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INSURANCE CODE (P.D. No. 1460) I. GENERAL CONCEPTS CONTRACT OF INSURANCE An agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event. (Sec. 2, par. 2, IC) “DOING AN INSURANCE BUSINESS OR TRANSACTING AN INSURANCE BUSINESS” (Sec. 2, par. 4) 1. Making or proposing to make, as insurer, any insurance contract;
2. 3. 4.
Making or proposing to make, as surety, any contract of suretyship as a vocation, not as a mere incident to any other legitimate business of a surety; Doing any insurance business, including a reinsurance business; Doing or proposing to do any business in substance equivalent to any of the foregoing
II. CHARACTERISTICS OF AN INSURANCE CONTRACT (The Insurance Code of the Philippines Annotated, Hector de Leon, 2002 ed.) 1. Consensual – it is perfected by the meeting of the minds of the parties. 2. Voluntary – the parties may incorporate such terms and conditions as they may deem convenient. 3. Aleatory – it depends upon some contingent event. 4. Unilateral – imposes legal duties only on the insurer who promises to indemnify in case of loss. 5. Conditional – It is subject to conditions the principal one of which is the happening of the event insured against. 6. Contract of indemnity – Except life and accident insurance, a contract of insurance is a contract of indemnity whereby the insurer promises to make good only the loss of the insured.
Personal – each party having in view the character, credit and conduct of the other.
REQUISITES OF A CONTRACT OF INSURANCE (The Insurance Code of the Philippines Annotated, Hector de Leon, 2002 ed.) 1. A subject matter which the insured has an insurable interest. 2. Event or peril insured against which may be any future contingent or unknown event, past or future and a duration for the risk thereof. 3. A promise to pay or indemnify in a fixed or ascertainable amount. 4. A consideration known as “premium”. 5. Meeting of the minds of the parties. 5 CARDINAL PRINCIPLES IN INSURANCE 1. Insurable Interest 2. Principle of Utmost Good Faith An insurance contract requires utmost good faith (uberrimae fidei) between the parties. The applicant is enjoined to disclose any material fact, which he knows or ought to know. Reason: An insurance contract is an aleatory contract. The insurer relies on the representation of the applicant, who is in the best position to know the state of his health. 3. Contract of Indemnity It is the basis of all property insurance. The insured who has insurable interest over a property is only entitled to recover the amount of actual loss sustained and the burden is upon him to establish the amount of such loss (Reviewer on Commercial Law, Professors Sundiang and Aquino) Rules: a. Applies only to property insurance except when the creditor insures the life of his debtor. b. Life insurance is not a contract of indemnity. c. Insurance contracts are not wagering contracts. (Sec. 4) 4. Contract of Adhesion (Fine Print Rule) Most of the terms of the contract do not result from mutual negotiations between the parties as they are prescribed by the insurer in final printed form to which the insured may “adhere” if he chooses but which he cannot change. (Rizal Surety and Insurance Co., vs. CA, 336 SCRA 12) 5. Principle of Subrogation It is a process of legal substitution where the insurer steps into the shoes of the insured and he avails of the latter’s rights against the wrongdoer at the time of loss. The principle of subrogation is a normal incident of indemnity insurance as a legal effect of payment; it inures to the insurer without any formal assignment or any express stipulation to that effect in the policy. Said right is not dependent upon nor does it grow out of any private contract. Payment to the insured makes the insurer a subrogee in equity. (Malayan Insurance Co., Inc. v. CA, 165 SCRA 536; see also Art. 2207, NCC) Purposes: (The Insurance Code of the Philippines Annotated, Hector de Leon, 2002 ed.) 1. To make the person who caused the loss legally responsible for it. 2. To prevent the insured from receiving a double recovery from the wrongdoer and the insurer. 3. To prevent tortfeasors from being free from liabilities and is thus founded on considerations of public policy. Rules: 1. Applicable only to property insurance.
2. The insurer can only recover from the third person what the insured could have recovered. 3. There can be no subrogation in cases: a. Where the insured by his own act releases the wrongdoer or third party liable for the loss or damage; b. Where the insurer pays the insured the value of the loss without notifying the carrier who has in good faith settled the insured’s claim for loss; c. Where the insurer pays the insured for a loss or risk not covered by the policy. (Pan Malayan Insurance Company v. CA, 184 SCRA 54) d. In life insurance e. For recovery of loss in excess of insurance coverage CONSTRUCTION OF INSURANCE CONTRACT The ambiguous terms are to be construed strictly against the insurer, and liberally in favor of the insured. However, if the terms are clear, there is no room for interpretation. (Calanoc vs. Court of Appeals, 98 Phil. 79) III. DISTINGUISHING ELEMENTS OF AN INSURANCE CONTRACT 1. The insured possesses an insurable interest susceptible of pecuniary estimation; 2. The insured is subject to a risk of loss through the destruction or impairment of that interest by the happening of designated perils; 3. The insurer assumes that risk of loss; 4. Such assumption is part of a general scheme to distribute actual losses among a large group or substantial number of persons bearing somewhat similar risks; and 5. The insured makes a ratable contribution (premium) to a general insurance fund. A contract possessing only the first 3 elements above is a risk-shifting device. If all the elements, it is a riskdistributing device. (The Insurance Code of the Philippines Annotated, Hector de Leon, 2002 ed.) IV. PERFECTION OF AN INSURANCE CONTRACT An insurance contract is a consensual contract and is therefore perfected the moment there is a meeting of minds with respect to the object and the cause or consideration. What is being followed in insurance contracts is what is known as the “cognition theory”. Thus, “an acceptance made by letter shall not bind the person making the offer except from the time it came to his knowledge”. (Enriquez vs. Sun Life Assurance Co. of Canada, 41 Phil. 269) Binding Receipt A mere acknowledgment on behalf of the company that its branch office had received from the applicant the insurance premium and had accepted the application subject to processing by the head office. Cover Note (Ad Interim) 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. Purpose: It is intended to give temporary insurance protection coverage to the applicant pending the acceptance or rejection of his application. Duration: Not exceeding 60 days unless a longer period is approved by Insurance Commissioner (Sec. 52). Riders Printed stipulations usually attached to the policy because they constitute additional stipulations between the parties. (Ang Giok Chip vs. Springfield, 56 Phil. 275) 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. (C. Alvendia, The Law of Insurance in the Philippines, 1968 ed.) Clauses An agreement between the insurer and the insured on certain matter relating to the liability of the insurer in case of loss. (Prof. De Leon, p.188) Endorsements Any provision added to the contract altering its scope or application. (Prof. De Leon, p.188) POLICY OF INSURANCE The written instrument in which a contract of insurance is set forth. (Sec. 49) Contents: (Sec. 51)
1. 2. 3. 4. 5. 6. 7.
Parties Amount of insurance, except in open or running policies; Rate of premium; Property or life insured; Interest of the insured in the property if he is not the absolute owner; Risk insured against; and Duration of the insurance.
