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Jackrammer INSURANCE 2nd Sem.

; 2005
GENERAL PROVISIONS

Sec. 1. Name of Decree: The Insurance Code of CHAPTER 1. THE CONTRACT OF INSURANCE
1978
Title 1. What May Be Insured (Against)
Jack: The question of whether a contract of
insurance is perfected is NOT governed by the Sec. 3. What may be insured (against):
Insurance Code but by the New Civil Code (re: 1.) Any contingent or unknown event, whether
perfection of contracts). past
or future, which may cause damage to a
Sec. 2. Definition of Terms: person having an insurable interest; or
2.) Any contingent or unknown event, whether
1.) Contract of insurance: An agreement past
whereby one undertakes for a consideration or future, which may create a liability
to indemnify another against loss, damage against the person insured.
or liability arising from an unknown or Validity of insurance policy taken out by
contingent event. married women and minors: The consent of the
husband is not necessary for the validity of an
Jack: Suretyship is different from an insurance insurance policy taken out by a married woman on
contract because there are three parties in her life or that of her children.
suretyship and when the surety pays, he is entitled Rights of insured married women and
to reimbursement. In insurance, when the insurer minors: The married woman or the minor herein
pays, he is not entitled to reimbursement. allowed to take out an insurance policy may exercise
all rights and privileges of an owner under a policy.
Underlying concept in insurance: It deals with a All rights, title and interest in the policy of
scheme of distribution of risk/loss. insurance taken out by an original owner on the life
or health of a minor shall automatically vest in the
Elements of insurance contract: minor upon the death of the original owner, unless
1.) Consent of parties otherwise provided for in the policy.
a.) Insurer
b.) Insured Sec. 4. Section 3 does not authorize an
2.) Object: Transfer or distribute risk of loss, insurance for or against the drawing of any
damage, liability or disability from insured to lottery, or for or against any chance or ticket
insurer in a lottery drawing a prize.
3.) Cause/consideration: Premiums
4.) INSURABLE INTEREST: Insured possesses an Jack: What is prohibited is not only a chance in
interest of some kind susceptible of lottery but all forms of gambling and wagering.
pecuniary estimation.
Sec. 25: A policy contract executed by way of
Elements of insurance contract: (according to Jack) gambling or wagering is void.
[IRASP]
1.) Insurable interest; Sec. 5. Applicability of Chapter 1 provisions to
2.) Risk of loss; all kinds of insurance: All kinds of insurance are
3.) Assumption of risk; subject to the provisions of this chapter so far as the
4.) Scheme to distribute losses; provisions can apply.
5.) Payment of premiums.

Characteristics of an insurance contract: Title 2. Parties to the Contract:


1.) Consensual; (not included in Jack transcript) 1.) Insurer;
2.) Voluntary; (ditto) 2.) Insured.
3.) Aleatory;
4.) Executory; (ditto) Sec. 6. Who may be an insurer: Every person,
5.) Conditional; partnership, association, or corporation duly
6.) Personal. authorized to transact insurance business as
elsewhere provided in this code.
7.) Jack: Indemnity is the basis.
Sec. 187: Certificate of authority from the Insurance
2.) Doing/transacting an insurance business: Commissioner is required to transact insurance
Includes: business.
a.) Making or proposing to make, as insurer,
any insurance contract; Sec. 7. Who may be insured: Anyone except a
b.) Making or proposing to make, as surety, public enemy may be insured.
any contract of suretyship as a vocation
and not as merely incidental to any other Requisites for one to be an insured:
legitimate business or activity of the 1.) He must be competent to enter into a
surety; contract;
c.) Doing any kind of business, including a 2.) He must possess an insurable interest in the
reinsurance business, specifically subject of insurance;
recognized as constituting the doing of 3.) He must not be a public enemy.
an insurance business within the
meaning of this Code; Public enemy: Nation w/ whom the Phils is at war,
d.) Doing or proposing to any business in and it includes every citizen or subject of such
substance equivalent to the foregoing in nation.
a manner designed to evade the
provisions of this Code. Jack: It does not include robbers, thieves, private
depredators, or riotous mobs. A local criminal can be
3.) Commissioner: The Insurance Commissioner. insured if the insurer is willing to take him as a good

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risk. The citizen of a country with which we do not
have diplomatic relations is not a public enemy and Jack: Section 10 speaks of insurable interest in life
can be insured. and health. The general rule is that a person may
designate anyone to be his beneficiary. The
Sec. 8. Insurance taken by mortgagor in his own exception is Art. 739 of the Civil Code in relation to
name but loss payable to mortgagee (or assigns Art. 2012 (prohibited donations). See Insular Life v.
policy to mortgagee) deemed to be upon his Ebrado.
(mortgagor’s) interest, but mortgagee may perform
any act under contract of insurance w/c is to be Insular Life v. Ebrado: Person forbidden from
performed by mortgagor. receiving donation cannot be named beneficiary.
Donations between persons guilty of
Effects when mortgagor effects insurance in his own adultery/concubinage void. Common-law spouse
name and provides that the loss be payable to the barred from receiving proceeds.
mortgagee: Jack: The reason for the exception is that a life
1.) K deemed to be upon the interest of the m’or, insurance policy is no different from a civil donation
hence he insofar as the beneficiary is concerned because both
does not cease to be a party to the K; are founded upon the same consideration liberality.
2.) Ant act of m’or prior to the loss, w/c would
otherwise Art. 739, CC: Void donations:
avoid the insurance affects the m’ee even if 1.) Those made between persons who were guilty
the property is in the hands of the m’ee; of
3.) Any act w/c under the K of insurance is to be adultery or concubinage at the time of the
performed donation;
by the m’or nay be performed by the m’ee; 2.) Those made between persons found guilty of
4.) In case of loss, the m’ee is entitled to the the
proceeds to same criminal offense, in consideration
the extent of his credit; thereof;
5.) Upon recovery by the m’ee to the extent of his 3.) Those made to a public officer or his wife,
credit, descendants and ascendants by reason of his
the debt is extinguished. office.

Jack: Section 8 speaks of a mortgage clause in an Jack: When you insure the life of another, the
insurance contract. This is common in car insurance. consent of that person must be obtained and there
It may be provided therein that in case of loss, the must also be insurable interest over the life of that
proceeds will be paid to the mortgagee. But it is still person.
the mortgagorwho is the insured so he is the only
one who can sue thereon. Sec. 11. Insured has right to change beneficiary
Under the Civil Code, when the insurer pays, he is unless waived
subrogated to the rights of the insured against the
wrongdoer. Jack: Remember that if the designation of the
beneficiary is irrevocable, change of beneficiary can
Sec. 9. When transfer of insurance is made from only be made with the consent of the said
mortgagor to mortgagee w/ assent of insurer w/ beneficiary.
imposition of additional obligations on assignee,
the mortgagor’s acts do not affect assignee’s Sec. 12. Interest of beneficiary in a life insurance
rights. policy forfeited if beneficiary a principal,
accomplice or accessory in death of insured;
This is an exception to the rule that all acts of the nearest relative of insured to receive proceeds if not
m’or affects the m’ee: when further obligations disqualified.
imposed on the m’ee.
Sec. 13. Insurable interest in property is that
w/c is of such nature that a contemplated peril
Title 3. Insurable Interest will damnify an insured

Sec. 10. Insurable interest in life and health: Jack: Interest in property has the classic example,
Every person has an insurable interest in the life and that is the ownership or any relation there to the
health of: trustee or liability, like the third party’s liability
1.) Himself, of his spouse and of his children; insurance for motor vehicle, so there’s an insurable
2.) Any person on whom he depends wholly or in interest.
part An insurable interest in property may consist of
for education or support, or in whom he has an existing interest. Again the classic example is
a pecuniary interest; ownership with interest found in an existing interest,
3.) Any person under a legal obligation to him like stockholders can insure the properties of the
for corporation because they have an existing interest
the payment of money, or respecting property as stockholders, and in quo with interest because in
or services, of w/c death or illness might delay case of dissolution of the corporation the assets will
or prevent the performance; and be distributed among the stockholders by way of
4.) Any person upon whose life any estate or liquidating dividends.
interest vested in him depends.
This is common. A foreign corporation sets up a
domestic subsidiary and usually there is one
Insurable interest: Person deemed to have insurable
insurance company abroad with which they insure
interest in subject matter where he has a relation or
the assets of their subsidiary here. They can do
connection with or concern in it that he will derive
that, an expectancy coupled with an existing interest
pecuniary benefit or advantage from its preservation
in that out of which expectancy arise; in the same
and will suffer pecuniary loss or damage from its
way as farmers can insure their future crops.
destruction, termination, or injury by the happening
of the event insured against.

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Harvardian College v. Country Bankers: Even if the risk of loss, so he can insure the building that he
not owners of the building and so w/o title is constructing.
to the property insured, building used and
in their possession for several years w/ the Sec. 15. Insurable interest of a carrier or
knowledge and consent of the owner as the depositary is extent of its liability
site of their educational institution. They,
therefore, had an insurable interest in the Sec. 16. Contingent or expectant interest not
building since they would have directly founded on actual right or valid contract not
benefited by the preservation of the insurable
property, and certainly suffered a
pecuniary loss by its being burned. Jack: Like the prospective heirs of somebody.
Test in determining insurable interest in property: Children cannot insure the properties of their
Whether one will derive pecuniary benefit or parents, for there is a mere expectancy.
advantage from its preservation, or will suffer
pecuniary loss or damage from its destruction, Sec. 17. Measure of insurable interest in
termination or injury by the happening of the event property – extent to w/c insured might be
insured against. damnified by loss (Property insurance is strictly a
contract of indemnity)
Sec. 14. What an insurable interest in property
consists of: Cha v. CA: Cha: lessees; CKS: lessors. Stipulation
1.) An existing interest; for consent contrary to public policy. CKS has no
2.) An inchoate interest founded on an existing insurable interest.
interest; or
3.) An expectancy, coupled w/ an existing interest Jack: Here’s the case of Chuck. There was this
in landlord who required his tenant to insure his stocks
that out of w/c the expectancy arises. in trade. It is still ok to require it to insure. Usually it
is the commercial centers part, in addition to the
Existing interest: Legal or equitable title. basic rent. They charge 5% of your gross sales, so
they want to make sure you always have the stocks
Inchoate interest: Interest w/c has not yet ripened. in trade so that if they get burned, you can replace
them. But then the contract provided that in case of
Expectancy: Must be coupled w/ an existing interest losses, the proceeds should be payable to the lessor.
in that out of w/c such expectancy arises. The court says that is void because there’s no
insurable interest in the stocks in trade. So, a review
Traders Insurance v. Golangco: Even if not on the loan agreement was required in a case where
owner, can claim insurance proceeds since a bank was found to require the borrower to insure
he still had insurable interest therein. He the building, but the building was not mortgaged.
was in legal possession and collecting Moreover, a provision was placed that in case of
rentals from its occupant, and so he was loss, the proceeds should be payable to the bank.
directly damnified by such loss. That is void. You have no insurable interest because
you have no lien on the building. The building is
Jack: A lessor, a lessee can insure the premises he is insured, but it’s not mortgaged to you.
leasing. There’s an interest in its preservation. Or
even mere possessory rights is sufficient- like the Sec. 18. Unenforceability of property insurance
case of a Jewish garment factory. They send textiles contract by one not having insurable interest
to garment factories to be converted into finished
dresses. These factories also have insurable interest Sec. 19. Time when insurable interest must
over the garment packed. The court also ruled that exist:
if textiles are delivered to be dyed, that fellow who 1.) Property insurance: at time insurance takes
was hired to dye the textile should have insurable effect
interest on that. & at time of loss;
2.) Life insurance: only at time insurance takes
Filipino Merchants v. CA: Tiekeng, consignee of effect.
fishmeal and vessel, had insurable interest due to
perfected sale. Such sale was the basis of insurable Jack: In property insurance, the insurable interest
interest. must exist when the policy takes effect and when
the loss occurs, but it need not exist in the
Jack: Like the court said, the buyer of undelivered meanwhile.
property in that Filipino Merchants case, that the This (inaudible) case was asked in the bar
consignee of the goods that were stolen in the pier exam. The owner of the building insured the
can be claimed and the defense of the insurance building. Now, the building was mortgaged and the
company is the insurable terms of the buyer. He has mortgage was foreclosed, but he failed to redeem
equitable interest. The seller also has an insurable that. After the expiration of the period of
interest because he still retains the legal title and redemption, the building was burned. The court said
unpaid salary with a lien on the property. he cannot collect. He had no more insurable
interest. But if he still has the right of redemption,
The Court of Appeals has ruled that where you he will also have insurable interest.
have a simulated deed of sale, the buyer has no
insurable interest because he is not actually the
owner. Sec. 20. Effect of change of interest in thing
insured on contract of insurance:
A mortgage insurable interest on the property General rule: insurance suspended until same
mortgaged, for example: a contractor who has not person becomes owner of both policy and the thing
been paid under the Civil Code has a lien on the insured.
building he constructed so he can insure that
building. In fact the Civil Code also says, until the Exceptions:
construction is finished it is the contractor who bears 1.) Life, health and accident insurance;

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2.) The change of interest in the thing insured Sec. 25. Stipulation in policy for payment of
occurs loss whether insurable interest exists or not,
after the injury w/c results in a loss; or that policy is proof of such interest, or
3.) A change of interest in one or more of several policy on wagering is void (This provision is the
things separately insured by one policy; authority for voiding a contract for lack of insurable
4.) A change of interest by will or succession on interest)
the death of the insured;
5.) A transfer of interest by will or succession on Jack: Wagering, well, I mentioned to you the case of
the death of the insured; this fellow who got an ordinary manual laborer
6.) A transfer of joint interest by one of several earning minimum wage to insure his life with 6
partners, joint owners or owners in common, insurance companies for fantastic amounts and he
who are jointly insured, to the other. named this person beneficiary and it was the person
paying for the premiums. The Court of Appeals
Sec. 58 (supra): Effect of transfer of thing insured – disallowed the collection of the proceeds when that
does not automatically transfer policy – coverage person died. This is a poor manual laborer earning
merely suspended. minimum wage. He was asked to insure his life with
this well to do person as beneficiary and this was
Jack: Insurance is a personal contract because it is this fellow paying for the premiums. The court said
not attached to the thing. That is why the law says that this person is actually wagering on the life of
change of interest on the thing insured will suspend that manual laborer. He chose his life but the
the insurance until interest in the insurance is based beneficiary is not his relative. This total stranger
on same person. who asked him to insure his life and was actually
As a general rule, when a car is insured and it is paying for the premiums, he was actually wagering
sold, the insurance policy does not automatically on his life.
attach to the buyer unless you get the consent of the
insurance company and it issues an endorsement
saying the policy is being assigned to the buyer. Title 4. Concealment
There are however exceptions to that - in case of
insurance upon life, accident or health, then a Sec. 26. What is concealment: A neglect to
change of interest inaudible the thing insured after communicate that w/c a party knows and ought to
the loss has occurred. Again, somebody insured the communicate.
building. The building was burned. He then
assigned the proceeds of the policy because at that Requisites of concealment:
point in time, the right to collect the proceeds has 1.) A party knows a fact w/c he neglects to
already accrued. There is now a chose in action communicate or disclose to the other;
which can be assigned or a change of interest in one 2.) Such party concealing is duty bound to
or some of several things separately insured by one disclose
policy. such fact to the other;
3.) Such party concealing makes no warranty of
Here’s a taxi company with a fleet of taxis, 20 the facts concealed; and
units. The taxicabs were insured. The owner sold 3 4.) The other party has no means of
of them. The policy will remain subsisting. It would ascertaining the fact concealed.
remain with respect to the remaining 17 units of
taxicabs. Four primary concerns of parties to an insurance
contract:
Sec. 21. Change in the thing insured after 1.) The correct estimation of the risk w/c enables
occurrence of injury resulting in loss does not the
affect right to indemnity insurer to decide whether he is willing to
assume it, and if so, at what rate of premium;
Sec. 22. Change of interest in one or more 2.) The precise delimitation of the risk w/c
distinct things separately insured does not determines the extent of the contingent duty
affect insurance of others to pay undertaken by the insurer;
3.) Such control of the risk after it is assumed as
Sec. 23. Change of interest by will or will enable the insurer to guard against the
succession of insured does not avoid the increase of the risk because of change in
insurance conditions; and
4.) Determining whether a loss occurred, and if
Sec. 181: Allows life insurance policy to pass by so, the amount of such loss.
transfer, will or succession to anyone w/ or w/o
insurable interest. Jack: Time and again, the courts have said that the
failure to disclose serious ailments in life insurance
Jack: A change of interest by succession because of would constitute concealment. This would usually
death – like, here’s a father who insured his house. involve cancer, tuberculosis, asthma, diabetes, high
When he died, his children inherited the house. The blood pressure, kidney ailments, liver disorders.
policy will remain in force.
Sec. 27. Intentional or unintentional
Sec. 24. Transfer of interest by one of concealment entitles injured party to rescind
partners, joint owners or common owners who contract
are jointly insured, to the others, does not
avoid the insurance Law makes no distinction between intentional and
unintentional concealment. There is no
Jack: like here are brothers who inherited a building. need to prove fraud to be able to rescind.
They insured it. Then one of them bought out the
other three, so he became the exclusive owner. The Criterion in applying Sec. 27: Was the insurer misled
policy remains in force so that if it is burned he can or deceived into entering a contract obligation or in
collect. fixing the premium of insurance by the withholding

