INSURANCE CODE OF THE PHILIPPINES : THE POLICY SEC. 55 TO SEC.

66
Vanity Gail Trivilegio and Aika Fore Garcia
LLB 3B
THE POLICY
SECTION 55 To render an insurance effected by one partner
or part-owner, applicable to the interest of his co-partners or
other part-owners, it is necessary that the terms of the
policy should be such as are applicable to the joint or
common interest.

to the subjects of insurance, by additional statements or

indorsements.
Kinds of Policies
1.

Insurance Effected by Partner or Part-Owner

Insurable interest in the property of the partnership exist

in the partnership itself and the partners.

If a partner insures partnership property in his own

name, such contract of insurance is limited only to the
said partners individual share unless, the terms of the
policy shows that the insurance was meant to cover the
shares of the other partners.

SECTION 56 When the description of the insured in a policy

is so general that it may comprehend any person or any
class of persons, only he who can show that it was intended
to include him can claim the benefit of the policy.

Example:
A house, insured for Php1,000,000, was totally
destroyed by fire. The insurer may introduce evidence
to show that the house was not really worth
Php1,000,000 but only Php800,000. Thus, the insured
will only receive Php800,000, the actual value of the
property, even though the face value of the policy is
worth Php1,000,000.
2.

SECTION 57 A policy may be so framed that it will inure to

the benefit of whomsoever, during the continuance of the
risk, may become the owner of the interest insured.
General Description of the Insured

It is usual to insert in the policy the name of the person

insured but this is not essential for he may be described
in other ways.

In contrast to sec. 51

The person claiming the benefit of the policy must show

that he is the person described in the policy or that he
belongs to the class of persons referred in the policy.
Example:
Where the policy provides for the owner, it is
necessary to prove that at least he was the owner of the
thing insured at the time of the loss

SECTION 58 The mere transfer of a thing insured does not

transfer the policy, but suspends it until the same person
becomes the owner of both the policy and the thing insured.

3.

Example:
A purchaser of a property who does not take the
precaution to transfer the policy of insurance to his
name cannot recover from such policy. The transfer of
the property insured has the effect of suspending the
insurance until the purchaser becomes the owner of the
policy and the property insured.

SECTION 60 An open policy is one in which the value of the

thing insured is not agreed upon, but is left to be
ascertained in case of loss.
SECTION 61 A valued policy is one which expresses on its
face an agreement that the thing insured shall be valued at a
specific sum.
SECTION 62 A running policy is one which contemplates
successive insurances, and which provides that the object
of the policy may be from time to time defined, especially as

Running Policy
Intended to provide indemnity for property which
cannot well be covered by a valued policy because
of frequent changes in location and quantity or
when the nature of the property does not admit of a
gross valuation.
It contemplates that the risk is shifting, fluctuating
or varying
It denotes insurance over a class of property rather
than any particular thing
Example:
Insurance over constantly changing stock of goods or
on grain that is being carried to and from in the harbor
or lighters.

Exceptions are provided for in sec. 20-24 and 57

SECTION 59 A policy is either open, valued or running.

Valued Policy
It is one in which the parties expressly agree on the
value of the subject matter of the insurance
Two values agreed upon:
a. Face value of the policy which is the
maximum amount that the insurer will pay
b. Value of the thing insured
In the absence of fraud or mistake, the agreed
value of the thing insured will be paid, unless, the
insurance is for a lower amount
In case of loss, parties may claim that the value of
the insured property is more or less than what was
agree upon.
The amount to be paid by the insurer as indemnity
may not necessarily be related to the actual loss.
Measure of indemnity is the agreed valuation and
not the actual loss.
In a life policy, the liability of the insurer is
measured by the face value of the property. This is
because, the value of human life cannot be
measured in actual monetary terms.
Example:
A policy insuring a ship valued at Php10,000,000 is a
valued policy. Absence of fraud or mistake, such
valuation is conclusive upon the parties.

