San Beda Insurance Code Bar Reviewer

San Beda College of Law 30
MEMORY AID IN COMMERCIAL LAW
INSURANCE CODE
(P.D. No. 1460)
promises to make good only the loss
I. GENERAL CONCEPTS of the insured.
7. Personal – each party having in view
CONTRACT OF INSURANCE the character, credit and conduct of
 An agreement whereby one the other.
undertakes for a consideration to
indemnify another against loss, damage REQUISITES OF A CONTRACT OF
or liability arising from an unknown or INSURANCE (The Insurance Code of the
contingent event. (Sec. 2, par. 2, IC) Philippines Annotated, Hector de Leon,
2002 ed.)
“DOING AN INSURANCE BUSINESS OR 1. A subject matter which the insured has
TRANSACTING AN INSURANCE an insurable interest.
BUSINESS” (Sec. 2, par. 4) 2. Event or peril insured against which may
1. Making or proposing to make, as be any future contingent or unknown
insurer, any insurance contract; event, past or future and a duration for
2. Making or proposing to make, as the risk thereof.
surety, any contract of suretyship as 3. A promise to pay or indemnify in a fixed
a vocation, not as a mere incident to or ascertainable amount.
any other legitimate business of a 4. A consideration known as “premium”.
surety; 5. Meeting of the minds of the parties.
3. Doing any insurance business,
including a reinsurance business; 5 CARDINAL PRINCIPLES IN INSURANCE
4. Doing or proposing to do any business 1. Insurable Interest
in substance equivalent to 2. Principle of Utmost Good Faith  An
any of the foregoing insurance contract requires utmost good
faith (uberrimae fidei) between the
II. CHARACTERISTICS OF AN INSURANCE parties. The applicant is enjoined to
CONTRACT (The Insurance Code of the disclose any material fact, which he
Philippines Annotated, Hector de Leon, knows or ought to know.
2002 ed.)  Reason: An insurance contract is an
1. Consensual – it is perfected by the aleatory contract. The insurer relies on the
meeting of the minds of the parties. representation of the applicant, who is in
2. Voluntary – the parties may the best position to know the state of his
incorporate such terms and health. 3. Contract of Indemnity
conditions as they may deem  It is the basis of all property
convenient. insurance. The insured who has insurable
3. Aleatory – it depends upon some interest over a property is only entitled to
recover the amount of actual loss
contingent event.
sustained and the burden is upon him to
4. Unilateral – imposes legal duties
establish the amount of such loss
only on the insurer who promises to
(Reviewer on Commercial Law,
indemnify in case of loss.
Professors Sundiang and Aquino) Rules:
5. Conditional – It is subject to
conditions the principal one of which a. Applies only to property insurance
is the happening of the event insured except when the creditor insures
against. the life of his debtor.
6. Contract of indemnity – Except life b. Life insurance is not a contract of
and accident insurance, a contract indemnity.
of insurance is a contract of c. Insurance contracts are not
indemnity whereby the insurer wagering contracts. (Sec. 4)
4. Contract of Adhesion (Fine Print Rule) 
Most of the terms of the contract do not
COMMERCIAL LAW COMMITTEE
CHAIRPERSON: Garny Luisa Alegre  ASST. CHAIRPERSON:Jayson O’S Ramos EDP: Beatrix I. Ramos SUBJECT HEADS:
Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario (Transportation
Laws);
Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel Gatdula (Banking
Laws);
Robespierre CU (Law on Intellectual Property)
Beda College of Law 31
MEMORY AID IN COM

result from mutual negotiations between e. For recovery of loss in excess of
the parties as they are prescribed by the insurance coverage
insurer in final printed form to which the
insured may “adhere” if he chooses but CONSTRUCTION OF
which he cannot change. (Rizal Surety and INSURANCE CONTRACT
Insurance Co., vs. CA, 336 SCRA 12) 5.  The ambiguous terms are to be
Principle of Subrogation  It is a process construed strictly against the insurer,
of legal substitution where the insurer and liberally in favor of the insured.
steps into the shoes of the insured and he However, if the terms are clear, there is
avails of the latter’s rights against the no room for interpretation. (Calanoc vs.
wrongdoer at the time of loss. Court of Appeals, 98 Phil. 79)
 The principle of subrogation is a
normal incident of indemnity insurance III. DISTINGUISHING ELEMENTS OF AN
as a legal effect of payment; it inures to INSURANCE CONTRACT
the insurer without any formal 1. The insured possesses an insurable
assignment or any express stipulation to interest susceptible of pecuniary
that effect in the policy. Said right is not estimation;
dependent upon nor does it grow out of 2. The insured is subject to a risk of loss
any private contract. Payment to the through the destruction or
insured makes the insurer a subrogee in impairment of that interest by the
equity. (Malayan Insurance Co., Inc. v. happening of designated perils;
CA, 165 SCRA 536; see also Art. 2207, 3. The insurer assumes that risk of loss;
NCC) 4. Such assumption is part of a general
 Purposes: (The Insurance Code of scheme to distribute actual losses
the Philippines Annotated, Hector de among a large group or substantial
Leon, 2002 ed.) number of persons bearing somewhat
1. To make the person who caused the similar risks; and
loss legally responsible for it. 5. The insured makes a ratable
2. To prevent the insured from contribution (premium) to a general
receiving a double recovery from the insurance fund.
wrongdoer and the insurer.  A contract possessing only the first 3
3. To prevent tortfeasors from being elements above is a risk-shifting device.
free from liabilities and is thus If all the elements, it is a riskdistributing
founded on considerations of public device. (The Insurance Code of the
policy. Philippines Annotated, Hector de
 Rules: Leon, 2002 ed.)
1. Applicable only to property insurance.
2. The insurer can only recover from the IV. PERFECTION OF AN INSURANCE
third person what the insured could CONTRACT
have recovered.  An insurance contract is a
3. There can be no subrogation in cases: consensual contract and is therefore
a. Where the insured by his own act perfected the moment there is a meeting
releases the wrongdoer or third party of minds with respect to the object and
liable for the loss or damage; the cause or consideration.
b. Where the insurer pays the insured the  What is being followed in insurance
value of the loss without notifying the contracts is what is known as the
carrier who has in good faith settled “cognition theory”. Thus, “an
the insured’s claim for loss; acceptance made by letter shall not bind
c. Where the insurer pays the insured for the person making the offer except from
a loss or risk not covered by the policy. the time it came to his knowledge”.
(Pan Malayan Insurance Company v. (Enriquez vs. Sun Life Assurance Co. of
CA, 184 SCRA 54) Canada, 41 Phil. 269)
d. In life insurance
COMMITTEE
y Luisa Alegre  ASST. CHAIRPERSON:Jayson O’S Ramos EDP: Beatrix I. Ramos SUBJECT HEADS:
Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario (Transportation Laws);
ura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel Gatdula (Banking Laws);
on Intellectual Property)
MEMORY AID IN COM

Binding Receipt  Contents: (Sec. 51)
 A mere acknowledgment on behalf of 1. Parties
the company that its branch office had 2. Amount of insurance, except in open
received from the applicant the or running policies;
insurance premium and had accepted the 3. Rate of premium;
application subject to processing by the 4. Property or life insured;
head office. 5. Interest of the insured in the
property if he is not the absolute
Cover Note (Ad Interim) owner;
 A concise and temporary written 6. Risk insured against; and 7. Duration
contract issued to the insurer through its of the insurance.
duly authorized agent embodying the
principal terms of an expected policy of  Persons entitled to recover on the
insurance. policy (sec. 53): The insurance
Purpose: It is intended to give proceeds shall be applied exclusively to
temporary insurance protection the proper interest of the person in
coverage to the applicant pending the whose name or to whose benefit it is
acceptance or rejection of his made, unless otherwise specified in the
application. policy.
 Duration: Not exceeding 60 days  Kinds:
unless a longer period is approved by 1. OPEN POLICY – value of thing insured is
Insurance Commissioner (Sec. 52). not agreed upon, but left to be ascertained
in case of loss. (Sec. 60)  The actual loss,
Riders as determined, will represent the total
 Printed stipulations usually indemnity due the insured from the insurer
attached to the policy because they except only that the total indemnity shall
constitute additional stipulations not exceed the face value of the policy.
between the parties. (Ang Giok Chip vs. (Development Insurance Corp. vs. IAC, 143
Springfield, 56 Phil. 275) SCRA 62) 2. VALUED POLICY – definite
 In case of conflict between a rider valuation of the property insured is agreed
and the printed stipulations in the policy, by both parties, and written on the face of
the rider prevails, as being a more policy. (Sec. 61)
deliberate expression of the agreement  In the absence of fraud or mistake,
of the contracting parties. (C. Alvendia, the agreed valuation will be paid in
The Law of Insurance in case of total loss of the property,
the Philippines, 1968 ed.) unless the insurance is for a lower
amount.
Clauses 3. RUNNING POLICY – contemplates
 An agreement between the insurer successive insurances and which provides
and the insured on certain matter that the object of the policy may from
relating to the liability of the insurer in time to time be defined (Sec. 62)
case of loss. (Prof. De Leon, p.188)
V. TYPES OF INSURANCE CONTRACTS
Endorsements 1. Life insurance
 Any provision added to the contract a. Individual life (Secs. 179–183, 227)
altering its scope or application. (Prof. b. Group life (Secs. 50, last par., 228)
De Leon, p.188) c. Industrial life (Secs. 229–231)
2. Non-life insurance
POLICY OF INSURANCE a. Marine (Secs. 99–166)
 The written instrument in which a b. Fire (Secs. 167–173)
contract of insurance is set forth. (Sec. c. Casualty (Sec. 174)
49) 3. Contracts of bonding or suretyship
(Secs. 175–178) Note:
COMMITTEE
MEMORY AID IN COM

