INSURANCE

PD 1460 (INSURANCE CODE) as

amended is a special law. Matters not
covered = NCC, Family Code, EO 209,
etc.
INSURANCE: Agreement to indemnify
another against LDL (loss, damage,
liability) = arising from unknown or
contingent event (fortuitous events, natural
disasters and negligence included)
CHARACTERISTICS
1. Risk-distributing device
2. Contract of indemnity (property
insurance) aleatory, not wagering
contract
3. Adhesion (fine print rule)
4. Uberrimae fidei contract = utmost
good faith, disclose facts.
5. Consensual contract (relate with
Cognition Theory)
ELEMENTS: In addition to CONSENT,
OBJECT, CAUSE or CONSIDERATION,
there must be;
1.
2.
3.
4.
5.

Insurable Interest
Risk of Loss
Assumption of Risk
Scheme to distribute loss
Premium

INSURANCE POLICY is the written

instrument where terms/conditions of
contract of insurance are set forth. It need
not be signed by the Insured EXCEPT
when express warranties are contained in
separate documents, part of the policy.
KINDS OF INSURANCE POLICIES
1. Open
2. Valued
3. Running
Policy
(successive
insurance)
4. Valuation of loss made after
TYPES OF INSURANCE CONTRACT
1. Life Insurance = Group, Industrial
life, Endowment
2. Non-Life = Marine, Fire, Accident,
Medical or Health Insurance
3. Suretyship = Surety/Bond a
contract
with
Indemnity
Agreement
TRANSFER OF POLICY = Life
insurance can be transferred even without
the consent of the insured but not in
property insurance because consent of the
insurer is required. Insurance policy on
property is SUSPENDED.

2. Insured
Public Enemy not insurable
BENEFICIARY not a party but entitled to
insurance proceeds = revocable/irrevocable
Insured may designate
Beneficiary EXCEPT;

anyone

as

1. Concubine/paramour or
2. Those specified under Art. 739 +2012 as
void donation.
Conviction is NOT a condition precedent
but designation of adulterous or adult
children as beneficiary is valid.
A person may take out life insurance and
make it payable to WHOMEVER he
pleases regardless of the beneficiarys lack
of insurable interest.
What is the effect of Annulment or legal
separation?

PARTIES
1. Insurer
1

INSURABLE INTEREST = The

RELATION, CONNECTION, CONCERN
in a person or property that the insured will
derive pecuniary benefit or advantage from
its preservation and suffers pecuniary loss
or damage from its destruction, injury or
death by the happening of event insured
against. = In short, An interest to benefit
from its existence.
In Life Insurance, insurable interest must
exist ONLY AT THE TIME OF
PERFECTION OF THE CONTRACT
(except Debtor insured and heirs). Every
person has insurable interest on his;
1.
2.
3.
4.

Life/Health
Spouse
Children
Any person whom he depends for
education
or
support,
has
pecuniary interest
5. Any person who has legal
obligation for payment of money,
property, services
6. Any person whose life any estate
or interest vested in him depends.
INSURABLE
INTEREST
IN
PROPERTY INSURANCE may consist
in;
A. Existing Interest ( Owner, Lessee,
Mortgagee)

B. Inchoate interest founded on

existing interest (Stockholder)
C. An expectancy coupled with
existing
interest
(farmer,
contractor)
Insurable interest in property should exist
when insurance takes effect and when
loss occurs, but need not exist in the
meantime.
A mere contingent or expectant interest
is not insurable because of lack of
insurable interest. Ex: Creditor cannot
insure property of debtor; Son cannot
insure properties of his parents.
Mortgagee/Mortgagor or Lessee/Lessor
has separate insurable interest. The
property can be separately insured.

There is no concealment in the following;

1. Those which other knows
2. Those which other ought to know
3. Not material and risk excluded by
warranty (sea worthiness)
4. Risk excepted in policy
5. Opinions or speculations
Rule
in
Concealment
and
Misrepresentation (stm(?)/Inducement to
deceive insurer)
If insured died within 2 years from contract
or reinstatement, Insurer can rescind
(Incontestability clause), EXCEPT;
1.
2.
3.
4.
5.

Non-payment of Premium
No Insurable interest
Cause of death excepted
Fraud
No proof of death

CONCEALMENT:
Neglect
to
communicate that which a party knows and
ought to communicate. It must be material
to the risk.

However, if concealment was discovered

before the death, Insurer can cancel the
policy, premium returned.

Insured need not die of disease concealed

to make the insurer liable. (This rule does
not apply in Marine Insurance (national
character of vessel; seizure from breach of
foreign laws; want of necessary
documents; use of false or simulated
documents must be the proximate cause of
the loss or seizure of the vessel or cargo.)

