement is binding on both Elements of a contract of insurance
insurer and insured. The right to subrogation can no longer be exercised ! 1. Insurable interest (susceptible of pecuniary estimation)
9 Civil code provisions supplement the Insurance Code ! 2. Risk of loss
9 Construction in California Courts apply to our Insurance Code ! 3. Insurer assumes risk of loss
there must be a risk covered by the policy to entitle the insurer to ! 4. Scheme to distribute actual losses proportionally among a large group or
subrogation. substantial number of persons bearing a similar risk
SEC 2. Wherever used in this Code, the following terms shall have the ! 5. Consideration in the form of premiums
respective meanings, unless the context otherwise requires: Nature and characteristics of contract
1) Contract of insurance o Consensual
9 an agreement where one undertakes for a consideration o Voluntary
9 to indemnify another against loss, damage, or liability " With exceptions: motor vehicles, social insurance, those
9 arising from an unknown or contingent event. that result by operation of law
A contract of suretyship: o Aleatory
9 shall be deemed to be an insurance contract " Liability of the insurer depends on some contingent event
9 only if made by a surety who is doing an insurance business o Executed on the part of the insurer
2) "Doing an insurance business" or "transacting an insurance " It is executed as to the insured after his payment of the
business", shall include: premium
(a) making or proposing to make, as insurer, any insurance contract; o Conditional on the part of the insurer
(b) making or proposing to make, as surety, any contract of suretyship as a o Contract of indemnity for non-life insurance.
vocation and not as merely incidental to any other business; " Only for indemnity, not for profit
(c) doing any kind of business, including a reinsurance business, o An investment in life insurance.
specifically recognized as constituting the doing of an insurance business; o Personal contract
(d) doing or proposing to do any business equivalent to any of the " Except life insurance policies
foregoing in a manner designed to evade the provisions of this Code. o Property in legal contemplation
o It is one of perfect good faith.
o It is a contract of adhesion
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 9 All insurance except liability can be fairly thought of as first-party Any minor of the age of 18 years or more, may, notwithstanding such minority,
insurance. (Liability is 3rd party insurance) contract for life, health and accident insurance, with any insurance company duly
9 Where inequitable conduct is shown by an insurance firm, it is estopped authorized to do business in the Philippines, provided the insurance is taken on his
from enforcing forfeitures or exemptions in its favor. own life and the beneficiary appointed is the minor's estate or the minor's father,
9 Travellers Insurance & Surety Corp v. CA mother, husband, wife, child, brother or sister (useless now)
The right of a third person to sue the insurer depends on whether the
contract of insurance is intended to benefit the 3rd person or just the The married woman or the minor herein allowed to take out an insurance policy
insurer. may exercise all the rights and privileges of an owner under a policy.
Insurance contract must be attached to the complaint in order for the
court to ascertain the limits and real nature of the liability. All rights, title and interest in the policy of insurance:
Classifications of insurance under the code: 9 taken out by an original owner on the life or health of a minor
o Life shall automatically vest in the minor:
" Individual 9 upon the death of the original owner,
" Group 9 unless otherwise provided for in the policy.
" Industrial
o Non-life Notes:
" Marine 9 Minor may enter only in life insurance, any other kind is voidable
" Fire 9 RA 6809 lowered the age of majority to 18yrs old, therefore a person who
" Casualty is 18 yrs of age may take insurance on his life or property w/o any
9 Interpretation of contracts: restriction.
o As a whole
o Construed in favor of the insured (adhesion) - Ambiguities must be SEC 4. The preceding section does not authorize an insurance:
strictly interpreted against the party that caused them. 9 for or against the drawing of any lottery or
9 Principal object and purpose test 9 for or against any chance or ticket in a lottery drawing a prize
o Principal object must be indemnity in order for it to be a contract
of insurance Notes:
9 A person who purchases a ticket cannot insure himself against the failure
Title 1. What May Be Insured of his ticket to win a prize.
9 Contract of insurance is a contract of indemnity failure to win a prize
SEC 3. Any: would not cause him damage.
9 contingent or unknown event, 9 Lottery: extends to all schemes for the distribution of prizes by chance
9 whether past or future, o Elements:
9 which may damnify a person having an insurable interest, or create a " Consideration
liability against him, " Prize
may be insured against. " Chance

The consent of the husband is not necessary for the validity of an insurance SEC 5. All kinds of insurance are subject to the provisions of this chapter so
policy taken out by a married woman on her life or that of her children. far as the provisions can apply.

Note: It applies to marine, fire, casualty, life and other kinds of insurance

!"#$%&'()*+',-.'/**0'*('&.'!.*1'213'4*3)567.8''9'1*,':;2652)58.3'<*7'(7=0.)>?'@'ABBC9ABDB'@'E,,<F'G5;;.62>' ' A'@'H 2 , 5 I * ' J ' K 2 ; 5 : 2 ' '

 Title 2. Parties To The Contract
SEC 6. Every person, partnership, association, or corporation:
9 duly authorized to transact insurance business
may be an insurer.
Notes:
9 Parties to a contract of insurance
o Insurer agrees to indemnify
o Insured party to be indemnified
o Beneficiary person who receives the benefits of the policy
9 This article enumerates the parties who can be an insurer
9 An individual, partnership, or association, foreign or domestic insurance
company needs a certificate of authority from the Insurance Commissioner
to engage in the business of insurance
9 The Certificate of Authority issued to those who posses the required
capital assets and those who comply with all other requisites prov. by law.
9 Insurance business are affected with public interest
SEC 7. Anyone except a public enemy may be insured
Notes:
9 Public enemy: a nation with whom the Philippines is at war
o Also includes every citizen or subject of such nation
o Even a corporation whos majority SHs are subjects of such nation can
be considered as an enemy corporation and cannot be insured.
SEC 8.
UNLESS the policy otherwise provides, where a mortgagor of property effects
insurance in his own name:
9 providing that:
o the loss shall be payable to the mortgagee, or
o assigns a policy of insurance to a mortgagee,
the insurance is deemed to be upon the interest of the mortgagor,:
9 who does not cease to be a party to the original contract, and
o 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,
9 BUT any act which 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.
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Notes:
Mortgagor and mortgagee have separate insurable interests
o Mortgagor: to the extent of property to its full value
o Mortgagee: only to the extent of debt secured
Ways for the contract to be for the benefit of mortgagee
o When it is assigned with consent of insurer
o When the mortgagee becomes pledgee
o A rider
o Standard mortgage clause
o Contract duty of mortgagor
Mortgagor may take an insurance payable to:
o To himself
" But the mortgagee has a lien on the proceeds by virtue of the
mortgage
o To the Mortgagee
" In case of loss, the mortgagee is entitled to the extent of the credit;
the remainder shall accrue to the mortgagor
" Upon recovery of the mortgagee, the debt is extinguished
" Mortgagee has the obligation to collect the proceeds of the policy
Rizal commercial Banking Corp vs CA
9 Mortgagee may still collect the proceeds even if the endorsements of the
policy was not signed by the mortgagor mortgagor is in estoppel since it
was stipulated in the mortgage contract that a policy would be taken in
favor of the mortgagee.
Insurance taken by the Mortgagee for his own interest
9 If proceeds are more than the amount of the credit the mortgagor has no
right to collect the balance
9 If the proceeds are less then the mortgagee may still collect from the
mortgagor for the deficiency
9 Upon payment, the insurer is subrogated to the rights of the mortgagee to
the extent of the amount paid.
Fire insurance (De Leon)
o If there is a standard or union mortgage clause, acts of mortgagor
do not affect mortgagee
o If open or loss-payable mortgage clause, acts of mortgagor affect
mortgagee
' L'@'H 2 , 5 I * ' J ' K 2 ; 5 : 2 ' '