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Jackrammer INSURANCE 2nd Sem.; 2005
of material information or facts w/in the insured’s Now there’s somebody applying for a fire
knowledge or presumed knowledge? insurance policy. So the insurance company sent its
inspectors to the place. They saw that it is located
Sec. 28. Duty of each party in an insurance in the slum area while the neighbors’ houses are
contract to communicate to the other, in good made up of flimsy materials. They cannot claim that
faith all facts material to the contract and as to w/c you did not disclose to us that your neighbors are
he makes no warranty, and w/c the other has no squatters that their houses are not made up of
means of ascertaining (Insurance contract is a hollow blocks or concrete but are made up of
contract “uberrima fides” – meaning “of utmost good plywood and cardboards which when your inspectors
faith”) hot tip: remember meaning of this crazy latin went there, you know.
word! Like during the gulf war, an insurance company
insured an oil tanker there, which turned into a loss.
Exception to duty to communicate: Those falling You cannot say why did you not tell us that the gulf
under Sec. 30 war was going on, you should know.
Test to determine whether one must communicate: And those in which the other waives
If the applicant is aware of the existence of some communication or those which prove or tend to
circumstance w/c he knows would influence the prove the existence of a risk excluded or a risk
insurer in acting upon his application, good faith excepted. For instance, your fire insurance policy
requires him to disclose that circumstance, though usually provides that it will not answer to loss due to
unasked. rebellion, sedition, coup de etat, riot. If the insured
did not disclose that there are members of the NPA
Sec. 31: What is material (infra) roaming in the place, exacting revolutionary taxes
from the establishments there, and burning the
Jack: Does the other party have the means of properties of those who refuse to comply. The
ascertaining it? In the typical application, there’s a insurance cannot claim you did not disclose that to
question there: Have you been hospitalized? And the us, because loss was due to insurgency, rebellion
applicant mention there, yes, I was hospitalized, say would be excluded anyway in the policy.
at the Makati Medical Center, and he gave the date,
but then he did not disclose for what ailment. In this Sec. 31. Materiality to be determined by
case, there’s no concealment because the insurer influence of facts on party in forming estimate
was already informed that he was hospitalized in a of the risk, not by the event.
particular hospital, and even the date was
mentioned. The application will usually require the Test of materiality: If the knowledge of fact would
waiver of the confidentiality of his hospital records. cause the insurer to reject the risk, or to accept it
So with that lead, the insurance company could have only at a higher premium rate, that fact is material,
inquired. If they did not do so, they could not though it may not even remotely contribute to the
complain that there was concealment because they contingency upon w/c the insurer would become
could have made inquiries based on that lead. liable, or in any wise affect the risk.

Sec. 29. Failure to communicate information Principal question to ask: Was the insurer misled or
proving or intending to prove the falsity of a deceived into entering a contract obligation or in
warranty entitles insurer to rescind – Here the fixing the premium of insurance by the withholding
concealment must be intentional or fraudulent to of material information or facts w/in the insured’s
warrant rescission. knowledge or presumed knowledge? If so, then the
contract is avoided, even if the cause of the loss w/c
Sec. 30. Matters w/c each party to insurance subsequently occurred be unconnected w/ the fact
contract is not bound to communicate: concealed.
1.) Those w/c the other knows;
2.) Those w/c, in the exercise of ordinary care, Jack: The failure to disclose an ailment which is
the merely temporary and light is not material. That will
other ought to know, and of which the not be concealment - like the failure to disclose that
former has no reason to suppose him the applicant for a life insurance has cough or sore
ignorant; throat, or say when he was in high school he was
3.) Those of w/c the other waives playing basketball he broke his leg, or the failure to
communication; disclose that when he gets drunk he has stomach
discomforts. That’s minor and need not be
5.) Those which prove or tend to prove the disclosed. Then the party may conceal and makes no
existence of a risk excluded by the
warranty. Why? If he makes a warranty, the defense
warranty, and w/c are not otherwise
of the insurance company will be breach of warranty
material; and
not concealment. The insurance company will still
6.) Those w/c relate to a risk excepted from escape liability but on the ground of breach of
the policy and w/c are not otherwise warranty.
material.
Exception: when the other inquires Sun Life v. CA: Even if the loss was not due to a
fact concealed, the insurance company is not liable -
Insular Life v. Feliciano: Falsified answers due to like somebody who applied for a life insurance
collusion between the insured and the policy. He did not disclose he had kidney ailment
insurance agent and medical examiner. and he died in a plane crash. The insurance
Insurance company absolved from liability. company is not liable although the death was not
due to kidney ailment. The fact remains that the
Jack: If the insurance agent fills up the application insurance company was misled into issuing a policy
for the insured and then the applicant signs it, he it would not otherwise have issued because that risk
will bound if there’s any concealment because by was not acceptable.
allowing the agent to fill up for him, he makes the
agent of the insurance company his own agent for Sec. 32. Each party bound to know:
purposes of filling out the insurance application. 1.) General causes w/c…

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Jackrammer INSURANCE 2nd Sem.; 2005
a.) are open to his inquiry, equally w/ Sec. 41: representation may be withdrawn or altered
that of the other, before effectivity date.
b.) may affect either the political or
material perils contemplated. Sec. 38. Language of communication the same
2.) General usages of trade. as contracts in general

Sec. 33. Right to information of material facts Representations are construed liberally in favor of
may be waived by: the insured.
1.) Terms of insurance (expressly); or
2.) Neglect to make inquiries where they are Sec. 39. Representation as to the future
directly implied in other facts already deemed a promise unless merely a statement
communicated (impliedly). of belief or expectation

Ng Gan Zee v. Asian Crusader Life: Insured Different kinds of representation:


stated in his application that he had a 1.) Oral or written;
tumor removed from his stomach. Yun 2.) Made at time of issuance of the policy or
pala, it was actually a portion of his before; and
stomach w/c was removed. Ins. co. now 3.) Affirmative or promissory.
refuses to pay on ground on false
information. Affirmative representation: Any allegation as to the
Pay up, damnum you! Can’t rescind the contract. existence or non-existence of a fact when the
Insured did not have sufficient knowledge to contract begins.
distinguish between a tumor and an ulcer. His
statement was made in good faith. Ins. co. could Promissory representation: Any promise to e fulfilled
have made an inquiry as to the illness and operation. after the contract has come into existence or any
Its failure to do so constituted a waiver of the statement concerning what is to happen during the
imperfection of the answer. existence of the insurance.

Sec. 34. Nature or amount of interest need not Sec. 40. Representation cannot qualify express
be communicated. provision of contract, but may qualify an
implied warranty
Exceptions:
1.) In answer to an inquiry; or Sec. 41. Representation may be altered or
2.) When he is not the absolute owner (Sec. 51: withdrawn before insurance is effected, but
items that not afterwards
must be included in an insurance policy: (e)
Interest of insured in property insured, if he is Sec. 42. Representation refers to date of
not the absolute owner thereof.) effectivity of contract

Sec. 35. Opinion or judgment of a party to a There is no false representation if the representation
contract not required to be communicated was true at the time the contract takes effect altho’
it was false at the time it was made. But there is
Sec. 108 (marine insurance): Info of the belief or false representation is although/ true at the time it
expectation of a 3rd person w/ respect to material was made, it subsequently becomes false at the
facts is material. time the contract took effect.

Sec. 43. Effect of representation when person


Title 5. Representation (Importance of has no personal knowledge of facts:
representation: False representation entitles insurer 1.) He may repeat info w/c…
to rescind – Sec. 45) a.) He believes to be true,
b.) With the explanation that he does so on
Sec. 36. Representation may be oral or written the info of others; or
2.) He may submit the info, in its whole extent
Representation: A factual statement made by the to
insured at the time of or prior to, the issuance of the the insurer.
policy to give information to the insurer and 3.) In either case he is not responsible for its
otherwise induce him to enter into the insurance truth.
contract. Exception: it proceeds from an agent of
insured whose duty is to give information.
Misrepresentation: A statement…
1.) as a fact of something w/c is untrue; Harding v. Commercial Union: Proposal form
2.) w/c the insured stated w/ knowledge that it is made out by person authorized to solicit
untrue insurance is an act of the insurer. Facts,
and w/ an intent to deceive, or w/c he states even if false, not warranted by insured in
as true w/o knowing it to be true and w/c has a the absence of willful misstatement.
tendency to mislead; and
3.) where such fact in either case is material to Sec. 44. Misrepresentation: When facts fail to
the risk. correspond to assertions or stipulations,
representation is deemed false
Effect of misrepresentation: Renders insurance
contract voidable at the option of the insurer, Representations need not be literally true. It is
although the policy is not thereby rendered void ab sufficient if they are substantially true.
initio.
Insular Life Co. v. Pineda: It is not
Sec. 37. Representation to be made at time of, misrepresentation for the insured to state that he
or before issuance of a policy did not drink beer or other intoxicants if he drank
very seldom.

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years from date of issue or last
Sec. 45. False representation in a material reinstatement.
point entitles insurer to rescind from time it
becomes false. Right to rescind waived by Sections 227(b), 228(b) and 230(b) make the
acceptance of premium despite knowledge incontestable clause compulsory in all life
insurance contracts.
Note that fraudulent intent here is immaterial.
Soliman v. U.S. Life: Insurer is once again given 2
Esgueras c. Grepalife: A sickly person files an years from date of reinstatement to
application for life insurance. During the investigate the veracity of the facts
medical examination conducted by the represented in the application for
insurer to determine the fitness of the reinstatement.
applicant, a robust and healthy person
appeared pretending to be the applicant. Tan v. CA: Key phrase: “2 years”. Does not need to
Held: The contract is avoided on the be during lifetime of the insured. The phrase “during
ground of fraudulent misrepresentation. the lifetime” simply means that the policy is no
longer in force after the death.
Musngi v. West Coast Life: Concealed that he saw
several physicians for a number of Paulino v. Capital Insurance Co.: There is a
ailments. He knew that he was suffering difference between termination by the insured and
from all these ailments yet he concealed by the insurer. Termination by the insured requires
this. This concealment constituted fraud only a request of such termination. Termination by
because the insurance company by reason the insurer requires the refund of the portion of the
of such statement accepted the risk w/c it premium proportional to the unexpired term of the
would otherwise have rejected. policy.

Edillon v. Manila Bankers Life: There is was a


provision in the certificate of insurance excluding Title 6. The Policy
ins. co. of liability to persons under 16 or over 60
years of age. However, insured stated correctly her Sec. 49. Policy: The written contract of insurance
date of birth showing that she was already 64 years
old. She did not conceal her age, yet co. accepted Jack: The policy is the measure of insurer’s liability.
her premium and issued the policy. Co. is estopped
from disclaiming liability. Ty v. Filipinas Cia de Seguros: Where the
insurance policy defines “partial disability” as loss of
Gonzales La O v. Yek Tong Lin Fire Insurance: either hand by amputation, insured cannot recover
Gonzales issued two fire insurance policies with for temporary disability caused by fracturing the
provisions prohibiting Gonzales from entering into hand. No ambiguity, literal meaning must apply.
other insurance contracts. Fire broke out. Yek
refused to pay because Gonzales violated the Del Rosario v. Equitable Insurance: Equitable
prohibition. Gonzales, however, was able to prove issued an accident policy on th elife of the insured,
that Yek knew of the violation long before the fire binding itself to pay P1000 to P3000. The insured
but did not make any effort to rescind the policies died. Held: Liable for P3000. Art 1377, CC: The
and even collected premiums on the policies. Held: interpretation of the obscure provisions of a contract
The action of the insurer constituted waiver of the should not favor the party that caused the obscurity.
right to annul the insurance policies.
Jarque v. Union Fire Insurance: Typed rider
Tan Chay Cheng v. West Coast Life: prevails over printed clause in case of inconsistency.
Misrepresent-ations made. Tan Chay claims that co.
cannot rescind because an axn for performance had Sec. 50. Formal requirements of a policy:
already been filed. Trial court found for Tan Chay 1.) In printed form w/c may contain blank
holding that an insurer cannot avoid a policy unless spaces;
it brings axn. to rescind before it is sued thereon. and
Trial court wrong. Through fraud in its execution, the 2.) Any word, phrase, clause, mark, sign, symbol,
policy is void ab initio and therefore no valid contract signature, number or word necessary to
was ever made. Not an axn for rescission coz that complete the contract of insurance shall be
would presuppose the existence of a contract. written in the blank spaces provided therein.
Therefore, not barred by Sec. 48. Formal requirements of a rider, clause,
warranty, endorsement as part of the contract:
Sec. 46. Materiality of a representation is 1.) The descriptive title or name of the rider
governed by same rules as materiality of w/c is
concealment pasted or attached to the policy must be
mentioned and written on the blank
Sec. 31: How materiality determined: not by event spaces provided in the policy; and
but y the influence of facts on other party in forming 2.) Unless applied for by the insured or owner,
an estimate of the risk. said
insured or owner must countersign the rider.
Sec. 47. Provisions of Chapter 1 applicable to Requirements of group insurance and group
amendment as well as to original contract annuity policies: May be typewritten and need not
be in printed form.
Sec. 48. Incontestable clause; Insurer’s right
to rescind; When must it be commenced: Rider: A printed or typed stipulation contained on a
1.) Non-life policy: before commencement of slip of paper attached to the policy and forming an
an integral part of the policy. Riders are usually
action; attached to the policy because they constitute
2.) Life insurance policy: incontestable if in force additional stipulations between the parties.
2