1. Health and accident insurance are 10)
either covered under life (Sec. 180) or iii. As a general rule, the
casualty insurance. (Sec. 174). designation of a beneficiary
2. Marine, fire, and the property is revocable unless the
aspect of casualty insurance are also insured expressly waived the
referred to as property insurance. right to revoke in the policy.
(Sec. 11) iv. The interest of
VI. PARTIES TO INSURANCE CONTRACT a beneficiary in a life insurance
1. Insurer - Person who undertakes to policy shall be forfeited when
indemnify another. the beneficiary is the principal
 For a person to be called an accomplice or accessory in
insurance agent, it is necessary willfully bringing about the
that he should perform the death of the insured in which
function for compensation. event, the nearest relative of
(Aisporna vs. CA, 113 SCRA 459) 2. the insured shall receive the
Insured - The party to be indemnified proceeds of
upon the occurrence of the loss. He must said insurance if not
have capacity to contract, must possess otherwise
an insurable interest in the subject of the disqualified. (Sec. 12)
insurance and must not be a public b. PROPERTY  The beneficiary of
enemy. property insurance must have an
 A public enemy- a nation with insurable interest in such
whom the Philippines is at war property, which must exist not
and it includes every citizen or only at the time the policy takes
subject of such nation. effect but also when the loss
3. Beneficiary - A person designated to occurs. (Sec. 13 and 18).
receive proceeds of policy when risk Effects of Irrevocable Designation Of
attaches. Beneficiary  Insured cannot:
 Rules in the designation of the 1. Assign the policy
beneficiary: 2. Take the cash surrender value of
a. LIFE the policy
i. A person who insures his own 3. Allow his creditors to attach or
life can designate any execute on the policy;
person as his beneficiary, 4. Add new beneficiary; or
whether or not the 5. Change the irrevocable
beneficiary has an insurable designation to revocable, even
interest in the life of the though the change is just and
insured subject to the reasonable.
limitations under Art. 739  The insured does not even retain the
and Art. 2012 of the NCC.  power to destroy the contract by refusing
Reason: in essence, a life to pay the premiums for the beneficiary
insurance policy is no can protect his interest by paying such
different form a civil premiums for he has an interest in the
donation insofar as the fulfillment of the obligation. (Vance, p.
beneficiary is concerned. 665, cited in de
Both are founded on the Leon, p. 101, 2002 ed.)
same consideration of
liberality. (Insular Life vs. VII. INSURABLE INTEREST
Ebrado, 80 SCRA 181) ii. A A. In General
person who insures the life of  A person has an insurable interest in the
another person and name subject matter if he is so connected, so
himself as the beneficiary must situated, so circumstanced, so related,
have an insurable interest in that by the preservation of the same he
such life. (Sec.
COMMITTEE
MEMORY AID IN COM

shall derive pecuniary benefit, and by its  When it should exist: When the
destruction he shall suffer pecuniary loss, insurance takes effect and when the loss
damage or prejudice. occurs, but need not exist in the
B. Life meantime.
 Every person has an insurable interest  Amount: The measure of insurable
in the life and health: interest in property is the extent to
a. of himself, of his spouse and of his which the insured might be damnified by
children; loss or injury thereof. (Sec. 17)
b. of any person on whom he
depends wholly or in part for INSURABLE INSURABLE
education or support; INTEREST IN LIFE INTEREST IN
c. of any person under a legal PROPERTY
obligation to him to pay money or Must exist only at Must exist at the
respecting property or services, the time the policy time the policy
of which death or illness might takes effect and takes effect and
delay or prevent performance; need not
and exist at the time of when the loss
d. of any person upon whose life any loss occurs
estate or interest vested in him Unlimited except in Limited to actual
depends. (Sec. 10) life insurance value of interest in
 When it should exist: When the effected by creditor property insured.
insurance takes effect; not thereafter on life of debtor.
or when the loss occurs. The expectation of An expectation of
 Amount: benefit to be derived a benefit to be
GENERAL RULE: There is no limit in the from the continued derived from the
existence of life continued
amount the insured can insure his life.
need not have any existence of the
EXCEPTION: In a creditor-debtor legal basis whatever. property insured
relationship where the creditor insures A reasonable must have a legal
the life of his debtor, the limit of probability is basis.
insurable interest is equal to the amount sufficient without
of the debt. more.
Note: If at the time of the death of the The beneficiary need The beneficiary
debtor the whole debt has already been not have an must have
paid, the creditor can no longer recover insurable interest insurable interest
over the life of the over the thing
on the policy because the principle of
insured if the insured.
indemnity applies.
insured himself
secured the policy.
C. Property
However, if the life
 Every interest in property whether
insurance was
real or personal, or any relation thereto, obtained by the
or liability in respect thereof, of such beneficiary, the
nature that the contemplated peril might latter must have
directly damnify the insured (Sec. insurable interest
13), which may consist in: over the life of the
1. an existing interest; insured.
2. any inchoate interest
founded on an existing SPECIAL CASES
interest; or 1. In case of a carrier or depositary 
3. an expectancy coupled with A carrier or depository of any kind has an
an existing interest in that insurable interest in a thing held by him as
out of which the expectancy such, to the extent of his liability but not
arises. (Sec. 14) to exceed the value thereof
(Sec. 15)
COMMITTEE
MEMORY AID IN COM

2. In case of a mortgaged property  c. Any act, which under the contract
The mortgagor and mortgagee each have of insurance is to be performed by the
an insurable interest in the property mortgagor, may be performed by the
mortgaged and this interest is separate and mortgagee with the same effect.
distinct from the other. d. In case of loss, the mortgagee is
a. Mortgagor – As owner, has an entitled to the proceeds to the extent of
insurable interest therein to the extent his credit.
of its value, even though the mortgage e. Upon recovery by the mortgagee to
debt equals such value. The reason is the extent of his credit, the debt is
that the loss or destruction of the extinguished.
property insured will not extinguish
the mortgage debt.  In case a mortgagee insures his own
b. Mortgagee – His interest is only up interest and a loss occurs, he is entitled
to the extent of the debt. Such interest to the proceeds of the insurance but he
continues until the mortgage debt is is not allowed to retain his claim against
extinguished. the mortgagor as the claim is discharged
but it passes by subrogation to the
 The lessor cannot be validly a insurer to the extent of the money paid
beneficiary of a fire insurance policy taken by such insurer. (Palileo vs. Cosio)
by a lessee over his merchandise, and the
provision in the lease contract providing VIII. RISK
for such automatic assignment is void for  What may be insured against:
being contrary to law and public policy. 1. Future contingent event resulting in
(Cha vs. Court of Appeals, loss or damage – Ex. Possible future
227 SCRA 690) fire
2. Past unknown event resulting in loss or
STANDARD OR OPEN OR LOSS damage – Ex. Fact of past sinking of a
UNION PAYABLE vessel unknown to the parties
MORTGAGE MORTGAGE 3. Contingent liability – Ex. Reinsurance
CLAUSE CLAUSE
IX. PREMIUM PAYMENTS
Subsequent acts of Acts of the
the mortgagor mortgagor affect  Consideration paid an insurer for
cannot affect the the mortgagee. undertaking to indemnify the insured
rights of the Reason: against a specified peril.
assignee Mortgagor  Basis of the right of the insurer to
does not collect premiums: Assumption of risk.
cease to be a
party to GENERAL RULE: No policy issued by an
insurance company is valid and binding
the
until actual payment of premium. Any
contract. (Secs. 8
agreement to the contrary is void. (Sec.
and 9)
77)
Effects of Loss Payable Clause
EXCEPTIONS:
a. The contract is deemed to be upon
1. In case of life or industrial life
the interest of the mortgagor; hence, he
insurance, when the grace periods
does not cease to be a party to the
applies; (Sec. 77)
contract.
2. When the insurer makes a written
b. Any act of the mortgagor prior to
acknowledgment of the receipt
the loss, which would otherwise avoid
premium; (Sec. 78)
the insurance affects the mortgagee
3. Section 77 may not apply if the
even if the property is in the hands of the
parties have agreed to the payment of
mortgagee.
the premium in installments and
COMMITTEE
MEMORY AID IN COM

partial payment has been made at the b. short period rate is
time of the loss. (Makati Tuscany agreed upon
Condominium Corp. v. CA, 215 SCRA c. life insurance policy
462) 2. When there is over-insurance
4. Where a credit term has been agreed (Sec. 82);
upon. (UCPB vs. Masagana Telemart,
308 SCRA 259) Instances when premiums are not
5. Where the parties are barred by recoverable:
estoppel. (UCPB vs. Maagana 1. When the risk has already
Telemart, 356 SCRA 307) attached and the risk is entire and
indivisible. 2. In life insurance.
 Section 77 merely precludes the parties 3. When the contract is rescindable
from stipulating that the policy is valid or rendered void ab initio by the
even if the premiums are not paid. (Makati fraud of the insured.
Tuscany Condominium Corp. v. 4. When the contract is illegal and
CA, 215 SCRA 462) the parties are in pari delicto.
Effect of Acknowledgment of Receipt of PREMIUM ASSESSMENT

