Insurance

Primary law is the insurance code, supplementary the civil code in the absence of any applicable provision in IC resort can be made to the cc, for a relevant provision which we find for ex. Essential elements of contract object, consent, cause or consideration, capacity of parties, Now who are the parties in a contract of insurance ? You have the insurer and the insured. Now there are cases rd where a 3 party is designated as beneficiary but strictly speaking he is not a party, he is not. First of all under the code who may act as insurer? Under the IC any person, partnership, association or corporation duly licensed by the office of the Insurance commissioner may act as insurer. You must have observed that practically all insurers are Corporations duly licensed by the office of the Insurance Commissioner but it does not necessarily mean that an individual person may not act as insurer an individual person may also act as an insurer if duly licensed by the office of the Insurance Commissioner. 60 s initial capital is only 500k so easy to organized so much so that small insurance companies proliferated. Now initial Capital is 200M Insurance Companies may be foreign or domestic if organized under local laws you call it a _________ Insurance Company. Now foreign insurance companies are also allowed to do business in our country provided that they meet the requirements prescribe by the laws of the Insurance______ Take note also that the Insurance industry affects Public Interest, Public Interest is involved so much so that it is subject to government regulation Now insofar as the other party is concerned the other party is the Insured. There are several kinds of Insurance Coverage you have property insurance also known as non-life insurance. Generally Insurance Companies are classified as Life and Non- Life. Non Life Insurance companies what kind of business do they have? They have property insurance like fire, marine insurance its prop insurance There is Life, health and accident Insurance-Life Insurance. rd 3 one is Casualty Insurance-Motor Vehicle Insurance is casualty. Now No Insurance Company is allowed to engage in both kinds of business life and non-life, these are 2 diff kinds of business, the reserve for life is different or the reserve for non-life. The requirements are different. Lloyd s of London supposed to be the largest insurance company in the world but Lloyds is not a corporation it s a partnership among diff enterprises. Insurance is not necessarily a game of chance it is not a speculative business because the risk here is distributed, there is a distribution of risk. Lets go to the business side of

insurance Ex. Here is an Insurance company assuming that the capital of the Ins Co. is only 50m can that Ins Co underwrite a policy worth of 200m or 500m? Capital only 50m, prop to be insured coverage 500m, No, how can they pay but with insurance that can be done because of what we call contract of reinsurance. Insured here is the original insurer ,Original insurer is reinsuring the risk with the other Insurance Company. The parties to the contract of insurance is the reinsurer and the insured. Theres a ceiling- the rest or the excess you have to reinsure You have 2 kinds of reinsurance you have the Automatic Reinsurance and Facultative Reinsurance. When you organized an insurance company one of the requirements of the Insurance Commissioner is an automatic reinsurance you have to look for somebody who is willing to sign a reinsurance contract with your company, a reinsurer should be a bigger company , automatic reinsurance of a certain percentage is automatically reinsured. The other one is the facultative Automatic reinsurer can omly absorb 50m you have to look for another insurance company. There is distribution of Risk, this is the essence of an Insurance Business. How about the Insured ? who can be a party to the contract as insured ? Natural person, corporation, Ex. Co. own a piece of Prop. You can insure it. In case of insured there must be what you call an insurable interest ,if there is no insurable interest there can be no valid insurance contract there is consent, as to matter of consent we follow the civil code. The contract of insurance is a consensual contract, consensual meeting of the minds, there must be meeting of the minds of the contracting parties, you have a perfected contract of insurance because mere consent is enough. Contract of Insurance is not a real contract. In Civil Law there is consent when there is a meeting of the minds of the parties, concurrence bet offer and acceptance, the contract of Insurance is perfected when the acceptance of the obligation by the insurer is brought to the knowledge of the insured. The offeror in the contract of Insurance is the insured the insurance company offers the insured an application form for insurance, if acceptable the insurer issues a policy, this is to be done by the issuance of the policy The moment the insurance policy is delivered by the agent to the insured knowledge of the acceptance is brought acceptance by the insurer of the terms of the Insurance. Now there is cause of insurance insofar as the insurer is concerned, what is the???/ = the premium to be paid by the insured insofar as the insured is concerned what is the consideration it is the promise of the insurer to indemnify the insured upon the happening of the unknown _____ peril event