Incontestability Clause = If life insurance

policy payable on the death of the insured
is in force during the lifetime of the insured
for period of 2 years from the date of the
contract
or
reinstatement,
insurer
CANNOT PROVE that the policy is void
ab ignition or is rescindable by reason of
fraudulent
concealment
or
2

misrepresentation of the insured, if

insurance contract was enforced for more
than 2 years from the date of contract or
reinstatement = Insurer is Liable!
HEALTHCARE
OR
MEDICAL
INSURANCE is casualty or non-life
insurance. In case of concealment, Insurer
cannot rescind contract (as provided under
sec 48) because the fact of concealment
can only be used as AFFIRMATIVE
DEFENSE to be established by the Insurer.
If concealment is one of EXCLUSIONS in
the health insurance contract, insurer can
refuse to pay or is not liable because of the
exclusion. Besides, the incontestability
clause under Sec. 48 does not apply in nonlife or casualty insurance contract.
SC said that the rule on concealment
insofar as Health or Medical insurance is
concerned, also applies as defense of
Insurer provided the that the matter
concealed is NOT EXCEPTED or
EXCLUDED in the medical or health
insurance.
PREMIUM = Consideration paid to
insurer for undertaking to indemnify the
Insured against specified peril.

Cash/Carry provision = no premium no

insurance policy = that no insurance
policy or contract is valid unless or until
premium is paid EXCEPT in the
following, where the Insurer is liable,
such as;
a. If there is acknowledgment of
receipt of premium in the contract,
although premium is not paid.
(S.78)
b. In case of life or industrial life
policy when grace period provision
applies.
c. If partial payment of premium was
accepted and loss occurred before
full payment of premium.
d. If premium payable on installment
term payment even if loss occurred
before full payment.
e. If Insurance agent received
premium payment (306) but did
not remit it to the Head Office.
f. If Insurer sent Notice of NonRenewal but notice not recorded
by the Insured who paid premium
before the loss.
RETURN OF PREMIUM =
1. If things insured is not exposed to the
risk insured against (79)

2. If contract is voidable due to fraud or

misrepresentation;
3. Insurer never incurred liability (81);
4. In case of over-insurance;
5. If rescission is granted.
FIRE INSURANCE = insurance against
loss or damage caused by fire, also caused
by
lightning,
windstorm,
tornado,
earthquake, and other alleged risks covered
by extension to fire insurance.
In fire insurance, Insurer is liable IF the
proximate cause is an excepted peril, like
gas explosion. That fire is the efficient
cause of the loss without the intervention
of any new, independent force. It is not
necessary that the property be directly
consumed by fire because IMMEDIATE
CAUSES such as smoke or water or falling
of building as a consequence of fire, or
damage caused by efforts to rescue,
removal, theft, are considered as LOSS BY
FIRE.
Arson?
PROXIMATE CAUSE = Is that which in
the natural and continuous sequence,
unbroken by any intervening cause,

produces the injury and without which that

injury would not have occurred.
FRIENDLY FIRE = fire that burns in a
place where it is supposed to burn = gas
stove, fire place.

GENERAL RULE: Risks insured against

are perils of the sea. HOWEVER, in an
ALL RISK POLICY, all risks are
covered.

HOSTILE FIRE = fire that escapes and

burns in a place where it is not supposed to
burn. Insurer is liable.

GENERAL AVERAGE LOSS = damages

and expenses to SAVE the vessel or cargo
from real or unknown risk, like
JETTISON, proper deviation, arrival under
stress.

MARINE INSURANCE: (99) Covers

risks connected with navigation, to which a
ship, cargo, freightage, profits or other
insurable interest maybe exposed to peril
during voyage or a fixed period of time.
The Insurer is liable for such loss or
damage occasioned by PERILS OF THE
SEA but not for perils of the ship because
of the implied warranty of seaworthiness
(that ship is reasonably fit to perform the
service and to encounter ORDINARY
perils of the voyage)

DEVIATION = is the departure of vessel

from the course of voyage. It is proper
when due to circumstances beyond control
of the captain. It is done to comply with
Warranty. Made in good faith to avoid
peril; made to save life or another
distressed vessel, the insurer cannot deny
claim if deviation is proper, which inured
to the common benefit of all. That the
INSURER of vessel or cargo saved, is
liable for the general contribution of the
owners.

PERILS OF THE SEA are unusual

violence or extra-ordinary perils of
navigation = FE, ND.

PARTICULAR AVERAGE LOSS =

Expenses incurred which have NOT
INURED to the common benefit of all.

PERILS OF THE SHIP = losses from

ordinary, natural action of the sea; ordinary
wear and tear of the ship.

ACTUAL LOSS (130) = Total destruction;

loss by sinking; damage rendering it
valueless; possession deprivation.

CONSTRUCTIVE TOTAL LOSS = Loss

of more than value; damage reducing
value by more than ; expense more than
. In case the vessel owner decides to avail
of constructive total loss CTL-, Owner
should
give
NOTICE
OF
ABANDONMENT to the Insurer, who
may deny the notice or CTL so that the
Insured owners can file claim for partial or
actual loss only.