Premium in Policy: Conclusive evidence of
its payment, so far as to make the policy
Levied and paid to Collected to meet
binding, notwithstanding any stipulation
meet anticipated actual losses.
therein that it shall not be binding until losses.
the
premium is actually paid. (Sec. 78)
Payment is not Payment is
ENTITLEMENT OF INSURED TO RETURN
enforceable enforceable once
OF PREMIUMS PAID against the levied unless
insured. otherwise agreed
A. Whole: upon.
1. If the thing insured was never
exposed to the risks insured
against; (Sec. 79) Not a debt. It becomes a debt
2. If contract is voidable due to the once properly
levied unless
fraud or misrepresentation of
otherwise agreed.
insurer or his agents; (Sec. 81)
3. If contract is voidable because of
X. TRANSFER OF POLICY
the existence of facts of which
1. Life Insurance
the insured was ignorant without
 It can be transferred even without
his fault; (Sec. 81)
the consent of the insurer except when
4. When by any default of the
there is a stipulation requiring the consent
insured other than actual fraud,
of the insurer before transfer. (Sec. 181)
the insurer never incurred
 Reason: The policy does not
liability; (Sec. 81)
represent a personal agreement between
5. When rescission is granted due to
the insured and the insurer.
the insurer’s breach of
2. Property insurance  It cannot be
contract. (Sec. 74)
transferred without the consent of the
B. Pro rata:
insurer.
1. When the insurance is for a  Reason: The insurer approved the
definite period and the insured policy based on the personal qualification
surrenders his policy before the and the insurable interest of the insured.
termination thereof;  3. Casualty insurance  It cannot be
Exceptions: transferred without the consent of the
a. policy not made for a insurer. (Paterson cited in de Leon p. 82)
definite period of time
COMMITTEE
MEMORY AID IN COM

 Reason: The moral hazards are as XI. ASCERTAINMENT AND CONTROL OF
great as those of property insurance. RISK AND LOSS
CHANE OF INTEREST IN THE THING A. Four Primary Concerns of the

INSURED Parties:
 The mere (absolute) transfer of 1. Correct estimation of the risk;
the thing insured does not transfer the 2. Precise delimitation of the risk;
policy, but suspends it until the same 3. Control of the risk;
person becomes the owner of both the 4. Determining whether a loss occurred
policy and the thing insured. (Sec. 58) and if so, the amount of such loss.
 Reason: Insurance
contract is personal. B. Devices used for ascertaining and
GENERAL RULE: A change of interest in controlling risk and loss:
any part of a thing insured unaccompanied 1. Concealment – A neglect to
by a corresponding change of interest in communicate that which a party knows
the insurance suspends the insurance to an and ought to communicate (Sec. 26) 
equivalent extent, until the interests in Requisites:
the thing and the interest in the insurance a. A party knows a fact which he
are neglects to communicate or
vested in the same person. (Sec. 20) disclose to the other.
EXCEPTIONS: b. Such party concealing is duty
1. In life, health and accident bound to disclose such fact to the
insurance.(Sec. 20); other.
2. Change in interest in the thing c. Such party concealing makes no
insured after occurrence of an warranty as to the fact concealed.
injury which results in a loss. d. The other party has not the means
(Sec. 21); of ascertaining the fact concealed.
3. Change in interest in one or more e. Material
of several distinct things  Effects: Entitles insurer to rescind, even
separately insured by one policy. if the death or loss is due to a cause not
(Sec. 22); related to the concealed matter (Sec. 27).
4. Change of interest, by will or Note: Good Faith is not a defense in
succession, on the death of the concealment. Sec. 27 clearly provides
insured. (Sec. 23); that, “the concealment whether
5. Transfer of interest by one of intentional or unintentional entitles the
several partners, joint owners, injured party to rescind the contract of
or owners in common, who are insurance.”
jointly insured, to others. (Sec.
24); Test of Materiality: Determined not by the
6. When a policy is so framed that event, but solely by the probable and
it will inure to the benefit of reasonable influence of the facts upon the
whomsoever, during the party to whom the communication is due,
continuance of the risk, may in forming his estimate of the advantages
become the owner of the of the proposed contract, or in making his
interest insured. (Sec. 57); inquiries (Sec. 31).  Exception to Sec.
7. When there is an express 31:
prohibition against alienation in a. Incontestability clause
the policy, in case of alienation, b. Matters under Sec.110 (marine
the contract of insurance is not insurance)
merely suspended but avoided.
(Art. 1306, NCC).  The waiver of medical examination
in a non-medical insurance contract
renders even more material the
COMMITTEE
MEMORY AID IN COM

information required of the applicant  Kinds:
concerning the previous conditions of a. AFFIRMATIVE – affirmation of a fact
health and diseases suffered. (Sunlife v. when the contract begins; and
Sps. Bacani, 246 SCRA 268). b. PROMISSORY – promise to be
performed after policy was issued. 
 The right to information of Effect of Misrepresentation: the
material facts may be waived, either by injured party is entitled to rescind
the terms of the insurance or by neglect to from the time when the
make inquiries as to such facts where they representation becomes false.
are distinctly implied in other facts of
which Test of Materiality: Same as that in
information is communicated. (Sec.33) concealment.
 Where matters of opinion or  Where the insured merely signed the

judgment are called for, answers made in application form and made the agent of
good faith and without intent to deceiver the insurer fill the same for him, it was
will not avoid the policy even though they held that by doing so, the insured made
are untrue. Reason: The insurer cannot the agent of the insurer his own agent
rely on those statements. He must make and he was responsible for his acts for
further inquiry. (Philamcare Health that purpose. (Insular Life Assur. Co. vs.
Systems vs. CA, G.R. No. 125678, March 18, Feliciano, 74 Phil. 469)
2002).
3. Warranties – Statement or promise by
2. Representations – Factual statements the insured set forth in the policy or by
made by the insured at the time of, or reference incorporated therein, the
prior to, the issuance of the policy to untruth or non-fulfillment of which in
give information to the insurer and any respect, and without reference to
induce him to enter into the insurance whether insurer was in fact prejudiced
contract. They are considered an active by such untruth or non-fulfillment,
form of concealment.  Requisites of a renders the policy voidable by the
false representation insurer.
(misrepresentation):  Purpose: To eliminate potentially
a. The insured stated a fact which increasing hazards which may either be
is untrue. due to the acts of the insured or to the
b. Such fact was stated with change to the condition of the property.
knowledge that it is untrue and  Kinds:
with intent to deceive or which a. EXPRESS – an agreement expressed
he states positively as true in a policy whereby the insured stipulates
without knowing it to be true that certain facts relating to the risk are or
and which has a tendency to shall be true, or certain acts relating to the
mislead. same subject have been or shall be done.
c. Such fact in either case is b. IMPLIED - it is deemed included in
material to the risk. the contract although not expressly
 Characteristics: mentioned. Example: In marine insurance,
a. It is not a part of the contract but seaworthiness of the vessel.
merely a collateral inducement to it. b.  Effects of breach of warranty: a.
It may be oral or written. Material
c. It is made at the same time of GENERAL RULE: Violation of material
issuing the policy or before but not after. warranty or of a material provision of a
d. It may be altered or withdrawn policy will entitle the other party to
before the insurance is effected but not rescind the contract. (Sec. 74)
afterwards. EXCEPTIONS:
e. It always refers to the date the a. Loss occurs before the time of
contract goes into effect. performance of the warranty.
COMMITTEE
MEMORY AID IN COM

