THE POLICY OF INSURANCE

A. Definition and form

Sec. 49. The written instrument in which a contract of insurance is set forth, is called a policy of
insurance.
Sec. 50. The policy shall be in printed form which may contain blank spaces; and any word, phrase,
clause, mark, sign, symbol, signature, number, or word necessary to complete the contract of
insurance shall be written on the blank spaces provided therein.
Any rider, clause, warranty or endorsement purporting to be part of the contract of insurance and
which is pasted or attached to said policy is not binding on the insured, unless the descriptive title or
name of the rider, clause, warranty or endorsement is also mentioned and written on the blank
spaces provided in the policy.
Unless applied for by the insured or owner, any rider, clause, warranty or endorsement issued after
the original policy shall be countersigned by the insured or owner, which countersignature shall be
taken as his agreement to the contents of such rider, clause, warranty or endorsement.
Group insurance and group annuity policies, however, may be typewritten and need not be in
printed form.
B. Fine Print Rule
Contract of adhesion
C. Contents of the policy
Sec. 51. A policy of insurance must specify: (R2AP2ID)
(a) The parties between whom the contract is made;
(b) The amount to be insured except in the cases of open or running policies;
(c) The (rate of) premium, or if the insurance is of a character where the exact premium is only
determinable upon the termination of the contract, a statement of the basis and rates upon which
the final premium is to be determined;
(d) The property or life insured;
(e) The interest of the insured in property insured, if he is not the absolute owner thereof;
(f) The risks insured against; and
(g) The (duration) period during which the insurance is to continue.
D. Papers attached to the policy and their binding effect
Rider
Warranties
Clause
Endorsement
E. Kinds of Policy
1) Open - Sec. 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.
2) Valued - Sec. 61. A valued policy is one which expresses on its face an agreement that the thing
insured shall be valued at a specific sum.
3) Running - Sec. 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 to
the subjects of insurance, by additional statements or indorsements.
F. Cover notes
Sec. 52. Cover notes may be issued to bind insurance temporarily pending the issuance of the
policy. Within sixty days after the issue of the cover note, a policy shall be issued in lieu thereof,
including within its terms the identical insurance bound under the cover note and the premium
therefore.
Cover notes may be extended or renewed beyond such sixty days with the written approval of the
Commissioner if he determines that such extension is not contrary to and is not for the purpose of
violating any provisions of this Code. The Commissioner may promulgate rules and regulations
governing such extensions for the purpose of preventing such violations and may by such rules and
regulations dispense with the requirement of written approval by him in the case of extension in
compliance with such rules and regulations.
G. Cancellation of policy
Sec. 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.
Sec. 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.
H. Time to commence action on the policy; effect of stipulation
Sec. 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.
An insurance policy being a written contract, any action based thereon should be brought within ten
(10) years from the time the right of action accrues (Art. 1144.) which period may be either
lengthened or shortened by the parties subject to Section 63.

CASES
PACIFIC TIMBER EXPORT CORPORATION VS CA
112 SCRA 199
Facts:
On March 13, 1963, Pacific secured temporary insurance from the Workemens Insurance Co. for its
exportation of logs to Japan. Workmen issued on said date Cover Note 1010 insuring said cargo.
The regular marine policies were issued by the company in favor of Pacific on Apr 2, 1963. The 2
marine policies bore the number 53H01032 and 53H01033. After the issuance of the cover note but
BEFORE the issuance of the 2 policies, some of the logs intended to be exported were lost due to a
typhoon. Pacific filed its claim with the company, but the latter refused, contending that said loss
may not be considered as covered under the cover note because such became null and void by
virtue of the issuance of the marine policies.
Issue:
Whether or not the cover not was without consideration, thus null and void.
Held:
It was with consideration. SC upheld Pacifics contention that said cover not was with consideration.
The fact that no separate premium was paid on the cover note before the loss was insured against
occurred does not militate against the validity of Pacifics contention, for no such premium could
have been paid, since by the nature of the cover note, it did not contain, as all cover notes do not
contain, particulars of the shipment that would serve as basis for the computation of the premiums.
As a logical consequence, no separate premiums are required to be paid on a cover note. If the
note is to be treated as a separate policy instead of integrating it to the regular policies
subsequently issued, its purpose would be meaningless for it is in a real sense a contract, not a
mere application.