SEC 9. If an insurer:
9 assents to the transfer of an insurance from a mortgagor to a
mortgagee, and,
9 at the time of his assent, imposes further obligation on the assignee,
making a new contract with him,
the act of the mortgagor cannot affect the rights of said assignee.
Notes:
9 Fire policy is not subject to assignment (strictly personal)
9 Marine insurance assignable even w/o consent
9 Casualty insurance assignable only w/ consent
9 Life policy freely assignable
Title 3. 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.
Notes:
(De Leon)
Insurable interest: interest which the law requires the owner of an insurance
policy to have in the person or thing insured
o Pecuniary in nature
o Except in life insurance (interest need not be pecuniary)
9 Life insurance and civil donations are similar - element of liberality
9 Relationship of brother, sister, father or child is sufficiently close to give
an insurable interest (pecuniary benefit not essential)
9 Those with an obligation to support another also have insurable interests
9 Creditor has an insurable interest on life of debtor to the extent of the debt
o Still a contract of indemnity (if there have been partial payments,
insurance will only be to the extent of unpaid installments)
9 When debtor takes a policy on his life for the benefit of creditor
o Payment of debt does not extinguish policy
o Proceeds go to the estate of debtor
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9 The fact that debt becomes unenforceable does not cut off the insurable
interest of creditor
(Rodriguez)
9 Insurable Interest (II): A person has an II where he has such a relation or
connection with or concern in it that he will derive pecuniary benefit or
advantage from its preservation and suffer pecuniary loss or damage from
its destruction
II is Necessary to Validity and Enforceability of Insurance Contract
9 A policy w/o II is a mere wager policy and void on the grounds of public
policy
Life Insurance
9 II in life insurance NEED NOT be pecuniary in nature
1. A person has an insurable interest upon his own life
o Beneficiary may be:
" Himself
" His estate
" A third person
o If for a 3rd person
" Rodriguez: He may designate a beneficiary even if such
person is w/o insurable interest PROV: there is no bad
faith or fraud.
" Deleon: there are two views (1) VOID since II is needed;
(2) VALID since it is an act of pure liberality similar to
that of a donation
o It is VOID if:
" The policy is taken out at the request of the beneficiary
" The premiums are paid by the beneficiary
" The original proposal to take out insurance was that of the
beneficiary
2. HOWEVER, taking a policy on the life of another
o One MUST HAVE an II on the life of the insured
Subsection (B) ART 195 Family Code: Persons obliged to support each other
(all have an II in each others life)
(1) Spouses
(2) Legitimate ascendants and descendants
(3) Parents and their legit/illegit children and the legit/illegit children of
the latter
(4) Legitimate brothers and sisters whether half or full blood
' M'@'H 2 , 5 I * ' J ' K 2 ; 5 : 2 ' '
Pecuniary Interest
9 mere blood relationship does not create an II in the life of another
9 relationship by affinity does not constitute an II
9 There is II when there exists some pecuniary interest
9 A company has an II in the life of its officers and employees
o But once the employee is separated: the II is lost
Legal Obligation
9 Exists when there is a commercial or contractual relationship
9 II of the creditor on the life of the debtor: ONLY to the extent of the
amount of the debt
o Amount of the policy must not be disproportional to the amount of
the debt otherwise it is a mere wagering policy VOID
When Must II EXIST:
9 On life insurance: When the insurance takes effect (need not exist at the
time of loss) since life ins is not a contract of indemnity
9 If his interest is capable of exact pecuniary measurement II must exist
not only at the time of policy but also at the time of the of debtors death
(policy taken by creditor on life of debtor)
Person upon whose life any estate or interest vested in him depends
9 Ex. Usufruct
Consent of the person whose life is insured is NOT necessary
9 PROV: person taking out the policy has II on life of insured
SEC 11. The insured shall have the right:
9 to change the beneficiary he designated in the policy,
9 UNLESS he has expressly waived this right in said policy
Notes:
Beneficiary:
9 person whether natural or juridical designated to receive proceeds
9 becomes exclusive owner of proceeds at the time of death of insured
Prohibited from becoming beneficiaries: (void donations) ART 739 NCC
a. Between persons who were guilty of adultery/concubinage
" Insular v. Ebrado: No need for previous conviction
" If the beneficiary is in GF he can still collect
b. Made between persons found guilty of the same criminal offense,
in consideration thereof
c. Made to a public officer or his wife, descendants and ascendants
by reason of his office
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Vda. De Consuegra v. GSIS: In case no beneficiary is designated or where the
designation is void in life insurance - proceeds go to estate of the insured
Exclusive recipient:
9 GR: The proceeds of a life insurance belong exclusively to the beneficiary
9 EXC: Policies issued by the GSIS must be first applied to the obligations
of the insured to the government
If right to change beneficiary waived - beneficiary acquires absolute and
vested interest to all benefits. The insured cannot:
9 Cannot assign new beneficiary
9 Cannot add new beneficiary
9 Cannot destroy contract
Note: Vested interest is on full face value not cash surrender value
Where the Beneficiary dies ahead of the Insured
9 IF NOT waived: beneficiary has no vested right over the interest in the
policy. The heirs of the beneficiaries cannot collect the proceeds
o It goes to the estate of the insured
9 IF waived: the beneficiary has a vested right on the policy.
o The heirs are entitled BUT UPON the death of the insured.
(De Leon) When beneficiary (irrevocable) dies before insured: 2 views
1. Proceeds go to the estate of the beneficiary
2. Proceeds go to estate of insured
SEC 12. The interest of a beneficiary in a life insurance policy
9 shall be forfeited when
o the beneficiary is the principal, accomplice, or accessory in
willfully bringing about the death of the insured;
in which event, the nearest relative of the insured:
9 shall receive the proceeds of said insurance if not otherwise disqualified.
Notes (DeLeon)
9 Order of relatives: (Who will receive)
a. Legitimate children
b. Parents
c. Grandparents/ascendants nearest in degree
d. Illegitimate children
e. Surviving spouse
f. Collateral relatives
i. Brothers/sisters full blood
ii. Brothers/sisters half blood
iii. Nephews and Nieces
' N'@'H 2 , 5 I * ' J ' K 2 ; 5 : 2 ' '
 9 Death in the provision covers death by legal execution 9 Examples:
9 Death by suicide not covered o Building contractor has an II in the building before payment of the
o Except: death when insane construction price
9 Section 12 does not apply: o Right to receive rentals is sufficient II to support a fire policy
o Self-defense o Consignee has insurable interest in said goods
o Accidental
o Insanity SEC 15. A carrier or depository of any kind:
9 The mere fact that insured dies while committing a felony does not warrant 9 has an insurable interest in a thing held by him as such,
denial of liability 9 to the extent of his liability but NOT to exceed the value thereof.

SEC. 13. Every: Notes:

1. interest in property,:
o whether real or personal, or any relation thereto, or
2. liability in respect thereof,
o of such nature that a contemplated peril might directly damnify the
insured,
is an insurable interest.
Notes:
9 Art 13 is on the insurable interest in property
9 Title or right to possession is not essential
9 Legal expectancy is enough the expectation of a benefit from the
property must have a basis of legal right even if he has no title
9 Factual Expectation (not arising from any legal duty or right) NOT an II
o But sufficient in life insurance
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.
9 Carrier or depositary has an II In the thing held by him
9 Under the General Bonded Warehouse Act warehouseman is required to
insure the properties against fire
SEC 16. A mere contingent or expectant interest in anything,:
9 not founded on an actual right to the thing,
9 nor upon any valid contract for it,
is not insurable.
Notes:
9 Mere expectancy uncoupled with any legal right is not insurable - VOID
o Son cannot insure property of dad
o A person designated as a beneficiary in a will has no II in the
designated property.
o Unsecured creditor cannot insure property of debtor. EXCEPT:
" Upon death of debtor
since all personal liability ceases upon the death of
the debtor
" Upon judgment obtained against the debtor
But must show that the debtor has no other
property to satisfy

Notes: SEC 17. The measure of an insurable interest in property:

9 Existing interest: 9 is the extent to which the insured might be damnified by loss or injury
o Legal/equitable title thereof.
o As an owner, mortgagee or lessee
9 Inchoate Notes:
o SH in a corporate property 9 Insurance Contract is one of indemnity, not wagering
9 Expectancy coupled w/ existing 9 Any policy that gives to the insured more than indemnity against his actual
o Owner of a vessel has an II in expected freightage loss that may be suffered is in a nature of a wagering policy - VOID
9 Not applicable to life insurance since it is not a contract of indemnity
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 Life Insurance Property Insurance
SEC 18. No contract or policy of insurance on property shall be enforceable:
9 EXCEPT for the benefit of some person having an insurable interest in the 9 II is unlimited 9 II is limited to the actual value
property insured
9 Reasonable probability is 9 Expectation of benefit as a II is not valid
Notes: sufficient II unless it has a basis of legal right.
9 No contract of insurance unless there is insurable interest
9 In case of void contracts, premiums are returned unless he is in pari delicto 9 II Must exist only at the time 9 II must exist not only on the date of the
with insurer the policy is procured execution but also on the date of the
9 Doctrine of waiver or estoppel NOT applicable. occurrence of the risk
o EXC. Where the insurer erroneously issued a fire policy to cover a
building not owned by the insured but the intention is to cover the
merchandise in the building insurer is liable on the policy.
9 Marine/fire insurance SEC 20. Except in the cases:
o Indemnity 9 specified in the next four sections, and
o Amount is maximum recoverable 9 in the cases of life, accident, and health insurance,
9 Liability insurance - Indemnity a change of interest in:
9 Life Insurance - Not actual value (life of person immeasurable) 9 any part of a thing insured
9 Personal Accident - Not Indemnity 9 unaccompanied by a corresponding change in interest in the insurance,
9 Health Insurance - Not indemnity suspends the insurance to an equivalent extent,
9 Health Care Agreement- Contract of indemnity 9 UNTIL the interest in the thing and the interest in the insurance are vested
in the same person.
SEC 19. An interest in property insured must exist:
9 when the insurance takes effect, and
9 when the loss occurs, but not exist in the meantime; Notes:
and interest in the life or health of a person insured must exist: 9 GR: Transfer of thing does not transfer the insurance policy, it merely
9 when the insurance takes effect, suspends it
9 but need not exist thereafter or when the loss occurs. 9 Transfer = must be absolute transfer or conveyance of property
9 EXCEPTIONS to Sec. 20
Change of interest does not affect the policy
Notes: o Life, accident, health insurance
9 May take out advance insurance to take effect upon purchase of a thing o Sec. 21: A change of interest in the thing insured after the
9 An expectant heir cannot insure property he expects to inherit occurrence of an injury which results in a loss
9 A stockholder may insure property of corporation even though he has no o Sec. 22: A change of interest in one or more of several things
legal interest in such property separately insured by one policy
9 In interest in property, II need not exist during the intervening period o Sec. 23: A change of interest by will or succession
o The recovery will not be defeated even if during the intervening o Sec 24: A transfer of interest by one or several partners, joint
time it was sold owners, or owners in common, who are jointly insured to others
o Sec 57: When a policy is so framed that it will inure to the benefit
of whomsoever during the continuance of the risk, may become
the owner of the interest insured

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 Notes:
SEC 21. A change in interest in a thing insured, after the occurrence of an
injury which results in a loss, does not affect the right of the insured to
indemnity for the loss.
Notes:
9 After loss, liability already becomes fixed
SEC 22. A change of interest in one or more several distinct things, separately
insured by one policy, does not avoid the insurance as to the others.
9 Reason for the rule: each partner is interested in the whole property and
the hazard or the risk is not increased because the purchasing partner has
acquired a greater interest in the property
9 Exception to the rule:
o A policy will be avoided by a sale of an interest by a partner to one
of his co-partner, without the consent of the insurer and before the
loss occurs, where the policy contains such condition.
(De Leon)
o Also, an alienation or transfer made to a 3rd person will avoid the
policy as to the selling partner but not to the others.

