INSURANCE LAW DISCUSSION TRANSCRIPTIONS OF ATTY.

LAROBIS FINALS COMPILATION

August 14, 2010
F. INSURANCE POLICY
I. Definition
Sec. 49. The written instrument in which a contract of insurance is set forth, is called a policy of insurance.
- What is a policy?
- Evidence of the contract of insurance , it is a written instrument which contains the terms and stipulations agreed
between the insured and the insurer. It controls the contract of insurance, it also serves as what? Measure of insurers
liability. Under section 49 the following needs to be in writing dba because it says a written instrument. Modern day
insurance are in writing, the policy is in writing; but the contract of insurance could either be formal or informal.
Formal, if you are issued a written policy gyud. It could be informal like your application form the insurer approve the
insurance, that could also be or it could be a cover note or a binding slip. Ok?
II. Form of Insurance Policy; Riders, etc) / Contents (Sections 50-51)
Sec. 50. The policy shall be in printed form which may contain blank spaces; and any word, phrase, clause, mark, sign,
symbol, signature, number, or word necessary to complete the contract of insurance shall be written on the blank spaces
provided therein.
Any rider, clause, warranty or endorsement purporting to be part of the contract of insurance and which is pasted or
attached to said policy is not binding on the insured, unless the descriptive title or name of the rider, clause, warranty or
endorsement is also mentioned and written on the blank spaces provided in the policy.
Unless applied for by the insured or owner, any rider, clause, warranty or endorsement issued after the original policy shall
be countersigned by the insured or owner, which countersignature shall be taken as his agreement to the contents of such
rider, clause, warranty or endorsement.
Group insurance and group annuity policies, however, may be typewritten and need not be in printed form.
- Must the form of the policy be approved? Does it require approval from the insurance commissioner?
o YES, because the business of insurance is imbued with public interest. So thats why the law requires that the policy
should be in a form previously approved by the insurance commissioner. To safeguard also the interest of the
public, otherwise basig the insurer might provides stipulation which are not beneficial or contrary to law morals,
good customs, public policy; or disadvantageous to the insured.
- What if the insurer issued a policy and the form is not previously approved by the insurance commissioner? What is the
effect?
o For one, the insurer cannot raise his own failure to have the form previously approve as a defense to defeat the
recovery of the insured, so although the form was not previously approved by the insurance commissioner it does
not invalidate the policy. The insured can still recover.
- But what is the penalty for the insurer? Is he subject to penalty?
o Yes, he would be penalized. In fact he is liable for prosecution, for having issued the policy which was not
previously approved. But as to the effect of the policy it does not invalidate the contract of insurance, the insured
can still enforce the policy.
- What about language of the policy, Is there a duty on the part of the insurer to explain to the insured?
o Jurisprudence states that if the language is clear, plain, and unambiguous there is no affirmative duty on the part
of the insurer to explain the policy.
- But in case there is ambiguity, what is the effect? Can the insured now say to the insurer that you did not explain to me
the policy?
o You have the case of Tang vs CA
o Facts:
In this case the insured was a Chinese and at the same time illiterate. He applied for an insurance policy
and in the application form there was a question on WON he is suffering from any illness and in his

