Oo 2427 (21 December 1914) which repealed the applicable Po ae Sees 1 Commerce, Act 2427 being copied from the California Insura N, oetaa ¥. Sunlife Assurance, 48 Phil. 53 Ang Giok Chip v. Springfield, 52 Phil. 375 Philippine Health Care Products v. Commissioner of Internal Revenue, 600 SCRA 413, at p. 427 and footnote 21 therein (September 18, 2009) * Gil Code, esp. Articles 739, 2011, 2012, 2021 to 2027 (dealing with life annuities), 2186 & 2207 (subrogation) + Special laws (e.g. GSIS Act, SSS Act, PDIC, crop insurance and government Property insurance, among others.) CHAPTER II — THE CONTRACT OF INSURANCE ¢ Definitions ¢ "Contract of Insurance" (Sec. 2-1); and "Contract of Suretyship" Oh a 7 ip", (ibid; see also Sec. 175 and discussion infra). * "Doing an insurance business" (sec. 2.2) B. — Elements insurable interest risk of loss or damage designated peril as cause consideration: premium risk distributing scheme SWE C. — Characteristics/Nature of insurance contracts (Review relevant provisions of the Civil Code on “Obligations and Contracts") 1. Aleatory (Art. 2010, Civil Code) 2. — Executory and conditional 3. Synallagmatic (See dissent of Vitug, J. in UCPB General Insurance vs. Masagana Telamart, 356 SCRA 307 (2001) - 4 Consensual and voluntary (Arts. 1305, 1306, and 1308, Civil 2Naw D. Be Code) Cont i ri nrg Set ee J est degre i Indemnity (non-life or property)” seearenn Contracts for Conti ont ae F Arrangements; ingent Services; Pre-need Plans and Similar Warrantie: i i rendered 'S Covering goods sold or services Cases on health care agreement: PHILAMCARE Health Systems v. CA, G.R. 1256781, March 3, 2002; 379 SCRA 356 [2002] Blue Cross Health Care v. Olivares, G.R. 169737, February 12, 2008; 544 SCRA 580 (2008) Philippine Health Care Providers v. Commission of Internal Revenue, G.R. 167330, June 2, 2008; 554 SCRA 411 (2008) and 600 SCRA 413 (September 18, 2009) resolution of Motion for Reconsideration Pre Need Case of the Philippines (R.A. 9829, Dec. 3, 2009) General Classification of Insurance under the Code Life a. individual life (as defined in Sections 179 and 180); pure endowment ¢ group life (Sections 50; 228, last par.) Pineda v. CA & Insular Life, 226 SCRA 7554 (93) ¢. _ industrial life (as defined in Sec. 229; for discussion infra) Non-Life (limited to definitions) marine (Sec. 99) b. fire (Sec. 167) c. casualty (Sec. 174) or liability insurance d. — suretyship (Sec. 175) Other modes of classification of insurance contracts 3FE sory) * private and public (voluntary and compu # (See Sec. 174) * “first party Wrenranon® and "third party insurance" ( Some life insurance plans in the market int-life, * whole life plan (ordinary, limited payment, single premium, Jo universal life, variable life; endowment life) term plan Modified life Pure endowment plan endowment Plan Construction/interpretation of insurance contracts (review Articles 1370 to 1379, Civil Code) - Basis/rationale for interpretation, whether literal or liberal (review consensual and obligatory nature of an insurance contract Articles 1305, 1306, & 1308, Civil