b. The performances becomes general language describing the risks
unlawful at the place of the assumed.
contract.  Effect: Limit the coverage of the
c. Performance becomes impossible. contract.
(Sec. 73)
b. Immaterial (ex. Other insurance clause) RESCISSION
GENERAL RULE: It will not avoid the  Grounds:
policy. A. Concealment
EXCEPTION: When the policy expressly B. Misrepresentation
provides or declares that a violation C. Breach of material
thereof will avoid it. (Sec. 75) warranty
D. Breach of a condition
WARRANTY REPRESENTATION subsequent  Waiver of the right to
Part of the contract Mere collateral
rescind: Acceptance of premium
inducement payments despite the knowledge of
the ground for rescission. (Sec. 45)
Written on the May be written in
 Limitations on the right of the
policy, actually or by the policy or may
insurer to rescind:
reference be oral.
1. Non-life – such right must be
Presumed material Must be proved to exercised prior to the commencement of
be material an action on the contract;
Must be strictly Requires only 2. Life – such right must be availed of
complied with substantial truth during the first two years from the date
and compliance of issue of policy or its last
4. Conditions – Events signifying in its reinstatement; prior to
broadest sense either an occurrence or a “incontestability.” (Sec. 48)
non-occurrence that alters the CANCELLATION OF NON-LIFE
previously existing legal relations of the INSURANCE POLICY
parties to the contract. They may be  Right of the insurer to abandon the
conditions precedent or conditions contract on the occurrence of certain
subsequent. grounds after the effectivity date of a
 Effect of breach: non-life policy.
a. Condition precedent – prevents  Grounds:
the accrual of cause of action 1. Non-payment of premium;
b. Condition subsequent – avoids 2. Conviction of a crime out of acts
the policy or entitles the insurer increasing the hazard insured
to rescind against;
 The insurer may also protect himself 3. Discovery of fraud or material
against fraudulent claims of loss and this misrepresentation;
he attempts to do by inserting in the 4. Discovery of willful or reckless acts of
policy various conditions which take the omissions increasing the hazard
form of conditions precedent. For insured against;
instance, there are conditions requiring 5. Physical changes in property making
immediate notice of loss or injury and the property uninsurable; and
detailed proofs of loss within a limited 6. Determination by the Insurance
period. Commissioner that the continuation of
the policy would violate the Insurance
5. Exceptions – Provisions that may Code. (Sec. 64)  Requirements:
specify excepted perils. It makes more 1. Prior notice of cancellation to the
definite the coverage indicated by the insured;
general description of the risk by 2. Notice must be in writing, mailed
excluding certain specified risk that or delivered to the named insured
otherwise would be included under the at the address shown in the policy;
COMMITTEE
MEMORY AID IN COM

3. Notice must state which of the 1. Policy is 1. That the
grounds set forth in Sec. 64 is void ab initio person taking the
relied upon and upon request of 2. Policy is insurance lacked
the insured, the insurer must rescindable by insurable interest as
reason of the required by law;
furnish facts on which the
fraudulent 2. That the
cancellation is based;
concealment or cause of the death of
4. Grounds should have existed after the insured is an
misrepresentation of
the effectivity date of the policy. the insured or his excepted risk;
agent 3. That the
XII. INCONTESTABILITY CLAUSE  premiums have not
Clause in life insurance policy that been paid (Secs. 77,
stipulates that the policy shall be 227[b], 228[b],
230[b]);
incontestable after a stated period.
4. That the
 Requisites:
conditions of the
1. Life insurance policy policy relating to
2. Payable on the death of the insured military or naval
3. It has been in force during the lifetime service have been
of the insured for a period of at least violated (Secs.
two years from the date of its issue or 227[b], 228[b]);
of its last reinstatement 5. That the
fraud is of a
Note: The period of 2 years may be
particularly vicious
shortened but it cannot be extended by type;
stipulation. 6. That the
beneficiary failed to
furnish proof of
 Incontestability only deprives the death or to comply
insurer of those defenses which arise in with any condition
connection with the formation and imposed by the
operation of the policy prior to loss. policy after the loss
(Prof. De Leon, p. 173 citing Wyatt and has happened; or 7.
Wyatt, p. 878) That the action was
not brought within
the time specified.
BARRED DEFENSES NOT
DEFENSES BARRED XIII.
OF THE INSURER A. OVER-INSURANCE – results when the
insured insures the same property for an
amount greater than the value of the
property with the same insurance
company.
 Effect in case of loss:
1. The insurer is bound only to pay to
the extent of the real value of the
property lost;
2. The insured is entitled to recover the
amount of premium corresponding to
the excess in value of the property;
B. DOUBLE INSURANCE – exists where

same person is insured by several insurers
separately in respect to same subject and
interest. (Sec. 93)  Requisites:
1. Person insured is the same;
COMMITTEE
MEMORY AID IN COM

2. Two or more insurers insuring  A stipulation against double insurance.
separately;  Purposes:
3. Subject matter is the same; 1. To prevent an increase in the
4. Interest insured is also the same; moral hazard
5. Risk or peril insured against is likewise 2. To prevent over-insurance and
the same. fraud.
 To constitute a violation of the clause,
 Effects: Where double insurance is there should have been double
allowed, but over insurance results: insurance.
(Sec. 94)
1. The insured, unless the policy C. REINSURANCE – a contract by which
otherwise provides, may claim the insurer procures a third person to
payment from the insurers in such insure him against loss or liability by
order as he may select, up to the reason of an original insurance (also
amount for which the insurers are known as “Reinsurance Cession”). (Sec.
severally liable under their 95)
respective contracts;  In every reinsurance, the original
2. Where the policy under which the contract of insurance and the contract of
insured claims is a valued policy, the reinsurance are covered by separate
insured must give credit as against the policies.
valuation for any sum received by him
under any other policy without regard DOUBLE REINSURANCE
to the actual value of the subject INSURANCE
matter insured; Involves the same Involves different
3. Where the policy under which the interest interest
insured claims is an unvalued policy he Insurer remains in Insurer becomes the
must give credit, as against the full such capacity insured in relation to
insurable value, for any sum received reinsurer
by him under any policy; Insured is the party Original insured has
4. Where the insured receives any sum in in interest in the 2 no interest in the
excess of the valuation in the case of contracts reinsurance
valued policies, or of the insurable contract.
value in the case of unvalued policies, Subject of insurance Subject of insurance
he must hold such sum in trust for the is is the original
insurers, according to their right of property insurer’s risk
contribution among themselves; Insured has to give Insured’s
5. Each insurer is bound, as between his consent consent not
himself and the other insurers, to necessary
contribute ratably to the loss in
proportion to the amount for which he TERMS:
is liable under his contract. 1. Reinsurance treaty – Merely an
agreement between two insurance
Additional or “Other Insurance” Clause companies whereby one agrees to cede
 A condition in the policy requiring the and the other to accept reinsurance
insured to inform the insurer of any other business pursuant to provisions specified
insurance coverage of the property in the treaty. (Prof. De Leon, p. 306)
insured. It is lawful and specifically
allowed under Sec. 75 which provides that 2. Automatic reinsurance – The
“(a) policy may declare that a violation of reinsured is bound to cede and the
a specified provision thereof shall avoid it, reinsurer is obligated to accept a fixed
otherwise the breach of an immaterial share of the risk which has to be reinsured
provision does not avoid it.” under the contract. (Prof. De Leon, p.
305)
COMMITTEE
MEMORY AID IN COM

3. Facultative reinsurance – There is 1. Loss the 1. Loss by
no obligation to cede or accept proximate cause of insured’s willful
participation in the risk each party having which is the peril act;
a free choice. But once the share is insured against 2. Loss due
(Sec. 84); to connivance of
accepted, the obligation is absolute and
2. Loss the the insured (Sec.
the liability thereunder can be discharged
immediate cause 87); and
only by payment. (Equitable Ins. & of which is the 3. Loss
Casualty Co. vs. Rural Ins. & peril insured where the
Surety Co., Inc. 4 SCRA 343) against except excepted peril is
where proximate the proximate
4. Retrocession – A transaction cause is an cause.
excepted peril;
whereby the reinsurer in turn, passes to
3. Loss
another insurer a portion of the risk through negligence
reinsured. It is really the reinsurance of of insured except
reinsurance. where there was
(Prof. De Leon, p. 305) gross negligence
amounting to
willful acts; and
XIV.
4. Loss
A. LOSS, IN INSURANCE  Injury or
caused by efforts
damage sustained by the insured in to rescue the thing
consequence of the happening of one or from peril
more of the accidents or misfortune insured against;
against which the insurer, in consideration 5. If during
of the premium, has undertaken to the course of
indemnify the insured. (Bonifacio Bros. rescue, the thing is
Inc. vs. Mora, 20 SCRA exposed
261) to a peril not
insured against,
which permanently
Loss for which Loss for which deprives the
insurer is liable insurer is not insured of its
liable possession, in
whole or in part
(Sec. 85).
Proximate Cause – An event that sets all

other events in motion without any
intervening or independent case,
without which the injury or loss would
not have occurred.
REQUISITES FOR RECOVERY