Contract of Insurance is Bilateral, bilateral in the sense that are bound by their respective prestation, the insured for the premium, the insurer to indemnify the insured upon the happening of a unknown_______________________________ Now with Subject Matter when it is a prop insurance is the thing itself but remember it is not the property alone that will determine whether there is ______ there must be what you call insurable interest. If a piece of property is being insured the insured must have an insurable interest in that piece of property. The person insuring the property must have insurable interest lack of insurable interest there is no contract of insurance. Ex a piece of property . Insurable Interest is essential in all contracts of insurance in life, property there should be insurable interest, in the absence of insurable interest there should be no valid contract of insurance. Now what is your concept of insurable interest? When a person in relation to a particular subject matter may pecuniary damage or pecuniary loss in case of damage or injury to the subject there is what you call insurable interest. There is also insurable interest where in relation to a subject the insured derives certain benefit so in other words loss or damage will mean loss of pecuniary _______ thee must be II. If you insure a piece of property you must have II in that piece of property. If you insure the life of a particular person gen. rule you must have II in the life of that person. Question? what is the underlying reason behind II, why does the LAW requires II as an essential Element in Cotracts of Insurance? You removed II do away w/II and it will no longer be a contract of Ins. It will become a wagering contract, a contract of chance and if it s a wagering contract it s against public policy because if you insure something and you do not have insurable interest in the thing and the loss of the thing and you are going to receive the proceeds there is a small temptation for you to destroy or damage_____________ if you sure the life of a person and you do not have II in the life of the person there will be a strong temptation on your part to kill that person. So basic reason PUBLIC POLICY. W/O II it becomes a wagering contract and a wagering contract is not____ because it s a game of chance. So much so that in any given case in insurance the first thing that you have to look into is the existence of Insurable Interest. Like for example in the case of Life. In Life Insurance may be classified into 2 here is a person insuring his own life and making his own estate or his own self as beneficiary. The other class of insurance is you insure the life of another person and make yourself as beneficiary. 2 classes generally speaking of Life Insurance. Insuring yourself when you insure yourself there is no question that you have insurable interest in your own life. But how about in the life of 3rd persons, in sec 10 of the IC there is an enumeration of the various cases

where a person may have insurable interest 1) Himself, spouse-you can insure the life of your husband and vice versa, children-parents can also insure the life of their children and this is due to blood relationship, close blood relationship that is why by law it says there is insurable interest 2) on any person on whom he depends wholly or in part for education and support or in whom he has a pecuniary interest you have insurable interest on these persons, now question is it necessary that there should be a legal basis in other is a person legally bound to finance your education or is a person legally bound to support you, supposing x has a rich auntie who wants to finance his education, legally the auntie has no legal obligation to finance his education but she has been supporting her for years? Can the niece has II in the life of her aunt, under the cc the aunt does not have a legal obligation? Does she have II? Yes, there is no requirement for legal basis, mere fact that a person has been supporting your education death/loss would mean loss on you, you have an II in the life of that person Another, here is a person a philathropist who has been supporting an act of philanthropy, no relation, no blood ties, you have an II here also. In life insurance there is no need for a legal basis mere fact that a person has been giving you support, you have an II in his life. This is the difference bet life insurance and prop insurance. In prop insurance there must be a semblance of legality, in other words there must be more or less a legal basis before a person can say that he has an II in that particular piece of property Ex. Say a bldg. a commercial bldg. you have a lease contract for 10 yrs of the Grnd Flr you have a store ther question do you have II in that Bldg? I f that Bldg is lost will you be damaged or ______ the answer is Yes, If you have a leasehold contract for a piece of property it is strategically located that is______ you can sell your leasehold right . Another Ex. You have a very good friend and your friend is leaving for abroad on a scholarship away for 1 yr, you can stay in my condo unit, nothing to pay, you can stay. Do you have an II interest in that condo unit ? you get benefits, its for free. Do you have II? You do not have II , there is no legal basis, no lease contract you are just allowed to stay. Unlike in Life Insurance remember that, that is the big difference bet the 2 , life Insurance there is no need for a legal basis, property insurance there must be a legal basis. For example you are a farmer and you neighbour had a farm has ____ you to participate in harvesting his crop every season, dyou have II in the farm of your neighbour just because he allows you to participate in the harvest. There is no contract, you do not have any insurable interest, That is prop. Insurance, In life remember no need for legal basis that s the difference. Mere blood relationship is not enough only those enumerated by law Ex. Art 195 of the FC those referring to support. Spouses, legitimate ascendants and descendants,

