When, What and How of Insurance Contract (Perfection)

When… Is it perfected?
It is perfected the moment there is a meeting of the minds with the respect to the object and the
cause or consideration.
Cognition Theory
the acceptance is considered to effectively bind the one making the offer only from the time it
came to his knowledge.
When… Is it not binding?
The mere delay in the acceptance of the insurance application will not result in binding contract.

 GR 112329 – Perez vs. Court of Appeals –

“a contract of insurance, like other contracts, must be assented to by both parties

either in person or by their agents. So long as an application for insurance has not
been either accepted or rejected, it is merely an offer or proposal to make a contract.
The contract, to be binding from the date of application, must have been a completed
contract, one that leaves nothing to be done, nothing to be completed, nothing to be
passed upon, or determined, before it shall take effect. There can be no contract of
insurance unless the minds of the parties have met in agreement”
How… Is it perfected?
Generally, the insured is the one making the offer by submitting the application to the insurer
and the latter accepts the offer by approving the application. Without corresponding approval,
the policy is not perfected.

What…are the importance of delivery of the policy?

It is important due to the consensual nature of the insurance contract.
The policy is the proof of the terms and conditions of the contract.
The policy is the proof that the insurer accepted the contract.
It may be the reckoning point for the compliance with certain conditions.
What… Is a cover note?
A concise and temporary written contract issued to the insurer through its duly authorized agent
embodying the principal terms of an expected policy of insurance.
It is intended to give temporary insurance protection coverage to the applicant pending the
acceptance or rejection of his application.
Its duration should not exceed 60 days unless a longer period is approved by Insurance
Commissioner.
What… is a policy?

Written instruments where the terms and conditions of the contract are set forth.
This is not necessary for the perfection of the contract, yet the law provides that no policy shall
be issued unless it is previously approved by the Insurance commission.
What… are the contents of the policy?
1. Parties
2. Amount of insurance except in open running policy.
3. Rate of premium
4. Property or life insured.
5. Interest of the insured in the property if he is not the owner.
6. Risk insured against.
7. The period of the insurance.
TIBAY vs. CA (G.R. No. 119655)
“The terms of the insurance policy constitute the measure of the insurer's liability. In the
absence of statutory prohibition to the contrary, insurance companies have the same rights as
individuals to limit their liability and to impose whatever conditions they deem best upon their
obligations not inconsistent with public policy. 17 The validity of these limitations is by law
passed upon by the Insurance Commissioner who is empowered to approve all forms of
policies, certificates or contracts of insurance which insurers intend to issue or deliver. That the
policy contract in the case at bench was approved and allowed issuance simply reaffirms the
validity of such policy, particularly the provision in question.”
What… Is a rider?
Printed stipulations usually attached to the policy because they constitute additional stipulations
between the parties.
In case of conflict between a rider and the printed stipulations in the policy, the rider prevails, as
being a more deliberate expression of the agreement of the contracting parties
What… are the kinds of policy issued by an insurance company?
a. Open policy – the value of the thing is not agreed upon, but left at the time of lost
b. Valued Policy – Definite value is agreed by the parties which can be found at the
face of the policy.
c. Running policy – Contemplates successive insurance and which provides that
the subject of the policy may be defined from time to time.
What… are the requisites for cancellation of policy?

 Notice of cancellation to insured

  Notice must be based on the occurrence after the effective date of the policy of one
or more grounds mentioned above.
 Must be in writing, mailed to the insured at the address shown in the policy
 Must state the grounds relied upon section 64 of the insurance code and upon the
request of the insured to furnished facts on the basis of the cancellation.
When… should a policy be cancelled?

 When the insured did not pay the premiums.

 When the insured was convicted of a crime out of acts increasing the hazard of the
insure
 When there is Fraud in the part of the insured
 When Physical changes to the property insured rendering it uninsurable
 When there is a violation to the insurance code.

