9.
Beneficiary may or may not be a party
Part 1 - Insurance Sundiang (2017)
1. Contract of insurance is an agreement
whereby one undertakes for a
consideration to indemnify another
against loss, damage or liability arising
from unknown or contingent event.
2. Parties: insurer and insured; beneficiary
3. What may be insured against?
4. What is included in the phrase doing of
insurance business or transacting an
insurance business
(1) Making or proposing to make as
insurer any contract of insurance
(2) Surety as an occupation and not
merely incidental
(3) Any business equivalent to
foregoing
(4) Doing a business with intention to
avoid the provisions of the
5. If not so covered, insurance code will
not apply.
6. Insurance commissioner has now
adjudicatory power.
7. If it is a contract of agency, insurance
commissioner has no jurisdiction.
8. Parties:
to the contract of insurance.
10. The word minor was changed to person.
Upon the death of the insured, the
designated beneficiary, no longer a
minor is entitled to the proceeds.
11. Contract of insurance is not a gambling
or a gaming contract.
12. The contract is void, because it is a
contract between enemy countries. It is
prohibited under the Insurance Code
(Sec 7)
13. Insurable interest in property
14. Husband, wife, descendant,
15. Father has insurable interest over a son
who is no longer living in the house of
the father. The law does not distinguish
16. Employees are not covered (Life
insurance)
17. One in whom he depends for education
or support.
18. There is no blood relationship, but she
is dependent on him for education or
support. There is insurable interest
involved. It is insurable. He has interest
in the life of the person in whom she
depends for support.
19. A creditor has insurable interest in the
life of the debtor.
20. Upon the death of the debtor, the
obligation is not extinguished.
21. Life insurance vs property insurance.
In life insurance, a creditor has
insurable interest in the life of the
debtor.
As a rule in LI, as distinguished from PI,
insurable interest must exist at the time
of the effectivity of the contract,
although it may not exist thereafter.
However, by way of exception to that
rule, in the case of the creditor, if the
debtor was able to pay the loan before
he died, then the creditor will no longer
have insurable interest in the life of the
debtor. Although it is a life insurance, it
is an exception.
**
In PI, insurable interest in property, the
measure of insurable interest is he will
derive any pecuniary gain or benefit by
its preservation or suffer loss or damage
by its destruction.
22. A mere hope or expectancy is not
insurable. For it to be insurable, it must
be couple with an interest in the thing
from which the expectancy may arise.
Otherwise, it is not insurable.
23. Mortgagor – mortgagee
Unless otherwise provided by the
policy, when a property is mortgaged,
the mortgagor has interest in the
property mortgaged to the extent of
the amount of the value of the
property.
The creditor mortgagee also has
interest in the property up to the
amount of the loan.
So both mortgagor and mortgagee each
have insurable interest over the
property mortgaged.
24. In mortgage, upon failure of the debtor
to pay, a creditor cannot appropriate
the property in payment of the debt.
The value of the property is much more
than the amount of loan.
That stipulation is void. Automatic
appropriation is illegal. The remedy of
the creditor is foreclose the mortgage.
The remedy of the debtor is to redeem.
In fact, that can be transferred for
consideration.
17:28
25.
26.
27.
 28.
29.
30.
31.
32.
Part 2 - Insurance Sundiang (2017)
1. Presence of insurable interest
2. As a rule LI is not a contract of
indemnity, only a property insurance
device
3. It is a risk distributing device. Loss of
one is paid by many
4. All pays premium
5. It is an aleatory contract
6. In property insurance, the parties must
be considered
7. The insurer, insured, beneficiary
8. Beneficiary may or may not be a party
to the insurance.
9. If a person insures his own life, he can
designate any person as beneficiary
even if there is no insurable interest
If it is the insured who designates the
beneficiary, then the beneficiary
becomes a party to the contract.
10. Those who cannot give or receive
donations under the civil law cannot be
beneficiaries in the contract of
insurance. What is required only is
preponderance of evidence, not
conviction beyond reasonable doubt.
11. Under 739, the mistress cannot be a
beneficiary. The wife is also not entitled
because she was not designated as
beneficiary. One who is not party to the
contract is not bound to it. It takes
effect only as between the contracting
parties, their heirs or assigned.
12. Property insurance. – Insurable
interest must exist at the time of
insuring the property (effectivity of the
policy) and at the time of loss, though
not in the meantime.
Exceptions:
(1) Sec 21 - loss occuring after transfer
or change of interest
There was a change in the interest
in the property without
corresponding change in the
insurance. Neither may recover.
(2) Sec 22 -
The son may recover from insurer.
Although the insurance policy
remained in the name of the father,
it was not transferred to the son.
Contracts take effect only between
the contracting parties, their heirs,
successors and assignees
So the only will inherit it because he
is an heir.

