Professional Documents
Culture Documents
I. INTRODUCTION
xxx
PART ONE: INSURANCE IN RELATION TO OTHER LAWS
Article 2012
Article 739
Separate Opinions
Any person who is forbidden from receiving any donation under Article 739
cannot be named beneficiary of a life insurance policy by the person who
cannot make any donation to him, according to said article.
(2)
(3)
In the cases 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 donor and
donee may be proved by preponderance of evidence in the same action.
x x x The contract of life insurance is a special contract and the destination of the proceeds
thereof is determined by special laws which deal exclusively with that subject. The Civil
Code has no provisions which relate directly and specifically to life-insurance contract or to
the destination of life-insurance proceeds. That subject is regulate exclusively by the Code
of Commerce which provides for the terms of the contract, the relations of the parties and
the destination of the proceeds of the policy.
Those made between persons found guilty of the same criminal offense, in
consideration thereof;
Article 1320
Article 1321
The person making the offer may fix the time, place, and manner of
acceptance, all of which must be complied with.
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 donee may be
proved by preponderance of evidence in the same action.
Article 1322
Article 1323
Article 1324
When the offerer has allowed the offeree a certain period to accept,
the offer may be withdrawn at any time before acceptance by
communicating such withdrawal, except when the option is founded
upon a consideration, as something paid or promised.
Article 1325
Article 1326
3.
In essence, a life insurance policy is no different from a civil donation insofar as the
beneficiary is concerned. Both are founded upon the same consideration: liberality. A
beneficiary is like a donee, because from the premiums of the policy which the
insured pays out of liberality, the beneficiary will receive the proceeds or profits of
said insurance. As a consequence, the proscription in Article 739 of the new Civil Code
should equally operate in life insurance contracts. The mandate of Article 2012 cannot
be laid aside: any person who cannot receive a donation cannot be named as
beneficiary in the life insurance policy of the person who cannot make the donation.
Under American law, a policy of life insurance is considered as a testament and in
construing it, the courts will, so far as possible treat it as a will and determine the
effect of a clause designating the beneficiary by rules under which wins are
interpreted.
B.
As a contract
(a)
a.1
Article 1327
a.1.1 Persons who cannot give consent to a contract of insurance (Article 1327 and
Article 1328, NCC)
Article 1328
Unemancipated minors;
(2)
a.1.2 Mistake, Fraud, Violence, Intimidation, Undue Influence (Articles 1330 1339,
NCC)
Article 1330
Article 1339
a.2
Article 1333
Article 1347
All things which are not outside the commerce of men, including
future things, may be the object of a contract. All rights which are
not intransmissible may also be the object of contracts.
Article 1334
Article 1335
All services which are not contrary to law, morals, good customs,
public order or public policy may likewise be the object of a contract.
Article 1348
Article 1349
Article 1336
Article 1337
Concept
It may be stated generally, however, to be such an interest, arising from
the relation of the party obtaining the insurance, either as creditor of or
surety for the assured, or from ties of blood or marriage to him, as will
justify a reasonable expectation of advantage or benefit from the
continuance of his life. It is not necessary that the expectation of
advantage or benefit should always be capable of pecuniary estimation;
for a parent has an insurable interest in the life of his child, and a child in
the life of his parent, a husband in the life of his wife, and a wife in the life
of her husband. The natural affection in cases of this kind is considered as
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a.3
These contracts are binding, unless they are annulled by a proper action
in court. They are susceptible of ratification.
Article 1391 The action for annulment shall be brought within four years.
This period shall begin: In cases of intimidation, violence or undue
influence, from the time the defect of the consent ceases.
In case of mistake or fraud, from the time of the discovery of the same.
And when the action refers to contracts entered into by minors or other
incapacitated persons, from the time the guardianship ceases.
Insurance is a risk-spreading device. The insurer pools the premiums paid by all its
client. In theory, the pool of premiums answers for the losses of each insured.
Indeed, it is no exaggeration to say that premium is the elixir vitae of insurance
business.
(1)
(2)
Article 1403 The following contracts are unenforceable, unless they are ratified:
(1)
Those entered into in the name of another person by one who has
been given no authority or legal representation, or who has acted
beyond his powers;
(2)
Those that do not comply with the Statute of Frauds as set forth in
this number. In the following cases an agreement hereafter made
shall be unenforceable by action, unless the same, or some note or
memorandum, thereof, be in writing, and subscribed by the party
charged, or by his agent; evidence, therefore, of the agreement
cannot be received without the writing, or a secondary evidence
of its contents:
(a) An agreement that by its terms is not to be performed within a
year from the making thereof;
(b) A special promise to answer for the debt, default, or
miscarriage of another;
(c) An agreement made in consideration of marriage, other than a
mutual promise to marry;
(d) An agreement for the sale of goods, chattels or things in
action, at a price not less than five hundred pesos, unless the
buyer accept and receive part of such goods and chattels, or
the evidences, or some of them, of such things in action or pay
at the time some part of the purchase money; but when a sale
is made by auction and entry is made by the auctioneer in his
sales book, at the time of the sale, of the amount and kind of
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Article 1409 The following contracts are inexistent and void from the beginning:
(1) Those whose cause, object or purpose is contrary to law, morals,
good customs, public order or public policy;
(2) Those which are absolutely simulated or fictitious;
(3) Those whose cause or object did not exist at the time of the
transaction;
(4) Those whose object is outside the commerce of men;
(5) Those which contemplate an impossible service;
(6) Those where the intention of the parties relative to the principal
object of the contract cannot be ascertained;
(7) Those expressly prohibited or declared void by law.
