INSURANCE
from obtaining more than the
Subrogation- substitution of once
person in the place of another with
reference to a lawful claim or right so
that he who is substituted succeeds to
the rights of the other in relation to a
debt or claim, including its remedies
and securities.
- Purpose: to make the persons
who caused the loss, legally
responsible for it and to prevent
the insured from receiving
double recovery from the wrong
doer and the insurer.
- The right of subrogation is not
defeated whenever the
wrongdoer settles with the
insured without the insurers
consent and with knowledge of
the insurers payment.
- The right of subrogation is
applicable only to property
insurance, not life insurance.
- Privity of contract by insured of
claim not essential. Payment by
the insurer to the insured
operates as an equitable
assignment to the former of all
the remedies which the latter
may have against the third
party whose negligence or
wrongful act caused the loss.
- Subrogation receipt, by itself, is
sufficient to establish not only
the relationship but also the
amount paid to settle the
insurance.
- Loss or injury for risk must be
covered by the policy.
Otherwise, it will be a
voluntary payment and the
insurer has no right of
subrogation against the third
party liable for loss.
- Principle of indemnity: the
right of subrogation given to the
insurer prevents the insured
amount of his loss.
- The right exists after indemnity
has been paid by the insurer.
- If the amount paid by the
insurance company does not
fully cover the loss, it is the
aggrieved part, not the insurer,
who is entitled to recover the
deficiency from the party at
fault.
- Right of the insurer against third
part is limited to amount
recoverable from the latter by
the insured.
- Art. 2207: the insurance
company that has paid the
indemnity shall be subrogated
to the rights of the insured
against the wrongdoer or the
person who has violated the
contract.
- Limitations: 1) both the insurer
and the consignee are bound by
the stipulations under the bill of
lading.
2) the insurer can be
subrogated only to the rights as
the insured may have against
the wrongdoer.
Sec. 2
Contract of insurance- an
agreement where by one undertakes
for a consideration to indemnify
another against loss, damage or
liability arising from an unknown or
contingent event.
Doing an insurance business/
transacting an insurance business
1) Making or proposing to make,
as insurer, any insurance
contract;
2) Making or proposing to make,
as surety, any contract of surety
 as vocation and not as merely or impairment of the interest by
incidental to any other business the happening of the
or activity of the surety. designated perils.
3) Doing any kind of business, 3) The insurer assumes that risk of
including reinsurance business loss.
- The fact that no profit is derived 4) The assumption of risk is part of
from the making of insurance a general scheme to distribute
contracts or direct consideration actual losses among a large
therefor, shall not be seemed group or substantial number of
conclusive to show that the persons.
making thereof does not 5) As consideration for the
constitute an insurance insurers promise, the insured
business. pays a premium.
- Even if the contracts are
Assurance- an event which must present, it may not be an
happen insurance contract if the
Insurance- a contingent event which parties purpose is rendering of
may or may not happen. services and not
indemnification.
Policy- written insurance contract.
Principle of risk distribution- broad
Elements: sharing of economic risk.
Subject matter- thing insured Coping with risks
Consideration- premium paid by the 1. Limiting the probability of loss
insured 2. Limiting the effects of loss
3. Self-insurance or self financing
Object and purpose- risk bearing 4. ignoring risks
contract; transfer and distribution of 5. Transferring risks to another
loss, damage or liability arising from a. Risk preferring- people
an unknown or contingent event would choose to forgo the
through the payment of consideration certain loss in the hope of
by the insured to the insurer. incurring no loss despite
Aleatory contract- one of the parties the equal probability of
or both reciprocally bind themselves to suffering a large loss
b. Risk neutral
give or to do something in
c. Risk adverse
consideration of what the other shall
give or do upon the happening of the Adverse selection- sub-
event. classification of risks; any group will
have a higher proportion of less
Elements of an insurance
desirable risks since more applications
contract:
for the insurance will tend to come
1) Insurable interest- interest from those who get a better bargain.
susceptible of pecuniary
Fields of insurance
estimation
2) The insured is subject to a risk 1. Voluntary
of loss through the destruction 2. Traditional
Classification of insurance specifically only if it
exempted results
1. Insurance against loss or
from the from
impairment of property interest
policy specifical
2. Insurance against loss of
- Not ly
earning power due to death
absolut identified
3. Insurance against contingent
e. *loss causes
liability to make payment to
due to listed in
another.
normal the
Modern categories: wear policy
and
1. Marine tear
2. Property
Burden Insurer Insured
3. Personal
of proof
4. Liability
Classification by interest
o a policy of insurance is a
- Distinction: no fault contract of adhesion- most of
insurance- the substitution of the terms in the contracts do
first-party insurance for tort not result from mutual
liability. negotiation between the parties
1. Frist party interest- the as they are prescribed by the
contract between the insurer insurer in final printed forms
and the insured is designed to which the insured may accept
indemnify the insured for the or reject.
loss directly suffered by the o Bargaining contract- both
insured. parties participate in
a. Property insurance formulating the terms and
b. Life insurance conditions of the contract.
c. Health insurance o Principal and purpose test- if
2. Third party insurance- the principal object is
Liability insurance; the indemnity, the contract
interest protected by the constitutes insurance.
contract are ultimately those of
third parties injured by the Sec. 3
insureds conduct.
Requisites of a contract of
All-risk Specified insurance:
insurance risk
1. Consideration- premium
insuranc 2. Meeting of minds
e 3. Subject matter- insurable
Distinctio Reimburses Covers interest
n the insured dameage 4. Promise to pay
for damage to the 5. E vent/ peril insured.
to the subject subject
matter of the matter of Subject matter:
policy; except the 1. Property
those policy 2. Life, health, accident
 3. Casualty insurance- use, or Sec. 6
the insureds risk of loss or
Insurer- a party who assumes or
liability, that he may suffer loss
accepts the risk of loss and undertakes
or be compelled to indemnity
for a consideration to indemnify the
for the loss suffered by a third
insured or to pay him a certain
person.
amount on the happening or a
Sec. 4 specified event.
Lottery- extends to all schemes for Insured- the person in whose favor
the distribution of prizes by chance. the contract is operative. This person
may be the beneficiary designated.
- Elements:
1. Consideration- prizes offered Capacity of party insured
come out of the funds raised
by the participants 1. Natural person
2. Prize a. He must be competent to
3. Chance make a contract
b. He must possess an
Gambling Insurance insurable interest.
Distinction Gain Distributio 2. Juridical person
through n of loss
Public enemy- a nation with whom
mere by reason
the Philippines is at war and it includes
chance of
every citizen or subject of each nation.
mischance
Fortune Increases Seeks to - A mob is not a public enemy.
the avoid
inequality misfortune Control test- a corporation is deemed
of fortune or to make to have the same citizenship as the
it equal controlling stockholders in time of war.
Essence Whatever Gain is not - Property insurance: the policy
one at the ceases to be valid and insurable
person expense of as soon as an insured becomes
wins is a another. a public enemy
lost - Life insurance: abrogated by
suffered reason of non payment of
by premium.
another. - The termination of the war does
Wager Risk of not revive the contract.
loss to
himself Sec. 8
Double insurance- both mortgagor
and mortgage take out separate
insurance policies on the same
property.