MOTOR
VEHICLE
LIABILITY
INSURACE = A contract of insurance
against liability for death, bodily injuries of
passengers or 3rd party liability for death or
injury arising from motor vehicular
accidents.
2 KINDS
1. Third-Party Insurance (TPI)
2. Comprehensive Insurance
COMPREHENSIVE THIRD PARTY
LIABILITY INSURANCE (CTPL) =
Who is a third party?
Purpose= To give immediate
assistance to victims of motor
accidents without proving
negligence PROVIDED the

financial
vehicular
fault or
following

proof of loss ( Police report, Death

Certificate, Medical Report) are sufficient.
Claim shall be made against the Insurer
of the vehicle in which the occupant is
riding.
Time to file and process claim under
CPTL:
1. Insurer has 30 days after receipt of
Proof of Loss to ascertain loss or
damage. If ascertainment is not
made within 60 days from receipt
of evidence or proof, Insurer
should settle within 90 days,
otherwise, double interest of
24% /pa applies.
2. File Notice of Claim- includes;
Certification of Doctor- within 6
mos. From date of accident if not
provided in No. 1
3. Prescriptive Period = GR: 10 years
although by agreement, action
may be filed in court of Insurance
Commissioner within 1 year from
the date the cause of action accrues
or from denial of claim. Motion for
reconsideration filed by Insured
does not suspend the prescriptive
period of one year from denial of
claim.

4. If there is agreement or
ascertainment of loss, payment
within 5 days, otherwise, double
interest (24%) rule applies.
5. If no agreement = Insurer shall pay
no fault indemnity without
prejudice to pursue claim further.

Claims over P100, 000 RTIC

Pre-need Plans
Commissioner.

Claims

Insurance

Insurance - agreement for consideration,

to indemnify another against Loss, Damage
and
Liability
arising
from
unknown/contingent
event
(includes
suretyship) following the cognition theory.

OTHER MATTERS
SUBROGATION: GR- INSURER has
automatic right of Subrogation to recover
from party at fault.
OVER-INSURANCE same property or
insurable interest for greater value.
DOUBLE INSURANCE Two or more
insurers or same property.
RE-INSURANCE - By original insurer to
insure its liability.
BORDEREAUX Book where reinsurer
enters its assumed risks.
POWERS
OF
INSURANCE
COMMISSIONER (I.C.) = adjudicatory
or quasi-judicial.
IC has concurrent jurisdiction with RTC
for claims below P100, 000

Insurance policy - is a written instrument

in which contract of insurance is set forth.
Even without insurance policy, contract is
valid.

Requisites: Contract (consent, object,

consideration) plus insurable interest;
premium; risk of loss; assumption of risk;

insurance
policies
are
contracts
uberrimae fides - contract of utmost good
faith - disclose all material facts.

Parties - insurer and insured.

Beneficiary is not a party - maybe

revocable/irrevocable

Insurable interest in property may consist

in
1. an existing interest

Insured may designate anyone as

beneficiary in life insurance, even
without insurable interest but not in
property insurance.

2. an inchoate interest founded on

existing interest
3. an expectancy.

However, if insured died after 2 years,

Insurer cannot exercise right to rescind insurer liable.
Except:
1. Non-payment of premium
2. No insurable interest

Insurable interest - is the relation,

connection, concern in a person/property
that the insured will derive pecuniary
benefit/advantage from its preservation and
suffers pecuniary loss.

A person has insurable interest in his life,

his spouse, child, person on whom he
depends for education/support etc. In life
insurance, insurable interest must exist
only at time of perfection of the contract.

In property insurance insurable interest

must exist when insurance takes effect and
when loss occurs, but need not exist in the
meantime.
beneficiary
in
property
insurance should have insurable interest.

Creditor cannot insure property of his

debtor; son cannot insure property of
parents.

3. cause of death excepted

4. fraud
5. no proof death

Concealment - neglect to communicate

that which a party knows and ought to
communicate must be material. In case of
concealment, contract is voidable at the
option of insurer.

Rule
in
concealment
and
misrepresentation - if discovered before
the loss/death, insurer can cancel policy,
premium be returned. If insured died
within 2 years from date of contract or last
reinstatement of insurance insurer can
rescind/refuse to pay (incontestability
clause)

VIP provision: Incontestability clause

concept - in life insurance, in case of
concealment, insurance is null/void except
when insured died after the 2 year period
from date of contract or from the last date
of reinstatement. insurer cannot refuse to
pay proceeds or rescind insurance contract
on
ground
of
concealment/misrepresentation - insurer is
liable. In case of concealment; the insurer
is not liable even if the insured dies of
another cause.

Concealment in Marine insurance is

stricter because the fact concealed must be
the proximate cause of the loss/damage, to
make Marine insurer liable. However in
Healthcare or health insurance, the fact of
concealment can only be used as an
affirmative defense to be established by the
insurer. If concealment is one of the
exclusions/exceptions in the health
insurance contract, insurer can refuse to
pay or is not liable.