UPON INSURANCE
1. The insured must have insurable
interest in the subject matter; 2. That
interest is covered by the policy;
3. There must be a loss; and 4. The loss
must be proximately caused by the peril
insured against.
NOTICE OF LOSS
In fire insurance In other types of
insurance
COMMITTEE
MEMORY AID IN COM

attorney’s fees; 2) expenses incurred by
Required Not required reason of the unreasonable withholding; 3)
interest at double the legal interest rate
Failure to give Failure to give fixed by the Monetary Board; and 4) the
notice will defeat notice will not amount of the claim. (Zenith
the right of the exonerate the Insurance Corp. vs. CA, 185 SCRA 398)
insured to recover. insurer, unless
there is a XV. PRESCRIPTIVE PERIOD (Secs. 63 &
stipulation in the
384)  Rules:
policy requiring the
insured to do so.
1. In the absence of an express
stipulation in the policy, it being based on
a written contract, the action prescribes in
10 years.
B. CLAIMS SETTLEMENT
2. However the parties may validly
 The indemnification of the loss of the
agree on a shorter period provided it is not
insured.
less than one year from the time the cause
of action accrues.
TIME FOR PAYMENT OF CLAIMS
3. The cause of action accrues from
NON-LIFE the rejection of the claim of the insured
LIFE POLICIES POLICIES and not from the time of loss. It shall
commence from the denial of the claim,
a. Maturing The proceeds shall not from the resolution of the motion for
upon the be paid within 30 reconsideration, otherwise it can be used
expiration of the days after the by the insured as a scheme or device to
term – The receipt by the waste time until the evidence which may
proceeds are insurer of proof of
immediately
be used against him is destroyed. (Sun
loss, and Insurance Office, Ltd. v. CA, 195 SCRA)
payable to the ascertainment of
insured, unless 4. In CMVLI, the written notice of
the loss or damage
they are made claim must be filed within 6 months from
by agreement of
payable in the date of the accident otherwise the
the parties or by
installments or as arbitration but not claim is deemed waived. The suit for
damages either with the proper court or
annuity, in which later than 90 days
case, the from such receipt with the Insurance Commissioner should be
installments or of proof of loss filed within 1 year from the date of the
annuities shall be whether or not denial of the claim by the insurer,
paid as they ascertainment is otherwise claimant’s right of action shall
become due. had or made. prescribe.
b. Maturing (Sec. 384)
at the death of
the insured,
occurring prior to PARTICULAR KINDS OF INSURANCE
the expiration of CONTRACTS
the term
stipulated – The XVI. MARINE INSURANCE
proceeds are  Insurance against risks connected with
payable to the
beneficiaries
navigation, to which a ship, cargo,
within 60 days freightage, profits or other insurable
after presentation interest in movable property, may be
and filing of proof exposed during a certain voyage or a
of death. fixed period of time. (Sec. 99) 
Coverage: A.
1. Vessels, goods, freight, cargo,
 In case of an unreasonable delay in the merchandise, profits, money,
payment of the insured’s claim by the valuable papers, bottomry and
insurer, the insured can recover: 1)
COMMITTEE
MEMORY AID IN COM

respondentia, and interest in respect c. No insurable interest if he
to all risks or perils of navigation; will be compensated by
2. Persons or property in connection charterer for the value of
with marine insurance; the vessel, in case of loss.
3. Precious stones, jewels, jewelry and 2. Cargo owner  Over the cargo and
precious metals whether in the expected profits (Sec. 105).
course of transportation or 3. Charterer  Over the amount he is
otherwise; and liable to the shipowner, if the ship
4. Bridges, tunnels, piers, docks and is lost or damaged during the
other aids to navigation and voyage (Sec. 106).
transportation. (Sec. 99)
 Cargo can be the subject of B.
marine insurance, and once it is In loans on bottomry and respondentia
entered into, the implied  Repayment of the loan is subject to
warranty of seaworthiness the condition that the vessel or
immediately attaches to goods, respectively, given as a
whoever is insuring the cargo, security, shall arrive safely at the
whether he be the shipowner or port of destination.
not. (Roque v. IAC, 139 SCRA 1. Owner/Debtor  Difference
596) between the value of vessel or goods
B. Marine Protection and Indemnity and the amount of loan. (Sec. 101) 2.
Insurance Creditor/lender
 Classes of inland marine insurance:  Amount of the loan
(Prof. De Leon, p. 325)
1. Property in transit – provides Note: If a vessel is hypothecated by
protection to property bottomry, only the excess is insurable,
frequently exposed to loss while since a loan on bottomry partakes of the
it is transportation form one nature of an insurance coverage to the
location to another. extent of the loan accommodation. The
2. Bailee liability - insurance for same rule would apply to the
those who have temporary hypothecation of the cargo by
custody of the goods. respondentia. (Pandect of Commercial
3. Fixed transportation property – Law and Jurisprudence, Justice Jose
they are so insured because they Vitug, 1997 ed.)
are held to be an essential part PERILS OF THE SEA PERILS OF THE
of the transportation system such SHIP
as bridges, tunnels, etc. Includes only those A loss which in the
4. Floater – provides insurance to casualties due to the: ordinary course of
1. unusual events, results
follow the insured property
violence; or from the:
wherever it may be located,
2. extraordinary 1. natural
subject always to the territorial action of wind and and inevitable
limits of the contract. wave; or action of the sea
 Insurable interest: A. 3. Other 2. ordinary
1. Shipowner extraordinary causes wear and tear of
a. Over the vessel to the extent connected with the
of its value, except that if navigation. ship or
chartered, the insurance is 3. Negligent
failure of the
only up to the amount not
ship’s owner to
recoverable from the
provide the vessel
charterer. (Sec. 100).
with proper
b. He also has an insurable equipment to
interest on expected convey the cargo
freightage. (Sec. 103).
COMMITTEE
MEMORY AID IN COM
under ordinary 1. Negligence of the captain, engineers,

conditions. etc.
2. Explosions, breakage of shafts; and 3.
Latent defect of machinery or hull.
(Bar Review Materials in Commercial
Law, Jorge Miravite, 2002 ed.)
D. Sue and Labor Clause  A clause under

which the insurer may become liable to
pay the insured, in addition to the loss
actually suffered, such expenses as he may
have incurred in his efforts to protect the
property against a peril for which the
insurer
would have been liable. (Sec. 163)
MATTERS ALTHOUGH CONCEALED, WILL

NOT VITIATE THE CONTRACT EXCEPT
Note: It is only perils of the sea which
WHEN THEY CAUSED THE LOSS (Sec.
may be insured against unless perils of
110)
the ship is covered by an all-risk policy.
1. National character of the insured;
2. Liability of the thing insured to capture
SPECIAL MARINE INSURANCE
or detention;
CONTRACTS AND CLAUSES
3. Liability to seizure from breach of
A. All Risks Policy – insurance against
foreign laws; 4. Want of necessary
all causes of conceivable loss or damage,
except: 1) as otherwise excluded in the documents; and
policy; or 2) due to fraud or intentional 5. Use of false or simulated papers.
misconduct on the part of the insured.  Note: This should be related to the general
The insured has the initial burden of rule regarding material concealment.
proving that the cargo was in good
condition when the policy attached and DISTINCTIONS ON CONCEALMENT
that the cargo was damaged when (Commercial Law Reviewer, A.F.
unloaded from the vessel; thereafter, Agbayani, 1988 ed.)
the burden then shifts to the insurer to
show the exception to the coverage. MARINE INSURANCE OTHER
(Filipinas Merchants Insurance vs. Court PROPERTY
of Appeals, 179 SCRA 638) INSURANCE
The information of the The information or
B. Barratry Clause  A clause which belief or expectation belief of a 3rd party
provides that there can be no recovery of 3rd persons is is not material and
on the policy in case of any willful material and must be need not be
misconduct on the part of the master or communicated communicated
unless it proceeds
crew in pursuance of some unlawful or
form an agent of
fraudulent purpose without consent of
the insured whose
owners, and to the prejudice of the duty it is to give
owner’s interest. (Roque vs. IAC, information
139 SCRA 596)
C. Inchamaree Clause  A clause which