Helen C. Arevalo 7 Section 4C


Jackrammer INSURANCE 2nd Sem.; 2005
If there is an inconsistency between the policy and may issue cover notes to bind insurance
the rider, the rider prevails, it being a more temporarily pending the issuance of the
deliberate expression of the agreement of the policy.
parties. 2.) A cover note shall be deemed to be a contract
of
Warranties: Inserted or attached to a policy to insurance w/in the meaning of Sec. 1(1) of this
eliminate specific potential increases of hazard Code.
during the policy term owing to axns of the insured, 3.) No cover note shall be issued or renewed
or conditions of property. unless
in the form previously approved by the
Clauses: Agreements between the insurer and the Insurance Commission.
insured on certain matters relating to the liability of 4.) A cover note shall be valid and binding for a
the insurer in case of loss. period not exceeding 60 days from the date
of its issuance, whether or not the premium
Jack: Examples of Clauses: therefore has been paid, but such cover note
1.) Three-fourths clause – where the insurer is liable may be canceled by either party upon at
for least 7 days notice to the other party.
only ¾ of the loss or damage; 5.) If a cover note is not so canceled, a policy of
7.) Loss payable clause – where the loss, if any, insurance shall w/in 60 days after
is payable to the named party or parties, as issuance of the cover note be issued in
their interest may appear; lieu thereof. Such policy shall include w/in its
8.) Change of ownership clause – where terms the identical insurance bound under
insurance will inure to the benefit of the cover note and premium therefor.
whomsoever, during the continuance of the 6.) A cover note may be extended or renewed
risk, may become the owner of the interest beyond the aforementioned period of 60 days
insured. w/ the written approval of the Insurance
Commission, provided that such written
Endorsement: An endorsement is any provision approval may be dispensed w/ upon the
added to an insurance contract altering its scope or certification of the president, VP, or gen mgr
application. of the insurance co. concerned, that the risks
involved, the values of such risks, and the
Enriquez v. Sunlife: The contract of insurance was premiums therefore have not been
not perfected. It had not been proved that the determined or established and that such
acceptance of application ever came to the extension or renewal is not contrary to and is
knowledge of the applicant. An acceptance of an not for the purpose of violation of any
offer of insurance not actually or constructively provision of the Insurance Code.
communicated to the proposer does not make a 7.) Insurance companies may impose on cover
contract of insurance, as the locus poenitentiae is notes
ended when an acceptance has passed beyond the a deposit premium equivalent to at least 25%
control of the party. of the estimated premium of the intended
insurance coverage but in no case less than
Tang v. CA: Insured is a Chinese illiterate. P500.
Beneficiary claims that since the insured was
illiterate and the policy was in English, the insurer Cover note: Written memorandum of the most
must show that it had fully explained the terms of important terms of the preliminary contract
the policy to the insured, otherwise, the insurer will of insurance, intended to give temporary
not be guilty of misrepresentation. Held: Insurer not protection pending the investigation of the
liable. It was under no obligation to prove that the risk by the insurer, or until the issue of a
terms of the insurance contract was fully explained formal policy, provided it is later
to the other party. determined that the applicant was
insurable at the time it was given.
Sec. 51. Substantive requirements in a
contract of insurance: Policy must specify: 2 types of preliminary contracts of insurance:
1.) The parties between whom the contract is 1.) Preliminary contract of present insurance; and
made; 2.) Preliminary executory contract.
2.) The amount to be insured except in the case
of Preliminary contract of present insurance: Insurer
open or running policies; insures the subject matter usually by what is known
3.) The premium, or if the insurance is of a as a “binding slip” or “binder” or “cover note” w/c is
character where the exact premium is only the contract to be effective until the formal policy is
determinable upon the termination of the issued or the risk rejected.
contract, a statement of the basis and rates
upon w/c the final premium is to be Preliminary executory contract of insurance: Insurer
determined; makes a contract to insure the subject matter at
4.) The property/life insured; some subsequent time w/c may be definite or
5.) The interest of the insured in property indefinite. Under such an executory contract, the
insured if right acquired by the insured is merely a right to
he is not the absolute owner thereof; demand the delivery of a policy in accordance w/ the
6.) The risks insured against; and terms agreed upon and the obligation assumed by
7.) The period during w/c the insurance is to the insurer is to deliver such policy.
continue.

Sec. 52. Rules on cover notes (binding receipts or


slips, interim, temporary or provisional policies):
1.) Insurance companies doing business in the
Phils

Helen C. Arevalo 8 Section 4C


Jackrammer INSURANCE 2nd Sem.; 2005
Sec. 59. A policy is either open, valued or
Grepalife v. CA: Binding deposit receipt is merely running
an acknowledgment of receipt of premium.
It is merely conditional as the insurance co. Sec. 60. What an open policy is: One in w/c the
may still approve or reject the application. value of the thing insured is not agreed upon, but is
It is not a temporary contract of life left to be ascertained in case of loss.
insurance. Grepalife had disapproved of
the application and so the binding deposit It is one in w/c a certain agreed sum is written on the
receipt never came into force. face of the policy not as the value of the property
insured, but as the maximum limit of the insurer’s
Pacific Timber v. CA: Ins. co. refuses to pay since liability.
it claims that the cover note was null and void due to
the issuance of the policy. In an open policy, in event of loss, whether total or
Cover note is not a separate policy. It is integrated partial, it is understood that the amount of
into the regular policies subsequently issued. If it the loss shall be subject to appraisal and
were a separate policy, its purpose would be the liability of the company shall limited to
rendered meaningless. Cover note was w/ the actual loss and in no case shall exceed
consideration. No separate premiums required. the amount of the policy.

Sec. 53. Insurance proceeds; to whom payable: Sec. 61. What a valued policy is: One w/c
The person in whose name or for whose benefit expresses on its face an agreement that the thing
the policy was made. insured shall be valued at a specified sum.

Exceptions: It is one in w/c the parties expressly agree on the


1.) Sec. 12: Forfeiture of proceeds by life value of the subject matter of the insurance.
insurance beneficiary when he is principal,
accomplice, or accessory in willfully bringing about See Sec. 156: Valued policy rules in marine
the death of the insured, in w/c case, proceeds will insurance; and Sec. 157: Valued policy rules in fire
go to nearest relative of insured. insurance.
2.) Art. 739, Civil Code (prohibited donations)
Sec. 62. Meaning of a running policy
Bonifacio Bros. V. Mora: Insurance proceeds go (sometimes called floating, adjustable, blanket or
directly to person in whose name policy declaration policy): One w/c contemplates
made. the proceeds cannot go directly to successive insurances, and w/c provides that the
the dudes who repaired the car in the object of the policy may be from time to time
absence of stipulation pour autrui in defined, especially as to the subjects of insurance,
contract. Since the repairmen and by additional statements or indorsements.
autoparts shop have no privity of contract
w/ the ins. co., they have no cause of axn. This kind of policy is intended to provide indemnity
for property w/c cannot well be covered by a valued
Coquia v. Fieldman’s Insurance: Where there is policy because of its frequent change of location and
an express stipulation pour autrui (in event of driver, quantity, or for property of such nature as not to
ins. co. will indemnify his personal representatives), admit of a gross valuation. It also denotes insurance
enforcement of contract may be demanded by a 3rd w/c contemplates that the risk is shifting, fluctuating
party as they have a direct cause of action. or varying, and w/c covers a class of property rather
than any particular thing.
Lampano v. Jose: A is a building contractor of the
house of B. A insured his interest in the house for Sec. 63. Stipulations limiting commencement
P7,800. His interest is actually only P7,000. The of an action to less than 1 year from the time
house is burned. Held: B is not entitled to the P800 cause of action accrues are void
in excess of the interest of A.
Sec. 231(d): Industrial life policy; Void if less than 6
Sec. 54. Insurance contract w/ agent or trustee years.
as insured: Fact that principal or beneficiary is the
real party in interest may be indicated in policy. Art. 1144 & 1445, CC: If no period agreed upon, the
action must be brought w/in 10 years (written
Sec. 55. Policy terms should be made contract) or 6 years (oral contract).
applicable to joint interest to render insurance
effected by one partner or part owner You can stipulate a period when an action based on
applicable to co-partners or part owners the insurance contract can be brought. In the
absence of stipulation, the period is 10 years.
Sec. 56. Who can claim policy benefits in case However, if you do stipulate and you limit the period
of a general description of insured: he who can to less than one year, the stipulation is void.
show that it was intended to include him (that he is
the person described; or that he belongs to the class Sec. 64. Cancellation of a policy (other than
of persons comprehended in the policy). life) by the insurer to be effective requires
prior notice and occurrence of enumerated
Sec. 57. A policy can be framed to inure to the conditions:
benefit of whomsoever becomes the owner of 1.) Non-payment of premium;
the interest insured 2.) Conviction of a crime arising out of acts
increasing the hazard insured against;
Sec. 58. Transfer of thing insured does not 3.) Discovery of fraud or material
automatically transfer policy; coverage misrepresentation;
suspended until owner of policy and owner of 4.) Discovery of willful/reckless
interest are one and the same acts/omissions
increasing the hazard insured against;

Helen C. Arevalo 9 Section 4C


Jackrammer INSURANCE 2nd Sem.; 2005
5.) Physical changes in the property insured 3.) Express (Sec. 67); or
w/c 4.) Implied (Sec. 67).
result in the property becoming uninsurable;
or Express warranty: An agreement contained in the
6.) A determination by the Commissioner that policy or clearly incorporated therein as part thereof
the whereby the insured stipulates that certain facts
continuation of the policy would violate or relating to the risk are or shall be true or certain acts
would place the insurer in violation of this relating to the same subjects have been or shall be
Code. done.

Cancellation: The right to rescind, abandon or cancel Implied warranty: Warranty w/c from the very nature
a contract of insurance. of the contract or from the general tenor of the
words, altho’ no express warranty is mentioned, is
Non-payment of premium: refers to premiums necessarily embodied in the policy as part thereof
subsequent to the first premium because the law and w/c binds the insured as tho’ expressed in the
speaks of non-payment after the effective date of contract.
the policy. Remember, if you do not pay the 1st
policy, no policy is valid and binding. Therefore, the Affirmative warranty: One w/c asserts the existence
1st premium is the condition precedent to the of a fact or condition at the time it is made.
effectivity of the insurance. So any premium after
the effective date of the policy must refer to the Promissory warranty: One where the insured
premiums after the 1st one has been paid. stipulates that certain facts or conditions pertaining
to the risk shall exist or that certain things w/
Sec. 65. Conditions for cancellation (by reference thereto shall be done or omitted. It is the
insurer) of policy (other than life): nature of a condition subsequent.
1.) There must be prior notice of cancellation to
the Sec. 68. A warranty may relate to the past,
insured; present or to the future, or any or all of them
2.) The notice must be based on the occurrence,
after the effective date of the policy, of one or Sec. 69. No particular form of words necessary
more of the grounds mentioned in Sec. 64; to create a warranty
3.) The notice must be in writing, mailed or
delivered to the insured at the address When insured stipulates something in the policy or
shown in the policy; even in the application form, it is not always a
4.) It must state which of the grounds set warranty. It depends on his intention. Sometimes a
forth in statement made by the insured is not meant to be a
Sec. 64 is relied upon; and warranty but a representation. In case of doubt, such
5.) If so requested by the insured, it is the statement is only considered a representation.
duty
of the insurer to furnish the facts on which Difference between a warranty and a representation:
the cancellation is based. Warranties Representations
Considered parts of the Collateral inducements to
Saura v. Phil International Co.: Notice of contract. the contract.
cancellation by insurer to m’ee alone is not effective Always written on the May be written in a
as to m’or/ owner. There must be actual and face of the policy, totally disconnected
personal notice. actually or by reference. paper, or may even be
oral.
Malayan Insurance v. Arnaldo: Notice was not Must be strictly Substantial truth only
effectively made. No proof was presented that the complied w/. required.
notice was actually mailed to and received. A valid Falsity/non-fulfillment Falsity renders policy
cancellation requires: operates as a breach of void on the ground of
1.) Prior notice to insured; contract. fraud.
2.) Notice must be based on grounds mentioned; Presumed material. Insurer must show the
3.) Must be in writing, mailed or delivered to the materiality in order to
insured; defeat axn on policy.
4.) Must state ground for cancellation.
Sec. 70. An express warranty must be in the
Sec. 66. In non-life insurance, insured is policy itself or in another document signed by
entitled to renew contract by payment of the insured and made part of the policy
premium unless notified by insurer 45 days
prior to expiry date Ang Giok Chip v. Springfield Fire & Marine Ins.:
It is well settled that a rider attached to a policy is a
part of the contract, to the same extent and with like
Title 7. Warranties effect as if actually embodied therein. In the second
place, an express warranty must appear upon the
Sec. 67. A warranty is express or implied face of the policy, or be clearly incorporated therein
and made a part thereof by explicit reference, or by
Warranty: A statement or promise set forth in the words clearly evidencing such intention.
policy itself or incorporated in it by proper reference,
the untruth or non-fulfillment of w/c in any respect Sec. 71. Express warranty: A statement in the
and w/o reference to whether the insurer was in fact policy relating to the person or thing insured, or
prejudiced by such untruth or non-fulfillment, to the risk as a fact
renders the policy voidable by the insurer.
Sec. 72. Promissory warranty: to do or not to
Different kinds of warranty: do a thing that materially affects the risk
1.) Affirmative (Sec. 68);
2.) Promissory (Sec. 72);

Helen C. Arevalo 10 Section 4C


Jackrammer INSURANCE 2nd Sem.; 2005
An act or omission is material to the risk if it Assessment: A sum specifically levied by mutual
increases the risk. Under the law, only substantial insurance companies or associations, upon a fixed
increase of risk forfeits the policy. and definite plan, to pay losses and expenses.

Sec. 73. Breach of warranty; effect: Avoids Difference between a premium and an assessment:
contract of insurance. Premium Assessment
Exceptions: Levied and paid to meet Collected to meet actual
1.) When loss occurs before time for anticipated losses. losses.
performance; Payment of premium, Legally enforceable once
2.) When performance becomes unlawful; after the 1st, is not levied.
3.) When performance becomes impossible. enforceable against the
insured.
Sec. 74. Violation of a material warranty or Not a debt. Is a debt (if properly
other material provision by either parties levied).
entitles other party to rescind
Effect of non-payment of premiums:
Young v. Midland Textile Ins.: Even if (storage of
1.) Non-payment of the 1st premium unless waived
firecrackers) not cause of the event insured against
prevents the contract from becoming binding
(fire), violation of warranty terminates the contract.
notwithstanding the acceptance of the application
Compliance with terms of contract is condition
nor the issuance of the policy. But non-payment of
precedent to right of recovery.
the balance of the premium due does not produce
the cancellation of the contract.
Exception: Merely incidental to the business.
2.) Non-payment of subsequent premiums does
not affect the validity of the contracts unless by
Jack: there may also be waiver. If the insurance co.
express stipulation, it is provided that the policy in
was aware that there was a breach of warranty but
that event be suspended or shall lapse.
despite that it continued the policy, it accepted the
renewal premium, then it waives the violation.
Secs. 227(a), 228(a), 230(a): In the case of life or
endowment insurance, group life insurance and
Sec. 75. If specifically stipulated, a violation of
industrial life insurance, the policy holder is entitled
a specified provision shall avoid a policy,
to a grace period of 30 days.
otherwise a breach of immaterial provision
does not avoid the policy
Sec. 78 (infra): acknowledgement of receipt of
premium in policy is binding.
Gen Insurance v. Ng Hua: Stipulation that failure
to give notice that any other insurance was
Sec. 306(2): delivery of policy to agent presumes
obtained would result in forfeiture of the
authority to collect premium.
benefits. The rebel didn’t give notice that
he had insurance on the same goods w/
UCPB v. Masagana Telamart: UCPB is in estoppel
another co. Breach of warranty. Insurer
for having received 60-90 day credit term.
entitled to rescind. Materiality of non-
disclosure of other insurance policies is
Jack:
undoubted.
General rule: non-payment of premiums = policy not
valid and binding.
Sec. 76. Breach of warranty, w/o fraud,
Exceptions:
exonerates insurer or prevents policy from
1.) Acknowledgement in policy that premium has
attaching to risk depending on when breach
been
occurred
paid;
2.) Installment payments – some made then stopped
Breach of warranty…
(can
1.) Without fraud: policy avoided only from
demand for payment of the rest);
time of the
3.) 30 day grace period in life and industrial life
breach and hence, the insured is entitled to:
policies;
a.) a return of premiums paid at the pro rata
4.) Ins. co. agreed to grant credit;
rate from the time of the breach if it occurs
5.) Estoppel.
after the inception of the contract; or
b.) to all the premiums if it is broken during Sec. 78. Legal fiction of payment of premium
the inception of the contract. for purposes of making policy binding:
2.) With fraud: policy avoided ab initio and the Acknowledgment in policy of receipt of premium is
insurer is conclusive evidence of payment for purpose of
not entitled to the return of the premium paid. making policy binding.