These contracts cannot be ratified. Neither can the right to set up the
defense of illegality be waived.
Article 1410 The action or defense for the declaration of the inexistence of a
contract does not prescribe.
Article 1384 Rescission shall be only to the extent necessary to cover the damages
caused.
III. CHARACTERISTICS
(a)
Aleatory Contract
Element of risk. An aleatory contract is one which is dependent on the occurrence of an
uncertain event or one which is certain to happen but the time is unknown.
An aleatory contract contains elements of both a conditional obligation and an obligation
subject to a period.
Article 2010 of the New Civil Code provides that a contract is aleatory when one of the parties or
both reciprocally bind themselves to give or to do something in consideration of what the other
shall give or do upon the happening of an event which is uncertain, or which is to occur at an
indeterminate time. Insurance is one of the contracts enumerated in the New Civil Code as
falling under this classification of special contracts. It is not a contract of chance but a contract
where some of the rights of the parties of the contract are contingent upon chance events.
(b) Onerous
This is valuable consideration.
You have to give something.
Onerous describes a contract or lease that has more obligations
advantages. Onerous derives from Middle English, from Old French onereus,
than
from
Latin onersus, from onus "burden." In English, an onus is a task or duty that is onerous, or very
difficult.
(c)
Bilateral
Manila, and if the words industrial policy are printed upon the policy as part of the
descriptive matter.
A bilateral contract is a reciprocal arrangement between two parties where each promises to
perform an act in exchange for the other party's act. Each party is an obligor (a person who is
bound to another) to its own promise, and an obligee (a person to whom another is obligated
or bound) on the other party's promise.
There are two or more contracting parties.
i.
Marine
The term marine insurance cannot be given a simple definition; it has no unified
conception. One might suppose that this type of insurance is limited to insurance
that secures vessels and its cargoes against the perils of navigation. However, the
present law does not limit marine insurance to the risks of navigation. It is well to
quote Section 101 of the Insurance Code which defines Marine Insurance by
enumeration:
(d) Form
Section 101 Marine Insurance includes:
It is a formal Contract.
(a)
IV. CONCEPTS AND TERM USED
(2)
(3)
Type of Insurance
(a)
Life Insurance
Section 181 of the Insurance Code defines life insurance as an insurance on human lives and
insurance appertaining thereto or connected therewith.
Life insurance is not a contract indemnity. Consistently, the interest of the person insured
in his or another persons life is generally not susceptible of exact pecuniary measurement.
Hence, the measure of indemnity is whatever is fixed in the policy.
Section 186 Unless the interest of a person insured is susceptible of exact pecuniary
measurement, the measure of indemnity under a policy of insurance
upon life or health is the sum fixed in the policy.
i.
Individual Life
ii.
Group Life
iii.
Industrial Life
It is that form of life insurance under which the premiums are payable either monthly
or oftener, if the face amount of insurance provided in any policy is not more than
five hundred times that of the current statutory minimum daily wage in the City of
ii.
As used in the Insurance Code, the term fire insurance shall include insurance
against loss by: (1) fire, (2) lightning, (3) windstorm, (4) tornado, (5) earthquake, and
(6) other allied risks, when such risks are covered by extension to fire insurance
policies or under separate policies. Thus, fire insurance covers not only damage or
loss by fire but also allied risks if they are covered by extensions and separate
policies.
Casualty
Section 176 Casualty insurance is insurance covering 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 or marine. It includes, but is not limited
to, employers liability insurance, motor vehicle liability insurance, plate
glass insurance, burglary and theft insurance, personal accident and
health insurance as written by non-life insurance companies, and other
substantially similar kinds of insurance.
The different kinds of Ocean Marine Insurance may be grouped into four
(1)
(2)
(2)
Fire
(3)
Aviation Insurance
Suretyship
For regulatory purposes, a contract of suretyship shall be deemed to be an insurance
contract within the meaning of the Insurance Code when made by a surety who or which,
as such, is doing an insurance business.
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The contract of suretyship under the New Civil Code is simply defined as an agreement
whereby one binds himself solidarily with the principal debtor.
The most recent amendment is RA No. 10607 dated August 15, 2013. RA 10607 was published in a
newspaper of general circulation on September 5, 2013. This law re-enacted PD No. 602 as
amended and introduced new concepts and provisions. For example, the law now includes a
provision on microinsurance, bancassurance, trust operations of insurance companies, and selfregulatory organizations. The new law strengthened the regulatory provisions of the Code.