GR 175666: MANILA BANKERS LIFE INSURANCE CORPORATION vs. ABAN

“the "incontestability clause" is a provision in law that after a policy of life insurance made
payable on the death of the insured shall have been in force during the lifetime of the insured for
a period of two (2) years from the date of its issue or of its last reinstatement, the insurer cannot
prove that the policy is void ab initio or is rescindible by reason of fraudulent concealment or
misrepresentation of the insured or his agent. The purpose of the law is to give protection to the
insured or his beneficiary by limiting the rescinding of the contract of insurance on the ground of
fraudulent concealment or misrepresentation to a period of only two (2) years from the issuance
of the policy or its last reinstatement.”
AMERICAN HOME ASSURANCE COMPANY vs. CHUA (G.R. No. 130421)
“it cannot be said that petitioner was deceived by respondent by the latter's non-disclosure of
the other insurance contracts when petitioner actually had prior knowledge thereof. Petitioner's
loss adjuster had known all along of the other existing insurance contracts, yet, he did not use
that as basis for his recommendation of denial. The loss adjuster, being an employee of
petitioner, is deemed a representative of the latter whose awareness of the other insurance
contracts binds petitioner. We, therefore, hold that there was no violation of the "other
insurance" clause by respondent.”
Constantino vs. ASIA LIFE INSURANCE COMPANY (G.R. No. L-1669)
After perusing the Insurance Act, we are firmly persuaded that the non-payment of premiums is
such a vital defense of insurance companies that since the very beginning, said Act no. 2427
expressly preserved it, by providing that after the policy shall have been in force for two years, it
shall become incontestable (i.e. the insurer shall have no defense) except for fraud, non-
payment of premiums, and military or naval service in time of war (sec. 184 [b], Insurance Act).
And when Congress recently amended this section (Rep. Act No. 171), the defense of fraud
was eliminated, while the defense of nonpayment of premiums was preserved. Thus the
fundamental character of the undertaking to pay premiums and the high importance of the
defense of non-payment thereof, was specifically recognize
What are the types of Insurance?
Government Insurance
Also called social insurance contracts.
Compulsory in nature.
Designed to provide minimum economic security for large group of person.
This includes the SSS and GSIS
GOVERNMENT SERVICE INSURANCE SYSTEM vs JUM ANGEL (G.R. No. 166863)
There is a competing, yet equally vital interest to heed in passing upon undeserving claims for
compensation. It is well to remember that if diseases or death not intended by the law to be
compensated are inadvertently or recklessly included, the integrity of the State Insurance Fund
is endangered. Compassion for the victims of diseases not covered by the law ignores the need
to show a greater concern for the trust fund to which the tens of millions of workers and their
families look to for compensation whenever covered accidents, diseases and deaths occur.
Private Insurance
Insurance offered by the private sectors known as insurers.
Optional in Nature.
A risk reducing device that combines as sufficient number of exposure units to make individual
losses collectively predictable.
This Includes, Life insurances, Non-Life Insurances (Property), Liability Insurance,
Microinsurance and Surety.
What… is a life insurance?
a contract between an insurer and a policyholder in which the insurer guarantees payment of a
death benefit to named beneficiaries upon the death of the insured.
Sunlife vs Sabiya (G.R. No. 211212)
“In the present case, Sun Life issued Atty. Jesus Jr.'s policy on February 5, 2001. Thus, it has
two years from its issuance, to investigate and verify whether the policy was obtained by fraud,
concealment, or misrepresentation. Upon the death of Atty. Jesus Jr., however, on May 11,
2001, or a mere three months from the issuance of the policy, Sun Life loses its right to rescind
the policy. As discussed in Manila Bankers, the death of the insured within the two-year period
will render the right of the insurer to rescind the policy nugatory. As such, the incontestability
period will now set in”
What… is a non-life insurance?
also called property and casualty insurance, is a type of coverage that is very common and
covers businesses and individuals.
It protects them, monetarily, from disaster by providing money in the event of a financial loss.
What… are the classification of life insurance?

 Term Insurance – Temporary Basis

 Whole Life Insurance – Lifetime
 Industrial Insurance - The word Industrial policy is printed upon the policy.
 Ordinary Life – A fixed premium is paid annually
 Endowment – A Certain amount is paid to the insured if he survives a certain period. If
he doesn’t the proceeds are paid to the beneficiary.
What… are the kinds of non-life insurance?