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answer she stated there that she was healthy. Later on he died of lung cancer and it was discovered that
he concealed some material facts concerning his health. The insurer now refused to pay on the ground of
concealment or misrepresentation, but the beneficiary alleged that since the insured was illiterate and
was Chinese he doesnt know how to speak or read the English language. So therefore, she could not be
guilt of concealment and also the beneficiary also alleged that the insurer did not prove that he explained
to the insured the policy. (not sure if tang is a boy or a girl ^_^)
o Issue: WON the insurer is liable?
Is there a duty, must the insurer prove to the court that he explained the policy?
The court said applying the provisions of the civil code which states that if the other party of the contract
is unable to read or if the language is not understood by him and mistake or fraud is alleged the person
who seeks to enforce the contract has the burden of proof. To prove that the terms thereof has been fully
explained.
So in that case who was the party interested in enforcing the contract? Was it the insured or the insurer?
It was the insured.
- What about on the part of the insured? Is there a duty to read the policy?
o There are two views:
First view was that the acceptance of the policy without reading it is not necessarily negligence per se, the
reason given is that the contract of insurance is a contract of adhesion. Even if iya panang gi basa ka
balik2x its not an insurance that he would have understood it or comprehend what is writtend in the
policy, considering that the language used indrafting the policy is technical terms. So even if wla niya gi
basa its not negligence per se.
There was another view which says that the fact that you did not read it is already negligence, but
base on recent jurisprudence it tend to favour more on the first view for the reason that the contract
of insurance is a contract of adhesion. Ok?
- SEC. 50, the policy shall be in printed form but it may contain blank spaces, so in the blank spaces pwde you can fill in
the name, the name of the insured, the value of the policy, etc. It does not affect the validity of the contract of
insurance.
o SEC 50, mentions about a rider, a clause, a warranty or an indorsement, what are these animal?
o Section 50 mentions about a rider, a clause, a warranty these are stipulations not found in the policy but it is
written on a separate paper, but this separate paper is attach to the policy.
- What is the purpose of this rider?
o Like for example a rider in particular like if you want some modification or amendment in the policy so instead of
revising the entire policy you just add a rider. Like for example in your original policy the coverage exclude damage
arising from earthquake, but the insured would like to have that risk included, ok, so ni apply siya for the
amendment for modification. So instead of revising the entire policy they would just add a rider. Same as clause a
warranty or indorsement, this tends to modify what is written in the policy.
o Now, in order for this rider this separate paper to have a binding effect para sya maging valid while attach to the
policy. This rider, a descriptive name or title to this rider must be mentioned in the policy itself in order for this
rider to be binding. Otherwise if there is no description of that rider then this would no be binding, unsa raman
gihapon mu govern ang? Policy... although it would not affect the other provisions and dili lang ma binding ang
what is indicated in the rider.
o Must the party sign in the rider?
Unless applied for by the owner or by the insured after the original policy shall be countersigned by the
insured which countersignature shall be taken as its agreement. Now, it does not need his signature if the
rider was issued contemporaneous with the issuance of the policy. Dungan siyag issue. Or even it was
issued after the original policy was issued if the rider was applied for by the insured or the owner.
o When countersignature needed:

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If it is not issued contemporaneous with the policy and it is not applied for by the owner or the insured of
the policy
o No countersignature needed:
Even if it was applied after the policy but it was the owner or insured himself who applied for the rider. Or
was issued together with the policy.
Sec. 51. A policy of insurance must specify:
(a) The parties between whom the contract is made;
(b) The amount to be insured except in the cases of open or running policies;
(c) The premium, or if the insurance is of a character where the exact premium is only determinable upon the
termination of the contract, a statement of the basis and rates upon which the final premium is to be determined;
(d) The property or life insured;
(e) The interest of the insured in property insured, if he is not the absolute owner thereof;
(f) The risks insured against; and
(g) The period during which the insurance is to continue.
- What are the informations contained in the policy? Sec. 51
- What if there is a misspelling in the name does it affect?
o It is not material, in the absent of fraud, incorrect designation misspelling of the name shall not invalidate the
policy. It does not affect your right to recover, unless of course its entirely different person.
- Amount of the insurance
o But the amount reflected in the policy, the face value of the policy, it does not necessarily mean that thats the
amount for which the insurer would be liable. That only serve as the ceiling or maximum limit of the insurance
liability.
- Premium
o There are factors in fixing the premium
In life what are the factors in fixing the premium?
Age
Gender
Occupation
Previous medical history
Property (factors)
Type of construction material used
Condition of the facility
Location
Use of the building
Moral hazard
Interest if not the absolute owner
III. Cover Notes (Section 52)
Sec. 52. Cover notes may be issued to bind insurance temporarily pending the issuance of the policy. Within sixty days after
the issue of the cover note, a policy shall be issued in lieu thereof, including within its terms the identical insurance bound
under the cover note and the premium therefor.chanrobles virtual law library

