INSURANCE LAW REVIEW 2016

From the lectures of Atty. Maria Christina Sagmit

JANUARY 4, 2016 PART ONE: GENERAL PRINCIPLES

CONCEPT
INSURANCE CODE OF 2013 Generally, if you take a look at the Civil , a person is
REPUBLIC ACT NO. 10607 not allowed to undertake an obligation of another
person. But in contract of Insurance…
AN ACT STRENGTHENING THE INSURANCE
INDUSTRY, FURTHER AMENDING PRESIDENTIAL An agreement whereby one undertakes for a
DECREE NO. 612, OTHERWISE KNOWN AS "THE consideration to indemnify another against loss,
INSURANCE CODE", AS AMENDED BY damage or liability arising from an unknown or
PRESIDENTIAL DECREE NOS. 1141, 1280, 1455, contingent event.
1460, 1814 AND 1981, AND BATAS PAMBANSA So, this is the first part of your definition of what a
BLG. 874, AND FOR OTHER PURPOSES contract of Insurance is. May isang magsa-suffer na
So when we talk about Insurance Law, we have to lang loss. May sasalo.
focus on a relatively new Insurance Code – Insurance A contract of suretyship is deemed an insurance
Code of 2013. Before this, we had the Insurance contract only if made by a surety who or which is
Code which was started to be implemented way back doing an insurance business as a vocation.
in 1975.
Ang laging misconception is pag suretyship,
This is the Codal that we will use for this course.
insurance yan. But that is not the case. The only time
[Reading of Syllabus of 2015 Bar Examination] a suretyship contract is considered an Insurance
Contract is when it is produced as a matter of
FRAMEWORK vocation. When we say vocation, more or less it is a
General Concepts regular business. Hindi pwede at will or isolated
transaction. Dapat it is within the concept of vocation
Life Insurance or something that is regularly done as a business.
Non-Life Insurance
ELEMENTS
Payment of Proceeds
The insured has insurable interest or interest of some
Grounds for Rescission kind susceptible of pecuniary estimation
Summary of Amendments in Insurance Code Insurable interest either sa buhay ng isang tao, own
PDIC Law life. Kung property, sa isang property. We will discuss
that further later.
I do not follow the provisions as they appear in the
codal. The insured is subject to a risk of loss caused by the
happening of the designated perils;
IMPORTANT CONCEPTS
So may insurance interest ka sa isang bahay and
Differences between life and non-life insurance exposed ka sa risk of loss.
What is insurable interest The insurer assumes the risk of loss;
No-fault Indemnity Clause
If there is some that would assume the risk of loss,
Special rules in Industrial Life that someone is an insurer.
Incontestability Clause Assumption is part of a general scheme to distribute
Unfair Settlement Practices Act actual losses among a large group of persons bearing
somewhat similar risks;
Illegal Acts in Collecting Claims
Example, sa sampung mag-iinsure against
Coverage under PDIC Law carnapping, nagbayad ng premium, ilan lang
Cash and Carry Rule carnapped? Isa or dalawa. So, sa halip na magbayad
si A ng malaking amount to cover him for carnapping,
Effect of grace period he will now join ABCDEFGHIJ. Magko-contribute sila
Cover notes Test of Materiality ng maliliit. At kung sino mamalasing ma-carnap,
babayaran.
Double Insurance
Rule in case of suicide As consideration for the insurer’s promise, the insured
pays the premium
Ratable return of premiums
Sino dito ang sasagot sa utang ng ibang tao kung
These are the concepts that you have to be familiar walang premium na matatanggap in return? Unless of
after all our sessions. course, if the consideration is love and affection. But

Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote Page 1
 INSURANCE LAW REVIEW 2016
From the lectures of Atty. Maria Christina Sagmit
still, that is a consideration. Ito nga lang, generally,
the consideration is pecuniary.
PHILIPPINE HEALTHCARE V. CIR
ISSUE: Is a healthcare agreement in the nature of a
contract of insurance?
FACTS: Individuals enrolled in its health care
programs pay an annual membership fee.
They are entitled to various preventive, diagnostic and
curative medical services provided by its duly licensed
physicians, specialists and other professional
technical staff participating in the group practice
health delivery system at a hospital or clinic owned,
operated or accredited by it.
The DST under Section 185 of the 1997 Tax Code is
imposed on the privilege of making or renewing any
policy of insurance (except life, marine, inland and fire
insurance), bond or obligation in the nature of
indemnity for loss, damage, or liability.
RULING: The health care agreement is primarily a
contract of indemnity. A health care agreement is in
the nature of a non-life insurance policy.
This is actually a tax case. Example, sino dito
working? Health care Agreement. Isa kang
empleyado ng isang company, one of your benefits
will be a health card. Para naman pag may nangyari
sa empleyado, di na mamomoblema si company. In
this scenario, pag nagkasakit, either sila ang
magbabayad or ire-refund sila. So ang tanong, is that
subject to doc stamps? Sabi dito, you have determine
the nature of a health care agreement. Is it a contract
of insurance? Sabi ng SC: It is primarily a contract
of indemnity. Indemnity means you are giving aid to
somebody for some damage that you are suffering. A
health care agreement is in the nature of a non-life
insurance policy. As such, it is not subject to doc
stamps.
Later on, we will know later why a health care
agreement is a non-life insurance eh buhay naman
ang pinag-uusapan. But as of now, tandaan nyo lang,
pag hindi kasama ang risk of death, it is categorized
as non-life, even if it deals with people.
BAR 2011
In return for the 20 years of faithful service of X as a
househelper to Y, the latter promised to pay
Php100,000.00 to X’s heirs if he (X) dies in an
accident by fire. X agreed. Is this an insurance
contract?
A. Yes, since all the elements of an insurance
contract are present.
B. Yes, since X’ services may be regarded as the
consideration.
C. No, since Y actually made a conditional
donation in X’s favor.
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
D. No, since it is in fact an innominate contract
between X and Y.
Answer: C. No, since Y actually made a
conditional donation in X’s favor.
Elements agad ang nasa isip nyo dapat.
It is a conditional contract. Wala namang ambag-
ambag eh. Insurable interest? Perhaps.
PRINCIPLE OF SUBROGATION
When we talk about insurance, there is the inevitable
concept of Subrogation.
Process of legal substitution
In layman’s term:
The insurer, after paying the amount covered by
the policy, steps into the shoes of the insured
Si Insurance Company sasaluhin nya ang loss ni
insured. Pag nasalo nya, it will now step into the
shoes of the insurer so that it can now run after the
wrongdoer.
Example: Nabangga ni A yung kotse ni B. Si B para
wala ng hassle, papa-cover nya sa insurance
company nya. The moment magbayad yung
insurance company ni B, the insurance company can
now run after A. So, si B in the general scheme of
things.
Insurer avails of the rights of the insured against
the wrongdoer
Insured CANNOT recover from offender what was
paid by insurer but can recover any deficiency.
Pagkatapos nakakuha si B from the insurance
company, hinabol nya pa si A. Sabi ng SC, not
allowed except kung iyong binigay sa kanya kulang.
So, B can only run after A for the deficiency.
Concept in property insurance which you have to
remember lagi, hindi nyo pwedeng pagkakitaan ang
pagkadamage or pagkawala ng inyong property.
Never. It is not supposed to be for unjust enrichment
because a property of insurance is a contract of
indemnity. You only get paid to the extent of the
damage to you. Wag nyong pagkakitaan.
Applicable only in non-life insurance (Philamgen v.
CA)
You cannot be compensated for the loss of life. You
can only consider it as a contract of investment.
Instances when subrogation is not applicable
a. When the insurer pay the insured for a loss
not covered by the policy.
Insurance company nagbayad, di naman covered ng
policy ang loss. Example: Damage to property by
accident. Binayaran mo. Di ka ngayon pwedeng
maghabol sa sinasabi mong at fault. There is no
subrogation there.
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 INSURANCE LAW REVIEW 2016
From the lectures of Atty. Maria Christina Sagmit
b. The insurer by his own act releases the
wrongdoer.
The insurance company mismo, by his own act,
releases the wrongdoer.
c. In case of life insurance.
d. Recovery of loss in excess of the limits
provided by the policy.
Example: Kung sa policy, ang recovery is only
P1Million. Pero si insurance company, nagbigay ng
P2 Million. Can it now run for P2Million?
Bar 2011
Where the insurer was made to pay the insured for a
loss covered by the insurance contract, such insurer
can run after the third person who caused the loss
through subrogation. What is the basis for conferring
the right of subrogation to the insurer?
A. Their express stipulation in the contract of
insurance.
B. The equitable assignment that results from the
insurer’s payment of the insured.
C. The insured’s formal assignment of his right to
indemnification to the insurer.
D. The insured’s endorsement of its claim to the
insurer.
Answer: B. The equitable assignment that results
from the insurer’s payment of the insured.
If you look at the choices, basically, AC&D are the
same. It is not supposed to be in the contract but it is
just an equitable assignment that results from the
insurer’s payment of the insured.
Bar 2014
ELP Insurance, Inc. issued Marine Policy No. 888 in
favor of FCL Corp. to insure the shipment of 132
bundles of electric copper cathodes against all risks.
Subsequently, the cargoes were shipped on board the
vessel "M/V Menchu" from Leyte to Pier 10, North
Harbor, Manila.
Upon arrival, FCL Corp. engaged the services of
CGM, Inc. for the release and withdrawal of the
cargoes from the pier and the subsequent delivery to
its warehouses/plants in Valenzuela City. The goods
were loaded on board twelve (12) trucks owned by
CGM, Inc., driven by its employed drivers and
accompanied by its employed truck helpers. Of the
twelve (12) trucks en route to Valenzuela City, only
eleven (11) reached the destination. One (1) truck,
loaded with eleven (11) bundles of copper cathodes,
failed to deliver its cargo.
Because of this incident, FCL Corp. filed with ELP
Insurance, Inc. a claim for insurance indemnity in the
amount of P1,500,000.00. After the requisite
investigation and adjustment, ELP Insurance, Inc.
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
paid FCL Corp. the amount of P1,350,000.00 as
insurance indemnity.
ELP Insurance, Inc., thereafter, filed a complaint for
damages against CGM, Inc. before the Regional Trial
Court (RTC), seeking reimbursement of the amount it
had paid to FCL Corp. for the loss of the subject
cargo. CGM, Inc. denied the claim on the basis that it
is not privy to the contract entered into by and
between FCL Corp. and ELP Insurance, Inc., and
hence, it is not liable therefor. If you are the judge,
how will you decide the case? (4%)
Suggested Answer: If I were the judge, I will rule in
favor of ELP. While it is true that CGP is not privy to
the contract of ELP and FCL, ELP has the right of
subrogation.
In insurance law, an insurer, after paying the claim of
an insured, by process of legal substitution, steps into
the shoes of the insured and can proceed against an
erring party or the one who caused the loss.
NATURE AND CHARACTERISTICS
Aleatory
Contract of indemnity for non-life and an
investment for life insurance
Personal
Executory and conditional on the part of the
insurer
Uberrimae fides
Adhesion
Bar 2012
An insurance contract is an aleatory contract,
which means:
A. The insurer will pay the insured equivalent to the
amount of premium paid
Pag nasunog ang bahay and ang premium na
binayad mo is P10,000, P10,000 rin daw ibabayad sa
iyo. Tama bay un?
B. The obligation of the insurer is to pay
depending upon the happening of an uncertain
future event
C. The insured pays a fixed premium for the duration
of the policy period and the amount of premiums paid
to the insurer is not necessarily the same amount that
the insured will get upon the happening of an
uncertain future event
Tama naman yung statement na yun. [Refers to
phrase before “That the insured will get upon the
happening of an uncertain future event:]
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 INSURANCE LAW REVIEW 2016
From the lectures of Atty. Maria Christina Sagmit
D. The obligation of the insurer is to pay dependent
upon the happening of an event which is certain to
happen
Answer: Aleatory- A contract whose performance by
one party depends on the occurrence of an uncertain
contingent event
Contingent means it may or may not happen.
ANSWER: B. The obligation of the insurer is to
pay depending upon the happening of an
uncertain future event
RULE OF CONSTRUCTION
Syempre, dahil contract of adhesion sya…
Doubts are resolved in favor of the insured
Since a contract of insurance is a contract of
adhesion, any obscure word or stipulation in the
insurance policy shall be resolved against the
insurance company which drafted the terms
thereof (AMERICAN HOME V. TANTUCO,
OCTOBER 8, 2001)
Pag nag-sign ka ng insurance contract, pro-forma
yan. Pati signature nga ng presidente nila naka-scan
na eh. Now, when you are talking to agent, you are
supposed to tell them what you want to be included.
Example: Agent, pwede ba pati death by suicide
covered? Isisingit nila ito ngayon sa blank form. But
generally, it is already printed. So, it is a contract of
adhesion. So in case of doubt in the interpretation,
again we only use this when there is doubt, do not
interpret when the contract is clear; any obscure
word or stipulation in the insurance policy shall
be resolved against the insurance company which
drafted the terms thereof.
[Story about Amorin – schoolmate at UP Law School]
[Stories about the Bar, Tips, Comfort Food during the
bar (Crispy Pata), Worrier and Agitated Classmates to
avoid ]
FORTUNE CARE V. AMORIN, MARCH 12, 2014
Amorin is a holder of a Fortune Care healthcard,
issued by his employer, the House of
Representatives.
While in Hawaii, Amorin had to undergo an
emergency surgery, an appendectomy.
He spent professional and hospitalization expenses of
US$7,242.35 and US$1,777.79, respectively.
He sought reimbursement from Fortune Care, which
denied the claim. The denial was based on the
contention that the Health Care Contract did not cover
hospitalization costs and professional fees incurred in
foreign countries, as the contract’s operation was
confined to Philippine territory. Further, it argued that
its liability to Amorin was extinguished upon the
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
latter’s acceptance from the company of the amount
of P12,151.36.
SC: In the absence of any qualifying word that clearly
limited Fortune Care's liability to costs that are
applicable in the Philippines, the amount payable by
Fortune Care should not be limited to the cost of
treatment in the Philippines, as to do so would result
in the clear disadvantage of its member. If, as Fortune
Care argued, the premium and other charges in the
Health Care Contract were merely computed on
assumption and risk under Philippine cost and, that
the American cost standard or any foreign country's
cost was never considered, such limitations should
have been distinctly specified and clearly
reflected in the extent of coverage which the
company voluntarily assumed. This was what
Fortune Care found appropriate when in its new
health care agreement with the House of
Representatives, particularly in their 2006 agreement,
the provision on emergency care in non-accredited
hospitals was modified to read as follows:
However, if the emergency confinement occurs in
a foreign territory, Fortunecare will be obligated to
reimburse or pay one hundred (100%) percent
under approved Philippine Standard covered
charges for hospitalization costs and professional
fees but not to exceed maximum allowable coverage,
payable in pesos at prevailing currency exchange rate
at the time of availment in said territory where he/she
24
is confined. x x x
Settled is the rule that ambiguities in a contract
are interpreted against the party that caused the
ambiguity. "Any ambiguity in a contract whose
terms are susceptible of different interpretations
must be read against the party who drafted it.”
Bar 2012
An insurance contract is a contract of adhesion, which
means in resolving ambiguities in the provision of the
insurance contract –
A. The general rule is that, the insurance contract is to
be interpreted strictly in accordance with what is
written in the insurance contract
B. Are to be construed liberally in favor of the
insured and strictly against the insurer who
drafted the insurance policy
C. Are to be construed strictly against the insured and
liberally in favor of the insurer
D. If there is an ambiguity in the insurance contract,
this will invalidate the contract
ANSWER: B
STATUTE OF LIMITATIONS
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From the lectures of Atty. Maria Christina Sagmit
General Rule: 10 YEARS from the time the cause
of action accrues.
Exception: Period may be increased or decreased
BUT
In industrial life: cannot be shorter than SIX
YEARS
Because this caters to those living below the low-
income group. Fishball vendor, balut vendor, market
vendor. Yung mga taong di nila alam bakit kailang nila
magdemanda.
in all other kinds of insurance: cannot be shorter
than ONE YEAR.
“RIGHT OF ACTION ACCRUES”
Period is reckoned from the time of the denial of the
claim by the insurer (Vda de Gabriel v. CA)
If there was no denial of the claim, right of action
does not accrue
Ano namang ibig sabihin ng right of action? Kailan ba
mag-uumpisa ang 10 years? The moment na
nagclaim sa isang insurance company at na-deny,
tumatakbo na yung 10 years. Wag na kayong
maghintay na mag motion for reconsideration pa kayo
sa insurance company kase tumatakbo na ang
prescriptive period.
“DOING AN INSURANCE BUSINESS”
making or proposing to make, as insurer, any
insurance contract;
making or proposing to make, as surety, any
contract of suretyship as a vocation and not
merely incidental to any other legitimate business
or activity of the surety.
doing any kind of business, including a
reinsurance business, specifically recognized as
doing insurance business
Yung big contracts like P10Million, di kaya ng
insurance company ninyo. So makiki-kontrata sya sa
inyo. Meron syang kausap na reinsurer. Sasabihin
mo, hati tayo ha, P5M saken, P5M sayo. Pero as far
as the insured is concerned, isa lang ang kausap nya.
doing or proposing to do any business in
substance equivalent to any of the foregoing
An entity can still be deemed engaged even if he
does not derive any profit from the activity
Bagong provision under the new codal…
MICROINSURANCE
Section 187. Microinsurance is a financial product or
service that meets the risk protection needs of the
poor where:
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
(a) The amount of contributions, premiums, fees or
charges, computed on a daily basis, does not exceed
seven and a half percent (7.5%) of the current daily
minimum wage rate for nonagricultural workers in
Metro Manila; and
(b) The maximum sum of guaranteed benefits is not
more than one thousand (1,000) times of the current
daily minimum wage rate for nonagricultural workers
in Metro Manila.
Yung microinsurance, parang industrial rin sya eh. It
caters to those belonging to the low income bracket. If
you take a look at the definition, ang premium nila
does not exceed 7.5% of the daily minimum wage in
Metro Manila – P481.00. Roughly, P28.00, yun ang
premium.
At ang benefit naman is not more than one thousand
(1,000) times of P481.00. So, magbabayad sila ng
P28.00, pag may nangyari sa kanila, ang
marerecover nila is not more than P481,000.
Section 188. No insurance company or mutual benefit
association shall engage in the business of
microinsurance unless it possesses all the
requirements as may be prescribed by the
Commissioner. The Commissioner shall issue such
rules and regulations governing microinsurance.
This time around, the Insurance Company is in full
control of those engaging in microinsurance – another
term for industrial life only granted by smaller
insurance companies.
REGULATION OF THE INSURANCE BUSINESS
Bakit kailang i-regulate? Think of what happened to
Prudential life, CAP. Dapat protected ang public dyan.
Insurance business is impressed with public interest.
The public must be protected against insolvency or
unfair treatment by insurers.
Insurance Commission is tasked to regulate the
conduct of insurance business through licensing,
examination, investigation and revocation
[NEW PROVISION] The Commission is authorized to
issue a certificate of authority which shall expire on
the last day of December, 3 years following its date of
issuance,
Dati annual.
This shall be renewable every 3 years thereafter,
subject to the company’s continuing compliance with
the provisions of this Code, circulars, instructions,
rulings or decisions of the Commission.
This is another new provision:
NO LGU INTERFERENCE
"No insurance company issued with a valid certificate
of authority to transact insurance business anywhere
in the Philippines by the Insurance Commissioner,
shall be barred, prevented, or disenfranchised from
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 INSURANCE LAW REVIEW 2016
From the lectures of Atty. Maria Christina Sagmit
issuing any insurance policy or from transacting any
insurance business within the scope or coverage of its
certificate of authority, anywhere in the Philippines,
by any local government unit or authority, for
whatever guise or reason whatsoever, including under
any kind of ordinance, accreditation system, or
scheme. Any local ordinance or local government unit
regulatory issuance imposing such restriction or
disenfranchisement on any insurance company shall
be deemed null and void ab initio.
Basically, this provision is telling us that once an
insurance company na-meet na nya ang sa insurance
code, no LGU can impose additional requirements.
Siguro, based on what happened before. This is to
safeguard the insurance companies
FINANCIAL REPORTING FRAMEWORK
All companies regulated by the Commission, should
comply with the financial reporting frameworks
adopted by the Commission for purposes of creating
the statutory financial reports and the annual
statements to be submitted to the Commission.
“Financial reporting framework” means a set of
accounting and reporting principles, standards,
interpretations and pronouncements that must be
adopted in the preparation and submission of the
statutory financial statements and reports required by
the Commission.
Not the same as financial reporting framework used to
prepare the financial statements of SEC.
Main purpose of the statutory statements: to present
important information about the level of risk and
solvency situation of insurers.
In prescribing the applicable statutory financial
reporting framework, the Commissioner shall take into
account international standards concerning solvency
and insurance company reporting as well as generally
accepted actuarial principles concerning financial
reporting promulgated by the Actuarial Society of the
Philippines.
The assets and investments discussed in Sections
204 to 215 shall be accounted for in accordance with
this section.
"The valuation of reserves shall be accounted for in
accordance with Title 5 of this Code.
Basically, this is supposed to show how solvent the
company is.
REGULATION OF BANCASSURANCE [NEW]
Section 375. The term bancassurance shall mean the
presentation and sale to bank customers by an
insurance company of its insurance products within
the premises of the head office of such bank duly
licensed by the Bangko Sentral ng Pilipinas or any of
its branches under such rules and regulations which
the Commissioner and the Bangko Sentral ng
Pilipinas may promulgate.
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
To engage in bancassurance arrangement, a bank is
not required to have equity ownership of the
insurance company. No insurance company shall
enter into a bancassurance arrangement unless it
possesses all the requirements as may be prescribed
by the Commissioner and the Bangko Sentral ng
Pilipinas.
So BPI need not have shares in PhilAm Life. But it
has to possess all the requirements required by
Insurance Commission and BSP.
No insurance product under this section, whether life
or non-life, shall be issued or delivered unless in the
form previously approved by the Commissioner.
Section 376. Personnel tasked to present and sell
insurance products within the bank premises shall be
duly licensed by the Commissioner and shall be
subject to the rules and regulations of this Act.
"Section 377. The Commissioner and the Bangko
Sentral ng Pilipinas shall promulgate rules and
regulations to effectively supervise the business of
bancassurance.
CONSEQUENCES OF BANCASSURANCE
PROVISIONS
To engage in a bancassurance arrangement, a bank
is not required anymore to have equity ownership of
the insurance company. Previously, pursuant to BSP
Circular 357 (dated 8 November 2002), only
insurance companies which are affiliates of banks can
engage in cross-selling.
Nonetheless, insurance companies cannot enter into
a bancassurance arrangement unless it possesses all
the requirements as may be prescribed by the
Insurance Commission and the BSP.
All bancassurance products, whether life or non-life,
are required to be issued or delivered in the form
previously approved by the Insurance
Commission.
Personnel tasked to present and sell insurance
products within the bank premises must be duly
licensed by the Insurance Commission. Such
personnel will also be subject to the rules and
regulations of RA 10607 to be promulgated by the
Insurance Commission and the BSP.
[Story about agent who was previously Atty. Sagmit’s
student in Insurance]
REGULATION OF INSURANCE-RELATED
ENTITIES
Madami kase fly-by-night insurance companies.
Just familiarize this.
The Commissioner shall have the power to register as
a self-regulatory organization, or otherwise grant
licenses, and to regulate, supervise, examine,
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 INSURANCE LAW REVIEW 2016
From the lectures of Atty. Maria Christina Sagmit
suspend or otherwise discontinue, as a condition for
the operation of organizations whose operations are
related to or connected with the insurance market
such as, but not limited to, associations of insurance
companies, whether life or non-life, reinsurers,
actuaries, agents, brokers, dealers, mutual benefit
associations, trusts, rating agencies, and other
persons regulated by the Commissioner, which are
engaged in the business regulated by this Code.
"The Commissioner may prescribe rules and
regulations which are necessary or appropriate in the
public interest or for the protection of investors to
govern self-regulatory organizations and other
organizations licensed or regulated pursuant to the
authority granted hereunder including, but not limited
to, the requirement of cooperation within and among
all participants in the insurance market to ensure
transparency and facilitate exchange of information.
Section 431. An association cannot be registered as a
self-regulatory organization unless the Commissioner
determines that:
(a) The association is so organized and has the
capacity to be able to carry out the purposes of this
Code and to comply with, and to enforce compliance
by its members and persons associated with its
members, with the provisions of this Code, the rules
and regulations thereunder, and the rules of the
association.
(b) The rules of the association, notwithstanding
anything in the Corporation Code to the contrary,
provide the following:
(1) Qualifications and the disqualifications
membership of the association;
(2) A fair representation of its members to serve on
the board of directors of the association and the
administration of its affairs, and that any natural
person associated with a juridical entity that is a
member shall also be deemed to be a member for this
purpose;
(3) Fair procedure for the disciplining of members and
persons associated with members; and
(4) The prohibition or limitation of access to services
offered by the association or a member thereof.
(5) The president of the association and at least two
(2) independent directors as members of the board of
directors of the association;
(6) Equitable allocation of reasonable dues, fees, and
other charges among members and other persons
using any facility or system which the association
operates or controls;
(7) The prevention of fraudulent and manipulative acts
and practices to protect the insuring public and the
promotion of just and equitable principles of business;
(8) Members and persons associated with its
members subject to discipline for violation of any
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
provision of this Code, the rules or regulations
thereunder, or the rules of the association;
Section 432. A self-regulatory organization may
examine and verify the qualifications of an applicant
to become a member in accordance with procedures
established by the rules of the association.
A self-regulatory organization shall deny membership
or condition the membership of an entity, if it does not
meet the standards of financial responsibility,
operational capability, training, experience, or
competence that are prescribed by the rules of the
association; or has engaged, and there is a
reasonable likelihood it will again engage, in acts or
practices inconsistent with just and equitable
principles of fair trade.
Another safeguard is CAPITALIZATION
What happens to those already registered insurance
companies?
Section 194
PAID UP CAPITAL FOR NEW DOMESTIC LIFE OR
NON-LIFE insurance company shall, in a stock
corporation: One billion pesos; (P1,000,000,000.00)
Provided,
Domestic Insurance company already doing business
in the Philippines;
Net worth by June 30, 2013-an additional P250 Million
 By December 31,206- an additional P300
Million worth
 By December 31,2019- an additional P350
on Million worth
 By December 31, 2022- an additional 400
Million worth
That is supposed to protect the policy holders. So by
2022, umabot na dapat sa 1 billion.
Pre-licensing requirement of a company, dapat it is
paid in cash not less than 100 million.
Pre-licensing requirement of a new insurance
company, in addition to the paid-up capital stock,
require the stockholders to pay in cash to the
company in proportion to their subscription interests a
contributed surplus fund of not less than P100 Million.
May also require such company to submit to him a
business plan showing the company’s estimated
receipts and disbursements, as well as the basis
therefor, for the next succeeding (3) years.
Diba when you put up a company, 25% must be
subscribed, 25% of the 25% must be paid up. So, the
paid up must not be less than P100 million. In the
case of Foreign Corporations:
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 INSURANCE LAW REVIEW 2016
From the lectures of Atty. Maria Christina Sagmit

SECTION 197 Foreign Corporations BAR 2011

Unimpaired capital or assets and reserve: P1 Billion
nor until it shall have deposited with the
Commissioner for the benefit and security of the
policyholders and creditors of such company in the
Philippines, securities satisfactory to the
Commissioner consisting of good securities of the
Philippines, including new issues of stock of
"registered enterprises” as this term is defined in E.O.
226 of 1987, as amended, to the actual market value
of not less than the amount herein required
A group of Malaysians wanted to invest in the
Philippines’ insurance business. After negotiations,
they agreed to organize "FIMA Insurance Corp." with
a group of Filipino businessmen. FIMA would have a
PhP50 Million paid up capital, PhP40 Million of which
would come from the Filipino group. All corporate
officers would be Filipinos and 8 out of its 10-member
Board of Directors would be Filipinos. Can FIMA
operate an insurance business in the Philippines?

A. No, since an insurance company must have at

Take note ha, buo, wala nang subscribe subscribe, so least PhP75 Million paid-up capital.
hindi pwedeng galawin ang perang yan, hindi B. Yes, since there is substantial compliance with our
pwedeng show money.
nationalization laws respecting paid-up capital and
Section 289. Filipino dominated Board of Directors.
Any partnership, association, or corporation C. Yes, since FIMA’s paid up capital more than meets
authorized to transact solely reinsurance business the country’s nationalization laws.
must have a capitalization of at least Three billion D. No, since an insurance company should be 100%
pesos (P3,000,000,000.00) paid in cash of which at owned by Filipinos.
least fifty percent (50%) is paid-up and the remaining
portion thereof is contributed surplus, which in no It is supposed to be a domestic corporation. Take
case shall be less than Four hundred million pesos, note that this is a 2011 question. So, what is applied
(P400,000,000.00) or such capitalization as may be is the old. Review the Consitution, nationalized ba
determined by the Secretary of Finance, upon the ang insurance companies? Only public utilities etc. Do
recommendation of the Commissioner: we have there insurance companies? No, so it is not
required that a company is 100% owned by Filipinos.
Answer A. No, since an insurance company must
Provided, That (25%) of the paid-up capital must be have at least PhP75 Million paid-up capital (based on
invested in securities satisfactory to the DO 27- 06). Now it is already 1 Billion Pesos.
Commissioner, consisting of bonds or other
instruments of debt of the Government of the
Philippines or its political subdivisions or
instrumentalities, or of government-owned or -
controlled corporations… Provided, That aforesaid
capital requirement is without prejudice to other
requirements to be imposed under any risk-based
capital method that may be adopted by the
Commissioner: Provided, finally, That the provisions
of this chapter applicable to insurance companies
shall as far as practicable be likewise applicable to
professional reinsurers.

Mutual Benefit Association

No mutual benefit association shall be issued a
license to operate as such unless it has constituted
and established a Guaranty Fund by depositing with
the Commissioner an initial minimum amount of Five
Something that would damnify a person or create a
million pesos (P5,000,000.00) in cash, or in
liability against him.
government securities with a total value equal to such
amount, to answer for any valid benefit claim of any of Damnify, meaning may direct loss ang tao. Or, kung
its members. hindi man siya, can create a liability against him. It
may be caused by an Unknown or Contingent Event.
For example, Agdao Multipurpose Coopeartive.
What are their definitions.
Contingent Event

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From the lectures of Atty. Maria Christina Sagmit

 An event which may or may not happen
 Example: Fire, accident, sinking of a ship,
theft
Unknown event
 An event which is certain to happen
 Aspect of being unknown is WHEN it will
happen
 Example: Death
Ex. Second coming of Christ
Damnify v. Create a liability
 Damnify - direct loss of a person
 Create a liability - expose the person to
liability to third persons. E.g. third party
liability insurance
Insurance by a married person
May take out an insurance on his/her life or that of her
children or that of his/her spouse without the consent
of his/her spouse
Insurance by a minor
Sec. 3
 Any minor may
 contract for life, health and accident
insurance, with any insurance company duly
authorized to do business in the Philippines
 provided the insurance is taken on his own
life and
 the beneficiary appointed is the minor's
estate or the minor's father, mother,
husband, wife, child, brother or sister.
actual custody of the minor insured or
beneficiary
 May obtain a policy loan, surrendering the
policy, receiving the proceeds of the policy,
and giving the minor's consent to any
transaction on the policy
 If the amount does not exceed P500,000.00
1. All of these conditions must be satisfied
2. Any of these people can get a long as mas
matanda sila sa minor.
3. Can obtain a loan on the policy, as long as
hindi nag-exceed ng half a million.
So kapag sinabi sa True or false, an insurance
contract entered into by a minor is void. False yun.
Insurance by a minor
 A property insurance taken by a minor is
voidable or valid until annulled (1390)
 If contract is not disaffirmed, insurer cannot
invoke minority to escape liability.
You cannot use the incapacity of the other party to
evade your obligations under a valid contract.
Bar 2012
X, a minor, contracted an insurance on his own life.
Which statement is most accurate?
The life insurance policy is void ab initio.
The life insurance is valid provided it is with the
consent of the beneficiary.