Sec. 79. When insured entitled to return of


Title 8. Premium premiums:
1.) When no part of thing insured has been
Sec. 77. Insurer entitled to premium from exposed to any of the perils insured
moment risk attached; policy binding only against (whole premium returned);
when premium paid; Exceptions (a life 2.) When the insurance is for a definite period
insurance policy where the grace period and
applies) the insured surrenders his policy before
termination thereof (such portion as
Premium: The agreed price for assuming and corresponds w/ unexpired time, at a pro
carrying the risk. It is the consideration paid an rata rate, returned).
insurer for undertaking to indemnify the insured Exceptions:
against a specified peril. a.) Short period rate agreed upon and
appears on face of policy (exception to pro
rata rate).

Helen C. Arevalo 11 Section 4C


Jackrammer INSURANCE 2nd Sem.; 2005
b.) Life insurance (exception to applicability assigned but a money claim OR a right of action
of this section). under the policy. There is no moral hazard because
3.) When the contract is voidable because of the insurer’s risk cannot be increased anymore since
fraud or the loss has already occurred.
misrepresentations of the insurer or his agent
(Sec. 81 infra); Sec. 84. Insurer liable if peril insured against
4.) When the contract is voidable because of the is proximate cause.
existence
of facts of w/c the insurer was ignorant w/o his Insurer liable only for a loss PROXIMATELY caused by
fault (Sec. 81 infra); the perils insured against although a peril not
5.) When the insurer never incurred any liability insured against may have been the remote cause of
under the the loss.
policy because of default of the insured other
than actual fraud (Sec. 81 infra); Proximate cause: That which, in natural &
6.) When there is overinsurance (Sec. 82 infra); continuous sequence, unbroken by any new
7.) When rescission is granted due to the independent cause, produces an event and without
insurer’s breach of which the event would not have occurred. It is the
contract. efficient cause – one that sets others in motion – to
which the loss is attributed, although other &
There is no right to recovery of premiums in life incidental causes may be nearer in time to the result
insurance because it is not a divisible contract. It is & operate more immediately in producing the loss.
not an insurance for any single year, w/ a privilege of
renewal from year to year by paying the annual Proximate cause is NOT synonymous to immediate
premium. It is an entire contract of insurance for life cause. Need not be the immediate cause.
subject to discontinuance and forfeiture for non-
payment of any of the stipulated premiums. Sec. 85. Insurer’s liability for loss:
1.)Loss from peril not insured against to
Sec. 80. Insured not entitled to return of which thing was exposed in rescuing it
premiums when risk already attached and from peril insured against; and
insurer liable for any period
2.) Loss caused by efforts to rescue thing
insured from a peril insured against.
Makati Tuscany v. CA: Where the risk is entire and
the contract is indivisible, the insured is not
Insurer is liable when:
entitled to a refund of the premiums paid
1.) Loss took place while being rescued from the
where the insurer was exposed to the risk
peril insured against;
for any period, however brief or
2.) Loss took place when, while in the course of
momentary.
rescue, thing is exposed to a peril not
insured against, which permanently deprived
Sec. 81. Insured entitled to return of premium
the insured of possession of the thing;
when:
3.) Loss is caused by efforts to rescue the thing
1.) Contract voidable due to insurer’s fault; or
insured from a peril insured against.
2.) Insurer never incurred liability due to:
a.) Insured’s ignorance of facts or
Sec. 86. Insurer liable for loss, the immediate
b.) Default other than fraud
cause of which was the peril insured against
unless the proximate cause was excepted in
Grepalife v. CA: Never at risk; not entitled to keep
contract
premiums.
Even if the proximate cause is not the peril insured
Sec. 82. Insured entitled to ratable return of
against, the insurer may still be held liable if the
premium in case of over-insurance.
immediate cause is the peril insured against.
Jack: For example. Here is a building wqorth P10M.
3 kinds of causes:
He insured with MGU insurance for 10M, Malayan for
1.) Remote;
5M and Pioneer for 5M, it is over insured by 10M.
2.) Proximate; and
Let’s say that he paid 10T premium to MGU, 5T to
3.) Immediate
Malayan and 5T to Pioneer. So he is entitled to a
refund of P5000 from MGU, 2500 from Malayan and
Sec. 87. Insurer not liable for loss caused by
2500 from Pioneer.
willful act or with connivance of insured;
Insurer liable for negligence of insured
Title 9. Loss Insurer is not liable for loss when:
1.) Loss was caused by willful act of insured; or
Sec. 83. Agreement not to transfer claim after 2.) Through the connivance of the insured.
loss happened is void. 3.) Gross negligence amounting to bad faith.
Exception: Life insurance Exception to the Rule:
Sec 180-A (Suicide Clause): Insurer liable if:
Limitation on the Transfer: Sec 173: Transfer of FIRE 1.) Suicide committed AFTER 2 yrs from date of
policy to agents of insurer is void if in fraud of issue; or
creditors 2.) Committed anytime in state of insanity
Rationale: Against public policy for it hinders the free Insurer is liable for negligence of insured.
transmission of property from one person to another.
Contributory negligence on part of insured does NOT
Why should the agreement be void when it is a mitigate insurer’s liability. It has no application to
personal contract? After loss has been suffered, it is insurance contracts.
no longer a personal contract which is being

Helen C. Arevalo 12 Section 4C


Jackrammer INSURANCE 2nd Sem.; 2005
Fortune Insurance: Producers Bank of the Phils.
filed a complaint for recovery of the sum of Form of notice and proof of loss: WALA! It may be
P725,000 which was lost during a robbery of given orally or in writing. However, its advisable to
Producer’s armored vehicle while it was in transit to give it in writing for the protection of the insured or
transfer the money from one of its branches to its beneficiaries. Para its not your word against theirs.
head office. Among the accused were the driver of
the armored truck and one of the guards. The policy Sec. 90. Defects in notice or preliminary proof
contained among its general exceptions any loss of loss waived if insurer omits to specify them
caused by any dishonest, fraudulent or criminal act as grounds of objections
of the insured or any officer, employee, partner…or
authorized representative of the insured. Sec 90 presupposes that notice of loss & proof of
The driver and the guard were, in respect to the loss have already been given. It is the DUTY of the
transfer of money from the branch to the principal insurer to specify to the insured all defects in the
office, authorized representatives as they were notice of loss or in the preliminary proof as grounds
entrusted with the specific duty to safely transfer for its objection without necessary delay. Otherwise,
that money. Ins. co. exempt from liability. same shall be deemed WAIVED.

There is waiver when the insurer:


Title 10. Notice of Loss 1.) Writes to the insured that he considers the
policy null & void so that furnishing of notice
Sec. 88. In fire insurance, failure of insured/ or proof of loss would be useless
assured to give notice of loss without 2.) Recognizes his liability to pay claim
unnecessary delay exonerates insurer 3.) Denies liability under the policy
4.) Joins in the proceedings for determining amt
Sec. 89. Preliminary proof of loss if required by of loss by arbitration without making
policy need not be that required by a court objections to the notice & preliminary proof
of law; best evidence enough 5.) Makes no objections on any ground other
than a formal defect in the preliminary proof
Condition that MUST be Complied with BEFORE loss
occurs: Compliance with terms of the policy. The General statement that proof is defective is NOT
terms of the contract constitute the measure of the sufficient. Insurer must specify what those defects
insurer’s liability & non-compliance therewith by the are in order that insured may remedy them.
insured bars his right of recovery.
Sec. 91. Delay in notice or proof of loss waived
Condition that MUST be Complied with AFTER loss if caused by insurer or if he fails to object
occurs: promptly
1.) Notice of loss must be given to insurer 2 cases of waiver by the insurer of delay in
without delay (immediately given)
presentation of notice or proof of loss:
2.) When required by the policy, preliminary 1.) Delay is caused by an act of the insurer
proof of loss (may be given later) 2.) Insurer omits to take objection promptly &
specifically upon ground of delay
These requirements are NOT exclusive. Certificate
of attending physician as part of proof of death is Sec. 92. If required by policy as a preliminary
required in some life & accident policies. proof of loss, the certificate or testimony of
person other than insured satisfies it if insured
Notice of loss: More or less formal notice given by used reasonable diligence to procure it; If
the insured or claimant under a policy of the person refuses to give it, then reasonable
occurrence of the loss insured against. evidence to insurer enough provided refusal is
not based on disbelief in facts
Purpose: To apprise the insurance company with the
occurrence of the loss, so that it may gather info & Where the policy requires, by way of preliminary
make proper investigation while evidence is still proof of loss, the certificate/testimony of a person
fresh & take such action as may be necessary to other than the insured, the insured is merely
protect its interest. In property insurance, it required to exercise due diligence to procure it.
prevents further loss to the property.
If he fails to procure certificate BUT has exercised
Effect if notice of loss not given: Insurer is due diligence, he would be considered to have
exonerated. complied with the requirement.

When notice of loss must be given: Without If the third person refuses: Insured must furnish
unnecessary delay; within reasonable time. reasonable evidence that the refusal was made NOT
coz of disbelief on the part of the third person in the
Proof of loss: More or less formal evidence of the facts necessary to be certified BUT coz of other
occurrence of loss given the company by the insured grounds.
or claimant under a policy of the occurrence of the
loss, the particulars thereof and the data necessary
to enable the company to determine its liability and Title 11. Double Insurance
the amount thereof.
Sec. 93. When double insurance exists:
Purpose:
1.) To give insurer info by which he may 1.) Person insured is the same;
determine extent of his liability; 2.) Interest insured is the same;
2.) To afford him a means of detecting any fraud 3.) Risk OR peril insured against is the
that may have been practiced upon him; same;
3.) To operate as a check upon extravagant
claims 4.) Subject matter insured is the same; and

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5.) Two or more insurers insure separately. 5.) Each insurer is bound, as between
himself and the other insurers, to
Double insurance is NOT the same as over contribute ratably to the loss in proportion
insurance. to the amount for which he is liable under his
contract.
Double insurance Over insurance
Sec 94 applies only when there is over-insurance by
There may be no over Amount of insurance is double insurance, that is, the insurance is contained
insurance as when the beyond the insured’s in several policies & the total amount of which is in
sum total of the amts of insurable interest excess of the insurable interest of the insured.
the policies issued does
not exceed the insurable
interest of the insured. Title 12. Reinsurance
Always Several insurers May only be one insurer
involved Sec. 95. Reinsurance: contract whereby one
party (reinsurer) agrees to indemnify another
Stipulation in policy that double insurance is (reinsured/original insurer), either in whole or
prohibited & violation of stipulation will result in in part, against loss or liability which the latter
avoidance of the policy is VALID and reasonable. (reinsured) may sustain or incur under a
separate & original contract of insurance with
Purpose of prohibition against double insurance: To a third party (original insured).
prevent over insurance & thus avert the perpetration
of fraud. The public & insurer are interested in
Difference between Reinsurance and Double
preventing the situation in which a loss would be
insurance
profitable to the insured.

Reason for prohibition of over insurance: An Reinsurance Double Insurance


insurance contract is strictly a contract of indemnity Original insurer becomes Original insurer remains
& the insured can’t profit. The hazard in this is that an insured as far as the an insurer
the insured may be tempted to cause the peril. reinsurer is concerned
SUBJECT: original SUBJECT: Property
Geagonia v. CA: Geagonia obtained a fire insurer’s risk
insurance policy over its stock-in-trade from Country Insurance of different Insurance of SAME
Banker’s Insurance. The policy provided that (1) interest interest
insurer be notified of other policies, otherwise, Original insured has no Insured is the party in
benefits shall be forfeited; (2) nullity shall only be to interest in the K of interest in all the
the extent exceeding P200T of the total policies reinsurance which is contract
obtained. Geagonia obtained a policy from Phil First independent of the
Insurance without notice. He now filed a claim for original K of insurance
P100T. Is Country Banker’s Insurance liable?
Consent of original Consent of original
YES. #1 only refers to double insurance. There
insured NOT necessary insured necessary
was no double insurance in this case coz the second
insurance was procured by Geagonia’s creditor-
mortgagee which has a distinct & separate insurable Jack: There are two kinds:
interest. Non-discloure of the former policies were 1.) Treaty; and
NOT fatal to Geagonia’s right to recover on the 2.) Facultative.
policy. Country Banker’s Insurance is also liable coz
it was willing to assume the risk provided that the
TOTAL insurance does not exceed P200T. Reinsurance Policy Reinsurance Treaty
Contract of indemnity Merely an agreement
Sec. 94. Consequences of over-insurance in one insurer makes between two insurance
case of double insurance: with another to companies whereby one
1.) The insured, unless the policy protect the 1st insurer agrees to cede & the other
otherwise provides, may claim payment from a risk it has to accept reinsurance
from the insurers in such order as he may already assumed. business pursuant to
select, up to the amount for which the provisions specified in the
insurers are severally liable under their treaty
respective contracts; Contracts OF Contracts FOR insurance
2.) Where the policy under which the insurance
insured claims is a valued policy, the I don’t know if “facultative” is the same as the
insured must give credit as against the reinsurance policy described in the left column but
valuation for any sum received by him under I’m just making a logical connection.
any other policy without regard to the actual
value of the subject matter insured; Sec. 96. Requirement when insurer obtains
3.) Where the policy under which the reinsurance: Communicate all
insured claims is an unvalued policy he 1.) Representations,
must give credit, as against the full 2.) Knowledge &
insurable value, for any sum received by him 3.) Information
under any policy; he possesses that are material to the risk
4.) Where the insured receives any sum in
excess of the valuation in the case of Things that insurer-reinsured must communicate to
valued policies, or of the insurable value the reinsurer:
in the case of unvalued policies, he must 1.) All the representations of the original
hold such sum in trust for the insurers, insured; and
according to their right of contribution 2.) All the knowledge and information he
among themselves; possesses, whether previously or

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Jackrammer INSURANCE 2nd Sem.; 2005
subsequently acquired, which are material to
the risk. Artex Dev. Corp. v. Wellington Insurance:
Wellington issued an insurance policy over the
Exception: In case of automatic reinsurance treaty. buildings, stocks, & machinery of Artex. Later,
Wellington reinsured the risk with Alexander &
Automatic reinsurance treaty: An agreement Alexander. When fire gutted the insured properties,
between 2 or more insurance companies that each Wellington paid Artex BUT left an unpaid balance.
will reinsure a part of any line of insurance taken by Artex then manifested that since Wellington was
the other; such contract is self-executing and the undergoing financial difficulties, it should be allowed
obligation attaches automatically on acceptance of a to go after Alexander & Alexander for the balance.
risk by the reinsured. In this case, the obligation to Can Artex recover from Alexander (reinsurer)?
communicate is not necessary due to the self- NO. Artex NOT being a party or privy to
executing and the automatic feature of such Wellington’s reinsurance contracts, could not directly
reinsurance treaty. demand enforcement of such reinsurance contracts.
UNLESS there is a specific grant in or assignment
Sec. 97. Reinsurance presumed indemnity of the reinsurance contract in favor of the insured or
contract against liability and not merely a manifest intention of the contracting parties to the
against damage reinsurance K to grant such benefit to the insured,
the insured NOT being privy to the reinsurance K,
Nature of reinsurance contract: Reinsurer agrees to has NO CAUSE OF ACTION against the reinsurer. The
indemnify insurer NOT against actual payment but stipulation pour autrui MUST be clearly expressed.
against liabilities incurred. Thus, it is by no means Artex’ right as insured to sue Wellington as
necessary that the insurer shall first have paid a loss insurer directly & solely should not be affected or
accruing, as a condition precedent to his demanding curtailed in any way, by Wellington’s filing a third-
payment of the reinsurer. party complaint or separate suit against its
reinsurer.
Reason: SM of contract is the INSURER’S RISK and
NOT the property insured under the original policy. This stipulation pour autrui (literally, “autrui” means
“other” in Francais; meaning: 3rd party), is called,
Jack: Fortune Clause: reinsurer agrees to rise and fall accdg to Jack: a CUT THROUGH CLAUSE.
with the fortunes of the original insurer. They share
in losses and profits. Sometimes they have this
clause that they will abide with whatever results of CHAPTER II – CLASSES OF INSURANCE
the suit against the insurer to settle the claim. They
will follow his fortune. Title 1. Marine Insurance