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Cover notes may be extended or renewed beyond such sixty days with the written approval of the Commissioner if he
determines that such extension is not contrary to and is not for the purpose of violating any provisions of this Code. The
Commissioner may promulgate rules and regulations governing such extensions for the purpose of preventing such
violations and may by such rules and regulations dispense with the requirement of written approval by him in the case of
extension in compliance with such rules and regulations.
- Cover notes are intended to provide temporary and immediate protection pending the issuance of the formal policy.
Like for example shipper ka, youre the owner of the goods gusto nagyud nimong e ship, dli na pwde ka huwat og
ugma; you intend to have protection for that shipment. So pwde ka mu apply for an insurance coverage but in the
meantime the insurer will just issue you a cover note pending the issuance of the formal policy.
- How come the formal policy cannot be issued?
o Because maybe there are certain information that are not yet available.
- But take note you have to distinguish because cover notes could either be a preliminary contract of present insurance
or a preliminary contract of future insurance.
o The preliminary contract of present insurance thats the kind that would already provide immediate protection, so
if the loss already happened but who havent been issued a policy you are covered already. But ang katong isa,
preliminary contract of future insurance, even if you have been issued a cover note or a binding slip it does not
mean that you are already covered, until the formal policy is issued.
o How would you know if it is a preliminary contract of present insurance or a preliminary contract of future
insurance?
It depends on what is written on the cover slip or cover note.
Like in the case, MR. A applied for a coverage and he was issued a cover slip or a cover note upon
payment of premium the cover slip specifically states that it was issued as an acknowledgement only for a
receipt of premium that the insurance is not yet effective until the application is approved by the insurer
or until the formal policy is issued. During the pendency of the policy ang iyang daughter died, ang iyang
daughter was the subject of the insurance. So the issued now is WON hes entitled to recover. And the
court said NO, because the nature of the cover note is merely a preliminary contract of future insurance.
ok?
If silent it means that it offers an immediate protection.
- Cover notes are usually issued for 60 days. Within 60 days dapat the insurer should already issue you a formal policy
but 60 days is subject to extension provided it is approved by the insurance commissioner.
IV. Application of Insurance Proceeds (Section 53)
Sec. 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.
- We have this case of Bonifacio brothers vs Mora
o Facts: Mora applied for coverage for accidental damage, theft on his car. He insured actually his car. The lost was
made payable actually to the mortgagee.ok? Now, after he had the car repaired kay na daot man. It was repaired
by bonifacio and the materials were supplied by ayala. Now bonifacio and ayala filed the claim against the insurer
to recover the proceeds.
o Issue: WON bonifacio and ayala are entitled to the proceeds of the insurance?
o Held: No, under sec. 53 the proceed of the insurance shall accrue exclusively to the interest of the person in whose
name and for whose benefit it was made. For whose benefit man ang proceeds? Mortagee. The contract of
insurance is separate or independent from the contract of repair, labor, supply and materials, that is different, they
have no right to go after the proceeds. K? The only exception where third party can go after the proceeds of the
insurance is if there is a stipulation in their favour, or if the policy is an indemnity against third person.
- In another case:
o Mr. A insured ang iyang fleet of taxi cab. He insured it with xyz company. The policy provides that the insurer shall
indemnify the driver who is driving the motor vehicle of the insured and in the event of the death of the driver.

