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INSURANCE LAW

Course Outline
Atty. Maria Zarah R. Villanueva-Castro
I.

Introduction
A.
B.
C.

D.
E.

Laws governing insurance


General concept of insurance
Characteristics
1.
risk distributing device
2.
contract of adhesion
3.
aleatory
4.
contract of indemnity
5.
uberrimae fides contract
Elements of insurance
Right of subrogation

Cases: White Gold Marine Services vs. Pioneer Insurance, et al. (GR No.
154514, 28 July 2005); Verendia vs. CA (217 SCRA 417); Philamcare Health
Systems Inc. vs. CA (379 SCRA 356); Fortune Insurance and Surety Co., Inc.
vs. CA (244 SCRA 308)l; Gulf Resorts Inc. vs. Philippine Charter Insurance
Corp. GR No. 155167, 16 May 2005; Manila Mahogany vs. CA (154 SCRA 650);
Federal Express Corporation vs. American Home Assurance Company and
Phil-Am Insurance Company, Inc., G.R. No. 150094, 18 August 2004); Eternal
Gardens Memorial Park Corporation vs. Phil. American Life Insurance Co., GR
No. 166245, 09 April 2008

II.

Contract of Insurance
A.
B.
C.
D.
E.

Requisites of a contract of insurance


Perfection
Parties to a contract of insurance (Sec. 6 & 7, ICP)
1.
rule on minors (Sec. 3, ICP)
2.
rule on married women (Sec. 3, ICP)
Subject matter of insurance (Sec. 3 & 4, ICP)
Insurance not a wagering contract (Sec. 4, ICP)

Cases: Enriquez vs. Sun Life Insurance of Canada (G.R. No. 15895, Nov. 29,
1920); Development Bank vs. CA (G.R. No. 100937, March 21, 1994); Great
Pacific Life Assurance Co. vs. CA (G.R. Nos. 31845 & 31873, April 30, 1979)
III.

Insurable Interest
A.
B.
C.
D.

Concept of insurable interest in general


Reason for the requirement of insurable interest
Insurable interest in life insurance (Sec. 10, ICP)
Insurable interest in property insurance (Sec. 13 & 14, ICP)
1.
Insurable interest in case of mortgaged property (Sec. 8,
ICP)
a.
standard or union mortgage clause
b.
open or loss payable clause

2.

Effect of change of interest in the thing insured (Sec. 20,


21, 22, 23, 24, 57 & 58, ICP, Art. 1306, NCC)

Cases: Spouses Cha vs. CA, (August 18, 1997); Geagonia vs. CA, February 6,
1995); RCBC vs. CA (289 SCRA 292); Gaisano Cagayan, Inc. vs. Insurance
Company of North America, G.R. No. 147839 (June 8, 2006).

IV. Devices for ascertaining and controlling risk and loss


A.

Concealment
1.
Concept (Sec. 26, ICP)
2.
Duty to communicate (Sec. 28, ICP)
3.
Test of materiality (Sec. 31, ICP)
4.
Effect of concealment (Sec. 27 & 29, ICP)
5.
Matters which need not be communicated (Sec. 30, 32,
34, & 35 ICP)
6.
Waiver of information (Sec. 33, ICP)

B.

Representation
1.
2.
3.
4.
5.
6.
7.

C.

Remedies available
representation
1.
2.

D.

Concept (Sec. 36, ICP)


Kinds of representation (Sec. 36, 37, 39, 42, ICP)
Test of materiality (Sec. 46, ICP)
Effect of alteration or withdrawal (Sec. 41, ICP)
Time to which representation refers (Sec. 42, ICP)
Effect when representation is obtained from third persons
(Sec. 43, ICP)
When presumed false; effect of falsity (Sec. 44 & 45, ICP)
in

case

of

concealment

or

false

When rescission by the insurer may be exercised (Sec. 48,


ICP)
When life insurance policy becomes incontestable (Sec.
48, ICP)
a.
requisites for incontestability
b.
theory and object of incontestability
c.
defenses not barred by incontestability

Warranties
1.
2.
3.
4.

