Insurance (Meeting 1) insurance business as hereinafter provided.
"(b) The term doing an insurance business or
THE CONTRACT OF INSURANCE
A. Concept
a. Definition
i. Black Law’s
1. A contract whereby, for a stipulated
consideration, one party undertakes to
compensate the other for loss on a specified
subject by specified perils. The party agreeing
to make the compensation is usually called the
“insurer” or “underwriter;” the other, the
“insured” or “assured;” the agreed
consideration, the “premium;” the written
contract, a “policy;” the events insured against,
“risks” or “perils;” and the subject, right, or
interest to be protected, the “insurable
interest.”
ii. Aquino’s definition
1. Contract whereby one party called the insurer
undertakes for a consideration to pay another
party called the insured, or his beneficiary,
upon the happening of the peril insured
against, whereby the party insured or his
beneficiary suffers loss or damage or is
exposed to liability
2. Presupposes that a contract exists
iii. Test
1. Whether a contract is one of insurance is to be
determined by its purpose, effect, contents
and import and not necessarily by the
terminology used.
a. Depends on the nature of the promise, the
act required to be performed, and the
exact nature of the agreement in the light
of the occurrence, contingency, or
circumstances under which the
performance becomes requisite
iv. Elements of a Contract, Civil Code (Article 1318)
1. Consent of the contracting parties;
2. Object certain which is the subject matter of
the contract; and
3. Cause of the obligation which is established.
v. Contract of Insurance
Section 2 Whenever used in this Code, the following
of R.A. No. terms shall have the respective meanings
10607 hereinafter set forth or indicated, unless the
context otherwise requires:
"(a) A contract of insurance is an agreement
whereby one undertakes for a consideration
to indemnify another against loss, damage
or liability arising from an unknown or
contingent event.
"A contract of suretyship shall be deemed to
be an insurance contract, within the
meaning of this Code, only if made by a
surety who or which, as such, is doing an
transacting an insurance business, within
the meaning of this Code, shall include:
"(1) Making or proposing to make, as insurer,
any insurance contract;
"(2) Making or proposing to make, as surety,
any contract of suretyship as a vocation and
not as merely incidental to any other
legitimate business or activity of the surety;
"(3) Doing any kind of business, including a
reinsurance business, specifically recognized
as constituting the doing of an insurance
business within the meaning of this Code;
"(4) Doing or proposing to do any business in
substance equivalent to any of the foregoing
in a manner designed to evade the provisions
of this Code.
"In the application of the provisions of this
Code, the fact that no profit is derived from
the making of insurance contracts,
agreements or transactions or that no
separate or direct consideration is received
therefor, shall not be deemed conclusive to
show that the making thereof does not
constitute the doing or transacting of an
insurance business.
"(c) As used in this Code, the term
Commissioner means the Insurance
Commissioner.
1. Elements:
a. The insured has an insurable interest
b. The insured is subject to a risk of loss by
the happening of the designated peril
c. The insurer assumed the risk
d. Such assumption of risk is part of a general
scheme to distribute actual losses among
a large group of persons bearing a similar
risk
e. In consideration of the insurer’s promise,
the insured pays a premium
b. Origin
i. Aboitiz Shipping vs New India Assurance
1. From the nature of their business and for
reasons of public policy, common carriers are
bound to observe extraordinary diligence over
the goods they transport according to all the
circumstances of each case. In the event of
loss, destruction or deterioration of the
insured goods, common carriers are
responsible, unless they can prove that the
causes specified in Article 1734 of the Civil
Code. In all other cases, common carriers are
presumed to have been at fault or to have
acted negligently, unless they prove that they
observed extraordinary diligence. Moreover,
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 where the vessel is found unseaworthy, the
ship owner is also presumed to be negligent
since it is tasked with the maintenance of its
vessel. Though this duty can be delegated, still,
the ship owner must exercise close supervision
over its men.
c. Laws Governing Insurance
i. Republic Act No. 10607 (2013)
1. Was published in a newspaper of general
circulation on Sept. 5, 2013.
