BINANGKAL MIDTERM NOTES (Insurance)
GENERAL PROVISIONS (Sections 1-2)
DEFINITION OF TERMS:
 Contract of Insurance: It is an agreement whereby one
undertakes for a consideration to indemnify another
against loss, damage or liability arising from an unknown
or contingent event.
o Contract of Suretyship: only falls within the
purview of the Contract of Insurance if
made by a surety which is doing an
insurance business.
 Pre Need Plan: It is an agreement to provide payment or
performance of service at the time of actual need of the
plan holder or on an agreed maturity date in exchange
for cash or installment amount.
 Variable Contract: It is a policy where the benefits
provided by the insurer varies upon the insured’s
portfolio of investments separately maintained from
other accounts.
 Contract of Suretyship: It is an agreement whereby one
binds himself solidarily with the principal debtor.
 Bancassurance: the presentation and sale to bank
customers by an insurer of its products within the
premises of such duly licensed bank.
 Mutual Insurance Companies: It is a company owned by
policy holders designed to promote their welfare.
 “Doing an Insurance business or transacting an
insurance business” means:
o making or proposing to make, as insurer,
any insurance contract
o making or proposing to make, as surety, any
contract of suretyship as a vocation
o Doing any kind of business, including
reinsurance, regarded specifically as doing
an insurance business as per this Code.
o Doing or proposing to do any business
equivalent to any of the foregoing.
RIGHT OF SUBROGATION
 Doctrine of Subrogation:
o It is a process of legal substitution where
the insurer, after paying the amount
covered by the insurance policy, steps into
the shoes of the insured where the former
avails himself of the latter’s right that exist
against the wrongdoer at the time of loss.
 Purpose of Subrogation:
o To prevent the insured from receiving a
double recovery from the wrongdoer and
the insurer.
 Right of subrogation only applies to property
insurance.
o Why not life insurance? Because the value
of human life is regarded as unlimited and
no recovery from 3rd party can be deemed
adequate to compensate the insured’s
beneficiary.
 Right of subrogation by the insurer arise on the ff:
o Payment by the insurer to the insured
o Even if insurer is not privy to the contract
where right of insured, being a party to
such contract, is being subrogated.
o No need to present evidence of the
insurance policy; the “subrogation receipt”
is enough with the amount paid to establish
relationship b/n insurer and insured.
o The insurer can only recover from the
offending party up to the amount it had
paid to the insured.
o The insured can no longer recover from the
offending party what was paid to him by
the insured. However, the insured can still
recover for the deficiency if the actual
damages were more than what the insurer
paid.
 Cases when there is no right of subrogation:
o When the insurer pays the insured for a
loss not covered by the policy.
o The insurer by his own act releases the
wrongdoer.
o In case of life insurance.
o Recovery of loss in excess of the limits
provided by the policy.
ELEMENTS OF INSURANCE (CRIPR)
 C-onsideration
o Premium
o Insurer undertakes to assume the risk of
loss for a consideration
 R-isk
o Risk of loss or damage
o Insured is subjected to risk through the
destruction or impairment of that interest
by the happening of designated peril
 I-nsurable Interest
o Interest in life for thing capable of
pecuniary estimation
 P-eril
o Designated peril as cause or the risk
coverage or qualifiers
o Cause of damage or loss must be caused by
the designated perils stated in the contract.
 R-isk Distributing Scheme
o Term is used because of the definition of
“insurance business”
o not “risk-transferring scheme”; the
assumption of risk is a part of the general
scheme to distribute actual losses among a
large group of persons bearing similar risks.
CHARACTERISTICS OF INSURANCE(SPACCIE)
 S-ynallagmatic
o Rights and obligations of the parties
correlate and mutually correspond. Insurer
assumes the risk of loss w/c insured might
suffer in consideration of payments under a
risk-distributing scheme. Pooling of
resources, legal reserve.
 P-ersonal and uberrimae fides
o Personal – each party has in view character,
credit and conduct of other
o Uberrimae fides – highest/utmost degree of
good faith enjoined by law
 A-leatory
o Liability of insurer depends upon some
event w/c is uncertain, or w/c though
certain, is to occur at some future
undetermined time.
 C-onsensual and Voluntary
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 BINANGKAL MIDTERM NOTES (Insurance)

o Meeting of mind of parties WHAT MAY BE INSURED (Sections 3-5)