Concept; distinguished from representation


Kinds of warranties (express, implied,
promissory)
Time to which warranty refers (Sec. 68, ICP)
Effect of breach (Sec. 74, 75, & 76, ICP)

affirmative,

Cases: Great Pacific Life Assurance vs. CA (316 SCRA 678); Sun Life
Assurance Co. of Canada vs. CA (G.R. No. 105135, June 22, 1995); Philamcare
Health Systems Inc. vs. CA (379 SCRA 356); Vda de Canilang vs. CA (G.R. No.
92492, June 17, 1993); Tan vs. CA (June 29, 1989); Prudential Guarantee vs.
Trans-Asia Shipping Lines, Inc. G.R. No. 151890, 20 June 2006; Lourdes v.
Philam Plans, G.R. No. 186983, February 22, 2012

V.

The Policy of Insurance


A.
B.
C.
D.
E.

F.
G.
H.

Definition and form (Sec. 49-50, ICP)


Fine print rule
Contents of the policy (Sec. 51, ICP)
Papers attached to the policy and their binding effect (rider,
warranties, clause, endorsement)
Kinds of policy
1.
open (Sec. 60, ICP)
2.
valued (Sec. 61, ICP)
3.
running (Sec. 62, ICP)
Cover notes (Sec. 52, ICP)
Cancellation of policy (Sec. 65-66, ICP)
Time to commence action on the policy; effect of stipulation
(Sec. 63, ICP)

Cases: Pacific Timber Export Corporation vs. CA (112 SCRA 199); Great
Pacific Life Assurance Corporation vs. CA, 89 SCRA 543); Asian Terminals, Inc.
v. First Lepanto-Taisho Insurance Corp., G.R. No. 185964, June 16, 2014 , 2002)
VI.

Premium
A.
B.
C.

Concept
Effect of non-payment of premium; Exceptions (Sec. 77, 78,
ICP, Art. 1306, NCC)
When insured entitled to return of premiums (Sec. 79-82, ICP)

Cases: Makati Tuscany Condominium Corp. vs. CA (215 SCRA 462); UCPB
General Insurance vs. Masagana Telamart (June 15, 1999); UCPB General
Insurance vs. Masagana Telamart (356 SCRA 307); American Home
Insurance vs. Chua (G.R. No. 130421, June 28, 1999); Tibay vs. CA (257
SCRA 126); Phil. Phoenix Surety & Ins., Co. vs. Woodworks, Inc., (92 SCRA
419)
VII.

Persons entitled to recover on the policy and conditions to


recovery
A.
B.
B.
C.
D.

Beneficiary (Sec. 11-12, 53, 56, & 57 ICP)


Limitations on the appointment of beneficiary (Art 2012 & 739,
NCC)
Rule where insurance is made by an agent or trustee (Sec. 54,
ICP)
Rule where insurance if made by partner or part owner (Sec. 55,
ICP)
Notice and proof of loss (Sec. 88-92, ICP)

Cases: Bonifacio Bros. Inc. vs. Mora (May 29, 1967); The Insular Life
Assurance vs. Ebrado, 80 SCRA 181); Vda. de Consuegra vs. GSIS (37 SCRA
315); Go vs. Redfern (72 Phil 71); Country Bankers Insurance Corporation vs.
Lianga Bay (January 25, 2002)

VIII.

Double Insurance
A.
B.
C.
D.

IX.

Reinsurance
A.
B.
C.
D.

X.

Definition and requisites (Sec. 93, ICP)


Distinguished from over-insurance
Stipulation against double insurance
Rules for payment where there is over-insurance by double
insurance (Sec. 94, ICP)

Definition (Sec. 95, ICP)


Nature (Sec. 97 & 98, ICP)
Distinguished from double insurance
Duty of reinsured to disclose facts (Sec. 96, ICP)

Marine Insurance
A.
B.
C.

Definition
Scope of marine insurance (Sec. 99, ICP)
Risks or losses covered in marine insurance
1.
perils of the sea vs. perils of the ship
2.
all risks marine insurance policy

D.

Insurable interest in marine insurance


1.

ship owners insurable interest (Sec. 100, ICP)


a.
rule where vessel is chartered (Sec. 100, ICP)
b.
rule where vessel hypothecated by bottomry (Sec.
101, ICP)
c.
insurable interest in freightage (Sec. 102-103, ICP)

2.

charterers insurable interest (Sec. 106, ICP)

E.