makes the insurer liable for loss or
damage to the hull or machinery arising
from the:
COMMITTEE
MEMORY AID IN COM
The concealment of Concealment of any that the vessel arrives in safety at the
any fact in relation to material fact will end of her voyage.
any of the matters vitiate the entire EXCEPTIONS:
stated in Sec. 110 does contract, whether 1. In the case of a time policy, the ship
not vitiate the entire or not the loss must be seaworthy at the
contract but merely results for the risk commencement of every voyage she
exonerates the insurer concealed. may undertake
from a risk resulting
2. In the case of cargo policy, each
from the fact
concealed
vessel upon which the cargo is
shipped or transshipped, must be
IMPLIED WARRANTIES
seaworthy at the commencement of
1. Seaworthiness of the ship at the
each particular voyage
inception of the insurance (Sec.
3. In the case of a voyage policy
113);
contemplating a voyage in different
2. Against improper deviation (Sec. stages, the ship must be seaworthy
123, 124, 125); at the commencement of each
3. Against illegal venture; portion
4. Warranty of neutrality: the ship will
carry the requisite documents of
 Applicability of implied warranty of
nationality or neutrality of the ship
seaworthiness to cargo owners: It
or cargo where such nationality or
becomes the obligation of a cargo owner
neutrality is expressly warranted;
to look for a reliable common carrier,
(Sec. 120) which keeps its vessels in seaworthy
5. Presence of insurable interest. conditions. The shipper may have no
control over the vessel but he has control
 While the payment by the insurer for in the choice of the common carrier that
the insured value of the lost cargo will transport his goods (Roque v. IAC,
operates as a waiver of the insurer’s 139 SCRA 596).
right to enforce the term of the implied
warranty against the assured under the Deviation
marine insurance policy, the same  A departure from the course of the
cannot be validly interpreted as an voyage insured, or an unreasonable delay
automatic admission of the vessel’s in pursuing the voyage or the
seaworthiness by the insurer as to
commencement of an entirely different
foreclose recourse against the common
voyage. (Sec.123)
carrier for any liability under the
 Instances:
contractual obligation as such common
1. Departure of vessel from the
carrier. (Delsan Transportation Lines vs.
course of the sailing fixed by
CA, 364 SCRA 24)
mercantile usage
2. Departure of vessel from the
Seaworthiness most natural, direct and
 A relative term depending upon the advantageous route if not fixed
nature of the ship, voyage, service and by mercantile usage
goods, denoting in general a ship’s
3. Unreasonable delay in pursuing
fitness to perform the service and to
voyage
encounter the ordinary perils of the
voyage, contemplated by the parties to 4. Commencement of an entirely
different voyage (Secs. 121-123)
the policy (Sec. 114).
 Kinds:
GENERAL RULE: The warranty of
seaworthiness is complied with if the 1. Proper -
ship be seaworthy at the time of the a. When caused by circumstances outside
commencement of the risk. Prior or the control of the ship captain or ship
subsequent unseaworthiness is not a owner;
breach of the warranty nor is it material
COMMITTEE
MEMORY AID IN COM

b. When necessary to comply with a voyage commenced until it ends and the
warranty or to avoid a peril; cargo unloaded.
c. When made in good faith to avoid a
peril; GENERAL PARTICULAR
d. When made in good faith to save Has inured to the Has not inured to the
human life or to relieve another vessel common benefit and common benefit and
in distress (Sec. 124) profit of all persons profit of all persons
 Effect: In case of loss, the interested in the interested in the
insurer is still liable. vessel and cargo vessel and her cargo.
2. Improper - Every deviation not To be borne equally To be borne alone by
specified in Sec. 124 (Sec. 125). by all of the interests the owner of the
 Effect: In case of loss or concerned in the cargo or the vessel,
damage, the insurer is not liable. venture. as the case may be.
(Sec. 126) Requisites for the
right to
claim
LOSS contribution:
1. Total: 1. Common danger
a. Actual - to the
i. Total destruction; ii.
vessel or
Irretrievable loss by sinking;
cargo;
iii. Damage rendering the
2. Part of the
thing valueless; or
vessel or cargo
iv. Total deprivation of owner of
was sacrificed
possession of thing insured.
deliberately;
(Sec. 130)
3. Sacrifice must
b. Constructive -
be for the
i. Actual loss of more than ¾ of common safety
the value of the object; or for the
ii. Damage reducing value by benefit of all;
more than ¾ of the value of 4. Sacrifice must
the vessel and of cargo; and be made by the
iii. Expense of transshipment master or upon
exceed ¾ of value of cargo. his
(Sec. 131, in relation to Sec. authority;
139) 5. It must be not
 In case of constructive be caused by
total loss, insured may: any fault of the
1. Abandon goods or party asking
vessel to the insurer and claim for whole the
insured value (Sec. 139), or 2. Without contribution;
abandoning vessel, claim for partial 6. It must be
actual loss. (Sec. 155) 2. Partial: That successful, i.e.
which is not total (Sec. resulted in the
128). saving of the
vessel or
AVERAGE cargo; and
 Any extraordinary or accidental Necessary.
expense incurred during the voyage for
the preservation of the vessel, cargo, or RIGHT OF INSURED IN CASE OF GENERAL
both, and all damages to the vessel and AVERAGE
cargo from the time it is loaded and the GENERAL RULE: The insured may either
hold the insurer directly liable for the
COMMITTEE
MEMORY AID IN COM

whole of the insured value of the property with all the chances of recovery and
sacrificed for the general benefit, indemnity (Transfer of
subrogating him to his own right of Interest)(Sec.146)
contribution or demand contribution from 2. Acts done in good faith by those who
the other interested parties as soon as the were agents of the insured in respect
vessel arrives at her destination to the thing insured, subsequent to
EXCEPTIONS: the loss, are at the risk of the insurer
1. After the separation of interests liable and for his benefit. (Transfer Of
to contribution Agency)(Sec.148)
2. When the insured has neglected or
waived his right to contribution  If an insurer refuses to accept a valid
abandonment, he is liable upon an actual
FPA Clause (Free From Particular total loss, deducting form the amount
Average) any proceeds of the thing insured which
A clause agreed upon in a policy of may have come to the
marine insurance in which it is stated that hands of the insured. (Sec.154)
the insurer shall not be liable for a
particular average, such insurer shall be CO-INSURANCE
free therefrom, but he shall continue to be  A marine insurer is liable upon a
liable for his proportion of all general partial loss, only for such proportion
average losses assessed upon the thing of the amount insured by him as the
insured. (Sec. 136) loss bears to the value of the whole
ABANDONMENT interest of the insured in the property
 The act of the insured by which, after insured.
a constructive total loss, he declared the (Sec. 157)
relinquishment to the insurer of his  When the property is insured for less
interest in the thing insured. (Sec. 138) than its value, the insured is
 Requisites for validity: considered a co-insurer of the
1. There must be an actual difference between the amount of
relinquishment by the person insured insurance and the value of the
of his interest in the thing insured property.
(Sec. 138);
2. There must be a constructive total  Requisites:
loss (Sec. 139); 1. The loss is partial;
2. The amount of insurance is less than the
3. The abandonment be neither partial
value of the property insured.
nor conditional (Sec. 140);
4. It must be made within a reasonable
 Rules:
time after receipt of reliable
1. Co-insurance applies only to
information of the loss (Sec. 141);
marine insurance
5. It must be factual (Sec. 142);
2. Logically, there cannot be
6. It must be made by giving notice
coinsurance in life insurance.
thereof to the insurer which may be
3. Co-insurance applies in fire
done orally or in writing (Sec. 143);
insurance when expressly provided for by
and
the parties.
7. The notice of abandonment must be
explicit and must specify the
CO-INSURANCE REINSURANCE
particular cause of the abandonment
(Sec. 144).
 Effects:
1. It is equivalent to a transfer by the
insured of his interest to the insurer
COMMITTEE
MEMORY AID IN COM
A percentage in the Situation where the

value of the insured insurer procures a 3rd Measure of Indemnity
property which the party called the 1. Open policy: only the expense
insured himself reinsurer to insure necessary to replace the thing lost or
assumes to act as him against liability
insurer to the extent injured in the condition it was at the
by reason of an time of the injury
of the deficiency in
original insurance.
the insurance of the 2. Valued policy: the parties are
insured property. In Basically,
bound by the valuation, in the absence
case of loss or reinsurance is an
insurance against
of fraud or mistake
damage, the insurer
will be liable only for liability which the
such proportion of original insurer may Note: It is very crucial to determine
the loss or damage as incur in favor of the whether a marine vessel is covered by a
the amount of the original insured. marine insurance or fire insurance. The
insurance bears to determination is important for 2 reasons:
the designated
1. Rules on constructive total loss
percentage of the full
value of the property and abandonment – applies only
insured. to marine insurance;
(Bar Review 2. Rule on co-insurance – applies
Materials in primarily to marine insurance;
Commercial Law, 3. Rule on co-insurance applies to
Jorge Miravite, 2002
fire insurance only if expressly
ed.)
agreed upon. (Commercial Law
Reviewer, Aguedo Agbayani,
1988 ed.)
XVII. FIRE INSURANCE
 A contract by which the insurer for a ALTERATION AS A SPECIAL GROUND
consideration agrees to indemnify the FOR RESCISSION BY INSURER 
insured against loss of, or damage to, Requisites:
property by hostile fire, including loss 1. The use or condition of the thing
by lightning, windstorm, tornado or is specifically limited or
earthquake and other allied risks, when stipulated in the policy;
such risks are covered by extension to
2. Such use or condition as limited
fire insurance policies or under
by the policy is altered;
separate policies. (Sec. 167)
3. The alteration is made without
the consent of the insurer;
 Prerequisites to recovery: 4. The alteration is made by means
1. Notice of loss – must be within the control of the
immediately given, unless delay is insured;
waived expressly or impliedly by the 5. The alteration increases the risk;
insurer (Sec. 168) and
2. Proof of loss – according to best 6. There must be a violation of a
evidence obtainable. Delay may also be policy provision. (Sec. 170)
waived expressly or impliedly by the
insurer Fall-of-building clause
 A clause in a fire insurance policy that if
the building or any part thereof falls,
HOSTILE FIRE FRIENDLY FIRE
except as a result of fire, all insurance by
One that escapes One that burns in a the policy shall immediately cease.
from the place place where it was
where it was intended to burn and
Option to rebuild clause  A clause giving
intended to burn and ought to be
ought to be.
the insurer the option to reinstate or
replace the property damaged or
Insurer is liable Insurer is not liable
destroyed or any part thereof, instead of
COMMITTEE
MEMORY AID IN COM