 C-ontract of Adhesion
o “take it or leave it” SUBJECT MATTER OF INSURANCE
 I-ndemnity  It is the “Insurable Interest”
o for non-life: you can’t recover more than o Anything that has an appreciable pecuniary
the value of your loss value, which is subject to loss or
o for life: investment – measure of economic deterioration or of which one may be
security for the insured during his lifetime deprived so that his pecuniary interest is or
and for the beneficiaries during his death may be prejudiced.
 E-xecutory and Conditional  how can you suffer loss when you
o Insurer has no obligation to pay until and have no interest?
unless the peril insured against takes place  Insurable interest to the extent
that you are damnified
RISK-DISTRIBUTING DEVICE  Purpose why insurance interest is only to the extent
 Insurance is a risk distributing device. that insured is damnified:
 How does INSURANCE become a risk distributing o Prevents wagering: no insurance against
device? drawing of any lottery
o Loss is equitably distributed out of a o Limits liability of insurer
general fund contributed by all.  Facts about “insurable interest” in the following:
 by paying a premium, each o Insurable interest in Life/ Health:
member contributes to a small
- exists where there is reasonable ground
degree toward compensation for
founded on (1)relations of the parties either
losses suffered by any member of
contractual or pecuniary, (2) or by blood
the group.
and affinity, to expect some benefit or
o Provides protection against absorbing one’s
advantage from continuance of life of
losses alone. insured.
DIFFERENT KINDS OF INSURANCE - Insurance interest must exist at the time
 LIFE INSURANCE CONTRACTS of inception (life) except for when a
o Individual Life husband took out life policy for wife. He is
o Group Life entitled to proceeds when she died even
o Industrial Life when they were already divorced then
 NON-LIFE INSURANCE CONTRACTS - Non-life: insurable interest at the inception
o Marine and time of loss
o Fire
o Casualty – Own life:
 CONTRACTS OF SURETYSHIP  Unlimited
CONSTRUCTION OF INSURANCE CONTRACTS  Beneficiary need
not have
 Where there is ambiguity or doubt:
insurable interest
o Liberal Interpretation
in life of insured
 Contracts of Insurance are to be
so long as not
construed liberally in favor of the
one of those
insured and strictly against the
prohibited by
insurer.
law.)
 When terms are clear:
 Spouse should be
o Literal Interpretation
legal, legitimate
 Contracts of Insurance should be
 Children may be
taken in their plain and ordinary
illegitimate,
sense.
legitimate,
 Where contract is silent with respect to a particular
minors or of legal
matter:
age, married or
o It should be resolved against the insurer.
not.
WHAT CONSTITUTES DOING OR TRANSACTING – Life of person whom he depends
AN INSURANCE BUSINESS for support
 Principal Object and Purpose Test:  Child may procure
o if the principal object and purpose is insurance on life of parent
“indemnity”, the contract constitutes (here not a)
insurance  Child taken by person
o if the principal object and purpose is from orphanage – w/
“service”, risk transfer and distribution insurable interest because
being merely incidental, the arrangement is of expectation of support
not insurance.  No insurable interest in
 it is not subject to the laws lives of cousins, nephews,
regulating insurance. aunts and other relatives,
not even in-laws.
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 BINANGKAL MIDTERM NOTES (Insurance)
 UNLESS: they
have pecuniary
interest so they
fall under (c)
– Person who has legal obligation of
which death or illness might delay
or prevent the performance
 Creditor can take life
insurance for debtor
 No insurable interest in
secured debts
 There is insurable interest
in unsecured debts so if
debtor dies, something
will still answer for debt
 Limit of insurable interest:
 Amount of debt
 Insurable Interest must
exist both:
 at the time of
inception of
contract
 at the time of
loss because debt
may have already
been paid by
them.
 Er can insure life of ee; if
ee has already severed
ties with e
– Of any person upon whose life any
estate or interest vested in him
depends
 Usufructuary has
insurable interest in life of
naked owner.
o Insurable Interest in Health
– His own health
o Insurable Interest in Property
– Interest of such nature that a
contemplated peril might damnify
the insured
– He will be benefited by continuing
existence of thing or suffer
pecuniary loss by its destruction
– Insurable interest in property
consists of:
 Existing interest: actual
interest
 Inchoate interest: interest
exists but is unripe upon
happening of the even
 Expectancy with actual
interest: mere expectancy
not enough; it must be
coupled with an actual
interest.
 a farmer has
insurable interest
in the yield of his
rice field because
of his existing
right since he
planted the rice.
 a son has no
insurable interest
in a property of
his father since
he only has a
mere
expectation.