(3) Sec 23
There are several properties in the
same compound. 5 houses owned
by one person. Houses A, B, C, D
and E. They were jointly insured
against fire for a period of 1 year.
After effectivity of policy, he sold
house A but retained houses B C D
and E
After sale of house A, house B was
damaged by fire. Can she recover?
Yes, because at the time of the loss,
she was still the owner.
(4) Sec 24
This would refer to co-ownership.
The law does not favor co-
ownership. It is not conducive to
the development of property.
It is difficult to agree on what
improvement is to be introduced to
the property.
***
3 co-owners of a property. Property
is worth 3M. they insured it jointly
with “I” company.
The exception will apply only when
there is a change of interest from
one co-owner to another co-owner,
not to a stranger.
The undivided share of 1/3 was
destroyed by fire.
The general rule will apply. The
exception will apply to sale from
one co-owner to another co-owner.
Not to a stranger. The general rule
applies, not the exception. There
can be no recovery.
If it was sold to a co-owner, there
can be recovery.
There was a change of interest, but
the interest is not inconsistent with
that of the insured.
Co-owner is originally a party to the
contract of insurance.
The buyer of the undivided share
was already originally a party to the
contract of insurance.
13. Should there be a doubt in the contract
of insurance, it shall be interpreted in
favor of the insured and strictly against
the insurer
14. Fine print rule
15. The insured cannot ask for a
modification or alteration of the terms
and conditions stated in the policy;
except in the nature of the property of
the property insured
16. If there is doubt or ambiguity, it shall be
interpreted liberally in favor of insured,
and strictly against the insurer.

