6.

executory
Insurable and conditional
Interest
- contract is executory to the insurer and subject to conditions
Purposes of insurable interest
-
principal
1. theis the happening
presence of insurable of the event
interest insured
reduces moralagainst
hazard
-
it includes
2. insurable manyinterest
otherlikewise
conditions helpswhich must be
in measuring thecomplied
loss of the with
insuredas precedent to the
right of the insured to claim the proceeds
 insured no insurable interest over the life or property he insures= unenforceable
Characteristics of contract
7. riskof insurance
 distributing
wager contract= device- voidinsurer’s
against public assumption
policy of risk is part of a general scheme to
1. Aleatory  policy= received as proof of interest
distribute loss among a large number of persons exposed to similar risks, who
classes of Insurable interest in life insurance
- art 2010 of NCC, when one oftothe
contributes
1. insurable
parties
ainterest
common in the
orinsured’s
fund bothfrom reciprocally
which
own
bind themselves
life the losses incurred are compensated
to give or to do8.something
contract in consideration
of adhesion
2. insurable interest(finein theprint of what
life ofrule)
anotherthe
– the other shall give or do
policy is presented
person to the insured already in
upon the happening of an
its printeda. event
form whichdo that
relationship by isheuncertain
bloodeither takes or itwhich to occur
or leaves it, mostat an
of the terms are prescribed
indeterminate time by the insurer
b. business in final printed form to which the insured may adhere if he chooses but
relationship
c. other pecuniary interest
which
- it is a contract where
Bloodsome
he cannot change.
of the rights of
relationship
In the
caseparties
of ambuity, of the insurer<insured
contract are
 insurance
contingent upon chance events
- life contributes
of a spouse or to
of society
one’s by
children favorably affecting the allocation of resources,
- what the insured will pay in peso is not equal to what he will receive inas
engaging
- no in loss-prevention,
insurable interest over indemnifying
the life of his losses,
parents or serving
his brothers aand
case basis of credit
ofsisters structure,
(falls under sec
loss eliminating worry, facilitating trade and commerce and providing chanel for investible
10 pecuniary interest)
Education or support
funds
- contract is commutative, - one whathas IItheon insured
the life of anypaid for isonthe
person whom equiavalent
he depends of what
or in heeducation or support
part for
 social - value of insurance far outweighs its socialtocosts
got, the promise of insurer to indemnify the insured in case of loss
no required that the person is legally obligated do so
generalPecuniary
benefitsInterest
of insurance
2. unilateral 1. gives - peace
one has of insurable
mind interest over the life of his partner or his employee
- payment of premium - is not traditionally
pecuniary
2. keeps families and benefit imposed
is derived
business by the
together asperson
an obligation
who will take butoutananevent
insurance policy with the
that gives the contract
3. increases obligatory
continued force
preservation of the life of the partner or employee
- lossmarginal utility of=assets
of life of employee economic because
loss onitthe serves
part ofastheintermediary
employer becausebetween those
he will be
- upon payment of who the premium
have there
smallofneed
deprived is only
for a minor
the service one party who has the obligation,
amount of capital and those who have great needs
of the employee
that is the insurer’s
forobligation
immediayeto
Creditor usepay of rhe
largeproceeds
sums to meet of the insurance
losses they have in case of
suffered
loss -
4. it facilitates credit transactions
insure the life 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
3. personal 5. it stimulates
performance
savings
6. provides
- because the contract investment
- is entered
creditor into
shall havecapital
with an due
insurableconsideration
interest over the to the
life of the debtor who may be obligated to
7. provides
circumstances of the parties incentive
deliver money to
or business
property or orto individuals
provide some because
service they are relieved of fortuitous
losses
- insurer may haveMortgage - debtor cannot insure the life of the creditor, not be damnified by the loss of the creditor’s life
accepted the riskinsurancebecause of the insurability of the insured
8. it helps
- each pary enters into- the in loss
redemption
contract prevention
in insured
view ofinto the character, creditknownand conduct
debtors may be a group life insurance as “mortgage redemption”
 consensual, perfected bythemere consent, by meeting of theandminds with respect to the
of the other - MRI- is a device for protection of both the mortgagee the mortgagor
object
- and consideration
Mortgagee= proceedsoffrom thesuch contract (art will
1319) meeting of the offer and
- property insurance contract, personal in nature; it insurance
is the person be applied
that is to the payment of the mortgage
acceptance debt, thereby relieving the heirs of the mortgagor from paying the obligation
protected rather than the property
 cognition theory, an insurance is perfected the moment the offeror learns of the
- character, credit and conduct
acceptancr ofof
histhe person
offer by thewho insures
other party a property are still
important considerations
 insured makes the offer by submitting the application to the insurer or its authorized
- property insurance, measure
agent, insurerofaccepts
insrance payment is
by approving loss
the to the insured
application and theand not is perfected upon
contract
the loss of specified property
receipt of the notice by the insured of such approval
4. consensual  binding upon proof that the insurance contract was duly received by the insurer
- perfected by mere consent
 courts without
cannot impose need of delivery
a contract in theor any formality
absence of a perfected contract
5. uberrimae fidae
- is one of perfect good faith
- both parties must not only perform their obligations in GF but they must also
avoid material concealment or misrepresentations
- caveat emptor rule is inapplicable
- imposed on both insured and insurer, accounts for the readiness which the
courts apply the doctrine of estoppel as against the insurer
 -mortgagor- in the event of death, mortgage obligation will be extinguished by the application of the
insurance proceeds to the mortgage indebtedness
- mortgagee is simply an appointee of the insurance fund, such loss-payable clause does not make
the mortgagee a party to the contract
 Friendship alone is
Insurable not theofinsurable
interest bailee interest contemplated in the life insurance
Insurable interest inthe In property
contract of carriage, carrier may be damnified by the loss of the goods because he may
 Sec 18, 13-17) be obligated to pay the shipper any damage to the property
 Test in determining  Depositary= II in property liableisidwhether
the thing one will derive
deposited pecuniary benefit or advantage
is damaged
from its preservation,
 Carrier and depositary have insurable interestfrom
or will suffer pecuniary loss or damage overits the destruction,
proper subject to sec 15
termination,injury by the happening of the event
Bailee policies that are involved in transportation of goods insured against
 Any titleIito of or interest inand
mortgagor property,
mortgagee legal or equitable will support a contract of property
insurance  Both mortgagor and mortgagee have insurable interest over the mortgaged property
Kinds of II
 Sec 8
1. existing interest
 Obligation2. to pay the loan by theMortgagor’s
mortgagor insurable
is not interest covers
extinguished the full value of the mortgaged property
inchoate interest founded on an exting interest when mortgagee received
the proceeds Mortgagee may be made the beneficial payee in several is ways
3. of the insurance
expectancy, company,
coupled with an theexisting
insurable interest
interest outofofmortgagee
which the expectancy separate and arises
distinctexisting
from the 1. he may become the assignee
interest of mortgagor. Recovery under an insurance policy separately of the policy with the consent takenof the insurer
interest
by the mortgagee will not 2. a mere
affect the pledge without
obligation of the such consent
insurer (insurance or the original policy may contain a mortgage clause
company)
- interest of an owner
 Upon payment a riding making the policy payable to the mortgagee “as his interest may appear” may be
3. (insurance
title to an by the insurer
ownership is not essentialcompany) the latter is subrogated to the rights of
the mortgagee. The right of attached is imposed by law. It is not dependent upon nor
subrogation
1. lessee
does it grow out of any 4. of
privity a “standard
contract, or mortgage
upon theclause” insurercontaining
an assignee a collateral
in equity.independent contract between the
2. depositary
Mortgagee’s consent to mortgagee
subrogation is not and insurer may
necessary. It benot
will attached
excuse him from liability
3. usufructuary
even he has not entered 5. any
into the loan
policy, or though
contract byofits terms payable
whatever nature absolutely
with the to the mortgagor, may have been
insurance
4. borrower in commodatum
procured by a mortgagor
company.  one has an ii if he is so situated with respect to the property that he will sufferunder a contract duty to insure for the mortgagee’s benefit, in
loss as the
Time when insurable interestresult which
exist (sec case the mortgagee acquires an equitable lien upon the proceeds
proximate of its19) damage or destruction
 Property 6. the policy may provide for a loss payable clause in favorbut of the mortgagee
 insurance=
unpaid seller exist haswhen insurance
a vendor’s lien takes effect
and therefore andhewhenwill be the loss occurs,
damnified by the loss of the goods
need not exist
eveninafterthe meantime
delivery
 Life orhealth insurance=
or buyerwhen
vendee Insurable has iithe
over insurance takes effect,
whilebut theneed notare exist
stillthereafter
or when the loss occurs interest of the goods
mortgagee even goods in transt, based on
perfected contract of sale
 mortgagee may, independently of the mortgagor, insure the mortgage property in his own
Property insurance contract of shipment (FOB, CIF, C&F) is immaterial in the determination of whether the
 II must exist when the has
insurance name takes andeffect
for his
and own wheninterest
the loss occurs.
vendee ii or
 from not
entitled in the
to thegoods in
insurance transit proceeds in case ofloss
loss, but he is not allowed to retain in his claim
 Need not exist continuously
 perfected contract thesale
of time takes
even effectdelivery
without until thevests
time of
the the
against the mortgagor; claim is passed by vendee
subrogation an equitable title, an
to the insurer to the extent of the
 Insured can recover existing even if he over
interest lost histhe insurable
goods interesttoafter
sufficient be the subject
the perfection of of the insurance
insurance
money paid
contract so longinterest
insurable as he recovers
in the upon the same
property before theof loss occurs
the exixts
destructionin any of the theproperty
followingthe insurance money paid to the mortgagee will not
 Insurance 1. is deemed
when the suspended
insured during the aintervening
possesses legal title period
to the (insurance
property automatically
inure to the benefit of the mortgagor andinsured,
the amount whether vestedthe
due under or mortgage debt remains
reinstated when the original
contingent, owner re-acquires
defeasible, or undefeasible the property)
unchanged
 Sec 20- 242. when he has equitable title of whatever character and in whatever manner acquired
 mortgagee is not allowed to retain his claim against the mortgagor, but it passes by
 Sec 57-583. when he possesses a qualified property or possessory right in the subject of the insurance
subrogation to the insurer, to the extent of the insurance money paid
 Sec 22, two 4. orwhen
morehe has mere
properties are possession
insured but ortheyrightare of possession
insured separately. Tw bldgs.
 mortgagor has no interest in the policy and is not entitled to have the insurance proceeds
Insured in 5.onewhenpolicyhe buthasthey neither possession
are insured of the property
separately, the change norofany legal interest
interest in one bldg in it but stands in
applied in reduction of the mortgage debt; mortgagee has still a right to recover his whole
does not suspend suchthe relation
insurance with respect
as to thetoother it thatbldg.he may suffer from its destruction, loss of a legal right
debt of the mortgagor
Life insurance dependent upon its continued existence