Persons entitled to recover on the policy (sec. 53): The insurance proceeds shall be applied exclusively to the proper interest of the person in whose name or to whose benefit it is made, unless otherwise specified in the policy. Kinds: 1. OPEN POLICY – value of thing insured is not agreed upon, but left to be ascertained in case of loss. (Sec. 60) The actual loss, as determined, will represent the total indemnity due the insured from the insurer except only that the total indemnity shall not exceed the face value of the policy. (Development Insurance Corp. vs. IAC, 143 SCRA 62) 2. VALUED POLICY – definite valuation of the property insured is agreed by both parties, and written on the face of policy. (Sec. 61) In the absence of fraud or mistake, the agreed valuation will be paid in case of total loss of the property, unless the insurance is for a lower amount. 3. RUNNING POLICY – contemplates successive insurances and which provides that the object of the policy may from time to time be defined (Sec. 62) V. TYPES OF INSURANCE CONTRACTS 1. Life insurance a. Individual life (Secs. 179–183, 227) b. Group life (Secs. 50, last par., 228) c. Industrial life (Secs. 229–231) 2. Non-life insurance a. Marine (Secs. 99–166) b. Fire (Secs. 167–173) c. Casualty (Sec. 174) 3. Contracts of bonding or suretyship (Secs. 175–178) Note: 1. Health and accident insurance are either covered under life (Sec. 180) or casualty insurance. (Sec. 174). 2. Marine, fire, and the property aspect of casualty insurance are also referred to as property insurance. VI. PARTIES TO INSURANCE CONTRACT
Insurer - Person who undertakes to indemnify another. For a person to be called an insurance agent, it is necessary that he should perform the function for compensation. (Aisporna vs. CA, 113 SCRA 459) 2. Insured - The party to be indemnified upon the occurrence of the loss. He must have capacity to contract, must possess an insurable interest in the subject of the insurance and must not be a public enemy. A public enemy- a nation with whom the Philippines is at war and it includes every citizen or subject of such nation. 3. Beneficiary - A person designated to receive proceeds of policy when risk attaches. Rules in the designation of the beneficiary: a. LIFE
A person who insures his own life can designate any person as his beneficiary, whether or not the beneficiary has an insurable interest in the life of the insured subject to the limitations under Art. 739 and Art. 2012 of the NCC. Reason: in essence, a life insurance policy is no different form a civil donation insofar as the beneficiary is concerned. Both are founded on the same consideration of liberality. (Insular Life vs. Ebrado, 80 SCRA 181)
A person who insures the life of another person and name himself as the beneficiary must have an insurable interest in such life. (Sec. 10) iii. As a general rule, the designation of a beneficiary is revocable unless the insured expressly waived the right to revoke in the policy. (Sec. 11) iv. The interest of a beneficiary in a life insurance policy shall be forfeited when the beneficiary is the principal accomplice or accessory in willfully bringing about the death of the insured in which event, the nearest relative of the insured shall receive the proceeds of said insurance if not otherwise disqualified. (Sec. 12) b. PROPERTY The beneficiary of property insurance must have an insurable interest in such property, which must exist not only at the time the policy takes effect but also when the loss occurs. (Sec. 13 and 18). Effects of Irrevocable Designation Of Beneficiary Insured cannot:
1. 2. 3. 4. 5.
Assign the policy Take the cash surrender value of the policy Allow his creditors to attach or execute on the policy; Add new beneficiary; or Change the irrevocable designation to revocable, even though the change is just and reasonable.
The insured does not even retain the power to destroy the contract by refusing to pay the premiums for the beneficiary can protect his interest by paying such premiums for he has an interest in the fulfillment of the obligation. (Vance, p. 665, cited in de Leon, p. 101, 2002 ed.) VII. INSURABLE INTEREST A. In General A person has an insurable interest in the subject matter if he is so connected, so situated, so circumstanced, so related, that by the preservation of the same he shall derive pecuniary benefit, and by its destruction he shall suffer pecuniary loss, damage or prejudice. B. Life Every person has an insurable interest in the life and health: a. of himself, of his spouse and of his children; b. of any person on whom he depends wholly or in part for education or support; c. of any person under a legal obligation to him to pay money or respecting property or services, of which death or illness might delay or prevent performance; and d. of any person upon whose life any estate or interest vested in him depends. (Sec. 10) When it should exist: When the insurance takes effect; not thereafter or when the loss occurs. Amount: GENERAL RULE: There is no limit in the amount the insured can insure his life. EXCEPTION: In a creditor-debtor relationship where the creditor insures the life of his debtor, the limit of insurable interest is equal to the amount of the debt. Note: If at the time of the death of the debtor the whole debt has already been paid, the creditor can no longer recover on the policy because the principle of indemnity applies. C. Property Every interest in property whether real or personal, or any relation thereto, or liability in respect thereof, of such nature that the contemplated peril might directly damnify the insured (Sec. 13), which may consist in: 1. an existing interest; 2. any inchoate interest founded on an existing interest; or 3. an expectancy coupled with an existing interest in that out of which the expectancy arises. (Sec. 14) When it should exist: When the insurance takes effect and when the loss occurs, but need not exist in the meantime. Amount: The measure of insurable interest in property is the extent to which the insured might be damnified by loss or injury thereof. (Sec. 17) INSURABLE INTEREST IN LIFE Must exist only at the time the policy takes effect and need not exist at the time of loss Unlimited except in life insurance effected by creditor on life of debtor.
INSURABLE INTEREST IN PROPERTY Must exist at the time the policy takes effect and when the loss occurs Limited to actual value of interest in property insured.
The expectation of benefit to be derived from the continued existence of life need not have any legal basis whatever. A reasonable probability is sufficient without more.
An expectation of a benefit to be derived from the continued existence of the property insured must have a legal basis.
The beneficiary need not have an insurable interest over the life of the insured if the insured himself secured the policy. However, if the life insurance was obtained by the beneficiary, the latter must have insurable interest over the life of the insured.
The beneficiary must have insurable interest over the thing insured.
SPECIAL CASES 1. In case of a carrier or depositary A carrier or depository of any kind has an insurable interest in a thing held by him as such, to the extent of his liability but not to exceed the value thereof (Sec. 15) 2. In case of a mortgaged property The mortgagor and mortgagee each have an insurable interest in the property mortgaged and this interest is separate and distinct from the other. a. Mortgagor – As owner, has an insurable interest therein to the extent of its value, even though the mortgage debt equals such value. The reason is that the loss or destruction of the property insured will not extinguish the mortgage debt. b. Mortgagee – His interest is only up to the extent of the debt. Such interest continues until the mortgage debt is extinguished. The lessor cannot be validly a beneficiary of a fire insurance policy taken by a lessee over his merchandise, and the provision in the lease contract providing for such automatic assignment is void for being contrary to law and public policy. (Cha vs. Court of Appeals, 227 SCRA 690)
STANDARD OR UNION MORTGAGE CLAUSE
OPEN OR LOSS PAYABLE MORTGAGE CLAUSE
Subsequent acts of the mortgagor cannot affect the rights of the assignee
Acts of the mortgagor affect the mortgagee. Reason: Mortgagor does not cease to be a party to the contract. (Secs. 8 and 9)
Effects of Loss Payable Clause a. The contract is deemed to be upon the interest of the mortgagor; hence, he does not cease to be a party to the contract. b. Any act of the mortgagor prior to the loss, which would otherwise avoid the insurance affects the mortgagee even if the property is in the hands of the mortgagee. c. Any act, which under the contract of insurance is to be performed by the mortgagor, may be performed by the mortgagee with the same effect. d. In case of loss, the mortgagee is entitled to the proceeds to the extent of his credit. e. Upon recovery by the mortgagee to the extent of his credit, the debt is extinguished. In case a mortgagee insures his own interest and a loss occurs, he is entitled to the proceeds of the insurance but he is not allowed to retain his claim against the mortgagor as the claim is discharged but it passes by subrogation to the insurer to the extent of the money paid by such insurer. (Palileo vs. Cosio) VIII. RISK What may be insured against: 1. Future contingent event resulting in loss or damage – Ex. Possible future fire 2. Past unknown event resulting in loss or damage – Ex. Fact of past sinking of a vessel unknown to the parties 3. Contingent liability – Ex. Reinsurance IX. PREMIUM PAYMENTS Consideration paid an insurer for undertaking to indemnify the insured against a specified peril. Basis of the right of the insurer to collect premiums: Assumption of risk.