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The insured shall indemnify the representatives or the heirs of the driver. K? So one of the drivers of Mr.A sa iyang
tax cab na si Mr.B met an accident and he died. The heirs now or the representative of Mr.B sought recovery from
xyz.
o Are they entitled to recover under the policy?
Yes, because the policy itself expressly provide that the insurer is liable to the insured or to his driver or in
the event of death of his driver to his representatives. K? There is a stipulation in favour of third person.
- Compusory TPL is this a stipulation in favour of third person? Can a third person, example lang naa kay na ligsan. Can
the heirs of the person na imong na ligsan go after you insurer?
o Yes because that is an example of indemnity against third person. But take note that is different from indemnity
against actual loss or damage. In indemnity against actual loss or damage the insurer binds himself to pay lang the
insured or to reimburse the insured for whatever the insured would be liable to third person.
o So if it is only an indemnity for actual loss or damage the third person cannot go after the insurer. The remedy is to
go after the insured. But if its indemnity against third party liability, the third person can go directly against the
insurer.
- Take note that the liability of the insurer is not solidary to that of the insured. Like for example in torts nu, nka ligis. K?
o Like youre the insured and you obtain a policy, motor vehicle policy, the policy provides for a TPL. Assuming you
were adjudged to pay 100,000 but your policy is only for 80,000 can the third person or victim go after your insurer
to recover the 80,000?
Yes, but for how much will the insurer be liable? 100k or 80k? Only 80k, because the liability of the insurer
is only to the extent of the policy or coverage in the insurance contract because his liability is not solidary
to that of the insured.
The liability of the insured is based on torts. But the liability of the insurer is based on the contract of
insurance. But if it is only an indemnity actual loss or damage, kato imong victim cannot go after the
insurer, only directly to the insured.
V. Section 54- 59
Sec. 54. When an insurance contract is executed with an agent or trustee as the insured, the fact that his principal or
beneficiary is the real party in interest may be indicated by describing the insured as agent or trustee, or by other general
words in the policy.
Sec. 55. To render an insurance effected by one partner or part-owner, applicable to the interest of his co-partners or other
part-owners, it is necessary that the terms of the policy should be such as are applicable to the joint or common interest.
Sec. 56. When the description of the insured in a policy is so general that it may comprehend any person or any class of
persons, only he who can show that it was intended to include him can claim the benefit of the policy.
Sec. 57. A policy may be so framed that it will inure to the benefit of whomsoever, during the continuance of the risk, may
become the owner of the interest insured.
Sec. 58. 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.
Sec. 59. A policy is either open, valued or running.
- SEC. 54 Talks about an insurance obtained by the agent but in behalf of the principal. The real party in interest is
actually the principal, so in this case the principal can recover the proceeds because he is the real party in interest;
provided that the interest of the principal is specifically stated in the policy. If it is only in the name of the agent, then
only the agent can recover.
- Now, can the agent himself insure the property belonging to the principal in his own interest? YES
- Sec. 55 talks about an insurance obtained by a co-owner or a partner. Unless it is stated in the policy that the insurance
is for the interest of these other co-owners or co-partners, it is understood to apply only to his own interest.
- Sec. 56 talks about the description of the insured in the policy. Now, if the description is too general as it would mean
to include a class of person like for example: the insured is described as the heirs, or co-owners, or parang collective

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noun dba, class of 2009, etc. So for you to be entitled to recover you must prove that you are part of that class
mentioned in that policy.
- Sec. 57 weve already discussed this when we discuss section 20.
o Remember what happens if you transfer interest in the insurance policy what happens to the insurance? It is
suspended until the interest in the policy (basin THING iya pasabot) and the interest in the insurance is vested in
the same person. By way of exception we have sec. 57, the policy is not suspended if the policy itself is so framed
that it will inure to the benefit of whoever during the continuance of the risk may be the owner of the interest
insured. Para siyang payable to bearer. Whoever is the bearer of the property the interest in the policy likewise
follows. So in that case the policy is not suspended.
- Sec. 58 again is just a reiteration of principle under section 20.
- Section 59, Types of policy
o Open;
o Valued; and
o Running
VI. Open Policy (Section 60)
Sec. 60. An open policy is one in which the value of the thing insured is not agreed upon, but is left to be ascertained in case
of loss.
- Open policy the value of the thing insured is not agreed upon, but it is only to be determined at the time of loss.
- So do not be confused if in the policy has a face value. It is still considered an open policy. Dba, lets say the face value
of the policy is 5m, but this is an open policy. Open policy in the sense that the parties did not agree as to the valuation
of the property, but e determine lang sya at the time of loss. The purpose of the face value will only serve as the cap or
limit of the insurers liability. So if at the time of the loss the insurer was able to submit or show evidence that the value
of the property, the house is only 4m. Then the insurer will only be liable for 4m. But if at the time of the loss it was
ascertain that the value diay of the property was 6m. How much will the insurer be liable? Only for 5m.
VII. Valued Policy (Section 61)
Sec. 61. A valued policy is one which expresses on its face an agreement that the thing insured shall be valued at a specific
sum.
- Valued policy it is called valued because the parties agreed already as to the valuation of the property and in absence
of fraud that valuation is binding on the parties. So in a valued policy duha ang amounts, we have the face value and
the valuation or the agreed value.
- Example: If they agreed that the value of the house is 4m. If at the time of the loss it was ascertain that the value of the
property was only 3m, in a valued policy, for how much will the insurer be liable? 4m, because the agreed valuation is
binding between the parties. If it turned out that the value of the property s 6m diay. For how much will the insurer be
liable? 4m, because the agreed valuation is binding between the parties.
VIII. Running Policy (Section 62)
Sec. 62. A running policy is one which contemplates successive insurances, and which provides that the object of the policy
may be from time to time defined, especially as to the subjects of insurance, by additional statements or indorsements.
- Running policy - applies to retail store, supermarket dba, department store, because the nature of the property insured
is frequent ang iyang change sa iyang location or change in the value like in a department store. It is difficult to obtain a
valued policy gyud because if you obtain a valued policy there is a tendency that in one particular month you will be
over insured or under insured. So what is application in that case is the running policy.
September 4, 2010
IX. Limitation to Commence Action (Section 63)
Section 63. A condition, stipulation, or agreement, in any policy of insurance, limiting the time for commencing an action
thereunder to a period of less than one year from the time when the cause of action accrues, is VOID.