Interestinterest insurer is subrogated to the rights of the mortgagee under the mortgage, insurer is akin to a
 Insured Inchoate
has insurable over the life that is insured at the time the insurance takes
surety
effect  inchoate interest must be founded on an existing interest, otherwise the loss of the property
 mortgagee themay also procure a policy as contracting party, in accordance with the terms of
 Life insurance will notadirectly
is not contractdamnifyof indemnity insured
an agreement by which the mortgagor is to pay the premiums upon such insurance
insured must expectancy
have insurable interest in the property insured not only at the time of the
 expectancy
perfection of the contract but also must mortgagee
likewise
at the timebe may
of coupledlikewise
the losswith procure an insurance
an existing policy forofhis
interest (interest theown
heirbenefit.
over theMortgagee will not
be required to account for the proceeds
properties of his successor who is still alive is mere expectancy that is not coupled with an or to share the same to the mortgagor; contract
existing interest) between the mortgagee as insured and the mortgagor is an independent contract
 although the mortgagee is himself the insured, as where he applies for a policy, full informs
the authorized agent of his interest, pays the premiums and obtains a policy on the
assurance that it insures him, the policy is in fact in the form used to insure a mortgagor with
loss payable clause

Concealment

4 primary concerns of the parties to an insurance contract

1. correct estimation of the risk which enables the insurer to decide whether he is willing to
assume it, and if so, at what rate of premium
2. the precise delimitation of the risk which determines the extent of the contingent duty to pay
undertaken by the insurer
3. such control of the risk after it is assumed as will enable the insurer to guard the against
4. determining whether a loss occurred
Intentional and if so, theconcealment
and unintentional amount of such loss
 sec 26-27  Concealment whether intentional or unintentional entitles the insurer to rescind he contract
 each party to a COI must communicate
of insurance. to the other in GF all facts within his knowledge
which are material to the It misleads
contract andorasdeceives
to whichthe he insurer
makes theno warranty,
insurer into and which thethe risk, or accepting it at the
accepting
other has not the means ofrate ascertaining
of premium agreed upon
 obligation to communicate  Insurer
is the obligation
is misleadofinto each part that the circumstance withheld does not exist and he thereby
a belief
 only material facts are required to be disclosed
induced to estimate the risk upon a false basis that it does not exist
 matters concealed are considered material if such
Every concealment whether matters willfrom
arising affects the insurer’s
accident, actioninadvertence
negligence, on or mistake, if
his application either by approving it or rejecting it
material will be equally fatal to the contract as if it were intentional or fraudulent
 sec 31  Materiality of the information withheld does not depend on the state of mind of the insured,
 matters concealed cond neither does it depend on the actual or physical events which ensue
 Good faith is not a defense
 the devices of concealment  Any and representations
concealment withoutwere originally
regard developed
to whether such for the purpose
concealment is intentional or unintentional
of enabling the insurer to secure the same information with respect
Sec 29 exception, omission must be intentional or fraudulent to the risk that was
possessed by the applicant
 There for insurance, so that
is still material he might beeven
concealment equally
if thecapable
insuredofhasforming a
no knowledge of the existence of
just estimate of its quality a duty to disclose
 warranties and conditions dealing with conditions
 Concealment is present existing at the has
if the insured inception of the contract
no knowledge of the materiality of the fact which
 exceptions are used for the hepurpose
already of making more definite and certain general words used
knows
to describe the risk the insurer
Actual undertook
knowledge to bear
of the insured is not necessary to give the insurance company the right to
avoid the policy on the ground of concealment
Concealement  Absence of knowledge of the fact concealed because unintentional concealment is still
concealment under sec 26
Requisites, there is concealment  Concealment need not be intentional
1. a party knows the fact which he neglects to communicate or disclose to the other
 There is still concealment even if the party does not know but he ought to know the matter
2. such party concealing is duty bound to disclose such fact to the other
concealed, Law ascribes to him presumed knowledge of the matter or fact in view of the
3. such party concealing makes no warranty of the fact concealed
surrounding circumstances
4. the other party has not the means of ascertaining the fact concealed
 Mistake, gf and negligence will not excuse the insured from material concealment because
 where a warranty is made of the fact concealed, non disclosure of such fact is not
unintentional non-disclosure still avoids the policy
concealment but constitutes a violation of warranty
No material concealment, even unintentional:
sec 27
1. matter allegedly concealed is a matter of opinion
 voidable at the insurer’s 2. option
when the insurer waived his right to the information as in the case where the insured gave
 contract uberrimae fidae an imperfect answer
 that the full circumstances of the subject
 medical opinionmatter
whichof insurance
cannot are known
be invoked so longto the
as insured
there wasonly,
no intent to deceive
and the insurer in deciding whether or not to accept a risk, must rely primarily upon the
 where upon the face of the application, a question appears to be not answered at all or to be
information supplied to him by the applicant
imperfectly answered, and the insurers issue a policy without any further inquiry = waived
 it misleads or deceives thethe insurer into accepting
imperfection the riskand
of the answer or relying
renderupon the belieftothat
the omission the more fully immaterial
answer
assured will disclose every material fact within his actual or presumed knowledge
 court cannot understand why the insured or its medical examiner did not make any further
 misled into a belief that theinquiries
circumstance
on such withheld
matter doesfrom thenot hospital
exist andorhe is thereby
require copy induced
of the hospital records from the
to estimate the risk upon aappellant
false basis that it does not exist
before acting on the application for insurance
 right to rescind should be execised previous to the commencement of an action on the
contract.
Representation
-statements made to give information to the insurer to induce him to enter into the insurance
contract
-collateral communication made to the other party in writing or by word of mouth
 they are supposed to induce the other party, they are made at the time or before the
issuance of the policy
  Information statements made after the policy takes effect will no longer have any bearing on the decision
of the insurer to issue the policy or the decision of the insured to enter into the contract
 Sec 37 (exception sec 47)
 Representation may be made at the time of, or before issuance of policy
 Apply as well to a modification of a contract of insurance as to its original formation
 Representation may also be one that induces the party to agree to modify the contract, induce the other party to
novate the agreement
 Representations may also be made at the time of or before the renewal of the policy
Concealment Representation
It involves an omission-nondisclosure it involves a positive assertion or affirmation
Warranties
Concealment cannot refer to future acts Representation can pertain to future because it can be
-is an affirmation of fact or promissory a promise that forms part of the terms and conditions of the policy
Same test of materiality applies -warranty is a statement orSame promise tests set
applies
forth in the policy or by reference incorporated therein, the
A party can rescind A party can rescind

untruth or
Representation may be oral or written
non-fulfillment, renders the policy voidable by the insurer
 May either be affirmativeor promissory
Contract of insurance is rendered voidable by the insurer without reference to the materiality
of the dealing
Affirmative representations-involve statements statement or promise
with facts existing atand to whether
the time the contract the insurer was in fact, prejudiced by such
is made
Promissory- pertain to statements madebreach by the insured concerning what is to happen at the time the insurance is already
effective