parents and their children that is art 195, dyou have a very __________ you have an II in the life of your friend, no, mere friendship is not enough, love and affection is not enough. Blood relationship only those relationship as enumerated by the law Ex Does a niece has a II in the life of the aunt? Cousins first cousins, mere blood relationship is not enough only those enumerated by law, love and affection no matter how close, NO, Friendship No. Another case where a person may have an ii in the life of another in the case of creditor and debtor, A creditor has II in the life of his debtor to the extent of his obligation/debts. If a person is indebted in the amount 50k creditor has an II in the life of that person only to the extent of 50k pesos. Now in a case of mortgagor and mortgagee as we have already studied before, the mortgagee is the creditor, the mortgagor is the debtor. If the mortgagor gave a piece of property as a collateral as security for a 50k peso loan does the mortgagee have an ii in the piece of property? The ans is yes to the extent of his mortgage remember also as we have stated before that mortgagor and mortgagee have separate II in the mortgaged property. The creditor can insure the prop to the extent of the obligation of the mortgagor, the creditor on the other hand can insure the prop. To the extent of its full value. 2 separate insurance, now in case of life when a person insures his own life what is the measure of his II in his own life ?you are insuring your own life, how do you measure your II, to what extent are you going to be damnified? Your heirs will be damnified? Remember II in life is beyond pecuniary estimation, you cannot assign a pecuniary value in the life of a person so much so that Life Insurance is an exception it is not a contract of indemnity. Because you cannot estimate the pecuniary value of human life, not a contract of indemnity unlike property insurance. Now to what extent ? up to how much may a person insure himself ? there is no limit as long as you can pay the corresponding premium. If you want to insure yourself for 10m and you can pay the premium well and good. Insurer will like it. That s the case in Life Insurance. In sec 10 another, this is any person under the legal obligation to him for a payment of money or respecting property or services which death or illness might delay or prevent the performance and of any person upon whose life any estate or any interest vested in him depends, well this a case of legacy, a legacy for example x is the legatee in a will x you can enjoy this house as long as your auntie is still alive but the moment she dies you your legacy _____ Your leasehold right depends upon another the owner of that leasehold has an II on the life of his auntie upon his, the moment his auntie died his leasehold right is terminated this is also insurable. So in Sec 10 you have a list an enumeration of the various cases of II. Now Beneficiaries sec 13 the insured shall have the right to change the beneficiary he designated in the policy unless he

has expressly waived this right in the policy. There a re 2 kinds of beneficiaries the revocable and the irrevocable. The revocable can be changed at any time. Irrevocable cannot be changed by the insurer. The presumption alone under sec 11 the beneficiaries designated is revocable unless there is an express waiver of the right to revoke. Presumption is revocable, waiver must be stated in the same policy. Let s try to analyse the property rights of the insured and the beneficiaries. If it is irrevocable, if the beneficiary. Is irrevocable he is practically the absolute owner of the policy. Another, the insured here/any person/ any owner of the policy under the insurance law is entitled to what you call a cash surrender value. After 2 yrs. the owner of the policy can surrender the policy and get a CSV from the insurance company that is 1 of the features of life insurance policy. Another you can get a loan, you can borrow from the insurance company using the same proceeds as your collateral. If your policy already has cash surrender value of 10k you use the proceeds as collateral. Can you use these 2 property feature of a life insurance policy be s till enjoyed by the insured since he has waived his right to revoke the beneficiary? Does the CSV belong to the beneficiary or the owner of the policy? Remember For the Beneficiary to enjoy the benefits of the policy, the policy is subject to a condition = upon the passing of the insured only then can the beneficiary enjoy the benefits of the policy but be that as may, owner of the policy insured he cannot use it w/o the consent of the irrevocable beneficiary he should get the consent, the insured also cannot get the CSV w/o the consent of the Irrevocable Beneficiary may the insured add another beneficiary? Can he include an additional beneficiary? No, any additional beneficiary can affect the right of the irrevocable beneficiary, no way, Another question may arise how about matter of paying premiums, who pays the premiums of course the insured but what if the insured stops paying the premium? Beneficiary cannot compel the insured to pay the premium, he can pay the premium instead. The IRREVOCABLE beneficiary can continue. Not everybody can be a beneficiary under the law there are persons who cannot be beneficiaries Ex. Art 739 any person can be a beneficiary irrespective of his lack of insurable interest, under art 739 the ff donations shall be void, there is a similarity bet the designation of a beneficiary and the making of a donation in both cases the consideration is LIBERALITY. Art 739 they are void donation this applies also to cases of Insurance Policies with beneficiaries. 1. Bet persons who were guilty of adultery and concubinage at the time of donation/designation. 2. Those made between persons found guilty of the same criminal offense in consideration thereof 3. Those made to Public Officers descendants or ascendants by reason of his office