Notes: SEC 25.

9 Things must be valued separately although included in a single policy Every stipulation in a policy of insurance:
9 Effect is dependent on divisibility of contract - divisibility is question of 9 for the payment of loss whether the person insured has or has not any
intention interest in the property insured,
9 When the gross sum or the entire premium insures the things in one policy 9 or that the policy shall be received as proof of such interest, and
- the contract is indivisible every policy executed by way of gaming or wagering,
is VOID.
SEC 23. A change on interest,:
9 by will or succession, Notes:
9 on the death of the insured, 9 Section involves void stipulations and a void policy
does not avoid an insurance; 9 Wager Policy pretended insurance where the insured has no interest in
9 and his interest in the insurance passes to the person taking his interest the thing insured and can sustain no loss by the happening of the
in the thing insured. misfortune insured against
o Void because of express provision of law and of public policy
Notes: " Since it will furnish strong temptation to bring about the
9 the insurance on property passes automatically on the death of the insured event insured against
to the heirs, legatees, devisees who acquired the interest in the thing " Also since the wagers suffers from no loss and yet they
9 The heirs may continue the policy and receive the proceeds by paying the actually profit from it
premiums
Title 4: Concealment
SEC 24. A transfer of interest: SEC 26. A neglect to communicate:
9 by one of several partners, joint owners, or owners in common, 9 that which a party knows and ought to communicate,
9 who are jointly insured, to the others, 9 is called a concealment
does not avoid an insurance:
9 even though it has been agreed that the insurance shall cease upon an Notes:
alienation of the thing insured. 9 Requisites:
o 1. Party knows the fact
o 2. Bound to disclose such fact
o 3. There is no warranty of the fact concealed
o 4. The Other party has no means of ascertaining such fact
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 9 Presence of bad faith not necessary
9 Reason for rule: 4 primary concerns of parties in the contract (De Leon)
o Correct estimation of the risk
o Precise limitation of the risk
o Control of the risk
o Determining whether the loss occurred
o Nature of an insurance contract is that it is done in good faith
(Rodriguez)
9 Fact concealed MUST be MATERIAL to the risk
SEC 27. A concealment whether intentional or unintentional:
- entitles the injured party to rescind a contract of insurance
Notes:
9 Insurance Contracts are uberrimaefidae (of utmost good faith)
9 Duty is on both insured and insurer
9 Existence of fraud not required. Bad faith is not required.
9 Rescission is OPTIONAL on the part of the injured party
9 Reason for the provision: the party is misled or deceived into accepting the
risk
9 Argente v. West Coast Life: Principal question to determine whether there
is concealment
o Was the insurer misled or deceived into entering a contract
obligation or in fixing the premium of insurance by a withholding
of material information or facts within the assureds knowledge or
presumed knowledge?
9 Applies to all kinds of insurance
SEC 28. Each party to a contract of insurance:
9 must communicated to the other, in good faith,
9 all facts within his knowledge which:
o are material to the contract and
o as to which he makes no warranty, and
o which the other has not the means of ascertaining.
Notes:
9 Matters must be communicated even in the absence of inquiry:
o All facts within the partys knowledge
o That are material to the contract
o Which the other has not the means of ascertaining said facts
o Party with the duty to communicate makes no warranty
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9 Knowledge:
o must be proven by the party claiming
o must be at the time the insurance takes effect
9 Test of Materiality
o It must be a fact of such nature that had the insurer known of it, it
would not have accepted the risk or would have demanded a
higher premium or different terms
9 No means of Ascertaining
o If the other party merely neglects to make inquiries the right to
information is waived
9 When there is a warranty such fact is covered by such warranty it is
superfluous to require disclosure
9 Insurance company has no obligation to verify facts made in the
application
o It has the right to rely upon the statements
SEC 29. An intentional and fraudulent omission:
9 on the part of one insured,
9 to communicate information of matters proving or tending to prove the
falsity,
entitles the insurer to rescind.
Notes:
9 Facts of matters covered by the warranty does not have to be disclosed
BUT matters proving or tending to prove the FALSITY of the warranty
must be communicated
9 Ex. Failure to communicate that the ships equipment is out of order
entitles the insurer to rescind since it tends to prove the falsity of the
warranty that the ship is seaworthy.
9 NOTE: Omission is on the part of the insured
SEC 30. Neither party to a contract of insurance is bound:
9 to communicate information of the matters following,
9 EXCEPT in answer to the inquiries of the other:
a) Those which the other knows;
b) Those which, in the exercise of 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;
d) Those which prove or tend to prove the existence of a risk excluded by a
warranty, and which are not otherwise material; and
e) Those which relate to a risk excepted from the policy and which are not
otherwise material.
' C'@'H 2 , 5 I * ' J ' K 2 ; 5 : 2 ' '
Notes:
9 Direct questions are considered material therefore the insured is required to
make full and true disclosure of questions asked.
9 Failure of an apparently complete answer to make full disclosure will
avoid the policy
9 However, an answer incomplete in its face will NOT avoid the policy in
the absence of bad faith
9 Nature or amount of insureds interest need not be disclosed unless in
answer to an inquiry
SEC 31. Materiality is to be determined:
9 not by the event,
9 but solely by the probable and reasonable influence of the facts
o upon the party to whom the communication is due,
o in forming his estimate of the disadvantages of the proposed
contract, OR in making his inquiries.
Notes:
9 Test of materiality: the effect which the knowledge of the fact in question
would have on the making of the contract. It is sufficient that it would
influence the parties in making the contract
9 Effect on insurer: a probable and reasonable influence upon the insurer in
assessing the risk involved and in making or omitting further inquiries, and
cause him to either reject the risk or to accept it only at a higher premium
or on different terms
o It is sufficient that the non-disclosure misled the insurer in forming
his estimates of the risk
o In case of avoided insurance, return premiums
9 If information acquired AFTER contract becomes binding and effective
o No duty to disclose information even if the policy is yet to issue
o Concealment must take place at the time the contract is entered
9 If information acquired BEFORE contract becomes effective
o There is a duty to disclose
SEC 32. Each party to a contract of insurance is bound to know:
9 all the general causes
o which are open to his inquiry, equally with that of the other, and
o which may affect the political or material perils contemplated; and
9 all general usages of trade
!"#$%&'()*+',-.'/**0'*('&.'!.*1'213'4*3)567.8''9'1*,':;2652)58.3'<*7'(7=0.)>?'@'ABBC9ABDB'@'E,,<F'G5;;.62>'
Notes:
9 insured need not disclosed public events such as that a nation is at war
9 insurer is also charged with the knowledge of general usages of trade
9 Such information are equally presumed to be known by both parties.
SEC 33. The right to information of material facts may be waived, either:
9 by the terms of insurance or
9 by neglect to make inquiries as to such facts where they are distinctly
implied in other facts of which information is communicated.
Notes:
9 Right to info may be waived:
o Expressly
o Impliedly
SEC 34. Information of the nature or amount of the interest of one insured:
9 need not be communicated
9 UNLESS in answer to an inquiry,
9 EXCEPT as prescribed by section 51
Notes:
9 GR: Nature or amount of interest need not be communicated
9 EXC:
o 1. Sec 51: Policy must specify the interest of the insured in the
property only when he is not the absolute owner thereof.
o 2. When the insurer makes inquiry from the insured
9 Ex of no. 1: Trustee, mortgagee or building contractor must communicate
EVEN IF no inquiry is made by the insurer
SEC 35. Neither party to a contract of insurance:
9 is bound to communicate, EVEN upon inquiry,
9 information of his own judgment upon the matters in question
Notes:
9 Duty to disclose is confined to facts, opinions not covered
Title 5. Representation
SEC 36. A representation may be oral or written
' DB'@'H 2 , 5 I * ' J ' K 2 ; 5 : 2 ' '
 Notes: SEC 38. The language of a representation is to be interpreted by the same rules as
9 Representations: factual statements made by the insured at the time of, or the language of contracts
prior to, the issuance of the policy to induce the insurer to enter into the
insurance contract Notes:
9 Misrepresentation: 9 Constructed liberally in favor of insured
o A fact which is untrue 9 Representation need ONLY to be substantially true and need not be
o Stated: literally true and accurate in every aspect
" with knowledge that it is untrue with intent to deceive OR 9 Warranties must be literally true, otherwise, the contract will fail
" stated positively as true without knowing it to be true and 9 Examples:
which has a tendency to mislead, and o Use of liquor = habitual drinking
o Where such fact in either case is material to the risk o Free from illness = true despite inflammation of eyes
9 Renders the contract VOIDABLE: o Illness = serious ailments
o at the option of insurer
o regardless of intent SEC 39. A representation as to the future is to be deemed a promise:
9 It is the duty of the person applying for insurance to give all the 9 UNLESS it appears that it was merely a statement of belief or expectation.
information necessary regarding the risk
9 Information given (which can be communicated in any manner) forms the Notes:
basis of the contract 9 Kinds of Representation
9 Representations are collateral inducements o Oral OR Written
o Made before OR during the issuance of the policy
SEC 37. A representation may be made: o Affirmative OR Promissory
9 at the time of, OR 9 Affirmative representation: allegation as to the existence or non-
9 before, issuance of policy existence of a fact when the contract begins.
o Ex. He is in good health
Notes: 9 Promissory representation: any promise to be fulfilled after the contract
9 Very nature of representation is that it precedes the execution of the has come into existence or any statement concerning what is to happen
contract. during the existence of the insurance
Misrepresentation Concealment o Promise made in connection but not incorporated in the policy
9 Active form of deceit 9 Passive form of deceit o Promise made with fraudulent intent will serve to defeat the
9 Bec there is an oral or written 9 Bec there is neglect or failure to insurance
false statement to induce disclose a material fact o Undertaking by insured inserted in policy but not specifically
9 Argente vs. West Coast life Ins., Co. made in a warranty is also a promissory representation
o concealment is equivalent to a false representation that such fact o Substantially a condition or warranty
does not exist 9 IF Representation is one of:
o terms have been used interchangeably Fact Mere Expression of Opinion
9 No need to distinguish since the rules applicable to both are similar: 9 Must prove to be false and 9 Must prove to be false and
o Both requires the fact to concealed or misrepresented to be material material
material 9 Need not be in bad faith (intent 9 Must be made in bad faith
o Both entitles the injured party to rescind the contract at his option to deceive presumed) (intention to deceive)
o Both may be committed intentionally or unintentionally. 9 Deemed to be a mere expression of opinion: Representation as to a
future event or condition over which the insured has no control