 A warranty may also be made by the insurer
Sec 39 representation as to the future is to be deemed a promise,
  Warranty
Representations are construed liberalyprovides
in favor ofathe safety-valve
insured and are by which
required underwriters can ensure
to be only substantially truethat an insurance is
 Sec 38 actually of the character attributed to it
 Art 1370 to 1379 may beapplied for interpretation
Warranty is either express or implied, a warranty may also be affirmative warranty or
 Sec 42 promissory warranty
 Representation must be presumed to refer to the date on which the contract goes into effect
 Sec 40
Kinds
 Test on materiality: there 1. is Express
deemed towarranty-
be materialismisrepresentation
one that is stated in knowledge
if the the policyoforone any of its
party attachments
thereof
will affect the insurer’s 2.action on his warranty-
Implied application,is a natural
either element
by approving of the
it with the contract imposed
corresponding by law and are part of the
adjustment
for a higher premium or rejecting policythe same or
without thein need
fixing the thatterms
it beand conditions
stated in the of the policy
policy (marine insurance)
 Health, freedom for disease, habits and medical attendance, family instances and family relationships also
important
3. Affirmative warranty- affirmation of the fact that exist at the time they are made. It is an
 Representation cannot qualifyundertaking that some
an express provision allegation
in a contract of factbutisittrue
of insurance may qualify an implied warranty
 4. Promissory
Materiality of a representation is determined warranty-
by the same stipulates that certain
rules as the materiality of athings shall be done or a specified condition
concealment
 Sec 233 D shall exist during the currency of life of the insurance contract. One party is bound by an
 Misstated of the age of the insured
executor does not avoid the policy, the only result is that any amount payable or benefit
stipulation
accruing under the policy shall be such as the premium paid would have purchased at the correct age
Rules on promissory warranty
 The benefits that will be paid will be equal to what the premium paid by the insured would have purchased if the
 Sec
age had been correctly stated 72-73can testify on his own age except from hearsay)
(no person
 Correct age of the insured  is the
Promissory warranty
chief corner-stone of themay either be positive act or an omission
life insurance
  There may
No birth cert, relied on misrepresentation of also be a –promissory
the insured then the insurer’s only recourse
warranty that isisintothe
make the of omission as in the case
form
adjustment regarding the premium if there was misstatement
where the insured warrants that he will not store gasoline or kerosene in the insured building
 Misstatement must be done in GF
  Sec 69, not
Ground to rescind for misrepresentation particular
if there is fraud orform intentoftowords
deceiveis necessary
consistent to create
with the feature ofa insurance
warranty
as contract of ubberimaefidaeSec 70
 Misdescription of the 2 bdlg
waysin fire insurancean
of making cannot be considered
express warranty material
part representation,
of the insurance mistake of the employees
contract
or agent of the insurance company cannot prejudice the insured
1. it must be contained in the policy itself
 Ordinary test of value of property is the price it will commend in the market if offered for sale
 There is misrepresentation 2. (secit may be facts
44) if the expressed in another
fail to correspond withinstrument
assertions or provided
stipulations.that the separate instrument is signed
Misrepresentation
entitles the aggrieved party the byright
thetoinsured
rescind the and referred to in the policy
contract
 sec 71, a statement in a policy of a matter relating to the person or thing insured, or to the
risk, as a fact
 warranty may likewise be in form of an other insurance clause whereby the insred warrants
that there is no existing insurance over the same property when the insurance policy takes
effect
 breach of warranty by the insured renders the contract defeasible
 in order to avid the policy insurer must prove such breach consistent with the rule that any
violation must be established by the person who is making such allegation
 insurer may elect to waive his right to avoid the policy in case of breach by the insured
 a party may rescind the policy if there is breach of warranty on the part of the other party
 sec 74 and 75 allow the party to rescind or to avoid the policy only in case of a material
breach
 breach of an immaterial provision does not avoid the policy
 however, if the policy itself provides that breach of a warranty or a provision avoids the
policy, the warranty is deemed to be material.
 Policy may make what would normally be considered an immaterial warranty into
 one that is material
 This may be done if the parties agree that the statements are absolutely true and if untrue in
any respect, avoided Exceptions:
1. non payment of premiums after it has been in force for 2 years from its date of issue
 Non compliance with a warranty is excused when by reason of a change of circumstances,
2. that no statement made by an insured under the policy relating to his insurability shall be
the warranty ceases to be applicable to the circumstances of the contract, or when
used in contesting the validity of the insurance with respect to which such statement was
compliance with the warranty is rendered unlawful by any subsequent law
made after such insurance has been in force prior to the contest for a period of 2 yrs during
 Breach may likewise be waived by the other party
such person’s lifetime nor unless contained in written instrument signed by him
 Sec 76
 the incontestable clause is upheld in law not for the purpose of upholding fraud but for the
Warranty Representation
purpose of shutting off harassing defenses.
It is part of the contract Not part of the contract but a collateral
 Clause designed to induce the insurer to investigate and act with reasonable promptness if it
inducement
wishes to avoid the policy
Written on a policy or its rider Can be oral or in written
 Insurer has 2 years from the date of issuance of the insurance contract or of its last
Presumed
If all of to
thebematerial
materialmatters setreinstatement
forth and alleged Must
withinin the
be defendant’s
established
which to contest special
to bethe plea arewhether
material
policy, true, or not, the insured still lives
Mustthere was compliance
be strict no valid COL within such period Must be substantially true
 Where any material representations is false, the insurer’s tender of the premium and
 After 2 yrs, the defenses of concealment or misrepresentation, no longer lie
 Risks
notice that thealso
can policy is cancelled
be limited or
beforeusing
controlled
2 year
the commencement
period not elapse, exceptions, of suitand
exclusions
the insurer
thereon,
still have the conditionsoperate
right to rescind the contract
to rescind
Conditions- are thein the contract
nature of collateral
insurance. terms, they do not relate to the risk covered or statement
incontestable clause cannot be invoked
of facts
Exercise
but areofinthe theright
nature to of
rescind
collateral does not require
promises or the filling of a case in court
stipulations
1. non payment of premiums
Waiver- 1. is the intentional
promises relinquishment
or obligations of a known right
2. regarding
violationclaims procedure of
of the conditions thattheare not fundamental
policy to theor
relating to military validity
naval service in times of war
-intended giving of the upcontract
of a known privilege or power
3. property insurance
-always 2. involves consent
conditions but it does
conferring more notrights
rise totothe thelevel
insurer of contract
enlarging or repeating the minimum rights
 the war clause itself id not required by the IC. The moment the parties include a war clause
-may be express provided or implied
by law
in the policy, the beneficiaries can no longer invoke the the incontestable clause if the war
 Right
 antoinsurance
information of material
contract facts may conditions
withclause
stipulated be waived is either
the law by the
betweentermsthe of the insurance or
parties
is violated
 neglect
by its terms and conditions
to make inquiry as toconstitute
 war limitation clause or rider limits the liability of the and
such facts.the measure
Where they are of the insurer’s
distinctly impliedliability
in other facts
insurer in the event the the insured
compliance
of which information therewith is looses
is communicateda condition precedent
his life as a result of war to the insured’s right to recovery from
 It has thebeen
insurerheld that where upon the face of the application, a question appears to be not
 war clause permits the issuance of life insurance policies that would not be otherwise be
 he forfeited
answered at all or all to be imperfectly
benefits therein
issued
answered
by virtue of and the insurers
the same issueofathe
stipulation policy without
policy in theanyabsence
further inquiry,
of proof thatthe theinsurers
insurer thereby
waived waived
such the imperfection of the answer and render the
provision
defenses of the insured against revocation (may be invoked by the insured or his beneficiaries to
 burden
omission to isanswer
on themore insurerfully immaterial
preventtothe prove that from
insurer the insured
invoking breached
the devices the condition
for limitingthat is imposed,the risk)
or controlling
 Sec breach33 of condition is 1. a defense that will relieve him of his liability under the policy the onus
guaranteed insurability clause
Estoppel proof is on the insurer2.whofailure will invoke such defense
to invoke before commencement of the action
Exception,
Art 1431, an admission
exclusion or3.
or exemption representation
waiver is rendered conclusive upon the person making it
 insurer
and cannot may be deniedprovide or for
disproved
4. exceptions
estoppel against the personin
or exemptions relying thereon
the policy
 In it must expressly so provide
pais or by deed  secin228 the (group
policy without ambiguity
life insurance policy) provides that no statement
 There
 policy is noshould
element ofstatements
express consent
such in estoppel
limitation
that tendintoclearshow andthatunmistakable
the insured is language
uninsurable cannot be used against him in the
 it is to be desired following that the termscases: and phraseology of the exception clause be clearly
Representation (cont) so as to be1.within
expressed if the theinsurance
easy geasp hasand been understanding
in force prior of to the
the insured
contest for a period of 2 yrs during the
Rescission  doubtful or obscure must be
is unavailable person’s lifetimeto be interpreted or resolved against the insured
of necessity
1. when whotherecauseis waiver
the ambiguity 2. if the statement is not in writing and or not signed by the insured
2. when an
 exceptions toaction hasthealready  been
general coveragecommenced
insurability- are on the
construed
includes all contract
most strongly
matters which would againsthave the company
been considered by the company on the
3. when the incontestable
 even an express exceptionapplication clause applies
in a policyexcept is to bethe construed
age of the against
insured the underwriters by whom
 estoppel no longer
the policy available,
is framed and forinsurer
whose
includes can stillelements
benefit
such rescind the
as policy
the exception even
is introduced
habits, if it accepted
occupation, financesthe and good health
premium despite knowledge
 obligation to prove that thegood of the
losee ground of rescission provided
is is not the same as insurability that other defenses are not
health
available like the incontestability clause
Incontestable clause  insurability clause may likewise be stipulated upon by the parties for individual life and
 right to rescind a contract endowment of insurancepolicies must be exercised previous to the commencement of
an action on the contract  proof of insurability at the time of the application for reinstatement is a proper risk for
 validity of the policy shall not be contested
insurance upon the basis except for original
of the non-payment contractof premiums after
it has been in force for  right to rescind a COI by insurer must be
2 years from its date of issue or date of approval
excisedofprevious
last to the commencement of
reinstatement an action
 The parties
-Domestic or foreign company
-mutual benefit association- must first secure a license from the insurance commission before they
 Insurer is the party who promises to pay in case loss results because the peril insured
can transact business
against occurred
-mutual insurance companies
 Insured is the owner of the policy whose property or life is insured or who took out the
 no insurance company shall transact any insurance business in the PH until after it shall
insurance over the life of persons in whom he has insurable interest
have obtained a cert of authority from the insurance commissioner upon application