GENERAL RULE: No policy issued by an insurance company is valid and binding until actual payment of premium. Any agreement to the contrary is void. (Sec. 77) EXCEPTIONS: 1. In case of life or industrial life insurance, when the grace periods applies; (Sec. 77) 2. When the insurer makes a written acknowledgment of the receipt premium; (Sec. 78) 3. Section 77 may not apply if the parties have agreed to the payment of the premium in installments and partial payment has been made at the time of the loss. (Makati Tuscany Condominium Corp. v. CA, 215 SCRA 462) 4. Where a credit term has been agreed upon. (UCPB vs. Masagana Telemart, 308 SCRA 259) 5. Where the parties are barred by estoppel. (UCPB vs. Maagana Telemart, 356 SCRA 307) Section 77 merely precludes the parties from stipulating that the policy is valid even if the premiums are not paid. (Makati Tuscany Condominium Corp. v. CA, 215 SCRA 462) Effect of Acknowledgment of Receipt of Premium in Policy: Conclusive evidence of its payment, so far as to make the policy binding, notwithstanding any stipulation therein that it shall not be binding until the premium is actually paid. (Sec. 78)
ENTITLEMENT OF INSURED TO RETURN OF PREMIUMS PAID A. Whole:
If the thing insured was never exposed to the risks insured against; (Sec. 79) 2. If contract is voidable due to the fraud or misrepresentation of insurer or his agents; (Sec. 81) 3. If contract is voidable because of the existence of facts of which the insured was ignorant without his fault; (Sec. 81) 4. When by any default of the insured other than actual fraud, the insurer never incurred liability; (Sec. 81) 5. When rescission is granted due to the insurer’s breach of contract. (Sec. 74)
B. Pro rata: 1. When the insurance is for a definite period and the insured surrenders his policy before the termination thereof; Exceptions: a. policy not made for a definite period of time b. short period rate is agreed upon c. life insurance policy 2. When there is over-insurance (Sec. 82); Instances when premiums are not recoverable: 1. When the risk has already attached and the risk is entire and indivisible. 2. In life insurance. 3. When the contract is rescindable or rendered void ab initio by the fraud of the insured. 4. When the contract is illegal and the parties are in pari delicto. PREMIUM
Levied and paid to meet anticipated losses.
Collected to meet actual losses.
Payment is not enforceable against the insured.
Payment is enforceable once levied unless otherwise agreed upon.
Not a debt.
It becomes a debt once properly levied unless otherwise agreed.
X. TRANSFER OF POLICY 1. Life Insurance It can be transferred even without the consent of the insurer except when there is a stipulation requiring the consent of the insurer before transfer. (Sec. 181) Reason: The policy does not represent a personal agreement between the insured and the insurer. 2. Property insurance It cannot be transferred without the consent of the insurer. Reason: The insurer approved the policy based on the personal qualification and the insurable interest of the insured. 3. Casualty insurance It cannot be transferred without the consent of the insurer. (Paterson cited in de Leon p. 82) Reason: The moral hazards are as great as those of property insurance. CHANGE OF INTEREST IN THE THING INSURED The mere (absolute) transfer of the thing insured does not transfer the policy, but suspends it until the same person becomes the owner of both the policy and the thing insured. (Sec. 58) Reason: Insurance contract is personal. GENERAL RULE: A change of interest in any part of a thing insured unaccompanied by a corresponding change of interest in the insurance suspends the insurance to an equivalent extent, until the interests in the thing and the interest in the insurance are vested in the same person. (Sec. 20)
In life, health and accident insurance.(Sec. 20);
Change in interest in the thing insured after occurrence of an injury which results in a loss. (Sec. 21); 3. Change in interest in one or more of several distinct things separately insured by one policy. (Sec. 22); 4. Change of interest, by will or succession, on the death of the insured. (Sec. 23); 5. Transfer of interest by one of several partners, joint owners, or owners in common, who are jointly insured, to others. (Sec. 24); 6. When a policy is so framed that it will inure to the benefit of whomsoever, during the continuance of the risk, may become the owner of the interest insured. (Sec. 57); 7. When there is an express prohibition against alienation in the policy, in case of alienation, the contract of insurance is not merely suspended but avoided. (Art. 1306, NCC). XI. ASCERTAINMENT AND CONTROL OF RISK AND LOSS A. Four Primary Concerns of the Parties: 1. Correct estimation of the risk; 2. Precise delimitation of the risk;
3. Control of the risk; 4. Determining whether a loss occurred and if so, the amount of such loss. B. Devices used for ascertaining and controlling risk and loss: 1. Concealment – A neglect to communicate that which a party knows and ought to communicate (Sec. 26) Requisites: a. A party knows a fact which he neglects to communicate or disclose to the other. b. Such party concealing is duty bound to disclose such fact to the other. c. Such party concealing makes no warranty as to the fact concealed. d. The other party has not the means of ascertaining the fact concealed. e. Material Effects: Entitles insurer to rescind, even if the death or loss is due to a cause not related to the concealed matter (Sec. 27). Note: Good Faith is not a defense in concealment. Sec. 27 clearly provides that, “the concealment whether intentional or unintentional entitles the injured party to rescind the contract of insurance.” Test of Materiality: Determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due, in forming his estimate of the advantages of the proposed contract, or in making his inquiries (Sec. 31). Exception to Sec. 31: a. Incontestability clause b. Matters under Sec.110 (marine insurance) The waiver of medical examination in a non-medical insurance contract renders even more material the information required of the applicant concerning the previous conditions of health and diseases suffered. (Sunlife v. Sps. Bacani, 246 SCRA 268). The right to information of material facts may be waived, either by the terms of the insurance or by neglect to make inquiries as to such facts where they are distinctly implied in other facts of which information is communicated. (Sec.33) Where matters of opinion or judgment are called for, answers made in good faith and without intent to deceive will not avoid the policy even though they are untrue. Reason: The insurer cannot rely on those statements. He must make further inquiry. (Philamcare Health Systems vs. CA, G.R. No. 125678, March 18, 2002). 2. Representations – Factual statements made by the insured at the time of, or prior to, the issuance of the policy to give information to the insurer and induce him to enter into the insurance contract. They are considered an active form of concealment. Requisites of a false representation (misrepresentation): a. The insured stated a fact which is untrue. b. Such fact was stated with knowledge that it is untrue and with intent to deceive or which he states positively as true without knowing it to be true and which has a tendency to mislead. c. Such fact in either case is material to the risk. Characteristics: a. It is not a part of the contract but merely a collateral inducement to it. b. It may be oral or written. c. It is made at the same time of issuing the policy or before but not after. d. It may be altered or withdrawn before the insurance is effected but not afterwards. e. It always refers to the date the contract goes into effect. Kinds: a. AFFIRMATIVE – affirmation of a fact when the contract begins; and b. PROMISSORY – promise to be performed after policy was issued. Effect of Misrepresentation: the injured party is entitled to rescind from the time when the representation becomes false. Test of Materiality: Same as that in concealment. Where the insured merely signed the application form and made the agent of the insurer fill the same for him, it was held that by doing so, the insured made the agent of the insurer his own agent and he was responsible for his acts for that purpose. (Insular Life Assur. Co. vs. Feliciano, 74 Phil. 469) 3. Warranties – Statement or promise by the insured set forth in the policy or by reference incorporated therein, the untruth or non-fulfillment of which in any respect, and without reference to whether insurer was in fact prejudiced by such untruth or non-fulfillment, renders the policy voidable by the insurer. Purpose: To eliminate potentially increasing hazards which may either be due to the acts of the insured or to the change to the condition of the property. Kinds: a. EXPRESS – an agreement expressed in a policy whereby the insured stipulates that certain facts relating to the risk are or shall be true, or certain acts relating to the same subject have been or shall be done.