The life insurance policy is valid provided the

beneficiary is his estate or his parents, or spouse or
General Rule, if a minor enters into a contract, it is child.
voidable. Subject to ratification. In the insurance code,
minor can get insurance for life, health and accident
The life insurance is valid provided the disposition of
as long as ang kukunan nya BUHAY nya and ang
beneficiaries ay ang enumerated. the proceeds will be subject to the approval of the
legal guardian of the minor.
Pag nasatisfy ang conditions na yon, maaring valid
ang kontrata of couse subject to ratification. Pag may
isang kulang, void. Pag nameet lahat, valid until ANSWER: The life insurance policy is valid provided
annulled. Voidable. the beneficiary is his estate or his parents, or spouse
or child.
Rights of minor under life insurance policies
 When there is a contract of life, health, or
accident insurance involving a minor
 The minor’s judicial guardian, father, or in
the latter’s absence or incapacity, the mother
 In the absence of parents and grandparents,
the eldest brother or sister at least eighteen
(18) years of age, or any relative who has

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From the lectures of Atty. Maria Christina Sagmit
Life Insurance
 Insurance on human lives and insurance
appertaining thereto or connected therewith
(This is the old definition)
 Every contract or undertaking for the
payment of annuities including contracts for
the payment of lump sums under a
retirement program where a life insurance
company manages or acts as a trustee for
such retirement program shall be considered
a life insurance contract for purposes of this
Code.
Bakit kailangang iincorporate ang part na ito?
Kasi before, we had to look into the civil code just
to get the definition of annuities, eto inilagay na.
So, this is the second part which is a new
provision.
Classes
1. Individual – protection is based on individual
application.
2. Group – unit of selection is the group rather
than the individual, blanket policy covering a
number of individuals
This is typically done by companies, isang policy
lang, pero lahat ng empleyado covered. So ang
makukuha ng mga empleyado, certificate of
participation lang.
Example. All the employees of Del Monte, isang
policy lang yan. So if you are not an employee of
Del Monte, you cannot benefit from the insurance
3. Industrial – premiums are payable either
monthly or oftener if the face amount of
insurance is not more than 500 times the
current statutory minimum wage in Metro
Manila.
Non-Life
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Property Insurance
Property insurance or insurance whose object is
other than a person’s life or where the covered
peril is something other than death
Sabi natin kanina sa health care case, A health
care agreement is considered as considered as a
non-life insurance policy because it does not
include the peril of death. But, if it is already
included, then it now becomes a Life insurance
policy.
Types:
Fire
 Includes insurance against loss by fire,
lightning, windstorm, tornado or
earthquake and other allied risks, when
such risks are covered by extension to
fire insurance policies or under separate
policies
Casualty
 Covers loss or liability arising from
accident or mishap, excluding certain
types of loss which by law or custom are
considered as falling exclusively within
the scope of other types of insurance
such as fire, marine.
 Includes but is not limited to employers’
liability insurance, workmen’s
compensation insurance, public liability
insurance, motor vehicle liability
insurance, plate glass insurance,
burglary and theft insurance, personal
accident and health insurance written by
non-life companies.
Compulsory Motor Vehicle Liability OR Third
Party Liability
 Insurance against passenger and third party
liability for death or bodily injuries arising
from motor vehicle accidents
 Required before an owner or operator can
use his vehicle
 Required in registration or renewal of
registration
 Land transportation operator, the insurance
guaranty in cash or surety bond shall cover
liability for death or bodily injuries of third-
parties and/or passengers arising out of the
use of such vehicle in the amount not less
than twelveTwelve thousand pesos
(P12,000.00) per passenger or third -party
and an amount, for each of such categories,
in any one accident of not less than that set
forth in the following scale:
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 INSURANCE LAW REVIEW 2016
From the lectures of Atty. Maria Christina Sagmit
rd
Kaya siya tinawag na 3 party, hindi ang mayari ng
rd
insurance ang makikinabang, yung nasagasaan na 3
party or yung nakasakay sa passenger’s jeepeney na
rd
3 party. Kaya required lahat ng cars magkaronn ng
ganitong insurance.
Bar 2014
As a rule, consensual ba yung insurance contract
except, motor vehicle liability. No motor vehicle
liability insurance, no registration.
(1) Motor vehicles with an authorized
capacity of twenty-six (26) or more
passengers: Fifty thousand pesos;
(P50,000.00);
(2) Motor vehicles with an authorized
capacity of from twelve (12) to twentyfive
(25) passengers: Forty thousand pesos;
(P40,000.00);
(3) Motor vehicles with an authorized
capacity of from six (6) to eleven (11)
passengers: Thirty thousand pesos;
(P30,000.00);
(4) Motor vehicles with an authorized
capacity of five (5) or less passengers: Five
thousand pesos (P5,000.00) multiplied by
the authorized capacity.
1. Private Cars
(i) Bantam: Twenty thousand
(P20,000.00);
(ii) (ii) Light: Twenty thousand
(P20,000.00); and
(iii) (iii) Heavy: Thirty thousand
(P30,000.00).
2. Other Private Vehicles
(i) Tricycles, motorcycles and scooters: Twelve
thousand pesos (P12,000.00);
(ii) Vehicles with an unladen weight of 2,600
kilos or less: Twenty thousand pesos
(P20,000.00);
(iii) Vehicles with an unladen weight of between
2,601 kilos and 3,930 kilos: Thirty thousand
pesos (P30,000.00); and
(iv) Vehicles with an unladen weight over 3,930
kilos: Fifty thousand pesos (P50,000.00).
Marine
 vessels, craft, aircraft, vehicles, goods,
freights, cargoes, merchandise, effects,
bottomry, respondentia interests
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 person or property in connection with or
appertaining to marine, inland marine, transit
or transportation insurance but excludes life
insurance or surety bonds or insurance
against loss by reason of bodily injury to any
person who arising out of ownership,
maintenance or use of automobiles
 precious stones, jewels, jewelry, precious
metals, whether in the course of
transportation OR otherwise
 bridges, tunnels and other instrumentalities
of transportation and communication
(excluding buildings, furniture and
furnishings fixed contents and supplies held
in storage), piers, wharves, docks and slips
other aids of navigation, dru docks, marine
railways, dams
Suretyship
 An agreement whereby a party called the
surety guarantees the performance of
another party called the principal or obligor
of an obligation or undertaking in favor of a
third party called the obligee.
Suretyship diba, when there is solidary liability.
 Includes official recognizances, stipulations,
bonds or undertakings issued by any
company
At a glance
 In an insurance contract, a person
indemnifies another person for his loss,
pesos damage or liability
pesos  Any contingent or unknown event which may
damnify a person or create a liability against
pesos him may be insured
 The two main kinds of insurance are life and
nonlife insurance
 A person can sue based on an insurance
contract within 10 years from the time the
right of action accrues
 10-year period may be longer or shorter but
generally, cannot be shorter than one year
and in industrial life, cannot be shorter than 6
years
 Doubts in interpreting insurance contracts
are resolved in favor of the insured
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From the lectures of Atty. Maria Christina Sagmit
The moment that you file an application, you are
actually the offeror, you want your application to be
approved. Ikaw ang nag-ooffer at hihintayin mo yung
acceptance. Pag inapprove nila ang application mo,
usually pag nag-aapply ka kas, you are required to
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pay the first premium. At that point, do not think, that
you already have an effective perfected contract.
Kapag naapprove ang application mo, iissue ng
policy. Kapag, di naapprove, very simple, ibabalik ang
premium. Do not think pag nagbayad ka, meron ka
nang kontrata. In case the contingency happens, then
the policy holder can get it or his designated
beneficiaries.
Minsan ang life insurance, survival ng period. For
example, if at 80 you are still alive, you’ll get the
proceeds. If at 180, A is still no longer alive, his
beneficiaries will get. So possible, na ang policy
holder ang makakuha ng proceeds. Depending on the
amount of the claim.
The claim may either be accepted or denied by the
insurance company. Pag dineny, tumatakbo ang 10
years nyo. Magfafile na kayo in court or insurance
commission, which is which, we will determine later
on.
Topics in Stages 1 and 2
 What may be insured against
 Rule in case of death by suicide
 Insurable Interest
 Parties
 Kinds of life insurance
 Kinds of life insurance policies
Concept
Life Insurance - insurance on human lives and
insurance appertaining thereto or connected therewith
Concept
Every contract or undertaking for the payment of
annuities including contracts for the payment of lump
sums under a retirement program where a life
insurance company manages or acts as a trustee for
such retirement program shall be considered a life
insurance contract for purposes of this Code.
Classes
1. Individual – protection is based on individual
application.
2. Group – unit of selection is the group rather than
the individual, blanket policy covering a number of
individuals
3. Industrial – premiums are payable either monthly or
oftener if the face amount of insurance is not more
than 500 times the current statutory minimum wage in
Metro Manila.
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From the lectures of Atty. Maria Christina Sagmit
Contingencies
 death
 survival of a specific period
 continuance or cessation of life
What may be insured against?
1. Actual death
 Cessation of life
 Best proof of death: death certificate
 Policy matures upon the death of the insured
This is the reason why some people are not able to
get their policies because they do not have birth
certificates. The policy will mature if you have death
certificates.
2. Living death
 When the insured suffers from disability due
to disease or accident which prevents him
from engaging in any lawful occupation
 Partakes the nature of health and disability
benefits
Buhay ka pa, pero parang patay ka na dahil ikaw ay
disabled.
Accident and Health
 Health, accident and disability
insurance are deemed as both life and
non-life insurance and such may be
issued by either life or non-life insurance
companies (Sec. 193, 9 th par).
 Deemed life insurance when death is
one of the risks insured against
(Gallardo v. Morales)
Gusto kong iemphasize na isang company,
nagbebenta ng life and non-life, isa lang yan. When
one of the risks covered is death, it already becomes
a life insurance company.
 Accident An event which happens
without any human agency or, if
happening through human agency, an
event which under the circumstances, is
unusual and not expected by the person
to whom it happens by reason of some
violence or casualty to the insured
without his design, consent or voluntary
cooperation (Sun Insurance v. CA)
Kung nag bungee jumping kayo, you do not expect to
die, tama? So kung di naman katumbas ang
consequence, isa pa rin yung accident. Example,
when one engaged in a boxing competition, akala nya
mamamatay na sya nang tumama ang ulo nya sa
ring. Remember the case when there was a secretary
and the guard was playing with his gun and
accidentally shot the secretary that was considered
an accident.
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There’s a thin line between accident and suicide.
Death by suicide: compensable?
General Rule: NO.
® The reason why we get insurance contracts is
because we want to be protected from events not
under our control. So, generally death by suicide is
not compensable because if there will be wilful act or
connivance by the insured, then there can be no
liability.
BASIS:
 Sec. 89 which provides that an insurer is not
liable if loss is caused by willful act or
connivance of the insured; and
 the Rules of Court which provides that a
person is presumed to intend the
consequences of his voluntary acts
Exceptions:
When is suicide compensable?
 Section 183 If insured was not in his right
mind/insane at the time of suicide
 If insured committed suicide after the policy
has been effective for at least 2 years from
issuance or last reinstatement
 Note: The 2-year period can be shortened
but not lengthened
Ibig sabihin, nawawala ang pre-meditation. Which
means that a person who intends to commit suicide
will not wait for 2 years after he gets the policy or after
it was reinstated. Pag naglapse yung policy, you
count it from the last reinstatement, pag hindi nag
lapse, you count it from the issuance.
Paguusapan lang natin ang rules na ito kapag death
by suicide is not excepted in the policy. Kunwari,
nagpakamatay sya and when you checked the policy,
it was specified there that death by suicide is not
covered. Tapos na ang laban.
Pero kung walang exclusion sa policy, we go now to
the rules.
Pwede bang iksian ang period? Yes! But can it be
lengthened, no!
Bar 2012
X, on January 30, 2009, or two years before reaching
the age of 65, insured his life for P20 Million. For
reasons unknown to his family, he took his life 2 days
after he reached 65. The policy contains no excepted
risk. Which statement is most accurate?
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 INSURANCE LAW REVIEW 2016
From the lectures of Atty. Maria Christina Sagmit
A. The insurer will be liable
B. The insurer will not be liable
C. The state of sanity of the insured is relevant in
order to hold the insurer liable
D. The state of sanity of the insured is irrelevant in
order to hold the insurer liable
ANSWER
The insurer will be liable. The suicide was
committed after the two-year period from the time the
policy was obtained. Further, there is no excepted risk
provision in the policy. Hence, the beneficiaries are
entitled to the proceeds.
3. Retirement death
Retirement Death Life Annuity – debtor binds himself
to pay annual pension or income during the life of one
or more determinate persons in consideration of a
capital consisting of money or other property, whose
ownership is transferred to him at once with the
burden of income (Art. 2021, Civil Code)
(MEMORIZE)
Annuitant gives money or property to the insurer
Insurer now becomes the debtor, and has the
obligation to give annual pension or income to either
the annuitant or another person The obligation of
insurer to give pension stops upon the death of the
annuitant
Shopaholic sya, di nya alam kung paano gastusin
pera nya. Sabi nya, I want to provide for myself before
I die. The annuitant gives money to the insurance
company. Pag bigay nya ng pera, the insurer now
becomes the debtor, kasi mag obligation sya ngayon
to give pension to the annuitant. Kumbaga,
imamanage nya ang pera. Hanggang kelan nya
ibibigay ang pension? Hanggang buhay pa si
annuitant. It is possible that the person who will get
the money is not necessarily the annuitant. Pag patay
na yung binibigyan nyo, then the pension goes to the
insurance company.
Parties are the Annuitant, Insurer and the Beneficiary.
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 Annuitant gives money or property to the
insurer
 Insurer now becomes the debtor, and has
the obligation to give annual pension or
income to either the annuitant or another
person
 The obligation of insurer to give pension
stops upon the death of the annuitant
Sabi natin, one of the elements of a contract of
insurance is insurable interest.
Insurable Interest in Life
A person cannot insure just anyone he wants
 One has to establish that he stands to suffer
some loss because of the death of a person
 Insurable interest ensures that a person can
only get a policy on the life of someone
whose death will produce loss
Concept
Relation between the insured and a particular event
such that the happening of the event will damnify or
cause loss to the person
PURPOSE FOR THE CONCEPT:
 To avoid wagering
 To avoid temptation of bringing about the
event
On whose life does a person have insurable interest?
 himself, spouse, children
 person on whom he depends wholly or in
part for education or support or in whom he
has a pecuniary interest
 any person who is under legal obligation to
him for payment of money or respecting
property or services of which illness or death
might delay or prevent performance
 any person upon whose life any estate or
interest vested in him depends
Section 10(a)
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From the lectures of Atty. Maria Christina Sagmit

 Every person has unlimited insurable interest X has been a long-time household helper of Z. X's
in his own life husband, Y, has also been Z's long-time driver. May Z
 One also had insurable interest in the life of insure the lives of both X and Y with Z as beneficiary?
his spouse and children on the basis of love
and affection
A. Yes, since X and Y render services to Z.
B. No, since X and Y have no pecuniary
Section 10(b) interest on the life of Z arising from their
employment with him.
Obligation to give support Article 195, Family Code C. No, since Z has no pecuniary interest in the
lives of X and Y arising from their
employment with him.
 Spouses, legitimate ascendants and D. Yes, since X and Y are Z’s employees.
descendants
 parents and their legitimate children and
legitimate or illegitimate children of the latter Answer C. No, since Z has no pecuniary interest in
 parents and their illegitimate children and the lives of X and Y arising from their employment
legitimate or illegitimate children of the latter with him.
 legitimate brothers and sisters whether of the
full or half blood

JANUARY 5, 2016
Article 196, Family Code
Brothers and sisters not legitimately related,whether
of the full or half blood, are likewise bound to support RECAP:
each other EXCEPT only when the need for support
of the brother or sister, being of age, is due to a cause
imputable to the claimant’s fault or negligence. Sabi ko, we have to focus on the new codal.

We discussed general concepts last meeting. What

Blood relationship, affinity: enough?
 In cases not falling under 195 and 196, mere
blood relationship or affinity does not create
insurable interest
 Examples: uncle, aunt, nephew, niece,
cousins, son-in-law, brother-inlaw,
stepchildren
The temptation of bringing about the event is there.
Section 10© Pecuniary Interest
 Debtor-Creditor to the extent of the debt.
 Employer-Employee - El Oriente v. Posadas
 Business partners
In one case, even corporate officers can be insured.
Section 10(d)
 Person in whose estate an interest is
dependent
 Person is given the right to use a house
 Right ceases when the owner dies and
another person becomes the owner
For example, may commodatum, namatay ngayon si
bailee, pwede mo iinsure. Pero napakahirap iestablish
ang loss. But pwede mo iinsure.
Bar 2011
we have to remember:
Prescriptive period
Elements of a contract of insurance
Insurance distinguished from other contracts
2 kinds of insurance - life and nonlife; subtypes
Very important: When we talk about insurance, we
talk about indemnification of a person
• In an insurance contract, a
person indemnifies another person for his
loss, damage or liability
• Any contingent or unknown event
which may damnify a person or create a
liability against him may be insured
• The two main kinds of insurance
are life and non- life insurance
Life Annuity
We said that even retirement plans, as long as
administered by _ Insurance company, will be
considered as an insurance contract.
I also emphasized yesterday that insurance policy can
either be life or nonlife insurance contract, depending
on whether it includes the risk of death. If it includes

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From the lectures of Atty. Maria Christina Sagmit

the risk of death, it is classified as Life. Otherwise, it is existence for at least 2 years from issuance or last
considered as property, specifically casualty. reinstatement?
Subrogation is a very important concept in If atleast 2 years or more, then it can be
insurance, because the moment the insurance compesable. Otherwise, andun yung
company pays the insured in case of the happening of premeditation. The two year period can be
the event, then it can now step into the shoes of the shortened but not lengthened.
policy holder so that it can sue the wrongdoer.
Bar 2012
Although, there are exceptions to the right of
subrogation: X, on January 30, 2009, or two years before reaching
the age of 65, insured his life for P20 Million. For
1. Right of subrogation not existent
reasons unknown to his family, he took his life 2 days
in Life. Paano mo issubrogate eh personal
after he reached 65. The policy contains no excepted
action yan.
risk. Which statement is most accurate?
Aleatory
A. The insurer will be liable
Microinsurance, basically caters those belonging to
B. The insurer will not be liable
the lower income group. It is akin to an industrial life
insurance policy, but not really the same. C. The state of sanity of the insured is relevant in
order to hold the insurer liable
Bancassurance - two agencies involved: BSP and
Insurance Commission. D. The state of sanity of the insured is irrelevant in
order to hold the insurer liable
Important concept also is Regulation, because of the
public interest aspect, thus the increase of ANSWER
capitalization - both for domestic and foreign
• The insurer will be liable. The suicide was committed
insurance companies.
after the two-year period from the time the policy was
Effect of insurance by a minor. Make sure you obtained. Further, there is no excepted risk provision
know the conditions for validity. in the policy. Hence, the beneficiaries are entitled to
the proceeds.
We started with the specifics of Life
Insurance. Retirement Death
Death by suicide: compensable? Life Annuity – debtor binds himself to pay annual
pension or income during the life of one or more
• General Rule: NO.
determinate persons in consideration of a capital
• BASIS: consisting of money or other property, whose
ownership is transferred to him at once with the
– Sec. 89 which provides that an
burden of income (Art. 2021, Civil Code)
insurer is not liable if loss is caused by willful act or
connivance of the insured; and
– the Rules of Court which provides
that a person is presumed to intend the
consequences of his voluntary acts
When is suicide compensable? Section 183
• If insured was not in his right mind/insane at the
time of suicide
• If insured commited suicide after the policy has
been effective for at least 2 years from issuance or
last reinstatement
• Note: The 2-year period can be shortened but not
lengthened
1st rule: Look at the policy. Kung exempted
sya, tapos ang laban. NOT COMPENSABLE. Retirement Death
If not exempted, you go to the specifics:
1. Was he in his right state of mind?
Basta wala sa right state of mind, obligation to give annual pension or income to either
compensable. the annuitant or another person
If he was in his right state of mind,
upon the death of the annuitant
2. Determine the date. Has the policy been in

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 INSURANCE LAW REVIEW 2016
From the lectures of Atty. Maria Christina Sagmit
Annuity, alam nyo na yan. Pano kung maagang
mamatay, eh di swerte yung insurance company?
YES! Unless stipulated that there can be return of the
funds. Problema lang, kung matagal mamatay, eh di
lugi na naman yung insurance company.
Insurable Interest in Life
• A person cannot insure just anyone he wants
• One has to establish that he stands to suffer some
loss 
because of the death of a person
• Insurable interest ensures that a person can only
get a policy on the life of someone whose death will
produce loss
Concept
• Relation between the insured and a particular event
such that the happening of the event will damnify or
cause loss to the person
• PURPOSE FOR THE CONCEPT: 
– To avoid
wagering 
– To avoid temptation of bringing about the
event
INSURABLE INTEREST IN LIFE - kaya may concept
na ganito kasi baka patayin yung tao. There is a
temptation of bringing about the event if you can just
get a policy on anyone you like. Dapat dun lng sa
mga naka enumerate sa section 10.
On whose life does a person have insurable
interest?
– himself, spouse, children
– person on whom he depends wholly or in part for
education or support or in whom he has a pecuniary
interest
NOTE: FACTUAL EXPECTATION OF SUPPORT IS
SUFFICIENT. You don't need to establish na, "ah sya
tlaga nagsusuport sa akin." NO NEED, as long as
nakalista sya sa mga dapat magsupport sayo.
– any person who is under legal obligation to him for
payment of money or respecting property or services
of which illness or death might delay or prevent
performance
– any person upon whose life any estate or interest
vested in him depends
*blood affinity not sufficient.
Section 10(a)
• Every person has unlimited insurable interest in his
own life
• One also had insurable interest in the life of his
spouse and children on the basis of love and affection
Section 10(b) Obligation to give support
Article 195, Family Code
• Spouses, legitimate ascendants and descendants
• parents and their legitimate children and legitimate
or illegitimate children of the latter
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• parents and their illegitimate children and legitimate
or illegitimate children of the latter
• legitimate brothers and sisters whether of the full or
half blood
ArIcle 196, Family Code
• Brothers and sisters not legitimately related, whether
of the full or half blood, are likewise bound to support
each other EXCEPT only when the need for support
of the brother or sister, being of age, is due to a cause
imputable to the claimant’s fault or negligence.
Blood relaIonship, affinity: enough?
• In cases not falling under 195 and 196, mere blood
relationship or affinity does not create insurable
interest
• Examples: uncle, aunt, nephew, niece, cousins, son-
in-law, brother-in-law, stepchildren
Section 10© Pecuniary Interest
• Debtor-Creditor
• Employer-Employee - El Oriente
v.
Posadas
• Business partners
Bar 2011
• X, Co., a partnership, is composed of A (capitalist
partner), B (capitalist partner) and C (industrial
partner). If you were partner A, who between B and C
would you have an insurable interest on, such that
you may then insure him?
• A. No one, as there is merely a
partnership contract among A, B and C.
• B. Both B and C, as they are
your partners.
• C. Only C, as he is an industrial
partner.
• D. Only B, as he is a capitalist
partner.
Answer
• B. Both B and C, as they are your partners.
Because, if the capitalist partner dies, mawawalan ka
ng capitalista. Kung wala naman si industrial, there is
a value on the labor that he provides, mas mahirap
lang i-substantiate. “Pag namatay si industrial, worth
1M labor ang nawala sa akin” - mas mahirap, but you
can still have insurable insterest. Again, the
presumption is, at the time of death, partners mo pa
sila; otherwise, wala kang pecuniary loss.
Corporate officers
• A corporation may have insurable interest in the
lives of its officers when the death or illness of said
officers would materially and injuriously affect the
corporation.
Section 10(d)
Person in whose estate an interest
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 INSURANCE LAW REVIEW 2016
From the lectures of Atty. Maria Christina Sagmit
is dependent
• Person is given the right to use a house
• Right ceases when the owner dies and another
person becomes the owner
Bar 2014
• Carlo and Bianca met in the La Boracay festivities.
Immediately, they fell in love with each other and got
married soon after. They have been cohabiting
blissfully as husband and wife, but they did not have
any offspring. As the years passed by, Carlo decided
to take out an insurance on Bianca’s life for
P1,000,000.00 with him (Carlo) as sole beneficiary,
given that he did not have a steady source of income
and he always depended on Bianca both emotionally
and financially.
• During the term of the insurance, Bianca died of
what appeared to be a mysterious cause so that Carlo
immediately requested for an autopsy to be
conducted. It was established that Bianca died of a
natural cause. More than that, it was also
established that Bianca was a transgender all
along – a fact unknown to Carlo. Can Carlo claim the
insurance benefit? (5%)
Si carlo, kumuha ng policy sa buhay ni Bianca,
designating himself as the beneficiary. pwede ba
yun? PWEDE. The one who takes out the policy and
who pays the premium can choose sinong
beneficiary. Pwede sya, kapitbahay nila, etc. Ang
important, yung kumuha ng policy, may insurable
interest dun sa buhay na ginamit nya. Q: may
insurable interest ba sya sa buhay ni Bianca?
Suggested Answer
• Carlo cannot recover from the insurance policy.
Insurable interest is necessary before a person can
obtain a life insurance policy on the life of another
person. Without insurable interest, there is no valid
life insurance policy.
• Section 10 of the Insurance Code enumerates the
people on whom we have an insurable interest on,
one of which is one’s legitimate spouse.
• In the instant case, the marriage between Bianca
and Carlo is void ab initio since marriage must be
between a man and a woman. Since Bianca was a
transgender, there was never a valid marriage
between Bianca and Carlo. Carlo never had any
insurable interest on the life of Bianca and hence,
cannot recover from the policy.
Bar 2014
• On July 3, 1993, Delia Sotero (Sotero) took out a
life insurance policy from Ilocos Bankers Life
Insurance CorporaSon (Ilocos Life) designating
Creencia Aban(Aban), her niece, as her beneficiary.
Ilocos Life issued Policy No. 747, with a face value of
P100,000.00, in Sotero’s favor on August 30, 1993,
after the requisite medical examination and payment
of the premium.
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• On April 10, 1996, Sotero died. Aban filed a claim
for the insurance proceeds on July 9, 1996. Ilocos Life
conducted an investigation into the claim and came
out with the following findings:
• 1. Sotero did not personally apply for insurance
coverage, as she was illiterate.
• 2. Sotero was sickly since 1990.
• 3. Sotero did not have the financial capability to pay
the premium on the 
policy.
• 4. Sotero did not sign the application for insurance.
• 5. Aban was the one who filed the insurance
application and designated herself as the
beneficiary.
• For the above reasons and claiming fraud, Ilocos
Life denied Aban’s claim on April 16, 1997, but
refunded the premium paid on the policy. (6%)
• (A) May Sotero validly designate her niece as
beneficiary?
• (B) May the incontestability period set in even in
cases of fraud as alleged in this case?
• (C) Is Aban entitled to claim the proceeds under the
policy?
Suggested Answer
• (A) May Sotero validly designate her niece as
beneficiary?
• Yes, Sotero has insurable interest
on her own life and can validly designate any
beneficiary as long as it is not against the
law, public policy and morals. A beneficiary
is not required to have insurable interest in
life insurance.
• (C) Is Aban entitled to claim the proceeds under the
policy?
• No, Aban is not entitled to the
proceeds. She was the one who obtained
the policy on the life of her aunt on whose
life she did not have insurable interest. Since
she did not insurable interest, the policy is
void.
Remember, mere blood relationship is not insurable
interest. Wala namang uncle, aunt dun sa entitled to
support.
Sa Life Insurance, magkano ba ang pwde mong
maclaim kung ikaw ang beneficiary? Sa totoo lang,
sky is the limit, generally. If ang premium na kaya
mong bayaran a year is 200k, sky is the limit, pwde ka
makaclaim upto 2-3M. Kung pang industrial life lng
kaya mo, you can only claim upto 481k.
Pero may exception tayo: Sec 10, yung may
pecuniary estimation. Yung kapag may utang sayo
ang tao pwde mo sya iinsure, or may partner ka pag
namatay, may mawawala sayo, or meron ka
corporate officer, pag namatay mwawala profits mo.
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 INSURANCE LAW REVIEW 2016
From the lectures of Atty. Maria Christina Sagmit
You can only insure them upto the extent of your
pecuniary or financial loss.
Example: Kung ang utang sayo ni A ay 1M, you can
insure his life but only for 1M. At kung binayaran nya
na part of that, you can only recover the part that is
not yet paid.
Measure of Recovery of Proceeds
• GENERAL RULE: Face value of the policy
• Except: pecuniary estimation is possible [10©]
Sa Industrial Life, dahil nga it caters to lower income
group, medyo mas maluwag sila with respect to
insurable interest.
Special Rule on Insurable Interest in Industrial
Life
• Usual rules re insurable interest are generally not
made applicable in industrial life because:
– Proceeds are small, little danger to induce a person
to kill
– Investigation of presence of insurable interest will
nullify speedy payment of proceeds under the facility
of payment clause
Example, may kapitbahay ka, market vendor. Ikaw
nagpalibing at nadiscover mo may industrial life
insurance sya. Makakatulong pa ba yung
iimbestigahan ka kung may insurable interest ka sa
buhay nya? The fact that you defrayed the expenses
for the burial, you are entitled already to some of the
benefits under the industrial life policy.
– The costs to prove insurable interest will destroy the
purpose for this type of insurance
PARTIES (LIFE Insurance Contract)
1. Cestui que vie
2. Insured
3. Insurer
4. Beneficiary
INSURER: Yung old na codal, itong "corporation",
“person” ito. But of course, because of the recent
increase in capitalization, can any person afford? Well
baka kayo noh, mga bongga dyan! :)
NEW* Insurer: Section 6
• Every corporation, partnership, or association, duly
authorized to transact insurance business as
elsewhere provided in this Code, may be an insurer.
Insurance corporations- corporations formed or
organized to save any person or persons or other
corporations harmless from any loss, damage or
liability arising from any unknown or contingent
event, or to indemnify or compensate for such
loss, damage or liability or to guarantee
performance with contractual obligations or
payment of debts
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Mutualization and Demutualization (NEW
CONCEPTS)

Mutualization – A shareholder-owned company is
converted into a mutual organization, typically
through takeover by an existing mutual
organization. A mutual organization is customer-
owned.
Demutualization -customer-owned mutual
organization or cooperative changes form to a
joint, stock company, sometimes called stocking
for privatization.
Yesterday I mentioned to you yung mga tipong Agdao
Multi Purpose Cooperative, they function by getting
contributions from members and when the particular
member passes away, may benefit na mappunta.
They cannot give benefits to non-members. This type
of company is considered to be MUTUAL, kayo2 lang.
Not organized for profit but solely for the benefit of its
members.
Pag sinabi mo mutualization, dati, ordinary profit
company sya, and now it wants to convert to
"members only" thing, you now mutualize it. The
process is called mutualization. So yung shares nyo
converted to membership na.
Ang kabaliktaran naman nito DEMUTUALIZATION.
Kung dati customer-owned, it now would like to
evolve into a stock corporation. So nawawala ang
pagkamutual. So not only members benefit.
So Agdao Multipurpose gustong maging ordinary
corporation, DEMUTUALIZATION.
Profit corporation wants to be a "members only" thing,
MUTUALIZATION.


Demutualization *NEW
Section 280. A domestic mutual life insurance
company doing business in the Philippines may
convert itself into an incorporated stock life
insurance company by demutualization. To that end, it
may provide and carry out a plan for the conversion
by complying with the requirements of this title.
"The conversion of a domestic mutual life insurance
company to an incorporated stock life insurance
company shall be carried out pursuant to a conversion
Page 19
 INSURANCE LAW REVIEW 2016
From the lectures of Atty. Maria Christina Sagmit
plan duly approved by the Commissioner (because
of the public policy aspect).
"The Commissioner shall promulgate such rules and
regulations as he or she may deem necessary to
carry out the provisions of this title, after due
consultation with representatives of the insurance
industry.
"All converted insurers under the provisions of this
title shall be subject to all other applicable provisions
of this Code. The provisions of the Corporation Code
shall apply in a suppletory manner. (kasi from a mere
Coop, it will not become a corporation)
Insured: Section 7
Anyone except a public enemy may be insured.
Public enemy - citizen or national of any country with
which the Philippines is at war
Bar 2000
May a member of the Moro Islamic Liberation Front or
its breakaway group Abu Sayyaf be insured with
a company licensed to do business under the
Insurance Code of the Philippines? Explain (3%)
ANSWER
Yes, a member of the MILF or the Abu Sayyaf may be
insured. Only a public enemy cannot be insured. A
public enemy is a citizen or national of a country with
which the Philippines is at war.
Insured
The person who must have insurable interest
The person who pays the premiums
Commonly referred to as the policyholder
Not necessarily whose life is used to constitute the
insurance policy
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Kaya say tinawag na insured, kasi may insurable
interest sya. Sya yung pwedeng kumuha ng policy,
sya magbabayad ng premiums. Not necessarily
buhay nya ang ginamit, sya lang yung kumuha ng
policy. Sya yung may insurable interest sa mga tao
under Sec 10.
Insured: Rights
- Right to borrow on the policy 227(g)
Since sya ang nagbbyad ng premium, he can borrow
on the policy. You pledge the policy, you obtain a
loan. The moment you pay the loan, the policy is
returned to you.
- Right to dividends if participating policy 227(e);
230(e)
For practical purposes, kung gusto mo may dividends
ka taon2, you get a participating policy, although mas
mahal ang premium.
- Right to reinstatement 227(j); 230(j)
3 years from date of default in individual
2 years from date of default in industrial
- payment of overdue premiums
- evidence of insurability
Kung hnd ka nakabayad on time, nag lapse, pwede
mo i-reinstate yan. Just be aware of the periods.
- Right to transfer/bequeath-pass by transfer, will or
succession to any person whether he has
insurable interest or not; notice to insurer not
required
I want to emphasize that a contract of insurance is a
contract of investment. You can actually transfer it
by will or succession, whether may insurable
interest sya o wala, pwde mo ipambayad ng utang
ang policy.
Cestui Que Vie
Page 20
 INSURANCE LAW REVIEW 2016
From the lectures of Atty. Maria Christina Sagmit
- Person on whose life the insurance contract is
constituted
- Can be any of those enumerated under Section 10
Sya yung naka enumerate sa sec 10. Sya yung buhay
na ginamit mo para makakuha ka ng policy.
Old Concept: Kuha ka ng policy sa buhay mo,
proceeds payable to your loved ones.
Nowadays, kuha ka ng policy sa buhay mo, asawa
mo, anak mo, lolo, lola, pwde mo kuhanan ng policy
lahat yan, making the proceeds payable to whoever
you want.
Who decides? the one who pays the premiums. No
need to ask permission from the cestui que vie.
Can you be the cestui que vie and at the same time
the insured? YES, when you insure your own life.
Can you also be the beneficiary? YES, if you survive
_. "If you will reach 80, I will give you this. If you do
not, I will give it to your beneficiaries." So pwdeng 3-
in-1. Ikaw ang kumuha ng policy, nagbayad ng
premiums, inappoint mo sarili mo na makkinabang,
buhay mo rin - cestui que vie.

Beneficiary *NEW
- One who receives benefits
GENERAL RULE: Designation may be changed by
insured
EXCEPTION: insured has expressly waived his right
to change
BUT, if there was no change of beneficiary,
designation is IRREVOCABLE (new provision)
Beneficiary, not required na may insurable interest.
Minsan hindi mo nga alam na beneficiary ka pala
eh.
Bar 2005
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What are the effects of an irrevocable designation of a
beneficiary under the Insurance Code? Explain
(2%)
Jacob obtained a life insurance policy for P1 M
designating irrevocably Diwata, a friend, as his
beneficiary. Jacob changed his mind and wants to
include two other friends as beneficiaries. Can Jacob
still add the two friends? (2%)
ANSWER
The irrevocable beneficiary has a vested interest in
the policy, including its incidents such as the policy
loan and cash surrender value
Jacob cannot include the two friends as additional
beneficiaries as this would diminish the interest of
Diwata who is irrevocably designated as beneficiary.
Diwata has to consent first to the inclusion.
So, what makes you irrevocable?
1. you just say it's irrevocable, or
2. may vested interest sya. Maaring bayad nya sa
utang or utang na loob. So hindi ka pwedeng
magbago.
Pag irrevocable yung beneficiary, may vested right
na yan. Wag nang baguhin. Pag dinagdagan nyo,
dapat may consent sya.
Disqualified Beneficiaries
- Article 2012 in relation to Article 739 of the Civil
Code
- those made between persons who were guilty of
concubinage at the time of donation (no conviction
yet)
- those made between persons found guilty of the
same criminal offense in consideration thereof
(convicted)
- those made to a public officer or his spouse,
descendants and ascendants by reason of his
office
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 INSURANCE LAW REVIEW 2016
From the lectures of Atty. Maria Christina Sagmit

entitled to the proceeds? (5%)

Beneficiary
ANSWER
Insular Life v. Ebrado, 80 SCRA 181 - The
designation of a common law wife is void. This
The estate of A (insured) is entitled to the proceeds. C
need only be proved by preponderance of
is a disqualified beneficiary because of the illicit
evidence, no previous conviction is required
relation she had with A.

Common-law spouses are, definitely, barred from

Bar 2012
receiving donations from each other.

X is the common law wife of Y. Y loves X so much

Article 739 of the new Civil Code provides:
that he took out a life insurance on his own life making
X as the sole beneficiary. Y did this to ensure that X
will be financially comfortable when he is gone. Upon
The following donations shall be void:
the death of Y---

1. Those made between persons who were guilty of

A. X as the sole beneficiary in the policy of Y will be
adultery or concubinage at the time of donation;
entitled to the entire proceeds

2. Those made between persons found guilty of the

B. Despite the designation of X, the proceeds will
same criminal offense, in consideration thereof;
go to the estate of Y

3. Those made to a public officer or his wife,

C. The proceeds will go the compulsory heirs of Y
descendants or ascendants by reason of his
office.
(Itong compulsory heirs, walang ganito sa insurance.
Dati, merong nearest relatives)
In the case referred to in No. 1, the action for
declaration of nullity may be brought by the
spouse of the donor or donee; and the guilt of the
D. The proceeds will be divided equally amongst X
donee may be proved by preponderance of
and the compulsory heirs of Y
evidence in the same action.

ANSWER: B
If the beneficiary is disqualified

Common law spouses are barred from donating to

- The estate of the insured will be entitled to the
each other. Those who are barred from being donees
proceeds of the life insurance policy.
cannot be beneficiaries in a life insurance policy.

This is very important. Hind tatanggap ang cestui que

Hence, X is a disqualified beneficiary and the
vie, not the estate of cestui que vie. Bakit? Kasi ang
proceeds will go to the estate of Y.
insured ang nagbayad ng premiums kaya estate nya
makakakuha.
If beneficiary willfully causes death of insured
*NEW
Bar 1998

If beneficiary WILLFULLY causes the death of the

A was issued a policy on whole life plan for P20,000.
insured/cestui:
A is married to B with whom he has 3 legitimate
children. However, A designated his common-law
wife C as the beneficiary in his policy and referred to - The share forfeited shall pass on to the other
C as his legal wife. When A died, both B and C beneficiaries, unless otherwise disqualified.
claimed the proceeds of the insurance. Who is

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 INSURANCE LAW REVIEW 2016
From the lectures of Atty. Maria Christina Sagmit

This presumes na hindi lang sya ang beneficiary.
- In the absence of other beneficiaries, the
proceeds shall be paid in accordance with the
policy contract.
The insurer is wrong. B as the beneficiary is entitled
to collect the proceeds. As a beneficiary in a life
insurance policy, B is not required to have insurable
interest on the life of A. A (insured) had insurable
interest on his own life and the policy was taken on
his life.

Kung walang ibang beneficiary, paid in accordance Eh kung arson pala? Sinunog pala ni B yung bahay at
with the policy contract. namatay si A. Dun na tayo sa "willfully causes the
death".

- If the policy contract is silent, the proceeds shall

be paid to the estate of the insured. LIFE INSURANCE POLICY

If beneficiary dies before insured Form *NEW

If beneficiary dies ahead of the insured/cestui, the - GENERAL RULE: printed form
estate of the insured will get the proceeds

- EXCEPTIONS: The policy may be in electronic

If no beneficiary form subject to the pertinent provisions of
Republic Act No. 8792, otherwise known as the
‘Electronic Commerce Act’ and to such rules
If beneficiary is not designated, insured’s estate will and regulations as may be prescribed by the
get the proceeds Commissioner. (new provision)

NOTE!!! - Contains blanks where word, phrase, clause, mark,

sign necessary to complete the policy are placed

Only the insured or policyholder in life insurance is

required to have insurable interest on the life of Contents
the cestui.