MEASURE OF INSURABLE INTEREST
 It is the extent to which the insured might be
damnified by the loss
 Indemnity Principle: The insured may not recover a
greater value than that of his actual loss
PARTIES TO THE CONTRACT(Section 6-9)
WHO ARE THE PARTIES
 Insurer:
o Party who assumes or accepts the risk of
loss and undertakes for a consideration to
indemnify the insured or to pay him a
certain sum on the happening of a specified
contingency or event.
 Insured:
o the person in whose favor the contract is
operative and who is indemnified against, or
is to receive a certain sum upon the
happening of a specified contingency or
event.
 Beneficiary: (not a vital party to the contract)
o He is the 3rd person designated by the terms
of the policy as the one to receive the
proceeds of the insurance and for whose
benefit the policy is issued and to whom
loss is payable.
WHO/WHAT MAY NOT BE INSURED?
 Public Enemy
 Paramour
 Wager
CAPACITY OF PARTY INSURED
 Natural Person
o Requisites are:
– He must be competent to make a
contract
– He must possess insurable interest
in the subject of contract
– He must not be a public enemy
 Juridical Person
o Requisites are:
– It must not be a public enemy: if
controlled by enemy aliens
 Control Test: a
corporation is deemed to
have the same citizenship
as the controlling
stockholders in time of
war.
EFFECT OF WAR ON INSURANCE CONTRACTS
 If the parties are not “enemy aliens”
o The contract continues to be enforceable.
 If the parties are rendered “enemy aliens”
o For property insurance:
– The contract becomes prohibited
o For life insurance
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 BINANGKAL MIDTERM NOTES (Insurance)
– The insured is entitled to the
reserve value of the policy
 If the war has ended:
o It does not revive the contract.
o Insurer not liable even if the loss is suffered
by the insured after the end of war.
MORTGAGOR – MORTGAGEE
 Mortgagor and mortgagee each have separate and
distinct insurable interest in the mortgaged property
INSURABLE INTEREST (Sections 10-25)
BENEFICIARY
 The insured shall have the right to change the
beneficiary he designated in the policy unless he has
expressly waived his right in said policy.
KINDS OF BENEFICIARY
 Insured himself
o The immediate party to the contract.
 Third person who paid a consideration
o Insured may have taken the policy for the
benefit of a creditor or to secure some
other obligation
 Third person by insured’s bounty
o Out of the insured’s liberality
FORFEITURE OF THE BENEFICIARY’S INTEREST
IN THE LIFE INSURANCE POLICY
 When the beneficiary is the Principal, Accomplice, or
Accessory in bringing about the insured’s death
 The nearest relative of the insured shall receive the
proceeds of the insurance:
o Legitimate children
o Father and mother
o Grandfather and grandmother or nearest
degree ascendant
o Illegitimate children
o Surviving spouse
o Collateral relatives
– Brothers and sisters of the full
blood
– Brothers and sisters of the half
blood
– Nephews and nieces
o In default of above, State.
INSURABLE INTEREST: CODAL DEFINITION
 Every interest in property, whether real or personal,
or any relation thereto, or liability in respect thereof,
of such nature that a contemplated peril might
directly damnify the insured. (Section 13)
CARRIER OR DEPOSITORY
 Extent of the insurable interest:
o To the extent of the liability of the carrier or
depository on the thing held by hm
o It should not exceed the value of the thing
A CONTINGENT/EXPECTANT INTEREST IS NOT
INSURABLE
 A contract of insurance does not support a mere
hope. For example:
o Property of father/son/spouse
o Property of debtor
o Property of testator still alive
TIME WHEN INSURABLE INTEREST MUST EXIST
 Only applies on property insurance and not life
insurance except that on the life of the debtor.
1. Upon the effectivity of the insurance
 Date of the execution f the contract
2. Upon the happening of the loss
 Need not exist during the intervening
period
EFFECT OF CHANGE OF INTEREST
 This happens when the thing insured of is
transferred to a 3rd person who does not take the
precaution of obtaining a transfer of the policy of
insurance.
o The contract is suspended
o The contract is not rendered void
 It does not apply to the following:
o Life, health and accident insurance
o Change of interest in the thing insured after
the occurrent of an injury which results in a
loss
o Change of interest in one or more of several
things, separately insured by one policy
o Change of interest by will or succession on
the death of insured
o Transfer of interest by one of several
partners, joint owners, or owners in
common who are jointly insured to the
others
o When a policy is so framed that it will inure
to the benefit of whomsoever, during the
continuance of the risk, may become the
owner of the interest insured
o When there is an express prohibition
against alienation in the policy. In case of
alienation, the contract of insurance is not
merely suspended but is avoided.
 Change of interest in the thing insured after the