The appointment of the beneficiaries in this cases shall be considered as null and void the beneficiaries cannot receive the profits of the policy. What will happen if the insured predeceased the beneficiaries / the beneficiary predeceased the insured to whom shall the proceeds fall? Is the heirs of the beneficiary entitled? If it has become a vested right? that can be subject of inheritance by way of succession the heirs of the beneficiary, Another school of thought when the beneficiary dies, the heirs are not entitled, the estate of the insured will be entitled to the proceeds not the heirs of the irrevocable beneficiary, they are not the intended persons by the insured to receive the _____ these were not the person intended. Beneficiary predeceased the insured it (proceeds) will go to the estate of the insured not the heirs of the irrevocable beneficiary. The authorities are more inclined to favour this view. Causes of the death of the insured is it relevant? Supposing the insured committed a crime and was sentenced to death execution in the hands of the law, will the beneficiary of the policy still be entitled to the proceeds of the policy ? will it still be valid? Better opinion is that the policy is still valid because dying in the hands of the law is 1 of the assumed risk of the insurer. Beneficiaries gets the proceed Insured commits suicide while in a state of insanity? Insurance is still valid, supposing insured died by accident thru reckless imprudence, gross negligence,? this will not affect the validity of the policy, policy would still be considered valid. How about property insurance what is insurable interest in property? Its different from Life, now in sec 14 insurable interest in property may consists in 1. Existing interest 2. Inchoate interest, founded on an existing interest 3. An expectancy coupled with existing interest , how about in the case of property insurance what is your concept of insurable interest, when a person derives benefit or advantage on a piece of property and deprived of its benefits by damage or destruction that is II. The contract of Property of Insurance is different from Life Insurance in the sense that Property insurance is a contract of indemnity to indemnify, if the value of the property is 100k and there is full coverage the insured is entitled to receive the full value of the prop. 100k because it s a contract of indemnity. In the case of life its not exactly a contract of indemnity because the value of life is beyond pecuniary estimation, that is why its not strictly speaking a contract of indemnity unlike property insurance. Existing Interest when you are an owner of a piece of property you have an II. If you have a leasehold right in a particular place where you conduct business, you have an II in that piece of property . Do children have II in the property of their owned by their parents, ex. Parents do not believe of in insurance, may the children insure the property in their own name, do they have

II? No, they don t have II, as you have studied in Civil Law the interest of children is merely inchoate they do not have any right in those properties those properties still belong to the parents, you do not have any say in the disposition of the properties. No II in those props. How about the props of a creditor, a General Debtor, Ex. X has obligations amounting to 200k in favour of y but the obligation is unsecured, No Collateral, 200k not collaterized but the debtor has existing props, does the creditor have II on the properties of the debtor ? No, Sir, A creditor may have II over the props of his debtor only if a piece of prop. Is given to him as collateral if no piece of prop is given to him as collateral, he is only a gen. creditor he does not have II to the pieces of prop. Of the debtor that is the rule. You re a lessee do you have II in the prop you re leasing ? would suffer damage loss? A lessee has II in the prop. He is leasing, How about carriers ? do they have II in the goods and passengers being transported? Yes they have II, Warehouseman,? Yes ,they have II in the goods stored in his warehouse, In prop. Ins. There must be more or less a semblance or legal basis unlike Life Insurance person giving support / education to a person, he may be a total stranger, that person has II in the life of that person. But not In the case of Property Ins. The inchoate interest founded on an existing interest, the case of a SH does a SH have an II in the props of the Corp? do you consider that an inchoate interest founded on an existing interest ? YES inchoate interest, how about in the case of a Partnership? Does he have an inchoate interest in the props belonging to the partnership? Yes , he has, In the case of a farmer, does a farmer have an II in his present crops? Theres a farm harvest will be 3 mos from now does he have II in his future harvest? Yearly harvest of 100k can he insure the future crops of his farm ? Yes, an expectancy founded on an existing interest. Merchant has goods coming from abroad and he wanted to insure not only the goods but also the expected profits that he is going to derive from the sale of the goods, 100$ insures goods another 30$ on the expected gains margins he is going to derive? Can this be included?, that is an expectancy founded on an existing interest, can also be covered in the policy. Not only the goods to be sold by the merchant but also the profit he expects to derive from the sale of the goods. Expected profits based on an existing interest that can be subject of an insurance. Study sec 15,16,17, X sold a piece of property but the property sold is presently mortgaged the buyer assumes the mortgage but the mortgagee does not relieve the seller from the obligation the seller is no longer the owner of the property he sold it already, in case the buyer fails to pay, the bank still holds him liable he does not have title anymore does he still have II ? yes, because in case the buyer fails to pay the mortgage the bank will be the one running after him.