- Parties
The beneficiary may or may not have insurable
interest on the life of the cestui. What is vital is
that the beneficiary is not disqualified under the - amount to be insured
law to get the proceeds.

- premium
In all rules, nakita nyo estate of the insured, EXCEPT
If beneficiary WILLFULLY causes the death of
the insured. - life insured

Bar 2000 - risks

A is an elderly bachelor who took out an individual life - period of effectivity

insurance policy on his life. The designated
beneficiary is B a companion-friend. A died in a fire
which also destroyed his home. The insurer refused Required Provisions
payment to B due to absence of insurable interest on
the life of A. Is the insurer correct?
- Grace period provision – provision which gives the
insured additional time to pay his premiums from
ANSWER the due date

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 INSURANCE LAW REVIEW 2016
From the lectures of Atty. Maria Christina Sagmit

lapse yan eh salary deduction yan.

- Clarifies the right to collect if death happens within
the grace period
Lalican v. Insular Life, August 25, 2009

- Individual life – 30 days/1 month

Eulogio obtained a life insurance policy on his life,
- Group life – 30 days/1 month with benefits payable to his wife Violeta.
- Industrial life – 4 weeks or if payable monthly –
30 days/1 month
The policy lapsed due to non-payment of premiums

Grace period - palugit, allowance.

Eulogio applied for reinstatement. On the same day
Ex. June 15 ka dapat magbayad. Wag ka mag alala, that Violeta was able to file the application, Eulogio
meron kpa hanggang July 15 (30days). died.

Entire contract provision – The policy shall SC: Reinstatement can only happen:
constitute the entire contract between the parties

1. upon filing of application within the applicable

Misstatement of age provision – if the age of the period,
insured is misstated, the amount payable shall be as
2. payment of premiums in arrears and
such premium would have purchased at the correct
age 3. evidence of insurability.

Pag kayo nagkamali sa paglagay ng edad, hindi ito The application should have been approved
ground to rescind. I-aadjust lang yan. Example, sabi during the LIFETIME of the insured. Therefore,
mo 30 ka palang. So bayad mo per year 10k, entitled Violeta is not entitled to the proceeds.
kana sa 1M. Eh 40 ka pala! 40 years old, 10k pa rin,
pero 500k na lang. You do not change your premium
but the coverage will be adjusted. The older you are Special Features
when you get the policy, the more it becomes
expensive for you.
Loan privilege – based on the cash surrender value,
the insured may obtain a loan by pledging the policy
Reinstatement provision – clarifies the requirements
for restoring a policy to premium-paying status after it
has lapsed. A life insurance policy is a contract of investment.
Pwede mo sya magamit na pang utang.

- Individual – within 3 years from default

Policy dividend options – if the policy is
participating, the policyholder is entitled to a share of
- Group – no reinstatement the surplus.

- Industrial – within 2 years from default Exemption from claims of creditors – protection
against execution

Reinstatement. Hindi ka na nga nakabayad, hindi ka

pa rin nagbayad within the grace period, naglapse. Your proceeds are exempted from claims of creditors.
Pero pwde mo pa rin syang i-reinstate. You're now
getting the feeling na ayaw ng batas na nag lalapse,
binibigyan ka ng iba pang chance to be protected by Income tax treatment – proceeds of life insurance
the policy. policies are generally tax exempt. However,
endowment proceeds and cash surrender values are
treated as income and are taxable.
Take note, no reinstatement in Group. Why? Kasi
diba ang employer and kumuha nyan. Alangan mag

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Generally tax exempt. Paid-Up Insurance

Example, ikaw yung tao na ayaw magbayad on time,
ayaw din magbayad within grace period kaya nag
lapse, ayaw dn mag reinstate. Sayang naman yung
binayad mo. So what are your options?
Surrender options/NON-DEFAULT OPTIONS
At least three annual premiums
same period, lower proceeds
Tatanungin mo, ano bang kayang bilihin nitong cash
surrender value ko? Sige covered pa rin yung buong
buhay mo, pero dating 1M, ngayon, 400k nalang.
The face value is different, but the period of coverage
is the same.

– if the policyholder cannot continue paying the

premiums, he has some options which will not put to Automatic Premium Loan
waste what he has paid. However, these options are
Parties agree that in case of default insurer
available only upon payment of at least 3 annual
advances the premium not subject to
premiums
repayment

1. Cash Surrender Value 227(f); 230(f) and (g)

Pauutangin ka lang ng insurance policy.
- payment of at least 3 annual premiums
- not less than the reserve on the policy
So based on our discussion, it seems sabi ko nga
kanina ___ policy, so basically may grace period, may
right of reinstatement, pag hindi pa rin, paabutin niyo
Anong ibig sabihin nito? Kung nakabayad ka na
lang yan ng 3 annual premiums para mas meron
ng atleast 3 annual premiums, hindi ibabalik sayo
kayong default options. You don’t get the full premium
ng buo yung 3 annual premiums. Pero may cash
but at least you get some refund for whatever you
surrender value ka. Surrender the policy, you get
spend.
the cash. Pero wala ka nang insurance policy.

Kinds of Policies
Eh kung gusto mo may insurance policy ka pa rin?
Extended insurance.
Kung nakabayad ka na ng 3 annual premiums, 1. Ordinary Life – payment of premiums is
sasabihin mong "magkano po ang cash surrender annually or at more frequent intervals
ko dyan?" throughout life and the beneficiary is
entitled to receive payment only after the
death of the insured.
"100K" a. And the moment the person passes
away, the beneficiaries will get it.
"ano po ba macocover ng 100k? Gusto ko 1M pa
rin ang coverage ko." The usual or typical policy.

So same face value but limited time. 2. Limited Payment Life – premiums are
payable only during a limited period of
years (10,15,20 years). After the period, the
Example, "ano po ba mabibili ng 1M ko? insurance is deemed fully paid. Proceeds are
payable upon death of insured.
"ah sige, 1M pa rin coverage mo pero good only a. Kung ikaw yung taong madaming
for 1 year. Dapat within 1 year mamatay." pera tapos gusto mo bayad kaagad,
pay kayo for 9 years tas antay
nalang. After that, the death will
Extended Insurance give rise to the proceeds.
At least three annual premiums
limited time, same face value 3. Term Insurance – provides coverage only if
the insured dies during a limited period. If the
insured dies within the period, the
Baliktad naman, paid up. beneficiary gets the proceeds. If the insured
survives the period, the contract is
terminated.

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a. The person will pay for the made. Ibig sabihin, no perfected contract.
insurance policy and he must die
within a certain period. If he does
not die within that period, goodbye Procedure
premiums. So dapat si insured
siguraduhin niyang mamamatay si
cestui qye vie during that period. Agent offers a person a life
insurance policy
Endowment Policy – insured gets a sum of
4.
money if he survives a specified period. If
insured dies within the period, the
?
beneficiary gets the proceeds. The person files an
a. The best policy for me, dugtungan application for a policy. He
niyo pa ng participating. Either way, is required to pay the first
may makukuha yung tao. If he
premium when he applies
survives the period, he gets it.
Kapag hindi niya nasurvive, the
?
benefits will now go to the Insurance company approves the
beneficiary. application and issues a policy in
b. Mas mahal but okay siya, walang favor of the person. In case of
lugi. disapproval, the premium is
returned to the person
By the way, kapag yung tao mismo ang nakakuha si
policy holder, habang buhay pa siya, that is not
exempted from income tax because that partakes the
nature of income. Kumita siya, so that is now subject When is an insurance contract perfected
to income tax. Exception to the rule on tax exemption.

At the time the insured-applicant has knowledge of

5. Life Annuity – debtor binds himself to pay an the approval of his application.
annual pension or income during the life of
one or more determinate persons in  Sabi ko sa inyo yesterday, when you fill up
consideration of a capital consisting of that application form, and you submit it, you
money or other property, whose ownership is become now the offeror. The mere
transferred to him at once with the burden of acceptance of the offer does not perfect,
income. dapat si offeror alam niyang tanggap ang
a. Habang buhay yung tao, may kanyang application.
natatanggap, the moment na
mamatay siya, it operates as a
resolutory condition benefits are Even if the application has been approved if the
now stopped. applicant-insured does not know about approval,
there is NO perfected contract yet.

6. Accident Insurance – may be life or non-life

insurance. Facts: Ang nangyari dito, pinafollow up niya sa
a. If death is one of the risks insured kanyang abugado ang kanyang application. Bago pa
against, it is classified as life lang nasabi ni abugado kay applicant, namatay na
insurance siya.

PERFECTION: Held: Since the insured is the one making the offer,
the submission of the application WITHOUT the
approval of the policy does not result in a perfected
Si agent wine and dine, yung agent yung babayad ng contract of insurance (Grepalife v. CA)
st
1 period ko kasi quota-quota yan. So offeran ka
ngayon and fill up the application form. Just because
you paid for something doesn’t mean that there is Note: Lawyer is not an agent of the applicant, dapat
already a perfected insurance contract because kung yung mismong offeror ang nakakaalam.
approved yung application mo, tapos. Kung
disapproved, its as simple as returning the payment

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De Lim v. Sun Life – the applicant paid the premium Held: The insured is presumed to have understood
upon filing of application but he dies before the the application and the contract of insurance (Tang v.
approval CA, 90 SCRA 236)

HOLDING: NO perfected contract of insurance COVER NOTES V. BINDING RECEIPT

BQ 2011: On June 1, 2011, X mailed to Y Insurance,
Co. his application for life insurance, with payment for
5 years of premium enclosed in it. On July 21, 2011,
the insurance company accepted the application and
mailed, on the same day, its acceptance plus the
cover note. It reached X's residence on August 11,
2011.
COVER NOTE: Temporary insurance policies
intended to cover the insured while application is
being evaluated
 Pang-goodwill yun ng mga insurance
company. Sige na apply ka sa amin, bigyan
ka namin ng cover note.

BINDING RECEIPT: acknowledgment of receipt of

But, as it happened, on August 4, 2011, X figured in a
premium and application subject to evaluation. NOT
car accident. He died a day later. May X's heirs
the same as cover note (Great Pacific v. CA, 89
recover on the insurance policy?
SCRA 543)
 Acknowledgement na nagbayad ka.
A. Yes, since under the Cognition Theory, the
insurance contract was perfected upon acceptance by
the insurer of X's application. So which covers you? Cover note.

B. No, since there is no privity of contract between the Cover note is a valid insurance contract IF:
insurer and X’s heirs.
1. Issued and renewed with prior approval of
Insurance Commissioner (IC)
C. No, since X had no knowledge of the insurer's
acceptance of his application before he died. 2. Valid and binding for not more than 60
days, unless the insurance commission has
approved an extension based on valid
D. Yes, since under the Manifestation Theory, the grounds
insurance contract was perfected upon acceptance of
a. Policy must be issued within 60
the insurer of X's application.
days from issuance of cover notes
b. 60-day period may be extended
Answer: C. No, since X had no knowledge of the upon written approval of IC
insurer's acceptance of his application before he died.
3. No separate premium is required for the
cover note (Pacific Timber v. CA)
If insured died during the period of provisional policy a. Goodwill nga eh, marketing
which is conditioned upon approval of application (so strategy.
nakalagay dun, sige ha, effective to basta na-approve
4. Bagong i-cancel: 7-day notice to the other
ang application mo), beneficiary is NOT entitled to
party is required to cancel the cover note
proceeds.

Written approval is dispensed when president, VP or

Even if the insurer has approved the application via a
general manager that the renewal is not to circumvent
letter, there is no perfected contract if there is no the insurance code (Ins. Memo Circular 3-75)
evidence that the applicant knew of the approval
(Enriquez v. SunLife, 41 Phil 629)
 Ito yung kinwento ko kanina.  PREMIUM

Facts: Chinese siya, ang sinasabi niya di raw niya Concept

naiintindihan yung kontratang pinirmahan niya.  Agreed price for assuming the risk
 The right to premium arises the moment the
property/object is exposed to risk

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 OTHERWISE, if this was

an ordinary life insurance,
Cash and carry basis - based on section 77 which
wala, lapse na.
provides that the moment the thing insured is
exposed to the peril, the insurer has the right to
payment of premium.
At a glance...
 As soon as the life of property is exposed to
1. So you have to remember ha, sa life, sino
the risk, you already have to pay the
yung required na may insurable interest?
premium. So you pay me first (cash) before
Only the insured must have insurable
you can carry the policy.
interest on the life if the cestui

Note: BQ 2003: What is cash-and-carry basis?

2. Suicide is generally not compensable unless:
mentally ill or committed after the policy has
existed for more than two years from
Yun bang non-payment of premium excused? GR:
issuance
No.

3. If the beneficiary is disqualified because he

NOTE: war does not suspend the policy and does not
participated in the death of the cestui, the
excuse non-payment of premiums
other beneficiaries will get his share.
Constantino vs. Asia Life, 87 Phil 248
a. Apply the policy kung walang ibang
beneficiary. If there are no other
When is non-payment excused? (EXCEPTIONS) beneficiaries or also disqualified,
the terms of the policy will be
1. insolvent insured followed.
2. insurer’s negligence or fault b. Otherwise, the estate will recover.
3. insurer waives the right to payment c. Kung disqualified siya, hindi naman
siya yung pumatay, estate.

If insured fails to pay 1st premium, insurer cannot d. In all other cases (like no other
ask for specific performance but can only rescind designated beneficiary), it is the
the contract since there is no creditor-debtor estate of the insured which can
relationship recover

 Hindi ka pwedeng i-force to pay (no specific

performance) 4. If the cestui dies during the grace period,
there can be recovery.

Special Rule in Industrial Life if premiums are not

paid: 5. If the cestui dies during the duration of the
cover notes, there can be recovery

Sikat nanaman si Industrial Life:

 Kanina, walang concept ng insurable interest
(si industrial life)
 Tapos, yung kanyang prescriptive period
cannot be shorter than 6 years.
 This time! Excused nanaman kahit hindi
nagbayad ng premium:
o If insured failed to pay because the
insurance agent did not collect in
the address provided in the policy –
policy will NOT lapse.
o EXCEPT: if 12 weeks or 3 months
have lapsed from end of grace
period [so after the grace period] –
LAPSE NA YAN!
6. The measure of recovery in life insurance is
the face value of the policy (sky is the limit!).
Except when insurable interest is capable of
pecuniary estimation. So magkano yung
utang, yun lang. kung magkano yung
pinapasok na profits, yung lang.
NON-LIFE INSURANCE
Tapos na tayo sa general concepts, sa life, punta na
tayo sa non-life. Kung kanina, buhay yung pinag-
uusapan natin, ito naman, inanimate property.
TOPICS:

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 INSURANCE LAW REVIEW 2016
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1. What may be insured against it’s a fire insurance policy but the cause of
the loss is explosion, you cannot recover.
2. Insurable interest
Gets?
3. Non-life insurance policy
4. Premiums
Concept of loss (in terms of property insurance) -
5. Parties injury, damage, liability, loss of income or profits
sustained by the insured in consequence of the
6. Double insurance v reinsurance
happening of one or more perils insured against
7. Different kinds of non-life insurance (Bonifacio Bros. V. Mora, 20 SCRA 261)

Proximate Cause
 That which in the natural and continuous
Contingent Unknown
sequence, unbroken by any NEW
Event- may or Event- time of INDEPENDENT cause, produces an event
may not occurrence is without which the event would not have
happen unknown occurred.
Which will damnify  Also called the EFFICIENT CAUSE, or one
a person that sets the others in motion
OR
create a liability  NOT equivalent to IMMEDIATE CAUSE
against him

Examples:
 Fire causes an explosion which results in
loss. Fire is the proximate cause of the loss.
Again, basically the same thing, anything which will If fire is a covered peril, the insurer is liable.
damnify a person OR create a liability against him  A house is insured against fire. The house is
which may be caused by the happening of a destroyed due to the falling of a wall. The
contingent event, or an unknown event. wall fell due to fire. The insurer is liable

WHAT MAY BE INSURED AGAINST Immediate Cause v. Proximate Cause

Requirement for recovery Immediate cause – cause or peril which appears

closest in time to the loss

Very basic lang naman, yun bang covered sa policy  Ito yung nangyari bago ito, pero yung
mo na risk, is it the proximate cause? tanong, did it set everything in motion,
resulting to this loss? Maybe not.
 Peril insured against must be the
PROXIMATE CAUSE of the loss or damage  So fire, explosion, loss. Proximate cause is
(sec. 86) the fire, immediate cause is the explosion.
So itrace mo. Hindi yung sino nauna.

Section 86. Unless otherwise provided by the policy,

an insurer is liable for a loss of which a peril insured Immediate cause is NOT necessarily the proximate
against was the proximate cause, although a peril not cause and vice versa
contemplated by the contract may have been a
remote cause of the loss; but he is not liable for a loss
Bar 2007: Alfredo took out a policy to insure his
of which the peril insured against was only a remote
cause. commercial building against fire. A fire broke out and
destroyed the building. It was found that the
proximate cause of the fire was explosion but fire was
the immediate cause of the loss. There is no excepted
NO liability if insured risk is only a remote cause or if
proximate cause is an excepted peril peril in the policy. Can there be recovery under the
policy.
 So if the insured risk is only a remote cause,
or kung proximate cause hindi kasama sa
policy, hindi ka makaka-recover. Example,

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ANSWER: Alfredo cannot recover from the policy.
Section 84 of the Insurance Code provides that before
there can be recovery under property insurance, the
proximate cause of the loss must be the covered peril.
In the instant case, the proximate cause of the loss
was not the peril insured against. Hence, there can be
no recovery under the policy.
Hostile v. Friendly Fire
Friendly - fire burns in a place where it is intended to
burn
Hostile - occurs outside the confines or begins as a
friendly fire and becomes hostile by escaping from the
place where it ought to be
 Example: naglalakad ka biglang nasunog
buhok mo. Ano yan? Ay friendly fire? Why
are you there? (Haha!) So hostile.
Hostile fire is the one covered by fire insurance
"Section 87. An insurer is liable where the thing
insured is rescued from a peril insured against that
would otherwise have caused a loss, if, in the course
of such rescue, the thing is exposed to a peril not
insured against, which permanently deprives the
insured of its possession, in whole or in part; or where
a loss is caused by efforts to rescue the thing insured
from a peril insured against.
Section 87: Loss in the course of rescue
 Ito na. Eh maam, hindi naman yung cause
ng loss, pero I was trying to rescue the
property from a covered peril.
Insurer is liable if the thing is rescued from peril
insured against if in the course of rescue, the thing is
exposed to a peril not insured against
 Then, you can still recover.
Illustration: An owner gets fire insurance for his
house and all furniture inside. In the course of
rescuing the furniture from fire, the furniture is
damaged due to water.
ANSWER: The insurer is liable to the owner although
the damage is not due to fire since it was in the
course of rescuing the furniture from fire that it
suffered some damage.
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
If loss due to willful act or connivance of insured
 Ito na, kaya tayo kumukuha ng insurance
policy kasi we want to be protected from
negligence. Kaya kung may element of
willfulness, nawawala na yung
compensability.
So, If loss due to willful act or connivance of insured,
hindi siya pwedeng maka-recover.
"Section 89. An insurer is not liable for a loss caused
by the willful act or through the connivance of the
insured; but he is not exonerated by the negligence of
the insured, or of the insurance agents or others.
Section 89 - insurer is not liable if insured, through his
willful act or connivance caused the loss
 Ex. Arson, owner hiring other people to rob
his property
Section 89 - if loss is through SIMPLE negligence of
insured or his agents, insurer is STILL LIABLE
 Ang covered sa property insurance is
SIMPLE NEGLIGENCE. Wag naman po
masyadong tanga 
Insurer is NOT liable if loss is caused by GROSS
negligence of insured
 Kasi pag-gross na, it is equivalent to a willful
act. Example, pumunta ka ng mall, hindi mo
lang kinalimutang ilock yung pinto, binuksan
mo pa yung pinto. So pagnanakawan ka,
gross negligence yan. O kaya may gasoline
station doon ka pa nanigarilyo, gasoline
station mo, hindi ka makakarecover.
Bar 2007: (in the case earlier…) If the fire was found
to have been caused by Alfredo’s own negligence,
can he still recover from the policy?
ANSWER: I qualify. If the negligence was simple in
nature then Alfredo can still recover under the policy.
However, if there was gross negligence on the part of
Alfredo then he is barred from recovering under the
policy.
Bar 2014: On February 21, 2013, Barrack entered
into a contract of insurance with Matino Insurance
Company (Matino) involving a motor vehicle. The
policy obligates Matino to pay Barrack the amount of
Six Hundred Thousand Pesos (P600,000.00) in case
of loss or damage to said vehicle during the period
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covered, which is from February 26, 2013 to February  Every interest in property, whether real or
26, 2014. personal (owner)
 Any relation thereto (lessee, agent)
On April 16, 2013, at about 9:00 a.m., Barrack  Liability in respect of property (carrier,
instructed his driver, JJ, to bring the motor vehicle to a depositary)
near by auto shop for tune-up. However, JJno longer
 Which will directly damnify (or create a
returned and despite diligent efforts to locate the said
liability) the insured when a contemplated
vehicle, the efforts proved futile. Resultantly, Barrack
peril happens
promptly notified Matino of the said loss and
demanded payment of the insurance proceeds of
P600,000.00.
"Section 14. An insurable interest in property may
consist in:
In a letter dated July 5, 2013. Matino denied the
claim, reasoning as stated in the contract that "the
"(a) An existing interest;
company shall not be liable for any malicious damage
caused by the insured, any member of his family or by "(b) An inchoate interest founded on an existing
a person in the insured’s service. Is Matino correct in interest; or
denying the claim? (4%)
"(c) An expectancy, coupled with an existing interest
in that out of which the expectancy arises.
Suggested Answer: No, Matino is wrong in denying
the claim.
Forms, Sec. 14
 Existing interest (owner)
Under the Insurance Code, an insurance policy is
 Inchoate interest founded on an existing
intended to cover losses due to acts of simple
interest (shareholder)
negligence. It is only when the insured is guilty of
willfull connivance in bringing about the risk insured o Hindi pwedeng inchoate lang, dapat
against or gross negligence that an insurer can deny naka-found pa rin sa existing
compensation. interest.
 Expectancy coupled with an existing interest
(usufructuary, expected profit)
In this case, the act of Barrack of allowing his driver to
bring the car for tune up is simple negligence, which o Hindi pwedeng expectation,
should be covered by an insurance policy. speculative. Tingin ko,
papamanahan ako ng lola ko ng
10M, so iinsure ko na yun, hindi
Further, the act of JJ, Barrack’s driver in running away pwede.
with the vehicle, cannot be considered as malicious
o Yung sabi ko kanina, tingin ko pag
damage. It is a crime, which is an act covered by an
nasunog tong gasoline station sa
insurance policy. Hence, Matino cannot use this
tabi ng bahay ko, masusunog din
exclusionary clause to defeat payment of proceeds.
bahay ko, so iinsure ko siya. Hindi
pwede.
INSURABLE INTEREST
Examples of Insurable Inchoate Right in Property
Kanina, insurable interest sa life, dapat alam niyo a. Contractor’s interest in the completed
yung nature ng interest. Pagdating sa property, dapat building for unpaid construction cost;
alam niyo, kalian kayo may insurable interest sa isang
a. Syempre, pag nafinish yan, tska ka
property.
pa niya babayaran. So pag nasira
yan, I have loss, I can insure.
"Section 13. Every interest in property, whether real or b. Lessor’s interest in the improvement made
personal, or any relation thereto, or liability in respect by the lessee;
thereof, of such nature that a contemplated peril might
a. Nagpalagay ng building,
directly damnify the insured, is an insurable interest.
nagpalagay ng structure, at the end
of the lease agreement, akin yan,
so kapag yan nasunog, mawawalan
Concept, Section 13
ako, I can insure.

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From the lectures of Atty. Maria Christina Sagmit
c. Naked owner’s interest over property which
another person has beneficial title.
a. Yung mga held in trust, nasa
pangalan niya pero actually sakin
yung property. I can insure.
Inchoate, based on an existing – si shareholder,
pwede bang sabihin ng shareholder ay masisira yan
ng corporation, so iinsure ko yan? Hindi pwede.
Pwede niyang iinsure yung extent ng share niya.
Factual Expectation
 Has no room in property insurance, kasi
kung may factual expectation ang daling
sumugit? diba? Ay yung gasoline station
pagnasunog masusunog yung bahay ko,
iinsure ko,tapos sinunod mo yung gasoline
station. Mas madali. The temptation of
bringing about the event is greater, so we
cannot rely on this.
Mere factual expectation of loss not arising from any
legal right or duty in connection with the SM does
NOT constitute an insurable interest.
NOTE: Factual expectation is enough basis in life
insurance.
 Take note sinabi ko sa inyo, yung mga taong
magsusupport sa inyo, not necessarily
isusupport kayo, but you expect under the
law, so you can insure them. Pagdating sa
property, hindi na, speculative.
Beneficiary is required to have insurable interest:
 Kung sa life, ang may insurable interest
dapat si insured, sa property, dapat si
beneficiary meron din. Only a person who
has insurable interest over a property can
benefit from the property insurance contract.
*stories*
Insurable interest is required before a person can
benefit from a property insurance (Sec. 18)
"Section 18. No contract or policy of insurance on
property shall be enforceable except for the benefit of
some person having an insurable interest in the
property insured.
Note: Differences:
 Insurable interest sa life – Sec. 10.
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
"Section 10. Every person has an insurable
interest in the life and health:
"(a) Of himself, of his spouse and of his
children;
"(b) Of any person on whom he depends
wholly or in part for education or support, or
in whom he has a pecuniary interest;
"(c) Of any person under a legal obligation to
him for the payment of money, or respecting
property or services, of which death or
illness might delay or prevent the
performance; and
"(d) Of any person upon whose life any
estate or interest vested in him depends.
Pagdating sa property, factual expectation,
di pwede.
 Sa life, ang may insurable interest si insured,
si beneficiary sabi ko nga sa inyo, mashock
nalang siya. Sa property, because there is
temptation of bringing about the event, kasi
mas medaling manunog ng bahay kaysa sa
pumatay ng tao, dapat may insurable
interest si beneficiary. So, this is required
under Section 18.
Bar 2000: A is an elderly bachelor. He insured his
house against fire. He named his companion-friend
as beneficiary. A died in a fire which also destroyed
his home. The insurer refused payment to B due to
absence of insurable interest on the life of A. Is the
insurer correct?
 Kung sa life, nakalusot, sa property kaya
makalusot?
ANSWER: The insurer is correct. The beneficiary in
property insurance must have insurable interest on
the property. The companion-friend of A does not
have insurable interest on the house of A. Hence, he
cannot recover from the fire insurance policy.
Bar 2001: JQ, the owner of a condominium insured
the same against fire with XYZ Company and made
the loss payable to his brother MLQ. In case of loss
by fire, who can recover from the policy. State the
reason for your answer (5%)
ANSWER: JQ can recover since he has insurable
interest over his own condominium unit. MLQ cannot
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From the lectures of Atty. Maria Christina Sagmit

recover since it is required that a beneficiary must

have insurable interest over the property.

Bar 2014: A person is said to have an insurable

interest in the subject matter insured where he has a
relation or connection with, or concern in it that he will
derive pecuniary benefit or advantage from its
preservation. Which among the following subject
matters is not considered insurable? (1%)

(A) A partner in a firm on its future profits

(B) A general creditor on debtor’s property
(C) A judgment creditor on debtor’s property
(D) A mortgage creditor on debtor’s mortgaged
property

Suggested answer: (B) A general creditor on debtor’s

property

Bar 2015: Novette entered into a contract for the

purchase of certain office supplies. The goods were
shipped. While in transit, the goods were insured by
Novette. Does she have an insurable interest over the
goods even before delivery of the same to her?
Explain. (2%)

Suggested Answer: It depends. If there was already

transfer of ownership to Novette even before the
goods were delivered to her, which may be caused by
payment of full purchase price, then she can insure
the goods. The loss of the goods shall cause damage
to Novette.

However, if the goods are still owned by the seller,

Novette cannot insure them.Only an existing interest,
inchoate interest founded on an existing interest or
expectancy coupled with an existing interest shall
justify an insurance policy on the goods.

Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote Page 33
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JANUARY 11, 2016
RECAP
Eto yung ating framework pa rin. So, general concept
of insurance. We started discussing the non-life
insurance and and in some aspects we were able to
compare already. So tingnan natin, nadiscuss na
natin to. The nature is basically the same in life
except that here instead of the cestui que vie, ang
nagtatake ng place sa non-life is property. There is no
more in Section 10, but in its place is of course
property.
Proximate Cause Rule, very important, your rule on
loss. We also have to specify whatever fire is
covered, then yung element ng wilfulness. We have to
bear in mind that insurance contracts of thing, for
purposes of protecting the policy holder from simple
negligence. When there is now gross negligence or
willful act, then there may be no recovery under the
policy.
Kung may suicide tayo sa life, meron din tayo
example ng arson or pinanakaw mo yung sarili mong
property, pinasink mo yung sarili mong vessel - so
basta kung may wilfulness, the element of negligence,
simple negligence, disappears.
INSURABLE INTEREST
Insurable interest, sinabi na natin, as opposed to life
where mere factual expectation of support is sufficient
to get a policy, walang ganoong concept sa property.
It really has to be an existing right whether it is
already an existing interest or pwede inchoate. Pero
expectancy, existing pa rin because the temptation of
bringing about the event is bigger in property
compared to life.
Another point of distinction between life and non-life is
the fact that in property, it is the beneficiary who is
required to have insurable interest over the property.
In life, it is the one who gets the policy, the insured,
who must have insurable interest over the life of the
cestui que vie. At kahit sinong kunin niyang
beneficiary walang problema. Whether may insurable
interest si beneficiary sa buhay ni cestui que vie, is
not important. But in property, syempre pag nalaman
niyong kayo ang makakakuha ng proceeds, hindi
naman sariling property, susunugin mo na or
ipapanakaw mo na.
BAR 2000
A is an elderly bachelor. He insured his house against
fire. He named his companion-friend as beneficiary.
A died in a fire which also destroyed his home. The
insurer refused payment to B due to absence of
insurable interest on the life of A. Is the insurer
correct?
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
ANSWER: The insurer is correct. The beneficiary in
property insurance must have insurable interest on
the property. The companion-friend of A does not
have insurable interest on the house of A. Hence, he
cannot recover from the fire insurance policy.
Si elderly bachelor, nakita natin kumpara
noon, si companion friend nakakuha sya ng proceeds
dun sa life, kaya lang di siya nakakuha ng proceeds
dun sa property insurance na nasunog yung property,
kasi in the first place, he is not an owner of the
property. Iyong si elderly bachelor at companion
friend, they are not suppose to require to have
insurable interest because si elderly bachelor kumuha
siya ng kanyang policy sa buhay niya. So nasatisfy
nya yung "insured must have insurable interest on the
life of the cestui que vie."
BAR 2015
Novette entered into a contract for the purchase of
certain office supplies. The goods were shipped.
While in transit, the goods were insured by Novette.
Does she have an insurable interest over the goods
even before delivery of the same to her? Explain.
(2%)
ANSWER: It depends. If there was already transfer of
ownership to Novette even before the goods were
delivered to her, which may be caused by payment of
full purchase price, then she can insure the goods.
The loss of the goods shall cause damage to Novette.
However, if the goods are still owned by the seller,
Novette cannot insure them.Only an existing interest,
inchoate interest founded on an existing interest or
expectancy coupled with an existing interest shall
justify an insurance policy on the goods.
Eto naman si Novette, bumili siya ng office
supplies. Nashipped na yung goods, there was a
contention of whether there was a due payment or if
there was effective delivery. While in transit, the
goods were insured by Novette. Does she have an
insurable interest over the goods even before delivery
of the same to her? (Review sa Sales: What is the act
that transfers ownership? Delivery). My suggested
answer is: It depends. If there was already transfer of
ownership to Novette even before the goods were
delivered to her, which may be caused by payment of
full purchase price or other incidents, then the loss of
the goods shall cause damage to Novette. But if the
goods are still owned by the seller, Novette cannot
insure them. Take note, we are just talking of ordinary
supplies. Kung siguro pinag-usapan natin eh portrait
or something that cannot be purchased readily, baka
pwedeng mag-insure si Novette kasi yung effort nya
eh nawala. Expected profit wala eh.
Now what happens if there is a mortgage property?
Yung sa credit transactions (Ugh ang sakit sakit Kuya
Eddie) noh, yung what differentiates between an
unsecured loan and a secured loan. Si unsecured,
umutang ka lang, walang security. Si secured, you get
a property owned by the debtor and magmmortgage
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From the lectures of Atty. Maria Christina Sagmit
ka - pledge ba yan or mortgage. So example, Si A
umutang kay B ng 1million. To secure the debt, A
mortgaged his house in favor of B covering the entire
amount. If you take a look at the value of the property,
it is not 1million only, but let's say, it's 5million. Si A as
the owner can insure the property upto 5million, full
value. How about B? Can he insure the property?
YES, but only upto the extent of the debt, so he can
only insure it upto 1million.
Insurable interest in a mortgaged property (Sec. 8)
Both the mortgagor and the mortgagee have
insurable interest on the mortgaged property
The II of the mortgagor is to the full value of the SM
The II of the mortgagee is only up to the extent of the
indebtedness
So both the mortgagor and the mortgagee have
insurable interest (II) on the mortgaged property. The
II of the mortgagor is only up to the full value of the
Subject Matter, because he is the owner. The
mortgagee creditor can insure it only up to the extent
of the obligation. Can they do it at the same time?
YES.
BAR 2012
A house and lot is covered by a real estate mortgage
(REM) in favor of ZZZ Bank. The bank required that
the house be insured. The owner of the policy failed
to endorse nor assign the policy to the bank.
However, the Deed of Real Estate Mortgage has· an
express provision which says that the insurance
policy is also endorsed with the signing of the REM.
Will this be sufficient?
A. No, insurance policy must be expressly
endorsed to the bank so that the bank will have a right
in the proceeds of such insurance in the event of loss.
B. The express provision contained in the Deed
of Real Estate Mortgage to the effect that the policy is
also endorsed is sufficient.
C. Endorsement of Insurance Policy in any form
is not legally allowed.
D. Endorsement of the Insurance Policy must
be in a formal document to be valid.
SUGGESTED ANSWER: B
A house and lot is covered by an REM.
Secured by a mortgage on the property in favor of
ZZZ bank. However, the Deed of REM has an
express provision which says that the insurance
policy is also endorsed in favor of the bank with the
signing of the REM. The answer is B: basically, it is
based on the concept that since ikaw ay hindi ka
babayaran kung itong bahay na ito ay masunog,
meron ka ring insurable interest to the extent of the
obligation. There is no need for a formal document,
there is only need for an endoresment.
BAR 1999
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
A businessman obtained a fire insurance policy on his
stocks for P5 M. Three months later, a fire broke out
and destroyed the grocery and stocks. The insurer
denied the claim since the stocks were mortgaged to
another person who also insured the same stocks for
P5 M. May the businessman and the creditor obtain
different insurance policies on the same stocks?
Si A, businessman, kumuha ng fire
insurance policy sa kanyang stocks for 5million. Three
months later, nasunog ang grocery at ang stocks.
Sabi ni insurer, ay hindi ako magbabayad kasi yung
creditor mo, ininsure nya din yan eh 5million din. The
question is, may the business and the creditor obtain
different insurance policies on the same stocks? YES,
the businessman as the owner, and the creditor as
the mortgagee have insurable interests over the
stocks. Hence, they may obtain separate policies on
the same stocks.
Measure
Measure of insurable interest is the extent the insured
might be damnified by loss or injury (Sec. 17)
Section 25: Void stipulations – payment of loss
whether insured has insurable interest or not or that
policy shall be proof of interest
Sabi natin sa life, magkano ang nakuha natin
sa policy, sabi ko sa inyo "sky is the limit" depende
kung magkano yung binabayad mong premium.
Pagdating naman sa property, eto tandaan nyo: IT IS
NOT A CONTRACT OF INVESTMENT, IT IS A
CONTRACT OF INDEMNITY. Therefore, the owner
can only recover upto the value of the loss. Sabi ko sa
inyo, kung ang life is contract of investment because
you cannot be indemnified for the loss of life,
pagdagting sa property, it is a contract of indemnity.
Hindi kayo pwedeng kumita sa inyong loss. So the
measure of insurable interest is the extent that the
insured may be damnify by the loss or injury. It is void
to say, " oh sige babayaran ka namin kahit wala kang
insurable interest" or it is also void to say na "ayy na-
isyuhan ka ng policy ibig sabihin may insurable
interest ka. Kasi posible na nanloko ka kaya ka
nagkaroon ng policy. So these are two void
stipulations under Section 25.
INSURABLE INTEREST:
jurisprudence
Fire insurance taken on a property belonging to
another is VOID, although the insurer had full
knowledge of fact of ownership and even if insured
subsequently acquired insurable interest (Cha v. CA,
277 SCRA 690)
In the case of Cha, hindi pa naman sya
owner, magiging owner pa lang sya, kumuha na sya
ng fire insurance policy. The Supreme Court said this
is void; there is no valid policy even though
subsequently naging owner sya. Dapat at the time
you insured, owner ka na. Take note, factual
expectation not enough in property.
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Ang iniinsure nya yung goods, nagbebenta
lang sya eh. Ang iniinsure nung company yung
building. Sabi ng SC, mistake yun ng insurance
company ha. So the policy holder can still recover.
Emphasized: Etong sa life, kailan ka dapat
my insurable interest sa mga taong under Section 10?
Generally, only at the start when you get the policy.
So ang perfect example dito, kukuha si A ng policy sa
life ng kanyang husband, so at the time that A was
married to the husband meron syang insurable
interest. At the time the husband passes away,
annulled na sila, pwede pa rin because the source of
the insurable interest is love and affection. So ang
sinasabi ng batas natin, kapag love and affection,
hindi yan nawawala kahit annulled na kayo. Pero sa
life, kung ang basis natin is pecuniary interest,
insurable interest must exist not only at the time you
obtain the policy, but also at the time of loss. Perfect
example, at the time namatay bayad na yung utang,
eh bakit ka pa kukuha? At the time namatay hindi mo
na sya partner, umiiyak iyak ka lang, eh anong loss
mo? Kaya nga yung sa mga mag-asawa, kahit na
may legal bond na na-sever, nandoon pa rin daw
yung basis na Love and Affection.
Kung sa pecuniary, two points in time. Pagdating
naman sa property, logically, at the time of issuance
and at the time of the loss, meron ka pa rin insurable
interest.
So in the meantime, Si A may kotse, kumuha sya ng
insurance policy. Binenta nya ngayon. Tapos binili
niya ulit. At the time nacarnap yung kotse, sa kanya
na ulit. Can he recover? YES. Two points in time lang
naman eh, even if in between there was transfer of
ownership.
BAR 2002
Distinguish insurable interest in property insurance
from insurable interest in life insurance (5%)
• In property insurance, the expectation of
benefit must have a legal basis. In life
insurance, insurable interest can be based
on mere factual expectation.
• In property insurance, the actual value of
the interest is the limit of the insurance.
There is no such limit in life insurance
except if insurable interest is capable of
pecuniary estimation.
• In property insurance, insurable interest
must exist when the insurance takes effect
and at the time of the loss but not in the
meantime. In life insurance, insurable
interest must exist only at the time the
insurance takes effect.
BAR 2012
For both the Life Insurance and Property Insurance,
the insurable interest is required to be -
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
A. existing at the time of perfection of the
contract and at the time of loss.
B. existing at the time of perfection and at
the time of loss for property insurance but only at
the time of perfection for life insurance.
C. existing at the time of perfection for property
insurance but for life insurance both at the time of
perfection and at the time of loss.
D. existing at the time of perfection only.
Change of ownership of property
Section 20 and 58: A change of interest in any part of
a thing insured unaccompanied by a corresponding
change of interest suspends the insurance until the
interest in the thing and interest in the insurance are
vested on the same person
May iba kasi na nagbenta ng property na may
insurance hindi sinama yung insurance sa pagbenta.
Halimbawa, nagbenta kayo ng bahay hindi nyo
binenta kasama yung fire insurance policy. So
pagnasunog yung bahay, who can benefit? Neither
the previous owner nor the present owner can benefit.
So a change of interest in any part of the thing,
unaccompanied by a corresponding change of
interest suspends the insurance. In other words,
walang kwenta. Kasi pag si old owner, does he satisfy
yung 2nd 3rd requirement na may insurable interest
sya at the time of the loss? Hindi na sya yung owner
eh. Si new owner, does he satisfy yun at the time of
issuance? Hindi. So very practical, when you sell
something, you include the insurance. Ilock nyo sa
price. Otherwise, walang makikinabang.
Yung kanina, there is transfer of ownership because
of sale or assignment. It must be specifically included.
Pagdating sa succession, you do not have to specify
that "I hereby bequeath this thing TOGETHER with
the insurance policy". No need. Automatically, when
the insured dies and the property is transferred by
succession, automatically, the insurance policy will be
transferred by succession.
POLICY
Kinds: Open and Valued and Running
Before we discuss the kinds of policies, let's go first
with the two types of Values.
TWO KINDS OF VALUES
Face value – maximum amount which may be
recovered under the policy
Valuation- value of the subject matter agreed on by
the parties
Face value - so let's say the policy is 10million. Even
if the value ng bahay is 50million, there can only be
recovery up to 10million.
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Valuation - magkano talaga yung value ng subject
matter.
KINDS
Open – Value of thing is not agreed upon but is to be
ascertained at time of loss. The amount of the
insurance merely represents the insurer’s maximum
liability.
Kapag yung policy mo Open, ang nawawalang value
sa kanya yung valuation. Paano malalaman kung
magkano babayaran? You only determine the value
at the time of the loss. So kung kukuha ka ng policy
Open, ang makikita mo lang is "Okay, maximum of
15million". Pagnasunog yung bahay, dun pa
paestimate. Paano kung 20million yung estimate?
Dun na papasok yung face value - 15million. The
disadvantage of an open policy is that you are not
sure, baka magkaproblema sa valuation.
A Valued policy on the other hand has the two values:
Running is advisable for stocks which change values
every now and then example sa grocery store,
hardware.
OPEN VS VALUED
Open - has a face value but has NO valuation of
the thing. Valuation is done after the loss
Valued - has both face value and valuation of the
thing
Illustration: Open
Value of the building: to be determined at
time of loss
Face Value: P100 Million
If the valuation is more than the face value,
recovery is limited to the face value
Example: Pag Open, nakikita nyo na face
value, 100million. Pagnasunog yung building,
magvavaluation kayo, paglumagpas sa 100million, di
na pwede. Face Value is the maximum. That is the
purpose of the Face value. Disadvantageous for the
policy holder because baka nga babaratin sya.
Illustration: Valued
Valuation of the car : P20 Million
Face Value : P 10 Million
GENERAL RULE: Recovery will be based on
valuation
EXCEPTION: If valuation is obtained through
fraud or misrepresentation. Recovery is limited to
the face value or insurer may deny the claim
Valued on the other hand, pagkuha mo ng policy,
tiwala ka na pagnawala ang kotse eh 20million
makukuha mo because there is already a valuation.
At the time you get the policy there is a valuation. Eh
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
anong silbi ng face value? Exception: If the valuation
is obtained through fraud or misrepresentation, then
ang option ni insurance company, either bayaran ka
lang ng face value or *inaudible* (conspiracy
conchat?). If there is now fraud or misrepresentation,
we will now remove the valuation, we stick to the face
value. Otherwise, absent fraud, we stick to the
valuation.
Illustration: Running
As of June 1, 2015 – value of goods – P1 Million
As of June 10, 2015 - value of goods – P500,000
Third kind, Running, example grocery. As of June 1,
1million. As of June 10, 500thou na. So every week
dapat pinapavalue mo, running or successive.
Ma'am prefers valued policy but its more likely to be
expensive.
PREMIUM
Sabi ko sa inyo, Cash and Carry. The moment the
thing is exposed to the risk, then you have to pay the
premium. That is the consideration for assuming the
risk.
• General Rule: Cash and carry basis –
nonpayment of the first premium
prevents the contract from becoming
binding
• Premium must be paid in cash as a
condition precedent for non-life
insurance policy to be valid and binding
• Exceptions to Cash and Carry Basis, Sec.
77
1. Life/industrial life when the grace period
applies
2. whenever under the broker and agency
agreements with duly licensed
intermediaries, a ninety (90)-day credit
extension is given. No credit extension to
a duly licensed intermediary should
exceed ninety (90) days from date of
issuance of the policy.
3. An acknowledgment in a policy or contract of
insurance or the receipt of premium is
conclusive evidence of its payment, so far as
to make the policy binding, notwithstanding
any stipulation therein that it shall not be
binding until the premium is actually paid.
4. When the parties have agreed on installment
payment (Makati Tuscany case)
5. When the insurer has renewed the insurance
over the years under a clear credit term
arrangement (UCPB case) (akin to a 90-day
credit extension)
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When is cash and carry not applicable? In case of life.
Sa life, the moment you fill up the application form,
you are supposed to pay the premium already.
This is a new provision which incorporate what was
otherwise obtained in jurisprudence only. Kailan
pwedeng hindi cash yung bayad sa premium? Sa
property insurance, under the broker and agency
agreements with duly licensed intermediaries, you are
given a credit extension of up to 90 days. Can it be
shorter upon agreement? YES. Can it be longer? NO,
only up to 90 days. No credit extension to a duly
licensed intermediary should exceed ninety (90)
days from date of issuance of the policy.
In UCPB case, si UCPB inisyuhan ng insurance si
Masagana every year with 60-90 days to pay the
premium. Everntually, nasunog on the 90th days
morning. Si masagana pagkahapon, nagbayad ng
premium. Nagdemanda si Masagana kasi di
nagbayad. Initially, the SC said hindi na pwede kasi
nung nagbayad ka nangyari na yung event. However,
upon MFR, the SC reconsidered and said pwede.
Wala naman notice of non-renewal and every year
may 60-90day credit extension. SC said, UCPB is
liable.
BAR 2007
Alfredo took out a policy to insure his commercial
building. The broker agreed to give a 15-day
credit to Alfredo within which to pay the premium.
Upon delivery of the policy on May 15, 2006,
Alfredo issued a postdated check dated May 30,
2006. On May 28, 2006, fire destroyed the
building. May Alfredo recover from the policy?
Alfredo can recover from the policy. In a decided
case by the Supreme Court, it was held that
parties may agree on a credit extension in paying
the premium. The happening of the peril during
the credit extension will entitle the insured to
proceeds, less the unpaid premiums.
Premium by installment:
Makati Tuscany v. CA
 Makati and American Assurance agreed that
premiums will be paid via three installments
 Makati paid premiums for 3 consecutive
years in three installments
 On the 4th year, Makati paid only the 1st 2
installments.

rd
American collected the 3 installment
 Makati’s defense: Section 77 provides that
no policy will be effective unless the
premium has been paid. Since premiums
were paid on installments, there was no valid
policy.
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
 Makati and American Assurance agreed that
premiums will be paid on three installments
 After paying premiums for 3 consecutive
years, Makati refused to pay the third
th
installment on the 4 year
 American sought to collect the balance from
Makati
• HELD: SC: Section 77 merely precludes the
parties from stipulating that the policy is valid
even if premiums are not paid, but does not
expressly prohibit an agreement granting
credit extension, and such an agreement is
not contrary to morals, good customs, public
order or public policy (De Leon, the
Insurance Code, at p. 175). So is an
understanding to allow insured to pay
premiums in installments not so proscribed.
At the very least, both parties should be
deemed in estoppel to question the
arrangement they have voluntarily accepted.
The moment na nagbayad ka nang first installment,
you are now entering into a valid insurance contract
which you have to honor. You cannot do this in life
because kung hindi ka nagbayad, eh di hindi ka
interesado. Corollarily, if something happen after the
first installment was paid, you can actually recover
from the policy as long as he made the subsequent
installment.
BAR 2006
A Insurance Company issued an policy on the new
car of B. The premium of P60,000 was to be paid in 6
st
months. B paid only the 1 two months installments.
Despite demands, B failed to pay the rest of the
installments. Five months after the issuance of the
policy, the vehicle was car napped. A denied the
claim of B since B did not pay the premium resulting
to cancellation of the policy. Can B recover from A?
Answer: B can recover from A the proceeds of the
policy less the unpaid premiums. In a decided case
by the Supreme Court, it was held that when the
parties agreed on payment of premiums by
installment, the policy becomes effective upon
payment of first installment. Absent any provision that
non-payment of subsequent installments will cause
cancellation, the policy between A and B continue to
exist.
As long as the first installment was paid, there is a
valid insurance contract. As long as di pa tapos yung
installment period mo pwede ka makarecover but less
the unpaid premiums.
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From the lectures of Atty. Maria Christina Sagmit
BAR 2010
Enrique obtained from Seguro Insurance Company a
comprehensive motor vehicle insurance to cover his
top of the line Aston Martin. The policy was issued on
March 31, 2010 and, on even date, Enrique paid the
premium with a personal check postdated April 6,
2010.
On April 5, 2010, the car was involved in an accident
that resulted in its total loss.
On April 10, 2010, the drawee bank returned
Enrique’s check with the notation "Insufficient Funds."
Upon notification, Enrique immediately deposited
additional funds with the bank and asked the insurer
to redeposit the check.
Enrique thereupon claimed indemnity from the
insurer. Is the insurer liable under the insurance
coverage? Why or why not? (3%)
Answer: Enrique cannot recover. In a decided case,
the Supreme Court said that an insurer and the
insured may agree on a credit scheme for payment of
premiums, which will give rise to a perfected contract
of insurance. However, the insurer must make
payment within the period agreed on (UCPB v.
Masagana).
In this case, Enrique’s check bounced on April 6. He
only funded the check on April 10 or 4 days late than
the date of the check. Thus, there was no perfected
contract of insurance which can cover the April 5
accident. Enrique cannot recover under the policy.
BAR 2014
On September 25, 2013, Danny Marcial (Danny)
procured an insurance on his life with a face value of
P5,000,000.00 from RN Insurance Company (RN),
with his wife Tina Marcial(Tina) as sole beneficiary.
On the same day, Danny issued an undated check to
RN for the full amount of the premium.
On October 5, 2013, Danny met a tragic accident and
died. Tina claimed the insurance benefit, but RN was
quick to deny the claim because at the time of
Danny’s death, the check was not yet encashed and
therefore the premium remained unpaid.
Is RN correct? Will your answer be the same if the
check is dated October 15, 2013? (4%)
ANSWER: RN is correct in denying the claim.
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Based on jurisprudence, an insurer can be held liable
for loss if the insurer and the insured agreed on a
credit scheme where is a definite period when
premium should be fully paid.
In this case, there was no clear credit extension
period or scheme since the check issue by Danny
was undated. Since there was no payment of
premiums or even a definite time when payment
should be made, there was no valid insurance policy
at the time of Danny’s death. Hence, there can be no
recovery of proceeds.
My answer will not be the same if the check was
dated October 15, 2014.
If the check was properly dated, this means that there
was a valid credit extension scheme or period
between the parties. Hence, there was a valid policy
and there should be payment of proceeds, less the
amount of premiums.
There is now a clear credit extension period even if he
died before the date on the check. The wife just has
to be sure that the check is properly funded or the
parties can agree to give the proceeds less the
unpaid premium.
BAR 2015
Will an insurance policy be binding even if the
premium is unpaid? What if it were a partially paid
premium? (3%)
ANSWER:
No. The general rule is the cash and carry rule. This
means that an insurance policy will only be effective
when premium has been paid. However, there are
exceptions to this rule. These are:
1. Life/industrial life when the grace period
applies
2. whenever under the broker and agency
agreements with duly licensed
Intermediaries, a ninety (90)-day credit
extension is given. No credit extension to a
duly licensed intermediary should exceed
ninety (90) days from date of issuance of the
policy.
3. An acknowledgment in a policy or contract of
insurance or the receipt of premium is
conclusive evidence of its payment, so far as
to make the policy binding, notwithstanding
any stipulation therein that it shall not be
binding until the premium is actually paid.
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4. When the parties have agreed on installment
payment (Makati Tuscany case)
5. When the insurer has renewed the insurance
over the years under a clear credit term
arrangement (UCPB case)
Unless any of these exceptions is present, a policy
without the payment of premium shall have no legal
effect.
When is
entitled to return of premium?
1. Whole premium – if object was never exposed to
peril, unless it is an indivisible policy
E.g. insured pays in advance the annual premium,
loss occurs before date of effectivity. Insured is
entitled to reimbursement of whole premium
2. Pro- rated premium – surrender policy before
period is up
E.g. A insures his house for 1 year but returns the
policy after 3 months. A is entitled to ¾ of the
premiums.
3. If the contract is voidable and subsequently
annulled under the provisions of the Civil Code or on
account of fraud / misrepresentation of insure/agent,
facts insured was ignorant of, default of insured other
than fraud
E.g. Agent represents that A can be insured even if
his age disqualifies him. Insured is entitled to return of
premium.
4. Over – insurance by several insurers, other than
life
>ratable return of premium
1. Is it possible for the policy holder to be entitled for a
return of premium in case of overinsurance?
Example, if the object was never exposed to the peril,
the policy holder can get the whole premium back.
Example: Nagpay ka in advance ng annual premium
and then the loss occurs before the date of effectivity
or you insured a trip of a vessel but the trip never
happened. You can now claim a full refund.
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2. Example, nag insure ka ng house for 1 year pero
after 3 months ayaw mo na. Since it is divisible, then
you can get a refund for 3/4 of the period premium.
Dapat 1 year pa covered, stop mo on the third month,
you are now entitled to the premium corresponding to
the 9 months. If divisible, pwede. Pero pag All-in,
hindi pwede ibreak into pieces, then you are not
entitled to a pro-rated refund.
3. Example, property insurance. Disability and health.
Sabi ni agent kay A "kahit 90 years old ka na, pwede
insured ka pa rin sa healthcard na to" yun pala hindi. So there
was some misrepresentation or fraud. The policy
holder can now get a refund of the premium. But kung
voidable, dapat annulled pa.
4. Example, the value of your house is just 20million,
but then you insured it with different insurance
companies amounting to 40million. You can only
recover 20million. Yung sobra, you can now get a
refund. How? Sec. 82
RATABLE RETURN OF PREMIUM IN CASE OF
OVERINSURANCE
Sec. 82 – premiums to be returned when there is over
insurance by several insurers shall be proportioned to
the amount by which the aggregate sum insured in all
policies exceeds the insurable value of the thing at
risk
House: 1.5million
Amount of
Insurer Premiums paid
insurance
A 1, 200,000 24, 000
B 600,000 12, 000
Total 1,800,000 36,000
How to compute:
STEP 1: Determine amount overinsured
Amount overinsured = Amount of insurance – value of
property
P1.8 – P1.5M = P300,000
STEP 2: Get the ratio of overinsurance with the total
amount of insurance
P300,000/P1,800,000.00
= 1/6
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STEP 3: Multiply the ratio to the amount of premium
paid to every insurer
A= 1/6 of P24,000 = P4,000 from A Company
B= 1/6 of P12,000 = P2,000 from B Company
NEW: ADDITIONAL PREMIUMS
Section 84. An insurer may contract and accept
payments, in addition to regular premium, for the
purpose of paying future premiums on the policy or to
increase the benefits thereof.
Note: A person insured is not entitled to a return of
premium if the policy is annulled, rescinded or if a
claim is denied by reason of fraud.
BAR 2000
Name at least three instances when an insured is
entitled to a return of the premium paid.
 Whole premium – if object was never
exposed to peril, unless it is an indivisible
policy
 Pro- rated premium – surrender policy before
period is up
 If the contract is voidable and subsequently
annulled under the provisions of the Civil
Code or on account of fraud /
misrepresentation of insure/agent, facts
insured was ignorant of, default of insured
other than fraud
 Overinsurance by several insurers
PARTIES
Insurer
Insured Beneficiary
The Beneficiary
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Section 18 - no contract or policy on property shall be
enforceable except for the benefit of some person
having an insurable interest in the property insured.
Must have an insurable interest over the property. Sa
life cestui que vie lang.
Compare with Life Insurance
Where the beneficiary is not required to have
insurable interest over the cestui que vie
It is only the insured who must have insurable interest
over the cestui que vie
INSURER
Before issuing such certificate of authority, the
Commissioner must be satisfied that the name of the
company is not that of any other known company
transacting a similar business in the Philippines, or a
name so similar as to be calculated to mislead the
public. The Commissioner may issue rules and
regulations on the use of names of insurance
companies and other supervised persons or entities.
Insurer- Bancassurance
Section 375. The term bancassurance shall mean the
presentation and sale to bank customers by an
insurance company of its insurance products within
the premises of the head office of such bank duly
licensed by the Bangko Sentral ng Pilipinas or any of
its branches under such rules and regulations which
the Commissioner and the Bangko Sentral ng
Pilipinas may promulgate.
To engage in bancassurance arrangement, a bank is
not required to have equity ownership of the
insurance company. No insurance company shall
enter into a bancassurance arrangement unless it
possesses all the requirements as may be prescribed
by the Commissioner and the Bangko Sentral ng
Pilipinas.
Insurer
No insurance product under this section, whether life
or non-life, shall be issued or delivered unless in the
form previously approved by the Commissioner.
Section 376. Personnel tasked to present and sell
insurance products within the bank premises shall be
duly licensed by the Commissioner and shall be
subject to the rules and regulations of this Act.
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"Section 377. The Commissioner and the Bangko
Sentral ng Pilipinas shall promulgate rules and
regulations to effectively supervise the business of
bancassurance.
Bancassurance – insurance policies are sold within
the premises of the bank. Insurer yan. That is
governed by both the Central Bank and the
Commission.
Insurer-Mutual Benefit Association and Trusts for
Charitable Uses
Section 403. Any society, association or corporation,
without capital stock, formed or organized not for
profit but mainly for the purpose of paying sick
benefits to members, or of furnishing financial support
to members while out of employment, or of paying to
relatives of deceased members of fixed or any sum of
money, irrespective of whether such aim or purpose is
carried out by means of fixed dues or assessments
collected regularly from the members, or of providing,
by the issuance of certificates of insurance, payment
of its members of accident or life insurance benefits
out of such fixed and regular dues or assessments,
but in no case shall include any society, association,
or corporation with such mutual benefit features and
which shall be carried out purely from voluntary
contributions collected not regularly and /or no fixed
amount from whomsoever may contribute, shall be
known as a mutual benefit association within the
intent of this Code.
Mutualization and Demutualization
Mutualization – A a shareholder-owned company is
converted into a mutual organization, typically through
takeover by an existing mutual organization. A mutual
organization is customer-owned.
Demutualization -customer-owned mutual
organization or cooperative changes form to a joint,
stock company, sometimes called stocking for
privatization.
Mutualization gusto mo nang maging for profit,
demutualization.
MUTUALIZATION
Section 280. A domestic mutual life insurance
company doing business in the Philippines may
convert itself into an incorporated stock life insurance
company by demutualization. To that end, it may
provide and carry out a plan for the conversion by
complying with the requirements of this title.
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"The conversion of a domestic mutual life insurance
company to an incorporated stock life insurance
company shall be carried out pursuant to a
conversion plan duly approved by the Commissioner.
"The Commissioner shall promulgate such rules and
regulations as he or she may deem necessary to
carry out the provisions of this title, after due
consultation with representatives of the insurance
industry.
"All converted insurers under the provisions of this
title shall be subject to all other applicable provisions
of this Code. The provisions of the Corporation Code
shall apply in a suppletory manner.
TRUST BUSINESS IN GENERAL
"Section 429. An insurance company may engage in
limited trust business, consisting of managing funds
pertaining only to retirement and pre-need plans,
provided it has secured a license to do so from the
Bangko Sentral ng Pilipinas. This trust business shall
be separate and distinct from the general business of
the insurance company and shall be subject to rules
and regulations as may be promulgated by the
Bangko Sentral ng Pilipinas in consultation with the
Commissioner.
Pwede daw maging trust business ang isang
insurance company, distinct from the insurance
business.
SELF REGULATORY ORGANIZATIONS
CHAPTER IX REGISTRATION, RESPONSIBILITIES
AND
OVERSIGHT OF SELF-REGULATORY
ORGANIZATIONS
Section 430. The Commissioner shall have the power
to register as a self-regulatory organization, or
otherwise grant licenses, and to regulate, supervise,
examine, suspend or otherwise discontinue, as a
condition for the operation of organizations whose
operations are related to or connected with the
insurance market such as, but not limited to,
associations of insurance companies, whether life or
non-life, reinsurers, actuaries, agents, brokers,
dealers, mutual benefit associations, trusts, rating
agencies, and other persons regulated by the
Commissioner, which are engaged in the business
regulated by this Code.
The Commissioner may prescribe rules and
regulations which are necessary or appropriate in the
public interest or for the protection of investors to
govern self-regulatory organizations and other
organizations licensed or regulated pursuant to the
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From the lectures of Atty. Maria Christina Sagmit
authority granted hereunder including, but not limited
to, the requirement of cooperation within and among
all participants in the insurance market to ensure
transparency and facilitate exchange of information.
Still monitored by the Insurance Commission.
DOUBLE INSURANCE VS OVER-INSURANCE
Double Insurance
Same person is insured by several insurers in
respect of the same subject and interest (Sec. 95)
Ang hindi nalagay dyan, sa aking opinion is
SAME RISK. Kasi pwede same house, same owner,
the same insurance corporation, but isa is fire and isa
is theft. Hindi yan double insurance. Dapat same Risk
or Peril. Pag isa lang insurance company mo, hindi
yan double. Pag mortgagor mortgagee, not the same
insured, hindi double. Pag isa insured yung buong
bahay ang isa insured lang yung likod, double? No.
Dapat exactly the same subject matter.
Requisites:
1. insured is the same
2. two or more insurers insuring separately
3. same subject matter
4. interest insured is the same
5. risk or peril insured against is the same
BAR 2005
When does double insurance exist? (2%)
BAR 1999
A businessman obtained a fire insurance policy on his
stocks for P5 M. Three months later, a fire broke out
and destroyed the grocery and stocks. The insurer
refused to pay claiming that double insurance is
contrary to law. Is this contention tenable?
ANSWER: The contention of the insurer is untenable.
First, there is no law prohibiting double insurance.
Second, there was no double insurance here because
the insured in the two policies are different. The two
insured also have different interests on the property.
BAR 2012
X borrowed from CCC Bank. She mortgaged her
house and lot in favor of the bank. X insured her
house. Tt1e bank also got the house insured.
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A. Is this double insurance? Explain your
answer. (3%)
B. Is this legally valid? Explain your answer.
(3%)
C. In case of damage, can X and CCC Bank
separately claim for the insurance proceeds? (4%)
1. No, this is not double insurance. Double
insurance exists when the same person is insured by
several insurers in respect of the same subject and
interest The insured in the two policies are different
and they have different interests. X’s interest is as the
owner of the house and lot while CCC’s interest is as
the mortgagee and is limited to the amount of the
debt.
2. Yes, this is legally valid. Both the mortgagee
and the owner have insurable interests over the
property. Either party may obtain a property insurance
policy on the same property because both stand to
suffer loss in case the house and lot is destroyed or
damaged.
3. Yes, both X and CCC can claim under their
insurance policies. X can claim to the extent of the
value of the property. CCC can claim to the extent of
the unpaid debt in favor of X, that is secured by the
property.
OVER- INSURANCE – amount of insurance is
beyond the value of insured’s insurable interest
How to collect in case of over-insurance by
double insurance, Sec. 96
• The insured, unless the policy otherwise
provides, may claim payment from the
insurers in such order as he may select, up
to the amount for which the insurers are
severally liable under their respective
contracts;
How to collect in case of over-insurance by
double insurance, Sec. 96
• Valued Policy- any sum received by him
under any other policy shall be deducted
from the value of the policy without regard to
the actual value of the subject matter
insured;
• Unvalued Policy- any sum received by him
under any policy shall be deducted against
the full insurable value, for any sum received
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by him under any policy; B. the two (2) insurers will be solidarily liable to
the extent of the loss.
C. the two (2) insurers will be proportionately
liable
Kung may unvalued naman, kung ano yung magiging
D. X can choose who he wants to claim
valuation i-fo-follow natin of the loss. ganun din. against.
actually, its basically kung kanino mo gustong
ma____. ANSWER: D

Ito yung sinasabi ko sa inyong mathematics dati. Eto

sa old material ko, may computation pa ako.
Kung UNVALUED, determine the valuation. If you get
more than your loss:
- you hold the excess in trust or
- ratable (wag nalang kasi mathematics to eh)
In other words, ratable, lahat sila kukuhanan mo
depende dun sa binayad mong premium at depende
din sa amount ng policy. So lahat sila nakuhanan mo.
How to collect in case of over-insurance by
double insurance, Sec. 96
 Policy is unvalued, determine actual loss
and collect from insurance in such order
as he may select
 If insured receives amount more than
loss, hold sum in trust according to the
right of contribution
 Each insurer must contribute ratably to
the loss in proportion to the amount for
which he is liable
Bar 2005
What is the nature of liability of several insurers in
double insurance (2%)?
ANSWER: In double insurance, the insurers are
considered as co-insurers. Each one is bound to
contribute ratably to the loss in proportion to the
amount for which he is liable under his contract (Sec.
96e)
Bar 2012
X insured the building she owns with two (2)
insurance companies for the same amount. In case of
damage, -
A. X cannot claim from any of the two (2)
insurers because with the double insurance, the
insurance coverage becomes automatically void.
REINSURANCE, double insurance kanina, alam nyo
na dapat ang elements.
1. One person
2. Several insurers
3. Same interest
4. Same risks
May concept na din tayo ng OVERINSURANCE,
when you are insured more than your amount of loss
or insurable interest.
Meron din OVERINSURANCE by several insurers.
Meron din tayong concept ng REINSURANCE. Ito
yung sinasabi ko sa inyo before.
Kung ang coverage ay napakalaki, like 100M, naki
contrata kayo kay A tapos si A pala di kaya. Pupunta
na sya ngayon sa sinasabi nating REINSURER, na
pwedeng magcover sa kanya for part of the liability.
This is also under the maintenance and monitoring of
the insurance commission.
Contract by which an insurer procures a third person
to insure him against loss or liability by reason of an
original insurance
Illustration
• A gets B to insure his building against fire for
P10 Million.
• B (insurer) can get C (reinsurer) to reinsure
him for P5 Million out of the P10 Million
insurance in favor of A. Thus, B’s liability
shall be limited to P5 Million. While C, the
reinsurer has to give the insurer the other P5
M.
Example: sabi ko sa inyo kanina, para ma-cover sya,
kuha muna sya ng insurance policy.

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Bar 1994 Compare. I just made it double insurance but it is still

like co-insurance if you think about it.
Distingush Co-Insurance from Reinsurance

REINSURANCE DOUBLE INSURANCE

CO-INSURANCE is the percentage in the value of the
insured property which the insured himself assumes insurer becomes the Insurer remains the
or undertakes to act as insurer to the extent of the insured insurer
deficiency in the insurance of the insured property. In
case of loss or damage, the insurer will be liable only (original insurer
becomes the insured)
for such proportion of the loss or damage as the
amount of insurance bears to the designated subject of insurance is subject of insurance is
percentage of the full value of the property insured. the original insurer’s risk property
(subject of the insurance
REINSURANCE is where the insurer procures a third is not the property but
party, called the reinsurer, to insure him against the risk)
liability by reason of such original insurance. insurance of a different insurance of the same
Basically, a reinsurance is an insurance against interest interest
liability which the original insurer may incur in favor of (because it is no longer
the original insured. the property but the risk)
original insured is not a insured is the party in
EXAMPLE: party interest in all contracts
consent of original Insured has to give his
insured is not consent
Dun sa several insurers, diba, pagkumuha tayo ng necessarily notified
several insurance companies and ang liability (kailangan ang consent
depende sa kabuuan. They are considered co- (so consent is not really nya kasi sya ang
insurers. necessary) kumuha ng insurance)

Sino ang kausap nya? Iisang tao. Iisang insured,
kausap nya lahat to, to cover the person from the
same risks, kaya sya "co". Kaya magkapantay sila.
CO-INSURANCE
Proportionately liable sila. Kailangan ratable. Yung
ratable distribution of the proceeds. So there's a
certain percentage in the full value which is assigned
to each co-insured. It's the same person talking to this
people. Parang double insurance.
Pero ang REINSURANCE naman, it is the original
insurer which procures a third party called a reinsurer
to insure him against liability by reason of the original
insurance. In other words, si insured nakikipag usap
kay original insurer, wala na syang paki-alam kung
sinong kausap ni insurer na reinsurer. Sila lang nag
uusap silang dalawa. So isa lang ang kausap mo.
Parang leveling. Yung kanina pantay pantay. Eto
hindi, levelling.
Basically, reinsurance is an insurance against liability
which the original insurer may incur by reason of the
original insurance.
KINDS OF NON LIFE INSURANCE
MARINE INSURANCE
Marine
• Sections 99 and 100 – concept
• Peril covered – perils of the sea or perils of
navigation – casualties due to unusual
violence or extraordinary action of wind and
wave or other extraordinary causes
connected with navigation – must be the
PROXIMATE CAUSE
• Peril of the ship is NOT covered
Contrary to popular belief, marine insurance is not
limited to vessels. It includes mga airports, mga
facilities. Be aware ha. You should memorize this.
Also, We are talking about perils of the sea not perils
of the ship. Pag ship kasi, controlado yan. Kasi kung
hindi properly laden, bakit maglalayag?
Yung perils of the sea, unusual violence or
extraordinary action of the wind and wave.
Peril of the Ship v. Peril of the Sea

• Roque v. IAC – sinking of barge without

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extra-ordinary circumstances (SHIP) which insured cannot recover from

charterer
• Go Tiaco v. Union – loss results from
natural and inevitable action of the sea, from • Insurance of owner – full value of
the ordinary wear and tear of the ship or property but recovery shall be
from negligence of owner to provide with limited to amount not paid by
proper equipment (SHIP) charterer
• Cathay v. CA – rusting of steel pipes in the • Insurance of charterer – extent of
course of the voyage in view of the toll on his liability in case of loss
cargo of wind, water and salt conditions
(SEA)

Example:
BAR 2011
• A and B enter into a charter agreement.
• A's vessel is valued at P1 Million.
Perils of the ship, under marine insurance law, refer to
loss which in the ordinary course of events results • Per agreement, B’s insurer shall be liable up
from to P500,000 in case of loss. A has an
insurance of P1 M.
A. natural and inevitable actions of the sea.
• In case of loss:
B. natural and ordinary actions of the sea.
• A’s insurer = P500,000
C. unnatural and inevitable actions of the sea.
• B’s insurer = P500,000
D. unnatural and ordinary actions of the sea.