Insurer is entitled to the payment of

premium (no premium no insurance policy
- cash/carry provision)

Insurer still liable in the following cases

(SC) even if premium is not actually paid
or premium not received:
1 acknowledgment of receipt of premium
1.
in case of life/industrial life policy when
grace period provision applies
2.
when partial payment of premium was
accepted by insurer

3.
if parties agreed on credit/term payment of
premium or on installment
4.
if insurance agent received premium
payment but did not remit to head office
5.
if check payment was issued to insurance
agent before the loss-death provided
check has sufficient funds.

Comprehensive motor vehicle insurance

policy refers to a contract of insurance
against liability for death, bodily injuries of
passengers or 3rd party liability for
death/injury arising from motor vehicle
accidents.

No fault indemnity clause - any claim for

death/injury arising from vehicular
accidents shall be paid without proving
fault or negligence. Just submit - police
report,
death
certificate,
medical
certificate.

Here insurance claims shall be made

against the insurer of the vehicle in which
the occupant is riding.

Notice of loss be made within reasonable

time - Notice of claim - within 6 months file suit - claim within one year from date
of denial.
Insurance
2 Right of subrogation attaches to insurer
upon payment to insured than against
the wrongdoer. Right of subrogation
accrues to the insurer upon payment to
the insured. In case of loss of the
vessel/goods. The insured is given
option to choose between abandonment
of the thing insured or claim for total
loss when the cause of loss is the peril
insured.

6.
Double interest - imposition of 2x interest
- 12 x 2 = 24/year until claim is fully
paid.

7.
Excepted risks like NPA causing fire be
proven by insurer, otherwise insurer
liable.

8.
License be secured from the insurance
commission aside from license as
insurance agent/broker

11.
Where insurance contract provides for
indemnity against liability to 3rd
persons the liability of the insurer is
direct and such 3rd persons can directly
sue the insurer up to the extent specified
in the agreement, not beyond that
amount.

INSURANCE
9.
Notice of loss, claim within reasonable
time, condition precedent, imperative opportunity to examine.

an agreement

for a consideration

to

indemnify another against LOSS,

DESTRUCTION, OR LIABILITY

arising from an unknown or contingent

event

ELEMENTS: COC-II-ER-AR-S-P
1. Consent, object, consideration
1.
Insurable interest

10.
SC reiterated that insurance instrument is
the instrument where a person has a
relation/connection/concern in it such
that such person will derive pecuniary
benefit/advantage from the preservation
of the property insured and will suffer
pecuniary loss/damage
from its
destruction/loss by the happening of the
event insured.

Insurance is

2.
Exposure of risk insured against
3.
Assumption of risk
4.
Scheme of distributing loss
5.
Payment of premium

A past event may be covered by MARINE

INSURANCE, provided that the loss of
vessel in the past could not be known by
ordinary means of communication.

Characteristics: R-I-A-U-C
1. Risk-distributing (contribution of all to
a certain fund will be used for the
payment of insurance of one
insurance fund)

6.
Contract of indemnity (exchange of value
for value aleatory or uncertain) **
waging contract depends on chance
7.
Contract of adhesion (fine print rule, policy
already approved by the commission;
generally construed in favor of the
insured)
8.
Uberrimae Fides contract (utmost good
faith contract; disclose facts)
9.
Consensual contract (perfected from the
time of meeting of minds with respect
to object, cause, or consideration)

The relationship with a person or interest

to benefit from the person or the thing
insured.

protect the person or the thing because of

the PECUNIARY BENEFIT and to
prevent PECUNIARY LOSS

every interest in property, real or personal,

of such nature that a contemplated peril
might directly damnify the insured

Generally , mistress cannot be insured by a

married man. However, if he derives
pecuniary interest from such mistress
(support), it is the designation only as a
spouse that is void. He can still insure
the life of the mistress.

In insurance, the insurer is the OFFEROR

because the insured is the one who applies.
If there is no policy given, then there is no
acceptance by the insurance company or
the insured, there is no meeting of the
minds.

Illegitimate child can be insured because

the law does not distinguish what kind of
child should be insurable. (sec. 6)The
insurer must be registered under the laws
of the Philippines through the insurance
commissioner.

INSURABLE INTEREST

for regulation purposes

for the fine print rule

WHO/WHAT
INSURED:

MAY

NOT

BE

Public enemy

Paramour

Wager (any chance or ticket in a lottery

drawing a prize)

INSURABLE INTEREST IN LIFE AND

HEALTH: (sec. 10) (Family, depend
E/S, debtor, other dependents)
1. Of himself, his spouse, and of his
children
10.
Of any person on whom he depends wholly
or in part for education or support, or
in whom he has a pecuniary interest
11.
Or anyone who has legal obligations to
him for the payment of money or
9

respecting property or services of

which death or illness might delay or
prevent the performance;
12.
Of any person whose life any estate or
interest vested in him depends.

The insured shall have the right to change

the beneficiary he designated in the policy,
unless he has expressly waived this
right(sec. 11):

An insurable interest in property consist

in (sec. 14):

The interest in the life or health of a person

insured must exist when the insurance
takes effect (when claiming) but need not
exist thereafter or when the loss occurs.