occurrent of an injury which results in a loss
o The insured now has a right to assign his
claim against the insurer as freely as any
other money claim.
 Change of interest in one or more of several things,
separately insured by one policy
o Divisible contract vs. indivisible contract: a
question of intention
o A change of interest in indivisible contracts
in one or more of the things will avoid the
insurance as to the others.
 Change of interest by will or succession on the death
of insured
o Insurance automatically passes on the death
of the insured
VOID INSURANCE
 Stipulation for the payment of loss whether the
person insured has or has not any interest in the
subject matter of the insurance
 Stipulation that the policy shall be received as proof
of insurable interest.
 Stipulation for wagering or gaming policy
CONCEALMENT (Sections 26-35)
CONCEALMENT: CODAL DEFINITION
 It is the neglect to communicate that which a party
knows and ought to communicate. (Section 26)
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 BINANGKAL MIDTERM NOTES (Insurance)
PRIMARY CONCERNS OF THE PARTIES (L-CEP)
 L-oss occurred
o Determine whether a loss has occurred and
if so, the amount of such loss
 C-ontrol of the risk
o Such control of the risk after it is assumed
as will enable the insurer to guard against
the increase of the risk because of change in
conditions
 E-stimation of the risk
o The 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
 P- recise delimitation of the risk
o It determines the extent of the contingent
duty to pay undertaken by the insurer.
REQUISITES OF CONCEALMENT
 A party knows the fact which he neglects to
communicate or disclose to the other
 Such party concealing is duty bound to disclose such
fact to the other
 such party concealing makes no warranty of the fact
concealed
o where a warranty is made of the fact
concealed, the non-disclosure of such fact is
not concealment but constitutes a violation
of warranty.
 the other party has not the means of ascertaining
the fact concealed
DEVICES FOR ASCERTAINING AND
CONTROLLING RISK AND LOSS (C-CREW)
 C-oncealment
o A neglect to communicate that which a
party knows or ought to communicate
 C-ondition
o Those which are not placed in the policy as
the risk insured against
o If a particular risk is not the one insured
against, e.g. fire, it cannot be covered by the
insurance policy
 R-epresentation (ideally Misrepresentation)
o When all the facts fail to correspond with
the represented assertions or stipulations
 E-xceptions
o Placed in the policy itself
 W-arranties
o Additional contracts: riders; a promise not
to do something after the execution of the
contract
EFFECT OF CONCEALMENT
 THE FACT CONCEALED NEED NOT BE THE CAUSE OF
THE LOSS OR DEATH.
 If made by the insured:
o Contract is voidable at the insurer’s option.
 If made by the insurer:
o “entitles” the injured party to rescission
o Applies to intentional and non-intentional
concealment
INFORMATION THAT NEED NOT BE
COMMUNICATED TO OTHER PARTY:
 Those with the other knows
 Those which, in the exercise of ordinary care, the
other ought to know, and of which the former has no
reason to suppose him ignorant
 Those of which the other waives communication
 Those of which prove or tend to prove the existence
of a risk excluded by a warranty, and which are not
otherwise material
 Those which relate to a risk excepted from the policy,
and which are not otherwise material.
DETERMINATION OF MATERIALITY
 Test of materiality: This is determined by the court.
o W/N a fact increases the risk
o W/N a fact contributes to any loss or
damage
o Does the fact influence the parties in the
decision of the contract?
PRESENCE OF CONCEALMENT OR
MISREPRESENTATION
 Generally, if there is concealment or
misrepresentation, the contract (policy) is VOID.
- Because there is deceit or fraud in obtaining the
consent of the insurer with the conditions of the
policy.
- The insurer is entitled to rescind the contract.
 CANCELLATION VS. RESCISSION
– Cancellation
 insurance for a certain period, the premium
paid within the unexpired period
 where the property is insured for more than
its value
 the interest was not exposed to the peril
insured against
 void ab initio – no insurable interest
 contract is voidable (fraud or
misrepresentation of insurer)
 premium should be returned
– Rescission
 there is fraud, concealment,
misrepresentation in obtaining the
insurance policy
 no return of premium
 right to rescind should be exercised prior to
the commencement of an action in the
contract (before any claim is made)
RIGHT OF RESCISSION
 The right to rescind granted by law to the insurer is
waived by the acceptance of premium payments
despite the knowledge of the ground for rescission.
INCONTESTABILITY CLAUSE
 If the concealment or misrepresentation has been
discovered after 2 years from the time the policy was
enforced (executed), insurer CANNOT RESCIND the policy. The
2-year period is enough for him to investigate.