Effect of Transfer of a Thing Insured

A contract of insurance is a PERSONAL CONTRACT. It

does not attach to or run with the property insured

Open or Unvalued Policy

It is one in which a certain agreed sum is written on
the face of the policy. Such agreed sum is the
maximum limit of the insurers liability (not the
value of the property)
How much will the insurer pay in case of loss?
The insurer will pay the actual cash value of the
property at the time of the loss but not exceeding
the amount agreed upon in the policy

SECTION 63 A condition, stipulation, or agreement in any

policy of insurance, limiting the time for commencing an
action thereunder to a period of less than one year from the
time when the cause of action accrues, is void.
Validity of Agreement Limiting Time for Commencing Action

General Rule:
A clause in the policy to the effect that an action upon
the policy must be brought within a certain period is
valid and will prevail over the general law on limitations
of actions prescribed by the Civil Code, if not contrary to
sec. 63. If the period fixed is less than one year from

September 22, 2014

INSURANCE CODE OF THE PHILIPPINES : THE POLICY SEC. 55 TO SEC. 66

Vanity Gail Trivilegio and Aika Fore Garcia
LLB 3B
the time the cause of action accrues, the stipulation
would be void.

Exception:
In industrial life insurance policies, the period cannot be
less than 6 years after the cause of action accrues

SECTION 64 No policy of insurance other than life shall be

cancelled by the insurer except upon prior notice thereof to
the insured, and no notice of cancellation shall be effective
unless it is based on the occurrence, after the effective date
of the policy, of one or more of the following:
(a) non-payment of premium;
(b) conviction of a crime arising out of acts increasing the
hazard insured against;
(c) discovery of fraud or material misrepresentation;
(d) discovery of willful or reckless acts or omissions
increasing the hazard insured against;
(e) physical changes in the property insured which result in
the property becoming uninsurable; or
(f) a determination by the Commissioner that the
continuation of the policy would violate or would place the
insurer in violation of this Code.
SECTION 65 All notices of cancellation mentioned in the
preceding section shall be in writing, mailed or delivered to
the named insured at the address shown in the policy, and
shall state (a) which of the grounds set forth in section
sixty-four is relied upon and (b) that, upon written request of
the named insured, the insurer will furnish the facts on
which the cancellation is based.

Renewal of Non-Life Insurance Policy

As a new contract
renewal of insurance by the payment of a new
premium and issuance of a receipt therefore where
there is no provision in the policy for its renewal

As extension of old one

renewal in pursuance of a provision of the old
contract

General rule:
Named insured is given the right to renew upon the
same terms and conditions the original policy upon
payment of premium due on the effective date of the
renewal

Exception:
The insurer at least 45 days in advance of the end of
the period mails or delivers to the insured notice of its
intention not to renew the policy or to condition its
renewal upon deduction of its amount or elimination of
some coverages.

Period of giving notice of non-renewal by insurer

Policy written for a term of 1 year
As if written for a term of 1 year
Policy written for a term of 1 year or no fixed
expiration date
As if written for successive policy periods of 1 year

What if the insurer failed to comply with the

requirements of Sections 65 and 66?
Insurer needs to renew the policy whether he likes it or
not.

Right of the Insurer to the Cancellation of a Policy of Insurance

other than Life

Important Terms:
Cancellation
- to rescind, abandon, or cancel a contract of
insurance
- termination by either the insurer or the insured of
a policy of insurance before its expiration
Premium
- payment after effective date of the policy because
an insurance policy is valid and binding unless and
until premium is paid

Conditions under which the right may be exercised:

1. Prior notice of cancellation to the insured
A. notice given to insured himself
- personal to the insured and not to any
unauthorized person
-notice to mortgagee of the insured is not
effective notice as to the insured owner
B. notice delivered personally or sent by mail
Purpose of prior notice of cancellation to the
insured: to prevent the cancellation of the
policy, without allowing the insured ample
opportunity to negotiate for other insurance in
its stead for his own protection
2. Notice based on occurrence, after the effective
date of the policy, of one or more of the
grounds
3. Written, mailed or delivered to the named
insured at the address shown in the policy
4. Grounds relied upon

SECTION 66 In case of insurance other than life, unless the

insurer at least forty-five days in advance of the end of the
policy period mails or delivers to the named insured at the
address shown in the policy notice of its intention not to
renew the policy or to condition its renewal upon reduction
of limits or elimination of coverages, the named insured
shall be entitled to renew the policy upon payment of the
premium due on the effective date of the renewal. Any
policy written for a term of less than one year shall be
considered as if written for a term of one year. Any policy
written for a term longer than one year or any policy with no
fixed expiration date shall be considered as if written for
successive policy periods or terms of one year.

September 22, 2014