b. IMPLIED - it is deemed included in the contract although not expressly mentioned. Example: In marine insurance, seaworthiness of the vessel. Effects of breach of warranty: a. Material GENERAL RULE: Violation of material warranty or of a material provision of a policy will entitle the other party to rescind the contract. (Sec. 74) EXCEPTIONS: a. Loss occurs before the time of performance of the warranty. b. The performances becomes unlawful at the place of the contract. c. Performance becomes impossible. (Sec. 73) b. Immaterial (ex. Other insurance clause) GENERAL RULE: It will not avoid the policy. EXCEPTION: When the policy expressly provides or declares that a violation thereof will avoid it. (Sec. 75) WARRANTY
Part of the contract
Mere collateral inducement
Written on the policy, actually or by reference
May be written in the policy or may be oral.
Must be proved to be material
Must be strictly complied with
Requires only substantial truth and compliance
4. Conditions – Events signifying in its broadest sense either an occurrence or a non-occurrence that alters the previously existing legal relations of the parties to the contract. They may be conditions precedent or conditions subsequent. Effect of breach: a. Condition precedent – prevents the accrual of cause of action b. Condition subsequent – avoids the policy or entitles the insurer to rescind The insurer may also protect himself against fraudulent claims of loss and this he attempts to do by inserting in the policy various conditions which take the form of conditions precedent. For instance, there are conditions requiring immediate notice of loss or injury and detailed proofs of loss within a limited period. 5. Exceptions – Provisions that may specify excepted perils. It makes more definite the coverage indicated by the general description of the risk by excluding certain specified risk that otherwise would be included under the general language describing the risks assumed. Effect: Limit the coverage of the contract. RESCISSION Grounds: A. Concealment B. Misrepresentation C. Breach of material warranty D. Breach of a condition subsequent Waiver of the right to rescind: Acceptance of premium payments despite the knowledge of the ground for rescission. (Sec. 45) Limitations on the right of the insurer to rescind: 1. Non-life – such right must be exercised prior to the commencement of an action on the contract; 2. Life – such right must be availed of during the first two years from the date of issue of policy or its last reinstatement; prior to “incontestability.” (Sec. 48) CANCELLATION OF NON-LIFE INSURANCE POLICY Right of the insurer to abandon the contract on the occurrence of certain grounds after the effectivity date of a non-life policy. Grounds:
1. 2. 3. 4. 5. 6.
Non-payment of premium; Conviction of a crime out of acts increasing the hazard insured against; Discovery of fraud or material misrepresentation; Discovery of willful or reckless acts of omissions increasing the hazard insured against; Physical changes in property making the property uninsurable; and
Determination by the Insurance Commissioner that the continuation of the policy would violate the Insurance Code. (Sec. 64) Requirements:
1. 2. 3. 4.
Prior notice of cancellation to the insured; Notice must be in writing, mailed or delivered to the named insured at the address shown in the policy; Notice must state which of the grounds set forth in Sec. 64 is relied upon and upon request of the insured, the insurer must furnish facts on which the cancellation is based; Grounds should have existed after the effectivity date of the policy.
XII. INCONTESTABILITY CLAUSE Clause in life insurance policy that stipulates that the policy shall be incontestable after a stated period. Requisites: 1. Life insurance policy 2. Payable on the death of the insured 3. It has been in force during the lifetime of the insured for a period of at least two years from the date of its issue or of its last reinstatement Note: The period of 2 years may be shortened but it cannot be extended by stipulation. Incontestability only deprives the insurer of those defenses which arise in connection with the formation and operation of the policy prior to loss. (Prof. De Leon, p. 173 citing Wyatt and Wyatt, p. 878)
BARRED DEFENSES OF THE INSURER Policy is void ab initio Policy is rescindable by reason of the fraudulent concealment or misrepresentation of the insured or his agent
DEFENSES NOT BARRED 1. That the person taking the insurance lacked insurable interest as required by law; 2. That the cause of the death of the insured is an excepted risk; 3. That the premiums have not been paid (Secs. 77, 227[b], 228[b], 230[b]); 4. That the conditions of the policy relating to military or naval service have been violated (Secs. 227[b], 228[b]); 5. That the fraud is of a particularly vicious type; 6. That the beneficiary failed to furnish proof of death or to comply with any condition imposed by the policy after the loss has happened; or 7. That the action was not brought within the time specified.
XIII. A. OVER-INSURANCE – results when the insured insures the same property for an amount greater than the value of the property with the same insurance company. Effect in case of loss: 1. The insurer is bound only to pay to the extent of the real value of the property lost; 2. The insured is entitled to recover the amount of premium corresponding to the excess in value of the property; B. DOUBLE INSURANCE – exists where same person is insured by several insurers separately in respect to same subject and interest. (Sec. 93) Requisites: 1. Person insured is the same; 2. Two or more insurers insuring separately; 3. Subject matter is the same; 4. Interest insured is also the same; 5. Risk or peril insured against is likewise the same. Effects: Where double insurance is allowed, but over insurance results: (Sec. 94) 1. The insured, unless the policy otherwise provides, may claim payment from the insurers in such order as he may select, up to the amount for which the insurers are severally liable under their respective contracts; 2. Where the policy under which the insured claims is a valued policy, the insured must give credit as against the valuation for any sum received by him under any other policy without regard to the actual value of the subject matter insured; 3. Where the policy under which the insured claims is an unvalued policy he must give credit, as against the full insurable value, for any sum received by him under any policy; 4. Where the insured receives any sum in excess of the valuation in the case of valued policies, or of the insurable value in the case of unvalued policies, he must hold such sum in trust for the insurers, according to their right of contribution among themselves; 5. Each insurer is bound, as between himself and the other insurers, to contribute ratably to the loss in proportion to the amount for which he is liable under his contract.