 The incontestability clause is applicable only in life or
industrial life insurance, except when EXPRESSLY
applied in non-life insurance.
 In life and industrial life insurance – the computation
for incontestability clause will be from the date of
reinstatement which starts on the date of payment.
(example: 6-months grace period, and the insured paid
premium on the 4th months, the computation starts from the
4th month)
IMPORTANT FACTS ABOUTCONCEALMENT
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 BINANGKAL MIDTERM NOTES (Insurance)
 In non-life insurance (health or casualty or medical
insurance), if there is no clear stipulation in the
contract regarding concealment, the rule on
concealment from the code should be followed; if
there are stipulations against concealment as
exception, the insurer is NOT liable.
 Concealment is only an affirmative defense in not
paying the insured if there is no express stipulation
against it. The contract cannot be rescinded
automatically by the insurer.
 The non-payment of premium does not affect the
incontestability rule, if the policy has been issued
and payment has already been acknowledged.
INCONTESTABILITY CLAUSE CANNOT BE
INVOKED:
1. In non-life insurance (health or casualty or medical
failure to pay premium – no premium no pay
2. material concealment found within 2 years from the
enforcement of the policy
3. there is no insurable interest (void ab initio)
4. no proof of death
5. willful act (to expose the subject to the risk insured
against)
6. exempted risk
MATERIALITY OF CONCEALED FACT
- Determined by the probable and reasonable
influence of the facts upon the insurer in
forming his estimate of the disadvantages of the
proposed contract or in making his inquiries.
 Each party in the contract is bound to know all the
general causes which are open to his inquiry which
may affect the material perils contemplated.
 The right to information of material facts may be
waived, either by the terms of the insurance of by
neglect of the other party to make inquiry as to such
facts.
GROUNDS FOR RESCISSION OF POLICY:
1. non-payment of premium
2. conviction of a crime arising out of acts increasing
then hazard insured against
3. discovery of fraud or material misrepresentation
4. discovery of willful or reckless acts or omissions
increasing the hazard insured against
5. physical changes (material alteration) to the property
insured which result in the property becoming
uninsurable
6. determination by the commissioner that the
continuation of the policy would violate the code or
would place the insurer in violation of the code
7. Breach of warranty.
** As long as the activity does not change the risk, the insurer
is still liable.
REPRESENTATION (Sections 36-48)
REPRESENTATION vs. MISREPRESENTATION
 Representation: It is a statement made by the
insured at the time of, or prior to, the issuance of the
policy, as to an existing or past fact or state of facts,
or concerning a future happening, to give
information to the insurer and otherwise induce him
to enter into the insurance contract.
 Misrepresentation: It is an active form of
concealment. It is a statement -
o As a fact of something which is not true
o Which the insure stated with knowledge
that it is untrue and with an intent to
deceive which he states positively as true
without knowing it to be true and which has
a tendency to mislead
o Where such fact in either case is material to
the risk.
CONSTRUCTION OF REPRESENTATIONS:
 It must be construed liberally in favor of the insured
 They are required to be only substantially true.
o Warranties, in contract, must be literally
true or the contract will fail.
KINDS OF REPRESENTATION:
 Oral or written
 Made at the time of or before the issuing of the
policy
 Affirmative or promissory
o Affirmation Representation: is any allegation
as to the existence or non-existence of a
fact when the contract begins.
o Promissory Representation: is any promise
to be fulfilled after the contract has come
into existence or any statement concerning
what is to happen during the existence of
the insurance.
REQUISITES FOR INCONTESTABILITY:
 It means that after the requisites are shown to
exist, the insurer shall be estopped from contesting
the policy for setting up any defense, except as is
allowed, on the ground of public policy.
1. The policy is a life insurance policy
2. It is payable on the death of the insured
3. It has been in force during the lifetime of the insured
for at least two years from its date of issue or of its
last reinstatement.
WHEN POLICY BECOMES INCONTESTABLE:
 the insurer may not refuse to pay the same by
claiming:
1. The policy is void ab initio
2. It is rescissible by reason of the fraudulent
concealment of the insured or his agent, not
matter how patent or well founded
3. It is rescissible by reason of the fraudulent
misrepresentations of the insured or his
agent.
THE POLICY (Sections 49-66)
POLICY OF INSURANCE: CODAL DEFINITION
 It is the written instrument in which a contract of
insurance is set forth . (Section 49)