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- Okay lets continue with policy. I believe we are to continue on Sec. 63.
- Section 63 talks about the period within which the insured must commence an action. This is the period within which
the insured must file a complaint in court against the insurer.
- Commencing an action here means what? It is the filing of a case in court.
o But now it also includes filing a case before the insurance commissioner, because the insurance commissioner is
empowered to adjudicate insurance cases. And even a case filed with POEA and DOLE, incase of insurance covering
OFWS or workers.
- Commencement of action includes filing of case with (provided it relates to insurance contract):
a. Court
b. Insurance Commissioner
c. POEA
d. DOLE
- So under section 63, there is a period. It is valid for the insurer and insured to agree in the insurance contract a certain
period within which the insured must commence his action. Naay time limit kanus.a siya dapat mo file ug case with
court. And if that period agreed is valid, that period would prevail over the general limitations provided under the Civil
Code. Dba under the civil code, unsay period of limitation for you to commence an action? Written contract, 10 years.
Oral contract, 6(sex) years.
- So if they agree in a different period that would be binding. So long as that period is NOT LESS THAN ONE YEAR.
From when? When do you count one year?
From the time the cause of action accrues.

When does that cause of action accrue on the part of the insured?
From the time your claim against the insurer was REJECTED by the insurer. From the time of the DENIAL of the
claim. Because until your claim is denied, there is no reason for you to go to court and sue the insurer.
- This period is very important for the prompt settlement of the insurance claim. Dapat dili dugaydugayon, dapat the
insured should comply with the period provided in the contract for him to be entitled to recovery. If he does not
comply with the proper period, then he could no longer recover. The reason is for prompt or proper settlement of
claims while the evidence or circumstances surrounding the loss is still available.
- So it could be any period. They could agree for 5, 3, or 2 yrs, but in no case shall it be less than one year from the time
the cause of action accrues. So timan-i when does the cause of action accrue, that is from the date of rejection of the
claim.
Now what if there is no period agreed upon, the insurance contract does not provide for a period kanus-a pwede, until when
can the insured file a claim? What is the period then?
- That is 10 years, since the insurance contract is a written contract. Or if the period agreed upon is not valid, then it is
still 10 years.
- It should be date of receipt of denial, and not on the date of actual denial, because how would you know if your claim
was denied.
CASE: Eagle Star Ins. Vs Chia Yu

Atkins S.S. Silverlight Yu

(Shipper) GOODS (Carrier) (Consignee

3/4/46 Good Unloaded

4/22/48 Claim rejected Insured with
With a stipulation: 1 year from happening of loss ---NOT ALLOWED
11/4/48 Case in Court Eaglestan