Sec. 98. Original insured (in insurance Subtitle 1-A. Definition


contract) has no interest in reinsurance
contract Sec. 99. Marine insurance includes:
1.) Insurance against loss of or damage to:
Reinsurance contract: Contract between reinsured & a.) Vessels, craft, aircraft,
reinsurer by which the latter agrees to protect the disbursements, profits, moneys,
former from risks already assumed. The insured, securities, choses in action,
unless the contract so provides, has no concern with evidences of debt, valuable papers,
the contract of reinsurance & the reinsurer is NOT bottomry, and respondentia interests
liable to the insured either as surety or otherwise. and all other kinds of property and
interests therein, in respect to,
Liability of reinsurer to reinsured: Reinsurer is appertaining to or in connection with
entitled to avail itself of every defense which the any and all risks or perils of
reinsured might urge in an action by the person navigation, transit or transportation,
originally insured. e.g. reinsurer not liable if or while being assembled, packed,
reinsured not liable to original insured. Reinsurer crated, baled compressed or
liable only to the extent that reinsured is liable. similarly prepared for shipment or
while awaiting shipment, or during
Liability of reinsurer to original insured: any delays, storage, transshipment
1.) If the K is only between the insurer & or reshipment incident thereto,
reinsurer, contemplating only an indemnity including war risks, marine builder’s
to the insurer against losses suffered by risks, and all personal property
reason of the policies carried by him the floater risks;
original insured has ABSOLUTELY no interest b.) Person or property in connection
in the contract & is a total stranger to it. with or appertaining to a marine,
2.) If the reinsurance contract contains a inland marine, transit or
transportation insurance, including
stipulation assigning the right of the insurer
liability for loss or for damage arising
in favor of the insured, then the insured may
out of or in connection with the
go after the reinsurer as an assignee. But
construction, repair, operation,
the insured-assignee will have no rights
maintenance or use of the subject
greater than that vested in the insurer-
matter of insurance;
assignor.
c.) Precious stones, jewels, jewelry,
3.) If the reinsurance K contains a provision precious metals, whether in course
whereby the reinsurer binds himself to pay of transportation or otherwise;
the insured for any loss which the insurer d.) Bridges, tunnels and other
may become obliged to pay under the instrumentalities of transportation
original policy, then reinsurer becomes liable and communication; piers, wharves,
to a suit by the insured under the K of docks and slips, and other aids of
insurance. Insured may go against BOTH the navigation and transportation;
insurer & reinsurer.

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Jackrammer INSURANCE 2nd Sem.; 2005
2.) Marine protection and indemnity insurance, insurable interest of owner of the ship IF
meaning insurance against legal liability of CHARTERED: To the extent that he can’t recover
the insured for loss, damage or expense from the charterer
incident to ownership, operation, chartering,
maintenance, use, repair or construction of Sec. 101. Insurable interest of shipowner if
any vessel, craft or instrumentality in use in hypothecated by bottomry: Excess of its value
ocean or inland waterways, including liability over amount of bottomry loan.
of the insured for personal injury, illness or
death or for loss of or damage to the Insurable interest of lender: To the extent of the
property of another person. loan.

2 major divisions of transportation insurance: Loan on bottomry: Payable only if vessel is given as
1.) Ocean marine insurance; and security for the loan completes in safety the
2.) Inland marine insurance. contemplated voyage. Lender is entitled to high rate
of interest to compensate him from the risk of losing
Scope of ocean marine insurance: Protection for: his loan. Owner of the vessel receives in case of loss
1.) Ships or hulls; no indemnity BUT he does secure immunity from
2.) Goods or cargoes; payment of the loan.
3.) Earning such as freight, passage money,
commissions, or profits; and Respondentia loan: Loan on goods
4.) Liability incurred by the owner or any party
interested in or responsible for the insured Sec. 102. Meaning of freightage in marine
property by reason of maritime perils. insurance: ALL benefit which is to accrue to the
owner of the vessel from its use in the voyage
Perils of the sea: Casualties due to unusual violence contemplated or the benefit derived from the
OR extraordinary action of wind & wave OR to other employment of the ship
extraordinary causes connected with navigation.
Embraces all kinds of marine casualty such as Sources of freightage:
shipwreck, foundering, stranding, collision & every 1.) Chartering of ship
specie of damage done to ship or goods at sea by 2.) Employment of ship for carriage of owner’s
violent action of the wind & waves or losses goods
occasioned by jettisoning the cargo if it is made for
the purpose of saving a vessel rendered unworthy 3.) Employment of ship for carriage of another’s
during the voyage, NOT thru the fault of the captain. goods

Not covered: Losses resulting from ordinary wear & Sec. 103. Insurable interest of shipowner in
tear OR other damage usually incident to the voyage expected freightage: The shipowner has an
are not included. Mere fact that the injury is due to insurable interest in expected freightage which
the violence of some marine force does NOT according to the ordinary and probable course of
necessarily bring it w/in the protection of the policy things he would have earned but for the intervention
of such violence NOT unusual or unexpected. of a peril insured against or other peril incident to
the voyage.
Perils of the ship: Loss which in the ordinary course
of events, results Sec. 104. When insurable interest in
1.) From natural & inevitable action of the sea freightage of charter party exists: When the
2.) From wear & tear of the ship ship has broken ground on the chartered voyage.
3.) From negligent failure of the ship owner to If a price is to be paid for the carriage of goods, it
provide vessel with proper equipment to exists when:
convey cargo under ordinary conditions (Go 1.) They are actually on board; or
Tiaco v. Union Insurance Society of Canton) 2.) There is some contract for putting them on
board, and both the ship and goods are
The insurer does NOT undertake to insure against ready for the specified voyage.
perils of the ship BUT only perils of the sea. Insured
can hold insurer liable only for perils of the sea. For Sec. 105. Insurable interest in profits. One who
perils of the ship, the injured party must look to the has an interest in the thing from which profits are
ship owner for redress. For the insurer to be liable, expected to proceed has an insurable interest in the
perils of the sea must be the proximate cause of the profits.
loss.
To give an insurable interest in expected freightage,
Scope of Inland Marine Insurance: Risk must involve the insured must have an inchoate right to freight.
an element of transportation. He must be in such position with regard to freight
that nothing could prevent him from ultimately
having a perfect right to it but the intervention of the
Subtitle 1-B. Insurable Interest perils insured against.

Sec. 100. Insurable interest of shipowner when Sec. 106. Insurable interest of charterer of
ship chartered. ship: To the extent that he is liable to be damnified
by its loss.
Insurable interest of owner of the ship: On the vessel
to the extent of its value. He continues to have Insurable interest of a charterer:
insurable interest even if he mortgaged or chartered 1.) Value of ship IF charter stipulates charterer
the vessel to a third person who agrees to pay him to pay ship’s value in case of loss
its value in case of loss. However, the insurer is only 2.) Profit he expects to earn by carrying goods,
liable only for the part of the loss which the insured in excess of the charter hired
cannot recover from the charterer. 3.) Up to the extent that he is liable to be
damnified by its loss.

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Jackrammer INSURANCE 2nd Sem.; 2005
Compare with Sec. 45 where intent is not essential

Subtitle 1-C. Concealment Sec. 112. Falsity of representation as to


expectation in absence of fraud does not avoid
Sec. 107. What information (other than that contract
required in section 28) each party in marine
insurance is bound to communicate to the Effect of False Representation of FACT in Marine
other: All the information he possesses, material to Insurance:
the risk, except such as is mentioned in Sec. 30, and 1.) If made with FRAUDULENT intent: avoids
to state the exact and whole truth in relation to all policy
matters that he represents, or upon inquiry discloses 2.) NOT intentional BUT material: insurer may
or assumes to disclose. also rescind

Concealment: Failure to disclose any material fact or Effect of Falsity of Representation as to


circumstance which in fact or law is within OR which EXPECTATIONS
ought to be within the knowledge of one party & for REPRESENTATIONS OF EXPECTATION: Statements of
which the other has no actual of presumptive future facts or events which are in their nature
knowledge. contingent & which the insurer is bound to know that
the insured could not have intended to state as
Sec. 108. In marine insurance, info of belief or known facts, but as intentions or expectations
expectation of 3rd party with respect to a merely. MUST be made with fraudulent intent to be a
material fact is material ground for rescission.

In marine insurance, the rule is STRICTER coz the Note: Fraudulent intent as ground for rescission is
insured is bound to communicate to the insurer not material only in marine policies. For other insurance
only (1) facts BUT also (2) beliefs or opinions of 3rd contracts, intent is immaterial & the insurer has a
persons OR (3) expectations of 3rd persons. Thus, right to rescind in case of misrepresentation or
there is concealment where the insured at the time concealment.
of application for insurance did not disclose the
opinion of marine experts who inspected the vessel
insured that it was unseaworthy. Subtitle 1-E. Implied Warranties

Sec. 109. Presumption of knowledge of prior Sec. 113. Seaworthiness of ship an implied
loss warranty in marine insurance

Sec 109 establishes a rebuttable presumption of Warranty: Stipulation, either expressed or implied,
knowledge of a prior loss on the part of the insured forming part of the policy as to some fact,
“if the info might possibly have reached him in the conditions, or circumstance relating to the risk.
usual mode of transmission at the usual rate of
communication. Implied Warranties:
1.) Seaworthiness at inception of voyage (Sec.
Reason: Quickness in transmission of news by 113);
means of modern communications 2.) Carry proper documents if nationality
expressly warranted (Sec. 120);
Sec. 110. Concealment in marine insurance 3.) No improper deviation (Secs. 123-125);
does not vitiate entire contract but merely 4.) Not an illegal venture (Vance).
exonerates insurer with respect to matters
enumerated Roque v. IAC: Roque insured its logs with Pioneer
1.) National character of the insured; Insurance. The logs were loaded on Mla Bay
2.) Liability of the thing insured to capture and Lighterage Corporation’s barge which sank. Pioneer
detention; Insurance denied liability as the ship was not
3.) Liability to seizure from breach of foreign seaworthy. Was the ship seaworthy?
laws of trade; NO. Seaworthiness as to the ship is different as to
4.) Want of necessary documents; seaworthiness as to the cargo. In this case, the
5.) Use of false and simulated papers. vessel was seaworthy as to the ship BUT NOT
seaworthy as to the cargo.
General Rule: Concealment of material fact entitles Cargo can be the subject of marine insurance &
the injured party to rescind the entire contract of once it is contracted, the implied warranty of
insurance. seaworthiness immediately attaches to whoever is
insuring the cargo, w/r he be the owner or not.
Exception: Under this Section, concealment of any of Cargo owner has the obligation to choose a common
the matters enumerated does NOT avoid the policy carrier that takes care of its ships. While the cargo
ab initio. owner has no control over the ship itself & its
seaworthiness, he has control over the choice of
If the vessel is lost by any of the causes in 110 shipping company to use.
which was concealed, insurer is NOT liable. The cause of the loss was perils of the ship & NOT
perils of the sea. An insurer is only liable for perils of
If vessel is lost by other perils of the sea like a storm, the sea.
the insurer is liable.
Sec. 114. Meaning of seaworthiness:
Reasonably fit to perform the service, and to
Subtitle 1-D. Representation encounter the ordinary perils of the voyage,
contemplated by the parties to the policy.
Sec. 111. Marine insurer entitled to rescind
contract if representation is intentionally false Sec. 115. Seaworthiness satisfied if ship
in any material aspect seaworthy at start of voyage; Exceptions:

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Jackrammer INSURANCE 2nd Sem.; 2005
1.) In the case of a time policy: The ship must Insurance co. is exempted from liability. The vessel
be seaworthy at the commencement of must also be seaworthy for the type of cargo, e.g. if
EVERY voyage she may undertake; it is to transport fruits and vegetable the vessel must
2.) In the case of cargo policy: each vessel upon have refrigeration.
which the cargo is shipped or transshipped
must be seaworthy at the commencement of Sec. 120. Express warranty on nationality or
EAC PARTICULAR voyage; neutrality of vessel implies requisite
3.) In the case of a voyage policy contemplating documents are carried on board (Implied
a voyage in different stages, the ship must warranty to carry required documents)
be seaworthy at the commencement of
EACH PORTION. If you EXPRESSLY WARRANT the nationality or
neutrality of the ship or cargo, you impliedly warrant
Sec. 116. Seaworthiness of ship means it must that you will carry the documents showing or proving
be properly laden and refers not only to body such nationality or neutrality.
of vessel but also to crew and equipment

Sec. 117. Where different portions of voyage Subtitle 1-F. The Voyage & Deviation
are contemplated in the policy, a ship must be
seaworthy at start of every portion Sec. 121. Voyage contemplated by marine
insurance policy with points of departure and
Sec. 118. Unseaworthiness during the voyage ending refers to route fixed by mercantile
must be attended to by shipowner or captain usage
without reasonable delay, otherwise insurer
exonerated from loss Sec. 122. If sailing route is not fixed by
mercantile usage, the voyage insured is that
Sec. 119. Seaworthiness of vessel for hull to which a master of ordinary skill and
insurance is not necessarily seaworthiness for discretion would be most natural, direct and
purposes of cargo insurance advantageous
Seaworthiness: Relative term depending upon the Sec. 123. Deviation is:
nature of the ship, the voyage, and the service in 1.) A departure from the course of the
which she is at the time engaged. voyage
2.) Unreasonable delay in pursuing voyage
Compliance of Seaworthiness: 3.) The commencement of an entirely
General Rule: Complied with if the ship be different voyage
seaworthy at time of commencement of the risk.
Prior or subsequent seaworthiness is not a breach of Deviation: Unexcused departure from the regular
the warranty; nor is it material that the vessel course or route of the insured voyage OR any other
arrives in safety at the end of her voyage. There is act which substantially alters the risk
no implied warranty that the vessel will remain in
seaworthy condition throughout the life of the policy. 4 cases of deviation:
Exceptions: 1.) Departure from course of sailing fixed by
1.) TIME POLICY: seaworthy at commencement mercantile usage
of EVERY voyage she may undertake 2.) NOT FIXED BY MERCANTILE USAGE:
2.) CARGO POLICY: seaworthy at departure from most natural, direct, &
commencement of EACH PARTICULAR advantageous route
VOYAGE 3.) Unreasonable delay in pursuing voyage
3.) VOYAGE POLICY: contemplating a voyage in 4.) Commencement of entirely different voyage
different stages, seaworthy at
commencement of EACH PORTION. In case of proper deviation, the effect is as if there
was no deviation at all. Hence, it is not that the
Jack: Now a vessel is seaworthy when it is fit to insurer is exonerated from liability, BUT that the
perform the services and encounter the perils of the INSURER WAS NEVER LIABLE.
voyage contemplated. And the implied worthiness is
complied with when the vessel is seaworthy, when it Sec. 124. Instances when deviation is proper:
commences the voyage. However, if the policy is for 1.) When caused by circumstances over which
a specific length of time let us say a year, then the neither the master nor the owner of the ship
vessel must be seaworthy, every time it leaves for a has any control;
voyage. If it is an insurance of the cargo with 2.) When necessary to comply with a warranty,
different ships, every vessel must be seaworthy. If or to avoid a peril, whether or not the peril is
you have equipment from Japan which will be insured against;
transported by a Japanese vessel from Tokyo to 3.) When made in good faith, and upon
Manila, and Manila to Cebu by a domestic vessel, all reasonable grounds of belief in its necessity
the vessels must be seaworthy. Now the to avoid peril; or
seaworthiness not only applies to the structure of 4.) When made in good faith, for the purpose of
the ship but it must also be properly loaded. For saving human life or relieving another vessel
example, the sides of vessels are painted in two in distress.
colors red and black, the dividing line means that the
water cannot go beyond that line, if it goes beyond, Sec. 125. Deviation not specified in Sec. 124 is
it means it is overloaded. It must also be provided improper
with a competent master, one who is fully qualified
and had passed all examinations. Then you must Sec. 126. Insurer not liable if loss occurred
also have the requisite equipment, radar, radio etc. after an improper deviation
Now if there are different portions of the voyage,
then the vessel must be seaworthy for every portion.
If the vessel becomes unseaworthy and there is
Kinds of deviation:
unreasonable delay in making repairs, then the

Helen C. Arevalo 18 Section 4C


Jackrammer INSURANCE 2nd Sem.; 2005
1.) Proper deviation; presumed to have been lost from a peril insured
2.) Improper deviation. against.

