Loss and Claims, and

Prescription, and Double

Insurance
Submitted by: Danilo D. Anastacio
REQUISITES FOR RECOVERY UPON INSURANCE
1. The insured must have insurable interest in the subject matter;
2. That interest is covered by the policy;
3. There must be a loss; and
4. The loss must be proximately caused by the peril insured against.
LOSS, IN INSURANCE
 Injury or damage sustained by the insured in consequence of
the happening of one or more of the accidents or misfortune
against which the insurer, in consideration of the premium,
has undertaken to indemnify the insured. (Bonifacio Bros.
Inc. vs. Mora, 20 SCRA 261)
 It may be total, partial, or constructive in Marine
Insurance.
Definition of Terms:
 Proximate Cause – Natural and Continuous sequence, unbroken by any efficient intervening
cause, produces the injury, and without which the result would have occurred.
 Remote Cause – independent force merely took advantage of accomplish something; not
natural effect; insurer not liable.
 Efficient Cause – direct and uninterrupted sequence between proximate cause and ultimate
cause (efficiency); new intervening cause.
 Peril Insured Against – intention of the parties; policy(coverage) and conceptual problem
meaning should be examined.
 Immediate cause – suggest proximity in time to the loss.

Question of Causation:
Whether or Not the risk insured against is the proximate cause of the loss is crucial in
fixing INSURER’s liability,
LOSS, IN INSURANCE
a. Loss for which insurer is liable:

1. Loss the proximate cause of which is the peril insured against (Sec. 84);
2. Loss the immediate cause of which is the peril insured against except where
proximate cause is an excepted peril;
3. Loss through negligence of insured except where there was gross negligence
amounting to willful/misconduct acts;
4. Loss caused by efforts to rescue the thing from peril insured against;
5. If during the course of rescue, the thing is exposed to a peril not insured
against, which permanently deprives the insured of its possession, in whole or in
part (Sec. 85).
LOSS, IN INSURANCE

b. Loss for which insurer is not liable

1. Loss by insured’s willful act;

2. Loss due to connivance of the insured (Sec. 87); and
3. Loss where the excepted peril is the proximate cause.
For Example:

 The proximate cause is fire and immediate cause is explosion.

The Insurer will be liable if fire is a peril insured against even if
explosion is an excepted peril.
If fire is an excepted peril and explosion is the one insured
against, the insurer will not liable.
 Policy covering barge which ran aground because of strong waves
brought about by bad weather. There is blatant negligence on the
part of the employees of the insured when patron(operator) of
the tugboat immediately left the barge at the wharf despite the
looming weather, the insurer will not be liable.
NOTICE OF LOSS
- It is the more or less formal notice given the insurer by
the insured or claimant under a policy of the occurrence
of the loss insured against.

 In fire insurance –Required; Failure to give notice will

defeat the right of the insured to recover.
 In other types of insurance - Not required ; Failure to give
notice will not exonerate the insurer, unless there is a
stipulation in the policy requiring the insured to do so.
Purpose of Notice of Loss

1. To give insurer information by which he may determine

the extent of his liability;
2. To afford the insurer a means of detecting any fraud that
may have been practiced upon him; and
3. To operate as a check upon extravagant claims
Proof of Loss

 It is the more or less formal evidence given the company

by the insured 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 the amount thereof.
Rule :Notice/Proof of Loss

1. The insured or some person entitled to the benefit of the

insurance, without unnecessary delay, must give notice
to the insurer; (Sec. 88)
2. When required by the policy, insured must present a
preliminary proof loss which is the best evidence he has
in his power at the time. (Sec. 89)
Delay in the presentation of notice or
proof of loss deemed waived
If caused by:
1. Any act of the insurer; and
2. By failure to take objection promptly and
specifically upon that ground. (Sec. 91)
Notice or proof of loss are considered waived

1. Writes to the insured that he considers the policy null

and void as the furnishing of notice or proof of loss
would be useless;
2. Recognizes his liability to pay the claim;
3. Denies all liability under the policy;
4. Joins in the proceedings for determining the amount of
the loss by arbitration, making no objections on account
of notice and preliminary proof; or
5. Makes Objection on any ground other than the formal
defect in the preliminary proof.
CLAIM SETTLEMENT