Additional or “Other Insurance” Clause A condition in the policy requiring the insured to inform the insurer of any other insurance coverage of the property insured. It is lawful and specifically allowed under Sec. 75 which provides that “(a) policy may declare that a violation of a specified provision thereof shall avoid it, otherwise the breach of an immaterial provision does not avoid it.” A stipulation against double insurance. Purposes: 1. To prevent an increase in the moral hazard 2. To prevent over-insurance and fraud. To constitute a violation of the clause, there should have been double insurance. C. REINSURANCE – a contract by which the insurer procures a third person to insure him against loss or liability by reason of an original insurance (also known as “Reinsurance Cession”). (Sec. 95) In every reinsurance, the original contract of insurance and the contract of reinsurance are covered by separate policies. DOUBLE INSURANCE
Involves the same interest Insurer remains in such capacity Insured is the party in interest in the 2 contracts Subject of insurance is property Insured has to give his consent
Involves different interest Insurer becomes the insured in relation to reinsurer Original insured has no interest in the reinsurance contract. Subject of insurance is the original insurer’s risk Insured’s consent not necessary
TERMS: 1. Reinsurance treaty – Merely an agreement between two insurance companies whereby one agrees to cede and the other to accept reinsurance business pursuant to provisions specified in the treaty. (Prof. De Leon, p. 306) 2. Automatic reinsurance – The reinsured is bound to cede and the reinsurer is obligated to accept a fixed share of the risk which has to be reinsured under the contract. (Prof. De Leon, p. 305) 3. Facultative reinsurance – There is no obligation to cede or accept participation in the risk each party having a free choice. But once the share is accepted, the obligation is absolute and the liability thereunder can be discharged only by payment. (Equitable Ins. & Casualty Co. vs. Rural Ins. & Surety Co., Inc. 4 SCRA 343) 4. Retrocession – A transaction whereby the reinsurer in turn, passes to another insurer a portion of the risk reinsured. It is really the reinsurance of reinsurance. (Prof. De Leon, p. 305) XIV. A. LOSS, IN INSURANCE Injury or damage sustained by the insured in consequence of the happening of one or more of the accidents or misfortune against which the insurer, in consideration of the premium, has undertaken to indemnify the insured. (Bonifacio Bros. Inc. vs. Mora, 20 SCRA 261) Loss for which insurer is liable 1. 2. 3. 4. 5.
Loss the proximate cause of which is the peril insured against (Sec. 84); Loss the immediate cause of which is the peril insured against except where proximate cause is an excepted peril; Loss through negligence of insured except where there was gross negligence amounting to willful acts; and Loss caused by efforts to rescue the thing from peril insured against; If during the course of rescue, the thing is exposed to a peril not insured against, which permanently deprives the insured of its possession, in whole or in part (Sec. 85).
Loss for which insurer is not liable 1. Loss by insured’s willful act; 2. Loss due to connivance of the insured (Sec. 87); and 3. Loss where the excepted peril is the proximate cause.
Proximate Cause – An event that sets all other events in motion without any intervening or independent case, without which the injury or loss would not have occurred. REQUISITES FOR RECOVERY UPON INSURANCE 1. The insured must have insurable interest in the subject matter; 2. That interest is covered by the policy; 3. There must be a loss; and 4. The loss must be proximately caused by the peril insured against. NOTICE OF LOSS In fire insurance Required
In other types of insurance Not required
Failure to give notice will defeat the right of the insured to recover.
Failure to give notice will not exonerate the insurer, unless there is a stipulation in the policy requiring the insured to do so.
B. CLAIMS SETTLEMENT The indemnification of the loss of the insured. TIME FOR PAYMENT OF CLAIMS NON-LIFE POLICIES LIFE POLICIES a. Maturing upon the expiration of the term – The proceeds are immediately payable to the insured, unless they are made payable in installments or as annuity, in which case, the installments or annuities shall be paid as they become due. b. Maturing at the death of the insured, occurring prior to the expiration of the term stipulated – The proceeds are payable to the beneficiaries within 60 days after presentation and filing of proof of death.
The proceeds shall be paid within 30 days after the receipt by the insurer of proof of loss, and ascertainment of the loss or damage by agreement of the parties or by arbitration but not later than 90 days from such receipt of proof of loss whether or not ascertainment is had or made.
In case of an unreasonable delay in the payment of the insured’s claim by the insurer, the insured can recover: 1) attorney’s fees; 2) expenses incurred by reason of the unreasonable withholding; 3) interest at double the legal interest rate fixed by the Monetary Board; and 4) the amount of the claim. (Zenith Insurance Corp. vs. CA, 185 SCRA 398) XV. PRESCRIPTIVE PERIOD (Secs. 63 & 384) Rules: 1. In the absence of an express stipulation in the policy, it being based on a written contract, the action prescribes in 10 years. 2. However the parties may validly agree on a shorter period provided it is not less than one year from the time the cause of action accrues. 3. The cause of action accrues from the rejection of the claim of the insured and not from the time of loss. It shall commence from the denial of the claim, not from the resolution of the motion for reconsideration, otherwise it can be used by the insured as a scheme or device to waste time until the evidence which may be used against him is destroyed. (Sun Insurance Office, Ltd. v. CA, 195 SCRA) 4. In CMVLI, the written notice of claim must be filed within 6 months from the date of the accident otherwise the claim is deemed waived. The suit for damages either with the proper court or with the Insurance Commissioner should be filed within 1 year from the date of the denial of the claim by the insurer, otherwise claimant’s right of action shall prescribe. (Sec. 384) PARTICULAR KINDS OF INSURANCE CONTRACTS XVI. MARINE INSURANCE Insurance against risks connected with navigation, to which a ship, cargo, freightage, profits or other insurable interest in movable property, may be exposed during a certain voyage or a fixed period of time. (Sec. 99) Coverage: A. 1. Vessels, goods, freight, cargo, merchandise, profits, money, valuable papers, bottomry and respondentia, and interest in respect to all risks or perils of navigation; 2. Persons or property in connection with marine insurance; 3. Precious stones, jewels, jewelry and precious metals whether in the course of transportation or otherwise; and
Bridges, tunnels, piers, docks and other aids to navigation and transportation. (Sec. 99) Cargo can be the subject of marine insurance, and once it is entered into, the implied warranty of seaworthiness immediately attaches to whoever is insuring the cargo, whether he be the shipowner or not. (Roque v. IAC, 139 SCRA 596) B. Marine Protection and Indemnity Insurance Classes of inland marine insurance: (Prof. De Leon, p. 325)
Property in transit – provides protection to property frequently exposed to loss while it is transportation form one location to another.
Bailee liability - insurance for those who have temporary custody of the goods.
Fixed transportation property – they are so insured because they are held to be an essential part of the transportation system such as bridges, tunnels, etc.
Floater – provides insurance to follow the insured property wherever it may be located, subject always to the territorial limits of the contract. Insurable interest: A.
Over the vessel to the extent of its value, except that if chartered, the insurance is only up to the amount not recoverable from the charterer. (Sec. 100). b. He also has an insurable interest on expected freightage. (Sec. 103). c. No insurable interest if he will be compensated by charterer for the value of the vessel, in case of loss. 2. Cargo owner Over the cargo and expected profits (Sec. 105). 3. Charterer Over the amount he is liable to the shipowner, if the ship is lost or damaged during the voyage (Sec. 106). B. In loans on bottomry and respondentia Repayment of the loan is subject to the condition that the vessel or goods, respectively, given as a security, shall arrive safely at the port of destination. 1. Owner/Debtor Difference between the value of vessel or goods and the amount of loan. (Sec. 101) 2. Creditor/lender Amount of the loan Note: If a vessel is hypothecated by bottomry, only the excess is insurable, since a loan on bottomry partakes of the nature of an insurance coverage to the extent of the loan accommodation. The same rule would apply to the hypothecation of the cargo by respondentia. (Pandect of Commercial Law and Jurisprudence, Justice Jose Vitug, 1997 ed.) PERILS OF THE SEA PERILS OF THE SHIP Includes only those casualties due to A loss which in the ordinary course of events, results from the: the: 1. natural and inevitable action of the sea 1. unusual violence; or 2. ordinary wear and tear of the ship or 2. extraordinary action of wind and 3. Negligent failure of the ship’s owner to provide the vessel with wave; or proper equipment to convey the cargo under ordinary conditions. 3. Other extraordinary causes connected with navigation.