Effect of improper deviation: Insurer becomes Sec. 133. Liability of insurer continues during
immediately absolved from further liability under the reshipment if ship is prevented from
policy for losses occurring SUBSEQUENT to (NOT completing voyage by a peril insured against
before!) the deviation, notwithstanding the fact that
the deviation did not increase the risk not in any Type of insurance contemplated under 133: Cargo.
wise contribute to the loss.
It is well-settled that if the original ship be disabled,
and the master. Acting with wise discretion forwards
Subtitle 1-G. Loss the cargo in another ship, such necessary and
justifiable change of ship will not discharge the
Sec. 127. Loss is either total or partial underwriter on the goods from liability for any loss
which may take place on goods subsequent to such
Sec. 128. When loss not total, it is partial reshipment. In any case however, the insurer may
always require an additional premium if the hazard
Sec. 129. Total loss is either actual or is increased by the extension of liability.
constructive
Sec. 134. Marine insurer also liable for
Sec. 130. Actual loss and causes thereof damages, expenses for discharging, storage,
reshipment, extra freightage and other
Kinds of losses: expenses in saving cargo reshipped – but only
1.) Total up to amount insured
a.) Actual
b.) Constructive Expenses contemplated in 134: Those necessary to
2.) Partial complete the transportation of cargo reshipped
under Sec. 133.
Effect of total loss: Underwriter is liable for the
WHOLE AMOUNT INSURED The insurer is liable for them in addition to paying for
any loss or damage which may take lace on the
Actual Total Loss: SM of insurance is wholly goods, due to the perils insured against. The liability
destroyed or lost or when it is so damaged as no however of the insurer under Sec. 134 cannot
longer to exist in its original character. Complete exceed the amount of the insurance.
physical destruction is not essential to constitute
actual total loss. Sec. 135. Insured entitled to payment in actual
total loss; no need of abandonment
Causes:
1.) Total destruction of the thing insured In case of actual total loss, the right of the insured to
2.) The irretrievable loss of the thing by sinking claim the whole insurance is absolute. Hence, he
OR by being broken up need not give notice of abandonment nor formally
3.) Any damage to the thing which renders it abandon to the insurer anything that may remain of
valueless to the owner for the PURPOSE for the insured property.
which he held it
4.) Any other event which effectively deprives Pan Malayan Ins. v. CA: FAO transported its rice
the owner of the possession, at the port of seeds to Vietnam. Barge sank in the China Sea.
destination, of the thing insured. Some bags of seed were recovered.
Still an absolute total loss. All bags were rendered
Malayan v. CA: TKC Mktg insured its soya bean valueless for their purposes since when they got
meal with Malayan Ins. Co. While docked in Durban, wet, they started to germinate. Since absolute total
South Africa, shipment arrested and detained. loss, no need for notice of abandonment.
Malayan liable for loss. “Arrest” caused by ordinary
judicial process included among the covered risks. Sec. 136. Free from particular average (FPA)
There was a constructive total loss over the cargo. coverage does not cover particular or simple
average losses unless loss is total; but insurer
Sec. 131. Constructive total loss or “technical liable for general or gross average loss
total loss” is one which gives insured the right
to abandon under Sec. 139 Average: Any extraordinary or accidental expense
incurred during the voyage for the preservation of
Constructive total loss: One in which the loss, the vessel, cargo or both; and all damages to the
although not actually total, is of such a character vessel and cargo from the time it is loaded and the
that the insured is entitled, if he thinks fit, to treat it voyage commenced, until it ends and the cargo is
as a total loss by abandonment. unloaded (Art. 806, Code of Commerce)

In cases of actual total loss, no abandonment is Kinds of Average:


necessary, but if the loss is merely constructively 1.) Gross or general average: Include damages
total, an abandonment becomes necessary in order and expenses which are deliberately caused
to recover as for a total loss. by the master of the vessel or upon his
authority, in order to save the vessel, her
Sec. 132. Presumption of actual loss arises cargo, or both at the same time from a real
from continued absence of ship without being or known risk. A general average loss must
heard from; length of time depends on be borne equally by all of the interests
circumstances concerned in the venture (Sec. 812, Code of
Commerce).
Presumption: Where a vessel is not heard of at all 2.) Simple or particular averages: Includes all
within a reasonable time after sailing, or for a damages and expenses caused to the vessel
reasonable time after she was last seen, she will be or to her cargo which have not inured to the

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Jackrammer INSURANCE 2nd Sem.; 2005
common benefit and profit of all the persons insurance in the place of the subject thereof, the
interested in the vessel and cargo. They remnant of which he cedes to the insurer.
refer to those losses which occur under such
circumstances as do not entitle the owners Requisites for a valid abandonment:
to receive contribution from other owners 1.) There must be an actual relinquishment by
concerned in the venture. It is suffered by the person insured of his interest in the thing
and borne alone by the owner of the cargo insured.
or of the vessel, as the case may be (Sec. 2.) There must be a constructive total loss.
808, Code of Commerce). 3.) The abandonment is neither partial nor
conditional.
Principle behind general average: Principle of 4.) The abandonment must be made within a
customary law, independent of contract, whereby reasonable time after receipt of reliable
when it is decided by the master of a vessel, acting information of the loss.
for all the interests concerned, to sacrifice any part 5.) It must be factual.
of a venture exposed to a common and imminent 6.) It must be by giving notice thereof to the
peril in order to save the rest, the interests so saved insurer which may be done orally or in
are compelled to contribute ratably to the owner of writing.
the interest sacrificed, so that the cost of the 7.) The notice of abandonment must be explicit
sacrifice shall fall equally upon all. and must specify the particular cause of the
abandonment.
Requisites to the right to claim general average
contribution: Sec. 139. Abandonment may be done when
1.) There must be a common danger to the more than ¾ of value will be suffered by
vessel or cargo; insured to recover thing insured or its
2.) Part of the vessel or cargo was sacrificed equivalent
deliberately;
3.) The sacrifice must be for the common safety When the insured may abandon the thing insured:
or for the benefit of all; When the loss or damage is more than three-fourths
4.) It must be made by the master or upon his of its value.
authority;
5.) It mustn’t be caused by any fault of the Rule when the insurance is divisible: Any particular
party asking for contribution; portion of the thing insured separately valued by the
6.) It must be successful, i.e. it resulted in the policy may be separately abandoned as it is deemed
saving of the vessel and/or the cargo; and separately insured.
7.) It must be necessary.
See also Sec. 146 for consequences of abandonment
Example: Jettisoning of goods to lighten the vessel.
Oriental Assurance Corp. v. CA: Logs insured for
total loss only. They were loaded onto 2 barges. 1 of
Jettison: Intentional casting overboard of any part of
the barges was damaged due to rough seas and
a venture exposed to a peril in the hope of saving
strong winds and so most of the logs on that barge
the rest of the venture.
were lost. Was there constructive total loss?
NO. Contract indivisible. No Constructive loss. The
Liability of insurer for general average: His
logs, although placed on 2 different barges, were not
proportion. He is placed on same footing as other
separately valued by the policy, nor separately
persons who have an interest in the vessel, or the
insured. The logs having been insured as one
cargo therein, at the time of the occurrence of the
inseparable unit, the correct basis for determining
general average and who are compelled to
the existence of constructive total loss is the totality
contribute.
of the shipment of logs. 2/3 requirement not met.
Formula for computing liability of insurer:
Sec. 140. Abandonment must not be partial
Loss x Amount insured = Contribution
nor conditional
Value
The abandonment must be entire and absolute and
Liability of insurer for particular average: If the
cover the whole interest insured. It must be
parties stipulate that the insurer will be liable for
unconditional and unfettered by contingencies and
“general average only” he will not be liable for
limitations.
particular average unless such particular average
loss has the effect of depriving the insured of the
Sec. 141. Abandonment must be made within
possession at the port of destination of the whole of
reasonable time from receipt of information of
the thing insured.
loss
Sec. 137. Insurance covering actual total loss
When abandonment must be made: When the
does not include constructive total loss.
insured has received notice of a loss, he must elect
However, it includes deprivation of possession
within a reasonable time whether he will abandon to
of thing insured at port of destination
the insurer, and if he so elects, he must give notice
thereof within a reasonable time. This is in order that
the insurer may not be prejudiced by the delay, and
Subtitle 1-H. Abandonment may take immediate steps for the preservation of
such property insured as may remain in existence.
Sec. 138. Abandonment is act of insured after
a constructive total loss in relinquishing to Sec. 142. If basis for abandonment is incorrect
insurer his interest in thing insured then it is ineffectual
Abandonment: The act of an insured in notifying the When the loss must exist: At the time of
insurer that owing to damage done to the subject of abandonment.
the insurance, he elects to take the amount of

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Jackrammer INSURANCE 2nd Sem.; 2005
When abandonment is ineffectual: The captain or master of the ship continues to be the
1.) When the information upon which an agent of the insured until abandonment, but from
abandonment has been made proves the moment of a valid abandonment, the master of
incorrect; and the vessel and the agents of the insured become the
2.) When the thing insured was so far restored agents of the underwriter, and the underwriter
when the abandonment was made that there becomes responsible for all their acts in connection
was in fact no total loss. with the insured property and for all the expenses
and liabilities in respect thereto.
Information required in order for the insured to
abandon: Need not be direct or positive. A The abandonment when made relates back to the
newspaper report, a letter from an agent or a notice time of the loss and of effectual, the title of the
from the master is sufficient. As long as the underwriter becomes vested as of that date and he
information is of facts and circumstances that is responsible for the reasonable expenses incurred
renders it highly probable that a constructive loss by the master after the date in an attempt to save
has occurred, that is enough. the vessel. The insurer is likewise liable for the
wages of the seamen earned subsequent to the loss.
Sec. 143. Notice of abandonment to insurer
may be oral or written, if oral, written notice Sec. 149. When notice of abandonment is
must be submitted within 7 days properly given, insured is not prejudiced by
insurer’s refusal to accept it
Form of notice: Written or oral. But if oral, must give
written notice within 7 days. Effect on the insured’s rights if the insurer refuses to
accept the abandonment: Acceptance is in no case
It need not be made by insured himself. Can be necessary if the abandonment is properly made. In
made by an authorized agent. this case, the insured’s right cannot be prejudiced by
the refusal of the insurer to accept.
Sec. 144. Notice of abandonment must be
explicit, specifying particular cause; Probable Sec. 150. Acceptance of abandonment is
cause not enough, no need of proof of interest express, or implied from insurer’s conduct.
or loss Mere silence of insurer for an unreasonable
length of time after notice deemed acceptance
Sec. 145. Abandonment sustained only upon
specified cause in notice Form of abandonment: Any. It may be express or
implied from the acts of the insurer.
Meaning: If the cause you specified in the notice is
non-existent, you will not be allowed to adduce The silence must be for an unreasonable length of
evidence to prove other causes for abandonment time.
which you did not so specify.
Sec. 151. Express or implied acceptance of an
Sec. 146. Abandonment equivalent to transfer abandonment is conclusive between parties,
of interest from insured to insurer admits loss and sufficiency of abandonment

Effect of valid abandonment: It transfers to the Sec. 152. Abandonment is irrevocable unless
underwriter the interests in the subject matter ground is unfounded
covered by the policy subject to the rights and
interests, if any, of third persons. The underwriter Effect of acceptance of abandonment:
acquires thereby the entire interest insured, 1.) Insurer becomes at once liable for the whole
together with all its incidents, including rights of amount of the insurance;
action which the insured has against third persons 2.) Insurer becomes entitled to all rights which
for injury. In other words, the insurer becomes the insured possessed in the thing insured;
entitled to all the rights which the insured possessed 3.) Fixes the rights of the parties. It is conclusive
in the thing insured. upon them and is irrevocable.

Sec. 147. If marine insurer pays for loss as if Therefore, the acceptance of an abandonment
actual total loss, the he is entitled to estops the underwriter from relying on any
remainder of thing insured, proceeds, or insufficiency in the form, time or right of
salvage as if abandoned abandonment. Except: when the ground upon which
the abandonment is made proves to be unfounded.
When formal abandonment necessary: Only in
constructive loss. Sec. 153. In an accepted abandonment of ship,
freightage before loss belongs to insurer of
Situation contemplated by this article: There is a freightage; freightage after belongs to insurer
constructive loss but without waiting for a formal of ship
abandonment, the insurer (magnanimously) pays
the insured as if the loss were actual and total. The Right to freightage of insurer of ship: When
law then steps in and says that since the insurer abandonment is validly made, the interest of the
paid and the insured accepted, we will consider that insured in the thing covered passes to the insurer.
as an offer and acceptance of abandonment. Hence, The insurer of the ship becomes the owner thereof
from that time on, the insurer is entitled to whatever after an abandonment, and his title becomes vested
may remain of the thing insured, or its proceeds or as of the time of the loss. Hence, freightage earned
salvage. subsequent to the loss belongs to the insurer of the
ship.
Sec. 148. Upon abandonment, acts done in
good faith by agents of insured after loss are Right to freightage of insurer of freightage: The
at risk of insurer and for his benefit (agent of insurer of the freightage is subrogated to the rights
the insured becomes agent of the insurer. of the insured at the time of the loss hence any

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Jackrammer INSURANCE 2nd Sem.; 2005
freightage earned previous to the time of loss of the amount insured as it bears to the
rightfully belongs to him. interest insured (principle of co-insurance)

Sec. 154. If insurer refuses to accept valid Meaning: In every marine insurance, the insured is
abandonment, he is liable for actual total loss expected to cover by insurance the full value of the
less proceeds from thing insured in hands of property insured. However, there are instances when
insured people insure for less than their interest. So if the
value of the insured’s interest exceeds the amount
Effect on the insurer’s liability if he refuses to accept of insurance, the insured is considered a co-insurer
valid abandonment: He is liable as upon an actual for an amount determined by the difference between
loss less any proceeds the insured may have the insurance taken out and the value of the
received on account of the damaged property as property.
when the insured succeeds in selling the property as
damaged. Circumstances in which Section 157 will apply:
1.) Loss is partial; and
Formula: 2.) Amount of insurance is less than the
Liability of insurer = Actual loss – Any Proceeds insured’s entire insurable interest in the
Received by property insured
the Insured.
Compare with Sec. 172 (fire insurance) – no co-
If abandonment was improper, the insured may insurance in fire insurance unless stipulated
nevertheless recover to the extent of the damage
proved. Sec. 158. Where profits are separately insured,
the insured is entitled to a proportion of
Sec. 155. If insured does not abandon, he can profits lost, equivalent to proportion of
recover actual loss property lost bears to value of whole

Effect of insured’s failure to abandon: The insured Sec. 159. In a valued marine policy of
has an election to abandon or not, and he cannot be freightage or cargo, if part of subject is
compelled to abandon although abandonment is exposed to risk, valuation applies in
proper. He may await the final event, and recover proportion to such part
accordingly for a total or partial loss, as the case
may be. Meaning: When cargo is insured under a valued
policy but only a portion of the cargo is actually
carried by the vessel at the time of loss, the
Subtitle 1-I. Measure of Indemnity valuation will be reduced proportionately. The
insurer is bound to return such portion of the
Sec. 156. Valuation in an marine policy (valued premium as corresponds with the portion of the
policy) is conclusive between parties; cargo which had not been exposed to the risk.
exception: hypothecation by bottomry or
respondentia before insurance; fraudulent Sec. 160. When profits valued, loss is
valuation entitles insurer to rescind conclusively presumed from loss of property
from which they arise and valuation fixes their
Object of valuation: It may happen that when a amount
vessel is insured for a long time or for a long voyage,
her value at the end of the voyage may not be the Meaning: If the property is totally lost, then
same as at the beginning. Hence, we resort to consequently, the total profits are also lost. Such
valuation in order to fix in advance the value of the loss of profits are conclusively presumed from the
property ands thus, avoid the necessity of proving its loss of the property and the valuation agreed upon
actual value in case of loss. in the policy fixes the amount of recovery.