GREAT PACIFIC LIFE ASSURANCE CORPORATION VS CA

89 SCRA 543
On March 14, 1957, respondent Ngo Hing filed an application with Grepalife for a 20-yr endowment
policy for 50T on the life of his one year old daughter Helen Go. All the essential data regarding
Helen was supplied by Ngo to Lapu-Lapu Mondragon, the branch manager of Grepalife-Cebu.
Mondragon then typed the data on the application form which was later signed by Ngo. Ngo then
paid the insurance premium and a binding deposit receipt was issued to him. The binding receipt
contained the following provision: If the applicant shall not have been insurable xxx and the
Company declines to approve the application, the insurance applied for shall not have been in force
at any time and the sum paid shall be returned to the applicant upon the surrender of this receipt.
Mondragon wrote on the bottom of the application form his strong recommendation for the approval
of the insurance application. On Apr 30, 1957, Mondragon received a letter from Grepalife Main
office disapproving the insurance application of Ngo for the simple reason that the 20yr endowment
plan is not available for minors below 7 yrs old. Mondragon wrote back the main office again
strongly recommending the approval of the endowment plan on the life of Helen, adding that
Grepalife was the only insurance company NOT selling endowment plans to children. On may 1957,
Helen died of influenza with complication of broncho pneumonia. Ngo filed a claim with Gepalife,
but the latter denied liability on the ground that there was no contract between the insurer and the
insured and a binding receipt is NOT evidence of such contract.
Issue:
Whether or not the binding deposit receipt, constituted a temporary contract of life insurance.
Held:
NO.
The binding receipt in question was merely an acknowledgement on behalf of the company, that the
latters branch office had received from the applicant, the insurance premium and had accepted the
application subject for processing by the insurance company, and that the latter will either approve
or reject the same on the basis of whether or not the applicant is insurable on standard rates. Since
Grepalife disapproved the insurance application of Ngo, the binding deposit receipt had never
became on force at any time, pursuant to par. E of the said receipt. A binding receipt is manifestly
merely conditional and does NOT insure outright. Where an agreement is made between the
applicant and the agent, NO liability shall attach until the principal approves the risk and a receipt is
given by the agent. The acceptance is merely conditional, and is subordinated to the act of the
company in approving or rejecting the application. Thus in life insurance, a binding slip or binding
receipt does NOT insure by itself.

PHILIPPINE AMERICAN LIFE AND GENERAL INSURANCE COMPANY VS JUDGE LORE R.

VALENCIA-BAGALACSA
G.R. No. 139776. August 1, 2002
On June 20, 1995, private respondents, as legitimate children and forced heirs of their late father,
Faustino Lumaniog, filed with the aforesaid RTC, a complaint for recovery of sum of money against
petitioner alleging that:
- their father was insured by petitioner under Life Insurance Policy No. 1305486 with a face value
of P50,000.00;
- their father died of coronary thrombosis on November 25, 1980;
- on June 22, 1981, they claimed and continuously claimed for all the proceeds and interests
under the life insurance policy in the amount of P641,000.00, despite repeated demands for
payment and/or settlement of the claim due from petitioner, the last of which is on December 1,
1994, petitioner finally refused or disallowed said claim on February 14, 1995;
- and so, they filed their complaint on June 20, 1995.
Petitioner contends that:
- the cause of action of private respondents had prescribed and they are guilty of laches;
- it had denied private respondents claim in a letter dated March 12, 1982, signed by its then
Assistant Vice President, Amado Dimalanta, on ground of concealment on the part of the
deceased insured Faustino when he asserted in his application for insurance coverage that he
had not been treated for indication of chest pain, palpitation, high blood pressure, rheumatic
fever, heart murmur, heart attack or other disorder of the heart or blood vessel when in fact he
was a known hypertensive since 1974;
- private respondents sent a letter dated May 25, 1983 requesting for reconsideration of the
denial;
- in a letter dated July 11, 1983, it reiterated its decision to deny the claim for payment of the
proceeds;
- more than ten (10) years later, or on December 1, 1994, it received a letter from Jose C. Claro, a
provincial board member of the province of Camarines Sur, reiterating the early request for
reconsideration which it denied in a letter dated February 14, 1995.
RTC upheld the claim of private respondents counsel that the running of the 10-year period was
stopped on May 25, 1983 when private respondents requested for a reconsideration of the denial
and it was only on February 14, 1995 when petitioner finally decided to deny their claim that the 10-
year period began to run.
CA found that the prescriptive period to bring the present action commences to run only on
February 14, 1995, the date when the petitioner finally rejected the claim of private respondents and
not in 1983. The ten year period should instead be counted from the date of rejection by the insurer
in this case February 14, 1995 since this is the time when the cause of action accrues. The plaintiffs
cause of action did not accrue until his claim was finally rejected by the insurance company. This is
because, before such final rejection, there was no real necessity for bringing suit.
ISSUE:
When the claim of respondents accrued?
HELD:
RTC committed a grave abuse of discretion when, in resolving the motion for reconsideration of
petitioner, it arbitrarily ruled in its Order dated December 12, 1997, that the period of ten (10) years
had not yet lapsed. It based its finding on a mere explanation of the private respondents counsel
and not on evidence presented by the parties as to the date when to reckon the prescriptive period.
Petitioner had specifically alleged in the Answer that it had denied private respondents claim per its
letter dated July 11, 1983. Hence, due process demands that it be given the opportunity to prove
that private respondents had received said letter, dated July 11, 1983. Said letter is crucial to
petitioners defense that the filing of the complaint for recovery of sum of money in June, 1995 is
beyond the 10-year prescriptive period