!"#$%&'()*+',-.'/**0'*('&.'!.*1'213'4*3)567.8''9'1*,':;2652)58.3'<*7'(7=0.)>?'@'ABBC9ABDB'@'E,,<F'G5;;.62>' ' DD'@'H 2 , 5 I * ' J ' K 2 ; 5 : 2 ' '


SEC 40. A representation:
9 cannot qualify an express provision in a contract of insurance; but it
9 may qualify an implied warranty.
Notes:
9 Representation is a mere collateral inducement to a contract it is not part
of the contract that is why it cannot qualify its express provisions
SEC 41. A representation may be altered or withdrawn:
9 before the insurance is effected,
9 but NOT afterwards
Notes:
9 May be done ONLY before the insurance is effected:
o Since the insurer has not yet been induced
o If done during such time policy is NOT rescissible anymore
SEC 42. A representation must be presumed to refer to the date on which the
contract goes in effect.
Notes:
9 There is no false representation if it is true at the time the contract goes
into effect but false at the time it was made
9 The contract is can be rescinded ONLY when it is false at the time when
the contract is effected
SEC 43. When a person insured has no personal knowledge of a fact,:
9 he may nevertheless repeat information
o which he has upon the subject, and which he believes to be true,
o with the explanation that he does so on the information of others;
9 OR he may submit the information, in its whole extent,
to the insurer;
and in NEITHER case:
9 is he responsible for its truth,
9 UNLESS it proceeds from an agent of the insured, whose duty it is to give
the information.
Notes:
9 The insured is given discretion to communicate what he knows of a matter
which he as no personal knowledge
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o GR: If it turns out to be FALSE he is not responsible
o EXC: He is responsible IF the information proceeds from an agent
of the insured, whose duty is to give information to his principal
9 Rule on agency:
o Knowledge of the agent is knowledge of the principal
o Applies to insured and insurer
o Failure to communicate: contract will be avoided
NOTE: If the insured receives information material to the risk, or has
knowledge of a loss, he ought to communicate
SEC 44. A representation is deemed to be false:
9 when the facts fail to correspond with its assertions or stipulations
Notes:
9 Unlike warranties, representation are not required to be literally true, only
be substantially true
9 Substantial AND material misrepresentation, avoids the contract
o EXC: marine insurance insurer is required to state the exact and
whole truth
9 The representation is substantially true and valid - EVEN if there are some
discrepancies which are minor or not material to the risk
9 A representation written in the policy which could be interpreted as a
promise will be construed as affirmative representation when possible to
save the policy
SEC 45. If a representation is false in a material point, whether affirmative or
promissory:
9 the injured party is entitled to rescind the contract
9 from the time when the representation becomes false.
The right to rescind granted by this Code to the insurer is waived:
9 by the acceptance of premium payments
9 DESPITE knowledge of the ground for rescission.
Notes:
9 Fraud not essential for right to rescind
9 Representation may be intentional or unintentional
9 Collusion between agent and insured will vitiate the policy
SEC 46. The materiality of a representation is determined by the same rules as
the materiality of concealment
' DA'@'H 2 , 5 I * ' J ' K 2 ; 5 : 2 ' '
Notes:
9 Materiality is a judicial question
9 Concealment and misrepresentation give right to rescind
9 Rules apply both to the insurer and insured
9 See discussion in SEC 31 (page 10)
SEC 47. The provisions of this chapter apply as well to a modification of a
contract of insurance as to its original formation
Notes:
9 The rules on concealment and misrepresentation applies to both the:
o Original execution of the insurance policy
o Any alteration or modification of the contract
SEC 48. Whenever a right to rescind a contract of insurance is given to the
insurer:
9 such right must be exercised previous to the commencement of an action
on the contract.
After a policy of LIFE insurance made payable on the death of the insured:
9 shall have been in force during the lifetime of the insured
9 for a period of 2 years from the date of its issue or of its last reinstatement,
the insurer cannot prove that the policy is void ab initio or is rescindable:
9 by reason of the fraudulent concealment or misrepresentation of the
insured or his agent.
Notes:
9 In NON-Life Policy
o Insurer may rescind even after the loss and filing of claim PROV it
is done BEFORE the insured files an action against the insurer
o However, a defense to an action that it was secured through
concealment or misrepresentation
" is not in a nature of an action to rescind.
" Hence, not barred by the provision
9 IN life insurance,
o the defenses are available ONLY during the first two years of a life
insurance policy
o Incontestable clause requisites:
" It is a life insurance policy
" Payable on death of insured
" In force during the lifetime of the insured for at least 2
years from its date of issue or of its last reinstatement
(Note: Period may be shortened but cannot be extended)
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9 When it becomes incontestable insurer cannot claim that policy is:
o Void abinito(means voidable) due to fraud in inducement;
o Rescissible due to concealment or misrepresentation
9 Defenses not barred by incontestability clause:
o Lack of insurable interest
o Cause of death is an excepted risk
o Non-payment of premium
o Conditions relating to military or naval service violated
o Fraud is of a particularly vicious type (scheme to murder, insured
substitutes a person for exam, beneficiary kills insured)
o Beneficiary failed to furnish proof of death or to comply with any
condition imposed by policy after loss happened
o Action not brought within time specified.
Title 6. The Policy
SEC 49. The written instrument in which a contract of insurance is set forth, is
called a policy of insurance
SEC 50. The policy shall be:
9 in printed form which may contain blank spaces;
o and any word, phrase, clause, mark, sign, symbol, signature,
number, or word necessary to complete the contract of insurance
shall be written on the blank spaces provided therein
Any rider, clause, warranty or endorsement:
9 purporting to be part of the contract of insurance and
9 which is pasted or attached to said policy
is not binding on the insured, UNLESS:
9 the descriptive title or name of the rider, clause, warranty or endorsement
is also mentioned and written on the blank spaces provided in the policy.
UNLESS applied for by the insured or owner, any rider, clause, warranty or
endorsement:
9 issued after the original policy
9 shall be countersigned by the insured or owner,
which countersignature shall be taken as his agreement to the contents thereof.
Group insurance and group annuity policies, however,:
9 may be typewritten and need not be in printed form
' DL'@'H 2 , 5 I * ' J ' K 2 ; 5 : 2 ' '
Notes: (De Leon)
9 Signatures of the Parties:
o GR: Policy need ONLY be signed by insurer
o EXC: Express warranties contained in a separate instrument
forming part of the policy insured must sign (Sec. 70)
9 Policy must comply with the elements of an insurance contract in Sec 2
9 Compliance by insured with terms of policy is a condition precedent to the
right of recovery
9 A policy is a contract of adhesion
o Ambiguity resolved against insurer
" Rule applies to suretyship agreements
o Forfeitures are not favored
o Only applies when relationship is one-sided and not when a person
is a businessman of experience who is presumed to have assented
to the provisions with full knowledge
9 Policy of Insurance ! Contract of Insurance
o Policy
" Formal written instrument that evidences the contact
" Form must be approved by insurance commissioner
o Contract of Insurance
" The result of the policy which evinces it
9 In case of conflict between written and printed, written prevails
9 Perfection of Contract
o Acceptance of application ! perfection
o Must be a perfected contract by the acceptance of the offer
o Insurer may impose pre-conditions for perfection (ex. Delivery of
policy and payment of first premium)
In property and liability insurance:
o It is the applicant who makes the offer to the insurer
In life insurance: (Depends upon the payment of the premium)
o If insured does not pay premium, application is considered an
invitation to insurer to make offer
o If he pays premium, he is the one making the offer to insurer
o Agents cannot accept the application, they can only give binding
receipts (a conditional acceptance)
o A policy issued according to application is implied acceptance
9 DELIVERY: the act of putting the insurance policy into the possession of
the insured
o EVIDENCE of making a contract
o Communication of insurers acceptance
o May also affect term of policy period (ex. When prov that policy
will terminate 1 yr after its delivery)
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9 Modes of delivery
o Actual/constructive
o In person/duly constituted agent
o Or deposited in mail
o Primarily a matter of intention (possession by insured prima facie
evidence of delivery)
9 Delivery to insurers agent as delivery to the insured
o 2 views: beneficiary can recover/beneficiary cannot recover
9 Effect of conditional/unconditional delivery of policy
o Conditional
" Nonperformance of the condition prevents the contract
from taking effect
o Unconditional delivery
" Consummates the contract
" When premium still unpaid:
It is not presumed that there was an extension of
credit
UNLESS there is a clear and express acceptance
by insured of insurers offer to extend credit.
Otherwise, policy will lapse for non-payment of
premium
o Stipulation that contract takes effect upon delivery is valid
9 RIDER: a printed/typed stipulation contained on a slip of paper attached
to the policy and forming an integral part of the policy
o Additional binding stipulations
o Conflict between rider and policy: rider prevails
o It is binding if properly attached or referred to therein in a manner
as to leave no doubt to the intention
o Any rider attached to said policy is not binding unless the
descriptive title or name is also mentioned and written on the blank
spaces provided. HOWEVER lack of description will not affect the
other provisions except where without such rider the contract
would be incomplete
o Lack of signature immaterial
9 Warranties: inserted to eliminate specific potential increases of hazard
during the policy owing to actions of insured, or condition of property
9 Clause: Agreement on certain matter relating to the liability of insurer in
case of loss
9 Endorsement: provision altering scope or application
' DM'@'H 2 , 5 I * ' J ' K 2 ; 5 : 2 ' '
 9 Insureds duty to read; Effect of failure to read policy
o Majority Ruling:
" Acceptance policies w/o reading is recognized
" Such acceptance is not negligence per se (majority rule)
o Minority Ruling:
" One who accepts is conclusively presumed, in the absence
of fraud or mistake, to know and assent to its contents
" Insured has the duty to read
EXCEPTIONS TO MINORITY RULE
" When the insured could not have discovered the erroneous
statement by such reading (ex. copy of application
containing false statements was not attached to policy)
" Insured is induced by fraud of agent of insurer
" Insurer illiterate or unable to read English
" When contracts are long, complicated, and difficult to
understand contracts
o Modern rule: Duty to read has less significance; insured relies not
upon the text of policies but on the general descriptions of the
coverage provided by insurer
9 Insurers duty to explain the policy
o If terms are clear, no duty to explain
Important caveats:
" Reasonable expectations: can operate to impose de facto a
duty in the insurer to explain the policys coverage
" Options available to insured
" Information expected by insured from insurers agent -
Agents must explain coverage
" Insurer must alert insured of his rights after denial of
coverage
9 Group Insurance
o Coverage of a number of individuals by means of a single or
blanket policy
o Common form: insurance for all employees of a single employer