o Contract is the meeting of the minds. The
policy is the formal written instrument
evidencing the contract.
o The best evidence that a contract has been
entered into between the insurer and the
insured is the delivery of the policy by the
insurer to the insured.
o Effects of delivery of policy: If delivery is
conditional, non- fulfillment of the
condition bars the contract from taking
effect.
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 BINANGKAL MIDTERM NOTES (Insurance)
o If unconditional, the insurance becomes
effective at the time of delivery.
POLICY vs. CONTRACT
 A policy of insurance is different from the contract of
insurance.
COVER NOTES
 These are temporary insurance issued pending the
issuance of insurance policy which usually lasts for
60 days. It may be extended with the written
approval of the commissioner if he determines that
such extension is not contrary to any provision of the
insurance code.
WHEN POLICY IS TRANSFERRED
 (sec. 58) The mere transfer of a thing insured does
not transfer the policy, but suspends it until the same
person becomes the owner of both the policy and
the thing insured.
KINDS OF POLICY
1. OPEN POLICY – a policy in which the value of the
thing insured is not agreed upon, but is left to be
ascertained in case of loss.
(the value of the thing at the time of the loss)
2. VALUED POLICY – a policy which expresses on its face
an agreement that the thing insured shall be valued
at a specific sum.
(the value of the thing stated in the policy)
3. RUNNING POLICY – a policy which contemplates
successive insurances, and which provides that the
object of the policy may be from time to time
defined by additional statements or indorsements.
(insured shall make inventory of the properties every
now and then to the insurer)
WHEN ACTION COMMENCES:
 (sec 64) The commencement of an action under the
insurance should not be less that one year from the
time when the cause of action accrues (refusal of the
insurer to pay the insured), otherwise, the
agreement as to the time is void.
o CASH AND CARRY PROVISION
 no premium, no insurance
 except:
1. In life or in industrial life insurance
– because there is a grace period in
which the insured has already been
entitled to the insurance without
having paid the premiums for the
agreed period.
2. In case of temporary receipt or
acknowledgment of premium by
the insurer (even if there is actually
no payment yet) through the
principle of ESTOPPEL. However,
the insured is not exempt from
payment of the proceeds of
insurance.
- if there is credit: for as long as the insured paid
within the period stipulated, and the insured
paid even after the loss, the insurer is liable.
- If the insurer willingly accepted the payment
even after loss, the insurer is liable.
 If the payment was given to the
agent of the insurer, the act of the
agent is the act of the principal.
The insurer is still liable.
 The insurer is liable as long as the
check has sufficient funds.
INSURANCE BY INSTALLMENT
 Insurance by installment – If the insured paid a part
of the insurance, and the property has been
damaged or lost before the completion of premium,
the insurer should pay the insured, but the insured is
still liable to pay the proceeds of the insurance.
TRANSFER OF POLICY
 LIFE insurance – can always be transferred even
without the consent of the insurer.
 PROPERTY insurance – could only be transferred with
the consent of the insurer.
- insurable interest must exist at the time of
execution and risk, but may not exist in the
mean time; suspended until the insurable
interest and the policy is vested in the same
person.
PROXIMATE CAUSE
 cause which was uninterrupted by any event,
without which, the injury would not have occurred.
** With FIRE INSURANCE – as long as fire is
the proximate cause, whatever the
immediate cause is, the insurer is still liable.
FORMAL REQUISITE OF A POLICY:
1.) In printed form w/c may contain blank spaces; and
2.) Any word, phrase, clause, mark, sign, symbol, signature,
number or word necessary to complete the contract of
insurance shall be written in the blank spaces provided
therein.
 Formal requirements of a rider, clause, warranty,
endorsement as part of the contract:
1.) The descriptive title or name of the rider w/c is
pasted or attached to the policy must be mentioned
and written on the blank spaces provided in the
policy; and
2.) Unless applied for by the insured or owner, said
insured or owner must countersign the rider.
 Requirements of group insurance and group
annuity policies:
o May be typewritten and need not be in
printed form.
SUBSTANTIVE REQUISITES IN A CONTRACT OF
INSURANCE:
 Policy must specify:
1.) The parties between whom the contract is made;
2.) The amount to be insured except in the case of
open or running policies;
3.) The premium, or if the insurance is of a character
where the exact premium is only determinable upon
the termination of the contract, a statement of the
basis and rates upon w/c the final premium is to