Code), as well as Articles 1370 to 1379 on interpretation. Some cases dealing with construction and interpretation. Discussion to be limited to contractual provision requiring interpretation (how it arose and how it was resolved and basis for such resolution) Cebu Shipyard v. William Lines, 306 SCRA 762 (1999) New Life Enterprises v. CA, 207 SCRA 669 (1992) First Quezon City Insurance v. CA, 218 SCRA 526 Ty v. First National, 1 SCRA 1324 (1961)* Misamis Lumber v. Capital Inc., 17 SCRA 228 (1966)* Sun Insurance v. CA, 195 SCRA 193 (1991) Fortune Ins. v. CA 244 SCRA 308 (1995) Perla v. CA, 185 SCRA 74* Oriental Assurance v. CA, 200 SCRA 459 (1991) Malayan Ins. V. CA, 270 SCRA 242 (1997) Western Guaranty v. CA, 187 SCRA 652 Qua v. Law Union 96 Phil. 85 (1955) Del Rosario v. Equitable Ins. 8 SCRA 343 (1963) Geagonia v. CA 241 SCRA 152 (1995) Sun Insurance v. CA 211 SCRA 554 (1992) 4Ai lndres v. Crown Life Insurance (Sec, 99) B. Refund of Premiums, Sections 79-82 CHAPTER IV ~ EON R IV — THE POLICY, PARTIES THERETO, & RIGHTS THE! * 1. Definition of a policy of insurance (Sec. 49) 2. Form & contents (Sections ; ; insurance (Sec. 22) 50 & 51 a tog); Sec. 226; F. group 3. Riders and endorsements; rules on formalities & effectivity (Section 50,par. 2) 4, Cover notes (Sec. 52) Lim v. Sun Life Assurance 41. Phil. 263 (1920) Great Pacific Life v. CA, 89 SCRA 543 (1979) Pacific Timber Export v. Ch, 112 SCRA 199 (1982) B. Types of non-life insurance policies Sections 59, 60, 61 & 62 (cf. Sections 156, 161, 171) 1, Open 2. Valued 3, Running (floating) JAG, 143 SCRA 62 (1986) Development Insurance V. 38 Phil, 464 (1918) Harding Vv. Commercial Union Assurance, B. Parties 1. Insurer Sections 6, 184, 185 & 299 Cf; Agents and brokers: Sections 300, 301, & 306 ai721 Tong Chuache & Co, v, insurance Commission, 158 SCRA 366 (1988) q HAPTER IV - PERFECTION OF THE CONTRACT OF INSURANCE ° Offer and acceptance; consensuality 1. Delay in acceptance; "tort theory" See Article 2176, Civil Code 1. Delivery of policy Perez v. CA 323 SCRA 613 (2000) Vda de Sindayen v. Insular 62 Phil 51 (1935) Enriquez v. Sun Life 41 Phil, 269 (1920) B. Premium payment Sections 77 & 78; 64 & 66; 306 (no agents/brokers) Velasco v. Apostol, 173 SCRA 228 (1985) Valenzuela v. CA, 191 SCRA 1(1990) Tibay v. CA 257 SCRA 126 (see dissent) (1996) Makati Tuscany v. CA 215 SCRA 462 (1992) South Sea Surety v. CA 244 SCRA 744 (1995) Areola v. CA 236 SCRA 643 (1994) UCPB Gen. Ins. v. Masagana Te/amart, June 15, 1999; 308 SCRA 259 (1999); 356 SCRA 307 (en banc; see dissents) (2001) American Home Assurance v. Chua, 309 SCRA 250 (1999) Non-default options in life insurance (Sec. 227, f & h) cash surrender value extended insurance paid up insurance . automatic premium loan Read: Manufacturer's Life Insurance v. Meer, 89 Phil. 351 (1951) wee B. Reinstatement of a lapsed policy of life insurance; Section 227 (j)Rizal Surety v.08 336 Scea 19 CHAPTER a- INSURABLE INTEREST A Definition & Purpose * Recall definition of an insurance contract (Sec. 2-1) * May not be waived (Sec. 25) A. Insurable Interest in life/heatth