17. The limit of liability of PAL in case
there is damage to any of baggage
loaded to the plane.
It is valid.
Because the passenger was requested
to read it but he did not read. It will not
be resolved liberally in favor of the
passenger, but strictly against him.
18. Different devices used for the purpose
of controlling risk and loss:
Concealment, misrepresentation,
warranties, exceptions, and conditions
C–M–W–E–C
19. The applicant did not have insurable
interest in the building but was willing
to pay premium.
Insurer agreed to issue the policy.
It is stated in the policy shall be
received as proof of insurable interest
of the insured. It is also stated that
although insurable interest is not
present, insurer will be liable.
In case of loss, is the insurer liable?
No. Those stipulations are void. They
are contrary to law. You cannot grant
insurable interest simply by stipulation
or agreement.
Although they agreed on those items,
such stipulation being contrary to law,
are void. Therefore, the insurer is not
liable. In fact, the insurer is required to
return the premiums paid.
20. Concealment.
21. Test of materiality. – Materiality is
determined not by the event but by the
probable and reasonable influence
upon the party to whom
communication is due in forming his
estimates of the advantages or
disadvantages of the proposed contract
or in making his inquiry.
22. A person applied for life insurance
policy. Although he was suffering from
serious ailment, but physically he
appears to be in perfect health. He
concealed to his insurer that he was
suffering from cancer of the lungs. The
policy was issued, the premiums were
paid. During the term of the policy, the
insured died in a plane crash.
Although there was no relation
between the cause of death and the
matter concealed, the insurer can deny
the claim. There is concealment of
material fact.
Materiality is determined not by the
event but by the probable and
reasonable influence upon the party to
whom communication is due in forming
 his estimates of the advantages or
disadvantages of the proposed contract
or in making his inquiry.
Had the insurer been informed that the
applicant is suffering from lung cancer,
chance are either the insurer will not
issue the policy or charge additional
premium.
23. Concealment whether intentional or
unintentional will entitle the injured
party to rescind the contract.
In other words, should there be a
material concealment (suffering from
serious ailment) whether intentional or
unintentional will entitle the injured
party to rescind the contract.
Because had the insurer been informed
of that fact, chances are either the
insurer will not issue the policy or
charge additional premium.
24. There are matters that are concealed
that may not unduly influence the
insurer in forming his estimates of the
advantage or disadvantage of issuing
the policy, or in making his inquiry.
Matters which are of common
knowledge even if not disclosed is not
material concealment. They are
presumed to be known by the insurer
A war going on between two countries
is presumed to be known by the
insurer. It is of public knowledge. There
is presumption that the insurer has
knowledge or notice of that fact. There
is no requirement that it be
communicated by the applicant.
25. An answer that appears to be
complete, but in reality incomplete
and untrue.
An answer which is untrue or false
The policy is not even signed by the
insured. It is the application form that is
signed by the insured. It is in the
application form that he is required to
provide his details and sign.
**
If no further question were asked by
the insurer other than “have you been
ever confined to the hospital”, insured
answered no. But it turned out that
insured was in fact hospitalized many
times.
Insured dies. Can the insurer deny the
claim on the ground that there was
concealment?
No, because the failure of the insurer to
ask further questions will constitute a
waiver of the right of the insurer to be
informed of those matters.
Insurer should have inquired further. It
cannot deny the claim.

26. At the time application was filed,
applicant did not suffer of any of the
ailments in the application form. But
while it is being processed and before
the policy is issued, he suffered from a
minor ailment. But because of the
modern medicine, he was able to
recover completely from the ailment
without informing anymore the
insurer. Policy was issued. Later on
insured died. Not because of that
ailment. Can insurer deny the claim?
Yes. Because although at the time the
policy was issued he no longer suffers
from any ailment, there was
concealment on the part of the insured.
Applicant should have informed the
insurer that he is suffering from an
ailment.
27. Representation
When application for life insurance is
filed, there are matters that are
required to communicate to the insurer
Test of materiality also applies.
The applicant is required to
communicate material information.
28. The purpose of representation is to
convince the other party to enter into
a contract. The moment the policy is
issued, no further representation is to
be made. The only exception is when
there was a change in the nature of the
property insured.
If at the time it was insured, it was used
for residential, but after policy is issued
the use was changed to commercial.
In order to ask for a refund for the
portion of the premium he paid, he
went to insurer and made that
representation (that it is still residential)
29. Future representation
To be performed after the issuance of
the policy
Failure on the part of insured to comply
with such requirement will be excused
if there is an agreement that the
building to be constructed (distance to
be observed), but later on there was an
alteration of the government (it
expanded the road), therefore the
applicant cannot anymore comply with
the requirement. The failure of the
insured to comply with the requirement
will not entitle the insurer to rescind.
**
Second, when the requirement
becomes unlawful
**
Third, the requirement becomes
impossible due to peculiar
circumstances. Insured will not be
required to comply with the
requirement.