Can the insurer get insurance for the expected

Himay himayin natin ha. Natural or unnatural? Natural
freightage? YES. Under 105
yan.
Can ship owner get insurance for:
Inevitable or ordinary? Eh kung ordinary eh di
naanticipate natin yan.
• Expected freightage (Sec. 105)
So its natural and inevitable. Kung may word na
extraordinary, pwede rin. • Expected freightage which in the
ordinary and probably course of
Question: what happens when the vessel is
things he would have earned but for
chartered?
the intervention of the peril insured
What are the 2 kinds of charter? against
1. Bareboat or demise charter • Important that insured must have
2. Voyage charter an inchoate right to freightage
which cannot be defeated
• Expected profits (Sec. 107) – YES.
What happens? For insurance purposes, when the
vessel is chartered, pwede pa rin ba daw iinsure ni
owner against loss? YES, but only those portion na
hindi babayaran ni charterer.
FIRE INSURANCE
Kasi ang concept, bawal pagkakitaan ang property
insurance. So si owner, can insure for the full value When we talk about fire, fire lang talaga, yang mga
but can only recover up to the amount not paid by the lightning allied risks yan and dapat covered yan ng
charterer. policy.
Si charterer pwede ba nya iinsure? YES Of course, the doctrine of proximate cause.
Hindi sya magsusuffer ng loss but he now becomes • insurance against loss by fire, lightning,
liable, so he can insure up to the extent of his liability windstorm, tornado or earthquake and other
in case of sinking. Parang mortgagor mortgagee din. allied risks, when such risks are covered
Is ship owner’s insurer liable in case of loss if: by extension to fire insurance policies or
under separate policies
• vessel is chartered (Sec. 102)
• Fire must be the proximate cause, and must
• YES. liable only for part of the loss

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be hostile in nature
How do you collect in case masunog yung property?
Kung may valuation,you stick to that. Valued policy.
Kung walang fraud, you stick to that.
Kung walang valuation, open policy, eto ang valuation
nyo:
The expense it would be to the insured to replace
the thing lost in the same condition.
Kung ganitong klaseng bagay sya before sya
nasunog, dapat, anong expense para maibalik sya sa
iyong itsura.
MEASURE OF INDEMNITY
• If there is a valuation – shall be conclusive
as between parties in adjusting partial or
total loss in the absence of FRAUD
• If there is NO valuation - the expense it
would be to the insured to REPLACE the
thing lost or injured in the condition in which
it was at the time of injury
• Loss and its amount may be determined on
the basis of such proof as may be offered by
insured which need not be of such
persuasiveness as is required in judicial
proceedings (Malayan v. Cruz Arnaldo)
Loss and its amount may be determined on the basis
of proof. Not necessarily required ang judicial
proceedings, basta meron naming substantial
evidence.
How do you give a valuation?
You get an independent appraiser.
HOW VALUATION IS MADE
• Sec. 174 – independent appraiser examines
the property and fixes the value
• Valuation shall be inserted in the policy
• GENERAL RULE: Valuation shall be the
basis for indemnity in case of total loss
• EXCEPT: If there is a change increasing the
risk without the consent of insurer or if
there's fraud on the part of insured.
Iinsert mo yun sa policy kung valued.
Generally, you stick to the valuation
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
EXCEPT, kung may ginawa k aba kaya nasunog
itong property na ito.
Example: Sabi mo walang flammable on board tapos
naglagay ka ng katakot takot na LPG na
pinagbabawal ng policy. So you don’t stick to the
policy. That would not be a true valuation anymore.
Eto na, pinaka magandang definition ng partiality:
• Partial loss – full amount of the partial loss
• Parties may agree that instead of payment,
insurer may repair, rebuild or replace
property
Example:
• Subject matter is a house
• Independent appraiser values it at P20
Million
• The valuation is attached to the policy
• If house is totally destroyed by fire, the
valuation of P20 M will be given
• If the house is half-destroyed, the indemnity
will be half of P20 Million or P10M.
• If the valuation is based on some fraud on
the part of the insured, e.g. adding fixtures
which are not part of the house OR there is
an alteration increasing the hazard such as
converting in to an ammunition factory, the
valuation is not used.
• Parties may agree that instead of paying the
amount, insurer will rebuild the house.
Eto na, what if merong mga pagbabagong ginawa
ditto sa property bago nasunog? Does it change the
liability?
Kung ang condition of the thing ang binago, tapos
yung pagbabago ay prohibited by the policy, it has to
be prohibited by the policy, made without the consent
of the insurance company and it increase the risk.
Tingnan nyo yung elements ha:
• Bawal sa policy
• Increases the risk
• Without the consent
= RESCISSION
When alteration can exonerate insurer
• The use or condition of a thing is altered
• Policy prohibits or limits the alteration
• Made without the consent of the insurer, by
means within the control of the insured
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From the lectures of Atty. Maria Christina Sagmit

• increasing the risks = Insurer can rescind the
K regards the property affected unless the
• The use or condition of a thing insured is
altered
• Policy prohibits it or limits it
• It does not increase the risk
Binago yung use or condition of the thing, bawal sa
policy pero it did not increase the risk. Then, it will not
affect the liability.
Example: nagdecorate lang ako, tapos ang decoration
ay hindi naman flammable pero bawal magdagdag.
SUGGESTED ANSWER:
Pero hindi naman na increase yung risk. So the
insurance company will still pay.
Act which does not violate the policy
• any act of the insured subsequent to the
execution of the policy
• Act does not violate its provisions, even
though it increases the risk and is the cause
of the loss
• No effect on policy
that "the insurance ceases to attach as
insured, before the occurrence of any loss or
damage, obtains the sanction of the
company signified by endorsement upon the
policy x x x (c) if the property insured is
removed to any building or place other than
in that which is herein stated to be insured."
PAM claims that it has substantially complied
with notifying Ilocano through its sister
company, the RBC, which, in fact, referred
PAM to Ilocano for the insurance coverage.
Is Ilocano liable under the policy? (4%)
• Ilocano is liable under the policy.
• Under the Insurance Code, any alteration in
the use or condition of a thing insured which
is limited by the policy, but does not increase
the risk will not affect the validity of the
policy.
• In this case, although the policy forbade the
transfer of the goods without the consent of
the insurer, the transfer of the goods did not
increase the risk of fire. Hence, the transfer
will not exonerate Ilocano.

May act ka na ginawa, hindi naman pinagbawal pero

nag increase ang risk, sabi ditto, magbabayad pa rin
si insurance company. Note: the alteration was limited by the policy, but it did
not increase the risk. Even if nag violate, if it did not
So kayo, pag insurance company kayo, ilagay nyo na
increase the risk, still it will not be a ground to
yung mga bawal. Kasi kung walang bawal, kahit na
exonerate. Plus, sinabi dito, nagconsent naman kayo,
mag increase ang risk, you still have to pay. Because
nagsabi kami sa agent nyo. So notice to the agent is
there was no breach of contract.
notice to the principal. So lahat ng klaseng changes
BAR 2014 ha. Covered.

• On May 13, 1996, PAM, Inc. obtained a JANUARY 12, 2016

P15,000,000.00 fire insurance policy from
Ilocano Insurance covering its machineries
and equipment effective for one (1) yearor *Checka about bag na kinuha ng Mama ni Ma’am.
until May 14, 1997. The policy expressly
Bottomline of the story is "Even if you are not trying
stated that the insured properties were
to be good to your parents, but if you are good,
located at "Sanyo Precision Phils. Building,
God will reward you always."
Phase III, Lots 4 and 6, Block 15, PEZA,
Rosario, Cavite." Before its expiration, the
policy was renewed on "as is" basis for
another year or until May 13, 1998. The
subject properties were later transferred to
Pace Factory also in PEZA. On October 12,
1997, during the effectivity of the renewed
policy, a fire broke out at the Pace Factory
which totally burned the insured properties.
• The policy forbade the removal of the
insured properties unless sanctioned by
Ilocano. Condition 9(c) of the policy provides

Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote Page 48
 INSURANCE LAW REVIEW 2016
From the lectures of Atty. Maria Christina Sagmit
Tapos na tayo sa general principles, life, non-life,
meeting at the middle payment of proceeds.
PAYMENT OF PROCEEDS.
PART FOUR:
PAYMENT OF PROCEEDS AND FILING OF
CLAIMS
The main purpose why we are getting an
insurance contract is because gusto natin kapag
nagngyari yung risk, may loss, gusto natin mabayaran
tayo.
Basic Rule in Recovery
Sec. 89. An insurer is not liable for a loss caused by
the willful act or through the connivance of the
insured; but he is not exonerated by the negligence of
the insured, or of the insurance agents or others.
Basic Rule in Recovery, do not forget this.
Willful Act, kapag may element ng willful act at
gross negligence, definitely, the insurance company
will not be liable. Except of course the usual like
suicide, etc. But generally basta may willfulness,
walang recovery.
Bar 2010
• To secure a loan of P10 million, Mario
mortgaged his building to Armando. In
accordance with the loan arrangements,
Mario had the building insured with First
Insurance Company for P10 million,
designating Armando as the beneficiary.
• Armando also took an insurance on the
building upon his own interest with Second
Insurance Company for P5 million.
• The building was totally destroyed by fire, a
peril insured against under both insurance
policies. It was subsequently determined that
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
the fire had been intentionally started by
Mario and that in violation of the loan
agreement, he had been storing inflammable
materials in the building.
• How much, if any, can Armando recover
from either or both insurance companies?
(2%)
• What happens to the P10 million debt of
Mario to Armando? Explain. (3%)
Suggested Answer
• Armando cannot recover from either policy.
Under Section 89 of the Insurance Code, an
insurer is exonerated when the loss is
caused by the willful act of the insured.
• The loan will remain, but it will be considered
as unsecured.
2010 BAR: To secure a loan of 10M
minortgage ni Mario yung building niya kay Armando.
Ininsure niya for 10M, ang beneficiary niya yung
creditor niya. So this is a situation where, it is the
debtor himself who got the insurance policy. Armando
also took an insurance but this time, with second
insurance company for 5M. Sino si Armando? Siya
yung creditor. Totally destroyed by fire of building, eh
fire insurance yun. Heto na, nadiscover that it was
intentional, sinong intentional? Si mario, the owner.
Ang tanong, Can Armando, the creditor recover from
either or both insurance companies? yung isa ang
kumuha si Armando-5M. Yung isa si owner ang
kumuha-10M. What happens to the 10 M debt of
Mario from Armando? Mejo kuha niyo na yung flow
eh. What happens, so ibig sabihin may nagaganap.
Can you recover? CANNOT, because an insurer is a
exonerated when the loss is caused by the willfull act
of the insured. kawawa nga lang si creditor kasi pati
siya apektado. The loan is still there but it is now
converted to unsecured loan. Diba? basic sa credit
transaction. nawala yung security mo, magiging
unsecured.
In Life Insurance
WHEN
 General Rule: Paid immediately upon
maturity of the policy (death, survival,
cessation or continuance of life)
 Exceptions:
 proceeds are payable in
installments
 annuity
In life, paano ka makakarecover when the
contingency happens? Generally, upon maturity of the
policy, dapat bayad na. So what will give rise to
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From the lectures of Atty. Maria Christina Sagmit
maturity, either death, survival or
cessation/continuance of life. Sabi ko sa inyo sa life,
hindi lang panay patay ang dapat makarecover,
posibleng kapag umabot ka sa ganitong age, you
survived it, you can get the annuity. Exceptions, when
the installment is payable in installments, napag
usapan niyo or annuity. bakit exception yung
annuityulit? kasi yung annuity baligtad, habang buhay
yung tao may binibigay na pension, upon the
happening of death, it now operates as a resolutory
condition, tapos na. So ang maturity sa ganoong
situation nag uumpisa sa unahan pa lang. gets?
If maturity is due to death
 Proceeds are paid within 60 days from
presentation of the claim and proof of
death
 Delay = interest unless due to fraudulent
claim
What if it is death that gives rise to maturity,
so namatay yung tao. Kailan dapat mababayaran
yung proceeds? 60 days from the presentation of the
claim and proof of death. sabay yan. hindi pwedeng
nagpresent kana ng claim walang death certificate.
Dapat sabay, and if there is delay, interest will be
paid.
Proof of death v. Notice of Death
• Notice of death is not enough, there must
be proof of death
• Proof of death - death certificate
Notice of death is not enough, there must be
proof of death and the best of course, or the only
proof acceptable is a death certificate and that's why I
told you earlier that for some people, they cannot get
a life insurance policy because they don't have this
documents. Example lang ha, I hope I am not
offending anyone, yung mga Badjao, I don't think they
even know their age. So, wala silang mga ganito.
Huwag na tayong lumayo, yng helper ng nanay ko,
hindi naman Badjao, walang birth certificate. Oh
paano yun? Ngayon pa lang namin pinoprocess, 45
yrs old na. So kung wala kang ganun, mahirap
kumuha ng life insurance policy.
TO WHOM
 General rule: paid to designated
beneficiaries
 Exception: Facility of payment clause in
group life and industrial life
Kanino naman babayaran? Upon death, 60
days. kanino ibibigay? Generally to whoever is
designated as the beneficiary. I just want to remind
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
you, ang mga exceptions of course si beneficiary ang
namatay, naunang namatay si beneficiary. Panay ang
estate of the insured ang nakakakuha nyan. If the
beneficiary is disqualified because of some of the
ground of donation, then it may now go to the estate
of the insured. Another exception is what we call
facility of payment clause. hayan, pwedeng itanong to
no?
Facility of Payment : Group Life
 There is no designated beneficiary
 pay not exceeding P500.00
 to any person equitably entitled for
incurring funeral or other expenses
incident to the last illness or death of the
insured
Alam niyo nalungkot ako kasi nagtanong ako
dun sa labor class ko kung ano yung double
indemnity loan, naku Diyos ko parang sampu lang ata
nakakuha eh. Alam niyo ba yun? What is the Facility
of Payment clause? Tingnan natin, ano ba yan. This
is applicable only in Group life and industrial life. Sa
Group life, ang cheap cheap, di pa rin nila binabago,
iwhen there is designated beneficiary, any person
who spends for the funeral expenses or the last
illness, even if wala siya or hindi siya designated
beneficiary, he can benefit. But only up to 500 pesos.
Eh magmamalasakit ka pa ba pag yun ang makukuha
mo? Oh diba, eh 500 lang, hindi pa rin tsinichange eh.
Group life.
Facility of Payment: Industrial
 If beneficiary:
 does not surrender policy with
proof of death during period
stated in the policy OR
 is the estate of insured OR
 is a minor OR
 dies before the insured OR
 is legally incompetent to give
valid release
 proceeds may be given to:
 the executor or administrator of
insured OR
 any of insured’s relative by blood
as legal adoption or by marriage
OR
any person who incurred expenses for
maintenance, medical attention or burial
Pag dating sa industrial, sinabi ko naman sa
inyo from the start there is always a special treatment
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From the lectures of Atty. Maria Christina Sagmit
in industrial because it caters to those who belong to
the low income group. So here the beneficiary, No. 1
either lang to ha, does not surrender the policy with
proof of death or ang beneficiary is the estate of the
insured Or minor or nauna na mamatay or legally
incompetent to give a valid release, dapat present
ang kahit na anong sitwasyon na ito. Any person who
incurred expenses or medical expenses or funeral
expenses can benefit, walang limit. Sa group meron
diba? 500 pesos, dito walang limit. Kung hindi naman
siya, any. The executor or administrator of the insured
or any of the relative by blood as legal adoption or by
marriag. Are you following me? Sabi natin, ah yung
beneficiary lang makikinabang, exception facility of
payment clause.
Paano niyo to matatandaan? Let's facilitate
the payment of the benefits.Facility of payment. A
person who is not a beneficiary can get the proceeds.
So pag tinanong kayo, what is the facility of the
payment clause? It is the exception to the rule that
only designated beneficiaries can get. In the case of
group, blank blank. In the case of industrial, blank
blank. Gets? Of course other than that, yung
nadiscuss natin: Ang namatay disqualified, etc. True
or false ko to dati sa exam. Only designated
beneficiaries are entitled to the proceeds. Dapat
alam niyo na to. Facility of payment.
NON-LIFE INSURANCE
WHEN
• within 30 days after proof of loss is
received by insurer and ascertainment of
loss is made
Ascertainment of loss
 made either by agreement
parties or by arbitration
WHEN
• If no ascertainment is made or can be had
within 60 days from receipt of proof of
loss, insurer must pay within 90 days
after receipt of proof
Refusal to pay within period unless due
to a fraudulent claim = interest
Paano naman ang payment of proceeds in
Non-life? kung sa life 60 days. Pagdating sa property,
30 days after proof of loss and ascertainment of loss.
So dalawa ha, magpasa ka muna ng proof of loss,
ganito yung nangyari, napablotter ko, yung kotse ko
kinarnap. Ascertainment of loss is done by the
insurance company, aalamin niya kung magkano ba
yung kotse. ok, 2 conditions. kapag pasok yung
dalawang conditions, bilang ka na ng 30 days. Kanina
sa life, 60 days from presentation of claim, proof of
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
death. Ito naman, property, 30 days after submission
of proof of loss and ascertainment of loss. kaya lang,
yung ascertainment kasi is outside the control of the
policyholder, so pwedeng patagalin ng insurance
company. sabihin nila, hindi ko muna pupuntahan, ay
hindi pala accurate yung estimate natin. So medyo
papatagalin. How do you do you determine the value?
It is done by agreement of the parties or kung hindi
sila magkasundo sa value, arbitration. You go to a
third person.
Kung wala pa ring ascertainment within 60
days from the tiime na binigay mo yung proof of loss,
lahat na blotters, pictures, whatever, hindi pa rin
inaksyunan, nagbabagal bagal siya, the insurance
conpany must pay within 90 days. After receipt of
proof. This is what I call a 30-60-90 Rule. Para
malaman niyo, 30 days from when? Proof of loss,
ascertainment of loss pero if after 60 days, hindi pa
rin siya bayad, wala pa ring ascertainment, then
additional 30 days or 90th day. Or in other words,
kapag nagpasa ka ng proof of loss, dapat on the 90th
day bayad na. Gets? Ang problema nito, (Nag-bell, di
ko kasabot sa gisulti ni Ma'am, sorry 14:05) 90 days,
kapag hindi siya nagbayad within the period, again,
interest.
ILLUSTRATION
• A presents proof of loss of car by theft and
insurer ascertains amount of loss on January
1, 2016
• Proceeds must be paid 30 days after
January 1, 2016. Otherwise, interest must
be paid.
• A presents proof of theft on January 1, 2016
but parties cannot agree on amount of loss
by March 1, 2016 (within 60 days from
Jan.1).
between • Proceeds must be paid within 90 days from
January 1, 2016. Otherwise, interest will
accrue.
Example, nagbigay ka ng proof of loss, theft
of car, January 2, 2016, kawaw ka naman. Besperas
ng new year, nacarnap. pero nagbigay ka, pinasa mo,
assuming bukas sila, generally dapat within 30 days,
nadyan na 30 days from when? dalawa. Proof of loss
and ascertainment of loss. So maaaring later than
January 31, otherwise, interest must be paid. What if,
napresent mo yung proo pero hindi kayo magkasundo
sa amount. 60 days tumatakbo, 61, wala pa rin, dapat
ang palugit mo nalang or allowance is 30 days. So on
the 90th day, whether may ascertainment or wala,
dapat bayad na. Still with me.
MOTOR VEHICLE LIABILITY
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From the lectures of Atty. Maria Christina Sagmit
Motor Vehicle Liability. How do we claim?
Ito, this is very practical, hindi niyo kailangan may
kotse, pwedeng pasahero kayo, huwag naman sana,
or baka naman may kilala kayong may ganitong
situation. When we talk about motor vehicle liability,
yung mismong driver na may insurance, hindi siya
covered, kaya siya tinawag na third party. So, in other
words magiging liable siya. Example, pasahero si A
sa isang jeepney, nabangga sila, nagkaroon ngayon
ng disability si A, kanino siya pwedeng magclaim?
kapag pasahero si A ng jeepney, dun siya magka
claim kung saan siya nakasakay. So the accident
happens, within 6 months, dapat magpa-file na ng
written notice of claim.
Ano ang consequence kapag kinalimutan
itong 6 months, goodbye. So huwag kayong petiks
petiks. kahit iyan ay konteng gasgas lang, naospital
kayo one day lang. Claim pa rin. The notice must
contain the nature, the extent, duration of injuries,
certified by the licensed physician. Pag natanggap
yung notice of claim, anong gagawin ni insurance
company? i-aascertain niya yung nature and proof of
the claim, totoo ba to. Jeep opeartor, totoo ba na
nabangga yung jeep mo nung ganitong araw? may
dinala sa ospital? If the parties agree as to the
amount, pay the claim within 5 calendar days. Kung
hindi naman sila magkasundo, hayan na, you have
what we call the no-fault indemnity clause.
No fault Indemnity
Section 391
rd
 death or injury of 3 party
 without necessity of proving
negligence of any kind
 if total indemnity of one person shall not
exceed P15,000.
 Proofs of loss are submitted under oath.
 police report of accident ; and
 Death certificate and evidence to
establish payee OR medical report
and evidence of medical and
hospital disbursement.
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
 Claim against one motor vehicle only
 if occupant of a vehicle, claim
against insurance of vehicle
 otherwise, claim against offending
vehicle
Kanina facility of payment clause, heto
naman no-fault indemnity clause. As the phrase
implies, there was death or injury of a third party
without necessarily proving who is at fault, the person
claiming can automatically get 15,000 pesos. Kanino?
ididiscuss natin. 15, 000, yan ang pinaka mataas na.
Is that the total indemnity that you can get for the
entire accident? No. pantawid gutom. No fault
indemnity, ah hindi tayo magkasundo, sige magnono-
fault muna ako. pinasa ko na sayo ang requirements,
akin na yung 15,000. Dedemanda nalang kita sa
balanse.
What is the person supposed to submit?
Police report and kung namatay, death certificate,
kung buhay, may disability, medical record together
with all the receipts. Pagkapasa nun, without
determining who is at fault, kaya nga siya, no fault
indemnity clause, pay 15, 000 automatically. Very
practical.
*Checka Minute
No fault indemnity, hindi po damage to
property to ha, ito ay death or injury. Huwag kayong
magfifile ng no faulty indemnity para sa damage to
property. dapat may namatay or may na injure. Ang
ipaspasa lang, itong mga to. Kanino kayo magka-
claim? So magka-claim ka against one motor vehicle
only, huwag niyo pong pagkakitaan, 15, 000 dun, tas
15,000 dito. Isang 15,000 lang. If the person is an
occupant of a vehicle, you claim against the insurance
of that vehicle, otherwise, yung directly offending
vehicle. So kung halimbawa, jeepney, andito yung
tao, sinagasaan, syempre doon ka magclaim sa
offending vehicle. kapag ka pasahero, dun ka dapat
magclaim. I want to point out, once the person gets
the 15,000 he is not supposed to let go of his claims,
he is not required to give full acquittance. He can
Clause: claim the balance. Pantawid gutom.
Bar 2012
X is a passenger of a jeepney for hire being driven by
fault or Y. The jeepney collided with another passenger
jeepney being driven by Z who was driving recklessly.
As a result of the collision, X suffered injuries. Both
passenger jeepneys are covered by Comprehensive
Motor Vehicular Insurance Coverage. If X wants to
claim under the "no fault indemnity clause", his claim
will lie -
A. against the insurer of the jeepney being
driven by Z who was the one at fault.
B. the claim shall lie against the insurer of the
passenger jeepney driven by Y because X was his
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 INSURANCE LAW REVIEW 2016
From the lectures of Atty. Maria Christina Sagmit
passenger.
C. X has a choice against whom he wants to
make his claim.
D. None of the above.
BAR 2012. Sino kaya ang kanyang
idedemanda? kung saan siya nakasakay o yung may
kasalanan? Choice ba yun, may priority tayo ha.
Answer is B. Take note hindi siya feeling ha,
automatically kung saan siya nakasakay, yun muna.
yung otherwise pag hindi siya nakasakay sa any
vehicle. This is a situation where we are not talking
about private vehicles diba, more on public to ui.
Unless you are for rent. kasi how can you claim from
your insurance company, are you a third aprty in the
first place. So it can only happen dun sa mga for rent
or common carriers.
Bar 2014
• On May 26, 2014, Jess insured with Jack
Insurance (Jack) his 2014 Toyota Corolla
sedan under a comprehensive motor vehicle
insurance policy for one year. On July 1,
2014, Jess’ car was unlawfully taken. Hence,
he immediately reported the theft to the
Traffic Management Command (TMC) of the
Philippine National Police (PNP), which
made Jess accomplish a complaint sheet as
part of its procedure. In the complaint sheet,
Jess alleged that a certain Ric Silat(Silat)
took possession of the subject vehicle to add
accessories and improvements thereon.
• However, Silat failed to return the subject
vehicle within the agreed 3-day period. As a
result, Jess notified Jack of his claim for
reimbursement of the value of the lost
vehicle under the insurance policy. Jack
refused to pay claiming that there is no theft
as Jess gave Silat lawful possession of the
car. Is Jack correct? (4%)
Suggested answer
• Jack is wrong.
• Jeff obtained a comprehensive motor vehicle
insurance policy, which should cover all
kinds of losses for whatever reason, except
gross negligence.
• The policy should cover the loss of the car,
although it was not really unlawfully taken by
Silat. The fact remains that there was loss of
vehicle and the proceeds for the loss should
be paid to Jeff.
BAR 2014. So hindi ito TPL. May reason ako
for inserting it here. So tingnan nating yung facts.
Hiniram niya yung kotse (naputol kasi ang ppt ni mam
during discussion, so assuming na yung lawful
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
transfer of possession is hiram lang), after the agreed
period, hindi sinoli, nagka claim siya, for theft, ang
sabi sa kanya, hindi ka pwedeng magclaim kasi you
gave lawful possession to the person. what is the
definition of theft? unlawful taking. So tama ba na
ayaw magbayad? So wrong daw because a
comprehensive motor vehicle insurance policy is
different from TPL, and that is why isiningit ko dito. If
you take a look at the insurance contract, wala
namang problema dun. Pero tinanong yung third
party, so siningit ko ha.
Pag sinabi mong comprehensive, basta
nawala yung kotse, pwede kang magclaim. Carnap,
fire, lahat, nabangga, total wreck, lahat pwede. kaya
siya comprehensive, which should cover all kinds of
losses for whatever reason and get?! gross
negligence. So the policy should cover the loss of the
car although it was not really unlawfully taken by Silat.
The fact remains that there was loss of motor vehicle.
So this is comprehensive motor vehicle insurance,
DO NOT confuse this with TPL. Yung TPL-injury or
death upon third person.
Delay, Proof, Subrogation
Reasonable Delay in Payment
 delay due to investigation to ascertain the
truth of information it received that
insured was not insurable at time of
application (Chuy v. Philamlife)
 delay caused by determination of actual
beneficiary and claims of creditors
(RCBC v. CA)
What if the insurance company in either life
or non life delays in payment. Sabi natin kanina,
dapat may interest?! pero if the delay was due to the
investigation, because na investigate ka na, and then
hay, hindi na pala insurable yung tao. That is a valid
delay. Or heto na nagkagulo na lahat ng beneficiaries,
kasi lahat ngaka claim na first wife, lahat nagka claim
na legitimate. Ah syempre, magtatake time ngayon si
RCBC, that is a valid delay. So, no interest will be
paid.
Preliminary Proof of Loss
• best evidence which insured has
 not evidence in ordinary courts
 purpose : Apprise insurer of
loss and make proper
investigation while evidence is
still fresh and to prevent further
loss
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What kind of proof of Loss are you supposed
to submit? Not necessarily that required in ordinary
courts but yun namang best evidence. So sa death-
syempre death certificate. Sa sunog- syempre picture
ng nasunog, police record, ganun din. The purpose is
just to inform the company that there is a loss
suffered. Ok, this is especially true in case of fire.
NOTICE OF LOSS IN FIRE
• Must be written
• Must be given without unnecessary delay
• Otherwise, the insurer is exonerated
What is the notice of loss in fire. Must be
written, given without unnecessary delay otherwise,
the company insurer is exonerated. Bakit ganun?
Very practical, madaling magwalis ng mga evidence
ng Arson. SO you should not delay in giving notice.
Hindi naman sinabing proof ang ibibigay mo eh,
notice lang. Hello, X company, nasusunog yung
building ko. notice lang or piece of paper. Kasi if you
delay in giving notice, the presumption is arson. May
tinatago ka. Do you get it. So partial rule in case of
fire must be given without unnecessary delay
otherwise exonerated na si insurance company.
NOTICE IN OTHER NON-LIFE POLICIES (new)
• The Commissioner may specify the
period for the submission of the notice of
loss.
In other non life insurance policies, the
provision may specify the period for the submission of
the notice of loss. Ang weird lang, binago na nila kasi
this is a new provision, hindi pa nila nilagyan ng days
ito. Parang within 12 hours, diba? Tapos biglang the
commissioner may specify the period. Suggestion ko
lang naman pag kayo naging mambabatas, *checka
minute.
Subrogation
• when insurer pays for the loss
• payment to insured operates as an
equitable assignment to the insurer of all
remedies which insured may have for the
recovery
• subrogation is limited to the amount
recoverable by the insured
Heto na. Subrogation. Alam na natin ang
subrogation diba, stepping into the shoes, getting the
legal right of the policyholder and proceeding against
the wrongdoer. Not present in life, there is no such
thing.
Marine
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
What may be insured against
• Only covers loss due to perils of the sea and
not perils of the ship
• In case there is a bottomry, insurable interest
of the ship owner is limited to excess of its
value over the amount secured by bottomry.
Marine. Sabi ko Perils of the sea not ship.
Ano yung bottomry? Difference between bottomry and
respondentia? Bottomry- anong ginangamit mo?
Vessel. Respondentia- cargoes. So you use the
vessel or the cargo to obtain a loan. What is the rule?
In case of bottomry, the insurable interest of the
owner is limited only to that portion that is not going to
be paid by the debtor. Kasi diba, pag nagsink yan,
may liability, nawala (Di ko nagets to na part), so yung
shipowner can only insure up to the extent na hindi
siya babayaran. Creditor.
Bar 2010
• Paolo, the owner of an ocean-going vessel,
offered to transport the logs of Constantino
from Manila to Nagoya. Constantino
accepted the offer, not knowing that the
vessel was manned by an irresponsible crew
with deep-seated resentments against
Paolo, their employer.
• Constantino insured the cargo of logs
against both perils of the sea and
barratry. The logs were improperly loaded
on one side, thereby causing the vessel to tilt
on one side. On the way to Nagoya, the crew
unbolted the sea valves of the vessel
causing water to flood the ship hold. The
vessel sank.
• Constantino tried to collect from the
insurance company which denied liability,
given the unworthiness of both the vessel
and its crew.
• Constantino countered that he was not the
owner of the vessel and he could therefore
not be responsible for conditions about
which he was innocent.
• Is the insurance company liable? Why or
why not? (3%)
• What is "barratry" in marine insurance? (2%)
Suggested Answer
• The insurer is not liable because the vessel
violated the implied warranty of
seaworthiness. The loss was also caused
by a peril of the ship and not peril of the sea.
• Barratry includes every wrongful act
committed by a vessel master or crew, to the
prejudice of the owner or the charterer.
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BAR 2010. Ano yung barratry? Hayan. Heto
po yung sitwasyon na hindi nya pa po linggo dapat
pero tinanong na. Civil tapos ito commercial. Ito po
yung sitwasyon na nandito na kayo sa commercial
pero tatanungin pa kayo ng civil. Bakit? What is
barratry?
Facts: So binaha ang vessel pati ang logs,
so nangongolekta ngayon si Constantino from the
insurance company. Sabi ng insurance company,
hoy, hindi kami liable kasi unworthiness of the vessel
and the crew yan. Sabi naman ni Constantino, eh
hindi naman kami ang owner ng vessel, so bakit sa
amin nyo yan iapapakarga. Gets? In the scheme of
things, nawala sa eksena si Paolo, the owner. Is the
insurance company liable? Why or why not? What is
"barratry" in marine insurance?
So when we talk of Marine insurance, we are
talking about perils of the sea, not perils of the ship.
The insurer is not liable because the vessel violated
the implied warranty of sea worthiness. When we talk
about sea worthiness- it is not only the vessel but also
the properly manned, properly laden. Pag sinabing
Sea worthy yan, hindi lang yung vessel, pati yung
nagdadrive. Barratry-includes every wrongful act
committed by a vessel master or crew, to the
prejudice of the owner or the charterer. Hindi siya
perils of the sea which is covered by marine
insurance but peril of the ship. Of course, your answer
will be different if it was caused by unexpected
tornado or unexpected tsunami. So yun, perils of the
sea yun, of course barratry is not included.
Bar 2011
• T Shipping, Co. insured all of its vessels with
R Insurance, Co. The insurance policies
stated that the insurer shall answer for all
damages due to perils of the sea. One of the
insured's ship, the MV Dona Priscilla, ran
aground in the Panama Canal when its
engine pipes leaked and the oil seeped into
the cargo compartment. The leakage was
caused by the extensive mileage that the
ship had accumulated. May the insurer be
made to answer for the damage to the cargo
and the ship?
• A. Yes, because the insurance policy
covered any or all damage arising from perils
of the sea.
• B. Yes, since there appears to have been no
fault on the part of the shipowner and
shipcaptain.
• C. No, since the proximate cause of the
damage was the breach of warranty of
seaworthiness of the ship.
• D. No, since the proximate cause of the
damage was due to ordinary usage of the
ship, and thus not due to a peril of the sea.
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
Answer
• D. No, since the proximate cause of the
damage was due to ordinary usage of the
ship, and thus not due to a peril of the sea.
BAR 2011
T Shipping, Co. insured all of its vessels with R
Insurance, Co. The insurance policies stated that the
insurer shall answer for all damages due to perils of
the sea. One of the insured’s ship, the MV Dona
Priscilla, ran aground in the Panama Canal when its
engine pipes leaked and the oil seeped into the cargo
compartment. The leakage was cause by the
extensive mileage that the ship had accumulated.
May the insurer be made to answer for the damages
to the cargo and the ship? Pwede ba?
A. Yes, because the insurance policy covered
any or all damage arising from perils of the
sea.
B. Yes, since there appears to have been no
fault on the part of the shipowner and
shipcaptain.
C. No, since the proximate cause of the
damage was the breach of warranty of
seaworthiness of the ship.
D. No, since the proximate cause of the
damage was due to ordinary usage of the
ship and thus not due to a peril of the sea.
ANSWER: D. No, since the proximate cause of
the damage was due to ordinary usage of the
ship and thus not due to a peril of the sea.
-Ito po ang tamang sagot because excessive
mileage, wear and tear is not a peril of the sea
but a peril of the ship.
Who can insure? Sa marine.
Freightage- all benefits derived by the owner
either from chartering the ship or its employment
for the carriage of his own goods orthose of
other(102). Anyone who expects to earn from the
freightage can insure
-Charterer of the ship has insurable interest on
the ship to the extent that he is damnified by the
loss(106). Kasi pagnawala ang ship magbabayad
siya kay owner.
Kinds of Average
General- insurer is liable for proportion of the loss
assessed (136).
Particular- insurer is liable unless there is a
stipulation exempting the insurer(136). Limited
liability.
Alam niyo yung jettison? So kung general
average sa isang ngsacrifice lahat nakinabang,
dahil lahat nakinabang lahat ng insurance
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companies nila have to contribute. Ang particular
dahil sa kung sino lang ang nakinabang,
insurance company lang niya ang magbabayad.
General Average
- Goods of A valued at 1 M are disposed
- Disposition saves the goods of B (1M) and C
(1M)
- The 1M loss of A will be shared by B and C
in proportion to the value of the goods
belonging to them which are saved. The 1 M
loss will be divided by three.
Particular Average
- If the goods of A are disposed, but
disposition did not inure to the common
benefit of other owners of goods. Only A and
his insurer will suffer the loss, other owners
and their insurers will not contribute in A’s
loss.
Kinds of Loss in Marine
Total or Partial
Total Loss maybe Actual or Constructive
Total v Partial Loss
- every loss which is not total is partial
(128),pinag-isipan yan ah 
- Total loss may either be actual or
constructive, kapag matagal nang di
dumadating o wala kang margining tungkol
sa ship, you can presume actual loss, hindi
na macontact with all the technologies.
- Actual loss may be presumed from the
continued absence of a ship without being
heard of (132)
Actual Loss, 130
- total destruction of the thing
- irretrievable loss of thing by sinking or being
broken up
- damage which renders thing valueless for
the purpose it is held
- other event which effectively deprives owner
of possession of the thing at the port of
destination
- remember the case na yung nabasa ay
bigas, kita mo parin ang bigas pero di mon a
magamit, pwede mo na lang siyang
masaing, di mo na siya mabenta. So
physically you see it but it is now valueless
for the purpose. Anything that deprives the
owner of possession, actual. Kapag actual,
total yan.
- Posible din na hindi naman totally sirang-sira
pero we consider it as total, that is what we
call constructive total loss.
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
- Tinatanong to lage, this is what we call the
“more than ¾ rule”, what is it? It is called
technical total loss. Kapag lumobog, di mon
a kailangan hintayin na lumubog yung buo,
pwede ka nang mag-abandon, tantamount to
saying na wala na akong hahabulin diyan sa
vessel na yan.
Constructive Total Loss, 133
- also called technical total loss
- Loss which gives the person the right to
abandon under section 141
- If you do not abandon, you are only entitled
to what remains or what is actually
damaged.
When can you Abandon?
- >¾ of the value is actually lost or would have
to be spent to recover it from peril
- If the vessel is injured to such an extent as to
reduce its value to >¾, this is more than
75%. SO kung 75% flat di ka pwede mag-
abandon, dapat lagpas.
- Section 141 If the thing is a ship, and the
voyage cannot be performed without
incurring either expense to the insured of
>3/4 the value of the thing abandoned or a
risk which a prudent man would not take
under the circumstances. Bakit ka pag
gagastos ng ganun, eh di e-abandon mon a
lang.
- If the thing is cargo or freightage, voyage
cannot be performed, nor another ship be
procured within a reasonable time and with
reasonable diligence to forward the cargo,
without incurring like expenses or risk >3/4 of
the value of the vessel. In these situations
the owner can now abandon and the beauty
of abandonment is you can recover the full
face value of the policy.
How do you abandon
- Neither partial nor conditional (140), pwede
bang kapag lumutang na siya after 3 hours
dun na ako mag-aabandon? Conditional, not
allowed
- Must be made within a reasonable time after
receipt of reliable information of loss (141).
- If information on loss is incorrect or thing is
restored and there is no total loss,
abandonment is ineffectual. (141) Huy,
cinompute naming more than ¾ , yun pala
hindi, the abandonment is ineffectual.
Bar 2011
- For a constructive total loss to exist in
marine insurance, it is required that the
person insured relinquish his interest in the
thing insured. This relinquishment must be
A. Actual
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B. Constructive first and if it fails, then
actual.
C. Either actual or constructive
D. Constructive
Answer: A. actual , diba sinabi neither
partial nor conditional.
Abandonment
- It is made orally or in writing. If orally, written
notice shall be submitted within 7 days from
oral notice (143)
- Anong effect when you abandon? Has the
effect of transferring by the insured of his
interest, to the insurer with all chances of
recovery and indemnity (146). Okay
insurance company wala na akong interest,
sayo na yan.
Bar 2011
- X shipping co., insured its vessel MV Don
Teodoro for Php 100 Million with ABC
Insurance, Co through T, an agent of X
shipping. During a voyage, the vessel
accidentally caught fire and suffered
damages estimated at Php80 Million. T
personally informed ABC Insurance that X
shipping was abandoning the ship. Later,
ABC insurance denied X shipping’s claim for
loss in the ground that a notice of
abandonment through its agent was
improper. Is ABC insurance right?
A. Yes, since X shipping should have
ratified its agent’s action.
B. No, since T, as agent of X shipping who
procured the insurance, can also give
notice of abandonment for his principal.
C. Yes, since only the agent of X shipping
relayed the fact of abandonment.
D. No, since in the first place, the damage
was more than ¾ of the ship’s value.
Answer: B , (agency)
Abandonment
What is the effect?
- If insurer pays for loss as if there was actual
total loss. SO kung binayaran na ng
insurance company yung property kahit
walang formal abandonment, it is as if there
was actual total loss. Tinanggap din naman
ng owner, so the insurance company is
entitled to whatever remains of the thing.
Kung nag-abandon siya dahil may 80%
damage, yung 20% now belongs to the
insurance company.
Who is entitled to freightage in case of
abandonment? Earnings for carrying goods,
freightage.
- If may abandonment, freightage earned
before the loss belongs to the insurance
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
company of the cargo. Pag inabandon na
ang vessel you are actually abandoning the
cargo, if after the loss it will now pertain to
the insurer of the ship.
Ito na, matigas ang ulo, more than ¾ na ayaw
pang mag-abandon. Ano mangyayari?
- He will only get , for example value is
10million, 80% damage, so he can only get 8
million. Kung inabandon niya he will get the
entire 10M. Kung matigas ang ulo, only the
extent of the actual loss.
- The rights of the insured are not prejudice by
refusal of insurer to accept abandonment
- Insurer is still liable for actual total loss
deducting any amount given to the insured
- Acceptance of abandonment may be
express or implied. Mere silence is
acceptance. Take note ha, there is no partial
and conditional abandonment but there is
such as thing as IMPLIED abandonment.
If insured refuses to abandon, he can
recover actual loss
- A insures a vessel with B for 1M, the
vessel’s value is reduced to P200k due to
peril of the Sea, he is entitled to 2 choices,
either Abandon or Claim actual loss.
- If A abandons, he must give a written notice
of abandonment to B
- IF B accepts the abandonment, it must give
A 1Million(whole amount). B now has all the
right with respect to the vessel. However,
freightage earned before loss will belong to
the insurer of the goods.
- Freightage earned after the loss will belong
to the insurer of the vessel.
- If A does not abandon but B still gives A
P1million, B will now have the right over the
vessel, what remains of it and proceeds of
salavage.
- IF A does not abandon, he can recover
actual loss or P800K, since the vessel is
reduce to 20% of its former value of
P1million.
Loss can either be Constructive or Actual. IN actual
the insured gets full amount. Constructive, the more
than ¾ rule, and there must be abandonment before
the insured gets the full amount.
Measure of Indemnity
- Valuation is conclusive between parties in
determining total or partial loss EXCEPT if
there is fraud
- Marine insurer is liable for partial loss only
for such proportion of the amount insured by
him as the loss bears to the value of the
whole interest. Partial loss, parang yung sa
fire din, percent2x. Kung there is 25%
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damage then you only get 25% of the face
value.
How to estimate loss in open policy(161)
- You get the value of the ship. Value at the beginning
of risk including articles which adds to its value or to
prepare it for the voyage
- Value of the cargo- actual cost to insured when
laden on board OR market value at the time and
place of lading.
- Value of the freightage is the gross freightage,
exclusive of primage
- Cost of insurance shall be added to the estimated
value
Effect of an Other Insurance Policy Clause
For ex: sasabihin sa insurance policy mo “ in
case the policy holder wants to get another
policy, it must give notice to the insurer”,
generally allowed daw yun.
- Only subject to possible stipulation that
insurer must be informed or must consent to
additional insurance policies on the same
property
- Very basic, ilalagay dun sa policy “ kung
ikaw ay kukuha ng iba pang policy, i.inform
mo ako”, generally allowed.
Bar 2011
If an insurance policy prohibits additional
insurance on the property insured without the
insurer’s consent, such provision being valid and
reasonable, a violation by the insured
A. Reduces the value of the policy
B. Avoids the policy
C. Offsets the value of the policy with the
additional insurance’s value
D. Forfeits premiums already paid.
Answer: B. avoids the policy
Bakit? Balikan natin, basta meron other
insurance policy clause, generally allowed.
Inform lang, tsaka consent, hindi naman
sinabing hindi ka pwedeng payagan, just
mere notice and consent, at walang effect
yun sa first policy. Pero pag-nagviolate ka
dun, it will now avoid the first policy.
Pagnag-file ka ng claim sa insurance
company tapos nadeny. How many years?
What is the prescriptive period again? 10
years, may be longer or shorter but
generally, cannot be shorter than one year
and in industrial life, cannot be shorter than 6
years.
Yung claim mo nadeny, si commissioner
dalawang, klase yung powers niya:
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
Administrative and Adjudicatory
Administrative- Section 437. The Insurance
Commissioner shall be appointed by the
president of the republic of the Philippines
for a term of six (6) years without
reappointment and who shall serve as such
until the successor shall have been
appointed and qualified. If the insurance
commissioner is removed before the
expiration of his term of office, the reason for
the removal must be published.
-to see that all laws relating to insurance,
insurance companies and other insurance
matters, mutual benefit associations, and
trusts for charitable uses are faithfully
executed and to perform the duties imposed
upon him by this Code.
- Sole and exclusive authority to regulate the
issuance and sale of variable contracts as
defined in section 238 hereof and to provide
for the licensing of persons selling such
contracts, and to issue such reasonable
rules and regulation governing the same.
- The Commissioner may issue such rulings,
instructions, circulars, orders and decision as
he may deem necessary to secure the
enforcement of the provisions of this Code,
subject to the approval of the Secretary of
Finance. Except as otherwise specified,
decisions made by the Commissioner shall
be appealable to the Secretary of Finance.
A. formulate policies and recommendations
on issues concerning the insurance industry,
advise congress and other government
agencies on all aspects of the insurance
industry and propose legislation and
amendments thereto
b. approve, reject, suspend or revoke
licenses or certificates o registration
provided for by this code
c. impose sanctions for the violation of laws
and the rules, regulations and orders issued
pursuant thereto
d. prepare, approve, amend or repeal rules,
regulations and orders and issue opinions
and provide guidance on and supervise
compliance with such rules, regulations and
orders
e. enlist the aid and support of, and/or
deputize any and all enforcement agencies
of the gov’t in the implementation of its
powers and functions under this code
f. issue cease and desist orders t prevent
fraud or injury to the insuring public
g. punish for contempt of the commissioner,
both direct and indirect, in accordance with
the pertinent provisions of and penalties
prescribed by the Rules of Court
h. compel the officers of any registered
insurance corporation or association to call
meetings of stockholders or members
thereof under its supervision
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i. issue subpoena duces tecum and summon
witnesses to appear in any proceeding of the
commission and, in appropriate cases, order
the examination, search and seizure of all
documents, papers, files and records, tax
returns, and books of acts of any entity or
person under investigation as may be
necessary for the proper disposition of the
cases before it, subject to the provision of
existing laws
j. suspend or revoke, after proper notice and
hearing, the license or certificate of authority
of any entity or person under its regulation,
upon any of the grounds provided by law
k. Conduct an examination to determine
compliance with laws and regulations if the
circumstance so warrant as determined by
appropriate rules and regulations
l. investigate not oftener that once a year
from the last date of examination to
determine whether an institution is
conducting its business on a safe and sound
basis: provided, that the deficiencies found
by or discovered by an audit shall be
immediately addressed
m. inquire into the solvency and liquidity of
the institutions under its supervision and
enforce prompt corrective action
n. to retain and utilize, in addition to its
annual budget, all fees, charges and other
income derived from the regulation of
insurance companies and other supervised
persons or entities.
o. to fix and assess fees, charges and
penalties as the commissioner may find
reasonable in the exercise of regulation
p. exercise such other powers as may be
provide by law as well as those which may
be implied from, or which are necessary or
incidental to the express powers granted the
Commission to achieve the objectives and
purpose of this code
- to impose penalties on insurers:
Fines not less than 5 thousand pesos and
not more than two hundred thousand pesos
Suspension, or after due hearing, removal of
directors and officer or agents.
Kailan pwede irevoke and lisensya ni
agent?
- Willfully violated any provision of this code
- Intentionally made a material misstatement
in the applicationto qualify for such license
- Obtained or attempted to obtain a license by
fraud or misrepresentation
- Has been guilty of fraudulent or dishonest
practices
- has misappropriated or converted to his
own use or illegally withheld moneys
required to be held in a fiduciary capacity;
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
- has not demonstrated trustworthiness and
competence to transact business as an
insurance agent or insurance broker in
such manner as to safeguard the public; or
- has materially misrepresented the terms
and conditions of policies or contracts of
insurance which he seeks to sell or has
sold; or
- has failed to pass the written examination
prescribed, if not otherwise exempt from
taking the same.
Kailan pwede masuspend o revoke ang
license ng insurance company?
- Unsound condition
- Insurer failed to comply with the provisions of
law or regulations obligatory upon it
- Insurer’s condition or method of business is
hazardous to the public or its policy holders
- Insurer’s paid up capital or available assets
or security deposits is impaired or is deficient
- Margin of solvency is deficient
- Commission of any unfair settlement
practices
a) knowingly misrepresenting to claimants
pertinent facts or policy provisions relating
to coverage at issue;
(b) failing to acknowledge with reasonable
promptness pertinent communications with
respect to claims arising under its policies;
(c) failing to adopt and implement
reasonable standards for the prompt
investigation of claims arising under its
policies;
(d) not attempting in good faith to
effectuate prompt, fair and equitable
settlement of claims submitted in which
liability has become reasonably clear; or
(e) compelling policyholders to institute
suits to recover amounts due under its
policies by offering without justifiable
reason substantially less than the amounts
ultimately recovered in suits brought by
them.
Unlawful Claims
Section 251. It is unlawful to:
a. Present or cause to be presented any
fraudulentclaim for the payment of a
loss under a contract of insurance
b. Fraudulently prepare, make or subscribe
any writing with intent to present or use
the same, or to allow it to be presented
in support of any such claim. Any
person who violates this section shall be
punished by a fine not exceeding twice
the amount claimed or imprisonment of
2 years, or both at the discretion of the
court.
ADJUDICATORY Powers
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Pag-dineny ang claim mo ng insurance
company, you can now go to the insurance
Commission for a single claim of P5million or
below (excluding cost, attorney’s fees and
interest)
- This jurisdiction is concurrent with the
regular courts
- -mas mabilis kung pupuntang kayong
Insurance Commissioner, hindi mag-coclog
yung ating courts.
- Kapag may nag-aaway na insurance
company at agent, hindi po yan kasama sa
adjudicatory powers. Only limited to claims
filed by an insured against an insurer. 5
million below, choose regular courts or
insurance commissioner.
Where to appeal?
If administrative functions- file a
memorandum of appeals within 15 days to
the Secretary of finance
If adjudicatory functions- Court of Appeals
At a glance
- Period to pay claims in life and non-life
(60days;30-60-90 rule)
- Facility of payment clause
- Notice of loss in fire insurance
- Actual loss
- Constructive loss- >3/4 rule on abandonment
- Jurisdiction of regular courts
- Unfair claims settlement practice
- Unlawful claims
JANUARY 18, 2016
REVIEW OF PAST LECTURES
We started with the general concepts. The principle of
subrogation. We also discussed that the health and
disability insurance contact is a life insurance contract
if it involves death as one of the risks insured.
Otherwise it is categorized as property insurance,
specifically casualty insurance. Under the general
concepts, we also look at the nature of a contract of
insurance. The most important of which is the aleatory
nature of the contract of insurance plus of course the
fact that it is a contract of adhesion which will now
lead us to the Rules on Interpretation, that is, in case
of doubt in the interpretation of the insurance
contracts, it will be ruled in favor of the policy holder
and against the insurance company.
We looked at the two different kinds of insurance.—
property insurance and life insurance. We also went
into the specifics of life insurance. The most important
of which is the concept of Insurable Interest in Section
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
10. Kanino ba tayo may insurable interest? Kaninong
buhay ang pwede natin iinsure?
Of course, in life insurance, only the policy-holder or
the one paying the premium is required to have
insurable interest on the cestui que vie. The
beneficiary is not required. Very important concept
also is the maluwag (loose) na interpretation of rules
on Industrial life and this includes insurable interest.
Sabi nga natin kung tayoy magtatanong kung may
insurable interest ka ba before we pay someone,
mahihirapan tayo makarecover under the industrial
life.
In Life, the rule on suicide, first we have to check if
the policy states that it is covered. If it is excluded,
then tapos ang laban. If it does not exclude, then we
ask when the suicide was committed. Kung wala pa
rin and he is in his right state of mind then we go to
the two-year rule. Has the policy been existing for two
years from the issuance or the last reinstatement? If
yes, hen we can already recover from the policy.
Different types of Life Insurance:
Survival for a specific period – Endowment. Dapat
mamatay—Ordinary Life. Buhay pa babayaran mo na
– Annuity.
When it comes to non-life, the cestui que vie, is now
replaced by property. Meaning, the insurer must have
insurable interest in the property, otherwise he cannot
benefit. Otherwise the risk of a person bringing about
the event will be grater.
The concept of Double or co-insurance vs.
reinsurance. The concept of insurable interest in
property and as to when it is supposed to exist.
Concept of insurable interest. When must it exist in
Life—only at the start, except if incapable of
pecuniary estimation. Ito na yung property, two points
in time—at the time of issuance and at the time of
loss. Although in between, maaring di mag exist ok
lang. In nonlife, proximate cause rule is very important
too. If the policy covers a risk and the proximate
cause of the loss is that risk, then you can recover.
If you are asked to differentiate a life and nonlife, it is
very important to point put that a life insurance policy
is a contract of investment. Thus, you can recover
more than whatever amount depending on the
premium paid, except incapable of pecuniary
estimation. In property insurance, it is only a contract
of indemnity. You cannot recover in excess of your
insurable interest. That’s why we have the rules on
when you are entitled to return of premium. It can be
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the whole premium or part of the premium—when you
have a case of overinsurance by several insurers,
fraud (rescission required). These are the instances
when there should be a return of premium.
Konting misrepresentation lang, it can be ground to
disapprove the claims.
These are all applicable for both life and non-life.

