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NCC), which will be binding (Art. 1308, NCC) provided, they do not 3. Doing any kind of business, including a reinsurance business,
contravene any provision of law and are not opposed to public policy specifically recognized as constituting the doing of an insurance
(Art. 1306, NCC) business within the meaning of (the Insurance Code)
4. Doing or proposing to do any business in substance equivalent to any
of the foregoing in a manner designed to evade the provisions of (the
VI. PRINCIPLES: Insurance Code)
1. PRINCIPLE OF SUBROGATION (applicable only in property QUESTION: Will a lack of consideration not constitute a valid
insurance) contract of insurance?
-The right of the insurer to succeed to the rights of the insured against ANSWER: NO.
the wrongdoer or persons who are responsible for the loss or damage. The fact that no profit is derived from the making of the
insurance contracts or that no separate or direct
2. PRINCIPLE OF ESTOPPEL (by deed or pais) consideration is received therefor, or that the contract states
If an insurance company had led the insured to believe that he could that it is not an insurance policy, is not conclusive to show
qualify under a certain insurance and the latter entered into a contract of that the making thereof does not constitute the doing or
insurance policy paying the premiums due, the insurer could not transacting of an insurance business. (Sec. 2(2) P.D 1460)
thereafter, in any litigation arising as such representation be permitted to
contend that the insured is not qualified. IX. REQUISITES OF INSURANCE
1. A subject matter in which the insured has an insurable interest;
3. CONSTRUCTION OF AN INSURANCE CONTRACT 2. Peril insured against which may be any contingent or unknown event,
IF THERE IS DOUBT past or future and a duration for the risk thereof;
Contracts of insurance are to be construed liberally in favor of the 3. A promise to pay or indemnify in a fixed or ascertainable amount;
insured and strictly against the insurer resolving all ambiguities against 4. A consideration for the promise, known as the premium;
the latter. 5. A meeting of minds of the parties upon all the foregoing essentials;
IF TERMS ARE CLEAR
Liberal construction in favor of the insured is not applicable. X. SUBJECT MATTER:
IN GENERAL
VII. WHAT CONSTITUTES DOING OR TRANSACTING AN 1. Anything having an appreciable pecuniary value
INSURANCE BUSINESS 2. Subject to loss or deterioration
3. Of which one may be deprived so that his pecuniary interest is or may
VIII. Acts considered as included in the term “doing an insurance be prejudiced
business OR “transacting an insurance business” (In) PROPERTY INSURANCE
It is the property covered by a policy that is regarded as the subject
A: P.D 1460, Sec. 2(2) matter of insurance or the risk of loss of such property
1. Making or proposing to make , as insurer, any insurance contract; (In) LIFE, HEALTH, & ACCIDENT INSURANCE
2. Making or proposing to make, as surety, any contract of suretyship as The subject matter is the person of insurance( in reference to the insured
a vocation and not merely as incidental to any other legitimate business as a party to the contract)
or activity of the surety;
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(In) CASUALTY INSURANCE A married woman may take out an insurance on her (1) life or
1. Property; or that of her (2) children without the consent of her husband or that
2. Risk involved in its use; or of her (3) husband, she having an insurable interest in the latter.
3. Insured’s risk of loss or liability (Section 10)
4. Probability that the insured may be compelled to indemnify for the She may also take out insurance on her (4) paraphernal property,
loss suffered by a third person (5) or on a property given to her by her husband.
A life insurance policy taken by a spouse on his (her) life in
X1. EVENT OR RISK INSURED AGAINST (Section 3) favor of the other takes effect after the death of the insured.
Any contingent or unknown event whether past or future which may:
1. Damnify or cause loss to a person having an insurable interest; or QUESTION: Is an insurance contract entered into by a minor void?