be determined;
4.) The property/life insured;
5.) The interest of the insured in property insured if
he is not the absolute owner thereof;
6.) The risks insured against; and
7.) The period during w/c the insurance is to
continue.
WARRANTIES (Sections 67-76)
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 BINANGKAL MIDTERM NOTES (Insurance)
WHAT ARE WARRANTIES
 These are promises written in the insurance, wherein
the insured and the insurer signed, and appended
the same in the policy.
- If there is breach, the insurer may rescind the
policy.
- If there is insurer’s knowledge of breach of
contract by the insured, and he did not take
action, and the insured still received insurance
money, the insurer is ESTOPPED from the return
of such money.
FOR FIRE INSURANCE
- Proximate cause of loss should be fire
- May include fire caused by natural disaster.
- Property must be consumed by fire, or when the
reason for loss or damage is caused by trying to
save the property (water damages or theft), or
when the wall of the house collapsed to another
infrastructure because of the fire… there is a
right to claim from the insurer.
- If the proximate cause is excepted from the
liabilities stipulated in the policy, the insurer is
not liable for the loss (example: explosion)
- FRIENDLY FIRE: the fire is on that place where it
is supposed to burn. If the fire escapes from
where it is supposed to burn, it becomes
HOSTILE fire.
 THE INSURERE IS STILL LIABLE EVEN IF THE
IMMEDIATE CAUSE OF THE LOSS IS NOT THE PERIL
INSURED, AS LONG AS THE PROXIMATE CAUSE IS
THAT PERIL INSURED.
FOR MARINE INSURANCE
- Covers all risks in the shipment or navigation of
a vessel, including the goods shipped, profits,
and the ship itself.
- CHARTERER (lessee) has insurable interest with
the freightage of the goods.
- Owner of the VESSEL has insurable interest with
the vessel itself and the goods
- Owner of the GOODS has insurable interest with
the goods themselves.
- INSURABLE:
o Any peril during the voyage
o Any peril for a certain period
o Ay peril for a certain voyage
- PERILS OF THE SHIP : ordinary wear and tear of
the ship, ordinary occurrences in the voyage
- PERILS OF THE SEA: unexpected and inevitable
circumstances and casualties due to the violence
of the sea (INCH MARIE CLAUSE)
IMPLIED WARRANTY OF SEA WORTHINESS
– ship is reasonably fit to perform service and
must be able to encounter the ordinary perils of
the voyage. It is not limited to the physical
structure of the vessel, but must be laden with
the proper equipment, machinery, crew
members, and food for passengers.
IMPLIED WARRANTIES OF THE SHIP
1. W. of seaworthiness
2. W. that the vessel will not deviate from the route
3. W. that the vessel will not engage in illegal paper
4. W. that the vessel has the proper documents
IN THE ABSENCE OF ANY STIPULATION, ONLY THE PERILS OF
THE SEA IS INSURED, UNLESS “ALL-RISK POLICY” IS
STIPULATED.
ALL-RISK POLICY – exempting clauses arte important;
concealment will not vitiate the contract except when such
concealment is the cause of damage or loss.
BAREBOAT or DEMISE charter
- charterer: ship becomes common carrier
- the real owner: becomes private carrier, tasked to
observe diligence of a good father of a family
VOYAGE OR TIME CHARTER- AFREIGHTMENT
- the owner of the vessel is the common carrier
(extraordinary diligence)
- shipper is a private carrier
INSURABLE INTEREST IN MARINE INSURANCE:
Shipper – cargo, expected profits
Charterer – the ship and the goods
Ship-owner – the ship itself
RESPONSIBILITY OF THE SHIPPER - should look for a
seaworthy ship
- INSURER should investigate first the
seaworthiness of the ship before paying the
claimant.
CONCEALMENT IN MARINE INSURANCE
- opinion of 3rd persons are material and must be
disclosed (example: Pag-asa report, Engineer of
the ship report on the machine of the ship)
- if due to concealment, there was loss or
damage, that us the only time that the insurer
may rescind the contract
- CANNOT RESCIND contract with the following
grounds:
o National character of the ship
o Falsified or simulated documents
o Illegal goods/contraband
GENERAL AVERAGE LOSS – damages and expenses incurred
for the salvation of the cargo or ship from a real or known risk
 everybody benefits!
PARTICULAR AVERAGE LOSS – damages and expenses
incurred not for the common benefit of all but only for
particular or certain persons.
CONSTRUCTIVE TOTAL LOSS
– if the owner of the vessel would spend more than ¾
of the value of the vessel to save it, or if the injury
reduced the value of the thing insured for more than
¾.
– the owner should abandon everything to the insurer,
so the insurer would look for something to salvage
from it. The insurer will pay the value of the vessel.
– Need to notify the insurer immediately, must be
made within reasonable time after receipt of reliable
information of the loss
HOW ABANDONMENT IS MADE:
1. notice (generally in writing) to the insurer
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 BINANGKAL MIDTERM NOTES (Insurance)

