‘The Insurance

Code’
Policy
Section 60 to 66
By: Carlo Franco B. Rapay
 Section 60

“ An open policy is one in which the value of the thing

insured is not agreed upon, and the amount of the insurance
merely represents the insurer’s maximum liability. The value
of such thing insured shall be ascertained at the time of the
loss.”
Section 61- A valued policy is one which expresses
on its face an agreement that the thing insured
shall be valued at a specific sum.

• EFFECT OF VALUATION- In a valued policy, the valuation is

“conclusive between parties thereto in the adjustment of
either a partial or total loss, if the insured has some interest
at risk, and there is no fraud on his part.”
• LIFE INSURANCE IS A VALUATION POLICY- Unless the
interest of a person insured is susceptible of exact pecuniary
measurement, the measure of indemnity under a policy of
insurance upon life or health is the sum fixed in the policy.
 OPEN AND VALUED POLICIES
DISTINGUISHED
• 1. In open policy, the value of the thing insured is not
agreed upon in the policy, while in valued policy, the
parties have stipulated in the policy that the thing insured
is valued at a specific sum.
• 2. In open policy, upon occurrence of the loss, the insured
must prove the value of the thing insured while in valued
policy, proof of value of the thing after the loss is no
longer necessary.
 Section 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.

• RUNNING POLICY- It is also called “floating policy”. It is

intended to supplement specific insurance and to provide
indemnity for property which cannot be covered by
specific insurance because of its frequent change in
location and quantity. It is usually issued when stocks-in-
trade are insured which cannot be covered by specific
insurance.
 Section 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 (1) year from
the time when the cause of action accrues, is void.

• LIMITATION OF ACTION BY AGREEMENT- The parties to a

contract of insurance may validly agree that an action on the policy
should be brought within a limited period of time, provided such
period is not less than one year from the time the cause of action
accrues. If the period agreed upon should be less than 1 year from
the time the cause of action accrues, such agreement is void. The
stipulation in the policy that an action on the claim denied by the
insurer must be brought within the certain period of time from the
denial over the rules on prescription of actions, provided that the
agreed period is not less than one year from denial of the claim.
 COMPUTATION OF ONE YEAR
PERIOD
• The prescriptive period to bring suit in court under an
insurance policy begins to run from the date of insurer’s
rejection of the claim filed by the insured, the beneficiary or
any person claiming under an insurance contract. The
reason is that the prescriptive period must be counted from
the accrual of the cause of action. And the cause of action
accrues from the time the insurer rejects the claim of the
insured since , before such rejection, there in no necessity
for bringing suit against the insurer.
 Illustration
• Fulton Insurance, issued a fire insurance policy in favor of Sally
Ang covering stocks of general merchandise. The policy provided
that if the claim is rejected and no action is commenced within 12
months after such rejection, all the benefits would be forfeited.
On Dec 27 1954, the stocks were destroyed by fire and on Dec 30
1954 the insured claimed loss from insurer . On April 6, 1956 the
claim was denied and the notice of denial was received by insurer
on April 19, 1956. On May 6, 1958 the insured filed an action
against insurer. Has the action prescribed?
• WHEN NO PERIOD AGREED UPON- When no period for bringing the
action has agreed upon in the policy, or when such agreement is void, the
insured may bring the action within the prescriptive period provided for
in the Civil Code, that is 10 years in case the contract is written and
within six years in case of an oral contract from the time the cause of
action accrues.
• WHERE RECONSIDERATION WAS FILED- In case the claim was
denied by the insurer but the insured filed a petition for reconsideration ,
the prescriptive period should be counted from the date the claim was
denied at the first instance not from the denial of the petition for
reconsideration. To rule otherwise would give insured persons a scheme
or devise to waste time until any evidence which may be considered
against them is destroyed.
Section 64-No policy of insurance other than life shall be cancelled by
the insurer except upon prior notice thereof to the insured, and no
notice of cancellation shall be effective unless it is based on the
occurrence, after the effective date of the policy, of one or more of the
following:

(a) Non payment of premium;

(b) Conviction of a crime arising out of acts increasing the hazard insured against;
(c) Discovery of fraud or material misrepresentation;
(d) Discovery of wilful or reckless acts or omissions increasing the hazard insured
against;
(e) Physical changes in the property insured which result in the property becoming
uninsurable;
(f) Discovery of other insurance coverage that makes the total insurance in excess of
the value of the property insured; or
(g) A determination by the Commissioner that the continuation of the policy would
violate or would place the insurer in violation of this Code.
• This is a new provision intended to curb the practice of some
insurance companies of cancelling policies without justifiable
grounds. Prior to the adoption of the insurance code, it was the
practice on the part of some insurers to provide in the policy that
in may cancel the policy by giving notice of cancellation to the
insured. The cancellation were often times arbitrary and without
reasonable basis. The practice is terminated by this section.
• Under this section the cancellation should be based on any of the
grounds provided otherwise, the same would be ineffective.
 Section 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, or to his
broker provided the broker is authorized in writing by the policy
owner to receive the notice of cancellation on his behalf, and
shall state:

(a)Which of the grounds set forth in Section 64 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.
 Requirements:

1. Prior notice of cancellation to the insured;

2. Notice must be in writing, mailed or delivered to the

named insured at the address shown in the policy;

3. Notice must state which of the grounds set forth in Sec. 64

is relied upon and upon request of theinsured, the insurer
must furnish facts on which the cancellation is based;

4. Grounds should have existed after the effectivity date of

the policy
 NOTICE MAILED BUT NOT
RECEIVED.
• The notice of cancellation necessary to produce the effect
of terminating the contract must be actual notice. Thus a
notice of cancellation sent by mail, but not received by the
insured, is ineffective as cancellation.

• Actual receive of the notice of cancellation is absolutely

essential and the insurer could not merely rely on the
presumption of regularity in the performance of duty.
 PERSONAL NOTICE
NECESSARY

After cancelling the policy pursuant to Section 64 allowing

the same, notice of cancellation must be sent to the
insured himself not to some other person so as to enable
the insured to procure another insurance, otherwise the
cancellation is not valid.
 Section 66

• In case of insurance other than life, unless the insurer at least forty-five (45)
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 (1) year shall be considered as
if written for a term of one (1) year. Any policy written for a term longer
than one (1) year or any policy with no fixed expiration date shall be
considered as if written for successive policy periods or terms of one (1)
year.
• It gives the insured the option to renew property
insurance by the payment of the premium due on the
effective date of renewal unless at least forty five days
prior to the end of policy, the insurer gives notice of its
intention not to renew the policy.