2. Create liability against him;
ANSWER: NO. It is one which is merely voidable. It is valid until
INSURABLE PAST UNKNOWN EVENT annulled in a proper action in court by the minor or his legal
ILLUSTRATION: representative.(Article 1390, Civil Code)
Y insured his vessels against the perils of the sea, “lost or not lost” with
X Insurance Company. Without the knowledge of both parties, the MINORITY NOT A DEFENSE
vessel had already sunk. Here the sinking of the vessel is a past event at If the contract is not disaffirmed by the minor, the insurer cannot
the time the policy took effect. escape liability by pleading minority as a defense because
“persons who are capable cannot allege the incapacity of those
QUESTION: Can Y collect the insurance from X? with whom they contracted.” (Article 1397)
The result is that an insurance company contracting with a minor
ANSWER: YES. The contract is valid and X Insurance Company is is bound by the contract, the minor is ordinarily not.
liable because it agreed to pay even though the vessel be already lost. BUT IF the contract is fair and no fraud or undue influence was
practiced by the insurer, the minor cannot recover the premiums
NOTA BENE: An insurance or past event is peculiar only to Marine paid, if he cannot return the benefits received. (Arts. 1385,1241,
Insurance. In case of Fire Insurance, the fire must be a future, not a past par. 1, 1427)
event. XI. NON INSURABILITY OF LOTTERY (Section 4)
QUESTION: Is the consent of the spouse needed for the validity of LOTTERY
an insurance policy? All schemes for the distribution of prizes by chance.
ANSWER: NO. (SECTION 3, PAR. 2) ELEMENTS:
“The consent of the spouse is not necessary for the validity of an 1. CONSIDERATION;
insurance policy taken out by a married person on his or her life or that 2. PRIZES;
of his or her children.” 3. CHANCE;
EXPLANATION:
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CONTRACT OF INSURANCE NOT A WAGERING CONTRACT -one in whose favor the contract is operative and who is indemnified
against , or is to receive a certain sum upon the happening of a specified
A contract of insurance is a contract of indemnity, and is not a contingency or event.
wagering or gambling contract.
While it is based on a contingency, it is not a contract of chance The relationship between the insurer and insured is that of a
and is not used for profit. contingent debtor and creditor, subject to the conditions of the
One enters into a contract of chance with the expectancy to policy and not that of trustee and cestui que trust.
gain, while one enters a contract of insurance to prevent loss
or misfortune. WHO MAY BE INSURERS: (Section 6)
During wartime, a private corporation is deemed an enemy c. Of any person under a Legal obligation to him for the payment of
corporation although organized under Philippine laws if they money, or respecting property or services of which death or illness
are controlled by enemy aliens . might delay or prevent performance;
d. Of any person upon whose Life any estate or interest vested in him
depends;
CONTROL TEST
A corporation is deemed to have same citizenship as the
controlling stockholders in time of holder. INSURABLE INTEREST
It is the interest which the law requires the owner of an
EFFECTS OF WAR ON EXISTING INSURANCE CONTRACTS insurance policy to have in the person or thing insured.
To have an interest in the preservation of a thing is to be
PROPERTY INSURANCE circumstance with respect to it as to have benefit from its
An insurance policy ceases to be valid and enforceable as existence and prejudice from its destruction.
soon as an ensured becomes a public enemy. The presence of insurable interest is really required only as
LIFE INSURANCE an evidence of the good faith of the parties.
A policy issued to a person without interest in the subject A beneficiary is like a done , because from the premiums of
matter insured is a mere wagering policy or contract and is the policy which the insured pays out of liberality, the
void for illegality. beneficiary will receive the proceeds or profits of said
The existence of insurable interest gives a person that legal insurance.
right to insure the subject of the policy of insurance.