Sec. 10 1. Insurable interest of the insured in his own life compared to that on the life of others. (cf Sec. 10 a with Sec. 10 b, c& d) 2. Insurable interest in health (see 2002 PHILAMCARE case, supra) A. Insurable Interest in Property * Definition (Sec. 13); enforceability where no insurable interest (Sec. 18) ¢ In what it may consist of (Sec. 14); cf. expectancy (Sec. 16); Filipino Merchants Ins. Co. v. Court of Appeals, 179 SCRA 638 (1989) Gaisano Cagayan v. Insurance Co. of North America, 490 SCRA 286 (2006) 3. Measure of insurable interest in Property Sections 15 to 17 4. When should insurable interest exist; cf. life (Sec. 19) 5. Change of interest in property; instances of automatic transfer of Interest Study Sections 20 to 24; also Sections 53 & 57 D. Double insurance and over insurance Sections 93 & 94 E. Multiple or several interests on same property; special provisions on mortgagor & mortgagee - Sections 8 & 9 Geagonia v. Court of Appeals, 241 SCRA 152 (1995) 5pamship White Gold marine Services v. Pioneer Insurance & the Sted Mutual, 464 SCRA 448 (2005) Pandiman v, Mari 0 SCRA , & singhid, 46 418 (2005) ine Manning Management Corp. 2. The insured (cf. cestu/ que vie in \ife insurance) Code; Sections 7, 54, 55, 56 & 57; RA 6809; Articles 110-111, Fatly Article 1390, Civil Code Filipinas Cia de Seguros v. Christen Huenefeld, 89 Phil. 54 (1951) 2. Beneficiaries (life insurance) * Designation & right to change Section 11 * Statutory limitations Articles 739, 2011 & 2012, Civil Code Insular v. Ebrado, 80 SCRA 181(1977) Consuegra v. GSIS, 37 SCRA 315 (1971) SSS v. Davac, 17 SCRA 863 (1966) Del Val v, Del Val, 29 Phil, 534 (1915) Gercio v. Sun Life Assurance, 48 Phil. 53 (1925) Philippine American Life Insurance v. Pineda, 175 SCRA 416 (1989) « Forfeiture of benefits by the beneficiary Section 12 B. Rights of Insured Over a Life Insurance Policy * Right to assign (cf. change of beneficiary) (see GREPALIFE v. CA, 316 SCRA 677 (1999) Sections 181 & 182Sun Life Fa Assurance Great Pacitic ice Of Canada v. Inge 4 °ICHic Lifes v. CAL gree tngerson, 41 Phil, 331 (1922) redemption Pree SCRA 677 (1999) on "mortgage ?. 2. Right to barrow Section 227g) 3 Right 0 dividends Section 227(e) CHAPTER VI - RES CISSION O1 MI F INSURA\ : REPRESENTATION, & BREACH OF i CONE CONCEALMENT, * Basis/Rationale I, Insurance is of utmost good faith (uberrimae fide!) 2. As risk management devices 3. As grounds for rescission « Concealment amended by B.P. 874) 28 & 29 Definition: Sections 26, 27 (as losed Sections 30, 32, 33, 34 & 35 Matters which need not be disc! e Test of materiality: Sec. 31 « Misrepresentation 1, The active form of concealment 2, Sections 36 to 47 (Sec. 45 as amended by BP 874): rm and when made (Sections 36, 37, 41 & 42) as to future (Sec. 39) 5 to information (Sec. 43) ions 44 & 45) Sec. 227d) (a) fol (b) representation (c) representation a: (d) effect of misrepresentation (Secti (e) misrepresentation as to age (supra; (f) test of materiality (Sec. 46) D. Cases on concealment and misrepresentation 9THE LAW ON INSURANCE: THE CODE, CASES & COMMENTS (Course Outline) U.P. College of Law Atty. Ernestine,CID Villareat-Fernando With thanks to/Dean Bartolome S. Carale "Carmen CHAPTER 1 - INTRODUCTION + Course Coverage Focus on substantive provisions of the Insuran ce Code as against the administrative provisions and the organizational structure of the insurance industry. Hence treatment shall be topical. * Origin and growth of insurance + Early maritime or marine insurance (See VANCE, A Handbook on the Law of Insurance, 3" ed., 1951, pp. 7-21). Read: Abaitiz Shipping v. New India Assurance, 488 SCRA 563 (2006) (on the real and hypothecary nature of maritime law). 2, Development of insurance - from marine to present day varieties ‘The insurance business in the Philippines: its beginnings and current status. rs 4. Office of the Insurance Commission; Administrative & Adjudicatory Powers Sections 414 to 416 - only 4he basics PHILAM v. Arnaldo, 234 SCRA 505 (1994) Republic (represented by Eduardo T. Malinisas Insurance Commissioner v. Del Monte Motors, Inc., 504 SCRA 52 (2006) C. Laws Governing Insurance (unless specified, all sections referred to in this Outline are of PD 612) ic Act No. 10607; Presidential Decree Nos. 612 & 1, The Insurance Code (Republi 874). Antecedent: Insurance 1460) as amended (e.g. Batas Pambansa Bg. 1Ng v. Asian Crusader, 122 SCRA 461 (1983) Canilang v. CA, 223 SCRA 443 (1993) Yu v. CA, 105 Phil, 930 (1959) Great Pacific Life v. CA, 89 SCRA 643 (1979) Pacific Banking v. CA, 168 SCRA 1 (1988) Suniife v. CA, 245 SCRA 268 (1995) Eguatas v. Great Eastern, 33 Phil, 263 (1916) Qua v. Law Union Rock, 98 Phil. 85 (1955) Argente v. West Coast Life, 51 Phil. 725 (1928) Great Pacific Life v. CA, 316 SCRA 677 (1999) Eilon v. Manila Bankers Life, 117 SCRA 187 (1982) Harding v. Commercial Union, 38 Phil. 469 (1918) The "incontestable clause" in life insurance policies; defenses not barred Sections 48 and 227(b) Tan v. CA, 174 SCRA 403 (1989) (Cf. Tan Chay v. West Coast Life, 51 Phil. 80 (1927) B. Waranties: Sections 67 to 76 ¢ Kinds (a) Express (Sections 67 & 71) (b) Implied (marine only) (e) Affirmative (Sec, 68) (d)_ Promissory (Section 72 & 73) Materiality and fraud Sections 74,75 & 76 3. Warranties in fire insurance Policies; standard Clauses Sections 168, 169, 170 storage of hazardous materials alteration in use or condition sole ownership clause “other insurance" clause 104. Cases: Pioneer v. Yap, 61 SCRA 426 (1974) New Life Enterpris | rprises v. CA, 207 SCRA 6 Pacifi Banking v. CA, 168 SCRA1 (1988) eS ed Chee Gan v. Law Union, 98 Phil. 85 (1955) ‘oung v. Midland Textile Insurance, 30 Phil. 617 (1915) B. Grounds & exercise of rights of rescission Sections 48, 63, 64, 65, 170, 227(b), 380 Tan v. CA, supra Areola v. CA, 236 SCRA 643, supra Tan Chay v. West Coast Life, 51 Phil, 80 (1927) supra Filipina Compania de Seguros v. Nava, 17 SCRA 210 (1965) CHAPTER VII — RISKS AND COVERAGES e Ingeneral: risks & causation 1. — Insurable risks: Section 3 2. "Specified risks: & “all-risks" policies 3 Exceptions/exclusions 4, Causes mentioned in the Code: "proximate," "remote," & "immediate" (Sections 