o Employer is issued a master policy, while the employees are
issued a certificate of participation
" For purposes of construction: All these instruments are
considered part of the same contract
o Employer becomes agent of insurer
o Employees are real parties in interest
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Notes: (Rodriguez)
9 Any ambiguity is resolved in favor of the insured.
9 No policy shall be delivered or issued w/in the RP UNLESS:
o In the form approved by the Insurance Commissioner
o Failure to comply with the form:
" does NOT invalidate the contract
" BUT the insurer who fails to obtain said approval may be
prosecuted
9 For a rider, clause, warranty or endorsement to be binding it must be
1. Pasted or attached to the policy (form must be approved by the
commissioner also)
2. Its descriptive title must be mentioned and written on the policys
blank spaces
9 Rider, etc must be countersigned:
o GR: to be valid IF executed after the original policy
o EXC: if applied by the insured himself no need to sign
9 Jarque vs Smith, Bell
o In case or repugnance bet the written and printed portions written
will prevail.
SEC 51. A policy of insurance must specify:
a) The parties between whom the contract is made;
b) The amount to be insured EXCEPT in the cases of open or running
policies;
c) The premium, or IF the insurance is of a character where the exact
premium is only determinable upon the termination of the contract, a
statement of the basis and rates upon which the final premium is to be
determined;
d) The property or life insured;
e) The interest of the insured in property insured, IF he is not the
absolute owner thereof;
f) The risks insured against; and
g) The period during which the insurance is to continue.
Notes:
9 Names of parties
o Incorrect spelling is of no importance, may refer to insured as the
insured, the owner, to whom it may concern
o PROV the identity of the party can be sufficiently established
9 Amount of insurance
o Need not be specified in open (Sec. 61) or running (Sec. 62)
policies
' DN'@'H 2 , 5 I * ' J ' K 2 ; 5 : 2 ' '
 Fire and Casualty Maximum limit of insurers liability SEC 52. Cover notes may be issued:
NOT the value of the property 9 to bind insurance temporarily pending the issuance of the policy.
Life, accident, death, injury Fixed sum payable Within 60 days after the issue of the cover note,:
Workmens compensation Law by reference fixes the amount 9 a policy shall be issued in lieu thereof,
o Automatic increase clause valid 9 including within its terms the identical insurance bound under the cover
9 Premium note and the premium therefor.
o Consideration of the contract Cover notes may be extended or renewed beyond such 60 days:
o Rate increases as risk of loss increases 9 with the written approval of the Commissioner
o Life: Average lifespan 9 if he determines that such extension is not contrary to and is not for the
o Property: Certain factors purpose of violating any provisions of this Code.
9 Interest of insured in property The Commissioner may:
o ONLY when insured not absolute owner 9 promulgate rules and regulations governing such extensions for the
9 Risks insured against purpose of preventing such violations and
o GR: All foreseeable risks/losses may be insured 9 may by such rules and regulations dispense with the requirement of written
o EXC: Those the insurance of which would be repugnant to public approval by him in the case of extension in compliance with such rules and
policy or positively prohibited or occasioned by insureds own regulations.
fraud or misconduct
9 Term or duration of insurance Notes:
o Period of time during which the insurer assumes the risk of loss 9 Cover Note: A written memorandum of the most important terms of a
o Insurer liable only when loss occurred during duration of insurance preliminary contract of insurance intended to give temporary protection
o 12 months: annual policies; Less: short period policies pending the investigation of the risk by the insurer or until the issuance of a
o May be in terms of date or in terms of distance formal policy. (binding slip, binding receipt, binder)
9 Risk: the chance of loss 9 2 kinds of Preliminary Contracts: (DeLeon)
9 Peril: contingent or unknown event which may cause a loss o Contract of present insurance
9 Hazard: Condition or factor which may create or increase the chance of " Binding slip and binders temporary contract and is
loss from a given peril (physical or moral) usually issued after first premium
9 For risk to be insurable: " Subject to all conditions contained in the policy
o Important enough to warrant insurance " Does NOT apply to life insurance, life insurance is
o Permit a reasonable statistical estimate of the chance of loss effective only upon approval of the risk (IMPT)
o Loss should be fairly determinate as to cause, time, place, and o Executory contract of insurance
amount " Insurer makes a contract to insure subject matter at some
o Not catastrophic subsequent time which may be definite or indefinite
o Accidental in nature 9 Cover notes are insurance contracts within the definition of Sec 2
Note: Requirements not absolute, insurability is a relative matter o No separate premium necessary
9 Kinds of Insurable Interest o Not a mere application for insurance (considered part of the
o Personal policy)
o Property 9 Rules on cover notes
o Liability (3rd party risks) o Insurance companies doing business in the Philippines may issue
o Deemed a contract of insurance
o Form approved by Insurance Commission
o Binding for 60 days whether premium has been paid
" May be cancelled upon at least 7 days notice
!"#$%&'()*+',-.'/**0'*('&.'!.*1'213'4*3)567.8''9'1*,':;2652)58.3'<*7'(7=0.)>?'@'ABBC9ABDB'@'E,,<F'G5;;.62>' ' DO'@'H 2 , 5 I * ' J ' K 2 ; 5 : 2 ' '
 " If not cancelled, regular policy of insurance shall be issued
o Extended with approval of Insurance Commission
" Approval may be dispensed with upon the certification of
the pres, vp or general manager of the insurer that the risks
and the extension do not violate the insurance code
o May impose a deposit premium equivalent to at least 25% of
estimated premium, in no case less then P500
SEC 53. The insurance proceeds shall be:
9 applied exclusively to the proper interest of the person in whose name or
for whose benefit it is made
9 UNLESS otherwise specified in the policy.
Notes:
9 3rd persons have no right to the proceeds, unless there is a contract between
insured and 3rd persons
SEC 54. When an insurance contract is executed with an agent or trustee as the
insured:
9 the fact that his principal or beneficiary is the real party in interest
9 may be indicated by describing the insured as agent or trustee, or by other
general words in the policy.
Notes:
9 The fact of agency must be indicated in the policy
9 If the agent secures policy w/o such indication agent is deemed to have
taken the insurance for his own benefit and the principal has no right of
action against the insured
SEC 55. To render an insurance effected by one partner or part-owner,
applicable to the interest of his co-partners or other part-owners,:
9 it is necessary that the terms of the policy should be such as are applicable
to the joint or common interest.
Notes:
9 Contract must show that it covers all shares of co-owners, otherwise it is
for the sole benefit of the one named in the contract.
SEC 56. When the description of the insured in a policy is so general:
9 that it may comprehend any person or any class of persons,
9 only he who can show that it was intended to include him can claim the
benefit of the policy.
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Note:
9 Ex. for the partners of Romulo he must prove that he is one
SEC 57. A policy may be so framed that:
9 it will inure to the benefit of whomsoever, during the continuance of the
risk,
o may become the owner of the interest insured.
Notes:
9 The transfer of the property will NOT suspend the insurance and instead,
the insurance is deemed transferred together with the property
9 An exception to Sec 20
9 Example: Insurance is for the owner of the property insured
SEC 58. The mere transfer of a thing insured:
9 does NOT transfer the policy, BUT suspends it
9 UNTIL the same person becomes the owner of both the policy and the
thing insured.
9 See discussion in Sec 20 (page 7)
9 Since a contract of insurance is a personal contract it does not attach to
the property unless so worded as in the case of sec 57
SEC 59. A policy is either: open, valued, or running
SEC 60. An open policy is one:
9 in which the value of the thing insured is not agreed upon, but is left to be
ascertained in case of loss.
Notes:
9 The amount stated in the policy is not the value of the property BUT
merely the maximum limit of the liability in case of total loss
9 The insurer pays the ACTUAL CASH value of the property as ascertained
at the time of loss
SEC 61. A valued policy is one:
9 which expresses on its face an agreement that the thing insured shall be
valued at a specific sum.
' DP'@'H 2 , 5 I * ' J ' K 2 ; 5 : 2 ' '
Notes: 9 Where action is filed determination which converts a claim into an
9 Valuation of the property insured is conclusive between the parties and in action or suit. If filed in:
the absence of fraud or mistake such value shall be paid in case of total o Regular courts of justice
loss o Office of Insurance Commissioner
VALUED OPEN " For claims NE 100K concurrent w/ civil courts
9 Proof of value of thing is NOT 9 Must prove value of thing o POEA or DOLE
necessary 9 Bringing an action against the agent has no effect does not interrupt
9 Value of the policy is agreed 9 Value is not agreed upon but left prescriptive period
upon to be ascertained in case of loss o It only notifies the agent of the claim
o EXC: if there is a stipulation/condition in the policy
SEC 62. A running policy is one: 9 A condition that suit must be brought w/in 1 year is void and action may be
9 which contemplates successive insurances, and brought w/in 10 years (written contract under CC) from time cause of
9 which provides that the object of the policy may be from time to time action accrues
defined, especially as to the subjects of insurance, by additional statements 9 Contractual limitations are construed against insurer
or indorsements.
SEC 64. No policy of insurance other than life shall be cancelled by the
Notes: insurer:
9 Running policies: Also known as floating policy where the indemnity of 9 EXCEPT upon prior notice thereof to the insured, and
property cannot be covered by specific insurance because of frequent no notice of cancellation shall be effective:
change of location and quantity 9 UNLESS it is based on the occurrence, after the effective date of the
o Risk is shifting, fluctuating, or varying policy, of one or more of the following:
o In reality open policies a) non-payment of premium;
o Example: Store and all the inventory within, stocks in trade b) conviction of a crime arising out of acts increasing the hazard insured
o Use monthly value reports against;
c) discovery of fraud or material misrepresentation;
d) discovery of willful or reckless acts or omissions increasing the hazard
SEC 63. A condition, stipulation, or agreement in any policy of insurance,: insured against;
9 limiting the time for commencing an action thereunder to a period of e) physical changes in the property insured which result in the property
o less than 1 year from the time when the cause of action accrues, becoming uninsurable; or
9 is VOID. f) a determination by the Commissioner that the continuation of the policy
would violate or would place the insurer in violation of this Code.
Notes:
9 GR: Parties may validly fix the period when the action should be brought SEC 65. All notices of cancellation mentioned in the preceding section shall:
o PROV: Period is not less than 1 year 9 be in writing,
o In case of industrial life insurance: period cannot be less than 6 9 mailed or delivered to the named insured at the address shown in the
years policy, and
9 Accrual of action: 9 shall state:
o For payment: at the happening of loss (a) which of the grounds set forth in section 64 is relied upon and
o Action on the contract: from denial of claim by insurer (b) that, upon written request of the named insured, the insurer will
" Rejection in the first instance furnish the facts on which the cancellation is based.