These include but are not limited to: (1) increase of the paid-up capital and net worth
requirements for insurers, (2) new requirements for unimpaired capital or assets and reserved,
(3) new provisions on financing report framework, (4) adoption of corporate governance rules,
(5) changes in the provisions on margin of solvency, (6) changes in the provisions on
investments, (7) fixing the term of the Insurance Commissioner to six years, and (8) changes in
the jurisdiction of the Insurance Commission over insurance claims. Other changes merely
expressly adopted prevailing jurisprudence.
By suretyship, a person known as surety binds himself solidarily to the creditor to fulfill the
obligation of the principal debtor. On the other hand, Sections 177 and 178 of the Insurance
Code provides:
Section 177 A contract of suretyship is an agreement whereby a party called the
surety guarantees the performance by another party called the principal
or obligor of an obligation or undertaking in favor of a third party called
the obligee. It includes official recognizances, stipulations, bonds or
undertakings issued by any company by virtue of and under the
provisions of Act No. 536, as amended by Act No. 2206.
Section 178
The liability of the surety or sureties shall be joint and several with the
obligor and shall be limited to the amount of the bond. It is determined
strictly by the terms of the contract of suretyship in relation to the
principal contract between the obligor and the obligee.
(b) Civil Code Provisions on contracts and Article 2011 and other related articles
The New Civil Code provisions govern suppletorily. For instance, the rules on perfection of
contracts under the Title IV of the New Civil Code on obligations and contracts can be applied in
the absence of provisions of the Insurance Code. Article 2011 of the New Civil Code provides
that the contract of insurance is governed by special laws and matters not expressly provided
for in such special laws shall be regulated by the said Code. The New Civil Code likewise provides
for grounds for disqualification of beneficiaries under Article 2012 thereof.
INSURANCE
There are two parties, the insurer and
the insured.
The insurer expects loss to occur and in
some cases, like life insurance, the loss is
a certainty.
The insurer does not have the right of
reimbursement from the insured.
V. APPLICABLE LAW
(a)
Right of Subrogation. The New Civil Code specifically deals with the right of the insurer to
subrogation. Article 2207 of the New Civil Code provides that if the plaintiffs property has
been insured, and he has received indemnity from the insurance company for the injury or loss
arising out of the wrong or breach of contract complained of, the insurance company shall be
subrogated to the rights of the insured against the wrongdoer or the person who has violated
the contract. If the amount paid by the insurance company does not fully cover the injury or
loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the
loss or injury.
(c)
Family Code
Whenever used in this Code, the following terms shall have the respective meanings
hereinafter set forth or indicated, unless the context otherwise requires:
(a)
The consent of the spouse is not necessary for the validity of an insurance policy
taken out by a married person on his or her life or that of his or her children.
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.
(b) The term doing an insurance business or transacting an insurance business, within
the meaning of this Code, shall include:
(1)
(2)
Any contingent or unknown event, whether past or future, which may damnify
a person having an insurable interest, or create a liability against him, may be
insured against, subject to the provisions of this chapter.
(3)
The preceding section does not authorize an insurance for or against the
drawing of any lottery, or for or against any chance or ticket in a lottery drawing
a prize.
Section 4
As used in this Code, the term Commissioner means the Insurance Commissioner.
Who can be an insurer? (Section 6, Insurance Code, in relation to Section 190, Insurance Code)
Section 6
Section 190
For purposes of this Code, the term insurer or insurance company shall include
all partnerships, associations, cooperatives or corporations, including
government-owned or -controlled corporations or entities, engaged as
principals in the insurance business, excepting mutual benefit associations.
Unless the context otherwise requires, the term shall also include professional
reinsurers defined in Section 288. Domestic company shall include companies
formed, organized or existing under the laws of the Philippines. Foreign
company when used without limitation shall include companies formed,
organized, or existing under any laws other than those of the Philippines.
Section 288
i.
Section 193
10
ii.
Prohibited acts for an insurer (Section 193, IC, in relation to Section 370 and Section 371, IC)
Section 193
11
Section 371
Mutual benefits association is not an insurer but requires authorization from the insurance
commission (Section 184, Insurance Code)
Section 184
Section 188
12
Mutual Benefit Association. Although excluded from the term insurer under
Section 184 of the Insurance Code, likewise within the regulatory powers of the
Insurance Commission are mutual benefit associations. They must first secure a
license from the Insurance Commission before they can transact business.
Section 184
iii.
For purposes of this Code, the term insurer or insurance company shall
include all partnerships, associations, cooperatives or corporations,
including government-owned or -controlled corporations or entities,
engaged as principals in the insurance business, excepting mutual benefit
associations. Unless the context otherwise requires, the term shall also
include professional reinsurers defined in Section 288. Domestic
company shall include companies formed, organized or existing under the
laws of the Philippines. Foreign company when used without limitation
shall include companies formed, organized, or existing under any laws
other than those of the Philippines.