therefor and payment Beneficiaryby theiscompany the person in whoseoffavor
concerned the feesthe insurance was taken by the insured and who
will receive the proceeds of the insurance in case of loss
 cert of authority is required because contracts of insurance involved public interest and
regulation thereof Beneficiary
by the state is not a party to the contract unless he is the insured himself
is necessary
insured
basic qualification (sec 192
1. vested
Said possessed of- theiscapital
right under
the person
the policy andcannot who applied
assets required
be
for of
divisible
andanany
at
toinsurance
whom ancorporation
given time
insurance policy doing istheissued
sameto cover his life,
property or the life of or property of other persons in whose life or property he has insurable
 kind
The ofdesignation
business in of thebeneficiary
interest
PH and invested
or liability isto
revocable
other
in the same manner
persons
2.  norIf unless the commissioner
the insured shall have granted to him or them a cert tonature
the effect thatbe he or
they have - wants
complied onewith whotheenters
designation
all the into a to
provisions
be irrevocable,
contract
of law with
which the an the
insurer irrevocable
insurance corporation
should
doing
expressly provided
Assured and in the policy
 business
Sec 11 in the PH is owner
required to observed
- obtain the policy as the owner and the person whose life was insured as the insured
  COA issued by commissioner
Rights of irrevocable shallcannot
expire be on affected
the last day of December , 3assignment
yrs following of its
- personsbeneficiary who took out an insurance onby the
a person’s subsequent
life the
date of issuance
insurance policy, and shall
in case be renewable
there is aifcash every 3
surrender yrs thereafter,
value, subject to
it is the irrevocable company’s
beneficiary
continuing contract is voidable one of the parties is incapacitated insured is (minor, insane or
who can compliance policywith
take aotherwise loan the provisions of this code, circulars, instructions, rulings or
thereon
incapacitated to enter into an insurance contract)
 decisions
Exception of the commission
is art
a 64 of FC, wherein personafter mayfinality
validlyofenter legalinto separation the innocent
contractspouse may
Beneficiaryrevoke theoffending capacitated
spouseperson as beneficiary
an insurance
in any insurance policy even if irrevocable
insuring the life of an
-may be incapacitated like a minor
 a Inthird
theperson,
event the
married
unless
insured
persons
he isdoes the not insured
change himself
the beneficiary during his lifetime, the designation
-beneficiary is not one
shall be deemed of the contracting
irrevocable parties
 married woman
-third party beneficiary has the right to file an action against can enter into IC w/o thethe consent
insurer of their
in case husbands vice versa for a policy
of loss
 Designation of beneficiary
taken oyr of his isorrevocable
her life or unless
that his waived
or her children
-no other party can recover the proceeds other than the beneficiary
 Sec 12  if the property regime of the spouses is absolute community property- insurance taken on
-sec 53
 Life insurance the policylife forfeited thirdwhen
of abeneficiary person the(debtor
beneficiary theisspouses)
the principal, accomplice, actorofaccessory
 Life insurance, designated entitled toof receive the proceeds, considered not theas heirs oradministration= must
in willfully bringingbe aboutjointly
taken the death by theofspouses
the insured (sec 96 of FC, administration of property must be by both
estate of the insured
Proceeds of the insurance spouses)shall be paid in accordance
; disagreement- husband withthat thewill
following
prevailrules:
 Proceeds are thr separate and individual property of the beneficiary and not the heirs of the
1. the forfeited  share
insuranceof the policy
disqualified of spouse beneficiary
own life, shall pass on third
beneficiary to theperson
other beneficiaries
unrelated to them, financially or
person whose life was insured
2. if there are no otherwise=
other beneficiaries=taking of shall insurance be paid andinpaymentaccordance with the is
of premium policy
in thecontract
nature of a donation that
 3. Atestate
any rate, heirinsured
of the may also be the beneficiary and the proceeds of the life insurance, belongs
should be approved by both spouses (absolute community prop regime)
to him exclusively snd does not form part of the deceased’s estate
disqualification  beneficiary
of the sec 98 of FC, neither spouse may donate any community property w/o consent of another
Third parties
1. those whoaremay forbidden to receive any donation under artproperty 739
took out an insurance to her separate
- 2. insurer
person haswhonocannot
obligation make to turn over the proceeds to immediate relatives
any donation
Minors
exceptions: to this rule is a situation where the insurance contract was intended to benefit third
 even insurance  cannot contract enter into insurance
is valid, designation contracts
of beneficiary is void because they are
persons who are not parties to the same in the form of favorable stipulations or indemnity. In
disqualifiedascontract
beneficiaries entered (artinto
739) between a minor and capacitated person is VIODABLE
such a case, third parties may directly sue and claim from the insurer
 par 1 art 739,  not validapplyuntil to
annulled
childreninborne a proper out action
of wedlock, in court by the minor
illegitimate or his
children arelegal
not representatives
 it is only when there is no designated beneficiary or when the designation is void, that laws
covered by thethe life of a minor can be insured, the parents can insure the life of their minor child
prohibition
on succession are applicable
 conviction not ifnecessarythe parents who are
in order for the
oneoriginal owners of the
to be disqualified duepolicy, will die,
to adultery all the rights, title and
or concubinage
 if there is no designated beneficiary= proceeds shall form part of the estate of the deceased
 the guilt of the interest
party in may thebe policy
provedwill die,in theall same
the rights, action titleforand interest in the
declaration policy shall
of nullity of be
insured
donation and automatically
it would be sufficient vested in the minor (person
if evidence insured) upon the guilt of the
preponderates
 funds of conjugal pship of gains are use to pay for the premium = proceeds of the policy
consort for  the anyone
offenses except indicated
a public enemy may be insured (public enemy, is a state which is at war with
constitute community property if the policy was made payable to the deceased’s estate, ½ of
 the proceeds the of thePhilippines)
insurance policy cannot be considered as a gift. Spouse can
said proceeds belongs to the estate and the other half to the surviving spouse
designatetheifother there as is nobeneficiary
war yet at (not the timecondiered
of taking asthe donation
policy, ensues
prohibitedbetweenunder theNCCPH and the country
 if there is designated beneficiary, beneficiary is entitled to the proceeds of the policy.
and FC) of the insured, insurance policy is deemed abrogated (US rule)
Source of premium immaterial
 if the concubine
Insurer or insurance
was disqualified, company- her include
shares in allthe
pships, associations,
insurance proceeds cooperatives
must be awarded or corporations,
to
 vested interestincluding or GOCC
right of theentities,beneficiaries in aaslife insurance in policy should be measured on
the illegitimate children or who are also engaged
designated principals
as beneficiaries the insurance business, excepting mutual
its full face value and not its cash surrender value, for in case of death of the insured, said
 insurance benefit associations.
policy may be obtained by a person through his agent or trustee
beneficiaries are paidreinsurer-
on the basis ofperson,
its value and in case the insured orshould discontinue
 paying
insuranceProfessional
contract
premiums, the executedany
isbeneficiaries with
may an continue
agentpartnership,
trusteeassociation
or paying as
it and theareinsured, corporation
entitled fact
to that his
automatic
that transacts solely and
principal
exclusively
or beneficiary reinsurance business in the PH
extended term orispaid-up
the realinsurance
party in interest, optionsmay and be thatindicated by describing the insured as
agent or trustee or by other general words in the policy
 it is necessary that the terms of the policy should be such as are applicable to the joint or
common interest
 policy is secured for the benefit of a pship, a change in the name of the pship does not avoid
the policy
 a life or health insurance policy can be transferred even without the consent of the insurer
 no formalities are required for the assignment of life or health insurance policies
  Insurance agents and brokers are under the regulatory powers of the IC.
 IC can revoke their license in proper case, in additional sanctions can be imposed by the
 Provisions of NCC provides insurance as one of the modes of transferring
commissioner on erring insuranceownership the delivery
agents of
and brokers
the proof or evidence of the right
 Delivery of policy may transfer ownership of the policy of insurance (life or health insurance)
 Notice ot the insurer is not necessary to validate the transfer
 Assignee acquires right thereon even without the knowledge of the insurer
 Double assignment= assignee under first assignment has preferable claim (American rule,
first in right, stronger in time)
 Assignee of property insurance- mere transfer of a thing insured does not transfer the policy,
suspendes until the same person becomes the owner of both the policy and the thing
The policyinsured (transferee must have insurable interest in the thing insured, insurer’s assent for the
transfer is necessary)
 Insurance
Exceptions when insurer’s
contract consent is not necessary
is a consensual contract, even perfectedif successor
by mereinconsent,interest no substitute
formality later
required
1. transfer through will or succession and other intances of transfer by operation of law
2. in cases
Absence
whereoftherepolicy is does
transfernotamong
bar thepartners
contract from coming into existence
 Statute
insurance agentoforfrauds
brokeris inapplicable
 Formalities
Shall have first are procured
not required from forthe
thecommissioner
perfection of the a license
contract,to act it isas anmandated
still insuranceby agent of
law that
such
written company
policies or as anbe
should insurance
issued bybroker the insurer
 License
Sec 49 must be renewed every 3 yrs
 Sec
Insurance
50 agent includes an agency leader, agency manager or their equivalent
 Policy
Insurancemayagentbe in is an independent
electronic form subject contractor
to theand not anprovisions
pertinent employeeofofra the company
8792
 Represented
Art 232
 Must
Provisions be insurance
of an empowered by a written power of attorney duly executed by such insurance
contract
company and registered with the insurance commission to receive notices, summons and
1. declarations
legal processes
2. insuring agreements for and in behalf of the insurance company concerned in connection with
actions or other legal proceedings against said insurance company
3. exclusions
 conditions
4. Shall be sufficient service and deemed as if served on the insurance company itself
 sec
Classes of agents
51
1. declarations
salaried employees identify who keep definite
the insured; describehours theand work under
property, activitytheorcontrol and supervision
life insured; state the of
the company
types of coverage (contract of employment)
purchased, the applicable policy limits and the terms of the coverage; and
2. indicate
independent contractor
the premium who
paid forwork
eachon commission
separate coverage basispurchases
(agency)
 purpose
insuranceofagents are governed
the declarations made byby thethe
NCC,insuredtheirisacts within
to give thethe limitssufficient
insurer of their authority are
information
considered
to enable it,binding on their principal,
with information from other also bind their
sources, principal
to issue if apparent
the desired authority
contract at a is given to
proper
them
price
 the principal
insuring is responsible
agreements- for the
describe the acts of its agentofdone
characteristics within the
the events scopeunder
covered of its the
authority and
contract
 exclusions- excluse specified perils, propery, sources of liability, persons, losses, locations
should bear the damage caused to third persons, agent exceeds his authority = personally
laible
and timefor the damage done
periods
 act of agent does not bind the
conditions- these provisions principal
define termsunless
used the in the principal ratifies
other parts of them expressly
the contract, or
prescribe
impliedly, ratification in agency is the adoption or confirmation
conditions that must be complied before the insurer can be made liable and may describe by one person of an act
performed
the basis for oncomputing
his behalf the by another
premiumwithout authority
marine  risk
insurer is entitled
insurance- to acknowledge
is an deny a claim iforadeclaration
material fact regardingthe
confirming thespecific
health of the insured
shipment was by
covered
its marineconcealed
open policy, by the theagent with the
evaluation participation
of the cargo, and of the
the chargeable
insured premium
 designation
provisions inofthe policy thatshould
beneficiary specifies and limits
be made the powersterms
in unequivocal and duties of an agent is binding
 sec
on the insured, cannot escape that he did not read the policy
53-55
 agent
the insurance
or trustee, broker acts for and
the principal mayinbe behalf of theby
damnified insured
the loss of the property that he owns that
 is
insurance
under the premium,
care of aheld by agent
trustee or agentor broker in a fudiciary capacity and shall not be
 both
misappropriated
the principalorand convert to his or
his agents own use or
trustee canillegally
insurewithheld
the property by the agentthe
under orlatter’s
broker care
 sec
insurance
54, policycommissioner cannot, in
may not expressly the exercise
provide that it was of itsthequasi judicial
principal who powers
really assume
took the policy
jurisdiction
but the policy over maycontroversies
contain words between the
that will insurance
indicate thatcompanies
the principal and theirreal
is the agents
party in
interest
 partners or co-owners may have insurable interest on the property owned by the pship or
owned in common (insurance can be taken by the managing partner or co-owner on the
property)
 terms of the policy should expressly provided that the insurance are applicable to the joint or
common interest
 an express provision is necessary because a CO and partner also has insurable
interest on the property and they may take an insurance for their own benefit
 sec 56, insured not specifically identified
 2. the cover note shall be valid and binding not more than 60 days from the date of its issuance
 when the description 3. the CN of the
mayinsured in the policy
be cancelled by either is soparty
general
uponthatpriorit may comprehend
notice to the otherany of at least 7 days
person or any 4. class
the of persons,
policy should only
be he who within
issued can show that itafter
60 days wasthe intended
issuanceto include
of the CNhim
can claim the benefit5. the 60 of day
the policy
period be extended upon written approval of the IC
 it is a question of proof  Written
if the person
approval claims that he iswith
is dispensed one upon
of thosethe described
certification asofinsured in
the president, vp, or general
general terms manager of the insurer that the risk involved, the values of such risks and premium thereof
 insurer is generally freehave to provide
not yetfor
beenthedetermined
terms and conditions
or establishedof the policies
and that it willor renewal is not contrary to
the extension
issue so long as the same or is provisons
not for theare not contrary
purpose ro law,
of violating themoral,
IC or any customs
rule and public
policy 
 forms are subject to the approval of the insurance commission
law provides for mandatory provisions of policies
The premium
 Pool 1. ofindividual
premiums lifeanswers for the losses of each insured
2.
 Sec 77 endowment insurance
3. group life
 Insurer is entitled to payment of the premium as soon as the thing insured is exposed to the
4. insured
peril industrial life
against
 sec 50
 Contract of insurance is unilateral, insurer does not have a reciprocal obligation to pay the
a rider, clause
premium warranty
although theorsame
endorsement
payment that are not
will give risepart
to theof the original
unilateral printed form
obligation of theare binding
insurer
provided that:
 Insured cannot be sued for non payment of the premium, the only effect of non-payment
1. the rider, clause, warranty or endorsement is attached to the policy
being that the policy will not go into force
2. the descriptive title or name of the rider, clause, warranty or endorsement is mentioned and
 After insurance comes into force, their payment of premium, it is only the insurer that makes
written on the blank spaces provided in the orginal policy form
a legally enforceable promise
3. if not applied for by the insured or owner, the rider, clause, warranty or endorsement shall
 Payment may be made by
be countersigned to the
the insurer
insured himself or its agent (sec 315)
 endorsement-
Payment to written
an insurance agent
agreement attached having authority
to a policy to toreceive
add ororsubtract
collect payment
insuranceiscoverages
equivalent
to payment
rider- to the principal
an endorsement himself, such
to an insurance policypayment is complete
that modifies clauses when
and money
provisionsdelivered is in
of policy,
the agent’s hand and
including or excluding coverage is a discharge of the indebtedness owing to the principal
 Industrial
 if seclife50policy
of IC (sec 235)
are complied with, they take precedent over the original policy provisons.
 The obligation of the insurer
They are deemend integral will not beof
parts valid
the and binding
original if the first premium has not been
policy
paid, if subsequent premiums have not
 written portion > printer portions of the policy been paid, the policies will be deemed to have lapse
 Insurer has no right to demand, much
 rider prevails over the printed clause it covers less sue the insured for the unpaid premiums
 Nonpayment
 contract of adhesion, insured cannot change the written policy end
of the premiums does not merely suspend but puts an imposed to anbyinsurance
the insurer
contract since the time of the payment is peculiarly of the essence of the contract
5 exceptions the rule that the policy is not valid and binding unless the premiums have been paid
1. when the grace period applies in case of life and industrial life policy
 grace period is the period after the date of premium is due during which the premium can be
paid with no interest charged and the policy remaining in force
 exception presupposes that the insurance policy had already been in force for a certain
period. Cannot apply when the insurance policy is first taken
sec 233,34,36
2. when there is an acknowledgement in the policy or receipt that the premium has been paid
 Second exception sec 79, even not paid premium, insurer’s obligation will already be in
force if there is agreement. The insurer can still demand payment of the premium
3. when there is an agreement that the premium shall be payable on installment
4. when there is a credit extension
 if the insurer has granted the insured a credit term for the payment of the premium and loss
occurs
Cover before
notes- are the
interimexpiration of the term,
or preparatory recovery
contracts on the policy should be allowed even
of insurance
 interim coverage may be necessary because the
though the premium is paid after the loss but within theinsurer
credit term
may need more time to process the
 90 day credit extension
insurance application may be given under the broker and agency agreements with duly
 secintermediaries
licensed 52
requisites
requisites
1.1. the cover
credit note
extension
shall be must be provided
issued or renewed for under the broker
only upon and agency
prior approval agreements
of the insurance commission
2. credit extension to a duly licensed intermediary should exceed 90 days from the date of
issuance of policy
 credit will benefit insurer who can also pay thru intermediary within the credit extension
5. when the equitable doctrine of estoppel applies
 if the insurer relied in gf on a practice that they have been following with the insurer.
  Sec 78
 Salary deductions, the insurance policy is already binding although the premium is paid thru
installment by the govt employee
 There is an agreement between the employee authorizing the deduction
 Surety is already liable even if there is non payment of premium if the oblige has already
accepted the bond
 Insurance contract will be continue to be binding if the non payment was due to the fault of
the insurer. Act of insurer or his agent in refusing to tender of payment of premium properly
made, will necessarily stop the insurer from claiming a forfeiture from non-payment
Prevent lapse of insurance policy
1. grace period
2. automatic policy loan
cash surrender value-life insurance policy, is the amount of money the company agrees to pay to
the holder of the policy if he surrenders it and releases his claims upon it.
-an amount which the insurance company holds in trust for the insured to be delivered to him upon
demand.
3. application of dividend
4. restatement clause