84 & 86) Cf. other terms used, e.g. "legal," "efficient," "predominant," etc. 1. Meaning of “proximate cause" Vda. de Bataclan v. Medina, 1 02 Phil. 181 (1957) 1. Rescue from covered peril: Section 85 7. Loss due to negligence (Cf. willful act: Section 87) FGU v. CA, 454 SCRA 337 (2005) 1* Life Insurance 1. Death or survival Sections 179 & 180 Suicide — Section 180-A; (Cf. Sec. 87, supra) 2. Accidental death; cf. death by accidental means rs Finman v. CA, 213 SCRA 493 (1992) Calanoc v. CA, 98 Phil. 79 (1955) 7 Biagtan v. Insular, 44 SCRA58 (with dissenting opinion) (1972) Sun Insurance v, CA, 211 SCRA 554 (1992) De la Cruz v. Capital Insurance, 1? SCRA 559 (1966) 1. Group life insurance (Sec. 50; 228, last par.) Pineda v. CA, supra Eternal Gardens vs. PHILAMLIFE, 551 SCRA 1 GREPALIFE v. CA, 316 SCRA 677 1. Industrial Life (Sec. 229) 1. Mutual Life Insurance Companies (Sec. 262) Republic v. Sunlife, 473 SCRA 129 e Fire Insurance 1. What "fire insurance" includes Section 167 "Hostile" fire and "friendly" fire Phil. Home Assurance v, CA, 257 SCRA 468 (1996) 2. "Increase of risks" and “moral hazard" Clauses Alteration of insured Property Sections 168, 169, 170 3. Measure of indemnity 12Vda. de Maglana v. Consolacion, 212 SCRA 268 (1992) Far Eastern Surety v. Misa, 25 SCRA 663 (1968) Peza v, Alikpala, 160 SCRA 31(1988) Western Guaranty v. CA, 187 SCRA 652 (supra) (1 990) 2. The "no-fault" clause Section 378 Perla v. Ancheta, 164 SCRA 144 (1988) G._ Reinsurance Sections 95 to 98 PHILAM v, Auditor, 22. SCRA 135 (1968) Fieldman v. Asian Surety, 34 SCRA 36 (1970) Equitable Insurance v. Rural Insurance, 4 SCRA 343 (1962) Artex Development Co. v. Wellington Ins. Co., 51 SCRA 352 (1973) CHAPTER VIII —- MARINE INSURANCE ¢ Definition and risks covered Section 99 B. General and particular average Sec. 136 (optional: Article 811, Code of Commerce) A. Magsaysay, Inc. v. Agan, 96 Phil. 504 (1955) Jarque v. Smith Bell & Co., 56 Phil. 758 (1930) Phil. Home Assurance v. CA, 257 SCRA 468, supra B. “Perils of the sea” and “Perils of the ship” Cathay Insurance v. CA, 151 SCRA 710 (1987) Roque v. IAC, 139 SCRA596 (1985) 4a Razon v. Union Insurance, 40 Phil, 40 (1919) Malayan Insurance v. CA, 270 SCRA 242 (1997) 4Mayer Stee! y, CA & Southsea Surety, 274 SCRA 432 B. Insurable Interest in marine insurance 1. Parties with insurable interest (Sections 100, 101, 103, 104, 105) 1. Kinds of “charter parties” (Sec, 106) Coastwise vy. CA, 245 SCRA 796 (1995) Lea Mer Industries v, Malayan Insurance, 471 SCRA 698, GR. 161745, 30 September 2005 Loadstar Shipping v. Pioneer, 479 SCRA 655 (2006) GR. 157481, January 24, 2006 Cebu Salvage v. Phil. Home Assurance, 512 SCRA 667 (2007) E. Concealment and misrepresentation Sections 107 to 112; cf. Section 28 F. Implied warranties Sections 113 to 120; Sections 121 to 126 1. Seaworthiness of the vessel Sec. 113 to 119 Roque v. Intermediate Appellate Court, 139 SCRA 596, supra 2. Implied warranty against improper deviation Sections 121 to 126 3. Implied warranty of proper documentation Sec, 120 G. Kinds of losses