Concealment
1.
Meaning of concealment in marine insurance
2.
Duty to communicate (Sec. 107, ICP)
3.
Opinions or expectations of third persons (Sec. 108, ICP)
4.
When concealment does not vitiate the entire contract
(Sec. 110, ICP)

F.

Representations
1.
Effect of false representation by the insured (Sec. 111,
ICP)
2.
Effect of false representation as to expectation (Sec. 112,
ICP)

G.

Implied Warranties in Marine Insurance


1.

Seaworthiness (Sec. 113, ICP)


a.
what constitutes seaworthiness (Sec. 114, 116,
119, ICP)
b.
when complied with; Exceptions (Sec. 115, ICP)
c.
rule where ship becomes unseaworthy in the
course of the voyage (Sec. 118, ICP)

H.

2.

Warranty that necessary documents are carried (Sec. 120,


ICP)

3.

Warranty against improper deviation


a.
meaning of deviation (Sec. 123, ICP)
b.
when proper (Sec. 124, ICP)
c.
effect of improper deviation (Sec. 125, ICP)

Loss
1.
2.
3.
4.
5.
6.

Kinds of losses (actual and constructive) (Sec. 130, 131, &


132, ICP)
Right to payment upon an actual total loss (Sec. 135, ICP)
Scope of insurance against actual total loss (Sec. 137,
ICP)
When constructive total loss exists (Sec. 139, ICP)
Concept of abandonment and its requisites
Average
1.
Kinds of average (particular and general)
2.
Requisites of general average
3.
Insurers liability for general average

Cases: Roque vs. IAC (139 SCRA 596); Go Tiaco vs. Union Ins. Society of
Canton (40 Phil 401); Cathay Insurance vs. CA (151 SCRA 710); Filipino
Merchants Insurance Co. vs. CA (179 SCRA 638); Oriental Assurance
Corporation vs. CA (200 SCRA 459)
XI.

Fire Insurance
A.
B.
C.
E.
F.

XII.

Definition and scope of fire insurance (Sec. 167, ICP)


Risks or losses covered
Effect of alteration in the thing insured (Sec. 168, ICP)
Measure of indemnity
Co-insurance clause

Casualty Insurance
A.
B.
C.
D.
E.

Concept (Sec. 174, ICP)


Third Party Liability insurance
Insurable interest
Meaning of accident and accidental in casualty insurance
Basis and extent of insurers liability

Cases: Finman General Assurance Co. vs. CA (September 2, 1992); Sun


Insurance Office Ltd. vs. CA (July 17, 1992); Biagtan vs. The Insular Life
Assurance Co., Ltd., (44 SCRA 58)

XIII.

Suretyship
A.
B.
C.

Definition (Sec. 175, ICP)


Nature of liability of surety (Sec. 176, ICP)
Distinctions between suretyship and property insurance

XIV.

Life Insurance
A.
B.
C.
D.
E.

XV.

Definition (Sec. 179 & 180, ICP)


Kinds of life insurance
Liability of insurer in case of suicide (Sec. 180-A, ICP)
Right to assign life insurance policy (Sec. 181 & 182, ICP)
Measure of indemnity (Sec. 183, ICP)

Compulsory Motor Vehicle Liability Insurance


A.
B.
C.
D.
E.

Reason for the requirement


Scope of coverage required
Persons subject to the requirement
No-fault indemnity claim (Sec. 378, ICP)
Notice of claim (Art. 384, ICP)

Cases: Vda. de Gabriel vs. CA (November 14, 1996); Vda. de Maglana vs.
Hon. Consolacion (August 6, 1992); Tiu vs. Arriesgado (GR No. 138060, 01
September 2004)
XVI. Claims Settlement
A.
B.
C.
D.

Unfair claim settlement practices (Sec. 241, ICP)


Claims for life insurance policies (Sec. 242, ICP)
Claims for non-life insurance policies (Sec. 243, ICP)
Delay in payment of claims (Sec. 244, ICP)

Cases: Tio Khe Chio vs. CA (September 30, 1991); Finman General Assurance
Corporation (July 12, 2001); see again: Prudential Guarantee vs. Trans-Asia
Shipping Lines, Inc. G.R. No. 151890, 20 June 2006

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