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- This the shipment of underwear. The shipper was Atkins, the consignee was Chia Yu. The shipment was insured against
all risks with Eagle Star Insurance Co., and it was later on assigned to the consignee. With the 14 bales of underwear,
only 10 were returned, and 3 of these bales were damages. So Chia Yu claimed for indemnity for the missing and
damaged bales of underwear. However the claim was declined first by the carrier and afterwards by the insurer. So
Chia Yu brought the present action against both the Insurer and Carrier.
When did Yu file a case in court against the Carrier?
Only on November 16, 1948 or two years after the delivery of the damaged/missing bales.
When did the goods arrive or when was it unloaded?
The goods were unloaded or arrived on March 4, 1946.
When was the claim of the consignee rejected?
He filed a claim against the insurer first on April 2, 1948, and it was rejected on 4/22/48. So this is where
you count the period, because this is the time when your cause of action accrues.
- And the commencement of the action was on 11/4/48. And according to the insurer Eagle Star the cause of action has
already prescribed because there is a stipulation in the policy that the one year prescriptive period should be counted
from the happening of the loss. And at the same time it provides that no action can be filed in court unless the insured
had complied with all the terms and conditions of the policy.

Is that a valid stipulation? One year from the happening of loss and after you have complied with all the terms and
conditions of the policy. Is this a valid stipulation? Why is this contrary from the provision of the law?
This is not valid because the one year period should be counted from the time the cause of action accrues,
and that is the time the claim was rejected.
- If we were to count the period from the happening of the loss, it would in effect shorten the period to less than one
year. At the time of the happening of the loss you do not yet have a cause of action and no reason for you to file a case
in court because you have not yet been denied by the insurer. Wala pa ka kahibaw whether your claim will be rejected.
This stipulation is not valid because it is against section 63 and in effect it reduces the period of one year. And by that
time you are not yet certain whether your time will be rejected, and also your cause of action does not yet accrue. Dili
man pwede upon happening of the loss mu diritsu dayon ka file ug case in court, you will only file a case when your
claim is denied.
- The period should not be less than one year from the date your cause of action accrues. And since in this case the
period stipulation is not valid, you will have ten years. So in this case, the filing of the case is still within the ten year
period. It was therefore still filed in time.

CASE: Ang vs Fulton Fire Insurance Co.

12/30/1954 Claim was filed and forwarded to the adjuster

4/6/56 Claim was denied
4/19/56 Received Denial of Claim
5/5/58 Case in Court

Considered NOT FILED on time because more than 2 years from denial of claim (consider date received denial of claim).

- This case involves the spouses Paolo and Sally Ang against Fulton Fire. Fulton Insurance issued an insurance policy in
covering the department store which Ang owned. In that Dept store there are general merchandise which were
stocked. The store which stored the goods was destroyed by fire. The spouses filed a claim with the adjuster of the
insurance company. And on April 6, 1956 the insurance company of Fulton Fire Insurance wrote to the spouses that
their claim was denied, and it was received by them on April 19, 1956. And on May 5, 1958 the spouses instituted the
present action.
- Issue: Whether or not the case was filed within the prescriptive period.

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- The claim was denied on April 6, 1956. The policy provided for the claim to be filed within 12 months after denial after
denial or rejection. Is this valid?
- Yes. But since the cause of action accrued on April 6, 1958 and Ang filed the case only on May 5, 1958 it was already
beyond the stipulated period. But there was a contention here by Ang that he filed a claim on 5/11/56 against the
agent of the insurer. But the SC said that such filing against the agent does not have any effect except notifying the
agent of the claim. What is required by commencement of action is filing a case in court, and filing a claim with the
agent is not equivalent to filing a case in court, not a commencement of action.
Sun Insurance Office Lt. vs CA
o The issue here is that after the denial of claim the insured filed a reconsideration with the insurer, and it was still
denied. So when do we count the period, from first denial or date of reconsideration?
o SC: The court said that it should be counted from the first denial otherwise it would be used as a scheme by the
insured to waste time. So it should be counted from the first denial.