Payment of proceeds, we have the 60-day rule in life

and 30-60-90-day in property. GROUNDS:
1. Concealment
Be familiar also with the More than ¾ rule in the case 2. Misrepresentation
of marine. There may be actual total loss but there 3. Breach of warranty, express or implied
can be abandonment in case of constructive total loss
which entitles the policy holder to recover the full 4. Other grounds - Section 64-65
amount of the insurance—full amount of the vessel or
goods insured.
Concealment
> neglect to communicate that which a party
Can a non-beneficiary benefit? FACILITY OF knows and ought to communicate.
PAYMENT CLAUSE. Improved (?) Life, 500 pesos
lang, under certain conditions. In industrial life, many > May be intentional or unintentional
conditions, no limit. Someone will spend for the burial
or confinement –relative, administrator—lahat yan
under certain conditions. Requisites of Concealment
(a)party knows the fact which he neglects to
communicate or disclose
Under Motor Vehicles, there is such a thing as no-
fault indemnity clause. 6 months dapat ang claim. Pag (b) party concealing is duty bound to disclose
di kayo nagkasundo, you go to the pantawid-gutom, such fact to the other
no-fault indemnity clause. Again, this is under motor (c) party concealing makes no warranty as to
vehicle liability or TPL which means only two things— concealed fact
someone died or was injured na third party. You can
only collect against one vehicle. Yung pasahero kung
saan nakasakay. Kung hindi, doon sa directly (example, “Are there flammable substances
offending vehicle. inside you building?” You said no. but you already
have a warranty that “ I hereby warrant that I will only
store the following things.” So nasalo ka na ng
GROUNDS FOR RESCISSION warranty. You will not be charged with concealment
anymore kasi nagwarrant ka na eh.)
At the start, I emphasized that the contract of
insurance is of utmost good faith or uberrimae fides. (d) other party has no means of ascertaining the
Why? Because during the process, if you are asked,” fact concealed
Are you suffering from any heart ailment?” and you
said “No” your words are taken seriously. (example, do you have a heart ailment? You
said No. walang physical exam, so no means of
ascertaining. But if chineck up ka, nakita meron, you
Experience ni maam: nag apply sya ng insurance, are not guilty of concealment because they have a
she placed everything in the application, that she had way of knowing it. Example, down syndrome, you
asthma in second year. She also had goiter in third can’t deny that because they all look alike.)
year law school.
Why do you need to place everything in the WHAT MUST BE COMMUNICATED:
application? Because I cannot afford to be approved
but later on my beneficiaries cannot recover because * All facts within his knowledge
I did not put everything. * Material to the contract
I have to be very specific about the details. My point * Other party has no means of ascertaining
is, of utmost good faith based on your judgment. If
you are asked if there is any person in the family who * He makes no warranty
has diabetes, you should ask around. If malayo na, * Information which prove or tend to prove falsity
excused kayo. of warranty

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What need not be communicated
 Those which the other knows
 Those which, in the exercise of ordinary
case, the other ought to know and which
the other has no reason to suppose him
ignorant
 Those of which the other
communication
(example, “this contract will not cover losses
due to explosion. Tapos what you concealed
was not related to explosion.” Or this policy
does not cover death by heart ailment. E di
kahit di mo ideclare ang heart ailment mo ok
lang. either way, you will not be able to
recover)
 Those which prove or tend to prove the
existence of a risk excluded by a
warranty, and which are not otherwise
material; and
 Those which relate to a risk excepted
from the policy, and which are not
otherwise material
 General causes open to his inquiry which
may affect the political or material perils
contemplated (32)
(example. Marine insurance. Do you need to
declare that there was bombing in
Indonesia? You don't need to declare it)
 General usages of trade (32)
(the use of bill of ladings, the use of
payment of checks)
 Nature or amount of interest, except in
answer to an inquiry (34)
 Information of his own judgment (35)
(do you think you are beautiful? Judgment. Do
you believe you are in a state of good heatlh?
Alangan naman sabihin mo no. if you say yes,
judgment yan, that is not concealment.)
How do you know if a certain information is material?
Common mistake. Ang kinamatay nya aksidente, ang
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
tinago na information about health. So dapat
makarecover sya. Common mistake. When you say
material:
TEST OF MATERIALITY
It is not Determined by event but the Probable and
reasonable influence of facts upon the party to
whom communication is due in forming his
waives
estimate of the disadvantages of the proposed
contract OR in making his inquiries.
Advantageous ba na iisure ko itong taong to? What
will make the company determine that? He must be
able to assess the risk according to the facts you filled
up. Isa na lang kidney, di nya dineclare. He died in an
accident. Was there concealment? Yes. When the
insurance company knew that he only had one
kidney, it would have made the person pay a higher
premium or not insure him.
One died of heart failure and did not declare asthma.
Still, there is concealment. It will affect the insurance
company’s assessment of the risk. Then, if there is
concealment that is a ground to rescind the contract.
This is a frequent question in the bar exams.
MATERIALITY
Sunlife v. CA, 245 SCRA 268 - where the applicant
concealed prior medical history and he died in a
plane crash, there was still concealment
notwithstanding the apparent lack of relation
between the fact concealed and the cause of
death
You can say that there’s a lack of relation between
the concealed fact and the cause of the death BUT
we have discussed that the test of materiality is
determined not by the event but the probable impact it
can have in the insurance company in determining
and estimating the pros and cons of entering in the
contract and assessing the extent if risk plus to
increase the premium of not.
BAR 2001
• A applied for non-medical life insurance.
He did not inform the insurer that he was
examined and confined at St. Luke’s
Hospital where he was diagnosed for
lung cancer. A died in a plane crash. Is
the insurer liable considering that the fact
concealed had no bearing with the cause
of death of A?
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From the lectures of Atty. Maria Christina Sagmit
ANSWER
• The insurer is not liable. The concealed
fact is material to the approval and
issuance of the policy. According to a
decided case, the insured need not die of
the disease he failed to disclose to the
insurer. It is sufficient that his non-
disclosure misled the insurer in forming
his estimate of the risks of the proposed
insurance policy or in making further
inquiries.
BAR 2011
• An insured, who gains knowledge of a
material fact already after the effectivity
of the insurance policy, is not obliged to
divulge it. The reason for this is that the
test of concealment of material fact is
determined
A. at the time of the issuance of the
policy.
B. at any time before the payment of
premium. (it is not the payment of the
premium that perfects the contract)
C. at the time of the payment of the
premium.
D. at any time before the policy becomes
effective.
ANSWER
• D. at any time before the policy becomes
effective. So kung nalaman nya before
naging effective ang policy, he has to inform.
WAIVER OF RIGHT TO INFORMATION
 By terms of insurance OR
 Neglect to make inquiries
concealment entitles the unguilty party to
rescind
Example. Have you been hospitalized for a lung
disease? Yes. But there was no space where you can
put the specifics. This is neglect to make further
inquiries.
So of there is concealment, the unguilty party can go
for rescission.
CONCEALMENT
In Marine Insurance
 in addition to Section 28
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
 all information he possesses material to
the risk except those in Section 30
 state exact and whole truth in relation to
all matters that he represents
 information of belief or expectation of a
third person as to a material fact is
MATERIAL
 insured is presumed to know prior loss at
time of insuring
Example. A insured his vessel 12 noon of January 1.
However, 4am of January 1, the vessel already sank.
So, we presume that A already knew that he already
knew that the vessel already sank.
General Rule: Concealment entitles the innocent
party to rescind
 Exception: Section 110
Concealment as to following does NOT vitiate
the entire contract but exonerates the insurer
from loss resulting from risk concealed.
(a) national character of insured
(b) liability of thing insured to capture and
detention
c) liability to seizure from breach of
foreign laws of trade
(d) the want of necessary document
(e) the use of false and simulated papers
If you concealed a material fact, you cannot recover.
But in Marine, even if you concealed, you can still
recover, unless what you concealed was connected to
the reason for the loss.
Example. Natural character of the insured. You said,
Belgian nationality. Because you misrepresented, the
vessel was seized. So the reason is the national
character of the insured and you concealed that and
misrepresented, and the reason for the seizure is also
the national character. If the reason of the loss is the
same as the concealed fact, the insurance company
will not pay.
But if what you concealed is the Belgian nationality,
but the vessel was confiscated because of the
contraband, in this situation, the policy-holder can still
recover.
Another example. The use of false and simulated
papers. If you used it to enter Switzerland, you
concealed that you used a simulated papers. but the
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From the lectures of Atty. Maria Christina Sagmit
reason for the loss is that the vessel sunk. Different.
Can you recover or not? You can recover. If the
reason of the detention of the vessel is that you used
simulated paper, then you cannot claim.
This is only in Marine. In other insurance, if you
concealed a material fact, you cannot recover.
What do you mean by, “a contract of insurance is a
contract of uberrimae fides” – fides means fidelity
INCONTESTABILITY CLAUSE IN
INSURANCE
Section 48, 2nd par – if life insurance has been in
force during the lifetime of the insured for a
period of 2 years from DATE OF ISSUE or LAST
REINSTATEMENT
the insurer cannot prove that the policy is void
ab initio or is rescindible
by reason of fraudulent concealment
misrepresentation of the insured or his agent.
Illustration
• A is issued a life insurance policy on
April 2, 2000
• He conceals the fact that he
tuberculosis
• A dies on April 3, 2002.
• Insurance company must pay. Although
there was concealment, the policy has
been in force during the lifetime of A for 2
years from April 2, 2000.
When Incontestability Clause DOES NOT apply
• Person has no insurable interest
• Cause of death is an excepted peril
• Premiums have not been paid
• Conditions of the policy relating to
military or naval service have been
violated
Generally, when you conceal, you cannot recover. But
in Life, if the policy has been in forced for 2 years (like
suicide rule), you can recover even if there is
concealment and misrepresentation.
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
Why? The principle behind this is that 2 years nayan
bat di mo pa rin na-investigate?
*****
Example: Inisyu ang policy January 1, 2000. Tinago
nya na sya ay may sakit sa atay. Namatay sya
January 5, 2002. So, the policy has been in existence
for 2 years from issuance or last reinstatement. Then,
pwede na mag-collect. That is what we call
incontestability clause. Para to syang sa suicide kasi
parehong 2 years eh. Sa suicide, hindi na sya aantay
ng 2 years bago sya magpakamatay. Ito naman, 2
years na, hindi mo pa nalaman na may
misrepresentation, so goodbye na. Are you with me?
LIFE That’s what you call incontestability clause.
In one case, bago nag 2 years, namatay. Pero wais
yung mga beneficiaries, finile nila yung claim after the
2-year term. SC: dapat yung 2 years buhay yung cesti
que vi. Hindi pwedeng finile mo after 2 years na nga,
pero namatay na sya bago ng 2-year period. Hindi na
pwede yun. Dapat yung 2 years, buhay sya. Namatay
sya dapat after the 2-year period. So, yung mga
nagconceal at nagmisrepresent, sana mamatay sila
after the 2-year period. Ok? Ngayon, namatay after 2
or years, sorry nalang, concealment na yan. Bakit
incontestability? You cannot contest it anymore.
Kelan hindi yun magaapply? Ok, 2 years na, yun pala
no insurable interest naman. Eh bat ka
makakarecover. So, these are the instances when
Incontestability Clause DOES NOT apply:
1.
Person has no insurable interest;
2.
Cause of death is an excepted peril;
3.
Premiums have not been paid; and
has 4.
Conditions of the policy relating to military or
naval service have been violated.
5. Fraud of a vicious type is present when
policy was taken out
6. Beneficiary failed to furnish proof of death or
to comply with any condition imposed by the
policy after the loss has happened
7. That the action was not brought within time
specified
Example of #4: Sinabi wag kang susugod, hindi ka
magpaparticipate sa war, hindi ka magpaparticipate
sa any military activity, pero nagparticipate. Kahit
hindi yun ang kinamatay, still there is a violation. So,
incontestability clause will not apply.
The fraud is of a vicious type: Nagpanggap na patay
si A, yun pala buhay, that’s vicious—declaring that
you’re dead.
Beneficiary failed to furnish proof of death: how can
you claim if there is no proof of death? Or that the
action was not brought within time specified—
prescriptive period has already set in.
Generally, concealment and misrepresentation are
grounds to rescind except in life, in incontestability
clause.
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BAR 2012:
The "incontestability clause" in a Life Insurance Policy
means ---
A. that life insurance proceeds cannot be
claimed two (2) years after the death of the insured.
B. that two (2) years after date of issuance or
reinstatement of the life insurance policy, the
insurance company cannot anymore prove that the
policy is void ab initio or rescindable by reason of
fraudulent concealment or misrepresentation of the
insured.
C. that the insured can still claim from the
insurance policy after two (2) years even though
premium is not paid.
D. that the insured can only claim proceeds in a
life insurance· policy two (2) years after death.
Answer: B
BAR 2014:
On July 3, 1993, Delia Sotero (Sotero) took out a life
insurance policy from Ilocos Bankers Life Insurance
Corporation (Ilocos Life) designating Creencia
Aban(Aban), her niece, as her beneficiary. Ilocos Life
issued Policy No. 747, with a face value of
P100,000.00, in Sotero’s favor on August 30, 1993,
after the requisite medical examination and payment
of the premium.
On April 10, 1996, Sotero died. Aban filed a claim for
the insurance proceeds on July 9, 1996. Ilocos Life
conducted an investigation into the claim and came
out with the following findings:
1. Sotero did not personally apply for insurance
coverage, as she was illiterate.
2. Sotero was sickly since 1990.
3. Sotero did not have the financial capability to pay
the premium on the policy.
4. Sotero did not sign the application for insurance.
5. Aban was the one who filed the insurance
application and designated herself as the beneficiary.
For the above reasons and claiming fraud, Ilocos Life
denied Aban’s claim on April 16, 1997, but refunded
the premium paid on the policy. (6%)
(A) May Sotero validly designate her niece as
beneficiary?
(B) May the incontestability period set in even in
cases of fraud as alleged in this case?
(C) Is Aban entitled to claim the proceeds under the
policy?
SUGGESTED ANSWER:
(B) May the incontestability period set in even in
cases of fraud as alleged in this case?
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
The incontestability clause shall not apply because
the niece did not have insurable interest on the life of
her aunt. Hence, she cannot use the clause to
recover. (So, kahit nasatisfy nya yung 2 years, kung
naprove natin na si pamangkin ang kumuha ng policy
on the life of the aunt, incontestability clause will not
apply. Pwede rin imodify konti yung facts. Naglapse
kasi hindi nagbayad ng premium, diba? Or
nagparticipate sya sa naval activity. All the exceptions
to the incontestability clause. Are you with me? So be
aware of that and its exceptions. 2 years ha? 2 years
yan lagi—incontestability and suicide)
(C) Is Aban entitled to claim the proceeds under the
policy?
No, Aban is not entitled to the proceeds because she
was the one who obtained the policy on the life of her
aunt and she does not have insurable interest. Hence,
the policy is void.
MISREPRESENTATION
Well, misrepresentation is just the more active version
of concealment. Kasi yung concealment, nag…(?), sa
misrepresentation, talagang naglie ka. Sinabi mo
talaga na no pero di totoo. Sa concealment, pinasulat
lang sayo yung sakit mo, itong misrepresentation,
tinanong ka kung may sakit ka, sinabi mo no. Ok?
Again, the test of falsity is when what you asserted is
different from the facts. That’s false. Materiality is
determined using the same test in concealment (Sec.
31).
Eto na, pag minisrepresent mo is age mo
(misstatement of age), that will not result to
rescission. Kasi tayo nagpapabata tayo. Ganitong age
ba, nagdedeny na kayo, or sinasabi nyo pa rin? Ako,
I’m 45. So, ang mga tao, “ah kaya pala mainit ang ulo!
Ano na yan..” alam nyo na  When I was a labor
arbiter in NLRC, dapat serious ka eh. Yung parties
halos di ko tinitingnan, kung gusto makipagusap, di ko
kinakausap so sabi nung isang party, “may asawa na
ba yan si atty. Sagmit? Suplada kasi” Ineequate nila
na pag wala kang asawa, suplada. Sa ganung edad?
Eh that was how many years ago? I left the NLRC
2009. So, 7 years ago, 38 pa lang ako nun. Pag
babae walang asawa, old maid. Pero pag lalake
suplado, ano? Ang sinasabi ba old butler sya? Sa
lalake, bachelor tapos pag babae old maid. Dapat sila
old butler or driver. Pag bakla, ano? Old beautician?
Unfair!
If you misrepresented your age, what will happen?
Kung magkano yung pwedeng bilhin nung binayad
mong premium sa tamang edad. How much can your
premium buy at the correct age. So, if you’re 40 and
sinabi mo 30 ka, you paid 10k, ang coverage mo 1
million. Again ha, 30 yrs. Old, 10,000, 1 million. Eh 40
ka na pala. So, what will happen? 40, 10k (hindi ka
papadagdagan), pero magkano nalang coverage mo?
Baka half a million ka nalang. Are you with me? So
same premium, but what your premium could have
purchased at the right age. In marine, rescission na
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yan. Kung at the start may sinabi ka tama, then
eventually naging false, it will not entitle the insurance
company to rescission because at the time you said it,
totoo sya eh.
BAR 2011
Shipowner X, in applying for a marine insurance
policy from ABC, Co., stated that his vessel usually
sails middle of August and with normally 100 tons of
cargo. It turned out later that the vessel departed on
the first week of September and with only 10 tons of
cargo. Will this avoid the policy that was issued?
A. Yes, because there was breach of implied
warranty.
B. No, because there was no intent to breach an
implied warranty.
C. Yes, because it relates to a material
representation.
D. No, because there was only representation of
intention.
ANSWER: D (Why? Because you are only saying
something about the future. Ngayon mo sinabi pero
ang intention naming in August, 100 tons. So, hindi ka
naglie.)
Can the shipowner recover? Yes.
BREACH OF WARRANTY
So, first is concealment, second misrepresentation,
and third is breach of warranty.
Warranty is either express or implied. It may relate to
the past, present or future.
Example:
“I hereby warrant that I have never used this building
for commercial purposes.”- past;
“I hereby warrant that at the moment, I have no
flammable substances inside the building.”- present;
“I hereby warrant that within 1 month I would install a
state-of-the-art burglar system in my building.”- future
So, lahat yun winawarrant mo na gagawin mo or
ginawa mo or nagawa mo. So, once you breach any
of your warranties, your contract may be rescinded. In
marine, there are what we call implied warranties. Of
course as the name implies, implied means you do
not declare it, but you are assumed to warrant.
Implied warranties in marine insurance:
1. Seaworthiness - 113
2. Nationality or neutrality – 120
3. Improper deviation -121
4. Illegal ventures
This was asked in the 2000 Bar.
Seaworthiness:
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
“Section 114 - a ship is seaworthy if reasonable fit to
perform the service, and to encounter the ordinary
perils of the voyage contemplated by the parties to
the policy.”
“Section 116 - extends not only to the seaworthiness
of the ship itself but requires that it be properly laden,
provided with competent master, sufficient number of
competent officers and seamen, requisite
appurtenances and equipment and other implements
for the voyage.”
So, when you say that a ship is seaworthy, it is fit to
perform the service, and to encounter the ORDINARY
perils of the voyage. Take note, when you say
seaworthy, it does not refer only to the ship, but also
to the crew of the vessel (ie., properly laden,
competent master, sufficient number of seamen (not
semen), officers and requisite appurtenances). That is
the implied warranty of seaworthiness, you don’t have
to put it in the contract. Implied nga eh.
Improper deviation:
“Section 123 - deviation is a departure from the
course of the voyage insured or unreasonable delay
in pursuing the voyage or the commencement of an
entirely different voyage.”
May nagtanong sa akin before, “ma’am, is there a
proper deviation?” Of course, but let’s discuss first
improper deviation.
So, when you depart from the course of the voyage,
or there was unreasonable delay, or you commence
an entirely different voyage, there is improper
deviation. So, for example, dapat davao-cebu, ginawa
mong davao-iloilo—different voyage. Dapat aalis ng
10am January 23,pero umalis ng January 24, 10am—
unreasonable delay.
But, we also have this concept of proper deviation.
The following are instances of proper deviation:
1. Caused by circumstances outside the control
of the master or owner;
2. When necessary to comply with a warranty
or to avoid peril;
3. When made in good faith upon reasonable
grounds to avoid a peril; and
4. When made in good faith to save human life
or to relieve another vessel.
So, captain ng isang vessel nakatulog, tulog sya,
napanaginipan nya na nagkaroon ng intensity 8
earthquake. Pagkagising nya, bigla nya ng nireturn to
port. Deviation noh? True enough, nagkaroon naman
talaga ng earthquake at tsunami 3 days later and his
ship was saved. Was the deviation proper? No,
because no reasonable ground for avoiding a peril
existed at the time of the deviation. Panaginip is not
enough!
BAR 2011
T, the captain of MV Don Alan, while asleep in his
cabin, dreamt of an Intensity 8 earthquake along the
path of his ship. On waking up, he immediately
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ordered the ship to return to port. True enough, the
earthquake and tsunami struck three days later and
his ship was saved. Was the deviation proper?
A. Yes, because the deviation was made in good faith
and on a reasonable ground for believing that it was
necessary to avoid a peril.
B. No, because no reasonable ground for avoiding a
peril existed at the time of the deviation.
C. No, because T relied merely on his supposed gift
of prophecy.
D. Yes, because the deviation took place based on a
reasonable belief of the captain.
ANSWER: B
Nationality:
“Section 120 - where the nationality or neutrality of the
ship is expressly warranted, it is impliedly warrantied
that the ship will carry the requisite documents to
show such nationality or neutrality and it will not carry
any document which will cast suspicion thereon.”
Take note: Hindi ito yung sinasabi natin na, “Ah,
Philippine citizenship yung vessel na yan” No! You
make an express warranty as to what the nationality
is, what is implied there is you are carrying the
documents to prove the nationality of the vessel.
Yung mismong anong nationality, express warranty.
Yung documents, implied. Gets?
Illegal ventures:
Sa illegal ventures, ang warranty is that yung vessel
hindi mo gagamitin for mga buying or selling drugs,
contrabands and other illegal activities.
So, we’re done with concealment, misrepresentation
and tapos na tayo sa breach of warranty, implied in
marine insurance. Ok? We have other grounds, but
this applies only to property (non-life) insurance.
Other grounds for rescission in non–life insurance:
1. Non- payment of premium;
2. Conviction of a crime arising out of acts increasing
the hazard insured against (example, Arson);
3. Discovery of fraud/material misrepresentation;
4. Discovery of willful or reckless acts or omissions
increasing the hazard insured against physical
changes in the property becoming uninsurable
(example, sinabi nyo residential tapos ginawa nyo
ngayong tindahan ng LPG. Inincrease nyo ngayon
yung risk);
5. Discovery of other insurance coverage that makes
the total insurance in excess of the value of the
property insured (kapag nakadiscover tayo ng other
insurance policies tapos ikaw ay nakarecover ng
sobra sa interest mo, then that is a ground to rescind.
Sana lang madiscover bago magbayaran.
Mangongolekta ka kay A, mangongolekta ka din kay
B. So, kung sino makadiscover, rescission. No need
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
to pay the proceeds. Are you with me? Ang tanong:
bawal ba talagang may other insurance coverage?
Sabi natin hindi bawal. Pero pag nasa document na
ideclare mo sa kanya na kumuha ka, igagalang pa rin
yun. Or kung sumobra na yung iyong pagrecover,
ground for rescission); and
6. Determination by Insurance Commissioner that
continuation of the policy would violate or would place
the insurer in violation of the Insurance Code.
So, how do you cancel the insurance?
Notice of cancellation:
1.In writing;
2.Mailed or delivered to named insured at
address shown in the policy OR to his broker
provided the broker is authorized in writing
by the policy owner to receive the notice of
cancellation on his behalf;
3. Shall state the grounds relied on;
4. Upon written request of the insurance policy
holder, insurer will furnish fact on which
cancellation is based.
When should you rescind?
1. Before the commencement of any action on
the contract;
2. In which motor vehicle liability insurance
notice of cancellation must be sent to the
land transportation owner/operator and the
LTO at least 15 days before date of
effectivity.
So, bago ka nagdemanda for a claim, dapat
nagrescind ka na. In motor vehicle liability, dahil
special rule yan, hindi ka makakaparegister without it,
hindi ka pwedeng mag apply(?) for a TPL, dapat yung
notice of cancellation, sent to LTO. “By the way, LTO,
si Juan dela Cruz pinacancel ko yung kanyang TPL
ha?” Yun, para may notice yung LTO at least 15 days
before date of cancellation. Para si LTO makarequire
sya kay owner na kumuha ng bagong TPL. In the
case of LTFRB, lalo na sa public vehicles, meron din
ganitong requirement, 15 days before date of
cancellation. So, special rules sa motor vehicle
liability ha?
REPUBLIC ACT NO. 9576
April 29, 2009
An Act increasing the maximum deposit insurance
coverage, Amending RA 3591
Uunahin ko ‘to kesa sa summary of amendments kasi
may mga na-discuss na tayo sa amendments.
‘Yung mga tao, nagpapasok sila ng pera sa bangko
para hindi nila magastos. Kaya lang, kung ‘yung
bangkong pinasukan nila ng pera ay nagsarado
naman, what’s the security for them? Kaya we have
this PDIC Law. So what is an “insured deposit”? It is
an unpaid balance of money or its equivalent received
by a bank in the usual course of business and for
which it has given or is obliged to give credit to a
Page 67
 INSURANCE LAW REVIEW 2016
From the lectures of Atty. Maria Christina Sagmit