Is the indemnification of the suffered by the

insured. The claimant may be the insured or
reinsured, the insurer who is entitled to
subrogation, or a third party who has a claim
against the insured.
Rules of Claim Settlement
1. No insurance company doing business in the Philippines shall
refuse, without justifiable cause, to pay or settle claims
arising under coverages provided by its policies, nor shall any
such company engage in unfair claim settlement practices.
2. Evidence as to numbers and types of valid and justifiable
complaints to the Commissioner against an insurance
company, and the Commissioner’s complaint experience with
other insurance companies writing similar lines of insurance
shall be admissible in evidence in an administrative or judicial
proceeding brought under this section (Sec. 241)

Note: To eliminate unfair claim settlement practices

Unfair claim settlement practices
1. Knowingly misrepresenting to claimants pertinent facts or policy
provisions relating to coverages at issue.
2. Failing to acknowledge with reasonable promptness pertinent
communications with respect to claims arising under its policies.
3. Failing to adopt and implement reasonable standards for the prompt
investigation of claims arising under its policies.
4. Not attempting in good faith to effectuate prompt, fair and equitable
settlement of claims submitted in which liability has become reasonably
clear; or
5. Compelling policyholders to institute suits to recover amounts due under
its policies by offering without justifiable reason substantially less than the
amounts ultimately recovered in suits brought by them. (Sec. 241, Par.1)
Obligation of the insurer- compromise
third party claim

Where a policy gives the insurer a control of the decision to settle

claim or to litigate it, the insurer nevertheless is required to
observe a certain measure of consideration for the interest of the
insured.
The rule has come to be generally accepted that while the express
terms of the policy do not impose of the insurer the duty to claim
settle the claim at all costs, there is an implied duty on his part to
give due consideration to the interest of the insured in its exercise
of the option to reject a compromise settlement and proceed with
litigation.
In insurance contracts, the law requires strict observance of the
standards of good faith and fair dealing on the part of the
insurer.
Time of Payment – Life Policy

1. Maturing upon the expiration of the term – the proceeds

are immediately payable to the insured, except if
proceeds are payable in installments or annuities which
shall be paid as they become due
2. Maturing at the death of the insured, occurring prior to
the expiration of the term stipulated – the proceeds are
payable to the beneficiaries within 60 days after
presentation of claim and filing of proof of death (Sec.
242)
Time of Payment – Non- Life Policy

 The proceeds shall be paid within 30 days after the

receipt by the insurer of proof of loss and ascertainment
of the loss or damage by agreement of the parties or by
arbitration but not later than 90 days from such receipt of
proof of loss, whether or not ascertainment is had or
made. (Sec. 243)
Effect of refusal or failure to pay the
claim within the time prescribed
Secs. 242, 243 and 244 provide that the insurer shall be liable to
pay interest twice the ceiling prescribed by the Monetary Board
which means twice 12% per annum (legal rate of interest
prescribed in CB No. 416) or 24% per annum interest on the
proceeds of the insurance from the date following the time
prescribed in Secs. 242 or 243 until the claim is fully satisfied

Note:
Refusal or failure to pay the loss or damage will entitle the
assured to collect interest UNLESS such refusal or failure to pay
is based on the ground that the claim is fraudulent.
 Prescriptive period
1. The parties to a contract of insurance may validly agree that an action
on the policy should be brought within a limited period of time, provided
such period is not less than 1 year from the time the cause of action
accrues. If the period agreed upon is less than 1 year from the time the
cause of action accrues, such agreement is void. (Sec. 63)
a. The stipulated prescriptive period shall begin to run from the date of
the insurer’s rejection of the claim filed by the insured or
beneficiary and not from the time of loss.
b. In case the claim was denied by the insurer but the insured filed a
petition for reconsideration, the prescriptive period should be counted
from the date the claim was denied at the first instance and not
from the denial of the reconsideration (Sun Life Office, Ltd. vs. CA,
GR. No. 89741, Mar 13, 1991)
Cont..

2. If there is no stipulation or the stipulation is void, the

insured may bring the action within 10 years in case the
contract is written.
3. In a comprehensive motor vehicle liability insurance
(CMVLI), the written notice of claim must be filed within
6 months from the date of the accident; otherwise, the
claim is deemed waived even if the same is brought within
1 year from its rejection. (Vda. De Gabriel vs. CA, GR No.
103883, Nov 14, 1996)
Cont..