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Notes:
9 A cancellation of non-life insurance policy must have the following
requirements:
1. There must be prior notice to the insured
2. Notice is based on the grounds in Sec 64 and shall so state them
3. Notice must be in writing, mailed and delivered
4. If requested in writing by the insured: insurer must furnish the facts on
which the cancellation is based.
9 Cancellation shall be ineffective:
o If there is no prior notice
o IF cancellation is not based on the grounds provided
9 Cancellation
o Right to rescind, abandon, or cancel a contract of insurance
o Is the termination of the policy before its expiration
o The ground must occur after the effective date of the policy
SEC 66. In case of insurance other than life,
UNLESS the insurer
9 at least 45 days in advance of the end of the policy period
9 mails or delivers to the named insured at the address shown in the policy
notice of its intention:
o not to renew the policy or
o to condition its renewal upon reduction of limits or elimination of
coverages,
the named insured shall be entitled to renew the policy:
9 UPON payment of the premium due on the effective date of the renewal.
Any policy written for a term of less than one 1 year:
9 shall be considered as if written for a term of one year.
Any policy written for a term longer than 1 year or any policy with no fixed
expiration date:
9 shall be considered as if written for successive policy periods or terms of
one year.
Notes:
9 Renewal may be:
o through extension (By provision) or
o through new contract
9 Insurance company is bound by the greater coverage in earlier policy
where insurer renews without informing insured of reduced coverage
9 IF the 45 day rule is not complied w/ - the insurer may refuse to renew
9 If insurer does not comply with Sec 65 & 66 - he must renew whether he
likes it or not
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Title 7. Warranties
SEC 67. A warranty is either express OR implied
Notes:
9 Warranty: statement or promise by insured set forth in the policy or
incorporated in it by proper reference, the untruth or non-fulfillment
renders the policy voidable by insurer -May ALSO be made by insurer
Kinds:
Express Promise is clearly set forth in the policy or incorporated by
reference
Implied Bec. of the general tenor of the terms of the policy or the
very nature of the contract warranty is necessarily inferred
Affirmative Insured asserts the existence of the matter at or before the
issuance of the policy
Promissory Promises that certain matters shall exist or will be done or
omitted after the policy takes effect
9 Unless the contrary appears, courts will presume that warranty is
affirmative
9 When warranty is waived and estoppel arises:
o When the policy contains a condition which renders it voidable at
its inception and such is known by the insurer it will be
presumed to waive the conditions and to execute a binding contract
o If there is information which could hardly be overlooked and the
corporation received still the payment of premiums it will be
estopped.
SEC 68. A warranty may relate to the past, the present, the future, or to any or all
of these
SEC 69. No particular form of words is necessary to create a warranty.
Notes:
9 The use of the word warranty is not necessary to establish it
9 It depends on intention of the parties, the nature of the contract or the
words used thereto.
9 In case of doubt, a statement will be referred to as a representation rather
than a warranty (esp when the statement is contained in any instrument
other than the policy)
' DC'@'H 2 , 5 I * ' J ' K 2 ; 5 : 2 ' '
 o Gratuitous answers not responsive to any questions asked - are 9 Statements in the application or medical examination are representations
NOT warranties, even though the policy makes the statements in ONLY if it is not incorporated in the policy or made part of it by reference
the application warranties
Warranty Representation SEC 72. A statement in a policy which imparts that:
Included in the contract Mere collateral inducements 9 it is intended to do or not to do a thing
Always written in face of May be written in a 9 which materially affects the risk,
policy, actually or by reference disconnected paper or oral is a warranty that such act or omission shall take place.
Strictly complied with Only substantial truth required
Falsity equates to breach of Falsity equates to fraud Notes:
contract 9 A promissory warranty
Presumed material Must be shown to be so 9 Breach of promise needs to be material to the risk in order to avoid policy
Breach is a breach of contract Ground for rescinding o Material if it increases the risk (substantial increase)
9 Warranties are strictly construed against insurer
9 In order for a representation to become a warranty SEC 73. When, before the time arrives for the performance of a warranty relating
o It must be expressly included or incorporated by clear reference in to the future,:
the policy 9 a loss insured against happens, or
o The contract must clearly show that the parties intended that the 9 performance becomes unlawful at the place of the contract, or
rights of the insured would depend on the truth or fulfillment of the 9 impossible,
warranty the omission to fulfill the warranty does not avoid the policy.

SEC 70. Without prejudice to section 51, every express warranty: Notes:
9 made at or before the execution of a policy, 9 3 exceptions to non-performance of warranty
must be contained: o Loss occurs before time specified
9 in the policy itself, or o Performance becomes unlawful before the time specified
9 in another instrument signed by the insured and referred to in the policy as o Performance becomes impossible before the time specified
making a part of it. 9 Non-performance may be barred by
o Waiver of insurer - needs a clear intent to waive
Notes: o Estoppel From insurers actions (May also apply to insureds
9 If contained in another instrument, must be signed by insured and referred representations)
to in the policy mere reference is not sufficient
9 Warranty may ALSO be contained in a RIDER: SEC 74. The violation of a:
o It need not be signed by the insured 9 material warranty, or
o UNLESS, such rider was issued after the original policy took 9 other material provision of a policy,
effect on the part of either party thereto, entitles the other to rescind.