II in property may consists in what? In hOw many ways can you determine II in property? What is the gen rule how do you determine II ? As a Gen Rule when a person stands to benefit _______ then on 1 hand he stands to lose something by the destruction of the same thing there is II - this is the Gen Rule. Under the IC more particularly Sec 14 II existing interest, example of existing interest, a piece of property where you have an existing interest, Ex if you own a condo unit you have an existing interest in that condo unit of course, supposed you have a lease contract for 5 or 10 years of a commercial place do you have an existing interest in that leasehold contract, Yes,. In the case of a usufructuary of a piece of property dyou have an existing interest? Yes, supposing you are 1 of the legatees in a will and your legacy is a piece of property in your GM S will, can you insure that piece of property ? if the gm is still alive? You cannot, only a mere expectancy, there is a difference bet an inchoate interest and a mere expectancy? How does it differ? Give an example of inchoate interest? Farmer and you have an insurable interest in your future harvest, - this is expectancy based on an existing interest, not an inchoate interest, but this is insurable, but if expectancy is not based on an existing interest that expectancy cannot be the subject of a valid insurance contract no II, If you do not own the farm for example, the farm is owned by the neighbour or friend and you just help in the harvest and a certain share is given to you that is an expectancy isn t it? 20 cavans share but the farm does not belong to you, can you insure the expected harvest in that particular farm? No, that is based on an expectancy not based on an existing interest, you do not have any interest in the farm, the farm belongs to another there is no legal basis insofar as your participation is concerned. That is the difference. How about inchoate interest? If you have an inchoate interest in a piece of property can that be subject of insurance ? yes, Ex. SH in the corporate of property, to the extent of his equity, Partnership-1 of the partner,to the partnership property do you have inchoate interest? Yes, he has inchoate interest in the props owned by the partnerships-ok so that s inchoate interest. Somebody is indebted to you, X is indebted in the amnt of 800k over the years and you do not have any collateral to secure the obligation, debtor has pieces of property can you insure any of those pieces of property? No, only a gen creditor, only a secured creditor has an II, there s a difference bet a gen creditor and a secured creditor, does a secured creditor have II ? Yes, he has II over those prop. given to you only as collateral, but not in the entire properties of the debtor. As an heir, Do you have II interest in the props of your parents? No, only a mere expectancy, parents can dispose of said props anytime so no II . You are a contractor do you have an II in the construction work you are undertaking ?

80% complete, He has II in the construction because he stands to lose if something goes wrong typhoon comes and damaged he stands to lose. Bet seller and buyer who has II? Remember what are the 3 stages in the life of a contract ? when we speak of a contract of sale, sale may either be executory, partly executory, thoroughly consummated, after perfection, what kind of a contract is a contract of sale? It is a consensual contract , what is the difference bet a real contract and a consensual contract ? mere meeting of the minds perfects it, real contract there has to be delivery of the object to be perfected, Ex. Contract of Pledge, Deposit consensual the moment there is a meeting of the minds bet the parties concurrence of offer and acceptance there is already a perfected sale, if x offers to Y a prop for sale 50k y accepted then there is a perfected sale, there is already the meeting of the minds, the contract here is executory, executory in the sense that the seller _________ __________ if it is a real contract mere meeting of the minds will not suffice delivery of the thing is the 1 _________________ Who has II in a contract of sale if the contract is sale is only executory both seller and buyer has II, if something happens to the thing the seller is deprived of the opportunity of acquiring, and the buyer is deprived of the opportunity of acquiring sale, if its already partly executory 1 party has already performed his prestation the other party ________ supposing the seller has already delivered the thing but he has not yet received the price _________________ now, how do you determine the extent of II of a particular person? In prop insurance? How do you determine the II? Ex a piece of prop is insured ? how much II to what extent? To the extent of the value of prop 1m that is the extent of your II, can you insure it for more than 1m? the max amount that you can recover is the value of the thing you are insuring, even though you have paid the corresponding premium you are not allowed to recover more than what the value of the thing is at the time of the loss because it will become a wagering contract, insurance is a contract is a contract of indemnity, it s a contract __________ you cannot be indemnified more than what you loss that is not _______ how about in the case of Life Insurance what is the extent of II in life, how much can you insure yourself ? No limit as to amount, as long as you can pay the premium, unlimited ! main distinction of II bet prop and life insurance not a contract of indemnity value of life is beyond pecuniary estimation. How do you distinguish II in property and life insurance ? give the distinctions. 1. Basis Prop; there should be Legal Basis Life: not necessary 2. Amount Life : II in life is unlimited any amount as long as you can pay the premiu

Prop; amount is limited only to the value of the thing 3. In case if II in property insured this must exist not only at the time the contract______ but also at the time of loss whereas in Life Insurance it may exist only at the time the insurance contract takes effect not necessarily at the time of loss 4. II so far as Prop is concerned is a contract of indemnity Life insurance not a contract of indemnity not subject to pecuniary estimation When we say that interpretation there must be at least legal justification not necessary a title, a possession that is prop insurance in life not necessary. In prop insurance the mere fact that you are deriving benefits from a piece of property you do not have an ii in said property. II is 1 of the essential elements of a contract of insurance so w/o II there is no contract of insurance, when shall II exist? Lifetime on the policy? Depends, on the kind Prop-when the ins policy takes effect and at the time of the loss occurs how about in the meantime? It may not be exist it will not affect the policy, Life Ins-II at time the policy takes effect but need not exist at the time of the loss, why the difference? In case of prop ins to avoid what you call a wagering contract, now supposing you have a car and that motor vehicle is presently covered by an insurance policy and then you sold that car to Mr X the coverage is for 1 year and the ins is only 6mo old will the ins be valid? in the hands of the buyer ? No, Contract of Ins is a personal Contract, there is no privity of contract between the buyer and the ins company, the mere fact that the vehicle is covered even though the policy is assigned the assignment of the policy will not amount to the coverage of the same vehicle in the hands of another person there must be consent of the insurer, Sale of a piece of property transfer of the interest in a piece of property does not include the insurance coverage if it is covered by 1, if loss takes place, there was II at the time the insurance took effect but who is the policy holder ? still the same the owner of the vehicle is not the policy holder its another person so there is no II, remember that neither the original seller cannot recover although he is the policy holder because at the time of the loss he does not have any II anymore it has been transferred to the buyer, on the other hand the buyer cannot also recover because there is no privity of contract bet him and the insurer. Any exception to the rule? That transfer of interest in other words the transfer on interest notwithstanding the fact that the transferee does not have any II at the time the Insurance takes effect still we can call, these are exceptions to the rule Sec 21-24 Sec 22: Bldg separately insured for so much, contents of the Building separately insured for so much if you sell or transfer one of the items separately insured it will not affect the