4. The suit for damages, either with the proper court or with
the Insurance Commissioner, should be filed within 1 year
from the date of the denial of the claim by the insurer,
otherwise, claimant’s right of action shall prescribe. (Sec. 384)
DOUBLE INSURANCE
 Exists where same person is insured by several insurers separately in
respect to same subject and interest. (Sec. 93)
 In insurance contracts, the terms “additional
insurance,” “other insurance,” and “double Insurance” are used
interchangeable.
 In double insurance, there is co-insurance (Section157) by two or more
insurers.
Requisites:

1. Person insured is the same;

2. Two or more insurers insuring separately;
3. Subject matter is the same;
4. Interest insured is also the same;
5. Risk or peril insured against is likewise the same.
Examples:

(1) There is double insurance if the owner of the a house will

insured it with two insurers.
Mr. X owns a house and he insures it with ABC Insurance
Corp against fire for P500K and XYZ Insurance Corp
also against fire for 600K, the same person is insured,
Mr. X and there are two insurers, ABC and XYZ.
The two policies cover the same subject matter, the
house of Mr. X and the same interest of Mr. X as owner is
involved .In addition, the same peril is insured against
fire.
(2) X mortgages his house to B. Insurance taken by X and another taken by
B on the same house is not double insurance because it is not on the same
interest. (Section 8)

(3)There is not double insurance if the owner and lessee of the same
house insures the same with two insurers. For instance:
If Mr. A owns a house which he leased to Mr. B, there will be no
double insurance if Mr. A will insure the house with ABC Insurance
Corp., and Mr. B will insure it to XYZ Insurance Corp.
Two separate interests are insured by different person.
(4) X insures his automobile against fire with Y company and
against theft with Z company. There is no double insurance
because the automobile is not insured against the same risk
or peril.

(5)There is no double insurance if the mortgagor and the

mortgagee separately insures the mortgaged property.
The two insurance policies do not involved the same
interest.
(6) Mr. X owns a house and he insures it with ABC Insurance Corp.
against fire for P500K and with XYZ Insurance Corp. against flood
for P600K.There is no double insurance because although the
same person and subject are involved in both insurance policies,
the peril insured against are different.

(7) It should be noted that there can be double insurance in life

insurance but there can never be over-insurance.
The life of a person can be insured for any amount
and it would be inadequate because of the intrinsic value of life.
Over Insurance
• When the amount of the insurance is beyond the value of the insured’s
insurable interest.
• There may be only one insurer, with whom the insured takes insurance
beyond the value of his insurable interest.
• Prohibited by law because it is a wagering contract and no longer a
contract of indemnity
Vs Double Insurance

• There may be no over insurance as when the sum total of

the amounts of the policies issued does not exceed the
insurable interest of the insure.
• Two or more insurers.
• Not prohibited by law, unless there is a stipulation to the
contrary
Example:

 OVER INSURANCE WITHOUT DOUBLE INSURANCE

You have a building worth P10M and you insured it with one
company forP15M

 DOUBLE INSURANCE WITHOUT OVER INSURANCE

You have a building worth P10M and you insured it with five
companies for P2M each for a total of P10M.
 Where, however, there is double insurance resulting in over insurance,
the premiums paid corresponding to the excess will be refunded.
Insofar as the excess is concerned , there Is no assumption of risk
on the part of the insurer.

 In case of total loss, the insured cannot recover more than the
value of the property, because insurance is a contract of indemnity,
not for profit. It is not intended to enrich the insured. Otherwise, it
becomes a wagering contract.

Note:
Wagering contract- If this is allowed, the insured would be tempted to
bring about the loss or destruction of the thing insured.
Example:

(1) You have a building worth P10M and you insured it

with five companies for P3M each, for a total of
P15M. In case of loss, even a total loss, the insured
cannot recover more than P10M, which is the value
of the property.
The premium corresponding to the excess of P5M
must be refunded to the insured, because insofar as
such excess is concerned, the insurer never assumed
any risk.
 OVER INSURANCE BY DOUBLE INSURANCE* There is over-
insurance if the insured takes out an insurance over the
property insured in an amount which is in excess of the
value of his insurable interest.

(2)Over-insurance may exist even if there is only one insurer

and one policy.If Mr. A owns a house valued at P500K, there
is over-insurance if he insures it with ABC Corp. for P700K.
(3) Over-insurance may likewise exist if there is double insurance.
Mr. X owns a house valued at P400K and he insures it with ABC
Corp. against fire for P300K and XYZ Corp. against fire for 300K.
There is over-insurance by double insurance.