SEC 71. A statement in a policy,: Notes:

9 of a matter relating to the person or thing insured, or to the risk, as a fact, 9 The rule is true EVEN if the violation did not contribute or was not the
9 is an express warranty thereof. direct cause to the loss
9 Rescission can be done ONLY if breach is material
Notes: o Non-disclosure of other existing insurance policies is material
9 Must refer to a fact, not an opinion

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 9 Keeping of substance which is necessary for the business, or small
quantities needed for daily use is not a violation of the warrant prohibiting
storage of inflammable materials
SEC 75. A policy may declare that:
9 a violation of specified provisions thereof shall avoid it,
9 otherwise the breach of an immaterial provision does not avoid the policy.
Notes:
9 GR: violation of an immaterial provision does not avoid the policy
9 EXC: By stipulation by the parties
9 Breach may be waived
o Insurer does not become liable for an excepted loss by waiver
UNLESS such waiver amounts to a new contract on valuable
consideration
o The defense that the loss is excepted is not barred by the
incontestable clause
Title 8. Premium
Sec. 77. An insurer is entitled to payment of the premium:
9 as soon as the thing insured is exposed to the peril insured against.

SEC 76. Breach of warranty without fraud: Notwithstanding any agreement to the contrary, no policy or contract of insurance
9 merely exonerates an insurer from the time that it occurs, or issued by an insurance company is valid and binding:
9 where it is broken in its inception, prevents the policy from attaching to 9 unless and until the premium thereof has been paid,
the risk. 9 EXCEPT in the case of a life or an industrial life policy whenever the
grace period provision applies.
Notes:
9 GR: Fraud is not essential for breach of warranty Notes:
o mere violation entitles the other party to rescind. 9 Premium: is the agreed price or consideration paid by the insured for
o Falsity, not fraud is the basis of liability on a warranty undertaking to indemnify the former against a specified peril.
9 Payment of premium one of the essential elements of an ins contract
W/OUT Fraud With Fraud 9 Non-payment puts an end to the insurance contract and the insurer has no
9 Policy avoided only from the time of 9 Policy is VOID ab initio right to collect the premium
the breach 9 Insured is NOT entitled to Non-payment of 1 st premium Non-payment of subsequent premiums
Insured is entitled: premiums paid 9 Prevents the contract from 9 Does not affect the validity of the contract
(1) Return premiums at a pro rata rate becoming binding 9 UNLESS by express provision of law it
from time of breach 9 UNLESS waived suspends the policy
(2) When breach occurs during inception Note: in case of life insurance policyholder is
of contract, return all premiums entitled to a grace period of 30 days to pay the
9 Conditions on Insurance Policies: premium after the first
o Insurers may impose any condition so long as it is not contrary to
law, morals, good customs, public order, or public policy o GR: If no premium is paid contract is NOT effective
o One w/o the performance of which the contract does not become in o Exceptions: UCPB General Insurance Inc v. Masagana
existence. (1) Sec 77: in case of a life or industrial life policy whenever the grace
9 Exceptions in Insurance Policies: period provision applies
o Certain risks inserted in a policy which the insurer is unwilling to (2) Sec 78: Any acknowledgment in a policy or contract of insurance of
assume and used for the purpose of withdrawing from the coverage the receipt of premium is conclusive evidence of its payment
of the policy. (3) Makati Tuscany vs. CA, when the parties agree to the payment in
Effect of breach on Legal Relation of Parties installments and partial payment has been made at the time of loss.
9 Renders the contract voidable (4) Makati Tuscany vs. CA, insurer may grant credit extension
9 BUT the occurrence of the risk does not affect the validity of the contract (5) Estoppel
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 9 No excuse for non-payment
o GR: Non-payment cannot be excused even for a fortuitous event
since the payment of a premium is of essence of a contract
o EXC: When the failure to pay was due to the wrongful act of the
insurer or his agent (he is estopped)
9 There is a valid payment even if check is encashed after the occurrence of
the risk insured against
9 On Partial Payments
o GR: Partial payment makes the policy effective during the whole
period of the policy
o EXC: When the parties expressly stipulate that the policy will not
be in force UNTIL the full payment of premium
" Partial payment considered as a deposit held in trust by
the insurer
9 When there is not only a perfected contract but also a partially performed
one as far as the payment of the premium was concerned the obligation
of the insurer to pay the amount of the policy became binding upon it.
9 Payment of the premium to the insurance agent or broker is payment
to the insurance company
o Misappropriation of the premiums paid by the agent is imputable
to the insurance company
9 Premium vs. Assessment
o Assessment: sum specifically levied upon a fixed and definite plan
to pay losses and expenses
o Premium: paid to meet ANTICIPATED losses; NOT a debt
o Assessment: paid to meet ACTUAL losses; a debt
Sec. 78. An acknowledgment in a policy or contract of insurance OR the receipt
of premium:
9 is conclusive evidence of its payment, so far as to make the policy binding,
9 notwithstanding any stipulation therein that it shall not be binding until the
premium is actually paid.
Notes:
9 This section establishes a legal fiction of payment
9 There is a waiver of the condition of prepayment since it is declared by
law to be conclusive evidence of payment
9 Conclusive Presumption extends ONLY to the question of the binding
effect of the policy
o Insurer may still dispute it but ONLY for the purpose of
recovering the premium due and unpaid
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Sec. 79. A person insured is entitled to a return of premium, as follows:
(a) To the whole premium if no part of his interest in the thing insured be exposed
to any of the perils insured against;
(b) Where the insurance is made for a definite period of time AND the insured
surrenders his policy:
9 to such portion of the premium as corresponds with the unexpired time, at
a pro rata rate,
9 UNLESS a short period rate has been agreed upon and appears on the face
of the policy,
9 after deducting from the whole premium any claim for loss or damage
under the policy which has previously accrued;
9 Provided, That no holder of a life insurance policy may avail himself of
the privileges of this paragraph without sufficient cause as otherwise
provided by law.
Sec. 80. If a peril insured against has existed,:
9 and the insurer has been liable for any period, however short,
9 the insured is not entitled to return of premiums, so far as that
particular risk is concerned.
Sec. 81. A person insured is entitled to return of the premium when:
9 the contract is voidable,
o on account of fraud or misrepresentation of the insurer, or of his
agent, or
o on account of facts, the existence of which the insured was
ignorant without his fault; or
9 when by any default of the insured other than actual fraud, the insurer
never incurred any liability under the policy.
Sec. 82. In case of an over-insurance by several insurers, the insured:
9 is entitled to a ratable return of the premium,
9 proportioned to the amount by which the aggregate sum insured in all
the policies exceeds the insurable value of the thing at risk.
Notes:
9 If insurance is illegal premiums cannot be recovered
o But if they are not in pari delicto innocent party may recover
' AA'@'H 2 , 5 I * ' J ' K 2 ; 5 : 2 ' '
7 Instances when the insured is entitled to recover premiums already made: 9 In Life Insurance
o It is an indivisible contract so insured cannot recover
1. When no part of the interest in the thing insured has been exposed to any of the o HOWEVER, he is entitled to receive to the cash surrender
perils insured against value AFTER 3 full annual premiums have been paid.
9 The assumption of risk is one of the essential elements in the insurance
contract if there is no risk premium may be recovered 3. Where the contract is voidable on account of fraud or misrepresentation of the
9 When the risk attaches: insurer or his agent
o If risk is entire + contract is indivisible: insured is not entitled to 9 If the insured is in fraud he is NOT entitled to return of the premium
return of premium if insurer is exposed to the peril however short
o If contract is divisible (involves several distinct risks) the 4. When the contract is voidable on account of facts, the existence of which the
premium for the risk which does not attach can be claimed insured was ignorant of w/o his fault
9 If the loss occurs before the effective date and an advance of the premium
was made insured is entitled to the premium 5. When by any default of the insured other than actual fraud, the insurer never
9 When the insured and insurer becomes public enemies insured is entitled incurred any liability under the policy
since war abrogates insurance contracts 9 Example: insured a vessel but it was destroyed before the actual voyage
9 Examples:
o Ship insured for the voyage voyage did not proceed 6. In case of an over-insurance by several insurers
o If the policy was in fact inoperative 9 Insurer is not entitled to the portion of the premium corresponding to the
excess of the insurance over the II of the insured
2. Where the insurance is made for a definite period of time and the insured 9 Return is only for the proportion which exceeds the II
surrenders his policy before the expiration of that period
9 The rule does NOT apply: Title 9. Loss
o When the insurance is not for a definite period
o A short period has been agreed upon Sec. 83. An agreement not to transfer the claim of the insured against the
o The policy is for life insurance policy insurer after the loss has happened,:
9 In short period rates: 9 is VOID IF made before the loss
o Usually found in a table of figures stipulating the amount for the 9 EXCEPT as otherwise provided in the case of life insurance.
premium
o The amount recoverable will not be the unexpired period BUT Notes:
ONLY the balance after deducting the percentage to be retained by 9 GR: A prohibition against the transfer of the claim after the loss is against
the insurer as stated in the table public policy therefore VOID
PERIOD % of Annual PERIOD % of Annual o The rights of the parties are already fixed after the loss
Rate Rate o The assignment is merely a transfer of a chose of action
1 or less 20% 7 mos 75% o It involves no moral hazard does not increase the insurers risk
2 mos 30% 8 mos 80% 9 EXC:
3 mos 40% 9 mos 85% o Sec 173. Which prohibits the transfer of a fire insurance policy to
4 mos 50% 10 mos 90% any person who acts as an agent of the issuing company and
5 mos 60% 11 mos 95% declares such transfer void insofar as it affects the creditors of the
6 mos 70% insured.
o In the case of Life Insurance