others because they are separately insured but if they are jointly insured as one the rule will apply. Sec 23 : when a person dies what s next? The policy will continue it will be valid inspite of the fact that the insured has already passed away in the hands of the heirs the one who succeed him. If the policy is good for 1 year. Remember this in Property Insurance 1 year, Always 1 year, no such thing as 2 yr, 3 yr prop. Insurane its always 1 year or renewable, the longer term is life insurance but if it is property its always 1 year renewable Sec 24 : There are several owners, in what capacity may you own the property? When you speak of partnership the owner is the partnership, the partnership is a juridical person, Remember when you speak of joint owners you are referring to a piece of property jointly owned by 2 or more co owner so if the prop is insured by another then he sold his share to another co-owner that will not affect the policy that is____ the other 1 is how about in the case of partnership? When a partner transfers his share to another partner it will not affect the policy, joint ownership, succession, assignment after the occurrence of the loss, after the loss its already a monetary claim so you can assign the policy already it will not affect anymore loss has already taken place, what you are assigning is no longer the policy/property what you are assigning is the claim itself that is why it is an exception to the rule. GEN RULE : Transfer of Interest not Accompanied by the transfer of the policy, the policy will not be considered as a valid one.subject to said exceptions. What do you understand by concealment ? neglect to communicate that which a party knows and ought to communicate-if he fails to communicate a piece of information which is material and he ought to communicate it is his duty to, now what are the essential elements of concealment to consider it concealment? Failure to communicate material information and he is duty bound to disclose such information and such party makes no warranty the other party _______-_look for the elements 4 essential elemts. COI is a special contract it is a contract highly tech nical in character what are the devices provided by law to protect the interest of the insurer one of them is 1. Concealment, 2. Representation 3. Warranties 4. Exceptions 5. Conditions devices employed by the insurer to protect his interest in the contract of insurance. Contracts in general does the CC made mention of concealment? Concealment is a term peculiar to the contract of insurance and what is the underlying reason behind concealment why the law so provides? In a contract of sale for example does the cc prescribe any duty on the part of the seller to make disclosures? No, no provisions, theres what you call buyer beware, conduct your own investigation, unlike in Insurance. In insurance concealment rather Insurance laws duty to disclose is based on the fact that COI is a contract of utmost confidence the insurer relies solely on the information

furnished by the insured in a coi the insured will be asked to accomplishes an application, material details material facts required by the insurer aside from the accomplishment of the application, the insured will be interviewed by the underwriter insured makes certain representation to the underwriter and the insurer will rely solely on the representation made by the insured on the basis of the application/conversation with the underwriter the insurer will enter into a contract of insurance. It is a contract of UTMOST CONFIDENCE that is why the insured is duty bound to disclose anything that he knows or anything that is material, he is duty bound. One of the conditions that it is piece of information the fact of which he does not make any warranty. He makes no warranty of the fact concealed what does it mean exactly, 1He ought to know, he should know any material piece of information or fact. 2 he has the duty to disclose because this is a contract of utmost confidence 3. He does not make any warranty of the fact concealed, in other words he concealed something but he did not make any warranty in other words if it is covered by a warranty there is no concealment. In insurance we have the implied warranty and the express warranty ex. 1 of the implied warranties is that the vessel is seaworthy, supposing the insured concealed the fact that the vessel has not been dry docked for the past 3 yrs., that will surely affect the seaworthiness of the vessel how will you categorize that failure to disclose is that concealment? Is it material? Yes it is material very material, but will this be considered as concealment under this section? No, it will not fall under concealment but violation of warranty that s why the condition is party concealing makes no warranty of the fact concealed this is covered by the implied warranty laws so if ever there is a cause of action _______ it is not on the ground of concealment but on the ground of a violation of warranty. How do you determine the materiality of a fact or condition? Materiality is to be determined not by the event but by the influence or effect _____upon the insurer see codal sec 31 for example in life insurance an information that will influence the insurer, state of health of the insured, if insured has been hospitalized or has undergone serious operation those are, the insured has triple bypass, you think that is a piece of information that is very material? Yes, It all depends The insurer may accept the application of the insured but at a higher rate of premium. In prop insurance for example Bldg just across the bldg. shanties a depressed area these are usually taken into account by the insurer, the insurer may reject or accept at a higher premium. Insurer has devices employed by the insurer in evaluating the policy, these devices are CONCEALMENT, REPRESENTATION, WARRANTIES, EXCEPTIONS AND CONDITIONS Area is openly lies in the typhoon belt there may be exceptions like for example Risks excepted Earthquake, Typhoon, insurer may accept but with certain exceptions like destruction