Insured value: That stated in the policy. It is Sec. 161. Rules in estimating loss in a marine
conclusive upon the parties provided that the open policy regarding values of:
insured has some interest at risk, and there is no 1.) Ship – Value at the beginning of the risk.
fraud on his part. 2.) Cargo – Its actual cost to the insured, when
laden on board, or where that cost cannot be
In case of fraud on part of insured in stating the ascertained, its market value at the time and
value: Insurer may rescind the contract. place of lading.
3.) Freightage – Gross freightage, exclusive of
In a valued marine policy, when the thing insured is primage, without reference to the cost of
lost, neither party is permitted to give evidence of earning it.
the real value of the thing. 4.) Cost of insurance added to value estimated

Reason: There was already a conclusive value given In determining the loss under an open policy of
to it by the parties in the policy. marine insurance, the real value of the thing insured
must be proved by the insured in each case. Section
Exception: If the thing has been hypothecated by 161 lays down the rules in ascertaining the value to
bottomry or respondentia before it was insured, and be used for indemnity purposes.
such hypothecation is WITHOUT the knowledge of
the person who procured the insurance, the real Sec. 162. Rule when cargo insured against
value of the thing MAY BE SHOWN by the insurer. partial loss arrives in damaged condition; loss
is deemed in same proportion as market price
See Sec. 161 for marine open policies of damaged goods bears to market price of
goods in sound condition in port of destination
Sec. 157. In a marine policy in case of partial
loss the insurer is liable only for a proportion Section 162 applies if:
1.) The cargo is insured against partial loss; and

Helen C. Arevalo 22 Section 4C


Jackrammer INSURANCE 2nd Sem.; 2005
2.) It suffers damage as a result of which its market
value at the port of destination is reduced. Limit as to the liability of the insurer: It is limited to
the proportion of contribution attaching to his policy
Sec. 163. Sue and Labor Clause (if stipulated): value where this is less than the contributing value
Insurer liable for expense incurred by insured of the thing insured. In other words, the liability of
in recovering the property in addition to total the insurer shall be less than the proportion of the
loss if it occurs later general average loss assessed upon the thing
insured where its contributing value is more than the
As a general rule, a marine insurer is not liable for amount of the insurance. In such case, the insured is
more than the amount of the policy. Under Section liable to contribute ratably with the insurer to the
163, however, expenses incurred in repairing indemnity of the general average.
damages suffered by a vessel because of perils
insured against and expenses incurred for saving the Sec. 166. Partial loss of ship or equipment –
vessel from such perils are items to be borne by the old materials to be applied to payment of new.
insurer in addition to a total loss if that afterwards Unless stipulated, marine insurer liable for
takes place. Such expenses are known as Port of only 2/3 of remaining costs of repairs but
Refuge Expenses. anchors to be paid in full

Sec. 164. Marine insurer liable for general Liability of the insurer in case of partial loss of the
average loss contribution in proportion to ship or its equipment: 2/3 cost of repairs. “1/3 new
what insured value bears to contributing value for old” on the theory that the new materials render
of thing insured the ship more valuable than it was before the loss.

See also Arts. 811-812, Code of Commerce (rules on


general average loss) Title 2. Fire Insurance

Jarque v. Smith Bell: Jarque owned the motorboat Sec. 167. Fire insurance includes insurance
Pandan which he insured with Nat’l Union Fire Ins. against fire, lightning, windstorm, tornado,
Co. for absolute total loss only. Due to very heavy earthquake & other allied risks if these are
sea, they had to jettison cargo. Ins. co. liable to stipulated in fire policies or in separate
contribute? policies
YES. Liability for contribution in general average is
not based on express terms of policy, but rests upon Fire insurance: A contract of indemnity by which the
the theory that from the relation of the parties and insurer for a consideration, agrees to indemnify the
for their benefit, a quasi-contract is implied by law. insured against the loss of or damage to, a property
Art. 859 of Code of Commerce is mandatory. by fire. As used in this Code, it includes loss also by:
Insurers are bound to contribute to indemnity of the 1.) Lightning;
general average. This simply places the insurer on 2.) Windstorm;
the same footing as other persons who have an 3.) Tornado;
interest in the vessel, or the cargo therein. The 4.) Earthquake; and
jettison was as much to the benefit of the 5.) Other allied risks.
underwriter as to the owner, if jettison had not taken But only when such risks are covered by extension
place and the ship foundered, insurer would have to fire insurance policies or under separate policies,
had to pay a lot more money. subject to the payment additional premiums.

Sec. 165. Marine insurer is liable for general Nature of fire insurance: Contract of indemnity.
average loss and is subrogated to insured’s Indemnity is its sole purpose and any contract that
right to general average contribution, but shall contemplates a possible gain to the insured by the
not be liable happening of the event upon which the liability
1.) When insurer is made liable after becomes fixed is contrary to the proper nature of
separation of interests liable to insurance and is not allowed.
contribution;
2.) When insured neglected or waived the Jack: Fire insurance policy only insures against
right to demand contribution from hostile fire not friendly fire (e.g. gas range fire,
others bonfire). Restaurant cannot collect due to soot on
the wall caused by gas range. Friendly fire yun eh.
Rights of the insured in case of general average: The Normally the policy provides that the insurer is not
insurer is liable for any general average loss where it liable for loss caused due to war or rebellion and the
is payable or has been paid by the insured in like. Buildings burned down by Japanese in WWII not
consequence of a peril insured against. The insured covered. BUT if there is one building that was
may either hold the insurer directly liable for the independently burned (the japs didn’t do it) that one
whole of the insured value of the property sacrificed building may recover under the insurance policy.
for the general benefit, subrogating him to his own
right of contribution, or demand contribution from Sec. 168. Change within control of insured, in
the other interested parties as soon as the vessel use or condition of thing insured, without
arrives at her destination. In other words, the consent of insurer increasing the risk entitles
insured need not wait for an adjustment of the insurer to rescind
average.
Jack: Section 168 talks of alteration. For example is
There can be no recovery for general average this case where the SC ruled that there was
against the insurer: alteration, when the building is insured as a
1.) After the separation of the interests liable to bookstore, but it was converted into a restaurant,
contribution, or rather, after the cargo liable also because there is an increase in risk. Another
for contribution has been removed from the example is when one stores canvass in the premises
vessel; or (inflammable), or when the place is insured as a
2.) When the insured has neglected or waived residence but used to store leather and other
his right to contribution. flammables.

Helen C. Arevalo 23 Section 4C


Jackrammer INSURANCE 2nd Sem.; 2005
Option to rebuild clause: Under this clause, if
Sec. 169. Change which does not increase risk stipulated, the insurer is given the option to
does not affect contract reinstate or replace the building damaged or
destroyed or any part thereof, instead of paying the
Requisites for insurer to rescind in case of alteration: amount of the loss or damage.
1.) The use or condition of the thing is
specifically limited or stipulated in the policy; Jack: When the insurer exercises this option, the
2.) Such use or condition as limited by the contract of insurance is novated. It turns into a
policy is altered; contract for piece of work and insurer becomes liable
3.) The alteration is made without the consent for quality of the work done.
of the insurer;
4.) The alteration is made by means within the Sec. 173. No policy of fire insurance shall be
control of the insured; and pledged, hypothecated, or transferred to
5.) The alteration increases the risk. agents or representatives of issuing company
(insurer). Such contracts are void insofar as
Alterations which avoid the policy: Any alteration in they affect creditors of insured
the use or condition of the property insured which
increase the risk.
Title 3. Casualty Insurance
Alterations which do not avoid the policy: [with CTPL Secs. 373-389]
1.) Building insured used in a different way but The Motor Vehicle liability actually should be read
which is not of a dangerous character and with this because it is a form of casualty/liability
does not differ materially from the use insurance. Many of the cases that jack discussed (as
specified in the policy; or to joyride; foreigner driving here, etc) are digested
2.) Prohibited articles are necessary or below.
ordinarily used in the business conducted in BOTH casualty and liability insurance fall under
the insured premises; or here. Medyo misleading ang jack transcript dahil
3.) The making of repairs, painting and other hiwalay sila. If you will notice though, the jack
acts of similar character on the thing transcript does make note that the liability insurance
insured. falls under Sec. 174.

Jack: For example is when a place is insured a Sec. 174. Casualty insurance is insurance
residential condominium but is converted into an covering loss or liability arising from accidents
office condominium, there is no increased risk, and or mishaps outside coverage of fire or marine
no alteration. insurance. It includes workmen’s
compensation, employer’s liability, public
Sec. 170. Act of insured increasing risk and is liability, motorcar, plate glass, burglary and
cause of loss but which does not violate fire theft, personal accident and health insurance
policy provisions does not affect fire policy as written by non-life insurance companies

Sec. 171. If no valuation in policy (open Casualty insurance: Includes all forms of insurance
policy), measure of indemnity is replacement against loss or liability arising from accident or
cost; if there is valuation (valued policy), same mishap which are not within the scope of other
rule as in marine insurance (conclusive types of insurance, namely marine, fire,
between parties) suretyship and fire.

Sec. 172. If insured desires valuation in a fire Liability insurance: It is a contract of indemnity for
policy – an independent appraiser may be the benefit of the insured and those in privity with
hired by insured at his expense & value can him, or those to whom the law upon the grounds of
then be fixed between him and insurer and a public policy extends the indemnity against liability.
clause then stipulated mentioning value. Value Under policies of this type, an indemnity is provided
stated is maximum of insurer’s liability. Full to the insured in respect of his legal liability to pay
amount of partial loss is payable. Parties can damages, usually arising out of negligence or
also stipulate that repair, replacement or nuisance and occasionally, under contract.
rebuilding of buildings be done
Insurable liability: Liability which arises from the
Unlike in marine insurance, in the absence of commission of a quasi-delict or a tort is insurable.
stipulation, insured is not a co-insurer under fire However, if the liability arose from the commission
policies. Thus, if property valued at P10,000 is of a crime, it depends. If the liability arose out of
insured for P5,000 and is damaged by fire to the acts of negligence which are also criminal, they may
extent of one-half of its value, the insurer will be be insurable on the ground that such acts are
compelled to pay the entire P5,000 necessary to ACCIDENTAL. Example is motor insurance policy
repair the loss. covering the insured’s liability for accidental injury
caused by negligence, even if it so gross resulting to
To avoid such a situation, fire insurers insert 2 types homicide.
of clause in their policy: On the other hand, if the liability arose out of
1.) Co-insurance clause; and DELIBERATE criminal acts, such is not insurable.
2.) Option to rebuild clause.
Jack: Where an insurance policy insures directly
Co-insurance clause: A clause requiring the insured against liability, the insurer’s liability accrues
to maintain insurance to an amount equal to the immediately upon the occurrence of the injury upon
value or specified percentage of the value of the which the liability depends, and does not depend on
insured property under penalty of being a co-insurer the recovery of judgment by the injured party
to the extent of such deficiency. In other words, this against the insured.
clause is inserted to make the insured a co-insurer. Usually, these contracts contain a provision that in
case of suit against the insured, the insurance

Helen C. Arevalo 24 Section 4C


Jackrammer INSURANCE 2nd Sem.; 2005
company will defend the case. Under the contract, Ins. co. liable. Where a car is admittedly unlawfully
the insurer has two obligations: taken w/o the owner’s consent/knowledge, such
1.) Indemnity; and taking constitutes theft and therefore it is the theft
2.) Defend the insured. clause and not the authorized driver clause that
should apply. There is no causal connection between
Villacorta v. Ins. Commission: Insured got private the possession of a valid driver’s license and the loss
car policy on his Colt Lancer for theft and 3rd partly of a vehicle.
liability. Vehicle was brought to Sunday Machine
Works. Taken by 6 persons to Rizal where they had Rule as to death or injury resulting from accidental
an accident. Claim denied. Commish dismissed means:
complaint contending that it does not fall under Own GR: Death or injury does not result from accident
Damage or Theft Coverage but under the Authorized or accidental means within the terms of an accident
Driver Clause. policy if it is the natural result of the insured’s
Mali ang commish. Insured did not know the driver, voluntary act, unaccompanied by anything
he is an unauthorized driver. When car unlawfully unforeseen except the death or injury
taken, theft clause, not authorized driver clause EXCEPTION: There is no accident when a
applies. It was without the owner’s consent – eh ‘di deliberate act is performed unless some additional,
theft sya. Ins. Co. must pay. unexpected, independent and unforeseen happening
occurs which produce or brings about injury or
Association of Baptists v. Fieldmen’s death. In other words, the death or injury is not the
Insurance: Chevrolet carry-all placed at Mobilgas natural or probable result of the insured’s voluntary
station under care of Rene Te to be displayed for act, or if something unforeseen occurs in the doing
sale. One of the station boys took the car for a joy- of the act which produces the injury, the resulting
ride without the consent of either Rene Te or the death is within the protection of policies insuring
owner. Bumped an electric post. against death or injury from accident.
It was theft; ins. co. liable. Taking without consent =
theft. No need for conviction. Preponderance of Sun Insurance v. CA: Felix Lim took the magazine
evidence only. Besides, no stipulation in policy which out of his gun then pointed it to his temple, thinking
requires prior conviction for theft to entitle insured it was unloaded. He pulled the trigger and shot
to recovery. himself to death.
Ins co. liable. This is a case of pure accident. He did
Tanco v. Phil Guaranty: Owner’s auto while being not expose himself intentionally to peril. He really
driven by his brother, got in a car accident. There’s thought the gun was not loaded. Oo, bobo sya, he
an exception clause in the policy w/c provided that was negligent, but it was an accident. Accidents are
the co. is not liable in case the driver is not an usually caused by negligence and kabobohan.
authorized driver. At the time of collision, brother did
not have a valid driver’s license. Jack: A usual accident policy says it won’t answer for
NOT authorized driver. Authorized driver: death or injury caused by murder or assault. If
1.) On owner’s order/permission; desired for the policy to cover these instances, the
2.) Permitted by licensing laws; not disqualified. insured must pay extra.