commercial, checking, savings, time or thrift account,
or issued in accordance with Bangko Sentral rules
and regulations and other applicable laws. Whether it
is commercial, savings, checking, time or thrift
account. Napaka-exclusive ha, ang mga ganyang
klase ng deposits.
PDIC. What do you do? You are supposed to
question it via petition for certiorari. Grounds: excess
of jurisdiction or with such grave abuse of discretion
as to amount to a lack or excess of jurisdiction.
It can be filed within 30 days from the denial of the
claim for deposit insurance. Okay?

What are excluded in the concept of deposit? Any
obligation of a bank which is payable at the office of
the bank located outside of the Philippines. So, kung
may branch ‘yan sa ibang bansa, hindi ‘yan kasali.
But, subject to the approval of the Board of Directors,
any insured bank which is incorporated under the
laws of the Philippines which maintains a branch
outside the Philippines may elect to include for
insurance ‘yung deposits sa branch outside. Example,
kung may BPI sa Hong Kong, ‘yung mga deposits
doon ay hindi covered. Pero the BPI here
(Philippines) can elect to include under PDIC, ‘yung
mga accounts sa Hong Kong. But that is a voluntary
thing. It is not automatic. Gets? So, kung hindi kasali
‘yung branch doon, hindi kayo pwedeng mag-
complain sa PDIC.
Excluded: The corporation shall not pay deposit
insurance for the following accounts or transactions,
whether denominated, documented, recorded or
booked as deposit by the bank:
(1) Investment products such as bonds and
securities, trust accounts, and other similar
instruments;
 Ayan na po. ‘Yung mga bank
assurance. Ang mga offer sa inyo,
malalaki, noh. Malaki ang interest,
pero ‘yun pala, hindi covered ng
PDIC.
(2) Deposit accounts or transactions which are
unfunded, or that are fictitious or fraudulent;
 Jose Velarde account. Jose Pidal
account. Ang hilig sa “Jose” eh. So,
hindi ‘yan pwede ah.
(3) Deposits accounts or transactions
constituting, and/or emanating from, unsage
and unsound banking practice/s, as
determined by the Corporation,
consultation with the BSP, after due notice
and hearing, and publication of a cease and
desist order issued by the Corporation
against such deposit accounts or
transactions; and
(4) Deposits that are determined to be the
proceeds of an unlawful activity as defined
under RA 9160 (Anti Money Laundering Act),
as amended.
 Are you with me? Siyempre, ‘di ba?
Fruit of the poisonous tree. Alangan
namang i-cover mo pa insurance
niyan.
What do you do with PDIC exclusions? Halimbawa,
meron kayong pinapa-include pero ayaw bayaran ng
What are insured deposits?
(1) amount due to any bona fide depositor for
legitimate deposits in an insured bank net of
any obligation of the depositor to the insured
bank as of date of closure, but not to exceed
Five hundred thousand pesos
(P500,000.00).
o How much is the insurance? Only
up to 500,000pesos. So, dito
nagkakaproblema ang mga
mayayaman dahil wala na silang
mapaglagyan ng pera nila. Inubos
na nila lahat ng bangko, na-exhaust
na nila lahat ng deposit maximum,
may pera pa rin sila. So ibabaon
nalang nila ang pera sa lupa,
hanggang may lumabas na bagong
circular na nagsasabing “Ilabas niyo
na ang inyong mga pera, papalitan
na natin.”
(2) add together all deposits in the bank
maintained in the same right and capacity for
his benefits either in his own name or in the
name of others.
o When we talk about banks, hindi
per branch ‘yan. Per bank. So BPI
Uyanguren, JP Laurel – BPI pa rin
‘yan. Counted sila as one. Gets?
(3) A joint account regardless of whether the
conjunction 'and,' 'or,' 'and/or' is used, shall
be insured separately from any individually-
owned deposit account: Provided, That (1) If
the account is held jointly by two or more
natural persons, or by two or more juridical
persons or entities, the maximum insured
deposit shall be divided into as many equal
shares as there are individuals, juridical
in persons or entities, unless a different sharing
is stipulated in the document of deposit
Account # Account Balance
Holder
#1 Pedro & P800,000
Maria
#2 Juan &/or P900,000
Pedro
Account Insured Uninsured
Number Share
Pedro - #1 P250,000 P150,000

Pedro
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote - #2 P250,000 P200,000 Page 68

Total P500,000 Total:

 INSURANCE LAW REVIEW 2016
From the lectures of Atty. Maria Christina Sagmit
o Example: Si Pedro AND Maria, may
account for 800,000. Si Juan AND/OR
Pedro (common denominator si Pedro),
900,000. Kung parehong joint yan, si
Pedro sa Account 1, ang insured lang
ay half kasi dalawa sila palagi eh.
500,000 / 2 = 250,000 lang ang covered.
Pero ang uninsured part niya ngayon na
lalabas ay 150,000. Bakit? Kasi 400,000
lang ‘yung kanya. So si Pedro, 250,000
lang ang insured sa kanya. So pati
insurance coverage, hahatiin pa rin yan.
So out of the 400,000 ni Pedro, ang
insured lang ay 250,000. Magkano ang
uninsured? Ooooy, maglalabas na ng
calculator. 400,000 – 250,000 is?
150,000. Si Maria, ganun din.
Sa second account, ganun na naman.
May fresh 250,000 insurance na naman
si Pedro. So 900,000, tag-450,000 sila.
Then ang uninsured is the balance. So
‘pag tinotal mo pa rin yung kay Pedro,
hanggang 500,000 pa rin siya. Gets
niyo?
Si Pedro individually, meron na siyang
fresh 500,000 with the same bank. Kung
nag-joint siya, meron siyang another
250,000. Kung may third account siya
na joint tapos tatlo sila, divided by 3.
Kapag tinotal mo, ang insurance
coverage ni Pedro is more than
500,000. May isang single/solo account
pero marami kang joint, ang total mo
niyan is more than 500,000. ‘Di ko
masyadong napakita dito, pero kung
may third account (joint) si Pedro, may
share pa rin siya sa 500,000 ng third
account.
(4) If the account is held by a juridical person or
entity jointly with one or more natural
persons, the maximum insured deposits
shall be presumed to belong entirely to such
juridical person or entity
o Joint accounts held by a juridical
person with natural person will be
Account No. Account Balance
Holder
#1 ABC Co. P600,000
#2 ABC Co. &/or P800,000
Pedro Cruz
ABC Co. #1 P600,000
ABC Co. #2 P800,00
Pedro Cruz NONE NONE
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
Total
Total for ABC balance: Insured:
P500,000 for
P1.4 Million both
presumed to belong to the juridical
person. Thus, Accounts #1 and #2
will be consolidated in the name of
ABC Co. Total amount of insured
deposits will be P500,000.
o For example: Juridical person +
officer, ABC Company AND/OR
Pedro Cruz, that is still owned by
the ABC company. Si Pedro is just
an authorized signatory, but that is
not his personal account. In this
situation, si ABC may 600,000. Si
ABC AND/OR Pedro may 800,000.
Sa Account #1, that is solely owned
by ABC. 600,000, magkano yung
covered sa Account #1? Only
250,000. Bakit? Kasi nga, sa
Account # 2, although it appears to
be a joint account, that is still
considered a juridical account. So,
strictly speaking, ABC owns
Account #1 and Account #2. The
total is 1.4M, but ABC can only
insure up to 500,000. Are you with
me?
o Ang magandang gawin, style na
naman. Meron tayong DEF
Company, GHI Company, JKL
Company. ‘Wag niyong
ipapangalan sa parehong entity.
Otherwise, kahit may “Pedro” pa
diyan, he will just be an authorized
signatory. Gets? So, ang ending,
unsecured ang 900,000. Gets niyo?
Gets niyo ba? Still with me?
Okay, ito, hindi na masyadong important kasi naka-3
years na tayo: 1st 3 years of RA 9576, P250,000 shall
be paid by PDIC, P250,000 by the national
government. Now, PDIC will be the one to pay the
whole 500,000.
What are the roles/rules (?) of PDIC?
1) PDIC may examine banks with prior
approval of the Monetary Board
o No examination can be conducted
within twelve months from the last
examination date
2) In case of threated or impending closure of
bank
o PDIC, in coordination with the
Bangko Sentral, may conduct a
special examination as the Board of
Directors, by an affirmative vote of
a majority of all of its members
3) In case of unsafe or unsound banking
practice
o PDIC and/or Bangko Sentral may
inquire into or examine deposit
Page 69
 INSURANCE LAW REVIEW 2016
From the lectures of Atty. Maria Christina Sagmit
accounts and all information related
thereto
Sanctions against unsafe and unsound bank practices
o Naka-commit na yung Board of
Directors or magcocommit palang,
the Board of Directors of the PDIC
can submit their report to the
Monetary Board
Sanctions against unsafe and unsound bank practices
o Kung walang pwedeng i-file na
action within 45 days from the
submission of the report, si PDIC
na mag-iimpose ng sanction: Cease
and Desist Order (ipapasara ‘yung
bangko), impose a fine. If the
practice will cause insolvency, 15
days to correct. Pero minsan, hindi
rin. So ‘pag hindi naka-recover,
ipapasara na ‘yung bank.
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
The Role of PDIC in closed banks
1) Shall act as receiver
2) Shall control, manage and administer the
affairs of the closed bank.
3) Effective immediately upon takeover as
receiver of such bank, the powers, functions
and duties, as well as all allowances,
remunerations and perquisites of the
directors, officers, and stockholders of such
bank are suspended, and the relevant
provisions of the Articles of Incorporation
and By-laws of the closed bank are likewise
deemed suspended
4) The assets of the closed bank under
receivership shall be deemed in custodia
legis in the hands of the receiver.
o Assets shall not be subject to
attachment, garnishment,
execution, levy or any other court
processes
o A judge, officer of the court or any
person who shall issue, order,
process or cause the issuance or
implementation of the writ of
garnishment, levy, attachment or
execution shall be liable under
Section 21 hereof
PDIC directors and officers have NO liability
o PDIC, its directors, officers,
employees and agents are held free
and harmless to the fullest extent
permitted by law from any liability
o They shall be indemnified for any
and all liabilities, losses, claims,
demands, damages, deficiencies,
costs and expenses of whatsoever
kind and nature that may arise in
connection with the performance of
their functions, without prejudice to
any criminal liability under existing
laws.
o EXCEPTION: If the actions of PDIC
or any of its officers and employees
are found to be in willful violation of
this Act, performed in bad faith, with
malice and/or gross negligence,
Tax obligations of PDIC
o All tax obligations of PDIC for a
period of five (5) years reckoned
from the date of effectivity of this
Act shall be chargeable to the Tax
Expenditure Fund (TEF) in the
annual General Appropriation Act
o On the 6th year and thereafter -
exempted from income tax, final
withholding tax, value-added tax on
assessments collected from
member banks and local taxes
Page 70
 INSURANCE LAW REVIEW 2016
From the lectures of Atty. Maria Christina Sagmit

Splitting of Deposits depositor can only recover a maximum of P500,000

o A deposit account with an
outstanding balance of more that
the statutory maximum amount of
insured deposit maintained under
the name of natural or juridical
persons is broken down and
transferred into two (2) or more
accounts in the name/s of natural or
juridical persons or entities who
have no beneficial ownership on
transferred deposits in their names
o Transfer is made within 120 days
immediately preceding or during a
bank-declared bank holiday, or
immediately preceding a closure
order issued by the Monetary Board
of the Bangko Sentral ng Pilipinas
for the purpose of availing of the
maximum deposit insurance
coverage
o So if the transfer is made within 120
days, that will still be considered as
one account.
for these kinds of accounts. The trust account and
money market placement are excluded from the
coverage of the PDIC Law.
o MCS: He can only recover up to a
total of P500,000 kasi iisang
bangko lang ‘yan. Walang joint
account. Only savings, time,
current. Trust accounts and money
market placement, under the PDIC
Law, are excluded. That’s an
investment banking.
OLD AND NEW INSURANCE CODE COMPARED:
Naka-bold letters po ‘yung changes. Na-tackle na
natin ‘yung iba diyan. Focus on the things we tackled.
Okay? Okay. So, tapos na tayo.

Bar 2000: BD has a bank deposit of half a million

pesos. Since the PDIC limit is P250,000, BD would
like some protection for the excess by taking out an
insurance against all risks arising from unsound bank
practices. Does BD have insurable interest under the
Insurance Code?
ANSWER: Yes, BD has insurable interest in his bank
deposit. In case of loss to the extent of the amount
not covered by PDIC, BD will be damnified. He will
suffer pecuniary loss of P250,000 since PDIC Law
only covers accounts up to P250,000.
o MCS: Pwede niya iinsure ‘yung
hindi covered ng PDIC. But can he
insure the whole amount? NO.
Again, this is a contract of
indemnity. Hindi ka pwedeng
kumita. Nagsara na ‘yung bangko,
umiiyak na lahat tapos ikaw
tumatawa-tawa ka pa kasi na-
endure mo, doble doble ka pa.
Okay?

Bar 2010: When OCCIDENTAL Bank folded up due to

insolvency, Manuel had the following separate
deposits in his name:
o P200,000 in savings deposit;
o P250,000 in time deposit;
o P50,000 in a current account;
o P1 million in a trust account; and
o P3 million in money market
placement.
Under the Philippine Deposit Insurance Corporation
Act, how much could Manuel recover? Explain. (2%)

Suggested Answer: Manuel can only recover up to a

total of P500,000 for his savings deposit, time deposit
and current account. Under the PDIC Law, a single

Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote Page 71
 INSURANCE LAW REVIEW 2016
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SUMMARY OF AMENDMENTS
OLD INSURANCE CODE
SECTION 3: CONSENT OF HUSBAND…
SECTION 3: The married woman or the minor
herein allowed to take out an insurance policy
may exercise all the rights and privileges of an
owner under a policy.
All rights, title and interest in the policy of
insurance taken out by an original owner on the
life or health of a minor shall automatically vest
in the minor upon the death of the original
owner, unless otherwise provided for in the
policy.
SECTION 6: Every person, partnership,
association, or corporation duly authorized to
transact insurance business as elsewhere
provided in this code, may be an insurer.
SECTION 11: The insured shall have the right to
change the beneficiary he designated in the
policy, unless he has expressly waived this right
in said policy.
SECTION 12: The interest of a beneficiary in a
life insurance policy shall be forfeited when the
beneficiary is the principal, accomplice, or
accessory in willfully bringing about the death of
the insured; in which event, the nearest relative
of the insured shall receive the proceeds of said
insurance if not otherwise disqualified.
SECTION 27. A concealment entitles the injured
party to rescind a contract of insurance.
SECTION 50, FOURTH PARAGRAPH. Group
insurance and group annuity policies, however,
may be typewritten and need not be in printed
form.
SECTION 60: An open policy is one in which the
value of the thing insured is not agreed upon,
but is left to be ascertained in case of loss.
SECTION 64: No policy of insurance other than
life shall be cancelled by the insurer except upon
prior notice thereof to the insured, and no notice
of cancellation shall be effective unless it is
based on the occurrence, after the effective date
of the policy, of one or more of the following:
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
INSURANCE CODE OF 2013
SECTION 3: CONSENT OF SPOUSE
SECTION 3: DELETION OF MARRIED WOMAN/MINOR
PROVISION TAKING OUT A POLICY.
All rights, title and interest in the policy of insurance taken out by
an original owner on the life or health of the person insured
shall automatically vest in the latter upon the death of the
original owner, unless otherwise provided for in the policy.
SECTION 6: DELETED THE WORD “PERSON”
Section 6. Every corporation, partnership, or association, duly
authorized to transact insurance business as elsewhere
provided in this Code, may be an insurer
SECTION 11. The insured shall have the right to change the
beneficiary he designated in the policy, unless he has expressly
waived this right in said policy. Notwithstanding the foregoing, in
the event the insured does not change the beneficiary during his
lifetime, the designation shall be deemed irrevocable.
Section 12. The interest of a beneficiary in a life insurance policy
shall be forfeited when the beneficiary is the principal,
accomplice, or accessory in willfully bringing about the death of
the insured. In such a case, the share forfeited shall pass on to
the other beneficiaries, unless otherwise disqualified. In the
absence of other beneficiaries, the proceeds shall be paid in
accordance with the policy contract. If the policy contract is
silent, the proceeds shall be paid to the estate of the insured.
SECTION 27. A concealment whether intentional or
unintentional entitles the injured party to rescind a contract of
insurance.
.
SECTION 50, FOURTH PARAGRAPH: Deleted
“TYPEWRITTEN” provision and replaced it with:
Notwithstanding the foregoing, the policy may be in electronic
form subject to the pertinent provisions of Republic Act No.
8792, otherwise known as the ‘Electronic Commerce Act’ and to
such rules and regulations as may be prescribed by the
Commissioner.
Section 60. An open policy is one in which the value of the thing
insured is not agreed upon, and the amount of the insurance
merely represents the insurer’s maximum liability. The value of
such thing insured shall be ascertained at the time of the loss.
Section 64. No policy of insurance other than life shall be
cancelled by the insurer except upon prior notice thereof to the
insured, and no notice of cancellation shall be effective unless it
is based on the occurrence, after the effective date of the policy,
of one or more of the following: ADDITIONAL GROUND
(f) Discovery of other insurance coverage that makes the total
Page 72
 INSURANCE LAW REVIEW 2016
From the lectures of Atty. Maria Christina Sagmit
SECTION 65:All notices of cancellation
mentioned in the preceding section shall be in
writing, mailed or delivered to the named insured
at the address shown in the policy, and shall
state (a) which of the grounds set forth in section
sixty-four is relied upon and (b) that, upon
written request of the named insured, the insurer
will furnish the facts on which the cancellation is
based.
SECTION 77:An insurer is entitled to payment of
the premium as soon as the thing insured is
exposed to the peril insured against.
Notwithstanding any agreement to the contrary,
no policy or contract of insurance issued by an
insurance company is valid and binding unless
and until the premium thereof has been paid,
except in the case of a life or an industrial life
policy whenever the grace period provision
applies.
SECTION 78: An acknowledgment in a policy or
contract of insurance or the receipt of premium
is conclusive evidence of its payment, so far as
to make the policy binding, notwithstanding any
stipulation therein that it shall not be binding until
the premium is actually paid.
SECTION 78:
SECTION 81. A person insured is entitled to
return of the premium when the contract is
voidable, on account of fraud or
misrepresentation of the insurer, or of his agent,
or on account of facts, the existence of which
the insured was ignorant without his fault; or
when by any default of the insured other than
actual fraud, the insurer never incurred any
liability under the policy.
SECTION 82. In case of an over-insurance by
several insurers, the insured is entitled to a
ratable return of the premium, proportioned to
the amount by which the aggregate sum insured
in all the policies exceeds the insurable value of
the thing at risk.
NONE
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
insurance in excess of the value of the property insured;
Section 65. All notices of cancellation mentioned in the
preceding section shall be in writing, mailed or delivered to the
named insured at the address shown in the policy, or to his
broker provided the broker is authorized in writing by the policy
owner to receive the notice of cancellation on his behalf, and
shall state:
SECTION 77. An insurer is entitled to payment of the premium…
Notwithstanding any agreement… premium thereof has been
paid, except in the case of a life or an industrial life policy
whenever the grace period provision applies, or whenever under
the broker and agency agreements with duly licensed
intermediaries, a ninety (90)-day credit extension is given. No
credit extension to a duly licensed intermediary should exceed
ninety (90) days from date of issuance of the policy.
SECTION 78. Becomes Section 79 and in its place:
Section 78. Employees of the Republic of the Philippines,
including its political subdivisions and instrumentalities, and
government-owned or -controlled corporations, may pay their
insurance premiums and loan obligations through salary
deduction:
Provided, That the treasurer, cashier, paymaster or official of the
entity employing the government employee is authorized,
notwithstanding the provisions of any existing law, rules and
regulations to the contrary, to make deductions from the salary,
wage or income of the latter pursuant to the agreement between
the insurer and the government employee and to remit such
deductions to the insurer concerned, and collect such
reasonable fee for its services.
SECTION 82:A person insured is entitled to a return of the
premium when the contract is voidable, and subsequently
annulled under the provisions of the Civil Code; or on account of
the fraud or misrepresentation of the insurer, or of his agent, or
on account of facts, or the existence of which the insured was
ignorant of without his fault; or when by any default of the
insured other than actual fraud, the insurer never incurred any
liability under the policy.
"A person insured is not entitled to a return of premium if the
policy is annulled, rescinded or if a claim is denied by reason of
fraud.
SECTION 83: In case of an over-insurance by several insurers
other than life, the insured is entitled to a ratable return of the
premium, proportioned to the amount by which the aggregate
sum insured in all the policies exceeds the insurable value of the
thing at risk.
SECTION 84: An insurer may contract and accept payments, in
addition to regular premium, for the purpose of paying future
Page 73
 INSURANCE LAW REVIEW 2016
From the lectures of Atty. Maria Christina Sagmit
Section 88. In case of loss upon an insurance
against fire, an insurer is exonerated, if notice
thereof be not given to him by an insured, or
some person entitled to the benefit of the
insurance, without unnecessary delay.
Section 94. Where the insured is overinsured by
double insurance :
(b) Where the policy under which the insured
claims is a valued policy, the insured must give
credit as against the valuation for any sum
received by him under any other policy without
regard to the actual value of the subject matter
insured;
(c) Where the policy under which the insured
claims is an unvalued policy he must give credit,
as against the full insurable value, for any sum
received by him under any policy;
Section 179. Life insurance is insurance on
human lives and insurance appertaining thereto
or connected therewith.
Section 180. Third paragraph
In the absence of a judicial guardian…may
exercise, in behalf of said minor, any right under
the policy, without necessity of court authority or
the giving of a bond, where the interest of the
minor in the particular act involved does not
exceed twenty thousand pesos.
Section 180. Third paragraph
NONE
SECTION 187, PAR 6
Before issuing such certificate of authority, the
Commissioner must be satisfied that the name
of the company is not that of any other known
company transacting a similar business in the
Philippines, or a name so similar as to be
calculated to mislead the public.
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
premiums on the policy or to increase the benefits thereof.
SECTION 90: In case of loss upon an insurance against fire, an
insurer is exonerated, if written notice thereof be not given to him
by an insured, or some person entitled to the benefit of the
insurance, without unnecessary delay. For other non-life
insurance, the Commissioner may specify the period for the
submission of the notice of loss.
SECTION 96: Where the insured in a policy other than life is
over insured by double insurance:
"(b) Where the policy under which the insured claims is a valued
policy, any sum received by him under any other policy shall be
deducted from the value of the policy without regard to the actual
value of the subject matter insured;
(c) Where the policy under which the insured claims is an
unvalued policy, any sum received by him under any policy shall
be deducted against the full insurable value, for any sum
received by him under any policy;
Section 181. Life insurance is insurance on human lives and
insurance appertaining thereto or connected therewith.
"Every contract or undertaking for the payment of annuities
including contracts for the payment of lump sums under a
retirement program where a life insurance company manages or
acts as a trustee for such retirement program shall be
considered a life insurance contract for purposes of this Code.
Section 182. Third paragraph
In the absence of a judicial guardian… may exercise, in behalf of
said minor, any right under the policy, without necessity of court
authority or the giving of a bond, where the interest of the minor
in the particular act involved does not exceed Five hundred
thousand pesos (P500,000.00) or in such reasonable amount as
may be determined by the Commissioner.
Section 182.
In the absence or in case of the incapacity of the father or
mother, the grandparent, the eldest brother or sister at least
eighteen (18) years of age, or any relative who has actual
custody of the minor insured or beneficiary, shall act as a
guardian without need of a court order or judicial appointment as
such guardian, as long as such person is not otherwise
disqualified or incapacitated. Payment made by the insurer
pursuant to this section shall relieve such insurer of any liability
under the contract.
Section 187 handles provisions on micro insurance
Similar to industrial insurance concept
SECTION 193, PAR 6
Before issuing such certificate of authority, the Commissioner
must be satisfied that the name of the company is not that of any
other known company transacting a similar business in the
Philippines, or a name so similar as to be calculated to mislead
the public. The Commissioner may issue rules and regulations
on the use of names of insurance companies and other
supervised persons or entities.
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SECTION 187, PAR 7
Such certificate of authority shall expire on the
last day of June of each year and shall be
renewed annually if the company is continuing to
comply with the provisions of this Code or the
circulars, instructions, rulings or decisions of the
Commissioner. Every company receiving any
such certificates of authority shall be subject to
the provisions of this Code and other related
laws and to the jurisdiction and supervision of
the Commissioner.
NONE
NONE
SECTION 188:
PAID-UP CAPITAL FOR DOMESTIC CORPS:
P5 Million
SECTION 188:
Dec. 31, 1978: additional P3M
Dec. 31, 1979: additional P4M
Dec. 31, 1980: additional P5M
SECTION 188:
Pre-licensing requirement of a new insurance
company, in addition to the paid-up capital
stock- require stockholders to pay in cash to the
company in proportion to their subscription
interests a contributed surplus fund of not less
than P1M
Life insurance company- not less than P500,000
may also require such company to submit to him
a business plan showing the company's
estimated receipts and disbursements, as well
as the basis therefor, for the next succeeding
three years.
SECTION 188:
If organized as a mutual company, in lieu of
such capital stock, it must have available cash
assets of at least five million pesos above all
liabilities for losses reported, expenses, taxes,
legal reserve, and reinsurance of all outstanding
risks, and the contributed surplus fund equal to
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
SECTION 193, PAR 7
The certificate of authority issued by the Commissioner shall
expire on the last day of December, three (3) years following its
date of issuance, and shall be renewable every three (3) years
thereafter, subject to the company’s continuing compliance with
the provisions of this Code, circulars, instructions, rulings or
decisions of the Commission.
SECTION 193, LAST PAR
"No insurance company issued with a valid certificate of
authority to transact insurance business anywhere in the
Philippines by the Insurance Commissioner, shall be barred,
prevented, or disenfranchised from issuing any insurance policy
or from transacting any insurance business within the scope or
coverage of its certificate of authority, anywhere in the
Philippines, by any local government unit or authority, for
whatever guise or reason whatsoever,
SECTION 193, LAST PAR
including under any kind of ordinance, accreditation system, or
scheme. Any local ordinance or local government unit regulatory
issuance imposing such restriction or disenfranchisement on any
insurance company shall be deemed null and void ab initio.
SECTION 194
PAID-UP CAPITAL FOR NEW domestic life or non-life insurance
company shall, in a stock corporation: One billion pesos;
(P1,000,000,000.00): Provided,
SECTION 194
Domestic insurance company already doing business in the
Philippines shall have a net worth
By June 30, 2013: P250 M
By Dec. 31, 2016: P300 M
By Dec. 31, 2019: additional P350 M
By Dec. 31, 2022: an additional P480 M
SECTION 194
Pre-licensing requirement of a new insurance company, in
addition to the paid-up capital stock, require the stockholders to
pay in cash to the company in proportion to their subscription
interests a contributed surplus fund of not less than P100M
May also require such company to submit to him a business plan
showing the company’s estimated receipts and disbursements,
as well as the basis therefor, for the next succeeding 3 years.
SECTION 194
If organized as a mutual company, in lieu of such net worth, it
must have available total members equity in an amount to be
determined by the Insurance Commission above all liabilities for
losses reported,; expenses, taxes, legal reserve, and
reinsurance of all outstanding risks, and the contributed surplus
fund equal to the amounts required of stock corporations.
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the amounts required of stock corporations
SECTION 188:
NONE
SECTION 188:
NONE
SECTION 188:
NONE
SECTION 191: Foreign Corporations
Paid-up unimpaired capital or assets and
reserve not less than that herein required of
domestic insurance companies, nor until it shall
have deposited with the Commissioner for the
benefit and security of the policyholders and
creditors of such company in the Philippines,
securities satisfactory to the Commissioner
consisting of good securities of the Philippines,
including new issues of stock of "registered
enterprises", as this term is defined in Republic
Act No. 5186, to the actual market value of not
less than the minimum paid-up capital required
of domestic insurance companies
SECTION 191: NONE
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
SECTION 194
The Secretary of Finance may, upon recommendation of the
Commissioner, increase such minimum paid-up capital stock or
cash assets requirement under such terms and conditions as he
may impose, to an amount which, in his opinion, would
reasonably assure the safety of the interests of the policyholders
and the public.
The minimum paid-up capital and net worth requirement must
remain unimpaired for the continuance of the license. The
Commissioner may require the adoption of the risk-based capital
approach and other internationally accepted forms of capital
framework.
SECTION 194
For the purpose of this section, net worth shall consist of:
"(a) Paid-up capital;
"(b) Retained earnings;
"(c) Unimpaired surplus; and
"(d) Revaluation of assets as may be approved by the
Commissioner.
"The Commission may adopt for purposes of compliance with
capital build up requirement under this Code the recognition as
part of the capital account, capital notes or debentures which are
subordinate to all credits and senior only to common capital
stocks.
SECTION 194
President may order a periodic review every 2 years the capital
structure set out above to determine the capital adequacy of the
local insurance industry from and after the integration and
liberalization of the financial services, including insurance, in the
ASEAN Region.
A review committee consisting of representatives from DOF, IC,
NEDA, SEC and other agencies shall conduct the review and
may recommend to the President to adopt for implementation
the necessary capital adjustment.
SECTION 197 Foreign Corporations
Unimpaired capital or assets and reserve: P1 Billion nor until it
shall have deposited with the Commissioner for the benefit and
security of the policyholders and creditors of such company in
the Philippines, securities satisfactory to the Commissioner
consisting of good securities of the Philippines, including new
issues of stock of "registered enterprises” as this term is defined
in E.O. 226 of 1987, as amended, to the actual market value of
not less than the amount herein required
SECTION 197 Foreign Corporations
The Commissioner may, as a pre-licensing requirement of a new
branch office of a foreign insurance company, in addition to the
required asset or net worth, require the company to have an
additional surplus fund in an amount to be determined by the
Insurance Commission.
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SECTION 192
In the event of any company ceasing to do
business in the Philippines the securities
deposited as aforesaid shall be returned upon
the company's making application therefor and
proving to the satisfaction of the Commissioner
that it has no further liability under any of its
policies in the Philippines.
SECTION 194
An insurance company doing business in the
Philippines shall at all times maintain a margin of
solvency which shall be an excess of the value
of its admitted assets exclusive of its paid-up
capital, in the case of a domestic company, or
an excess of the value of its admitted assets in
the Philippines…
SECTION 195
No domestic insurance corporation shall declare
or distribute any dividend on its outstanding
stocks except from profits attested in a sworn
statement to the Commissioner by the president
or treasurer of the corporation to be remaining
on hand after retaining unimpaired:
SECTION 195
(a) The entire paid-up capital stock;
(b) The margin of solvency required by section
one hundred ninety-four;
(c) In the case of life insurance corporation, the
legal reserve fund required by section two
hundred eleven;
(d) In the case of corporations other than life, the
legal reserve fund required by section two
hundred thirteen;
(e) A sum sufficient to pay all net losses
reported, or in the course of settlement, and all
liabilities for expenses and taxes.
SECTION 196
In any determination of the financial condition of
any insurance company doing business in the
Philippines, there shall be allowed and admitted
as assets only such assets owned by the
insurance company concerned and which
consist of:
SECTION 196
Cash in the possession of the insurance
company or in transit under its control, and the
true and duly verified balance of any deposit of
such company in a financially sound commercial
bank or trust company.
SECTION 198
Section 198. No insurance company shall loan
any of its money or deposits to any person,
corporation or association, except upon first
mortgage or deeds of trust of unencumbered,
improved or unimproved real estate…
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
SECTION 198
The securities deposited as aforesaid shall be returned to the
company upon the Commissioner’s written approval and only
after the company has duly proven in its application therefor that
it has no further liability whatsoever under any of its policies nor
to any of its creditors in the Philippines.
SECTION 200
An insurance company doing business in the Philippines shall at
all times maintain the minimum paid-up capital, and net worth
requirements as prescribed by the Commissioner. Such
solvency requirements shall be based on internationally
accepted solvency frameworks and adopted only after due
consultation with the insurance industry associations.
SECTION 201
No domestic insurance corporation shall declare or distribute
any dividend on its outstanding stocks unless it has met the
minimum paid-up capital and net worth requirements under
Section 194 and except from profits attested in a sworn
statement to the Commissioner by the president or treasurer of
the corporation to be remaining on hand after retaining
unimpaired:
SECTION 201
(a) The entire paid-up capital stock
(b) The solvency requirements defined by Section
200;
(c) In the case of life insurance corporations, the legal reserve
fund required by Section 217;
(d) In the case of corporations other than life, the legal reserve
fund required by Section 219; and
(e) A sum sufficient to pay all net losses reported, or in the
course of settlement, and all liabilities for expenses and taxes.
The Commissioner shall prescribe solvency requirements for
branches of foreign insurance companies operating in the
Philippines.
SECTION 202
In any determination of the financial condition of any insurance
company doing business in the Philippines, there shall be
allowed and admitted as assets only such assets legally or
beneficially owned by the insurance company concerned as
determined by the Commissioner which consist of:
SECTION 202
(a) Cash in the possession of the insurance company or in
transit under its control, and the true and duly verified balance of
any deposit of such company in a financially sound bank or trust
company duly authorized by the Bangko Sentral ng Pilipinas.
SECTION 204
A life insurance company may lend to any of its policyholders
upon the security of the value of its policy such sum as may be
determined pursuant to the provisions of the policy.
No insurance company shall loan any of its money or deposits to
any person, corporation or association, except upon the security
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SECTION 198
Section 198. No insurance company shall loan
any of its money or deposits to any person,
corporation or association, except upon first
mortgage or deeds of trust of unencumbered,
improved or unimproved real estate…
SECTION 198
Section 198. No insurance company shall loan
any of its money or deposits to any person,
corporation or association, except upon first
mortgage or deeds of trust of unencumbered,
improved or unimproved real estate…
SECTION 198
Section 198. No insurance company shall loan
any of its money or deposits to any person,
corporation or association, except upon first
mortgage or deeds of trust of unencumbered,
improved or unimproved real estate…
SECTION 198
Section 198. No insurance company shall loan
any of its money or deposits to any person,
corporation or association, except upon first
mortgage or deeds of trust of unencumbered,
improved or unimproved real estate…
SECTION 198
Section 198. No insurance company shall loan
any of its money or deposits to any person,
corporation or association, except upon first
mortgage or deeds of trust of unencumbered,
improved or unimproved real estate…
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
of any of the following:
SECTION 204
(a) First mortgage or deeds of trust of registered,
unencumbered, improved, unimproved real estate, including
condominiums;
(b) First mortgages or deeds of trust of actually cultivated,
improved and unencumbered agricultural lands in the
Philippines;
(c) Purchase money mortgages, lease purchase agreements or
similar securities executed or received by it on account of the
sale or exchange of real property acquired pursuant to Sections
206 and 208;
SECTION 204
(d) Bonds or other instruments of indebtedness issued or
guaranteed by the Government of the Philippines or its political
subdivisions authorized by law to incur such obligations or issue
such guarantees or of government-owned or -controlled
corporations and instrumentalities including the Bangko Sentral
ng Pilipinas; or
SECTION 204
(e) Obligations issued or guaranteed by universal banks,
commercial banks, offshore banking units, investment houses or
other financial intermediaries duly registered with the Bangko
Sentral ng Pilipinas; or
(f) Obligations issued or guaranteed by foreign banks or
corporations, each of which shall have total net worth of at least
One hundred fifty million US dollars ($US150,000,000.00) or
such other higher net worth as may be prescribed by the
Insurance Commission, as shown in their financial statements as
of the immediately preceding fiscal year; or
SECTION 204
(g) Assignments of monetary instruments such as cash deposits,
deposit certificates or other similar instruments of universal
banks, commercial banks, investment houses or other financial
intermediaries duly registered with the Bangko Sentral ng
Pilipinas; or
(h) Pledges of shares of stock, bonds or other instruments of
indebtedness specified in Section 209; or
(i) Chattel mortgages over equipment not more than three (3)
years old; and
(j) Such other security as may be approved by the
Commissioner.
SECTION 204
"The loans provided in the preceding subsection shall be subject
to the following conditions:
(1) The amount of loan secured by real estate mortgage over a
non-agricultural land shall not exceed seventy percent (70%) of
its appraised value, and in the case of a loan secured by a real
estate mortgage over an agricultural land, the amount of loan
shall not exceed forty percent (40%) of its market value:
Provided, That, in no case shall such loan have a maturity period
in excess of twenty-five (25) years;
(2) Unless approved by the Commissioner, no loan may be
granted upon the security of a mortgage on improved real estate
if the improvements thereon do not belong to the owner of the
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SECTION 198
Section 198. No insurance company shall loan
any of its money or deposits to any person,
corporation or association, except upon first
mortgage or deeds of trust of unencumbered,
improved or unimproved real estate…
SECTION 198
Section 198. No insurance company shall loan
any of its money or deposits to any person,
corporation or association, except upon first
mortgage or deeds of trust of unencumbered,
improved or unimproved real estate…
SECTION 199
No loan by any insurance company on the
security of real estate shall be made unless the
title to such real estate shall have first been
registered in accordance with the existing Land
Registration Act, or shall be a titulo real duly
registered, or have been previously registered
under the provisions of the existing Mortgage
Law.
SECTION 200
(1) An insurance company may purchase, hold,
own and convey such property, real and
personal, as may have been mortgaged,
pledged, or conveyed to it in good faith in trust
for its benefit by reason of money loaned by it in
pursuance of the regular business of the
company, and such real or personal property as
may have been purchased by it at sales under
pledges, mortgages or…
SECTION 200
(1) An insurance company may purchase, hold,
own and convey such property, real and
personal, as may have been mortgaged,
pledged, or conveyed to it in good faith in trust
for its benefit by reason of money loaned by it in
pursuance of the regular business of the
company, and such real or personal property as
may have been purchased by it at sales under
pledges, mortgages or…
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
land, and the owner of the improvements does not sign the deed
of mortgage. However, if the owner of the land is the
Government of the Philippines or
SECTION 204
any of its political subdivisions, and a long-term lease has been
executed in favor of the owner of the improvements, the owner
of the land need not be a party to the deed of mortgage. The
expiration date of the lease shall not, however, precede the
maturity of the loan. The phrase ‘improved real estate’ as used
herein shall mean land with permanent building or buildings
erected thereon;
(3) Lease-agreements or similar securities received on the sale
of real estate property shall not exceed one hundred percent
(100%) of the selling price of said property, or one hundred
percent (100%) of its market value at the time of its disposition,
whichever amount is lower. However, in no case shall such
agreement have a maturity period not exceeding thirty (30)
years;
SECTION 204
(4) Loans secured by shares of stock of solvent corporations or
institutions shall not exceed fifty percent (50%) of:
(i) The weighted average market price for the one hundred
eighty (180) days preceding the approval of the loan for shares
listed in the stock exchange; and
(ii) For unlisted shares, the adjusted book value of such shares.
(5) Loans secured by the chattel mortgages over equipment
shall not exceed seventy percent (70%) of the market value of
said equipment.
SECTION 205
No loan by any insurance company on the security of real estate
shall be made unless the title to such real estate shall have first
been registered in accordance with the existing Land
Registration Act, or shall have been previously registered under
the provisions of the existing Mortgage Law and the lien or
interest of the insurance company as mortgagee has been
registered.
SECTION 206
(b) An insurance company may purchase, hold, and own the
following:
(1) Real properties which serve as its main place of business
and/or branch offices: Provided, That such investment shall not
in the overall exceed twenty percent (20%) of its net worth as
shown by its latest financial statement approved by the
Commissioner.
SECTION 206
(2) Bonds or other instruments of indebtedness of the
Government of the Philippines or its political subdivisions
authorized by law to issue bonds at the reasonable market value
thereof.
(3) Bonds or other instruments of debt of government-owned or -
controlled corporations and entities, including the Bangko
Sentral ng Pilipinas.
(4) Bonds, debentures or other instruments of indebtedness of
any solvent corporation or institution created or existing under
Page 79
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SECTION 200
NONE
SECTION 201
An insurance company may (1) invest in equities
of other financial institutions, and (2) engage in
the buying and selling of short-term debt
instruments; Provided, That any or all of such
investments shall be with the prior approval of
the Commissioner.
SECTION 201
Acquire or construct housing projects and, in
connection with any such project, may acquire
land or any interest therein by purchase, lease
or otherwise, or use land acquired…The
aggregate book value of the investments of any
such company in all such projects shall not
exceed at the time of such investments twenty
five per centum of the total admitted assets of
such company on the thirty-first day of
December next preceding;
SECTION 220
Every insurance company authorized to do
business in the Philippines shall report to the
Commissioner on forms prescribed by him the
particulars of reinsurance treaties as of the first
day of January of the year following the approval
of this Code and shall thereafter similarly report
to the Commissioner particulars of any new
treaties or changes in existing treaties.
SECTION 223
NONE
SECTION 225
Within thirty days after receipt of the annual
statement approved by the Commissioner, every
insurance company doing business in the
Philippines shall publish in two newspapers of
general circulation in the City of Manila, one
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
the laws of the Philippines;
SECTION 206
Securities issued by a registered enterprise, as this term is
defined in Executive Order No. 226, otherwise known as the
Omnibus Investments Code of 1987, as amended: Provided,
That the total investment of a domestic non-life insurance
company in any registered enterprise shall not exceed twenty
percent (20%) of the net worth of said insurance company as
shown by its aforesaid financial statement unless previously
authorized by the Commissioner.
SECTION 207
An insurance company may:
(1) Invest in equities of other financial institutions;
and
(2) Engage in the buying and selling of long-term debt
instruments; Provided, That any or all of such investments shall
be with the prior approval of the Commissioner. Insurance
companies may, however, invest in listed equities of other
financial institutions without need of prior approval by the
Commissioner.
SECTION 208
Any life insurance company may:
a) Acquire or construct housing projects and, in connection with
any such project, may acquire land or any interest therein by
purchase, lease or otherwise, or use land acquired pursuant to
any other provision of this Code…. Provided, That the funds of
the company for the payment of pending claims and obligations
shall not be used for such investments.
SECTION 226
Every insurance company authorized to do business in the
Philippines shall report to the Commissioner on forms prescribed
by him the particulars of reinsurance treaties or any new treaties
or changes in existing treaties within three (3) months from their
effectivity.
SECTION 229, SECOND PAR
The annual statement shall be prepared in accordance with the
financial reporting framework as determined by the
Commissioner. In addition, the Commissioner may require other
relevant information. The form and details of such other relevant
information shall be prescribed by the Commissioner and shall
form part of the supplementary schedules to the annual
statement.
SECTION 231
Within thirty (30) days after receipt of the annual statement
approved by the Commissioner, every insurance company doing
business in the Philippines shall publish in a newspaper of
general circulation a full synopsis of its annual financial
statement showing fully the conditions of its business, and
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From the lectures of Atty. Maria Christina Sagmit
published in English and one in Pilipino, a full
sypnosis of its annual financial statement
showing fully the conditions of its business, and
setting forth its resources and liabilities.
SECTION 225
NONE
SECTION 225
NONE
NONE
SECTION 247
If the Commissioner is of the opinion upon
examination of other evidence that any domestic
or foreign insurance company is in an unsound
condition, or that it has failed to comply with the
provisions of law or regulations obligatory upon
it, or that its condition or method of business is
such as to render its proceedings hazardous to
the public or to its policyholders, or that its paid-
up capital stock,
SECTION 248
NONE
NONE
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
setting forth its resources and liabilities in accordance with such
form prescribed by the Commissioner.
SECTION 231
The Commissioner shall have the authority to make, amend, and
rescind such accounting rules and regulations as may be
necessary to carry out the provisions of this Code, and define
accounting, technical and trade terms used in this Code:
Provided, That such shall be in accordance with internationally
accepted accounting standards.
SECTION 231
The Commissioner may prescribe the form or forms in which
required information shall be set forth, the items or details to be
shown in the balance sheet and income statement, and the
methods to be followed in the preparation of accounts, appraisal
or valuation of assets and liabilities, determination of recurring
and nonrecurring income, differentiation of investment and
operating income, and in the preparation, where the
Commissioner deems it necessary or desirable, of consolidated
balance sheets or income accounts of any person directly or
indirectly controlling or controlled by the insurance company.
SECTION 251
It is unlawful to:
(a) Present or cause to be presented any fraudulent claim for the
payment of a loss under a contract of insurance; and
(b) Fraudulently prepare, make or subscribe any writing with
intent to present or use the same, or to allow it to be presented
in support of any such claim. Any person who violates this
section shall be punished by a fine not exceeding twice the
amount claimed or imprisonment of two (2) years, or both, at the
discretion of the court.
SECTION 254
If the Commissioner is of the opinion upon examination of other
evidence that any domestic or foreign insurance company is in
an unsound condition, or that it has failed to comply with the
provisions of law or regulations obligatory upon it, or that its
condition or method of business is such as to render its
proceedings hazardous to the public or to its policyholders, or
that its net worth requirement, in the case of a domestic stock
company, or its available cash assets, in the case of a domestic
mutual company
SECTION 255, 5th PAR
No insurance company, life or non-life, or any professional
reinsurer, ordered to be liquidated by the Commissioner under
the provisions hereunder may be rehabilitated or authorized to
transact anew, insurance or reinsurance business, as the case
may be.
SECTION 280-DEMUTUALIZATION
A domestic mutual life insurance company doing business in the
Philippines may convert itself into an incorporated stock life
insurance company by demutualization. To that end, it may
provide and carry out a plan for the conversion by complying
with the requirements of this title.
"The conversion of a domestic mutual life insurance company to
an incorporated stock life insurance company shall be carried
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From the lectures of Atty. Maria Christina Sagmit
NONE
SECTION 274- requirement for withdrawal in
business of a foreign corporation
The Commissioner shall publish the application
for withdrawal daily for a period of one week in
two newspapers of general circulation in the City
of Manila, one in English and the other in
Pilipino. The expenses of such publication shall
be paid by the insurance company filing such
application.
SECTION 276
The Commissioner shall make an examination
of the books and records of the withdrawing
company, and if, upon such examination, the
Commissioner finds that the insurer has no
outstanding liabilities to residents of the
Philippines, it shall cancel the withdrawing
company's certificate of authority, if unexpired,
and shall permit the insurer to withdraw. The
cost and expenses of all such examination shall
be paid as prescribed in section four hundred
seventeen.
SECTION 281
Any person, partnership, association, or
corporation authorized to transact solely
reinsurance business must have a paid-up
capital stock of at least ten million pesos,
twenty-five per centum of which must be
invested in securities satisfactory to the
Commissioner, consisting of bonds or other
evidences of debt of the Government of the
Philippines or
SECTION 281
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
out pursuant to a conversion plan duly approved by the
Commissioner.
SECTION 280
"The Commissioner shall promulgate such rules and regulations
as he or she may deem necessary to carry out the provisions of
this title, after due consultation with representatives of the
insurance industry.
"All converted insurers under the provisions of this title shall be
subject to all other applicable provisions of this Code. The
provisions of the Corporation Code shall apply in a suppletory
manner.
Section 282.
The Commissioner shall publish the application for withdrawal
once a for three (3) consecutive weeks in a newspaper of
general circulation in the Philippines. The expenses of such
publication shall be paid by the insurance company filing such
application.
Section 284.
The Commissioner shall cause an examination of the books and
records of the withdrawing company, and if, upon such
examination, the Commissioner finds that the insurer has no
outstanding liabilities to policyholders and creditors in the
Philippines, and no policies uncancelled; or its primary liabilities
have been reinsured or assumed by another insurance company
authorized to transact business in the Philippines, as required in
the preceding section, it shall cancel the withdrawing company’s
certificate of authority, if unexpired, and shall permit the insurer
to withdraw. The cost and expenses of all such examination
shall be paid as prescribed in Section 440.
Section 289.
Any partnership, association, or corporation authorized to
transact solely reinsurance business must have a capitalization
of at least Three billion pesos (P3,000,000,000.00) paid in cash
of which at least fifty percent (50%) is paid-up and the remaining
portion thereof is contributed surplus, which in no case shall be
less than Four hundred million pesos, (P400,000,000.00) or
such capitalization as may be determined by the Secretary of
Finance, upon the recommendation of the Commissioner:
Section 289.
Provided, That (25%) of the paid-up capital must be invested in
securities satisfactory to the Commissioner, consisting of bonds
or other instruments of debt of the Government of the Philippines
or its political subdivisions or instrumentalities, or of government-
owned or -controlled corporations… Provided, That aforesaid
capital requirement is without prejudice to other requirements to
be imposed under any risk-based capital method that may be
adopted by the Commissioner: Provided, finally, That the
provisions of this chapter applicable to insurance companies
shall as far as practicable be likewise applicable to professional
reinsurers.
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SECTION 294 Section 302

NONE No person, other than an authorized insurer, shall acquire
control of any domestic insurer, whether by purchase of its
securities or otherwise, except: …
1. After twenty (20) days written notice to its insurer
or such shorter period as the Commissioner may
permit, of its intention to acquire control and
2. (2) With the prior written approval of the
Commissioner.

SECTION 294 Section 302

NONE (b) The Commissioner shall disapprove the acquisition of control
of a domestic insurer if he determines, after notice and an
opportunity to be heard, that such action is reasonably
necessary to protect the interest of the people of this country.
The following shall be the only factors to be considered by him in
reaching the foregoing determination:…
7) Whether the acquisition is likely to be hazardous or prejudicial
to the insurer’s policyholders or stockholders.

SECTION 299 Section 307,308, 326, 331, 337, 345

Renewal of licenses of agents shall be annually Renewal of licenses of agents, resident agents, reinsurance
NONE agents, non-life company underwriters, brokers, adjusters,
actuaries shall be every 3 years
Licenses may be renewed in the case of the company
represented by such agents, and in the case of insurance
brokers, upon the application of the said brokers, themselves.
Section 308. The provisions of Sections 307 and 309 shall apply
to an employee who shall be engaged to sell insurance products
by an insurance company.

SECTION 300 Section 309, PARS 2 and 3

NONE An insurance agent is an independent contractor and not an
employee of the company represented. ‘Insurance agent’
includes an agency leader, agency manager, or their equivalent.
Since the insurance industry is imbued with public interest, the
insurance companies upon approval of the Commissioner may
exercise wide latitude in supervising the activities of their
insurance agents to ensure the protection of the insuring public.

SECTION 302 and 310 Sections 311 and 320

Bonding requirement: P100,000 Bonding requirement of Every applicant for an insurance
broker’s license or reinsurer’s license= P500,000

SECTION 303 Section 312

The Commissioner shall, in order to determine
the competence of every applicant to have the
kind of license applied for, require such
applicant to submit to a written examination and
to pass the same to the satisfaction of the
Commissioner. Such examination shall be held
at such times and places as the Commissioner
shall from time to time determine.
The Commissioner shall, in order to determine the competence
of every applicant to have the kind of license applied for, require
such applicant to submit to a written examination and to pass the
same to the satisfaction of the Commissioner. The
Commissioner may delegate or authorize the administration of
the examination to an independent organization, subject to such
conditions that the Commissioner may provide.

SECTION 309 Section 318

Old penalty is P10,000.00 Penalty to procure, receive or forward applications of insurance
in, or to issue or to deliver or accept policies or contracts of
insurance of or for, any insurance company or companies not
authorized to transact business in the Philippines, covering risks,
life or non-life, situated in the Philippines; and any such person,
partnership, association or corporation violating the provisions of
this section shall be deemed guilty of a penal offense, and upon

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SECTION 334
Any violation of any provision of this title shall be
punished by a fine of not more than ten
thousand pesos, or by imprisonment in the
discretion of the court; Provided, That, in case of
a partnership, association or corporation, the
said penalty shall be imposed upon the partner,
president, manager, managing director, director
or person in charge of its business or
responsible for the violation.
SECTION 335
No life insurance company shall be licensed to
do business in the Philippines nor shall any life
insurance company doing business in the
Philippines be allowed to continue doing such
business unless they shall engage the services
of an actuary duly accredited with the
Commissioner who shall, during his tenure of
office, be directly responsible for the direction
and supervision of all actuarial work connected
with or that may be involved in the business of
the insurance company.
SECTION 335
NONE
SECTION 338, 2nd PAR
NONE
Section 363
If the Commissioner, after notice and hearing,
finds that any insurance company, rating
organization, agent, broker or other person has
violated any of the provisions of this title, it shall
order the payment of a fine not to exceed five
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
conviction thereof, shall for each such offense be punished by a
fine of P250,000.00, or imprisonment of six (6) months, or both,
at the discretion of the court;: Provided, That the provisions of
this section shall not apply to reinsurance.
Section 343
Any violation of any provision of this title shall be punished by a
fine of not less than Ten thousand pesos, (P10,000.00), or by
imprisonment at the discretion of the court;: Provided, That, in
case of a partnership, association or corporation, the said
penalty shall be imposed upon the partner, president, manager,
managing director, director or person in charge of its business or
responsible for the violation
Section 344
No life insurance company shall be licensed to do business in
the Philippines nor shall any life insurance company doing
business in the Philippines be allowed to continue doing such
business unless they shall engage the services of an actuary
duly accredited with the Commissioner who shall, during his
tenure of office, be directly responsible for the direction and
supervision of all actuarial work connected with or that may be
involved in the business of the insurance company. The
Commissioner may also require non-life insurance companies to
engage the services of an accredited actuary, in accordance
with the rules and regulations that the Commissioner will
formulate.
Section 345
The registration of the actuary shall be suspended or revoked by
the Commissioner on the following grounds:
(1) Failure to adequately perform required functions
and duties under this Code;
(2) Failure to disclose conflict of interest;
(3) Failure to comply with the Code of Conduct of the Actuarial
Society of the Philippines; or
(4) Such other grounds that may be determined by the
Commissioner.
No actuary engaged by a life insurance company shall be at the
same time a stockholder or a director of the board, chief
executive officer or chief financial officer of the company or hold
any position that the Commissioner may determine to have an
inherent conflict of interest to the position of an actuary.
Section 347, 2nd PAR
No external auditor shall be engaged by supervised persons or
entities unless it has been issued an accreditation certificate by
the Commissioner. The accreditation certificate shall be valid
until December 31 of the third year from issuance unless it is
revoked or suspended. The Commissioner shall issue rules and
regulations to govern the accreditation of the external auditor
and the revocation or suspension of the accreditation.
Section 372
If the Commissioner, after notice and hearing, finds that any
insurance company, rating organization, agent, broker or other
person has violated any of the provisions of this title, it shall
order the payment of a fine not to exceed Twenty-five thousand
pesos (P25,000.00) for each such offense, and shall
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From the lectures of Atty. Maria Christina Sagmit

hundred pesos for each such offense, and shall
immediately revoke the license issued to such
insurance company, rating organization, agent,
or broker. The issuance, procurement or
negotiation of a single policy or contract of
insurance shall be deemed a separate offense.
immediately suspend or revoke the license issued to such
insurance company, rating organization, agent, or broker. The
issuance, procurement or negotiation of a single policy or
contract of insurance shall be deemed a separate offense.

NONE Section 374

The Commissioner, in consultation with the duly accredited
associations representing the insurance industry, shall adopt
and promulgate a code of conduct to promote integrity, honesty
and ethical business practices among insurance agents,
distributors and other intermediaries.

NONE Section 375-377

TITLE 9
"BANCASSURANCE
The term bancassurance shall mean the presentation and sale
to bank customers by an insurance company of its insurance
products within the premises of the head office of such bank duly
licensed by the Bangko Sentral ng Pilipinas or any of its
branches under such rules and regulations which the
Commissioner and the Bangko Sentral ng Pilipinas may
promulgate.

NONE Section 375-377

To engage in bancassurance arrangement, a bank is not
required to have equity ownership of the insurance company. No
insurance company shall enter into a bancassurance
arrangement unless it possesses all the requirements as may be
prescribed by the Commissioner and the Bangko Sentral ng
Pilipinas.
"

NONE Section 375-377

No insurance product under this section, whether life or non-life,
shall be issued or delivered unless in the form previously
approved by the Commissioner.
Section 376. Personnel tasked to present and sell insurance
products within the bank premises shall be duly licensed by the
Commissioner and shall be subject to the rules and regulations
of this Act.

NONE Section 375-377

Section 377. The Commissioner and the Bangko Sentral ng
Pilipinas shall promulgate rules and regulations to effectively
supervise the business of bancassurance.

Section 377 Section 390

In the case of a land transportation operator, the insurance
guaranty in cash or surety bond shall cover liability for death or
bodily injuries of third-parties and/or passengers arising out of
the use of such vehicle in the amount not less than Twelve
thousand pesos (P12,000.00) per passenger or third -party and
an amount, for each of such categories, in any one accident of
not less than that set forth in the following scale:

Section 377 Section 390

(1) Motor vehicles with an authorized capacity of twenty-six (26)
or more passengers: Fifty thousand pesos; (P50,000.00);
(2) Motor vehicles with an authorized capacity of from twelve
(12) to twenty-five (25) passengers: Forty thousand pesos;
(P40,000.00);

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(3) Motor vehicles with an authorized capacity of from six (6) to

eleven (11) passengers: Thirty thousand pesos; (P30,000.00);
(4) Motor vehicles with an authorized capacity of five (5) or less
passengers: Five thousand pesos (P5,000.00) multiplied by the
authorized capacity.

Section 377 Section 390

Private Cars
(i) Bantam: Twenty thousand pesos (P20,000.00);
(ii) Light: Twenty thousand pesos (P20,000.00); and
(iii) Heavy: Thirty thousand pesos (P30,000.00).

Section 377 Section 390

2) Other Private Vehicles
(i) Tricycles, motorcycles and scooters: Twelve thousand pesos
(P12,000.00);
(ii) Vehicles with an unladen weight of 2,600 kilos or less:
Twenty thousand pesos (P20,000.00);
(iii) Vehicles with an unladen weight of between 2,601 kilos and
3,930 kilos: Thirty thousand pesos (P30,000.00); and
(iv) Vehicles with an unladen weight over 3,930 kilos: Fifty
thousand pesos (P50,000.00).

Section 392 Section 405

Capitalization used to be P10,000
No mutual benefit association shall be issued a license to
operate as such unless it has constituted and established a
Guaranty Fund by depositing with the Commissioner an initial
minimum amount of Five million pesos (P5,000,000.00) in cash,
or in government securities with a total value equal to such
amount, to answer for any valid benefit claim of any of its
members.

Section 395 Section 408

NONE "A mutual benefit association shall only maintain free and
unassigned surplus of not more than twenty percent (20%) of its
total liabilities as verified by the Commissioner. Any amount in
excess shall be returned to the members by way of dividends,
enhancing the equity value or providing benefits in kind and
other relevant services. In addition, subject to the approval of the
Commissioner, a mutual benefit association may allocate a
portion for capacity building and research and development such
as developing new products and services, upgrading and
improving operating systems and equipment and continuing
member education.

NONE Section 423

All provisions of this Code governing life insurance companies
and such other provisions whenever practicable and necessary,
shall be applicable to mutual benefit associations.

NONE Section 428

The treasurer of a charitable trust shall file a fidelity bond in the
amount commensurate with the value of the trust property in his
custody, as may be determined by the Commissioner.

NONE Section 429

CHAPTER VIII

"TRUST BUSINESS IN GENERAL
"Section 429. An insurance company may engage in limited trust
business, consisting of managing funds pertaining only to
retirement and pre-need plans, provided it has secured a license
to do so from the Bangko Sentral ng Pilipinas. This trust

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 INSURANCE LAW REVIEW 2016
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business shall be separate and distinct from the general

business of the insurance company and shall be subject to rules
and regulations as may be promulgated by the Bangko Sentral
ng Pilipinas in consultation with the Commissioner.

NONE Section 430

"CHAPTER IX
"REGISTRATION, RESPONSIBILITIES
AND
OVERSIGHT OF SELF-
REGULATORY
ORGANIZATIONS
“The Commissioner shall have the power to register as a self-
regulatory organization, or otherwise grant licenses, and to
regulate, supervise, examine, suspend or otherwise discontinue,
as a condition for the operation of organizations whose
operations are related to or connected with the insurance market
such as, but not limited to, associations of insurance companies,
whether life or non-life, reinsurers, actuaries, agents, brokers,
dealers, mutual benefit associations, trusts, rating agencies, and
other persons regulated by the Commissioner, which are
engaged in the business regulated by this Code.

NONE Section 437

The Insurance Commissioner shall be appointed by the
President of the Republic of the Philippines for a term of six (6)
years without reappointment and who shall serve as such until
the successor shall have been appointed and qualified. If the
Insurance Commissioner is removed before the expiration of his
term of office, the reason for the removal must be published.

NONE Section 437

In addition to the foregoing, the Commissioner shall have the
following powers and functions:
(a) Formulate policies and recommendations on issues
concerning the insurance industry, advise Congress and other
government agencies on all aspects of the insurance industry
and propose legislation and amendments thereto;
(b) Approve, reject, suspend or revoke licenses or certificates of
registration provided for by this Code;

NONE Section 437

(c) Impose sanctions for the violation of laws and the rules,
regulations and orders issued pursuant thereto;
"(d) Prepare, approve, amend or repeal rules, regulations and
orders, and issue opinions and provide guidance on and
supervise compliance with such rules, regulations and orders;
(e) Enlist the aid and support of, and/or deputize any and all
enforcement agencies of the government in the implementation
of its powers and functions under this Code;
(f) Issue cease and desist orders to prevent fraud or injury to the
insuring public;
(g) Punish for contempt of the Commissioner, both direct and
indirect, in accordance with the pertinent provisions of and
penalties prescribed by the Rules of Court;

NONE Section 437

(h) Compel the officers of any registered insurance corporation
or association to call meetings of stockholders or members
thereof under its supervision;
(i) Issue subpoena duces tecum and summon witnesses to
appear in any proceeding of the Commission and, in appropriate
cases, order the examination, search and seizure of all
documents, papers, files and records, tax returns, and books of

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 INSURANCE LAW REVIEW 2016
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accounts of any entity or person under investigation as may be

necessary for the proper disposition of the cases before it,
subject to the provisions of existing laws;

NONE Section 437

(j) Suspend or revoke, after proper notice and hearing, the
license or certificate of authority of any entity or person under its
regulation, upon any of the grounds provided by law;
(k) Conduct an examination to determine compliance with laws
and regulations if the circumstances so warrant as determined
by appropriate rules and regulations;
(l) Investigate not oftener than once a year from the last date of
examination to determine whether an institution is conducting its
business on a safe and sound basis: Provided, That, the
deficiencies/irregularities found by or discovered by an audit
shall be immediately addressed;
(m) Inquire into the solvency and liquidity of the institutions
under its supervision and enforce prompt corrective action;

NONE Section 437

(n) To retain and utilize, in addition to its annual budget, all fees,
charges and other income derived from the regulation of
insurance companies and other supervised persons or entities;
(o) To fix and assess fees, charges and penalties as the
Commissioner may find reasonable in the exercise of regulation;
and
(p) Exercise such other powers as may be provided by law as
well as those which may be implied from, or which are
necessary or incidental to the express powers granted the
Commission to achieve the objectives and purposes of this
Code.

NONE Section 437

The Commission shall indemnify the Commissioner, Deputy
Commissioner, and other officials of the Commission, including
personnel performing supervision and examination functions, for
all costs and expenses reasonably incurred by such persons in
connection with any civil or criminal actions, suits or proceedings
to which they may be made a party to by the reason of the
performance of their duties and functions, unless they are finally
adjudged in such actions, suits or proceedings to be liable for
negligence or misconduct.

NONE Section 437

In the event of settlement or compromise, indemnification shall
be provided only in connection with such matters covered by the
settlement as to which the Commission is advised by external
counsel that the persons to be indemnified did not commit any
negligence or misconduct:
"The costs and expenses incurred in defending the
aforementioned action, suit or proceeding may be paid by the
Commission in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf
of the Commissioner, Deputy Commissioner, officer or employee
to repay the amount advanced should it ultimately be determined
by the Commission that the person is not entitled to be
indemnified.

NONE Section 438.

In addition to the administrative sanctions provided elsewhere in
this Code, the Insurance Commissioner is hereby authorized, at
his discretion, to impose upon the insurance companies, their

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NONE
SECTION 416
The insurer or surety may, in the same action
file a counterclaim against the insured or the
obligee.
The insurer or surety may also file a cross-claim
against a party for any claim arising out of the
transaction or occurrence that is the subject
matter of the original action or of a counterclaim
therein.
With leave of the Commissioner, an insurer or
surety may file a third-party complaint against its
reinsurers for indemnification, contribution,
subrogation or any other relief, in respect of the
transaction that is the subject matter of the
original action filed with the Commissioner.
SECTION 416
NONE
SECTION 417
Used to be P10,000
SECTION 417
Used to be P10,000
Morilla, Remoroza, Camello, Alabastro, Soriano, Mier, Diesto, Quibo, Genolos, Morente, Bote
directors and/or officers and/or agents, for any willful failure or
refusal to comply with, or violation of any provision of this Code,
or any order, instruction, regulation, or ruling of the Insurance
Commissioner, or any commission or irregularities, and/or
conducting business in an unsafe or unsound manner as may be
determined by the Insurance Commissioner, the following:
Section 438.
(a) Fines not less than Five thousand pesos
(P5,000.00) and not more than Two hundred
thousand pesos (P200,000.00); and
(b) Suspension, or after due hearing, removal of directors and/or
officers and/or agents.
Section 439. The Commissioner shall have the power to
adjudicate claims and complaints involving any loss, damage or
liability for which inan insurer may be answerable under any kind
of policy or contract of insurance, or for which such insurer may
be liable under a contract of suretyship, or for which a reinsurer
may be sued under any contract of reinsurance it may have
entered into; or for which a mutual benefit association may be
held liable under the membership certificates it
Section 439.
The power of the Commissioner, does not cover the relationship
between the insurance company and its agents/brokers but is
limited to adjudicating claims and complaints filed by the insured
against the insurance company.
The Commissioner may authorize any officer or group of officers
under him to conduct investigation, inquiry and/or hearing and
decide claims and he may issue rules governing the conduct of
adjudication and resolution of cases. The Rules of Court shall
have suppletory application.
Section 439, last PAR
In order to promote party autonomy in the resolution of cases,
the Commissioner shall establish a system for resolving cases
through the use of alternative dispute resolution.
Section 442
Any person, company or corporation subject to the supervision
and control of the Commissioner who violates any provision of
this Code, for which no penalty is provided, shall be deemed
guilty of a penal offense, and upon conviction be punished by a
fine not exceeding Two hundred thousand pesos (P200,000.00)
or imprisonment of six (6) months, or both, at the discretion of
the court.
Section 442
If the offense is committed by a company or corporation, the
officers, directors, or other persons responsible for its operation,
management, or administration, unless it can be proved that
they have taken no part in the commission of the offense, shall
likewise be guilty of a penal offense, and upon conviction be
punished by a fine not exceeding Two hundred thousand pesos
(P200,000.00) or imprisonment of six (6) months, or both, at the
discretion of the court.
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