(1)
(2)
Common Law Spouses, Unions Without Marriage Can common-law-spouses and partners
be insured by the other partner? (Article 1409, NCC)
Article 1409 The following contracts are inexistent and void from the beginning:
(1) Those whose cause, object or purpose is contrary to law, morals,
good customs, public order or public policy;
(2) Those which are absolutely simulated or fictitious;
(3) Those whose cause or object did not exist at the time of the
transaction;
(4) Those whose object is outside the commerce of men;
(5) Those which contemplate an impossible service;
(6) Those where the intention of the parties relative to the principal
object of the contract cannot be ascertained;
(7) Those expressly prohibited or declared void by law.
These contracts cannot be ratified. Neither can the right to set up the defense of
illegality be waived.
Who owns the insurance policy taken by one spouse? (Arts. 91, 92, 96 & 109, Family Code)
i.
Spouses as insured individuals Spouses can enter into contracts of insurance covering
her life or the life of her children and the consent of the other spouse is not required for its
validity.
Article 91
Article 92
The consent of the spouse is not necessary for the validity of an insurance policy taken out
by a married person on his or her life or that of his or her children. (Section 3, par. 2, IC)
Article 73, Family Code
13
(1)
(3)
Article 1327
Article 93
Article 109
(2)
(3)
iii.
ii.
Minors as procurer of insurance See changes in Section 3 as per RA 10607. Relate to 1327,
NCC
Section 3
14
(1)
Unemancipated minors;
(2)
(c)
(4) That which is purchased with exclusive money of the wife or of
the husband.
Beneficiary
Beneficiary is a party to whom the insurance proceeds will inure when the contingency covered
by the insurance happens. It may be the insured himself or a third party.
The beneficiary may be a third person. Unless he is the insured himself, the beneficiary is not
one of the contracting parties. However, a third party beneficiary named in the policy has the
right to file an action against the insurer in case of loss. No other party can recover the proceeds
other than the beneficiary.
Section 53, Insurance Code
The consent of the spouse is not necessary for the validity of an insurance
policy taken out by a married person on his or her life or that of his or her
children.
Section 53
The insurance proceeds shall be applied exclusively to the proper interest of the
person in whose name or for whose benefit it is made unless otherwise
specified in the 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.
When a beneficiary is designated. In life insurance, if there is a named beneficiary and the
designation is not invalid, it is the designated beneficiary who is entitled to receive the proceeds
and not the heirs of the insured. If another person is named the beneficiary, the proceeds of an
insurance policy belong exclusively to the beneficiary and not to the estate of the person whose
life was insured. In other words, the proceeds are the separate and individual property of the
beneficiary, and not of the heirs of the person whose life was insured. At any rate, the heir may
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also be the beneficiary and the proceeds of the life-insurance policy payable to said heir belongs
to him exclusively and does not form part of the deceaseds estate.
Third Parties. The insurer has no obligation to turn over the proceeds of the insurance to third
persons even if the third persons are immediate relatives if there is a designated beneficiary.
When there is no beneficiary. It is only when there is no designated beneficiary or when the
designation is void, that the laws of succession are applicable. In other words, if there is no
designated beneficiary, the proceeds shall form part of the estate of the deceased insured.
Exception. By way of exception, the Family Code provides for revocation of an irrevocable
designation of beneficiary. Article 64 of the Family Code provides that after the finality of
the decree of legal separation, the innocent spouse may revoke the designation as a
beneficiary in any insurance policy, even if such designation is stipulated to be irrevocable.
The revocation of or change in the designation of the insurance beneficiary shall take
effect upon written notification thereof to the insured.
Effect of use of conjugal funds. If the funds of the conjugal partnership of gains are used to pay
for the premium, the proceeds of the policy constitute community property if the policy was
made payable to the deceaseds estate. One-half of said proceeds belongs to the estate and the
other half to the surviving spouse.
ii.
i.
As a rule, the designation of the beneficiary is revocable. If the insured wants the
designation to be irrevocable, the irrevocable nature should be provided for in the policy.
Section 11, IC
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.
Article 64, FCP After the finality of the decree of legal separation, the innocent spouse
may revoke the donations made by him or by her in favor of the offending
spouse, as well as the designation of the latter as beneficiary in any
insurance policy, even if such designation be stipulated as irrevocable. The
revocation of the donations shall be recorded in the registries of property
in the places where the properties are located. Alienations, liens and
encumbrances registered in good faith before the recording of the
complaint for revocation in the registries of property shall be respected.
The revocation of or change in the designation of the insurance
beneficiary shall take effect upon written notification thereof to the
insured.
The action to revoke the donation under this Article must be brought
within five years from the time the decree of legal separation become
final.
15
Section 12 of the Insurance Code talks about a disqualification that arises after the
perfection of the contract of insurance. The beneficiary does not suffer any disqualification
at the inception of the contract but he becomes disqualified after the contracts
perfection. The underlying principle is that the beneficiary should not profit from his
misdeed. The disqualification under Section 12 of the Insurance Code arises due to a willful
act of the beneficiary.