paying the amount of the loss or the rights and obligations of the parties must
damage.  The insurer, after electing to be determined by their contract, taking
rebuild, cannot be compelled to perform into consideration its purpose and always
this undertaking by specific performance in accordance with the general principles
because this is an obligation to do, not to of insurance law.
give. Remedy: Art. 1167, NCC.
 In burglary, robbery and theft
XVIII. CASUALTY OR ACCIDENT insurance, the opportunity to defraud
INSURANCE the insurer – the moral hazard – is so
 Insurance covering loss or liability great that insurer have found it
arising from accident or mishap, necessary to fill up the policies with
excluding those falling under other many restrictions designed to reduce the
types of insurance such as fire or hazard. Persons frequently excluded are
marine. (Sec. those in the insured’s service and
174) employment. The purpose of the
exception is to guard against liability
 Classifications: should theft be committed by one having
1. Insurance against specified perils which unrestricted access to the property.
may affect the person and/or property of (Fortune Insurance vs. CA, 244 SCRA 208)
the insured. (accident or health insurance)
 Examples: personal accident, Right of a third party injured to sue the
robbery/theft insurance insurer
2. Insurance against specified perils which 1. Indemnity against liability – A
may give rise to liability on the part of the third party injured can directly sue the
insured for claims for injuries to or insurer.
damage to property of others. (third party 2. Indemnity for actual
liability insurance)  Insurable interest is loss or reimbursement after
based on the interest of the insured in the actual payment by the insured – A third
safety of persons, and their property, who party has no cause of action against the
may maintain an action against him in case insurer (Sec. 53, Bonifacio Bros. v.
of their injury or destruction, respectively. Mora, 20 SCRA 261).
 Examples: workmen’s compensation,
motor vehicle liability  The insurer is not solidarily liable
 In a third party liability (TPL) with the insured. The insurer’s liability
insurance contract, the insurer assumes is based on contract; that of the insured
the obligation by paying the injured third is based on torts.
party to whom the insured is liable. Prior Furthermore, the insurer’s
payment by the insured to the third liability is limited by the amount of the
insurance coverage (Pan Malayan
person is not necessary in order that the
Insurance Corporation v. CA, 184 SCRA
obligation may arise. The moment the
54).
insured becomes liable to third persons,
the insured acquires an interest in the
insurance contract which
may be garnished like any other
credit. (Perla Comapnia de Seguro, Inc
vs. Ramolete, 205 SCRA 487) “INTENTIONAL” vs. “ACCIDENTAL” AS
 Aside from compulsory motor USED IN INSURANCE POLICIES 1.
vehicle liability insurance, the Insurance Intentional – Implies the exercise of the
Code contains no other provisions reasoning faculties, consciousness and
applicable to casualty insurance. volition. Where a provision of the policy
Therefore, such casualty insurance are excludes intentional injury, it is the
governed by the general provisions intention of the person inflicting the injury
applicable to all types of insurance, and that is controlling. If the injuries suffered
outside of such statutory provisions, the by the insured clearly resulted from the
COMMITTEE
MEMORY AID IN COM

intentional act of the third person, the passengers for compensation, including
insurer is relieve from liability as persons expressly authorized by law or by
stipulated. (Biagtan v. the Insular Life the vehicle’s operator or his agents to
Assurance Co. Ltd., 44 SCRA 58, 1972) ride without fare. (Sec. 373[b])
2. Accidental – That which happens by
chance or fortuitously, without intention Third Party – Any person other than the
or design, which is unexpected, unusual passenger, excluding a member of the
and unforeseen. household or a member of the family
within the second degree of
NO ACTION CLAUSE consanguinity or affinity, of a motor
 A requirement in a policy of liability vehicle owner or land transportation
insurance which provides that suit and operator, or his employee in respect of
final judgment be first obtained against death or bodily injury arising out of and
the insured; that only thereafter can the in the course of employment. (Sec.
person injured recover on the policy. 373[c])
(Guingon vs. Del Monte, 20 SCRA 1043)
“No-Fault” Clause
XIX. COMPULSORY MOTOR VEHICLE  A clause that allows the victim
LIABILITY INSURANCE (CMVLI)  A species (injured person or heirs of the
of compulsory insurance that provides for deceased) to an option to file a claim
protection coverage that will answer for for death or injury without the
legal liability for losses and damages for necessity of proving fault or
bodily injuries or property damage that negligence of any kind.
may be sustained by another arising from  Purpose: To guarantee compensation
the use and operation of motor vehicle by or indemnity to injured persons in
its owner.  Purpose: To give immediate motor vehicle accidents.
financial assistance to victims of motor  Rules:
vehicle accidents and/or their 1. Total indemnity - maximum of P5,000
dependents, especially if they are poor 2. Proofs of loss -
regardless of the financial capability of a. Police report of accident;
motor vehicle owners or operators b. Death certificate and evidence
responsible for the accident sustained sufficient to establish proper
(Shafer v. Judge, RTC, 167 SCRA 386). payee;
 Claimants/victims may be a c. Medical report and evidence of
“passenger” or a “3rd party”  It applies to medical or hospital
all vehicles whether public and private disbursement.
vehicles. Note: It is the only compulsory 3. Claim may be made against one motor
insurance coverage under the Insurance vehicle only
Code. 4. Proper insurer from which to claim -
a. In case of an occupant: Insurer of
the vehicle in which the
occupant is riding, mounting or
dismounting from;
b. In any other case: Insurer of the
directly offending vehicle. (Sec. 378)
Method of coverage
1. Insurance policy  The claimant is not free to choose
2. Surety bond from which insurer he will claim the “no
3. Cash deposit fault indemnity” as the law makes it
mandatory that the claim shall lie
Passenger – Any fare-paying person being against the insurer of the vehicle in
transported and conveyed in and by a which the occupant is riding, mounting or
motor vehicle for transportation of dismounting from. That said vehicle
COMMITTEE
MEMORY AID IN COM

might not be the one that caused the C. Cooperation Clause  A clause which
accident is of no moment since the law provides in essence that the insured shall
itself provides that the party paying may give all such information and assistance
recover against the owner of the vehicle as the insurer may require, usually
responsible for the accident. (Perla requiring attendance at trials or
Compania de Seguros, Inc. v. Ancheta, hearings.
169 SCRA 144) XX. SURETYSHIP
 An agreement whereby a surety
 This no-fault claim does not apply guarantees the performance by the
to property damage. If the total indemnity principal or obligor of an obligation or
claim exceeds P5,000 and there is undertaking in favor of an obligee. (Sec.
controversy in respect thereto, the finding 175)
of fault may be availed of by the insurer  It is essentially a
only as to the excess. The first P5,000 shall credit accommodation.
be paid without regard to  It is considered an insurance
fault. (Prof. De Leon, p. 716) contract if it is executed by the surety as
a vocation, and not incidentally. (Sec. 20
 The essence of the no-fault  When the contract is primarily drawn
indemnity insurance is to provide victims up by 1 party, the benefit of doubt goes
of vehicular accidents or their heirs to the other party (insured/obligee) in
immediate compensation although in case of an ambiguity following the rule in
limited amount, pending final contracts of adhesion. Suretyship,
determination of who is responsible for the especially in fidelity bonding, is thus
accident and liable for the victims treated like non-life insurance in some
injuries or death. (Ibid.) respects.
SPECIAL CLAUSES Nature of liability of surety