2. notice should be made explicitly stating the cause of

abandonment
3. if oral notice is made, there should be a written
notice within 7 days from the oral notice

VEHICLE INSURANCE

Comprehensive insurance for vehicles – all risk insurance

No fault indemnity clause – right to claim without proving

fault or negligence; made on the vehicle within which the
injured is riding at the time of the accident; indemnity not
exceeding PhP 5,000; proof for claim – medical cert, or death
cert, or police report of the accident.

3 party suit against insurer – depends on the policy

(sometimes, the person at fault pays first, then the insurer
pays afterwards)

Compulsory 3rd party liability - the purpose is to give financial

assistance to victims of motor vehicle accidents or their
dependents

Compulsory motor vehicle liability insurance

- contract of insurance against liability for death
or bodily injuries of passengers or 3rd parties
arising from motor vehicle accidents

PROCESS UNDER COMPULSORY 3RD PARTY LIABILITY

1. File notice of claim within 6 months from date of
accident. Include cert. of physician.
2. Prescriptive period- action should be filed in:
a. Insurance commission – less than Php
100,000 claim
b. RTC – more that Php 100,000 claim

Within 1 year from denial of claim (with stipulation) or 10

years (without stipulation)
3. If there is agreement, the insurer should make
payment within 5 days of Compulsory 3rd party
liability;
4. If there is no agreement, insurer shall pay “no fault
indemnity” without prejudice to pursue claim
further. The insurer has the right of subrogation to
sue for recovery against the vehicle at fault.

Authorized drivers clause – driver should be duly licensed or

with permission, even if the license is fake.
- Expired license of the driver (not the insured himself) is not
authorized driver.

Theft Clause – if there is theft clause and the vehicle is

unlawfully taken, insurer is liable under the clause and
authorized driver clause DOES NOT APPLY. Insured can recover
even if thief has no license