Other special laws related to insurance:

1. The Revised Government Insurance Act of 1977

2. The Social Security Act of 1954
3. The Philippine Deposit Insurance Corporation
4. Philippine Crop Insurance Corporation
5. Home Insurance and Guaranty Corporation

SUBROGATION – the transfer of rights and remedies of the insured to the insurer who has
indemnified the insured in respect to the loss

ELEMENTS
1. The insured possesses an interest of some kind susceptible of pecuniary estimation,
known as insurable interest
2. The insured is subject to a risk of loss through the destruction or impairment of that
interest by the happening of designated perils.
3. The insurer assumes that risk of loss.
4. Such assumption is part of a general scheme to distribute actual losses among large group
of persons bearing somewhat similar risks.
5. As consideration for the insurer’s promise, the insured makes a ratable contribution,
called a premium to a general insurance fund.

CHARACTERISTICS
1. It is an aleatory but not a wagering contract.
2. It is a contract of indemnity.
3. It is personal contract.
4. It is a conditional contract.
5. It is voluntary in the sense that it is not compulsory and the applicant for insurance may
accept or reject it, except for motor vehicles which the law requires.
6. It is executed as to the insured after the payment of the premium, and executor on the part
of the insurer in the sense that it is not executed until the payment for a loss.
7. It is unilateral in the sense that the contract is prepared by the insurance company.

PRIMARY FUNCTIONS
1. Scientific assessment of risks
2. Equitable distribution of losses

SUBSIDIARY FUNCTIONS
1. Stimulates business enterprise
2. Encourages business efficiency
3. Promotes loss-prevention
4. Encourages savings
5. Solves social problems

INDEMNITY – payment made for a certain loss or damage. It is by which an insured is

compensated for losses sustained and placed as much as possible in the same pecuniary position
as he is in before the misfortune
GAMBLING vs INSURANCE
1. Gambling- parties seek gain thru chance / Insurance – distribution of loss
2. Gambling – courts fortune / Insurance – avoids misfortune
3. Gambling – increases inequality / Insurance – equalizes fortune

GAMBLING vs WAGER
1. Insurance – enforceable / Wager – not enforceable
2. Insurance – immune from loss /Wager – either party may win or lose
3. Insurance – evet is not sure to happen / Wager – event will happen at a future date
4. Insurance – insurer and insured does not want peril to happen / Wager – both party desire
to win
5. Insurance – principle of utmost good faith / Wager – principle is not applicable

Sec 7 . Anyone except a public enemy may be insured

Sec 10. Every person has an insurable interest in the life and health :
1. Of himself, of his spouse and of his children;
2. Of any person on whom he depends wholly or in part for education or support, or in
whom he has a pecuniary interest
3. Of any person under a legal obligation to him for the payment of money, or with respect
to property or services , of which death or illness might delay or prevent the performance;
4. Of any person upon whose life any estate or interest vested in him depends

BENEFICARY- person who is designated in a contract of life, death or accident insurance as the
one who is to receive the benefits which become payable, according to the terms of the contract,
upon death of the insured

Exceptions : Those forbidden by law to receive donations from the insured, such as:
1. Those made between persons who are guilty of adultery or concubinage at the time of
donation
2. Those made between person found guilty of the same criminal offense
3. Those made to a public officer or his wife, descendants, ascendants by reason of his
office.
Kinds of Beneficiary:
1. Primary Beneficiary – first person/s entitled to benefits upon death of insured
2. Contingent beneficiary – person named in case the primary beneficiary is dead
3. Revocable beneficiary – beneficiary that can be changed
4. Irrevocable beneficiary – beneficiary that can only be changed with the consent of the
beneficiary himself
Sec 12. ..... Nearest relatives

1. The legitimate children

2. The father and mother, if living
3. The grandfather, grandmother or ascendants of nearest degree, if living
4. The illegitimate children
5. The surviving spouse
6. The collateral relatives
a. Brothers and sisters of full blood
b. Brothers and sister of half blood
c. Nephews and nieces
7. The State

Sec 14. An insurable interest in property may consist in:

1. An existing interest
2. An inchoate interest founded on an existing interest
3. An expectancy, coupled with an existing interest in that out of which the expentatncy
arises

Elements of INSURABLE INTEREST

1. There must be property, rights, interest, life or potential liability capable of being insured
2. Such property, rights, life must be the subject matter of the insurance
3. The insured must bear a legal relationship to the subject matter

INSURABLE INTEREST : LIFE vs PROPERTY

1. Property- based on a pecuniary interest / Life- not exclusively a pecuniary one, but
other things like consanguinity or affinity
2. Property – exists at time the policy takes effect and at the time of loss / Life – need to
exist only at the time the policy takes effect
3. Property – there is partial loss / Life – no distinction between partial and total loss
4. Property – limited to actual value of damage / Life – no limit to value

METHODS
1. Cash Payment
2. Repair
3. Replacement
4. Reinstatement

CONCEALMENT – a neglect to communicate that which a party knows and ought to

communicate. It may either be intentional or unintentional

REPRESENTATION – statements made to give information to the insurer and otherwise induce
him to enter into an insurance contract. It may be oral or written. It may be made at the time of ,
or before the issuance of the policy.
MISREPRESENTATION – statement as a fact of something which is untrue, and which the
insured states with knowledge that it is untrue, and with the intention to deceive

Sec 49. The written instrument in which the contract of insurance is set forth is called a policy of
insurance

Sec 51 A policy of insurance must specify

1. The parties between whom the contract is made
2. The amount to be insured except in cases of open or running policies
3. The premium to be paid
4. The property or life to be insured
5. The interest of the insured in the property insured
6. The risks insured against
7. The period during which the insurance is effective

Requirements for risks to be insured

1. Importance
2. Calculability
3. Definiteness of loss
4. No catastrophic loss
5. Accidental nature

COVER NOTES – these may be issued to bind the insurance temporarily pending the issuance
of the policy which has an effectivity of sixty days but may be extended

RIDER- sweeteners or additional benefits attached to the insured if the peril happens under
certain conditions

ENDORSEMENT – a clause attached to the contract to effect changes in the contract

particularly its beneficiaries due to change in ownership of property.

Sec 59 A policy may either be open, valued or running

1. OPEN – value of insured is not agreed upon but determined at the time of loss
2. VALUED – value of insured is specific amount
3. RUNNING – value of insured changes because of additions and subtractions