Stokes v. Malayan Insurance: Owner’s car, when Finman Gen. Ins. v. CA: Charlie was stabbed to
in collision, driven by James Stokes, who was death at a maskara festival. There was no motive for
authorized to do so by owner. Stokes is Irish. He was the stabbing – thrill killing. Finman says that death
here for more than 90 days. by assault/murder is not included in the policy.
NOT authorized driver. Tourists who are licensed to Finman liable. There was no voluntary act of Charlie
drive in own country can drive in phils. However, that led to his death. He did not mean to get in the
after 90 days, they should pay fees and carry a path of a psychotic murderer nor in the way of the
license to still be able to drive here. latter’s knife. It was a case of pure accident. No
stipulation that death by assault/murder excluded.
Gutierrez v. Capital Insurance: Jeepney got into a
collision. Passenger killed. Jeepney driver licensed Jack: Another case: A group of policemen and a
for years 1962 and 1963 but at the time of the security guard were chasing a robber. The robber
accident, did nto have license. Instead, he had a fired killing the security guard. It was ruled as
carbon copy of a traffic violation report which served accidental death, because the victim was chosen at
as temporary operator’s permit but only for 15 days. random. Hence the guard’s heirs can collect.
15-day period had already expired. Another case: if a robber holds up a bus he was
NOT authorized driver. Barred from recovery under riding and before he leaves shoots at one of the
policy passengers. Accident.
Jack handled this case where in this restaurant, a
Palermo v. Pyramid Insurance: Claim was customer tried to leave without paying. He was able
disallowed since insured was driving with an expired to momentarily leave the premises. One of the
driver’s license. Tama ba ang disallowance? customers wanted to avoid the fracas, so he paid
NO. Driver of the vehicle at the time of accident was then left. When he stepped out the door, the
the insured himself, hence, an authorized driver. The estafador customer (thinking he was one of the
requirement that the driver be permitted in waiters out to catch him) shot him. Error in
accordance with the licensing and other personae. Accident.
laws/regulations applies only when the driver is
driving on the insured’s order/with his permission. It Gabriel v. CA: Gabriel, insured, was employed at
does not apply when the person driving is the contruction project in Iraq and covered by a personal
insured himself. accident insurance under a group policy. The insured
risk was for bodily injury caused by violent
Perla Cia de Seguros v. CA: While the car was accidental external and visible means which injury
parked it was carnapped. Ins. Co. denied claim since would solely and independently of any other cause
person who was driving the vehicle before it was result in death/disability. He died. Wife claimed
carnapped was in possession of an expired driver’s insurance. The only evidence given was wife’s own
license and hence, not an authorized driver. affidavit and a letter of a co-worker.

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Jackrammer INSURANCE 2nd Sem.; 2005
Lack of evidence. In an accident insurance, the the use of the vehicle. This is what the law calls
insured’s beneficiary has burden of proof in THIRD PARTY LIABILITY COVERAGE
demonstrating that the cause of death is due to the
covered peril (not like life insurance where insured’s Sec. 377. Compulsory liability maximum
death, regardless of cause would normally be amount limits
compensable).
Sec. 378. No fault indemnity; amount limits
a.) Death & bodily injuries only
CHAPTER VI – COMPULSORY MOTOR VEHICLE b.) Not more than P5,000 per person
LIABILITY INSURANCE c.) Claim against one motor vehicle only;
against motor vehicle where one is a
Sec. 373. Definition of Terms. See nalang codal if passenger, mounting or dismounting;
you really want to know this but I don’t think it’s otherwise, against offending vehicle
important. d.) Proofs required by law are submitted
(i.e. police report, death certificate,
Sec. 374. Insurance policy, cash or surety bond medical report, proof of medical
in favor of 3rd party or passenger in case of expenses)
death or bodily injury, is required for motor
vehicles. What is a ‘no-fault indemnity’ claim?
It provides that in cases where the vehicle
Motor vehicle liability insurance (MVLI): MVLI is a insured causes death or physical injuries, the person
protection coverage that will answer for legal liability injured may claim under the following
for losses and damages for bodily injuries or circumstances:
property damage that may be sustained by another 1.) If the person is a passenger of the vehicle
arising from the use and operation of a motor meaning he is on board, or boarding or
vehicle by its owner. dismounting from the vehicle, the person
injured or his heirs (in case of death) may
Before this protection was obtained purely on a claim from the insurer of the vehicle he was
voluntary basis by a vehicle owner to meet his needs on board under the CMVLI
in connection with whatever liability he would have 2.) If it transpires in any other case but resulting
incurred in operating the vehicle. However now, with from an accident involving motor vehicles
the increase in the number of stupid, idiotic and and the person is not a passenger, he may
moronic drivers whose licenses should be revoked, claim from the insurer of the offending
legal luminaries have made it COMPULSORY. vehicle.

Persons subject to CMVLI requirement: Under the ‘no-fault indemnity clause,’ the person
1.) Motor vehicle owner or one who is the actual injured or the heirs may claim up to P5,000—without
legal owner of a motor vehicle whose name need of establishing whose fault or who is liable for
such vehicle is registered with the LTO; or the accident. That the said vehicle might not be the
2.) Land transportation operator or one who is one who caused the accident is immaterial since the
the owner of a motor vehicle being used for law provides that the party paying the claim may
conveying passengers for compensation later on recover against the owner of the vehicle
responsible for the accident. This is precisely the
Jack: Every vehicle must have compulsory insurance, essence of the ‘no-fault indemnity’ insurance, to
otherwise you can’t drive it on the road. provide victims immediate compensation although in
Even if the policy provides that final judgment is a limited amount, pending final determination of who
needed before liability attaches, it’s a void provision. is responsible for the accident and liable for the
Who can file claim: Lawyer goes to a conference and victim’s injuries or death. Nevertheless, he or his
his secretary is with him to take down notes. If they heirs may only claim from one vehicle and if the
have an accident she can’t file a claim because her person injured wishes to claim more he must
presence in the vehicle arises out of the course of establish fault or liability as to who caused the
employment. But if they’re out on a date she can accident.
file. If the lawyer is married I doubt if she’ll file the
claim. Jack Requisites for insurer to be liable under “no
Joyride – can claim under theft (Villacorta). fault indemnity” provision:
Importance of a license: If the insured himself is the 1.) The claim is for death or injury to any
driver, he has the right to recover damages even if passenger or third party;
his license has expired. If the driver is merely 2.)The total indemnity in respect of any one
authorized by the owner, then the authorized driver person does not exceed P5,000; and
must have a valid license (hindi expired), otherwise 3.) The necessary proof of loss under path to
the claim is barred. substantiate the claim must be submitted.

Sec. 375. Insurance Commissioner to furnish Jack: In case of death, you submit the death
list of authorized insurance companies. certificate. In case of injury, you submit a medical
report. In ALL cases, however, you have to submit a
Sec. 376. Evidence of 3rd party liability police report.)
coverage required prior to motor vehicle
registration or renewal Jack Which insurer is liable under the no-fault
indemnity” provision? A claim under the “no fault
Prerequisite before a motor vehicle is registered and indemnity” provision may be made against the
operated: Sec 374 prohibits a land transportation insurer of one motor vehicle only. Such claim may be
operator or a motor vehicle owner from operating his made directly by the injured party against the
vehicle in public highways unless there is in force in insurer as follows:
relation thereto a policy insurance or guaranty in 1.) In case of an occupant of a vehicle, claim
cash or surety bond to indemnify the death or bodily shall lie against the insurer of the vehicle in which
injury of a third party or of a passenger, arising from the occupant is riding, mounting, or dismounting
from;

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Jackrammer INSURANCE 2nd Sem.; 2005
2.) In any other case, claim shall lie against the
insurer of the directly offending vehicle. Sec. 388. Sanctions and penalties for violation
of these provisions:
Perla Cia de Seguros v. Ancheta: Bus collision 1.) Fine of not less than P500 but not more than
between 2 buses, IH Scout and Superlines. P1,000 and/or imprisonment for not more
Passengers of IH Scout sustained injuries and went than 6 months.
after the insurer of Superlines (Perla) under the no 2.) Revocation of certificate of public
fault indemnity provision. convenience (in the case of land
It is the insurer of IH Scout (Malayan) which is liable transportation operator).
under the no fault clause. The law is clear – they
must claim against the insurer of the vehicle in Sec. 389. Persons liable as principals in case
which they were riding. It is immaterial who was violator of these provisions is a corporation,
really at fault. association or government office: Executives
or officers who knowingly permitted or failed
Jack: The no fault indemnity clause is without to prevent violation.
prejudice to the claimant’s getting more. For
instance, the claim is for 15,000. Under the no fault
indemnity clause, he gets 5,000. But this doesn’t Title 4. Suretyship
mean that the 10,000 is barred. Only that the
claimant has to prove that there was negligence. It’s Sec. 175. Surety contract is an agreement
void for the insurance company to require the where a party (the surety) guarantees
claimant to waive his other claims as a condition performance by another party (the principal or
precedent to the release of the P5,000 (which the obligor) of an obligation or undertaking in
claimant is entitled to as a matter of right anyway. favor of a 3rd party (obligee)

Nature of the liability of the surety:


Sec. 379. Rules for insurance companies 1.) Joint and Several or Solidary – This means
authorized to issue CTPL insurance that upon default by the obligor in complying
with his obligation as secured by the bond,
Sec. 380. Rules on cancellation of compulsory the surety becomes primarily liable to the
liability coverage by insurer obligee who has the right to demand
1.) Notice to land operator or owner payment under the terms and conditions of
2.) Notice to LTO 15 days prior to cancellation the bond.
2.) Limited to the amount of the bond
Sec. 381. Rules on cancellation of compulsory 3.) Determined strictly by the terms of the
liability coverage by land transportation contract of suretyship in relation to the
operator or owner principal contract between the obligor and
1.) Replace policy, bond or cash & file with LTO the obligee.
2.) Notify insurer of cancellation
Sec. 176. Liability of surety is solidary with
Sec. 382. Effect of change of ownership of obligor but limited to amount of bond. It is
motor vehicle on CTPL insurance coverage: no determined strictly by surety contract and
need of issuing a new policy until the next date of principal contract between obligor and obligee
registration or renewal of registration of such
vehicle, and provided the ins. co. shall agree to Jack: An accused applies for a bond with an
continue the policy, such change of ownership shall insurance company. The obligee (the court) is not
be indicated in an endorsement filed with the Land concerned if the premium is not paid. If the accused
Transpo. Commission. absconds, the court will proceed against the
insurance company.
Sec. 383. Indemnity not an instrument of
enrichment Sec. 177. Surety entitled to payment of
premium as soon as contract perfected &
Sec. 384. Claims procedure in case of delivered to obligor. Contract not valid until
compulsory motor vehicle liability insurance premium paid except where obligee accepted
1.) Notice of claim to insurer within 6 months – bond where contract valid irrespective of
otherwise whether premium paid or not; if contract not
2.) Action or suit – within 1 year from denial of accepted by, or not filed with, obligee, surety
claim – otherwise action prescribed entitled to service fee of not exceeding 50% of
premium due plus documentary stamps and
Jack: Two periods: You have to file the claim with the other taxes
insurance company within 6 months from the time of
the accident otherwise it’s deemed waived. Then Jack: If the bond is not accepted, the principal is
you have to go to court within one year from the entitled to the return of the premiums paid.
denial of the claim, otherwise your claim will be However, taxes cannot be refunded. In some
barred. instances, the insurance company will charge a
service fee because the insurance company took
Sec. 385. Deadline for payment of claims: time to review the application for the bond. For
1.) After reaching agreement – within 5 working instance, the manager took time to go over the
days. papers, the clerk took time to type the application,
2.) No agreement – pay under no fault etc.
indemnity. But if the bond was denied because there was fault
on the part of the insurance company, the applicant
Sec. 386. Unlawful to require drivers and is entitled to the return of the premiums paid AND
employees to contribute premiums the taxes paid. Example: Courts require insurance
companies to get a clearance. The bond which the
Sec. 387. Government offices, and their accused applied for was not approved because the
employees prohibited from acting as agents. surety company failed to get a clearance (because it

Helen C. Arevalo 27 Section 4C


Jackrammer INSURANCE 2nd Sem.; 2005
had an outstanding obligation with the court 2.) On his surviving a specified period; or
because it failed to make good on a prior bond). In 3.) Otherwise contingently on the continuation
this case, the applicant is entitled to the return of or cessation of life.
the premiums paid and whatever taxes he has paid
as well. Sec. 180-A. Insurer in a life policy liable for
Continuing bonds (e.g. judicial bonds) remain in suicide if committed after policy in force for 2
force until the case is finally terminated. The years after issue or last reinstatement unless
insurance company is entitled to charge premiums shorter period stipulated. Suicide while insane
every year. is compensable regardless of date of
commission (Sec. 3, BP 874)
Sec. 178. Civil Code provisions suppletory in
interpreting surety contracts This is an exception to Sec. 87 where the insurer is
not liable for loss caused by the willful act of the
insured
Title 5. Life Insurance (See also Secs. 226-231)
In case of suicide, insurer is liable when:
Life insurance: An insurance payable on the death of 1.) The suicide is committed after the policy has
a person, or on his surviving a specified period, or been in force for a period of 2 years from the
otherwise contingently on the continuance or date of its issue or of its last reinstatement;
cessation of life. It is a contract to make specific 2.) The suicide is committed after a shorter
payments upon the death of a person whose life is period provided in the policy although within
insured. the 2 years period; and
3.) The suicide is committed in the state of
Sec. 179. Life insurance covers human lives insanity regardless of the date of
and allied matters commission, unless suicide is an excepted
risk.
Jack: 3 principal types:
1.) Term – for a fixed period (e.g., for 5 years, Cannot provide for longer period than 2 years.
for 10 years, etc), after that it expires. This is the
least expensive type of insurance. It does not have Jack: Who has the burden of proving suicide? The
cash surrender value. basic instinct of self-preservation militates against
2.) Whole life – the insured pays premiums up to the commission of suicide. Thus, it is incumbent
a certain time and then he will be insured up to a upon the party alleging suicide as a defense,
certain age or until he dies, whichever comes first. especially in actions involving insurance policies to
For example, the policy states that the insured will prove it by clear and convincing evidence.
pay premiums until he’s 65. After that he’ll be
insured until he’s 96. Sec. 181. A life insurance policy may pass by
3.) Endowments – For example, the policy transfer, will or succession whether transferee
states that if the insured reaches 60, the insurer will has insurable interest or not
pay him annuities for life. This is the most expensive
type of life insurance. Jack: The insured may assign a life insurance policy
if the policy is payable to his estate or his legal
Sec. 180. Life insurance is that payable upon representative or where the insured has reserved
1.) Death of insured; or the right to change the beneficiary. If the policy is
2.) His surviving a specified period. payable to an irrevocably appointed beneficiary, the
Contract for payment of endowments or insured cannot assign it because that will prejudice
annuities considered a life insurance contract the vested interest of the irrevocable beneficiary.
under Insurance Code.
In the absence of a judicial guardian, the Sec. 182. Notice to insurer of transfer not
following exercise rights of minor insureds or necessary unless stipulated
beneficiaries under life insurance policies
(without court authority or bond): When effecting a transfer, the consent of the
1.) Father following must be obtained:
2.) In latter’s absence or incapacity, the 1.) Assignor;
Mother 2.) Assignee; and
Provided minor’s interest does not exceed 3.) Beneficiary.
P20,000. (Now P50,000)
When is the consent of the beneficiary a must? Only
Nario v. Philamlife: Court authorization in a in policies which contain an express waiver of the
competent guardianship proceeding is needed in right to change the beneficiary. The execution of
order to proceed w/ transaction (policy loan or such waiver gave the beneficiary a vested and
surrender of policy) w/c involve a disposition or absolute interest which he cannot be divested of
alienation of the property of the minor beneficiary. without his consent. In case the policy contains no
Written consent of father-guardian, if w/o court such waiver, the insured may assign the policy
authorization, is insufficient. without the consent of the beneficiary.

Jacl: Because of Section 180, the father (or in his Sec. 183. Measure of indemnity under life
absence, the mother) is now authorized to do acts of insurance policy is face amount of policy
ownership (e.g., obtaining a policy loan, unless interest of person insured is
surrendering the policy) without judicial authority, so measurable (Life insurance is a valued policy)
long as the interest of the minor does not exceed
P50,000. The interest of the minor is based on the
face value of the policy and not on its cash surrender CHAPTER III – THE BUSINESS OF INSURANCE
value.
Jack: You need a certificate of authority from the
Life insurance may be made payable: commissioner before you can engage in the
1.) On the death of the person;

Helen C. Arevalo 28 Section 4C


Jackrammer INSURANCE 2nd Sem.; 2005
insurance business. A certificate of authority is valid
for 1 year.
Agents and brokers must be licensed. Soliciting for
compensation without a license criminally liable.
Rebate of premiums is also prohibited. Agreements
regarding kickbacks can’t be enforced because they
are illegal.
Margin of insolvency: Excess of the value of an
insurance company’s admitted assets over the
amount of its liabilities. (in non-life, dapat at least
20% ‘to)

 Good Luck! 

Helen C. Arevalo 29 Section 4C

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