grounds for return of premium

1. when the thing was not exposed to peril insured against
2. time policy, when the policy is surrendered before the expiration of the stipulated time
(refund is pro rata)
3. when the contract is voidable and subsequently annulled under the provisions of the civil
code
4. when the contract is annulled on account of the fraud or misrepresentation of the insurer or
his agent or on account of facts, or the existence of which the insured was ignorant of
without his fault
5. when by any default of the insured other than actual fraud, the insurer never incurred liability
under the policy
6. when there is over-insurance by several insurers
Marine Insurance

Sec 101
 Transportation insurance
Divisions of transportation insurance
1. ocean marine insurance
2. inland marine insurance

risk of losses covered in ocean marine insurance

 all risks or losses may be insured against, except such as are repugnant to public policy or
positively prohibited
 a general marine insurance policy which does not state the risks assured is valid and covers the
usual marine risks and in a marine policy, the general enumeration of “all other perils”etc extends
only to marine damage like kind of those enumerated
 to sustain a recovery on a marine policy, the loss must have been occasioned by a risk or peril
insured against
 the goods are presumed to be shipped under deck, that is, below the weather deck of the vessel. If
the gods are shipped on deck, they are not covered by the policy unless special notice of the
stowage is given to the underwriter and he accepts the enhanced risk
 shipowners have no legal right to load goods on deck, if they do, such goods are at shipowner’ risk
unless he had obtained the consent of the cargo owner to such stowage
 exception: certain kind of goods, dangerous, are by custom and sometimes by law, required to be
shipped on deck so that they will not endanger the other cargo and can, if necessity arises, be
quickly thrown overboard. Underwriters are presumed to know these customs and legal
requirements
perils of the sea, in ocean marine
 ocean marine insurance protects ships at sea and cargo or freight on such ships from standard
perils of the sea
 includes only those casualties due to the unusual violence or extraordinary action of the wind and
wave, or to other extraordinary causes connected with navigation
 the phrase embraces all kinds of marine casualty
- shipwreck
- foundering
- stranding
- collision
- every specie of damage done to the ship or goods at sea by the violent action of the winds and
waves
- losses occasioned by the jettisoning of cargo if it is made for the purpose of saving vessel
rendered unworthy during the voyage, not thru the fault of the captain
- barratry- willful misconduct on the part of the master or crew in pursuance of some unlawful
or fraudulent purpose without the consent of the owners, and to the prejudice of the owner’s
interest
perils not covered
-losses resulting from ordinary wear and tear or other damage usually incident to the voyage
 the mere fact that an injury is due to the violence of some marine forces does not necessarily bring
it within the protection of the policy if such violence was not unusual or unexpected
 not liable sail carried away by tempests
 carry away by mast or the loss of an anchor by storm
  the insurer does not undertake to insure against perils of the ship. The purpose od an ocean
marine policy is to secure an indemnity against accidents which may happen not against event
which must happen
perils of the sea- include only such losses as are of extraordinary nature or arise from some
overwhelming power which cannot be guarded against by the ordinary exertion of human skill or
prudence
 everything which happens thru the inherent vice of the thing, or by the act of the owner, master or
shipper shall not be reputed a peril if not otherwise borne in the policy.
 The insurer is liable only for such losses or damages proximately caused by the perils insured
against
All risk marine insurance policy- insures against all causes of conceivable loss or damage, except as
otherwise excluded in the policy or due to fraud or intentional misconduct on the part of the insured
-all losses during the voyage whether arising from an marine peril or not, including pilferage losses
during the war
-no included to cover loss, damage or expense proximately caused by delay or inherent vice or nature of
the subject matter insured
 It is the duty of the insurance company to establish that said loss or damage falls within the
exceptions provided for by law; otherwise, it is liable thereof
 An all risks provision of a marine policy creates a special type of insurance which extends
coverage to risks not usually contemplated and avoids putting upon the insured the burden of
establishing that the loss was due to peril falling within the policy’s coverage
 The insurer can avoid coverage upon demonstrating that a specific provision expressly excludes
the loss from coverage
 “all risk insurance policy” has the initial burden of proving that the cargo was in good condition
when the policy attached and that the cargo was damage when unloaded from the vessel , the
burden then shifts to the insurer to show the exception to the coverage
 in all risk policy, the insured need not prove the precise cause of loss or damage
 the insurance company has the burden of proving that the loss is caused by the risks
excepted and for want of such proof, the company is liable

Inland Marine insurance

 property was on land during transit

classes of inland marine insurance

1. property in transit- property frequently exposed to loss while it is in transpo from one location to
another
2. bailee liability- provides protection to persons who have temporary custody of the goods of
personal property of others (carriers, laundrymen, warehousemen and garage keepers)
3. fixed transportation property- bridges, tunnels and other instrumentalities of transportation and
communication, although fixed in a property
4. floater- jewelry, furs, works of art, constructor’s equipment, theoretical property, salesmen,
samples and others (covering property that is seldom moved)

insurable interest

sec 102
 marine insurance id invalid unless supported by an insurable interest in the thing insured
 the owner of the vessel has an insurable interest on the vessel to the extent of its value and this is
true even if he has mortgage the same or has chartered it to a third person who agrees to pay him
its value in case of loss.
  The insurer is liable only for that part of the loss which the insured cannot recover from the
charterer.
 Charterer of the ship has an insurable interest in it to the extent that heis liable to be damnified by
the loss
 The liability of the insurer is subsidiary to that of the charterer
 After payment of indemnity, the right of subrogation is given to the insurer in case the loss arose
out of wrong or breach of contract
 A person has an II if he will suffer in the even of loss, or damage to the subject matter insured