RA No. 10607 changed the default rules on beneficiary under Section 12. The Life
Insurance, if a beneficiary is disqualified under Section 12, the proceeds of the insurance
shall be paid in accordance with the following rules:
(1)
The forfeited share of the disqualified beneficiary shall pass on to the other
beneficiaries;
(2)
If there are no other beneficiaries, the proceeds shall be paid in accordance with
the policy contract;
(3)
Any person who is forbidden from receiving any donation under Article
739 cannot be named beneficiary of a life insurance policy and by the
person who cannot make any donation to him, according to said article.
Article 739
(2)
(3)
Effect of use of conjugal funds. If the funds of the conjugal partnership of gains are
used to pay for the premium, the proceeds of the policy constitute community
property if the policy was made payable to the deceaseds estate. One-half of said
proceeds belongs to the estate and the other half to the surviving spouse.
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 donor
and donee may be proved by preponderance of evidence in the same
action.
If funded from the separate property of one of the spouses, the policy belongs to the
owner.
In a case decided when the New Civil Code provisions on the property regime of the
spouses was still in force, the Supreme Court adopted the following comments of Manresa
in his Commentaries on the Civil Code (Vol. 9, page 589 cited in the Bank of the Philippine
Islands v. Juan Posadas, Jr.):
Grounds for disqualification. See Article 739, NCC. Thus in the cases mentioned in Article
739, NCC, although the insurance contract itself is valid, the designation of beneficiary is
void because they are disqualified as beneficiaries.
The amount of the policy represents the premium to be paid, and the right to it
arises the moment the contract is perfected, for at the moment the power of
disposing of it may be exercised, and if death occurs payment may be demanded. It is
therefore something acquired for a valuable consideration during the marriage,
though the period of its fulfillment, depend upon the death of one of the spouses,
which terminates the partnership. So considered, the question may be said to be
decided by Articles 1396 and 1401: if the premiums are paid with the exclusive
property of husband or wife, the policy belongs to the owner; if with conjugal
property, or if the money cannot be proved as coming from one or the other of the
spouses, the policy is community property.
While a concubine is disqualified, the illegitimate children of the insured are not
disqualified. No legal prescription exists in naming as beneficiaries the children of illicit
relationships by the insured. If the concubine was disqualified, her shares in the insurance
proceeds must be awarded to the illegitimate children who are also designated as
beneficiaries.
iv.
16
vi.
General and vague designation of beneficiary Sections 53 and 54, Insurance Code
Section 53
Section 54
(d) Insurance Agent Section 54, Insurance Code in relation to Section 309, Insurance Code. See
also the general provisions of Agency in the Civil Code.
The insurance policy may be obtained by a person through his agent or trustee.
Section 54
Section 309
The provisions of Sections 307 and 309 shall apply to an employee who shall be
engaged to sell insurance products by an insurance company.
Article 1869
Agency may be express, or implied from the acts of the principal, from his
silence or lack of action, or his failure to repudiate the agency, knowing
that another person is acting on his behalf without authority.
No insurance company doing business in the Philippines, nor any agent thereof,
shall pay any commission or other compensation to any person for services in
obtaining insurance, unless such person shall have first procured from the
Commissioner a license to act as an insurance agent of such company or as an
insurance broker as hereinafter provided.
No person shall act as an insurance agent or as an insurance broker in the
solicitation or procurement of applications for insurance, or receive for services
in obtaining insurance, any commission or other compensation from any
insurance company doing business in the Philippines, or any agent thereof,
without first procuring a license so to act from the Commissioner, which must
be renewed every three (3) years thereafter. Such license shall be issued by the
Commissioner only upon the written application of the person desiring it, such
application if for a license to act as insurance agent, being approved or
endorsed by the company such person desires to represent, and shall be upon a
form prescribed by the Commissioner giving such information as he may
17
Article 1870
Acceptance by the agent may also be express, or implied from his acts
which carry out the agency, or from his silence or inaction according to the
circumstances.
Article 1871
Between persons who are present, the acceptance of the agency may also
be implied if the principal delivers his power of attorney to the agent and
the latter receives it without any objection.
Article 1872
Between persons who are absent, the acceptance of the agency cannot be
implied from the silence of the agent, except:
Article 1873
(1)
When the principal transmits his power of attorney to the agent, who
receives it without any objection;
(2)
becomes a duly authorized agent, in the former case with respect to the
person who received the special information, and in the latter case with
regard to any person.
(12)
(13)
(14)
(15)
The power shall continue to be in full force until the notice is rescinded in
the same manner in which it was given.
Article 1874
Article 1879
Article 1880
Article 1875
Article 1881
The agent must act within the scope of his authority. He may do such acts
as may be conducive to the accomplishment of the purpose of the agency.
Article 187
Article 1882
Article 1883
If an agent acts in his own name, the principal has no right of action
against the persons with whom the agent has contracted; neither have
such persons against the principal.
The former comprises all the business of the principal. The latter, one or
more specific transactions.