(4) It does not follow, however, that there will be over-insurance if

there is double insurance. In fact, there can under-
insurance even if there double insurance.
If Mr. X owns a house valued at P400K and insures it with ABC
Corp. against fire for P100K and XYZ Corp. against fire for
P100K. There is double insurance in this case but there is no
over-insurance.
RULES IN CASE OF OVER-INSURANCE BY
DOUBLE INSURANCE
 If there is over-insurance by double insurance, it is necessary to
determine from whom and how much can the insured recover.
 It is also necessary to determine the rights of the insurers
interse. (as among themselves, the Insurers).
RULES IN CASE OF OVER-INSURANCE BY
DOUBLE INSURANCE
A) In determining the rights of the insured, one indispensable
consideration is that an insurance contract is a contract of indemnity.
Hence, the insured cannot recover more than what he lost. The insured is
not supposed to profit from his loss even if he has two or more insurers.
Thus, if there is over-insurance, he cannot recover beyond his loss. It is well
to emphasize, however, that this is true only with respect to property
insurance because insurance over the life of a person is not a contract of
indemnity and there cannot be over-insurance over the life of any person.

B) Refer to Section 94 for the rules in case of over-insurance by double

insurance.
Effects: Where double insurance is allowed,
but over insurance results: (Sec. 94)

A. The insured, unless the policy otherwise provides, may

claim payment from the insurers in such order as he may
select, up to the amount for which the insurers are severally
liable under their respective contracts;

B. Where the policy under which the insured claims is a

valued policy, the insured must give credit as against the
valuation for any sum received by him under any other
policy without regard to the actual value of the subject
matter insured;
cont..
C. Where the policy under which the insured claims is an
unvalued policy he must give credit, as against the full insurable
value, for any sum received by him under any policy;

D. Where the insured receives any sum in excess of the valuation

in the case of valued policies, or of the insurable value in the
case of unvalued policies, he must hold such sum in trust for the
insurers, according to their right of contribution among
themselves;

E. Each insurer is bound, as between himself and the other

insurers, to contribute ratably to the loss in proportion to the
amount for which he is liable under his contract.
Binding Effect of stipulation against
double insurance
 The implication of the rules on double insurance under
the insurance Code is that double insurance is not
prohibited.
However, it may be prohibited by stipulation in what is
known as the “Other Insurance Clause.”  A stipulation
against double insurance.
Cont..
1)Additional insurance obtained by the insured.
Such provision is commonly known as the additional
or “other insurance” clause and is
intended to prevent an increase in the moral hazard.
It is valid and reasonable, and in the absence of consent,
waiver, or estoppel on the part of the insurer, a breach thereof
will prevent a recovery on the policy.
However, in order to constitute a violation, the other insurance
must be upon the same subject matter, the same interest
therein, and the same risk.
(2)Additional insurance obtained by a third person. –
The good or bad faith of the insured usually is immaterial.
However, insurance obtained by a third person without the
knowledge or consent of the insured will not affect his rights
under the policy in the absence of ratification.

Purposes:
 1. To prevent an increase in the moral hazard
 2. To prevent over-insurance and fraud.
 Purpose of prohibition against double insurance
 The purpose of the prohibition against double insurance is to prevent over-
insurance and thus avert the perpetration of fraud.
 The public as well as the insurer, is interested in preventing the situation
in which loss would be profitable to the insured.
 There is a great temptation upon dishonest persons, whose property is
insured up to its full value or above, to bring about its destruction;
 And the same considerations undoubtedly tend to
lessen the care that may be exercised by the honest in preventing loss.
 In view of these facts, as amply demonstrated by
experience as they are apparent to reason, the under writers take every
precaution to avoid over-insurance.
Bar Problem :
(1) Pedro Reyes applied for a fire insurance on his house. In
his application, it was asked the following question:
“Is the house insured with another insurance company?
If so, how much?” His Answers was “No.”
The fact, however, was that the house had been insured
with the FGU for P100K. The application was approved
and made part of the policy. Subsequently, a fire
occurred in the neighboring house, and spread to the
house of Pedro which was completely burned. Demand
for payment having been refused by the insurer, Pedro
failed a complaint. May he recover? Reason
Answer:
 No. Pedro may not recover because he was guilty of concealment.

The existence of another insurance is a material fact that should

have been disclosed to the insurer.
Section 26 of the IC defines concealment as “a neglect to
communicate that which a party knows and ought to
communicate.”Section 27 also of the IC, provides further that a
“concealment whether intentional or unintentional entitled an
injured party to rescind a contract of insurance.”