2. Now includes a provision on microinsurance,
bancassurance, trust operations of insurance
companies and self-regulatory organizations.
a. Increase of the paid-up capital and net
worth requirements for insurers
b. New requirements for unimpaired capital
or assets and reserved
c. New provisions on financial reporting
framework
d. Adoption of corporate governance rules
e. Changes in the provisions on margin of
solvency
f. Changes in the provisions on investments
g. Fixing the terms of the Insurance
Commissioner to 6 years
h. Changes in the jurisdiction of the Insurance
Commission over insurance claims
ii. Civil Code provisions
1. Govern suppletory
a. Life annuities
b. Donations
c. Damages
d. Subrogation
e. Guarantees and sureties
f. Insurance provisions repeal
iii. Special Laws
1. GSIS
2. SSS
3. PDIC
4. Pre-Need Code
5. Gercio vs Sunlife Assurance
a. The Philippine Law of Insurance should be
supplemented by the general principles
prevailing on the subject. The purpose
should be to have the Philippine Law of
Insurance conform as nearly as possible to
the modern Law of Insurance as found in
the United States proper.
b. The insured—the husband— has no power
to change the beneficiary—the former wife
— and to name instead his actual wife,
where the insured and the beneficiary have
been divorced, and where the policy of
insurance does not expressly reserve to the
insured the right to change the beneficiary.
6. Philippine Health Care Products vs CIR
a. The mere presence of risk would be
insufficient to override the primary purpose
of the business to provide medical services
as needed, with payment made directly to
the provider of these services. In short,
even if petitioner assumes the risk of
paying the cost of these services even if
significantly more than what the member
has prepaid, it nevertheless cannot be
considered as being engaged in the
insurance business.
b. Various courts in the United States, whose
jurisprudence has a persuasive effect on
our decisions, have determined that HMOs
are not in the insurance business. One test
that they have applied is whether the
assumption of risk and indemnification of
loss (which are elements of an insurance
business) are the principal object and
purpose of the organization or whether
they are merely incidental to its business. If
these are the principal objectives, the
business is that of insurance. But if they are
merely incidental and service is the
principal purpose, then the business is not
insurance. Applying the “principal object
and purpose test,” there is significant
American case law supporting the
argument that a corporation (such as an
HMO, whether or not organized for profit),
whose main object is to provide the
members of a group with health services, is
not engaged in the insurance business.
c. Even if a contract contains all the elements
of a contract, if its primary purpose is the
rendering of service; it is not a contract of
insurance.
d. Although risk is a primary element of an
insurance contract, it is not necessarily true
that risk alone is sufficient to establish it.
7. Republic vs Del Monte Motors, Inc.
a. The insurance commissioner has been
given a wide latitude of discretion to
regulate the insurance industry so as to
protect the insuring public. The law
specifically confers custody over the
securities upon the commissioner, with
whom these investments are required to be
deposited. An implied trust is created by
the law for the benefit of all claimants
under subsisting insurance contracts issued
by the insurance company.
b. The emergence of the multifarious needs of
modern society necessitates the
establishment of diverse administrative
agencies. In addressing these needs, the
administrative agencies charged with
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 applying and implementing particular
statutes have accumulated experience and
specialized capabilities. Thus, in a long line
of cases, this Court has recognized that
their construction of a statute is entitled to
great respect and should ordinarily be
controlling, unless clearly shown to be in
sharp conflict with the governing statute or
the Constitution and other laws.
d. Pre-Need Plans
i. Are contracts, agreements, deeds or plans for the
benefit of the planholders which provide for the
performance of future service/s, payment of
monetary considerations or delivery of other
benefits at the time of actual need or agreed
maturity date, as specified therein, in exchange for
cash or installment amounts with or without
interest or insurance coverage and includes life,
pension, education, interment and other plans,
instruments, contracts or deeds as may be
determined by I.C.
e. Variable Contracts
i. Means any policy or contract on either a group or
on an individual basis issued by an insurance
company providing for benefits or other
contractual payments or values thereunder to vary
so as to reflect investment results of any
segregated portfolio of investments or of a
designated separate account in which accounts
received in connection with such contracts shall
have been placed and accounted for separately
and apart from other investments and accounts.
f. Bancassurance
i. The presentation and sale to bank customers by an
insurance company of its insurance products
within the premises of the head office of such bank
duly licensed by the BSP or any of its branches
under such rules and regulations which the
Commissioner and the BSP may promulgate
g. Mutual Insurance Company
i. Entities that are “doing an insurance business”
within the contemplation of the Insurance Code.
ii. In a sense, the member is both the insurer and
insured. It has no capital stock and the premiums
or contributions of the members are the only
sources of funds to meet losses and expenses