Insurable interest is not applicable to industrial life Article 87 of the FC (E.O No. 209)
insurance. “Every donation or grant of gratuitous advantage, direct or indirect,
between the spouses during the marriage shall be void, except moderate
Requirement of Insurable Interest as a matter of public gifts which the spouses may give each other on the occasion of any
policy (Why?) family rejoicing”
1. As a deterrence to the insured: The prohibition shall apply also to persons living together as
It prevents the insured to have an interest in the husband and wife without a valid marriage.
destruction of the subject matter rather than its
preservation. WHEN BLOOD RELATIONSHIP SUFFICIENT (AS
It subdues temptation on the part of the insured with INSURABLE INTEREST)
nothing to lose and everything to gain, to bring to pass
the event upon the happening of which the insurance The mere relationship of brother or sister, father or child is
becomes payable. sufficiently close to give either an insurable interest in the life of
2. As a measure of limit of recovery: the other.
The insurance should not provide the insured with the
means of making a net profit from the happening of the REASON: The natural affection in cases of this kind is
event insured against. considered sufficient, if not more powerful, to protect the life of
If and to the extent that any particular insurance the insured than any of other consideration.
contract is a contract to pay indemnity, the insurable
interest of the insured will be the measure of the upper RELATIONSHIPS WHICH FIT THE CONCEPT OF
limit of his provable loss under the contract. INSURABLE INTEREST
A creditor who insures the life of his debtor does not act as the
WHEN PECUNIARY BENEFIT ESSENTIAL agent of the latter.
-Mere blood relationship (lesser degree of kinship, such as The contract is one purely between the insurer and the insuring
uncle or aunt, and nephew or niece, and cousins) DOES NOT creditor in as much as by law, the creditor is given an insurable
create an insurable interest in the life of another. interest on the life his debtor.
Under our law, their must be an expectation of pecuniary In short, the insurance does not inure to the benefit of the
benefit in the life of the insured to sustain the insurance, that debtor unless, the contrary is expressly stipulated.
is, a risk of actual monetary loss from his death.
Extent of the amount that may be recovered by insuring creditor
WHEN PERSONS MAY PROCURE INSURANCE OVER THE -The insuring creditor could only recover such amounts as remain
LIFE OF OTHERS unpaid at the time of the death of the debtor. If the debt has already
1. Persons related by contract or commercial relation been paid, then recovery on the policy is no longer permissible.
Any person so related to another, either by contract or (Principle of Indemnity)
commercial relation, that a right possessed by him will be
extinguished or impaired by the death or illness of the other may When insurance taken by debtor for the benefit of the creditor
lawfully procure insurance on the other’s life. -Where a debtor in good faith insures his life for the benefit of the
Examples: creditor, full payment of the debt does not invalidate the policy;
Employer-(life of Employee) in such case, the proceeds should go the estate of the debtor.
Corporation-(life of Manager)
Partnership- (life of Principal) QUESTION: Is the consent of the person to be insured necessary for
Surety- (life of Principal) the validity of the contract?
QUESTION: May a creditor insure the life his debtor? ANSWER: YES AND NO. (2 VIEWS)
ANSWER: YES. The creditor has unquestionably an insurable interest
in the life of his debtor for the purpose of protecting his debt but only to 1. YES.
the extent of the amount of the debt and the cost of carrying the All contracts without the consent of the insured are contrary
insurance of the debtor’s life. to public policy.
HOWEVER, the amount of the policy must not be so The excess of insurance offers a strong temptation to hasten the
disproportionate to the amount of the debts and liens theron plus death of the insured by criminal means.
the cost of the insurance as to justify the conclusion that the The danger to the public of such insurances is largely
policy is merely a wagering or speculative one. obviated when the insured, with knowledge of all the
Example: circumstances, has given consent to the contract.
A policy on the life of another for P 300,000 to cover a debt of P The insured’s consent is strong evidence of the good faith of
50,000, is a mere wagering policy and is void. the person procuring the insurance, and thus affords a
needed guaranty to society.
Right of the debtor in insurance taken by creditor
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2. NO.
The consent of the person insured is not essential to the
validity of the policy. So long as it can be proved that the
assured has a legal insurable interest at the inception of
the policy, the insurance is valid even without such
consent.
The presence of insurable interest takes the contract out
of the class of forbidden wagers.