Sec 103
 A loan of bottomry is one which is payable only if the vessel, given as a security for the loan,
completes in safety the contemplated voyage
 The lender in bottomry is entitled to receive a high rate of interest to compensate him for the risk
of losing his loan
 Extent of II in case of bottomry and respondentia (value of the vessel – the value of the loan)
similar to contract of insurance, but the money is given in advance
 The insurable interest of the lender on the bottomry in the vessel given as security is to the extent
of the loan
 The owner of the vessel receives in case of loss no indemnity, but he does secure immunity from
payment of loan

Sec 104
Freightage- is the benefit which is to accrue to the owner of the vessel from its use in the voyage
contemplated or the benefit derived from the employment of the ship

Freightage may be derive from

1. chartering of the ship
2. its employment for the carriage of his own goods
3. its employment for the carriage of the goods of others

sec 105
 the owner of the ship also includes the charterer who expects to earn in the transportation of
goods of others
 the owner of a ship has an insurable interest in expected freightage which he may not earn in case
of the intervention of a peril insured against or other peril incident to the voyage. Applicable even
if freightage if paid in advance
 where agreement is that the freight is payable in any event, whether the vessel is lost or is not lost,
the ship-owner has no insurable interest in such freight. Shipper wjo has prepaid the freightage
under such condition, has an insurable interest on the same
 passage money, payable in advance, cannot be recovered if vessel is lost before the completion of
the passage
 passenger can insure his advances of passage money but the SO mau not insure it unless it is
payable only upon the completion of the voyage

sec 106
 to give an insurable interest in expected freightage, the insured must have an inchoate right to
freight, nothing could prevent him from ultimately having a perfect right to it but the intervention
of the perils insured against
 freight is the price to be paid for the hire of the ship under charter party, SO has inchoate rigt to
freight as soon as there is an inception of performance by the ship under the charter party
where there is no insurance interest
1. where there is no contract and no part of the goods expected to be carried are on board, there is
no II on F although there are goods ready for shipment or the master is provided with funds for
the purpose of purchasing a cargo
2. where the vessel is a mere seeking ship or a vessel looking for a cargo to be transported, the
owner has no II in freight to be earned on the goods not loaded

sec 107
 interest in the goods or adventure out of which the profits are expected to be realized should be
legal interest although such interest may be contingent like commission to an agent or consignee
 may take out an insurance to expected profits from the cargo
 the insured has sufficient interest if it is based on a valuable consideration paid (made ready for
shipment, although not loaded )

sec 108
 the II of a charterer of the ship is up to the extent that he is liable to be damnified by its loss
1. one who charters a vessel, with a stipulation to pay its value in case of loss, has II to the extent of
its value
2. the charterer has also an insurable interest in the profits he expects to earn by carrying the goods
in excess of the amount he agreed to pay for the charter of the vessel

concealment

sec 109

concealment- is the failure to disclose any material fact or circumstance which in fact or law is within
or which ought to be within the knowledge of one party and of which the other has no actual or
presumptive knowledge
 to constitute concealment, it is sufficient that the insured is in possession of the material fact
concealed although he may not be aware of it (agent failed to notify his principal of the loss of
cargo)

sec 110
 a party to a contract of insurance need not communicate info of his own judgment to the insurer
much less what he learns from a third person
 the insured is bound to communicate to the insurer
- beliefs or opinions of third persons
- expectations of third persons
 the information be in reference to a material fact
 there is concealment where the insured at the time of application for insurance did not disclose
the opinion of marine experts who inspected the vessel insured that it was unseaworthy
sec 111
 rebuttable presumption of knowledge of a prior loss on the part of the insured of the information
might possibly have reached him in the usual mode of transmission and at the usual rate of
communication
 exception: the insured is not bound, to use accessible means of information at the very last instant
of time ascertain the condition of the property insured.
Sec 112
 concealment of material fact entitles the injured party to rescind the entire contract of insurance
 concealment under sec 112, does not avoid the policy. If the vessel be lost due to any of the causes
mentioned in sec 112, which was concealed, the insurer is not liable
 but if the vessel be lost due to other perils of the sea, like a storm, the insurer is not exonerated
from liability
 national character of the vessel is not a material fact, but facts lying peculiarly within the
knowledge of the insured, which will expose the property to belligerent risks or seizure and
condemnation for violation of the trade or navigation laws of another country must be disclosed

representation

sec 113
 representation is material where it would influence the judgment of a prudent insurer in fixing the
premium or in determining whether he would take the risk, is applicable to marine insurance
effect
1. intentional- avoids the policy
2. not intentional- material to the risk, rescind the contract from the time the representation becomes
false
qualifies sec 45, injured party may rescind the contract only from the time when representation becomes
false although the representation is intentionally false
3.materiality of representations- representation as to the age, equipment, earnings and particular
condition or rating of a vessel. Statements of the nature and amount of the cargo, where she was not
overloaded or where the underwriter did not rely thereon, have been held to be immaterial

sec 114

 unless made with fraudulent intent, their failure of fulfillment is not a ground for rescission

implied warranties

sec 115
warranty- stipulation , either expressed or implied, forming part of the policy as to some fact, condition
or circumstance relating to the risk
insurer will not be liable for any loss under his policy in case the vessel
1. is unseaworthy at the inception of the insurance
2. deviates from the agreed voyage
3. engages in an illegal venture
4. the ship will carry the requisite documents of nationality or neutrality of the ship or cargo where
such nationality of neutrality is expressly warranted
 impliedly warranted that the insured has II in the subject matter insured
 there is an implied warranty that the vessel is in all respect seaworthy and such warranty can be
excluded only by clear provisions of the policy
sec 116
 for a vessel to be seaworthy, it must be adequately equipped for the voyage and manned with a
sufficient number of competent officers and crews. The failure of a CC to maintain a seaworthy
condition the vessel involved in the COC is a clear breach of its duty prescribed in art 17855 of CC


Voyage and deviation

Sec 125
 deviation- any unexcused departure from the regular course or route of the insured voyage or any
other act which substantially alters the risk constitutes deviation

sec 126-127
 the insurer is not exonerated from liability for loss happening after proper deviation. The effect is
as if there were no deviation
 deviation from the course of the voyage will not vitiate a policy of marine insurance if the
deviation is justified or caused by actual necessity which is equal in importance to such deviation
 such compulsory deviations are risks impliedly assumed by the underwriter. But while deviation
to save property is not justified, unless it is to save another vessel in distress, a deviation for the
purpose of saving life does not constitute a breach of warranty.
Sec 128
 insurer is not liable for loss occurring subsequent to deviation

Loss

Sec 129-131
Kinds of total loss
- actual or absolute
- constructive or technical
 when the loss is total, the underwriter is liable for the whole of amount insured
sec 132
 actual total loss- exist when the subject matter of the insurance is wholly destroyed or lost or
when it is so damaged as no longer to exist in its original character
 such loss may exist where the form and specie of the thing is destroyed although the materials of
which it consisted still exist
 when vessel is totally lost in which case there is no vessel to abandon, abandonment is not
required. Because of such total loss, the liability of the ship-owner or agent for damages is
extinguish
 exception: a SO or SA may be held liable for damages when the sinking of the vessel is attributable
to the actual fault or negligence of the SO or its failure to ensure the seaworthiness of the vessel.
Sec 133
Constructive loss/technical loss- one in which the loss, is of such character that the insured is entitled, if
he thinks fit, to treat it as total by abandonment
  in actual loss, no abandonment is necessary; but if the loss is merely constructive total, an
abandonment becomes necessary in order to recover as for a total loss

sec 134
 where a vessel is not heard of at all within a reasonable time after sailing, or for a reasonable time
after she was last seen, she will be presumed to have been lost from a peril insured against.
 No fixed rule with regard to the time after which a missing vessel will be presumed to be lost. It
depends upon the circumstances of each case
 Enough to prove that the vessel was not heard of at her port
Sec 135
 If the original ship be disabled and the master forwards the cargo in another ship, the underwriter
is still liable for any loss which may take place on goods subsequently to such reshipment
 Insurer may require an additional premium if the hazard be increased by the extension of liability
Sec 136
 Expenses necessary to complete the transportation of cargo reshipped
 The insurer is liable for them in addition to paying for any loss or damage which may take place on
the goods, due to the perils insured against
 The liability cannot exceed the amount of insurance
Sec 137
 Constructive total loss- an abandonment by the insured is necessary in order to recover for a total
loss, in the absence of any provision to the contrary in the policy
 Actual total loss- the right of the insured to claim the whole insurance is absolute. He need not give
notice of abandonment nor formally abandon to the insurer anything that may remain of the
insured property
Sec 138
 Average- an extraordinary or accidental expenses incurred during the voyage for the preservation
of the vessel, cargo, or both and all damages to the vessel and cargo from the time it is loaded and
the voyage commenced until it ends and the cargo unloaded
Liability of insurer for general average
 Sec 136, art 859 coc
 Insurer whether for vessel or cargo are bound to contribute to the indemnity for the general
average.
 Liability of the insurer cannot exceed the contributing value of the vessel

Liability of insurer for particular average

 It may be agreed by the parties that the insurance shall be free from particular average, marine
insurer is liable only for particular averge
 Unless, particular average loss has the effect of depriving the insured of the possession at the port
of destination of the whole of the thing insured

Sec 139
 If the insured is deprive of the possession of the entire thing insured at the port of destination, the
insurer is liable because the permanent non-arrival thereof is really an actual total loss
 An insurance against total loss only- will cover any total loss, whether it is actual or constructive
although there is authority to the contrary
 Where the insurance is against absolute total loss or actual total loss, the insurer will not be liable
for constructive or technical total loss

Abandonment
Sec 140
  Abandonment- an act of an insured in notifying the insurer that owing to damage done to the
subject of the insurance, he elects to take the amount of the insurance in the place of the subject
thereof, the remnant of which he cedes to the insurer
 Right of abandonment of vessels, as a legal limitation of a shipowner’s liability, does not apply to
cases where the injury or average was occasioned by the SO own fault.
 Speaks only situations where the fault or negligence is committed solely by the captain. Where the
SO is likewise to be blamed it will not apply
 Loss is technically total, insured cannot claim the whole insurance without showing due regard to
the interest which the underwriter may take in the abandoned property.


Sec 141
 Insured may not abandon the thing insured unless the loss or damage is more thn ¾ of its value
 Any particular portion of the thing insured separately valued by the policy may be separately
abandoned as it is deemed separately insured
 Whether a contract is entire or severable is a question of intention to be determined by the
language employed by the parties
 The extent of the injury to the vessel is to be considered with reference to its general market value
immediately before the disaster, value of the policy
 In determining the extent of the loss, the expenses incurred or to be incurred by the insured
recovering the thing insured are taken into account
Sec 142
 Abandonment must be the entire and cover the whole interest insured
 It must be unconditional, unfettered by contingencies and limitations.
 If only a part of a thing is covered by the insurance, the insured nee only abandon that part.