 Fire Insurance
 Marine Insurance
 Casualty Insurance

Malayan Insurance vs. PAP CO., LTD (G.R. No. 200784)

“Considering that the original policy was renewed on an "as is basis," it follows that the
renewal policy carried with it the same stipulations and limitations. The terms and
conditions in the renewal policy provided, among others, that the location of the risk
insured against is at the Sanyo factory in PEZA. The subject insured properties,
however, were totally burned at the Pace Factory. Although it was also located in PEZA,
Pace Factory was not the location stipulated in the renewal policy. There being an
unconsented removal, the transfer was at PAP’s own risk. Consequently, it must suffer
the consequences of the fire. Thus, the Court agrees with the report of Cunningham
Toplis Philippines, Inc., an international loss adjuster which investigated the fire incident
at the Pace Factory, which opined that "[g]iven that the location of risk covered under the
policy is not the location affected, the policy will, therefore, not respond to this
loss/claim.”
What… is liability insurance?
An insurance that provides protection against claims resulting from injuries and damage to
people and/or property
What… is CTPL?
An Insurance protects the owner of the vehicle from financial obligations to anyone who is
injured or killed by the insured vehicle.
STRONGHOLD INSURANCE COMPANY, INCORPORATED vs INTERPACIFIC CONTAINER
SERVICES (G .R. No. 194328)
“Contrary to the claim of the petitioner; it miserably failed to prove the fact of intoxication during
the trial. Aside from the Medico Legal Certificate and the Pagpapatunay, which were stripped of
evidentiary value because of the dubious circumstances under which they were obtained, the
petitioner did not adduce other proof to justify the avoidance of the policy. It must be
emphasized that the RTC doubted the authenticity of the Medico Legal Certificate because of
the attendant alteration and tampering on the face of the document. In adopting the findings of
the trial court, the appellate court reiterated the evidentiary rule that the party alleging violation
of the provision of the contract bears the burden of proof to prove the same. The evident
tampering of the medico legal certificate necessitated the presentation by the petitioner of
additional evidence to buttress his claim.1âwphi1 For instance, petitioner could have adduced
affidavits of witnesses who were present at the scene of the accident to attest to the fact that the
driver was intoxicated. It did not. Upon the other hand, respondents duly established their right
to claim the proceeds of a validly subsisting contract of insurance. Such contract was never
denied.”
What… is surety?
is a very specialized line of insurance that is created whenever one party guarantees
performance of an obligation by another party. There are three parties to the agreement: · The
principal is the party that undertakes the obligation.

Stronghold Insurance Company, Inc. v. Republic-Asahi Glass Corporation (G.R. No. 147561)
“The surety's obligation is not an original and direct one for the performance of his own act, but
merely accessory or collateral to the obligation contracted by the principal. Nevertheless,
although the contract of a surety is in essence secondary only to a valid principal obligation, his
liability to the creditor or promisee of the principal is said to be direct, primary and absolute; in
other words, he is directly and equally bound with the principal”
Who… are the parties in an insurance contract?
Insured
The one who enters into an insurance contract and the owner of the policy.
The person, group, or organization whose property, health, life is covered by an insurance
contract.
Who… is an Assured?
the person who took insurance on another’s life.
What… are the rights of a policy holder?
Rights to a financially sound and viable insurance company.
Rights to access the company’s financial information.
Rights to be informed of the licensing status of the insurance company, its intermediaries and
agents.
Rights to be offered a duly approved insurance product.
Rights to be informed of the benefits, exclusions and other provisions in the policy
Right to receive a policy.
Right of confidentiality of Information.
Rights to efficient service
Rights to prompt and fair settlement of claims
Rights to seek assistance from insurance commission.
Insular life vs. Khu – GR no. 195176
“The insurer and the insured as contracting parties on equal footing is inaccurate at best.
Insurance contracts are wholly prepared by the insurer with vast amounts of experience in the
industry purposefully used to its advantage. More often than not, insurance contracts are
contracts of adhesion containing technical terms and conditions of the industry, confusing if at
all understandable to laypersons, that are imposed on those who wish to avail of insurance. As
such, insurance contracts are imbued with public interest that must be considered whenever the
rights and obligations of the insurer and the insured are to be delineated. Hence, in order to
protect the interest of insurance applicants, insurance companies must be obligated to act with
haste upon insurance applications, to either deny or approve the same, or otherwise be bound
to honor the application as a valid, binding, and effective insurance contract”
Who is an Insurer?
The party who assumes or accepts the risk of loss and undertakes for a consideration to
indemnify the insured or to pay him a certain sum on the happening of a specified contingency
or event.
Who… can be an insurer?
  Professional Reinsurer
 Foreign and Domestic Insurance Companies
 Partnerships
 Associations
 Cooperative
What… is required to transact insurance business in the Philippines?
A Certificate of Authority coming from the Insurance commission.
What are the qualifications to be granted with the certificate of authority?