Note: It is only perils of the sea which may be insured against unless perils of the ship is covered by an all-risk policy. SPECIAL MARINE INSURANCE CONTRACTS AND CLAUSES A. All Risks Policy – insurance against all causes of conceivable loss or damage, except: 1) as otherwise excluded in the policy; or 2) due to fraud or intentional misconduct on the part of the insured. The insured has the initial burden of proving that the cargo was in good condition when the policy attached and that the cargo was damaged when unloaded from the vessel; thereafter, the burden then shifts to the insurer to show the exception to the coverage. (Filipinas Merchants Insurance vs. Court of Appeals, 179 SCRA 638) B. Barratry Clause A clause which provides that there can be no recovery on the policy in case of any willful misconduct on the part of the master or crew in pursuance of some unlawful or fraudulent purpose without consent of owners, and to the prejudice of the owner’s interest. (Roque vs. IAC, 139 SCRA 596) C. Inchamaree Clause A clause which makes the insurer liable for loss or damage to the hull or machinery arising from the: 1. Negligence of the captain, engineers, etc. 2. Explosions, breakage of shafts; and
Latent defect of machinery or hull. (Bar Review Materials in Commercial Law, Jorge Miravite, 2002 ed.)
D. Sue and Labor Clause A clause under which the insurer may become liable to pay the insured, in addition to the loss actually suffered, such expenses as he may have incurred in his efforts to protect the property against a peril for which the insurer would have been liable. (Sec. 163) MATTERS ALTHOUGH CONCEALED, WILL NOT VITIATE THE CONTRACT EXCEPT WHEN THEY CAUSED THE LOSS (Sec. 110) 1. National character of the insured;
2. Liability of the thing insured to capture or detention; 3. Liability to seizure from breach of foreign laws; 4. Want of necessary documents; and 5. Use of false or simulated papers. Note: This should be related to the general rule regarding material concealment. DISTINCTIONS ON CONCEALMENT (Commercial Law Reviewer, A.F. Agbayani, 1988 ed.) MARINE INSURANCE
OTHER PROPERTY INSURANCE
The information of the belief or expectation of 3rd persons is material and must be communicated
The information or belief of a 3rd party is not material and need not be communicated unless it proceeds form an agent of the insured whose duty it is to give information Concealment of any material fact will vitiate the entire contract, whether or not the loss results for the risk concealed.
The concealment of any fact in relation to any of the matters stated in Sec. 110 does not vitiate the entire contract but merely exonerates the insurer from a risk resulting from the fact concealed IMPLIED WARRANTIES 1. Seaworthiness of the ship at the inception of the insurance (Sec. 113); 2. Against improper deviation (Sec. 123, 124, 125); 3. Against illegal venture; 4. Warranty of neutrality: the ship will carry the requisite documents of nationality or neutrality of the ship or cargo where such nationality or neutrality is expressly warranted; (Sec. 120) 5. Presence of insurable interest.
While the payment by the insurer for the insured value of the lost cargo operates as a waiver of the insurer’s right to enforce the term of the implied warranty against the assured under the marine insurance policy, the same cannot be validly interpreted as an automatic admission of the vessel’s seaworthiness by the insurer as to foreclose recourse against the common carrier for any liability under the contractual obligation as such common carrier. (Delsan Transportation Lines vs. CA, 364 SCRA 24) Seaworthiness A relative term depending upon the nature of the ship, voyage, service and goods, denoting in general a ship’s fitness to perform the service and to encounter the ordinary perils of the voyage, contemplated by the parties to the policy (Sec. 114). GENERAL RULE: The warranty of seaworthiness is complied with if the ship be seaworthy at the time of the commencement of the risk. Prior or subsequent unseaworthiness is not a breach of the warranty nor is it material that the vessel arrives in safety at the end of her voyage. EXCEPTIONS:
In the case of a time policy, the ship must be seaworthy at the commencement of every voyage she may undertake
In the case of cargo policy, each vessel upon which the cargo is shipped or transshipped, must be seaworthy at the commencement of each particular voyage
In the case of a voyage policy contemplating a voyage in different stages, the ship must be seaworthy at the commencement of each portion
Applicability of implied warranty of seaworthiness to cargo owners: It becomes the obligation of a cargo owner to look for a reliable common carrier, which keeps its vessels in seaworthy conditions. The shipper may have no control over the vessel but he has control in the choice of the common carrier that will transport his goods (Roque v. IAC, 139 SCRA 596). Deviation A departure from the course of the voyage insured, or an unreasonable delay in pursuing the voyage or the commencement of an entirely different voyage. (Sec.123) Instances: 1. Departure of vessel from the course of the sailing fixed by mercantile usage 2. Departure of vessel from the most natural, direct and advantageous route if not fixed by mercantile usage 3. Unreasonable delay in pursuing voyage 4. Commencement of an entirely different voyage (Secs. 121-123) Kinds: 1. Proper a. When caused by circumstances outside the control of the ship captain or ship owner; b. When necessary to comply with a warranty or to avoid a peril; c. When made in good faith to avoid a peril; d. When made in good faith to save human life or to relieve another vessel in distress (Sec. 124) Effect: In case of loss, the insurer is still liable. 2. Improper - Every deviation not specified in Sec. 124 (Sec. 125).
Effect: In case of loss or damage, the insurer is not liable. (Sec. 126) LOSS 1. Total: a. Actual i. Total destruction;
Irretrievable loss by sinking; iii. Damage rendering the thing valueless; or iv. Total deprivation of owner of possession of thing insured. (Sec. 130) b. Constructive i. Actual loss of more than ¾ of the value of the object; ii. Damage reducing value by more than ¾ of the value of the vessel and of cargo; and iii. Expense of transshipment exceed ¾ of value of cargo. (Sec. 131, in relation to Sec. 139) In case of constructive total loss, insured may: 1. Abandon goods or vessel to the insurer and claim for whole insured value (Sec. 139), or 2. Without abandoning vessel, claim for partial actual loss. (Sec. 155) 2. Partial: That which is not total (Sec. 128). AVERAGE Any extraordinary or accidental expense incurred during the voyage for the preservation of the vessel, cargo, or both, and all damages to the vessel and cargo from the time it is loaded and the voyage commenced until it ends and the cargo unloaded. GENERAL Has inured to the common benefit and profit of all persons interested in the vessel and cargo To be borne equally by all of the interests concerned in the venture. Requisites for the right to claim contribution: 1. Common danger to the vessel or cargo; 2. Part of the vessel or cargo was sacrificed deliberately; 3. Sacrifice must be for the common safety or for the benefit of all; 4. Sacrifice must be made by the master or upon his authority; 5. It must be not be caused by any fault of the party asking the contribution; 6. It must be successful, i.e. resulted in the saving of the vessel or cargo; and Necessary.
PARTICULAR Has not inured to the common benefit and profit of all persons interested in the vessel and her cargo. To be borne alone by the owner of the cargo or the vessel, as the case may be.