30. Warranties are to be made by the
insured
**
Kinds: present and future
**
Breach of warranty will entitle the
insurer to rescind the contract.
**
Example: a warranty regarding the use
and condition of the property; a
warranty on certain matters and
information in relation to the property
insured.
A breach thereof will entitle the insurer
to rescind the contract.
31. Conditions
These can be conditions precedent or
subsequent.
Condition precedents are those
conditions to be performed prior to
issuance of the policy. Example is
payment of premium.
Condition subsequent are those to be
performed after the issuance of the
policy
**
If car was involved in an accident and it
was brought to the motor shop for
repair, but policy provides that before
repair there are requirements to be
complied with: police report containing
pictures of the damage car, where it
happened, how it happened, parties
involved, cost of repair.
These are conditions subsequent to be
performed by the insured in order to
make the insurer liable.
**
If there is a condition requiring the
insured to submit statement of a
certain person which should be duly
notarized. If insured submits an
ordinary statement which is not
notarized, can the insurer deny the
claim?
If there was an implied admission on
the part of the insurer on the validity of
the claim of the insured, he cannot
deny the claim
But if there are no other grounds by
which the insurer except that the
statement is not notarized, insurer can
deny the claim on that ground under
the law.
**
If there is a requirement in the policy
that there should be a statement to be
submitted by the insured, to be signed
by a specific person where the accident
happened, and there is no compliance,
 what is the effect in the claim of the
insured?
If it was a government who was
required to sign an ordinary statement,
claim cannot be deny. You do not
expect a governor to sign an ordinary
statement.
The insurer is deemed to have complied
with that requirement, even if the
government was not able to sign as
opposed to their agreement.
**
But if it is a statement coming from a
witness, then the signature is material
and therefore reasonable. Claim will be
denied for non-compliance of the
condition subsequent, if that is a
condition they agreed upon.
He cannot hold the insurer liable until
after insured is able to submit the
documents which are required as
condition subsequent. It has to be
complied with before the insurer as a
rule can be held liable.
32. The thing insured must be the
proximate cause of the loss.
Proximate cause does not mean it is the
nearest in point in time to the loss or
injury
Proximate cause is that cause which
sets other events in motion, without
any independent intervening cause,
from the time of the occurrence of the
event up to the occurrence of the loss.
**
Insurance against fire. The peril insured
against is fire. There was volcanic
eruption. There was lightning. The
lightning caused fire. Fire caused the
loss.
Here, fire was only the immediate
cause, not the proximate cause.
**
The peril insured against is the
proximate cause. But it can also be the
immediate cause. If only an immediate
cause, insurer is not liable. The thing
insured must be the proximate cause
of the loss.
**
Before the payment of the amount by
the insurer to the insured, can the
insured assign the claim to another
person?
Yes.
There was already an agreement. There
can be a substation. It can be assigned.
It can be transferred to another person.
Claim against an insurance company
can be assigned provided that there is
already an agreement between the
insured and insurer that he will receive
a claim.

33. In times of calamities, we become
stronger. More adrenaline pumps into
the blood stream.
34. A foreigner corporation can sue in the
Philippines on isolated transactions. It
need not secure a permit to do business
here to so especially if it is not engaged
in business in the Philippines.
It is not the lack of a license, but doing
business without a license that will bar
the foreign corporations from access in
our courts and administrative agencies.
A foreign corporation like Melon Bank is
not doing business in the Philippines so
it can sue.
35. The couple is not correct. Assuming the
money was there, it will not exonerate
them from their obligation. Money is
generic. Genus never perishes.
36. Houses A and B. distant of light and
view. At least 2 meters. A total of 4
meters from House of A to B. House of
A is insured. The owner of house of A
insured not only his house but also its
contents, except money and jewelry.
The policy requires owner of house A to
exert effort to save contents of the
house in case of fire. But when the
things are out of the house, the things
were lost.
Because of timely arrival of firemen, the
fire was controlled
House A was not burned at all, but the
items taken out were stolen. They were
stolen.
The insurer is still liable. In this
situation, the owner of the house is in a
no win situation. The phrase “which
would have otherwise caused the loss”
should be interpreted in favor of the
insured.
37.
38.
39.
40.
41.
Part 3 – Insurance Sundiang (2017)
1. Insurer can no longer question the
policy after the lapse of two years from
the date of issuance or last
reinstatement. It shall become
incontestable.
2. Exception: non-payment of premiums,
fraudulent act on the part of the
insured.