Article 1877
Article 1878
In such case the agent is the one directly bound in favor of the person with
whom he has contracted, as if the transaction were his own, except when
the contract involves things belonging to the principal.
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
18
(e)
Insurance for a partner Section 55, Insurance Code. See Civil Code provisions.
Section 55
If the policy is secured for the benefit of a partnership, a change in the name of the partnership
does not avoid the policy. For example, the Supreme Court ruled in one case that when the
partners of a general partnership doing business under the firm name of Sharruf & Co.
obtained insurance policies and the latter afterwards changed its name to Sharruf & Eskenazi
(which are the names of the same and only partners of said firm Sharruf & Co.), but
continuing the same business, the new firm acquires the rights of the former under the same
policies.
Article 2011
Article 2012
Any person who is forbidden from receiving any donation under article 739
cannot be named beneficiary of a life insurance policy by the person who
cannot make any donation to him, according to said article.
Article 1771
Article 1767
Article 1772
Two or more persons may also form a partnership for the exercise of a
profession.
Article 1768
Article 1769
The partnership has a juridical personality separate and distinct from that
of each of the partners, even in case of failure to comply with the
requirements of article 1772, first paragraph.
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Article 1773
Article 1774
Article 1775
Associations and societies, whose articles are kept secret among the
members, and wherein any one of the members may contract in his own
name with third persons, shall have no juridical personality, and shall be
governed by the provisions relating to co-ownership.
Article 1776
Article 1770
A universal partnership may refer to all the present property or to all the
profits.
Article 1778
Article 1779
Double Assignment. There are views in determining who has a better right in case the insured
assigns the life or health insurance policy to two or more persons. One is the English Rule
according to which the assignee who first gives notice is the one entitled to the proceeds if he
has no notice of any prior assignment. The other view is known as the American Rule which
provides that the assignee under the first assignment has the preferable claim. The American
Rule applies in this jurisdiction because in the absence of any specific provision on double sale
or assignment of rights, the applicable principle is prius tempore portior jure first in time,
stronger in right.
Article 1782
Article 1783
(f)
A policy of insurance upon life or health may pass by transfer, will or succession
to any person, whether he has an insurable interest or not, and such person
may recover upon it whatever the insured might have recovered.
How to transfer. No formalities are required for the assignment of life or health insurance
policies. Hence, the provisions of the New Civil Code on assignment of rights should be applied.
For example, the New Civil Code provides as one of the modes of transferring ownership the
delivery of the proof or evidence of the right. Accordingly, delivery of the policy may transfer
ownership of the policy of insurance.
Notice not necessary. Since the right to transfer is conferred by law, notice to the insurer is not
even necessary to validate the transfer. The assignee acquires the right thereon even without
the knowledge of the insurer. Nevertheless, while notice to the insurer is not required, it is more
advantageous to the assignee to give notice to the insurer of such transfer. (Section 185,
Insurance Code)
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Mere transfer of the thing insured does not transfer the policy, but suspends the same till the
new owner becomes the owner of both the property and the policy.
Section 58, Insurance Code
The mere transfer of a thing insured does not transfer the policy, but suspends it until the
same person becomes the owner of both the policy and the thing insured.
Implicit from this provision is the rule that the policy cannot be transferred so long as the
transferee has insurable interest in the thing insured. Nevertheless, the insurers assent is
necessary for the transfer.
Exceptions. There are exceptional cases when the insurers consent is not necessary even if
successors-in-interest of the insured substitute the latter. These include cases involving transfer
through will or succession and other instances of transfer by operation of law and in cases
where there is transfer among partners. (Sections 23 and 24, Insurance Code)
Section 23
A change of interest, by will or succession, on the death of the insured, does not
avoid an insurance; and his interest in the insurance passes to the person taking
his interest in the thing insured.
Section 24
Any person who for compensation solicits or obtains insurance on behalf of any
insurance company or transmits for a person other than himself an application
for a policy or contract of insurance to or from such company or offers or
assumes to act in the negotiating of such insurance shall be an insurance agent
within the intent of this section and shall thereby become liable to all the duties,
requirements, liabilities and penalties to which an insurance agent is subject.
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.
1.
2.
3.
4.
Right of control test is considered as the most important element in determining the
existence of employment relation.
Of the above-mentioned elements, the right of control test is considered as the most
important element in determining the existence of employment relation. The control test
initially found application in the case of Viaa vs. Al-Lagadan and Piga, where the court
held that there is an employer-employee relationship when the person for whom the
services are performed reserves the right to control not only the end achieved but also the
manner and means used to achieve that end.
Four-fold test
Economic reality test
Two-tiered test (or Multi-factor test)
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Control test thus refers to the employers power to control the employees conduct not
only as to the result of the work to be done but also with respect to the means and
methods by which the work is to be accomplished.
In applying this test, it is the existence of the right, and not the actual exercise thereof,
that is important.