1. An existing interest;
13.
An inchoate interest founded on an existing
interest;
14.
An expectancy coupled with an existing
interest from which the expectancy
arises.

In case of property insurance, a change in

interest in any part of a thing insured,
unaccompanied by a corresponding change
in the insurance, suspends the insurance to
an equivalent extent, until the interest in
the thing and the interest in the insurance
are vested in the same person (sec. 20).

A carrier or depository has insurable

interest to the thing he holds to the extent
of his liability only.

if there is change in the interest in the

thing without change in the interest in
the insurance (policy), the insurance is
deemed suspended. It will continue
when the interest in the thing and
interest in the insurance is vested in the
same person.

The interest in the property insured must

exist when the insurance takes effect (e.g.
when claiming under the insurance) and
when the loss occurred. It may not exist in
the meantime (if the insurance is not yet
for claiming or when the risk insured
against has not yet happened) (sec. 19).

A change in interest in the thing insured

after the loss does not affect the right of the
insured to indemnity for the loss.

IRREVOCABLE BENEFICIARY
A beneficiary in a life insurance policy or
segregated
fund
contract
whose
compensation cannot be changed without
his or her consent.
The interest of the beneficiary in the
insurance policy will be FORFEITED if he
wilfully brings about or causes the death of
the insured, whether he is the principal,
accomplice, or accessory to the crime.
With this, the nearest relative of the
insured shall receive the proceeds of the
insurance as long as that person is not
disqualified.

If the insured dies, such death does not

avoid insurance and his interest in the

10

insurance passes to the person taking his

interest in the thing insured.

CONCEALMENT
MISREPRESENTATION

DEVICES TO CONTROL THE RISKS

used by the insurer:

The fact that there is concealment, whether

intentional or not, the insurer can
RESCIND the contract. (sec. 27)

1. Concealment
(a
neglect
to
communicate that which a party knows
or ought to communicate)
15.
Warranties (additional contracts: riders; a
promise not to do something after the
execution of the contract)
16.
Misrepresentation ( when all the facts fail
to correspond with the represented
assertions or stipulations)
17.
Exceptions (placed in the policy itself)
18.
Those which are not placed in the policy as
the risk insured against. (if a particular
risk is not the one insured against, e.g.
fire, it cannot be covered by the
insurance policy)

and

Exceptions: (sec. 30)

Generally, if there is concealment or

misrepresentation, the contract (policy) is
VOID.
-

Because there is deceit or fraud in

obtaining the consent of the insurer with
the conditions of the policy.

The insurer is entitled to rescind the

contract.

1. Those which the other knows;

19.
Those which the other ought to know in the
exercise of ordinary care, and of which
the former has no reason to suppose
him ignorant;
20.
Those of which
communication;

the

other

waives

21.
Those which prove or tend to prove the
existence of a risk excluded by a
warranty and which are not material;
22.
Those which relate to a risk exempted from
the policy and which are not material.

11

CANCELLATION VS. RESCISSION

there
is
fraud,
misrepresentation in
insurance policy

Cancellation

insurance for a certain period, the premium

paid within the unexpired period

where the property is insured for more than

its value

the interest was not exposed to the peril

insured against

void ab initio no insurable interest

contract
is
voidable
(fraud
misrepresentation of insurer)

or

concealment,
obtaining the

no return of premium

right to rescind should be exercised prior to

the commencement of an action in the
contract (before any claim is made)

The right to rescind granted by law to the

insurer is waived by the acceptance of
premium payments despite the knowledge
of the ground for rescission.

THE FACT CONCEALED NEED NOT

BE THE CAUSE OF THE LOSS OR
DEATH.

Rescission

premium should be returned

INCONTESTABILITY CLAUSE
If the concealment or misrepresentation
has been discovered after 2 years from the
time the policy was enforced (executed),
insurer INSURER CANNOT RESCIND

the policy. The 2-year period is enough for

him to investigate.

The incontestability clause is applicable

only in life or industrial life insurance,
except when EXPRESSLY applied in nonlife insurance.

In life and industrial life insurance the

computation for incontestability clause will
be from the date of reinstatement which
starts on the date of payment. (example: 6months grace period, and the insured paid
premium on the 4th months, the
computation starts from the 4th month)

In non-life insurance (health or casualty or

medical insurance), if there is no clear
stipulation in the contract regarding
concealment, the rule on concealment from
the code should be followed; if there are
stipulations against concealment as
exception, the insurer is NOT liable.

Concealment is only an affirmative defense

in not paying the insured if there is no
12

express stipulation against it. The contract

cannot be rescinded automatically by the
insurer.

The non-payment of premium does not

affect the incontestability rule, if the policy
has been issued and payment has already
been acknowledged.