RIGHT OF INSURED IN CASE OF GENERAL AVERAGE GENERAL RULE: The insured may either hold the insurer directly liable for the whole of the insured value of the property sacrificed for the general benefit, subrogating him to his own right of contribution or demand contribution from the other interested parties as soon as the vessel arrives at her destination EXCEPTIONS: 1. After the separation of interests liable to contribution 2. When the insured has neglected or waived his right to contribution FPA Clause (Free From Particular Average) A clause agreed upon in a policy of marine insurance in which it is stated that the insurer shall not be liable for a particular average, such insurer shall be free therefrom, but he shall continue to be liable for his proportion of all general average losses assessed upon the thing insured. (Sec. 136) ABANDONMENT The act of the insured by which, after a constructive total loss, he declared the relinquishment to the insurer of his interest in the thing insured. (Sec. 138) Requisites for validity:
There must be an actual relinquishment by the person insured of his interest in the thing insured (Sec. 138);
2. 3. 4. 5. 6.
There must be a constructive total loss (Sec. 139); The abandonment be neither partial nor conditional (Sec. 140); It must be made within a reasonable time after receipt of reliable information of the loss (Sec. 141); It must be factual (Sec. 142); It must be made by giving notice thereof to the insurer which may be done orally or in writing (Sec. 143); and
The notice of abandonment must be explicit and must specify the particular cause of the abandonment (Sec. 144).
Effects: 1. It is equivalent to a transfer by the insured of his interest to the insurer with all the chances of recovery and indemnity (Transfer of Interest)(Sec.146) 2. Acts done in good faith by those who were agents of the insured in respect to the thing insured, subsequent to the loss, are at the risk of the insurer and for his benefit. (Transfer Of Agency)(Sec.148) If an insurer refuses to accept a valid abandonment, he is liable upon an actual total loss, deducting form the amount any proceeds of the thing insured which may have come to the hands of the insured. (Sec.154) CO-INSURANCE A marine insurer is liable upon a partial loss, only for such proportion of the amount insured by him as the loss bears to the value of the whole interest of the insured in the property insured. (Sec. 157) When the property is insured for less than its value, the insured is considered a co-insurer of the difference between the amount of insurance and the value of the property. Requisites: 1. The loss is partial; 2. The amount of insurance is less than the value of the property insured. 1. 2. 3.
Rules: Co-insurance applies only to marine insurance Logically, there cannot be co-insurance in life insurance. Co-insurance applies in fire insurance when expressly provided for by the parties.
CO-INSURANCE A percentage in the value of the insured property which the insured himself assumes to act as insurer to the extent of the deficiency in the insurance of the insured property. In case of loss or damage, the insurer will be liable only for such proportion of the loss or damage as the amount of the insurance bears to the designated percentage of the full value of the property insured. (Bar Review Materials in Commercial Law, Jorge Miravite, 2002 ed.)
REINSURANCE Situation where the insurer procures a 3rd party called the reinsurer to insure him against liability by reason of an original insurance. Basically, reinsurance is an insurance against liability which the original insurer may incur in favor of the original insured.
XVII. FIRE INSURANCE A contract by which the insurer for a consideration agrees to indemnify the insured against loss of, or damage to, property by hostile fire, including loss by lightning, windstorm, tornado or earthquake and other allied risks, when such risks are covered by extension to fire insurance policies or under separate policies. (Sec. 167) Prerequisites to recovery: 1. Notice of loss – must be immediately given, unless delay is waived expressly or impliedly by the insurer 2. Proof of loss – according to best evidence obtainable. Delay may also be waived expressly or impliedly by the insurer HOSTILE FIRE One that escapes from the place where it was intended to burn and ought to be.
FRIENDLY FIRE One that burns in a place where it was intended to burn and ought to be
Insurer is liable
Insurer is not liable
Measure of Indemnity 1. Open policy: only the expense necessary to replace the thing lost or injured in the condition it was at the time of the injury 2. Valued policy: the parties are bound by the valuation, in the absence of fraud or mistake Note: It is very crucial to determine whether a marine vessel is covered by a marine insurance or fire insurance. The determination is important for 2 reasons:
1. 2. 3.
Rules on constructive total loss and abandonment – applies only to marine insurance; Rule on co-insurance – applies primarily to marine insurance;
Rule on co-insurance applies to fire insurance only if expressly agreed upon. (Commercial Law Reviewer, Aguedo Agbayani, 1988 ed.)
ALTERATION AS A SPECIAL GROUND FOR RESCISSION BY INSURER Requisites: 1. The use or condition of the thing is specifically limited or stipulated in the policy; 2. Such use or condition as limited by the policy is altered; 3. The alteration is made without the consent of the insurer; 4. The alteration is made by means within the control of the insured;
The alteration increases the risk; (Sec. 168) and There must be a violation of a policy provision. (Sec. 170)
Fall-of-building clause A clause in a fire insurance policy that if the building or any part thereof falls, except as a result of fire, all insurance by the policy shall immediately cease. Option to rebuild clause A clause giving the insurer the option to reinstate or replace the property damaged or destroyed or any part thereof, instead of paying the amount of the loss or the damage. The insurer, after electing to rebuild, cannot be compelled to perform this undertaking by specific performance because this is an obligation to do, not to give. Remedy: Art. 1167, NCC. XVIII. CASUALTY OR ACCIDENT INSURANCE Insurance covering loss or liability arising from accident or mishap, excluding those falling under other types of insurance such as fire or marine. (Sec. 174) Classifications: 1. Insurance against specified perils which may affect the person and/or property of the insured. (accident or health insurance) Examples: personal accident, robbery/theft insurance 2. Insurance against specified perils which may give rise to liability on the part of the insured for claims for injuries to or damage to property of others. (third party liability insurance) Insurable interest is based on the interest of the insured in the safety of persons, and their property, who may maintain an action against him in case of their injury or destruction, respectively. Examples: workmen’s compensation, motor vehicle liability In a third party liability (TPL) insurance contract, the insurer assumes the obligation by paying the injured third party to whom the insured is liable. Prior payment by the insured to the third person is not necessary in order that the obligation may arise. The moment the insured becomes liable to third persons, the insured acquires an interest in the insurance contract which may be garnished like any other credit. (Perla Comapnia de Seguro, Inc vs. Ramolete, 205 SCRA 487) Aside from compulsory motor vehicle liability insurance, the Insurance Code contains no other provisions applicable to casualty insurance. Therefore, such casualty insurance are governed by the general provisions applicable to all types of insurance, and outside of such statutory provisions, the rights and obligations of the parties must be determined by their contract, taking into consideration its purpose and always in accordance with the general principles of insurance law. In burglary, robbery and theft insurance, the opportunity to defraud the insurer – the moral hazard – is so great that insurer have found it necessary to fill up the policies with many restrictions designed to reduce the hazard. Persons frequently excluded are those in the insured’s service and employment. The purpose of the exception is to guard against liability should theft be committed by one having unrestricted access to the property. (Fortune Insurance vs. CA, 244 SCRA 208) Right of a third party injured to sue the insurer 1. Indemnity against liability – A third party injured can directly sue the insurer. 2. Indemnity for actual loss or reimbursement after actual payment by the insured – A third party has no cause of action against the insurer (Sec. 53, Bonifacio Bros. v. Mora, 20 SCRA 261). The insurer is not solidarily liable with the insured. The insurer’s liability is based on contract; that of the insured is based on torts. Furthermore, the insurer’s liability is limited by the amount of the insurance coverage (Pan Malayan Insurance Corporation v. CA, 184 SCRA 54). “INTENTIONAL” vs. “ACCIDENTAL” AS USED IN INSURANCE POLICIES 1. Intentional – Implies the exercise of the reasoning faculties, consciousness and volition. Where a provision of the policy excludes intentional injury, it is the intention of the person inflicting the injury that is controlling. If the injuries suffered by the insured clearly resulted from the intentional act of the third person, the insurer is relieve from liability as stipulated. (Biagtan v. the Insular Life Assurance Co. Ltd., 44 SCRA 58, 1972) 2. Accidental – That which happens by chance or fortuitously, without intention or design, which is unexpected, unusual and unforeseen. NO ACTION CLAUSE A requirement in a policy of liability insurance which provides that suit and final judgment be first obtained against the insured; that only thereafter can the person injured recover on the policy. (Guingon vs. Del Monte, 20 SCRA 1043)