caused by typhoons or earthquake, = Excepted Risks. These are things resorted to by the insurer. The materiality does not depend upon the event itself but the kind of influence the effect that it will have on the insurer in evaluating the application form in the policy. There are things that are given like age is a given factor, if you are insuring a vessel age of the vessel is considered. When you reach a certain age the insurer may consider you not insurable anymore. According to the IC there are certain items where the insured need not make any answer. No need to answer. except in an answer to the inquiries to the other. Those which the other party knows Ex. I don t need to tell you, you insurance people know already, no need to tell the underwriter presumed that you already knows. When you insure a piece of property the property is inspected by the insurance company. If the property you are insuring has already been inspected by the underwriter there is no need to tell him what kind of building it is, is it made of concrete materials ? Those which in the exercise of ordinary care the other ought to know and which the former has no reason to suppose him ignorant. means matters of gen. knowledge, in the ordinary course of things the insurer already knows this piece of information, Ex. Marine Insurance the vessel is being insured and the vessel is bound for the Bicol Area, Bicol belongs to typhoon belt the insurer should know this already. Person insuring himself but then he is assigned in Basilan. You can assume that the insurer already knows. Is there concealment if you fail to tell the insurer that Basilan is a dangerous place nowadays it doesn t matter this is gen knowledge, vessel bound for Syria or Somalia, there s a presumption that insurer knows that there is trouble in this places Those of which the other waives communication there is waiver of communication when

Those which prove or tend to prove the existence of a risk excluded by the warranty and which are not otherwise material Ex. Implied Warranty Vessel is Seaworthy in Marine insurance, so everything that will affect the warranty you do not need to ask because after all it is covered by a warranty ex. The effect of the vessel ultimately if there is a loss the insurer will not be liable because there is a breach of warranty not concealment but a violation of the warranty. Those which relate to risk excepted from the policy and which are not otherwise material Exceptions one of the devices employed by the insurer to protect itself. Destruction of property typhoon, excepted, earthquake excepted. Most common exception in property insurance is earthquake, in short if the proximate cause of destruction is earthquake the entire policy. This is a defense of the insurer. Suppose you are insuring yourself and the underwriter asked you How is your health? What will be your answer? Under

the IC matters involving judgment, are you bound to answer questions that requires an expression of opinion or judgment ? no, he is not bound to communicate this, matter of opinion. State of health, condition of property you are not bound to make any expression of opinion. Supposing you insure yourself it is a life insurance policy but for 1 reason or another you overlooked it, you failed to inform the insurer that you have been hospitalised due to an ailment, 1st is that material? Is it your duty to disclose it? Yes it is material, but you have no intention to conceal, you realize only later. Can you write to the IC that Im sorry I failed to disclose it I would like to amend my application? Could you do that? Can you do it? No, you cant, do you mean to say that the mere fact that you have advised the insurer your failure to disclose unintentionally of a very material information the insurer can no longer utilize this as a ground for the avoidance of the policy? Remember there is already a perfected contract of insurance in the assessment in the evaluation of the policy issued in your favour, the insurer failed to take into account this information that you have failed to disclose and that will not in anyway cure the defect in the policy, the LAW GIVES PROTECTION ALSO TO THE INSURER. Remember the 2 year period allowed under the law incontestability clause what is this clause about? To give the insured peace of mind the law provided this clause because you never can tell if you failed to disclose something to the insurer after 2yrs no more whether the concealment is intentional or unintentional no more you cannot contest the policy anymore. You cannot cure the effect of concealment by disclosing the same after the issuance of the policy it s already a perfected contract. When the insurer evaluated your application did not take into account this material information that you have failed to disclose, so disclosure after the perfection of contract did not in any way correct the defect in the policy nonetheless you have the incontestability clause after 2 years the insurer cannot raise it anymore. When we talk about concealment we said that the basis the rationale behind this is that the coi is a contract of utmost Good Faith meaning to say that the Insurer Relies Solely to the representation that the insured makes, is the insurer duty bound to investigate the things you have stated? The law does not prescribe it, the insurer can rely solely on the representation made by the insured concealment and representation, Do not expect the insurer to conduct further investigation although not mandated or required by law but as a matter of prudence rather if the insurance is substantial let s say here is a person insuring himself for 10m even after the issuance of the policy the IC will conduct an investigation. Also in the matter of Concealment the Law says intentional or unintentional you cannot set up the defense that you are in Good Faith when you are in interviewed you failed to disclose you realize it only after the policy was issued ----Law says Intentional or Unintentional.