 Possessed the required capital asset

 Certificate of compliance granted by the commissioner of insurance commission
When is the expiration of the certificate of authority?
The certificate would expire on the last day of December, 3 years following the date of its
issuance.
Who… is a beneficiary?
The designated person to receive the proceeds of the policy when risk attaches. He can be the
same person as the insured or another third party.
Third party beneficiary are not part of the contracting parties, but they can file an action against
the insurer in case of loss.
They beneficiary in the insurance contract is generally revocable.
When… does the beneficiary of the contract becomes irrevocable?
When expressly provided in the policy.
When… does the rights of the beneficiary forfeited?
When he is involved as Principal, accomplice or accessory in willfully bringing death to the
insured.
What are the ground for disqualification of beneficiary?

 Made by public officer by reason of his office.

 The person is guilty of concubinage or adultery
Heirs of Loreto C. Maramag vs. Eva Verna De Guzman (G.R. No. 181132)
“Petitioners are third parties to the insurance contracts with Insular and Grepalife and, thus, are
not entitled to the proceeds thereof. Accordingly, respondents Insular and Grepalife have no
legal obligation to turn over the insurance proceeds to petitioners. The revocation of Eva as a
beneficiary in one policy and her disqualification as such in another are of no moment
considering that the designation of the illegitimate children as beneficiaries in Loretos insurance
policies remains valid. Because no legal proscription exists in naming as beneficiaries the
children of illicit relationships by the insured, the shares of Eva in the insurance proceeds,
whether forfeited by the court in view of the prohibition on donations under Article 739 of the
Civil Code or by the insurers themselves for reasons based on the insurance contracts, must be
awarded to the said illegitimate children, the designated beneficiaries, to the exclusion of
petitioners. It is only in cases where the insured has not designated any beneficiary, or when the
designated beneficiary is disqualified by law to receive the proceeds, that the insurance policy
proceeds shall redound to the benefit of the estate of the insured.”
Philmacare vs. CA – GR 125678
“The health care agreement is in the nature of a contract of indemnity. Hence, payment should
be made to the party who incurred the expenses. It is not controverted that respondent paid all
the hospital and medical expenses. She is therefore entitled to reimbursement. The records
adequately prove the expenses incurred by respondent for the deceased’s hospitalization,
medication and the professional fees of the attending physician
GALLARDO vs MORALLES (GR L 12189)
The object of this statue was to enable a husband, when death deprived wife and children of his
support, to secure them from want and to prevent them from becoming a charge upon the
public. Necessities of the wife and children and the public interest are none the less if the death
of the husband be brought about by accident rather than by disease. The intent of the
legislature in the enactment of this statute would not be advanced by the construction of the law
upon which the petitioners insist.
ALPHA INSURANCE AND SURETY CO vs CASTOR (GR 198174)
it is a basic rule in the interpretation of contracts that the terms of a contract are to be construed
according to the sense and meaning of the terms which the parties thereto have used. In the
case of property insurance policies, the evident intention of the contracting parties, i.e., the
insurer and the assured, determine the import of the various terms and provisions embodied in
the policy. However, when the terms of the insurance policy are ambiguous, equivocal or
uncertain, such that the parties themselves disagree about the meaning of particular provisions,
the policy will be construed by the courts liberally in favor of the assured and strictly against the
insurer.
Other Parties
Trustee or agent
They are the ones who contract an insurance in behalf of the principal
Partners
Assignee of Life Insurance
Insurance agents and brokers