The Supreme Court has laid down in a formidable line of decisions the elements to be
generally considered in determining the existence of an employer-employee relationship,
as follows:
(a)
(b)
(c)
(d)
The control testmeaning whether or not the employer controls or has reserved the right
to control the employee not only as to the result of the work to be done but also the
means and methods employed in reaching that endconstitutes the most important
index of the existence of an employer-employee relationship.
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Applying the control test, that is, whether the employer controls or has reserved the right
to control the employee not only as to the result of the work to be done but also as to the
means and method by which the same is to be accomplished, the question of whether or
not there is an employer-employee relationship for purposes of the Social Security Act has
been settled in this jurisdiction in the case of Investment Planning Corp. vs. SSS, 21 SCRA
924 (1967). In other words, where the element of control is absent; where a person who
works for another does so more or less at his own pleasure and is not subject to definite
hours or conditions of work, and in turn is compensated according to the result of his
effort, the relationship of employer-employee does not exist. (SSS vs. Court of Appeals, 30
SCRA 210 [1969]).
the same can be considered void for being against public policy. Thus, Section 25 of the
Insurance Code provides:
Section 25
a.1
In Life Insurance That circumstances which will allow a person to take on insurance over
the life of another person for reasons that the death, disability or injury of that person will
cause damage to the emotional or economic well being of the one who obtained the
insurance.
a.2
Concept
Insurable Interest
Section 13
Concept
It may be stated generally, however, to be such an interest, arising from the relation
of the party obtaining the insurance, either as creditor of or surety for the assured, or
from ties of blood or marriage to him, as will justify a reasonable expectation of
advantage or benefit from the continuance of his life. It is not necessary that the
expectation of advantage or benefit should always be capable of pecuniary
estimation; for a parent has an insurable interest in the life of his child, and a child in
the life of his parent, a husband in the life of his wife, and a wife in the life of her
husband. The natural affection in cases of this kind is considered as powerful as
operating more efficaciously to protect the life of the insured than any other
consideration. But in all cases there must be a reasonable ground, founded upon the
relations of the parties to each other, either pecuniary or of blood or affinity, to
expect some benefit or advantage from the continuance of the life of the assured.
Otherwise, the contract is a mere wager, by which the party taking the policy directly
interested in the early death of the assured. Such policies shall have the tendency to
create a desire for the event. They are, therefore, independently of any statue on the
subject, condemned, as being against public policy.
The presence of insurable interest has the following purposes:
(1)
(2)
a.3
Effect of lack of insurable interest Generally unenforceable (Section 18, IC) and will be
considered as a contract of wager.
If the insured has no insurable interest over the life or property he insures, the insurance
contract is considered unenforceable. If it can be established that the contract is really a
wager, the same can be considered void for being against public policy. Thus, Section 25 of
the Insurance Code provides:
Section 25
B.
22
Insurable interest over the life of another person. The persons in whose life one may have
insurable interest are enumerated in Section 10 of the Insurance Code.
Section 10
If the insured has no insurable interest over the life or property he insures, the insurance
contract is considered unenforceable. If it can be established that the contract is really a wager,
(c)
Mortgage Redemption Insurance. Debtors may be insured into a group life insurance
known as mortgage redemption insurance. A mortgage redemption insurance is
a device for the protection of both the mortgagee and the mortgagor. On the part of
the mortgagee, it has to enter into such form of contract so that in the event of the
unexpected demise of the mortgagor during the subsistence of the mortgage
contract, the proceeds from such insurance will e applied to the payment of the
mortgage debt, thereby relieving the heirs of the mortgagor from paying the
obligation. In a similar vein, ample protection is given to the mortgagor under such a
concept so that in the event of death; the mortgage obligation will be extinguished
by the application of the insurance proceeds to the mortgage indebtedness.
(d) Of any person upon whose life any estate or interest vested in
him depends.
Classes of Insurable Interest in Life Insurance. Insurance interest may be
(1)
(2)
b.2 Insurable interest over blood relationship Limited to Spouse and Children. Parents are
not included unless they all due under Section 10 (b), IC.
With respect to insurable interest in the life of another person, the same may be
based on
C.
(1)
(2)
(3)
relationship by blood,
business relationship, or
other pecuniary interest,
Blood Relationship. Blood relationship is limited to insurable interest over the life of a
spouse or of ones children. Blood relationship alone would not suffice in other cases.
Thus, one has no insurable interest over the life of his parents or his brothers and
sisters by the mere fact that they are related to him by blood alone. The basis of
insurable interest is not blood relationship but pecuniary interest.
Other relation provisions. Section 13, 14, 16 and 17 of the Insurance Code
Education or support. One has insurable interest on the life of any person on whom
he depends wholly or in part for education or support. The law does not require that
the person on whom one depends wholly or in part for education or support is legally
obligated to do so.
Pecuniary Interest. Every person has insurable interest in the life or health of any
person in whom he has a pecuniary interest. Accordingly, one has insurable interest
over the life of his partner or his employee. In both cases, pecuniary benefit is derived
by the person who will take out an insurance policy with the continued preservation
of the life of the partner or employee. In the case of a partner, it is reasonable to
conclude that the continuance of partnership and the life of a partner furnished a
reasonable expectation of advantage to the other partners. Similarly, the loss of the
life of the employee will result in economic loss on the part of the employer because
he will be deprived of the service of the employee.