A. Authorized Driver Clause  A clause 1. Solidary;
which aims to indemnify the insured owner 2. Limited to the amount of the bond;
against loss or damage to the car but limits 3. It is determined strictly by the terms
the use of the insured vehicle to the of the contract of suretyship in
insured himself or any person who drives relation to the principal contract
on his order or with his permission between the obligor and the obligee.
(Villacorta v. Insurance Commissioner) (Sec. 176)
 The requirement that the person driving
the insured vehicle is permitted in SURETYSHIP PROPERTY
accordance with the licensing laws or other INSURANCE
laws or regulations to drive the motor Accessory contract Principal contract
vehicle (licensed driver) is applicable only 3 parties: surety, 2 parties: insurer and
if the person driving is other than the obligor and oblige insured
insured. Credit Contract of
accommodation indemnity
B. Theft Clause  A clause which includes Surety can recover Insurer has no such
theft as among the risks insured against. from principal right; only right of
 Where the car is unlawfully and subrogation
wrongfully taken without the owner’s Bond can be May be cancelled
consent or knowledge, such taking cancelled only with unilaterally either by
constitutes theft, and thus, it is the “theft consent of obligee, insured or insurer on
clause” and not the “authorized driver Commissioner or grounds provided by
clause that should apply (Palermo v. court law
Pyramids Ins., 161 SCRA 677). Requires No need of
acceptance of acceptance by any
obligee to be valid third party
COMMITTEE
MEMORY AID IN COM
Risk-shifting device; Risk-distributing indebtedness to the lender assured and the

premium paid being device; premium paid deceased’s heirs will thereby be relieved
in the nature of a as a ratable from paying the unpaid balance of the
service fee contribution to a
loan. (Great Pacific Life Assurance Corp.
common fund
vs. Court of
XXI. LIFE INSURANCE
Appeals, 316 SCRA 677)
 Insurance on human lives and
insurance appertaining thereto or
LIABILITY OF INSURER IN CERTAIN
connected therewith which includes every
CAUSES OF DEATH OF INSURED
contract or pledge for the payment of
1. Suicide
endowments or annuities. (Sec. 179)
 Kinds: (Bar Review Materials in  Insurer is liable in the following cases:
Commercial Law, Jorge Miravite, 2002 1. If committed after two years
ed.) from the date of the policy’s
issue or its last reinstatement;
1. Ordinary Life, General Life or Old Line
Policy - Insured pays a fixed premium 2. If committed in a state of
every year until he dies. Surrender insanity regardless of the date
value after 3 years. of the commission unless
suicide is an excepted peril.
2. Group Life – Essentially a single
(Sec. 180-A)
insurance contract that provides
coverage for many individuals. 3. If committed after a shorter
Examples: In favor of employees, period provided in the policy 
“mortgage redemption insurance”. Any stipulation extending the 2-
3. Limited Payment Policy – insured pays year period is null and void.
premium for a limited period. If he 2. At the hands of the law (E.g. by legal
dies within the period, his beneficiary execution)
is paid; if he outlives the period, he  It is one of the risks assumed by the
does not get anything. insurer under a life insurance policy in
4. Endowment Policy – pays premium for the absence of a valid policy exception.
specified period. If he outlives the (Vance,p.572 cited in de Leon, p. 107)
period, the face value of the policy is Note: Justice Vitug believes that death
paid to him; if not, his beneficiaries by suicide (if the insured is sane) or at
receive the benefit. the hands of the law obviates against
recovery as being more in consonance
5. Term Insurance – insurer pays once
with public policy and as being implicit
only, and he is insured for a specified
under Section 87, ICP. (Pandect of
period. If he dies within the period, his
Commercial Law and Jurisprudence,
beneficiaries benefits. If he outlives
1997 ed. P. 191)
the period, no person benefits from
3. Killing by the beneficiary
the insurance.
6. Industrial Life - life insurance entitling
GENERAL RULE: The interest of a
beneficiary in a life insurance policy
the insured to pay premiums weekly,
shall be forfeited when the beneficiary
or where premiums are payable
is the principal accomplice or accessory
monthly or oftener.
in willfully bringing about the death of
the insured, in which event, the nearest
Mortgage Redemption Insurance  A life
relative of the insured shall receive the
insurance taken pursuant to a group
proceeds of said insurance if not
mortgage redemption scheme by the
otherwise disqualified. (Sec. 12)
lender of money on the life of a mortgagor
EXCEPTIONS:
who, to secure the loan, mortgages the
1. Accidental killing
house constructed from the use of the
2. Self-defense
proceeds of the loan, to the extent of the
3. Insanity of the beneficiary at the
mortgage indebtedness such that if the
mortgagor dies, the proceeds of his life time he killed the insured
insurance will be used to pay for his
COMMITTEE
MEMORY AID IN COM

 If the premiums paid came from A long-term contract May be cancelled by
conjugal funds, the proceeds are and cannot be either party and is
considered conjugal. If the beneficiary cancelled by the usually for a term of
is other than the insured’s estate, the insurer one year
source of premiums would not be Beneficiary is under Insured is required to
relevant. (Del Val v. Del Val, 29 Phil 534) no obligation to submit proof of his
prove actual actual pecuniary loss
 The measure of indemnity in life or
financial loss as a condition
health insurance policy is the sum fixed precedent to collecting
in the policy except when a creditor the insurance.
insures the life of his debtor. (Sec. 183)
IS THE CONSENT OF THE BENEFICIARY
NECESSARY TO THE ASSIGNMENT OF A
LIFE INSURANCE POLICY? XXII. VARIABLE CONTRACT
 It depends. If the designation of the  Any policy or contract on either a
beneficiary is irrevocable, the group or individual basis issued by an
beneficiary’s consent is essential because insurance company providing for benefits
of his vested right. If the designation is or other contractual payments or values
revocable, the policy may be assigned thereunder to vary so as to reflect
without such consent because the investment results of any segregated
beneficiary only has a mere expectancy to portfolio of investment.
the proceeds. (The Insurance Code of the
Philippines XXIII. INSURANCE COMMISSIONER 
Annotated, Hector de Leon, 2002 ed.) Main agency charged with the
enforcement of the Insurance Code and
Cash Surrender Value other related laws.
 As applied to a life insurance policy, it  Functions:
is the amount the insured in case of 1. ADJUDICATORY/QUASI-JUDICIAL
default, after the payment of at least 3 full a. Exclusive original jurisdiction – Any
annual premiums, is entitled to receive if dispute in the enforcement of any
he surrenders the policy and releases his policy issued pursuant to Chapter
claims upon it. VI
(CMVLI). (Sec. 385, par. 2)
LIFE INSURANCE FIRE INSURANCE b. Concurrent original jurisdiction
(with the RTC) – Where the
Contract of Contract of indemnity maximum amount involved in any
investment not of single claim is P100,000 (Sec. 416),
indemnity except in case of maritime
Valued policy Open or valued policy insurance which is within the
May be transferred The insurable interest exclusive jurisdiction of the RTC.
or assigned to any of the transferee or (BP 129; admiralty & maritime
person even if he has assignee is essential jurisdiction)
no insurable interest  Where the amount exceeds
P100,000, the RTC has jurisdiction.
Consent of insurer is Consent of insurer
not essential to must be secured in the
validity of absence of waiver
assignment
Contingency that is Contingency insured
contemplated is a against may or may not
certain event, the occur
only uncertainty
being the time when
it will take place
COMMITTEE
MEMORY AID IN COM
 The Insurance Commissioner has

no jurisdiction to decide the legality
of a contract of agency entered into
between an insurance company and
its agent. The same is not covered by
the term “doing or transacting
insurance business” under Sec 2, ICP,
neither is it covered by Sec. 416 of
the same Code which grants the
Commissioner adjudicatory powers
(Philippine American Life Insurance
Co. v. Ansaldo, 234 SCRA 509).
2. ADMINISTRATIVE/REGULATORY
a. Enforcement of insurance laws
b. Issuance, suspension or revocation
of certificate of authority
c. Power to examine books and
records, etc.
d. Rule-making authority
e. Punitive
COMMITTEE

San Beda Insurance Code Bar Reviewer

Загружено:

Сведения о документе

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

San Beda Insurance Code Bar Reviewer

Загружено:

Авторское право:

Доступные форматы

San Beda College of Law 30

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COM

MEMORY AID IN COM

MEMORY AID IN COM

MEMORY AID IN COM

MEMORY AID IN COM

MEMORY AID IN COM

Effect of Acknowledgment of Receipt of PREMIUM ASSESSMENT

MEMORY AID IN COM

CHANE OF INTEREST IN THE THING A. Four Primary Concerns of the

MEMORY AID IN COM

 Where matters of opinion or  Where the insured merely signed the

MEMORY AID IN COM

MEMORY AID IN COM

B. DOUBLE INSURANCE – exists where

MEMORY AID IN COM

MEMORY AID IN COM

Proximate Cause – An event that sets all

REQUISITES FOR RECOVERY

MEMORY AID IN COM

MEMORY AID IN COM

MEMORY AID IN COM

under ordinary 1. Negligence of the captain, engineers,

D. Sue and Labor Clause  A clause under

MATTERS ALTHOUGH CONCEALED, WILL

C. Inchamaree Clause  A clause which

MEMORY AID IN COM

MEMORY AID IN COM

MEMORY AID IN COM

MEMORY AID IN COM

A percentage in the Situation where the

MEMORY AID IN COM

MEMORY AID IN COM

MEMORY AID IN COM

SPECIAL CLAUSES Nature of liability of surety

MEMORY AID IN COM

Risk-shifting device; Risk-distributing indebtedness to the lender assured and the

MEMORY AID IN COM

MEMORY AID IN COM

 The Insurance Commissioner has

Вам также может понравиться