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Sec. 84. Unless otherwise provided by the policy, an insurer is liable for a loss:
9 of which a peril insured against was the proximate cause,
9 although a peril not contemplated by the contract may have been a
remote cause of the loss;
but he is not liable for a loss:
9 which the peril insured against was only a remote cause.
Notes:
9 Loss: Injury, damage, or liability sustained in consequence of the peril
9 Scope of the Peril:
o Loss of income
o Bodily Injury
o Legal liability to 3rd party
9 Insurer is Liable: when the peril insured is the proximate cause
9 Insurer is NOT liable: when the peril insured is ONLY a remote cause
9 Burden of proof: Insurer has the burden of proof to show that he is not
liable
9 Proximate Cause: is that which in a natural and continuous sequence,
unbroken by any efficient intervening cause, produces an injury w/o which
the injury would not have occurred.
Sec. 85. An insurer is liable where the thing insured is rescued from a peril
insured against that would otherwise have caused a loss, IF,
9 in the course of such rescue, the thing is exposed to a peril not insured
against,
o which permanently deprives the insured of its possession, in whole
or in part; or
9 where a loss is caused by efforts to rescue the thing insured from a peril
insured against.
Notes:
9 For as long as the loss occurred in the course of rescuing or by efforts to
rescue from a peril INSURED against and also PROV that the property
would have been lost by the peril insured against- the insurer is liable
9 However, if it did not take place in the course of the rescue nor caused
by efforts to recue insurer is not liable
Sec. 86. Where a peril is especially excepted in a contract of insurance:
9 a loss, which would not have occurred but for such peril, is thereby
excepted
9 although the immediate cause of the loss was a peril which was not
excepted.
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Notes:
9 The insurer is NOT liable if the proximate cause is an excepted peril even
if the immediate peril is a peril not excepted
9 Immediate Cause: cause or condition nearest to the time and place of injury
9 Insurer has the burden of proof that the risk causing the loss is excepted.
Sec. 87. An insurer is not liable:
9 for a loss caused by the willful act or through the connivance of the
insured;
but he is not exonerated:
9 by the negligence of the insured, or of the insurance agents or others.
Notes:
9 It must be caused by a willful act
9 GR: negligence of the insured or his agents insurer is LIABLE
9 EXC: if the negligence is so gross insurer is NOT liable
Title 10. Notice of Loss
Sec. 88. In case of loss upon an insurance against fire, an insurer is
exonerated,:
9 IF notice thereof be not given to him by:
o an insured, or
o some person entitled to the benefit of the insurance,
9 without unnecessary delay.
Notes:
9 Notice of loss: necessary for the insurer to be liable to pay the claim.
o Purpose: is to enable the insurer to make the proper investigation
and take such action as may be necessary to protect his interest
9 No particular form is needed
9 W/o unreasonable delay means w/in reasonable time
o Depends on the circumstances, construed in favor of insured
o Parties may stipulate the period but must not be unreasonably short
Sec. 89. When a preliminary proof of loss is required by a policy, the insured:
9 is not bound to give such proof as would be necessary in a court of justice;
9 but it is sufficient for him to give the best evidence which he has in his
power at the time.
' AM'@'H 2 , 5 I * ' J ' K 2 ; 5 : 2 ' '
Notes:
9 Proof of loss: evidence given to the insurer of the occurrence of the loss Sec. 92. If the policy requires, by way of preliminary proof of loss, the certificate
and the information necessary to determine its liability and the amount or testimony of a person other than the insured,:
thereof. 9 it is sufficient for the insured to use reasonable diligence to procure it,
9 Best evidence which he has in his power at the time is sufficient and
9 No form required 9 in case of the refusal of such person to give it, then to furnish reasonable
9 Failure to serve notice or proof may be excused when the circumstances evidence to the insurer that such refusal was not induced by any just
are such as to make strict compliance with the requirement impossible grounds of disbelief in the facts necessary to be certified or testified.
o Ex. Insured died before the fire and the heirs did not know about
the policy Notes:
9 Effect of fraudulent claim of loss 9 Liberally construed in favor of the insured
o Mere filing of such claim will exonerate the insurer if such clause
is part of the contract Title 11 Double Insurance
o Good faith however will not exonerate the insurer
o There must be positive proof of fraud burden is on the insurer
Sec. 93. A double insurance exists where:
Sec. 90. All defects in a notice of loss, or in preliminary proof thereof,: 9 the same person is insured
9 which the insured might remedy, and 9 by several insurers separately
9 which the insurer omits to specify to him, without unnecessary delay, as 9 in respect to the same subject and interest.
grounds of objection,
are WAIVED. Notes:
9 Requisites:
Notes: 1. Same person is insured
9 A general statement that proofs are defective is not sufficient to impose on 2. There are several insurers
the insured the duty to supply the defects not pointed out. 3. Same subject insured
9 Ex. If the policy required an affidavit of loss and a defective one is 4. Same interest insured
accepted there is a waiver on such defect. 5. Same risk or peril insured against
9 Double insurance is NOT prohibited IF the policy does not contain any
Sec. 91. Delay in the presentation to an insurer of notice or proof of loss is waived stipulation against such
9 IF caused by any act of him, or 9 Prohibition for DI is valid in order to prevent over insurance and thus avert
9 if he omits to take objection promptly and specifically upon that the perpetration of fraud
ground. 9 IF the insurer knows the existence of other insurances AND continued the
policy it amounts to a waiver of the annulment for such cause
9 An additional insurance obtained by a3rd person in good faith and w/o the
Notes: knowledge of the prohibition will NOT affect his rights under the policy
9 By accepting payment of premium with full knowledge that the premises
had been injured

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Sec. 94. Where the insured is overinsured by double insurance:
(a) The insured, unless the policy otherwise provides, may claim payment from the
insurers in such order as he may select, up to the amount for which the insurers are
severally liable under their respective contracts;
(b) Where the policy under which the insured claims is a valued policy, the insured
must give credit as against the valuation for any sum received by him under any
other policy without regard to the actual value of the subject matter insured;
(c) Where the policy under which the insured claims is an unvalued policy he must
give credit, as against the full insurable value, for any sum received by him under
any policy;
(d) Where the insured receives any sum in excess of the valuation in the case of
valued policies, or of the insurable value in the case of unvalued policies, he must
hold such sum in trust for the insurers, according to their right of contribution
among themselves;
(e) Each insurer is bound, as between himself and the other insurers, to contribute
ratably to the loss in proportion to the amount for which he is liable under his
contract.
Notes:
9 The insured can only recover the amount of his II whether in one policy or
several policies
9 Since a contract of insurance is one of indemnity the amount of recovery
is limited to the value of the insureds II
9 Principle of contribution: requires each insurer to contribute ratably to the
loss
9 Contribution clause stipulation that the insurance company shall not be
liable to pay or contribute more than its ratable proportion of the loss or
damage
Double Insurance Over Insurance
9 There must be several insurers 9 One insurer is sufficient
9 The total of the sum of the
policies need not exceed the II 9 Amount of the insurance is always
beyond the value of the II
Title 12. Reinsurance
Sec. 95. A contract of reinsurance is one by which:
9 an insurer procures a third person
9 to insure him against loss or liability by reason of such original insurance.
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Notes:
9 Reinsurance policy: contract of indemnity
9 Reinsurance treaty: merely an agreement bet 2 insurance companies where
one agrees to cede and the other to accept reinsurance business
Double Insurance Reinsurance
9 Insurer remains the insurer 9 Insurer becomes the insured
9 Subject matter is property 9 Subject is the insurers risk or liability
9 Same interest and risk are insured 9 Different risk and interest are insure
Sec. 96. Where an insurer obtains reinsurance, except under automatic
reinsurance treaties, he must communicate:
9 all the representations of the original insured, and also
9 all the knowledge and information he possesses,
whether previously or subsequently acquired, which are material to the risk.
Notes:
9 Policy may be avoided where the reinsured conceals the fact that a loss has
taken place or that the property is over-insured
9 EXC to Sec 96: in case of an Automatic Reinsurance Treaty since the
contract is self-executing and the obligation attaches automatically
Sec. 97. A reinsurance is presumed to be:
9 a contract of indemnity against liability, and
9 not merely against damage.
Notes:
9 Reinsurance is a contract of indemnity against the reinsureds liability
from the original contract BUT not exceeding the amount of the
reinsurance
9 Reinsured may obtain payment EVEN before paying the original insured.
Sec. 98. The original insured has no interest in a contract of reinsurance.
Notes:
9 GR: Contract is solely bet the reinsured and the reinsurer
9 EXC: if the contract is made for the benefit for reinsureds policyholders
OR IF Reinsurer agrees to assume the reinsureds contracts
o PROV: original insured accepts and communicates acceptance
9 Insurer is entitled to avail itself of every defense the reinsured has against
the original insured
' AO'@'H 2 , 5 I * ' J ' K 2 ; 5 : 2 ' '