Incontestability
invoked when:

clause

cannot

be

1. failure to pay premium no premium

no pay
23.
material concealment found within 2 years
from the enforcement of the policy
24.
there is no insurable interest (void ab
initio)
25.
no proof of death
26.
willful act (to expose the subject to the risk
insured against)

27.
exempted risk

MATERIALITY
FACT

OF

CONCEALED

-Determined by the probable and

reasonable influence of the facts upon the
insurer in forming his estimate of the
disadvantages of the proposed contract or
in making his inquiries.

Each party in the contract is bound to know

all the general causes which are open to his
inquiry which may affect the material
perils contemplated.

The right to information of material facts

may be waived, either by the terms of the
insurance of by neglect of the other party
to make inquiry as to such facts.

POLICY the contract of insurance

Cover notes temporary insurance issued

pending the issuance of insurance policy
which usually lasts for 60 days. It may be
extended with the written approval of the
commissioner if he determines that such
extension is not contrary to any provision
of the insurance code.

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 (sec.
58).

OPEN POLICY a policy in which the

value of the thing insured is not agreed
upon, but is left to be ascertained in case of
loss. (the value of the thing at the time of
the loss)

VALUED POLICY a policy which

expresses on its face an agreement that the
thing insured shall be valued at a specific
sum. (the value of the thing stated in the
policy)

13

RUNNING POLICY a policy which

contemplates successive insurances, and
which provides that the object of the policy
may be from time to time defined by
additional statements or indorsements.
(insured shall make inventory of the
properties every now and then to the
insurer)

31.
physical changes (material alteration) to
the property insured which result in the
property becoming uninsurable
32.
determination by the commissioner that the
continuation of the policy would
violate the code or would place the
insurer in violation of the code

The commencement of an action under the

insurance should not be less that one year
from the time when the cause of action
accrues (refusal of the insurer to pay the
insured), otherwise, the agreement as to the
time is void (sec 64).

33.
Breach of warranty.

Grounds for RESCISSION of Policy:

CASH AND CARRY PROVISION

1. non-payment of premium

No premium, No insurance,

28.
conviction of a crime arising out of acts
increasing then hazard insured against

EXCEPTIONS:

29.
discovery
of
fraud
misrepresentation

or

material

30.
discovery of willful or reckless acts or
omissions increasing the hazard
insured against

** As long as the activity does not change

the risk, the insurer is still liable.

1. In life or in industrial life insurance

because there is a grace period in
which the insured has already been
entitled to the insurance without
having paid the premiums for the
agreed period.

34.
In case of temporary receipt or
acknowledgment of premium by the
insurer (even if there is actually no
payment yet) through the principle of
ESTOPPEL. However, the insured is
not exempt from payment of the
proceeds of insurance.
- if there is credit: for as long as the

insured paid within the period

stipulated, and the insured paid even
after the loss, the insurer is liable.
- If the insurer willingly accepted the

payment even after loss, the insurer

is liable.
35.
If the payment was given to the agent of
the insurer, the act of the agent is the
act of the principal. The insurer is still
liable.
36.
The insurer is liable as long as the check
has sufficient funds.

Insurance by instalment If the insured

paid a part of the insurance, and the
property has been damaged or lost before
the completion of premium, the insurer
14

should pay the insured, but the insured is

still liable to pay the proceeds of the
insurance. CAN A POLICY BE
TRANSFERRED?

LIFE insurance can always be

transferred even without the consent of the
insurer.

could only be transferred with the

consent of the insurer.

insurable interest must exist at the

time of execution and risk, but may not
exist in the mean time; suspended until
the insurable interest and the policy is
vested in the same person.

PROXIMATE CAUSE cause which

was uninterrupted by any event, without
which, the injury would not have occurred.

** With FIRE INSURANCE as ling as

fire is the proximate cause, whatever the
immediate cause is, the insurer is still
liable.

If the proximate cause is excepted

from the liabilities stipulated in the
policy, the insurer is not liable for the
loss (example: explosion)

FRIENDLY FIRE: the fire is on that

place where it is supposed to burn. If the
fire escapes from where it is supposed to
burn, it becomes HOSTILE fire.

WARRANTIES
-

These are promises written in the

insurance, wherein the insured and the
insurer signed, and appended the same
in the policy.

If there is breach, the insurer may

rescind the policy.

If there is insurers knowledge of

breach of contract by the insured, and he
did not take action, and the insured still
received insurance money, the insurer is
ESTOPPED from the return of such
money.

PROPERTY insurance
-

FIRE INSURANCE
-

Proximate cause of loss should be fire

May include fire caused by natural

disaster.

Property must be consumed by fire, or

when the reason for loss or damage is
caused by trying to save the property
(water damages or theft), or when the
wall of the house collapsed to another
infrastructure because of the fire there
is a right to claim from the insurer.

THE INSURER IS STILL LIABLE

EVEN IF THE IMMEDIATE CAUSE
OF THE LOSS IS NOT THE PERIL
INSURED, AS LONG AS THE
PROXIMATE CAUSE IS THAT PERIL
INSURED.