In the case at bar, there was concealment of the fact that

his house was already insured with FGU. Therefore, Insurance
Company may rescind the contract, Pedro may no longer recover
(2) A fire insurance policy in favor of the insured contained a
stipulation that the insured shall give notice to the company of any
insurance already effected, covering the property insured and
unless such notice be given before the occurrence of any loss,
all benefits shall be forfeited. The face of the policy bore
the annotation “Co-Insurance declared.”
The thing Insured were burned, it turned out that several insurances
were obtained on the same goods for the same term. The insurer
refused to pay on the ground of concealment. May the insured
recover? Reason.
Answer:
Yes, the insured may recover from the insurer. The insurer
cannot claim that there was material concealment. The problem
states that the face of the policy bore an annotation
“Co-insurance Declared.” This annotation is notice to the insurer as
to the existence of other insurance contracts on the property
insured. The insurer should have inquired about the details of such
insurance if it was really concern about them.(General Insurance and
Surety Corp. vs. Ng Hua, No. L-14373,30 Jan. 1960)
Rules for payment of claims where there is
over-insurance by double insurance

 As the contract of insurance is a contract of indemnity, the insured can

recover no more than the amount of his insurable interest whether the
insurance is contained in one policy or in several policies.

 The rules provided in Section 94 enunciate the principle of contribution

which requires each insurer to contribute ratable to the loss or
damage considering that the several insurances cover the same subject
matter and interest against the same peril.
Cont..
 They apply only where there is over-insurance
by double insurance, that is, the insurance is contained in
several policies the total amount of which is in excess of
the insurable interest of the insured.

 Paragraph (e) governs the liability of the insurers

among themselves where the total insurance taken
exceeds the loss.

 If the loss is greater than the sum total of all the

policies issued, each insurer is liable for the amount of his
policy.
Examples
(1)Several or solidary liability of insurers under the irrespective contracts.
A owns a house valued at P180,000 and he insures the same with three insurance
companies as follows:
X Company 60,000
Y Company 180,000
Z Company 240,000
Total 480,000
If the house is totally burned, A, unless the policies
otherwise provide, may claim payment from each of them in such order as he may select,
up to the amount for which each is liable under the contract.
Thus, A may demand indemnity first from X Co. but the latter is liable only to the extent
of P60,000, the amount specified in is policy. But if A elects to claim payment first from Z
Co., A cannot recover more than P180,000 which is the value of his insurable interest. A
may collect P60,000 from each of the insurers, orP180,000 only from Y Co. and nothing
from X and Z Co.
Cont…

 The exception allowed by law (i.e., “unless the policy

otherwise provides”) applies where the policy contain
what is generally referred to as the“contribution
clause”which stipulates that the insurance company shall
not be liable to pay or contribute more than its ratable
proportion of the loss or damage.
(2)Where insured claims under a valued policy
A owns a house valued at P180,000 and he insures the same with three
insurance companies as follows:
X Company 60,000
Y Company180,000
Z Company240,000
Total480,000

 In case A recovers P60,000 from X Co., he must give credit as against

the valuation of P180,000 for the sum of P60,000 thus received by him
without regard to his actual loss. In other words, A may recover only the
difference of P120,000 from either Y Co. or Z co. or from both of them
so long as the amount recovered does not exceedP120,000.If A has been
fully indemnified for his loss by one insurer, he cannot file subsequent
claims against the others.
(3)Where insured claims under an unvalued policy.
In case the policies are unvalued or open, the value of the loss
must be ascertained.
If the actual loss is estimated to be P150,000, A may recover
said amount from the insurers in such order as
he may select up to amount for which they are
severally liable under their respective insurance contracts.
If A collects from:
X Company 30,000
Y Company 90,000
120,000
He can still collect from Z Co. the amount of P30,000,the
difference to make up for the loss of P150,000.(150,000 –
120,000 = 30,000)
Formula to determine the amount recoverable

(Partial) Loss X Amount of Insurance

------------------------ = Amount of Recovery
Value of thing
Insured
(4) If a vessel valued at P1M is insured for only P800, 000
and is damaged to the extent of P400, 000, the insurer will
be required to pay only 80% of the loss suffered, or
P320,000; the other 20% or P80,000 being borne by the
insured himself.
P400,000 or 2/5
-------------------------X P800,000 = P320, 000
P1M
The insured is considered a co‐insurer as to the uninsured
portion of P200,000. Note: If the loss is total, the insurer is
liable for the full amount of P800,000. On the other hand, if
the property is insured to its full value, the insured is
entitled to recover the full amount of the partial loss of
P400,000.
Thank you!