- The next case calls for the application of COGSA. Carriage of Goods by the Sea Act.
o What is the application of COGSA in relation to insurance?
Under the provisions of COGSA, the carrier and the ship shall be discharged from liability for loss or
damage to the goods if no suit/case is filed within one year from delivery of goods or when the goods
should have been delivered. COGSA involves a case filed by the shipper against the carrier. Under COGSA,
the liability of the carrier towards the shipper or even to the insured shall be discharged if no claim is filed
within one year. The COGSA applies in relation to his liability to the shipper or to the consignee or even to
the insurer.

Shipper Carrier / Ship Consignee

GOODS

Insurer, in exercising the right of subrogation is bound by COGSA

Insurer

o Example: If the goods were damaged and the shipper filed a claim against the insurer and the insurer paid the
shipper, is there right of subrogation on the part of the insurer to go after the carrier? Yes.
But in order for the insurer to exercise that right of subrogation, the insurer is also bound by COGSA.
(class:ahhhhhhh)
o So after paying the shipper, the insurer exercises the right of subrogation. If the claim is not filed within one year
the carrier has the right to refuse payment to the insurer, in effect pwede ma defeat ang right of subrogation sa
insurer. Because when the insurer seeks reimbursement, mo exercise sa iyang right to subrogation, it is not now
based on the contract of insurance but based on contract of carriage. Because the relationship between shipper
and carrier is contract of carriage. The insurer in exercising the right of subrogation, he merely steps into the shoes
of the shipper. So as far as the carrier is concerned, it is still based on a contract of carriage.
Mayer Steel Pipe Corp vs CA

Mayer Carrier / Ship Mayer and Carrier: Based on the Contract of Carriage
GOODS

Filed a claim
2 years after
South Sea liable!
delivery of goods

Take Note: Could have actually refused payment by saying

Mayer and South Sea: that Mayers act defeats his right of subrogation
Based on Contract of South Sea
Insurance (Insurer)

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o In this case Mayer the shipper, shipped the goods and was insured by South Sea(insurer). When the goods arrived
a portion of the goods were damaged. Mayer filed a claim against the insurer, but it was brought two years after
delivery of goods. Mayer the shipper and carrier and South Sea was the insurer. South Sea refused to pay by saying
that the liability was already discharged because under COGSA the claim should have been filed within one year
from the delivery of the goods. WON insurer liable.
o SC: The insurer is liable. The provision on COGSA applies only within a relationship between shipper and carrier.
The liability of South Sea as far as Mayer is considered is concerned is based on a contract of Insurance.
Filipino Merchants Insurance Co vs CA

Shipper Carrier
GOODS

Filed a 3rd Party 3rd Party Complaint against carrier was filed
Complaint more than 1 year from the delivery of goods

Insurer
rd
Insurer cannot file a 3 party complaint!
Cannot file anymore because it has already prescribed based on COGSA.

o We have a shipper and a carrier and the goods and the insurer. When the goods were damaged the shipper filed a
claim against the insurer, the insurer filed a third party complaint against the carrier. The 3 rd party complaint was
filed more than one year from delivery of goods. The insurer can file a 3 rd party complaint because if he is made
liable to the insurer he can exercise right of subrogation. WON 3 rd party complaint filed by insurer against carrier
has already prescribed.
o SC: The insurer can no longer file a case against the carrier. It has already prescribed. Because the basis of claim by
insurer is contract of Carriage and covered by the COGSA provision which requires the filing of claim within one
year from date of delivery of goods. The filing of 3 rd party complaint was beyond the one year period from delivery
of goods.
- Compared with the prior case it was a case filed by the Shipper against the Insurance Co, and the basis is contract of
insurance, so we do not apply COGSA.
- But there is an issue actually here, if I was South Sea the insurer, I can refuse payment by saying that the act of Mayer
defeats his right of subrogation. But in this case SC said that Mayer can still go after South Sea because of the failure of
South Sea to raise the defense of the act of Mayer defeating the right of South Sea to subrogation.
- So the act of the insured defeating the right of the insurer to subrogation will allow the insurer to refuse payment to
the insured. Note that the right to subrogation arises only after the payment by insurer.
X. Cancellation of Policy ( Section 64-65)
Section 64. No policy of insurance other than life shall be cancelled by the insurer except upon prior notice thereof to the
insured, and no notice of cancellation shall be effective unless it is based on the occurrence, after the effective date of the
policy, of one or more of the following:
a. Non-payment of premium;
b. Conviction of a crime arising out of acts increasing the hazard insured against;
c. Discovery of fraud or material misrepresentation;
d. Discovery of willful or reckless acts or omissions increasing the hazard insured against;
e. Physical changes in the property insured which result in the property becoming uninsurable; or
f. A determination by the Commissioner that the continuation of the policy would violate or would place the insurer in
violation of this Code.