Sec 143
 When the insured has received notice of loss, he must elect within a reasonable time whether he
will abandon to the insurer and if he elects to abandon, he must give notice thereof.
 Reasonable time is a question depending on the facts and circumstances in each case
 The insured is entitled to a sufficient interval to ascertain its real nature, but he cannot wait an
undue length of time to see whether it will be more profitable to abandon or to claim for partial
loss
 After the property passes beyond the control of the insured, as form an unjustifiable sale, an
abandonment is too late
Sec 144
 The right of the insured to abandon and recover for a total loss depends upon the state of facts at
time of the offer to abandon, and not upon the state disclosed by the information received or upon
the state of loss at a prior or subsequent time
 If abandonment when made in gf, the rights of the parties are definitely fixed and do not become
changed by any subsequent events. If one the other hand, if not made in gf, subsequent
circumstances will not affect it so as retroactively, to impart to it a validly which it has not at its
origin
 Insured cannot abandon when the thing insured is safe, or when he knew, at the time of his offer
to abandon, that the vessel has been repaired and is successfully pursuing her voyage. The
invalidity of the abandonment is not cured by the subsequent loss of the thing insured
  After a valid abandonment has been made, the insured property was recovered, the insured
cannot withdraw the abandonment
 The insured may abandon for a total loss under a marine insurance policy in case of capture,
seizure or detention of the ship or cargo, restraint by blockage or embargo, where through no fault
of the owner, funds for repair cannot be raised; where the voyage is absolutely lost, or where
under urgent necessity, the master of a vessel at an intermediate port, makes a sale of the insured
property
 The intelligence which authorize the insured to abandon need not be direct or positive
information
 Protest of the master, newspaper report, report of pilot or a letter from an official or an agent is
sufficient.
 Info must be of such facts and circumstances as to render it highly probable that a constructive
total loss has occurred and facts sufficient to constitute a total loss must exist. But the facts and
info need not be the same
Sec 145
 Notice may be made orally unless the policy requires it to be in writing, and even then a notice by
telegraph is sufficient
 If done orally, insured must submit to then insurer within 7 days from such oral notice, a written
notice of abandonment
 Abandonment need not necessarily be made by the insured but may be made by an authorized
agent
 May be made to an agent of the underwriter and abandonment to a broker who is agen for both
parties is sufficient
Sec 146
 Notice of abandonment must be explicit and not left open as a matter of inference from some
equivocal acts.
 There must be an intention to abandon, apparent from the communication to the insurer and a
relinquishment of all rights to the insurer
 But there is no abandonment although the insured may have given notice of an intention to
abandon, if he continues to claim and use the property as his own
 Grounds for abandonment must be stated with such particularity as to enable the underwriter to
determine whether or not he is bound to accept the offer
 It is sufficient if the notice shows probably cause for the abandonment, nor is it required that it be
accompanied with proof of interest or of loss
Sec 147
 The insured must state sufficient grounds for the abandonment to make it valid and he cannot
avail himself of any ground of abandonment other than that stated at the time thereof
 If he assigns an insufficient cause or causes which do not in fact exist, proof of other causes will
not be admitted in suing for total loss
Sec 148
 A valid abandonment transfers to the insurer the interests in the subject matter covered by the
policy subject to the rights and interests, if any of third persons.
 Insurer acquires thereby the entire interest insured, together with all its incidents, including right
of action which the insured has against third persons for the injury

Sec 149
 An election and notice of abandonment is a condition precedent to a claim for constructive total
loss
  The interest of the insured over the thing covered by the policy will be transferred to the insurer,
notwithstanding the lack of abandonment as if there had been a formal abandonment, in case the
insurer pays for a loss as if it were an actual total loss.
 The acceptance by the insured of the payment is deemed an offer of abandonment on his part,
hence, the insurer is entitled to whatever may remain of the thing insured, or its proceeds or
salvage

Sec 150
 The captain or master continues to be the agent of the insured until abandonmenr, but from the
moment of a valid abandonment the master of the vessel and agents of the insured become the
agents of the insurer, and the latter becomes responsible for all their acts in connection with the
insured property and for all the expenses and liabilities in respect thereof
 Abandonment when made relates back to the time of the loss and if effectual, the title of the
insurer becomes vested as of that date and he is responsible for the reasonable expenses incurred
by the master after that date in an attempt to save the vessel
 Insurers are also liable for the wages of seamen earned subsequent to the loss, but take free from
any lien or any liability for wages earned prior thereto

Sec 151
 Acceptance s no case necessary if the abandonment is properly made
 Right to abandon is absolute when justified by the circumstance

Sec 152
 Notice of abandonment may be implied by conduct, as by an act of the insurer in consequence of
an abandonment which can be justified only under a right derived from abandonment
 Mere silence after notice would not operate as an acceptance, if it is not for an unreasonable
length of time, nor would steps taken by the insurer to preservr the property from further loss for
the benefit of all parties amount to an acceptance
Sec 153
 Upon receiving the notice of abandonment, the insurer may accept or reject the abandonment. If
he accepts, he becomes

Sec 158
 Object of valuation- a policy of marine insurance may be valued or open
Fire insurance

Sec 169
 Fire insurance is a contract of indemnity by which the insurer, for a stipulated premium, agrees to
indemnify the insured against loss of, or damage to, a property caused by hostile fire located at the
place stated in the policy
 Include allied lines that protect against loss by lightning, windstorm etc, but only when such risks
are covered by extension to fire insurance policies or under separate policies subject to the
payment of additional premiums, may be attached by endorsements
 Fire insurance is essentially a contract of indemnity.
 Fire is spontaneous combustion
 Presence of heat, steam, or even smoke is evidence of fire, but taken by itself will not prove the
existence of fire
 Fire insurance policies now frequently contain extended coverage provisions bringing certain
additional risks or all other risks not included within the coverage of the policy. They also extend
the coverage to indirect or consequential losses
 The standard fire insurance id an agreement to repay the insured for direct loss.
 The attachment of a consequential loss form to the standard fire policy extends the coverage to
such consequential losses= loss of profits insurance or business interruption insurance
 A policy of insurance on a vessel engaged in navigation is a contract of ocean marine insurance
although it insures against fire risks only
 Unfinished vessel, never afloat for a voyage = fire risks
Marine insurance Ordinary fire insurance
Rules on constructive total loss and abandonment Not apply
apply
In case of partial loss of a thing insured for less Insurer may only become a co-insurer in fire
than its actual value, insured in a marine policy is a insurance if expressly agreed upon by the parties
co-insurer of the uninsured portion
Sec 170-171

Requisites for valid alteration

1. the use or condition of the thing is specifically limited or stipulated in the policy
2. such use or condition as limited by the policy is altered
3. the alteration is made without the consent of the insurer
4. the alteration is made by means within the control of the insured
5. the alteration increases the risk
 not affected by any act of the insured subsequent to the execution of the policy, which does not
violate its provisions even though it increases the risk and is the cause of the loss
 there is an implied promise or undertaking on the part of the insured that he will not change the
premises or the character of the business carried there, or to be carried on there, so as to increase
the risk of loss by fire although most fire insurance policies contain a specific provision against an
increase of risk or hazard
 increase of hazard takes place whenever the insured property is put to some new use, and the new
use increases the chance of loss
 mere negligent act temporarily endangering the property will not violate the policy, nor the
temporary acts or conditions which have ceased prior to the occurrence of the loss.
 Increase must be substantial in character
 Policy is avoided by any alteration in the use or condition of the policy insured increasing in the
use or condition of the property
  Insurer would still be liable if the increase in hazard was no longer existing at the time of the loss,
unless there is a breach of warranty that no hazardous goods should be stored or kept in the
property insured.
 There is not an increase of risk and the policy is not avoided where a different use is made of the
insured premises, which use is not a dangerous character and does not differ materially from the
use specified in the policy, even though an additional or increased premium may be demanded
thereof.
 Policy will not be avoided by a violation of provisions (prohibiting specified articles) if the articles
are necessary or ordinarily used in the business conducted in the insured premises
 Making of repairs, painting or doing other acts of similar character on the thing insured are not to
be regarded as an increasing the risks since the property would be useless to the insured if such
acts were prohibited even though by reason thereof, the property may be expose to some
additional risk.
 Insurer not relieved from liability if the acts or circumstances by which the risk is increased are
occasioned by accident, or a cause over which the insured has no control will not avoid a policy
unless actually known to the insured or from the act of the insured’s tenant provided the act us
not known to the insured
 Every act of the insured’s tenant substantially and permanently affecting the conditions of the
property so as to constitute an increase in risk, would be presumptively known to the insured.
 Alteration which does not increase the risk will not affect a contract of life insurance
 Breach of immaterial provision does not avoid the policy
 Insurer is given the right to insert terms and conditions in the policy which if violated would avoid
it, although it does not increase the risk
Sec 172
 If the policy does not contain any prohibition limiting the use or condition of the thing insured, an
alteration in said use or condition does not constitute a violation of the policy.
 The contract is not affected by such alteration even though it increases the risk and is the cause of
the loss
Sec 173-174
 In the absence of express valuation in a fire insurance policy, the insured is only entitled to
recover the amount of actual loss sustained and the burden is upon him to establish the amount of
such loss by a preponderance of evidence
 Contract of fire insurance is a contract of indemnity, insured is entitled to received the amount
necessary to indemnity him, or to have the thing insured in the same condition in which it was at
the time of the loss
 Liability of the insurer shall in no event exceed what it would cost the insured to repair or replace
the thing insured with materials of like kind and quality with proper deduction for depreciation
considering the age or condition of the thing before the loss
 In the case of goods or personal property having a market value which can readily be determined,
such market value may be applied in determining the actual loss sustained.
 Valuation is a policy of fire insurance is conclusive between the parties in the adjustment of either
partial or total loss if the insured had an insurable interest and was not guilty of fraud
 Under an ordinary fire insurance policy, the liability of the insurer in case of fire losses cannot
exceed the amount of insurance nor the actual loss suffered
 The maximum recovery is the amount of insurance or the actual loss suffered, whichever is lower
 Valuation of a building or structure of bldg. or structure insure under a policy against fire may be
fixed as provided in sec 174
 Total loss= the insured can recover the whole amount so insured as stated in the policy
 Partial loss= full amount of the partial loss
  A total loss of the insured building exists when the results of the fire is such as to render the
property wholly unfit for use as a building however valuable it may be as mere material.
 If thing is insured under 2 or more policies, each policy shall contribute pro rata to the payment of
such whole or partial loss
 Life insurance, the measure of indemnity is the sum fixed in the policy. The principle of indemnity
does not apply
 Open policy, can recover actual loss, the value of the property at the time of the loss
 Valued policy, only the value of the things insured stated in the policy
 Insurer in case of partial loss of the subject of the contract, is required to give full indemnity for
such loss up to the amount written in the policy even though the property be very inadequately
insured.
 Co insurance clause- clause requiring the insured to maintain insurance to an amount equal to the
value or specified percentage of the value of the insured property under penalty of becoming co-
insurer to the extent of such deficiency
 Insured is considered the co-insurer for the amount determined by the difference between the
insurance take out and the value of the property insured. This difference is assumed to be the
personal risk of the insured.
 In case of total loss, insurer liable for the full amount
 The mere fact that the parties have fixed a valuation in the policy does not prevent them from
stipulating in the policy concerning repairing, rebuilding or replacing of buildings or structure
wholly or partially damaged or destroyed
 Insurer may be given the option to reinstate or replace the property damaged or destroyed or any
part thereof, instead of paying the amount of the loss or damage= option to rebuilt clause
 It is reserved by the insurer in order to protect him against unfairness in the appraisal and award
rendered by a packed board of arbitrators, exercise within time stipulated in the policy, or in the
absence of stipulation, within a reasonable time.
 Choice by the insurer shall produce no effect except from the time it has been communicated to
the insured.
 Unless the policy is limited the cost of rebuilding to the amount of insurance, the insurer after
electing to rebuild, can be compelled to perform his undertaking, even though the cost may exceed
the original amount of insurance
Sec 175
 After a loss has occurred, the insured may pledge, hypothecated or transfer a fire insurance policy
or rights thereunder. He may do this even without the consent or notice of the insurer
 Not the personal contract which is being assigned, but a claim under a right of action on the policy
against the insurer.
 Assignee acquires no greater rights against the insurer than had the one to whom the policy was
issued
 The right of the insured to assigning his claim against the insurer after a loss has occurred, is
subject to the prohibition in sec 175 against the transfer of a policy of fire insurance to any person
or company who acts as agent or otherwise represents the insurer. Any such pledge etc shall be
void and of no effect insofar as it may affect other creditors of the insured