3. Law does not prohibit double insurance.
Same insured but there are two or
more insurance companied.
But insurers may require the applicant
to inform them if the property is
insured with other insurance company.
It must be remembered that the
contract of insurance is not for profit or
gain. It is not a contract of indemnity.
Insured cannot be allowed to recover
more than the value of the property
insured.
4. Failure to settle will make the insurer
liable to pay interest twice the value
prescribed by the monetary board.
5. He may either claim from his insurer,
or from the party at fault. He cannot
recover from both since it is a contract
of indemnity. But since it is tedious for
him to recover from the party at fault,
he may opt to recover from the insurer
If insurer (subrogee in equity) pay him,
there will be subrogation.
This will only apply when it is the fault
of the other party, not the insured.
6. He signed a quit claim releasing the
woman who was at fault. When the
insurer learned it, the insurer denied
the claim. Was the insurer correct?
Yes, because the right that should have
been transferred to the insurer was
impaired because of the act of releasing
the party at fault.
7. General rule: subrogation. 3
Exceptions:
(1) Release of party at fault.
(2) With respect to insured’s
participation otherwise known as
contribution for betterment
(3) If the insurer indemnifies the
insured, even if the claim is
fraudulent
8. Exception to subrogation:
Insured’s Participation
There is no subrogation with respect to
this amount. Because the insured
himself cannot recover it from the
insurer
But insured can recover it from the
party at fault.
9. If the insurer indemnifies the insured,
even if the claim is fraudulent. That is
another exception to subrogation.
10. Co-insurance clause. - requirements
and effects

11. Deviation. – may be proper or
improper.
It is proper if it is made to save human
lives. It is proper when it is made in
honest to goodness belief in the
warnings of PAGASA, made in
circumstances wherein captain has no
control
14. General average loss
12. Abandonment
General average loss
Particular average loss
As a rule, insurer is not liable in case of
PAL. Only in case of GAL
The amount of contribution of the
parties is not the amount of insurance
Even if properties are not insured, it
does not mean that the owners are not
required to contribute for the loss.
The value of the property is the basis
for the contribution.
Even the parties whose interests were
sacrificed will share in the loss.
As a matter of fact if those properties
are insured, the insurer will share in the
loss.
13. Situation: the vessel and the cargoes
are fully insured
But the basis in determining the
amount of contribution is not the
amount of the insurance but the value
of the property.
If they are fully insured, there is no
difference in the value of the property
and the amount of the insurance. But
the properties need not be insured in
order for the parties benefited to
contribute.
The parties involved are: the owner of
the vessel which is worth 40M.
Loaded in the vessel are cargoes
belonging to A worth 10M, belonging to
B worth 5M, belong to C worth 5M
During the voyage the vessel there was
a strong typhoon. The captain decided
to jettisoned the cargo belonging to A
to lighten the vessel.
Those belonging to B and C arrived
safely in the destination. There is GAL.
The basis in determining the amount of
contribution is not the amount of the
insurance but the value of the property
The assumption here is that they are
fully insured.
So the basis in arriving the amount of
compensation is the amount of
insurance
 But there are cases when the goods are amount spent for the hiring of the
not insured. experts.

Here, they will have to share in the

value of the goods lost by A
17. The law requires
Total value x GAL

O – 40M / total value (60) = 4/6 or 2/3

B – 5M / total value (60) = 1/6 18.
C – 5M / total value (60) = 1/6 19.
20.
They will proportionately contribute 21.

2/3 of 10 million will be share by O. 1/6

of 10M will each be contributed by B
and C.

15. Particular average loss

16. Marine Insurance

While in property insurance, being a

contract of indemnity, the amount to be
paid is not more than the value of the
property.

An exception is:

(1) Captain and members of the crew

exerted effort to refloat the vessel,
they incurred expenses. They hired
the services of experts from
London. But they were not able to
refloat it. In marine insurance, the
liability of the insurer (assuming the
vessel is fully insured) is not only
the value of the vessel but also the