covered by marine insurance: total, partial, actual, constructive Sections 127, 128, 129, 130, 132 1. Actual total loss Sec. 130 15Sections 171 and 172 D. Casualty & Liability Insurance Section 174 Fortune Insurance v. CA, 244 SCA 309, supra II-F E. Suretyship Sections 175 to 178 1. Definition and extent of liability Sections 175 & 176 National Power Corp. v. CA, 145 SCRA 529 (1986) Zaragoza Vv. Fidelino, 163 SCRA 443 (1988) Eastern Assurance v. IAC, 179 SCRA 561 (1989) Stronghold Insurance v. CA, 208 SCRA 336 (1992) Prudential v. Equinox, 533 SCRA 257 (2007) Intra-Strata v. Republic, 557 SCRA 363 2. Premium Payment Sec. 177 Reparations Commission v. Universal Deep Sea Fishing Corp., 83 SCRA 764 (1979) Philippine Pryce Assurance v. CA, 230 SCRA 164 (1994) 3. Applicability of the Civil Code Sec. 178 E. Motor Vehicle Insurance (limited discussion) ¢ Compulsory Motor Vehicle Insurance Sections 373, 374 & 375 Perla Compania de Seguros v. CA & Lim 208 SCRA 487 (1992) Shafer v. Judge, 167 SCRA 386 (1988) 132. Constructive total loss Sec. 131 3. Concept of abandonment; requisites; conditions Sections 138 to 155 3. Cases: Choa v. CA, 183 SCRA 223 (1990) Filipino Merchants v. CA, 178 SCRA 638 (1989) Oriental Assurance v. CA, 200 SCRA 459 (1991) Pan Malayan v. CA, 201 SCRA 382 (1991) G. Measure of indemnity; “open and "valued" policies Sections 156 to 166 CHAPTER IX — CLAIMS SETTLEMENT & SUBROGATION A. Notice and proof of loss Sections 88 to 92 PHILAM v. CA, 344 SCRA 620 Aboitiz Shipping v. Insurance Company of North America, 561 SCRA 262 (2008) A. Guidelines on claims settlement: Sections 241 to 244 1. Unfair claims settlement; sanctions Sections 241 to 244 Londres v. National Life, 94 Phil. 627 (1984) Fernandez v. National Life, 105 Phil. 59 (1959) Tio v. CA, 202 SCRA 119 (1991) Cathay v. CA, 174 SCRA 11 (1989) Noda v. Cruz-Arnaldo, 151 SCRA 227 (1967) 16Finman General v. CA, 361 SCRA 214 (2000) Delsan Transport v. CA,369 SCRA 24 (2004) C. Prescription of action Sections 63, 384 & 416 (for motor vehicle); Article 1144, Civil Code Ang v. Fulton, 2 SCRA 945 (1961) Travellers Insurance v. CA, 272 SCRA 536 (1997) Lopez v. Filipinas, 16 SCRA 855 (1966) Finman v. Inocencion, 179 SCRA 480(1989) Eagle Star v. Chin Yu, 96 Phil, 696 (1955) ACCFA v. Alpha Ins, 24 SCRA 151 (1968) Travellers Insurance v, CA, 272 SCRA 536 (1997) Sun Insurance v. CA, 195 SCRA 193, supra (1991) Mayer Steel case, supra Vda, De Gabriel v. CA, 264 SCRA 137 D. Subrogation Articles 1236 & 2207, Civil Code Coastwise v. CA, 245 SCRA 796 (supra) ‘Maglana v. Consolacion, 212 SCRA 268 (1992) Cebu Shipyard v. Willam Lines, 306 SCRA 762 (1999) Pioneer Insurance v. CA, 175 SCRA 668 (1989) ‘Manila Mahogany v.CA, 164 SCRA 652 (1957) Fireman's Fund v. Jamilla, 70 SCRA 323 (1976) PHILAMGEN v, CA, 273 SCRA 262 (1997) ‘St. Paul v. Macondray, 70 SCRA 122 (1976) Malayan Insurance v. CA, 165 SCRA 536 (1988) FEDEX v. American Homes Assurance, 437 SCRA 50 (2004) Lorenzo Shipping v. Chubb & Sons, Inc. et.al, 431 SCRA 266 (2004) FGU v. CA, 454 SCRA 337, supra ‘Aboitiz Shipping case (561 SCRA 262), supra wv