Creditor. One can insure the life 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.
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Section 13
Section 14
c.1
Section 16
Section 17
In general, test of insurable interest in property Section 13, IC and Section 17, IC
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Section 13
Section 17
Test. Based on Section 13 of the Insurance Code, the presence of insurable interest in
property can be determined by asking if the insured has interest in property, whether
real or personal, or any relation thereto, or liability in respect thereof, of such nature
that a contemplated peril might directly damnify the said insured.
c.2.3 Expectancy. Expectancy must likewise be coupled with an existing interest. For
instance, the interest of an heir over the properties of his successor who is still alive is
a mere expectancy that is not coupled with an existing interest. Hence, the heir does
not have insurable interest over the properties of his successor-in-interest.
The test in determining insurable interest in property is whether one will derive
pecuniary benefit or advantage from its preservation, or will suffer pecuniary loss or
damage from its destruction, termination, injury by the happening of the event
insured against.
c.2
When he has neither possession of the property nor any other legal
interest in it but stands in such relation with respect to it that he may
suffer from its destruction, loss of a legal right dependent upon its
continued existence.
An existing interest;
An inchoate interest founded on an existing interest; or
An expectancy, coupled with an existing interest in that out of
which the expectancy arises
As to extent
Beneficiarys interest
Beneficiary must
insurable interest.
c.2.1 Existing Interest. Existing interest includes the interest of an owner. However, title or
ownership is not essential. Thus the following persons have insurable interest over
the property even if they are not the owners thereof: (1) lessee, (2) depositary, (3)
usufructuary, and (4) borrower in commodatum.
Insurable interest in property exists in any of the following cases because the person
is so situated that he will suffer because of the loss due to a peril insured against:
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(1)
When the insured possesses a legal title to the property insured, whether
vested or contingent, defeasible or undefeasible;
(2)
(3)
c.3
have
Included in insurance policies taken by depositaries are the so-called bailee policies that
are involved in transportation of goods.
c.4
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He may become the assignee of the policy with the consent of the insurer; or
A mere pledgee without such consent, or the original policy may contain a
mortgage clause; or
(3) A rider making the policy payable to the mortgagee as his interest may
appear may be attached; or
(4) A standard mortgage clause, containing a collateral independent contract
between the mortgagee and the insurer, may be attached; or
(5) The policy, though by its terms payable absolutely to the mortgagor, may have
been procured by a mortgagor under a contract duty to insure for the
mortgagees benefit, in which case the mortgagee acquires an equitable lien
upon the proceeds; or
(6) The policy may provide for a loss payable clause in favor of the mortgagee.
In the policy obtained by the mortgagor with loss payable clause in favor of the
mortgagee as his interest may appear, the mortgagee is only a beneficiary under the
contract, and recognized as such by the insurer but not made a party to the contract
himself. Hence, any act of the mortgagor which defeats his right will also defeat the right
of the mortgagee. This kind of policy covers only such interest as the mortgagee has at the
issuance of the policy. The typical loss payable clause is also known as the open
mortgage clause.
A loss payable clause should be distinguished from a union mortgage clause where
there is a transfer of an insurance from the mortgagor to the mortgagee with the assent
of insurer. The applicable statute is Section 9 of the Insurance Code which provides:
Section 9
The different variations of loss payable clauses were explained by Prof. Vance in this
wise:
As a mortgaged property, the mortgagor and the mortgagee have each an independent
insurable interest therein and both interests may be covered by one policy, or each may
take out a separate policy covering his interest, either at the same or at separate times.
The mortgagors insurable interest covers the full value of the mortgaged property. The
mortgagees insurable interest is to the extent of the debt, since the property is relied
upon as security thereof, and in insuring he is not insuring the property but his interest or
lien thereon. His insurable interest is prima facie the value of the mortgaged property.
Thus, separate insurances covering different insurable interests may be obtained by the
mortgagor and the mortgagee.
In the first class are those that merely designate the mortgagee as payee, to the
extent of his interest, of such sum as may become payable under the provisions and
conditions of the policy. Under such clause the mortgagee is made merely a
beneficiary under the contract, recognized as such by the insurer, but not made a
party to the contract itself. Any default on the part of the mortgagor, which by the
terms of the policy defeat his rights, will also defeat all rights of the mortgagee under
the contract, even though the latter may not have been in any fault.
The usual practice and contractual stipulation is for mortgagor to take out insurance for
the benefit of the mortgagee. The mortgagee may be made the beneficial payee in several
ways including the following:
In the second class are those clauses, known in their more usual forms, as standard
or union mortgage clauses, which create collateral independent contracts
between the insurer and mortgagee, and provide that the rights of the mortgagee
shall not be defeated by the acts or defaults of the mortgagor. Under clauses of this
class, we have the general rule that the mortgagees rights remain unaffected by any
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