MARINE INSURANCE
-

Covers all risks in the shipment or

navigation of a vessel, including the
goods shipped, profits, and the ship
itself.

CHARTERER (lessee) has insurable

interest with the freightage of the goods.

Owner of the VESSEL has insurable

interest with the vessel itself and the
goods
15

Owner of the GOODS has insurable

interest with the goods themselves.

- INSURABLE:
-

PERILS OF THE SHIP : ordinary

wear and tear of the ship, ordinary
occurrences in the voyage
PERILS OF THE SEA: unexpected
and inevitable circumstances and
casualties due to the violence of the sea
(INCH MARIE CLAUSE)

Implied warranty of sea worthiness ship

is reasonably fit to perform service and
must be able to encounter the ordinary
perils of the voyage. It is not limited to the
physical structure of the vessel, but must
be laden with the proper equipment,
machinery, crew members, and food for
passengers.

37.
Warranty that the vessel will not deviate
from the route
38.
Warranty that the vessel will not engage in
illegal papers
39.
Warranty that the vessel has the proper
documents

IN
THE
ABSENCE
OF
ANY
STIPULATION, ONLY THE PERILS OF
THE SEA IS INSURED, UNLESS ALLRISK POLICY IS STIPULATED.

1. Warranty of seaworthiness

the real owner: becomes private

carrier, tasked to observe diligence of a
good father of a family

VOYAGE OR TIME
AFREIGHTMENT
-

CHARTER-

the owner of the vessel is the common

carrier

(extraordinary diligence)

shipper is a private carrier

INSURABLE INTEREST IN MARINE

INSURANCE:
Shipper cargo, expected profits

ALL-RISK POLICY exempting clauses

arte important; concealment will not vitiate
the contract except when such concealment
is the cause of damage or loss.

Charterer the ship and the goods

Ship-owner the ship itself

RESPONSIBILITY OF THE SHIPPER

BAREBOAT or DEMISE charter

Implied warranties of the ship:

charterer:
carrier

ship

becomes

common

should look for a seaworthy ship

INSURER should investigate first the
seaworthiness of the ship before paying
the claimant.

16

CONCEALMENT
INSURANCE
-

IN

MARINE

opinion of 3rd persons are material

and must be disclosed (example: Pagasa report, Engineer of the ship report
on the machine of the ship)
if due to concealment, there was loss
or damage, that us the only time that the
insurer may rescind the contract
CANNOT RESCIND contract with
the following grounds: o National
character of the ship o Falsified or
simulated
documents
o
Illegal
goods/contraband

GENERAL AVERAGE LOSS damages

and expenses incurred for the salvation of
the cargo or ship from a real or known risk
everybody benefits!

PARTICULAR AVERAGE LOSS

damages and expenses incurred not for the
common benefit of all but only for
particular or certain persons.

if the owner of the vessel would spend

more than of the value of the vessel to
save it, or if the injury reduced the value
of the thing insured for more than .

Comprehensive insurance for vehicles all

risk insurance

the owner should abandon everything

to the insurer, so the insurer would look
for something to salvage from it. The
insurer will pay the value of the vessel.

Need
to
notify
the
insurer
immediately, must be made within
reasonable time after receipt of reliable
information of the loss

No fault indemnity clause right to claim

without proving fault or negligence; made
on the vehicle within which the injured is
riding at the time of the accident;
indemnity not exceeding PhP 5,000; proof
for claim medical cert, or death cert, or
police report of the accident.

HOW ABANDONMENT IS MADE:

1. notice (generally in writing) to the
insurer
40.
notice should be made explicitly stating the
cause of abandonment

Compulsory 3 rd party liability - the

purpose is to give financial assistance to
victims of motor vehicle accidents or their
dependents

41.
if oral notice is made, there should be a
written notice within 7 days from the
oral notice

Compulsory
insurance
-

VEHICLE INSURANCE
CONSTRUCTIVE TOTAL LOSS

3 party suit against insurer depends on

the policy (sometimes, the person at fault
pays first, then the insurer pays afterwards)

motor

vehicle

liability

contract of insurance against liability

for death or bodily injuries of
passengers or 3rd parties arising from
motor vehicle accidents
17

PROCESS UNDER COMPULSORY

3RD PARTY LIABILITY
1. File notice of claim within 6 months
from date of accident. Include cert. of
physician.
42.
Prescriptive period- action should be filed
in:
a. Insurance commission less than
Php 100,000 claim
b. RTC more that Php 100,000
claim within 1 year from denial of
claim (with stipulation) or 10 years
(without stipulation)
43.
If there is agreement, the insurer should
make payment within 5 days of
Compulsory 3rd party liability;
44.
If there is no agreement, insurer shall pay
no fault indemnity without prejudice
to pursue claim further. The insurer has
the right of subrogation to sue for
recovery against the vehicle at fault.

Authorized drivers clause driver should

be duly licensed or with permission, even
if the license is fake. - Expired license of
the driver (not the insured himself) is not
authorized driver.
Theft Clause if there is theft clause and
the vehicle is unlawfully taken, insurer is
liable under the clause and authorized
driver clause DOES NOT APPLY. Insured
can recover even if thief has no license.