Section 65. All notices of cancellation mentioned in the preceding section shall be in writing, mailed or delivered to the
named insured at the address shown in the policy, and shall state (a) which of the grounds set forth in section sixty-four is
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relied upon and (b) that, upon written request of the named insured, the insurer will furnish the facts on which the
cancellation is based.
- Section 64 talks about cancellation of insurance other than life. Applies only to property insurance. So if the insurer
would want to cancel an insurance contract involving property he must comply with the requirements in order for it to
be valid:
i. prior notice of cancellation
ii. based on the occurrence of the following grounds
a. nonpayment of subsequent premium(not initial premium, because if initial p is not paid, not insurance
contract)
b. conviction of a crime arising out of acts increasing the hazard insured against (ex. If the insured was
subsequently convicted for arson, the insurer now has basis for cancelling the policy)
c. discovery of fraud or material misrepresentation
d. discovery of willful/reckless acts or omission increasing the hazard
e. physical changes in the property insured.
f. determination by the Commissioner that the continuation of policy would violate the provisions of Insurance
code.
iii. the notice of cancellation must be in writing
iv. must state the grounds for cancellation
- Relate this to Section 65.
What is the purpose of prior notice?
The purpose is to give opportunity to the insured to look for other insurance. Arbitrary cancellation is not allowed, there
should be prior notice.

Saura Import & Export Co vs Phil InterNational Surety Co

o The notice of cancellation was given to the mortgagee and not mortgagor.
o SC: notice of cancellation is not valid.

- Another case wherein the notice of cancellation was simply delivered thru mail but it was not received by insured.
Which would prevail?
o Presumption of regularity on due performance of employees in post office, if the letter was duly mailed there is a
presumption that nahatod jd na siya, na received jd na siya.
o Or the contention of the insured that he did not received notice.
o SC: it is the insureds contention that prevails.
XI. Renewal of Policy (Section 66)
Sec. 66. In case of insurance other than life, unless the insurer at least forty-five days in advance of the end of the policy
period mails or delivers to the named insured at the address shown in the policy notice of its intention not to renew the
policy or to condition its renewal upon reduction of limits or elimination of coverages, the named insured shall be entitled
to renew the policy upon payment of the premium due on the effective date of the renewal. Any policy written for a term
of less than one year shall be considered as if written for a term of one year. Any policy written for a term longer than one
year or any policy with no fixed expiration date shall be considered as if written for successive policy periods or terms of
one year.
Section 66: Renewal.

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- If the insurer does not want to renew the policy, the insurer must give notice of his intention not to renew the policy or
to condition the renewal within 45 days before the expiry or end of the policy. If the insurer does not give that notice,
the presumption is that the policy is automatically renewed.

1 YEAR 1 2 3 4 5

45 days 45 days 45 days 45 days 45 days

- So if the policy is 5 years and I do not want to renew it, I must give notice of non renewal within 45 days before the
anniversary date. If an insurance contract is more than one year, it is considered as if it is written for one year. So if you
do not want to proceed in the third year you give notice of nonrenewal 45 days before the anniversary date of the third
year.
- If the insurer fails to give that notice of non renewal he must renew the policy whether he likes it or not. He cannot
raise the defense that his contract has expired because it is considered as automatically renewed.

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