Do you consider Representations as part of the contract ? No not considered as part and parcel of the contract because not unless it forms part of the contract if it form part of the contract. Representations are not considered part and parcel of a contract of insurance, now we said what's the purpose of representations? To induce the insurer to accept the application, insurance is a contract and just like any other contracts what are the elements of contracts, object, cause and consent. Representations under what particular element of contracts does representations belong where will it apply, what element? Element of Consent, what about concealment what particular element of contract does it belong? Also Consent, this is the element to be affected the consent to be given by the insurer that is the one affected by concealment and representation. In your study of Contracts what will vitiate contract, if vitiated what happens to the contract? Contract is voidable, what vitiate consent in contracts ? FUMIV when we speak of concealment, representations is it necessary that they be intentional? No, In other words if representation is intentional OR unintentional it will affect the consent in a contract of insurance. If it is Intentional it will fall under Fraud. That will vitiate consent. Why because the COI is a contract of Utmost Confidence the insurer relies only in the rep made by the insured so much so that whether it is intentional or not it will affect the consent of the insurance. It will be a ground to rescind or to deny payment on the ground of misrepresentation. In the matters of interpretation, how is the COI be interpreted more particularly representation ? In the same manner as contracts in General, is the Gen. Rule applicable to contracts ? what kind of interpretation ? Liberal or Strict Interpretation? Liberal Interpretation in favour of the Insured, so the representations made by the insured are literally interpreted in favour of the insured, there is no strict application Only Substantial Compliance, Substantial Compliance will Suffice, when we speak of a COI the insurer has an advantage over the insured because this is the business of the insurer the insurer knows the Ins and Outs, Not only that who prepares the contract of Insurance? The Policy? The Insurer, practically the insurer has the edge that s why in the interpretation of the coi in general liberal construction in favour of the insured. Insured does not have a hand in drafting of the policy to offset the disadvantage you have liberal construction. When we speak of representation there are 2 kinds of representations what are they? Affirmative and promissory. What do you understand by affirmative representations? Ex. Life Insurance the insured tells the underwriter I have never been hospitalised during the past 10 years, is this aan Affirmative Rep? Yes, this is a Rep., in the case of property insurance fire insurance? The bldg. has a 24hr Security Guard, this is an affirmative Representation, Marine- My

vessel is a five year old vessel is that a material representation? Yes, very material affirmative representation How about promissory representation, when do you say it is a promissory representation? In other words there is a commitment on the part of the insured to do something in the future this is promissory representation, Ex. Starting next month I will have security guards, not necessarily aprt of the contract if that promise is written in the policy then it becomes part of the COI, but if only a promise what legal effect does it have if he does not comply with the promise which is not included or part of the policy? Is the representation of having a security guard a material one? Is it enough to influence the insurer in the acceptance of the application and also in determining the rate of premium for insurance? Do you consider that material? Yes, very material it can be a ground for rescission. Can a representation qualify an express provision in the contract of insurance? No, it cannot modify the contract ,what can it modify then? ____________________________________________ Can you give us an implied warranty? Seaworthiness of the vessel, can you insure vessel there is an implied warranty that the vessel is seaworthy the insurer need not ask, although not part of the contract itself the insured warrants that the vessel is seaworthy, This implied warranty ______maybe affected by a representation. What are the things that may affect the seaworthiness of a vessel? If not properly manned Sec 40 READ NALANG, Aside from this the law says how about, can representations be altered or withdrawn? Supposing you have already accomplished the application? Can you still correct the application? No, it cannot be withdrawn, remember as long as the policy is not yet issued any representations made oral or written can still be altered, withdrawn but the moment the policy is issued, can you still alter? Aside from the policy is there a really a contract of insurance? When you say COI what particular contract are you referring to? Remember there is no separate contract of insurance the terms and conditions agreed upon by the parties are found in the policy the____ itself contains the terms and conditions and take note who signs the policy is the insured a signatory to the policy? No, the only one signatory is insurer so much so that the policy is not the contract of insurance only 1 signatory how can that be a contract? It contains the terms and conditions. The application accomplished by the insured is the proof __________ I insure myself when the insurer prepares the policy that is ________ the issuance of the policy is match the acceptance of the offer of the insured, there is no separate contract of insurance. Do not labor under the erroneous impression that aside from the policy there is another Contract of Insurance no more. The application is an offer the insurer evaluates the application if the insurer accepts it, insurer issues the policy containing the terms and conditions _______ . Now, under the IC

Date of representation refers to what time? Refers to date of insurance