Casualty insurance

Sec 176
 Includes all forms of insurance against loss or liability arising from accident or mishap
excluding certain type of loss or liability which are not within the scope of other types of
insurance (marine, fire, suretyship and life)
 Casualty= accident
2 general divisions of casualty insurance
1. insurance against specified perils which may affect the person and property of the insured
(personal accident, robbery, theft, damage to or loss of motor vehicle, insolvency of debtors,
defalcation of employees, etc)
2. insurance against specified perils which may give rise to liability on the part of the insured for
claims for injuries to others or for damage to their property(such as workmen’s compensation,
motor vehicle liability, professional liability, products liability etc)
 liability insurance has been said to be a contract of indemnity for the benefit of the insured and
those in privity with him, or those to whom the law upon the grounds of public policy extends the
indemnity against liability
 liability is financial responsibility that one party has to another party as a consequence of doing or
failing to do something the doing of failing to do may involve negligence or the terms of an existing
contractual agreement between 2 or more parties
 liabilities arising out of acts of negligence which are also criminal are also insurable on the ground
that such acts are accidental injury caused by his negligence
 liability insurance must be supported by an insurable interest in the insured, although there is
some authority to the contrary
 insurable interest is to be found in the interest the insured has in the safety of persons who may
maintain or in the freedom from damage or property which may become the basis of suits against
him in case of their injury or destruction.
 The interest does not depend upon whether the insured has a legal or equitable interest in the
property but upon whether he may be charged by law with the liability against which insurance is
taken out
 Always supported by insurable interest
 Insurance against liability, that the coverage or liability of the insurer under the first attaches
when the liability of the insured to the injured third party attaches, regardless of actual loss at that
time
 actual loss, an action against the insurer does not lie until an actual loss is sustained by the insured
 In third party liability insurance contract, the insurer assumes the obligation of paying the injured
third person to whom the insured is liable
 The right of the person insured to sue the insurer of the party at fault depends on whether the
contract of insurance is intended to benefit third persons also or only the insured
 Where the contract provides for indemnity against liability to third persons, then third persons to
whom the insured is liable, can sue directly the insurer upon the occurrence of the injury or event
upon which the liability depends
 Where the contract is one of indemnity against liability, it becomes operative as soon as the
liability of the person indemnified arises irrespective of whether or not he has suffered actual
 Where the contract is for indemnity against actual loss or payment, then third persons cannot
proceed against the insurer, the contract being solely to reimburse the insured for liability actually
discharged by him thru payment to third persons, said third person’s recourse being thus limited
to the insured alone.
 Prior payment by the insured is necessary in order that the obligation of the insured may arise
 Direct liability of the insurer under indemnity contract against third party liability does not mean
that the insurer can be held solidarily liable with the insured and or the other parties found at
fault.
 Liability of the insurer to the third party is based on contract particularly, the insurance policy
while that of the insured is based on tort
 Third party liability of the insurer is only up to the extent of the insurance policy and that required
by law
  Any award beyond the insurance coverage would already be the sole liability of the insured and or
other parties if any
 Accident insurance reimburses the insred for the pecuniary loss suffered as a result of injuries
sustained in an accident
 Health insurance- reimburses the insred for pecuniary loss arising out of disease-related illness.
 In both kinds of insurance, the insured is reimbursed for medical and hospital expenses and in the
case of accident insurance and sometimes health insurance, earnings as a result of the incapacity
 Accident insurance, the beneficiary has burden of proof in demonstrating that the cause of death is
due to the covered peril
 Once that fact is established, the burden then shifts to the insurer to show any excepted peril that
may have stipulated by the parties.
 An accident insurance not compensable in all cases
 an accident is an event that takes place without one’s foresight or expectation, an event that
proceeds from an unknown cause, or is an unusual effect of a known cause and thereof not
expected.
 An even which happens without any human agency or if happening through human agency, an
even which, under the circumstances, is unusual to and not expected by the person to whom it
happens
 The terms do not, without qualification, exclude events resulting in damage or loss due to the fault,
recklessness or negligence of third parties.
 Death or injury does not result from accident or accidental means within the terms of an accident
policy if it is the natural result of the insured’s voluntary act, unaccompanied by anything
unforeseen except the death or injury
 Exception: there is no accident when a deliberate act is performed unless some additional,
unexpected, independent and unforeseen happening occurs which produces or bring about the
result of injury or death.
 Where the death or injury is not the natural or probable result of the insured’s voluntary act, or if
something unforeseen occurs in the doing of the act which produces the injury, the resulting death
is within the protection of policies insuring against death or injury from accident
 Suicide and willful exposure to needless peril, both are in pari matere because they both signify a
disregard for one’s life.
 Only difference is in degree, as suicide imports a positive act of ending such life whereas the
second act indicates a reckless risking of it that it almost suicidal in intent
 Voluntary exposure to a known danger- is a generally held to negate the accidental character of
whatever followed from the known danger
 Intentional, implies the exercise of the reasoning faculties, consciousness, and volition. Where a
provision of the policy excludes intentional injury, it is the intention of the person inflicting the
injury that is controlling.
 If the injuries suffered by the insured clearly resulted from the intentional act of a third person,
the insurer is relaived from liability as stipulated.
 The policy requires that suit and final judgment be first obtained against the insured, that only
“thereafter” can the person injured recover on the policy; it expressly disallows suing the insurer
as co-defendant of the insured in a suit to determine the latter’s liability to the third person

Suretyship

Sec 177
 It is an agreement whereby one undertakes to answer, under specified terms and
conditions for the debt, default or miscarriage of another (principal or obligor) such as
 failure to perform a contract or certain duties or for breach of trust, negligence and the like,
in favor of a third party
 A contract of suretyship incldes official recognizances, stipulations, bonds or undertakings
issued by any company
Sec 178
 contract of surety is evidenced by a writing called, surety bond which is essentially a
promise to guarantee the debt or obligation of the obligor
 the liability of the surety or sureties undr a bond is joint nd several or solidary
 surety becomes primarily liable upon default of the obligor
 it is limited to the amount of the bond
 merely a collateral contract
 basis is the principal contract or undertaking which it secures
 it is determined strictly by the terms of the contract of suretyship in relation to the
principal contract between the obligor and the oblige
 to indemnify the surety against loss, the obligor executes a third contract in favor of the
surety= indemnity agreement
 any misrepresentation made by the bond applicant cannot defeat the rights of the oblige
 the orginal surety issuing the prime bond may cede a portion or portions of the bond to one
or more insurers or sureties under a bond reinsurance contract
 a bond can be cancelled by or with the consent of the oblige or by the commissioner or by a
court of competent jurisdiction, while a contract of insurance may be cancelled unilaterally
wither by the insured or by the insurer on the grounds provided by law
 in contract of suretyship it requires the acceptance of the oblige before it becomes valid
and enforceable
 surety undertakes to pay if the principal does not pay, the guarantor binds himself to pay if
the principal cannot pay.
 Surety is not entitled to the benefit of exhaustion of debtor’s assets, while the guarantor or
has this right to have all the property of the debtor and legal remedies against the debtor
first exhaust before he can be compelled to pay the creditor
Sec 179
 Premium becomes a debt as soon as the contract of suretyship or bond is perfected and delivered
to the obligor
 The contract of suretyship or bonding shall not be valid and binding unless and untl the premum
theref has been paid
 Where oblige has accepted the bond, it shall be valid and enforceable nothwithstanding that the
premium has not been paid
 If the contract of suretyship or bond is not accepted by, or filed with the oblige, the surety shall
collect only a reasonable amount
 If the non-acceptance of the bond be due to the fault or negligence of the surety, no service fee,
stamp, or taxes imposed shall be collected by the surety
 In case of a continuing bond, the obligor shall pay the subsequent annual premium as it falls due
until the contract is cancelled.
 The premium is the consideration for furnishing the bond or guaranty and the obligation to pay
the same subsists for as long as the liability of the surety shall exist
Sec 180
 Provisons from art 2047 to 2084 of civl code is applicable to suretyship