OVER INSURANCE same property

insured for greater value; insured is entitled
to ratable return of premium proportioned
to the amount by which the aggregate sum
insured exceeds the insurable value of the
thing at risk.

DOUBLE INSURANCE 2 or more

insurance, same property, not exceeding
value of property

RE-INSURANCE taken by the original

insurer to insure his liability

1. Notice of loss given within reasonable

time: so that the insurer will have
ample time to investigate on the loss/
destruction/ death.
45.
Notice of claim to the insurer should be
given within 6 months after notice of
loss. Submission of evidence of loss.
46.
Insurer should pay
a. NON-LIFE 30 days after proof
of loss is received by the insurer, and
the loss/ damage has been
ascertained through agreement or
arbitration;
b. NON-LIFE 90 days after receipt
of proof of loss, and the
ascertainment had not been made
within 60 days after such receipt;
c.
LIFE
INSURANCE

immediately upon maturity of policy

(except when payable in installments
or as an annuity, they are payable as
they become due) ;
d. LIFE INSURANCE - within 60
days from filing of proof of death.

SETTLEMENT OF CLAIMS:
18

DOUBLE INTEREST DOCTRINE

The insurer must pay immediately upon
maturity, otherwise, the insurer pays: (12%
interest per annum x 2) of the principal +
other damages at 6% per annum

WHEN DOES THE CAUSE OF ACTION

ACCRUE?

Asian Terminals, 702 SCRA the right of

subrogation accrues upon payment by the
insurer and in Vector shipping, 700 scra,
right of subrogation is not dependent nor
grow out of a privity of contract nor does it
need assignment of rights but simply
payment to the insured.

- upon final denial of the claim

- MR filed in the insurance company does
not affect the prescriptive period.

** When the insurer pays, there is the right

of subrogation. The insurer steps into the
shoes of the insured. Need not be
stipulated.

** Subrogation does not apply in:

-

LIFE insurance

or when the insurer released the wrong

doer

or when he pays for a risk which is not

covered by the policy

or when he pays more than the value

of the insurance.

LATEST
SC
INSURANCE

RULINGS

IN

Asian Terminals vs. Malayan Ins 647

Scra = insurer can exercise its right of
SUBROGATION to recover from the
common carrier at fault for the value of
lost cargo. Presentation in evidence of
marine
insurance
policy
is
not
indispensable to exercise subrogation right.
Insurer is given 30-90 days within which to
pay the insured after receipt of loss and
Ascertainment of the loss / damage New
World International vs. NYK Shipping
656 Scra
Suretyship is a kind of insurance under
Sec. 175 of Insurance Code, whereby a
party called the Surety guarantees the
performance of another by another called

the Principal or obligor of an obligation or

undertaking in favor of a 3rd party called
the obligee. It includes bonds, official
recognizances, stip issued by any company
/ insurer. Liability of surety is joint/several
with the obligor. PD 1455 Star Two vs Ko
646 Scra
The term DOUBLE INTEREST used in
Insurance (s. 243 and 244) means a
categorical imposition of interest twice
12% per annum or 24% p.a. until the
insurance claim is fully paid = Prudential
Guarantee vs. Trans-Asia Lines 491
Scra
Insurable interest in prop, is any relation
thereto, or LIAB of such a nature that a
contemplated peril might damnify the
insured. This is a case wherein the liability
of Gaisano Cagayan, as distributor of Levi
Strauss jeans, was insured. Here, what is
insured is not the loss of goods but the
LIABILITY on accounts that remain
unpaid 45 days after a fire. The SC said in
the case of Gaisano vs. Insurance Co of
North America, 490 Scra, that the liability
of unpaid accounts within 45 days after the
fire is an ins interest which is insurable.
In DBP Ins vs. Radio Mindanao
Network 480 Scra, the SC ruled that the
insurer which invokes that the loss /
19

damage was an EXCEPTED RISK has the

burden of proof. Here the radio network
facilities was fire-insured by 2 insurance
companies for Php 7M. The radio facilities
were razed by fire but insurance claims
were DENIED on ground that the cause of
loss was AN EXCEPTED RISK = that
CPP/NPAs caused the fire The SC ruled
that the insurers have the burden of
proving that the fire loss comes within the
purview of the exception or limitation.
Otherwise, the insurers are liable.

In White Gold vs Pioneer Ins, 464 SCRA

the SC said that any entity engaged in the
business of insurance, must secure a
License from the Insurance Commission
even an Insurance Co. licensed as Insurer,
must still secure another License as
Insurance Agent/Broker.

extent of liability or injury. SC reiterated

the right of subrogation of an Insurer
against the CC- Phil charter Ins vs.
Chemoil, 462 scra

A Notice of Loss by the Insured (within

reasonable time) is a condition precedent
which is imperative in order to give the
insurer an opportunity to examine the

20