XIX. COMPULSORY MOTOR VEHICLE LIABILITY INSURANCE (CMVLI) A species of compulsory insurance that provides for protection coverage that will answer for legal liability for losses and damages for bodily injuries or property damage that may be sustained by another arising from the use and operation of motor vehicle by its owner. Purpose: To give immediate financial assistance to victims of motor vehicle accidents and/or their dependents, especially if they are poor regardless of the financial capability of motor vehicle owners or operators responsible for the accident sustained (Shafer v. Judge, RTC, 167 SCRA 386). Claimants/victims may be a “passenger” or a “3rd party” It applies to all vehicles whether public and private vehicles. Note: It is the only compulsory insurance coverage under the Insurance Code. Method of coverage 1. Insurance policy 2. Surety bond 3. Cash deposit Passenger – Any fare-paying person being transported and conveyed in and by a motor vehicle for transportation of passengers for compensation, including persons expressly authorized by law or by the vehicle’s operator or his agents to ride without fare. (Sec. 373[b]) Third Party – Any person other than the passenger, excluding a member of the household or a member of the family within the second degree of consanguinity or affinity, of a motor vehicle owner or land transportation operator, or his employee in respect of death or bodily injury arising out of and in the course of employment. (Sec. 373[c]) “No-Fault” Clause A clause that allows the victim (injured person or heirs of the deceased) to an option to file a claim for death or injury without the necessity of proving fault or negligence of any kind. Purpose: To guarantee compensation or indemnity to injured persons in motor vehicle accidents. Rules: 1. Total indemnity - maximum of P5,000 2. Proofs of loss a. Police report of accident; b. Death certificate and evidence sufficient to establish proper payee; c. Medical report and evidence of medical or hospital disbursement. 3. Claim may be made against one motor vehicle only 4. Proper insurer from which to claim a. In case of an occupant: Insurer of the vehicle in which the occupant is riding, mounting or dismounting from; b. In any other case: Insurer of the directly offending vehicle. (Sec. 378) The claimant is not free to choose from which insurer he will claim the “no fault indemnity” as the law makes it mandatory that the claim shall lie against the insurer of the vehicle in which the occupant is riding, mounting or dismounting from. That said vehicle might not be the one that caused the accident is of no moment since the law itself provides that the party paying may recover against the owner of the vehicle responsible for the accident. (Perla Compania de Seguros, Inc. v. Ancheta, 169 SCRA 144) This no-fault claim does not apply to property damage. If the total indemnity claim exceeds P5,000 and there is controversy in respect thereto, the finding of fault may be availed of by the insurer only as to the excess. The first P5,000 shall be paid without regard to fault. (Prof. De Leon, p. 716) The essence of the no-fault indemnity insurance is to provide victims of vehicular accidents or their heirs immediate compensation although in limited amount, pending final determination of who is responsible for the accident and liable for the victims injuries or death. (Ibid.) SPECIAL CLAUSES A. Authorized Driver Clause A clause which aims to indemnify the insured owner against loss or damage to the car but limits the use of the insured vehicle to the insured himself or any person who drives on his order or with his permission (Villacorta v. Insurance Commissioner) The requirement that the person driving the insured vehicle is permitted in accordance with the licensing laws or other laws or regulations to drive the motor vehicle (licensed driver) is applicable only if the person driving is other than the insured. B. Theft Clause A clause which includes theft as among the risks insured against. Where the car is unlawfully and wrongfully taken without the owner’s consent or knowledge, such taking constitutes theft, and thus, it is the “theft clause” and not the “authorized driver clause that should apply (Palermo v. Pyramids Ins., 161 SCRA 677).
C. Cooperation Clause A clause which provides in essence that the insured shall give all such information and assistance as the insurer may require, usually requiring attendance at trials or hearings. XX. SURETYSHIP An agreement whereby a surety guarantees the performance by the principal or obligor of an obligation or undertaking in favor of an obligee. (Sec. 175) It is essentially a credit accommodation. It is considered an insurance contract if it is executed by the surety as a vocation, and not incidentally. (Sec. 20 When the contract is primarily drawn up by 1 party, the benefit of doubt goes to the other party (insured/obligee) in case of an ambiguity following the rule in contracts of adhesion. Suretyship, especially in fidelity bonding, is thus treated like non-life insurance in some respects. Nature of liability of surety 1. Solidary; 2. Limited to the amount of the bond; 3. It is determined strictly by the terms of the contract of suretyship in relation to the principal contract between the obligor and the obligee. (Sec. 176) SURETYSHIP Accessory contract 3 parties: surety, obligor and oblige Credit accommodation
PROPERTY INSURANCE Principal contract 2 parties: insurer and insured Contract of indemnity
Surety can recover from principal Insurer has no such right; only right of subrogation Bond can be cancelled only with consent of obligee, May be cancelled unilaterally either by insured or insurer Commissioner or court on grounds provided by law Requires acceptance of obligee to be valid No need of acceptance by any third party Risk-shifting device; premium paid being in the Risk-distributing device; premium paid as a ratable nature of a service fee contribution to a common fund XXI. LIFE INSURANCE Insurance on human lives and insurance appertaining thereto or connected therewith which includes every contract or pledge for the payment of endowments or annuities. (Sec. 179) Kinds: (Bar Review Materials in Commercial Law, Jorge Miravite, 2002 ed.)
Ordinary Life, General Life or Old Line Policy - Insured pays a fixed premium every year until he dies. Surrender value after 3 years.
Group Life – Essentially a single insurance contract that provides coverage for many individuals. Examples: In favor of employees, “mortgage redemption insurance”.
Limited Payment Policy – insured pays premium for a limited period. beneficiary is paid; if he outlives the period, he does not get anything.
Endowment Policy – pays premium for specified period. If he outlives the period, the face value of the policy is paid to him; if not, his beneficiaries receive the benefit.
Term Insurance – insurer pays once only, and he is insured for a specified period. If he dies within the period, his beneficiaries benefits. If he outlives the period, no person benefits from the insurance.
Industrial Life - life insurance entitling the insured to pay premiums weekly, or where premiums are payable monthly or oftener.
If he dies within the period, his
Mortgage Redemption Insurance A life insurance taken pursuant to a group mortgage redemption scheme by the lender of money on the life of a mortgagor who, to secure the loan, mortgages the house constructed from the use of the proceeds of the loan, to the extent of the mortgage indebtedness such that if the mortgagor dies, the proceeds of his life insurance will be used to pay for his indebtedness to the lender assured and the deceased’s heirs will thereby be relieved from paying the unpaid balance of the loan. (Great Pacific Life Assurance Corp. vs. Court of Appeals, 316 SCRA 677) LIABILITY OF INSURER IN CERTAIN CAUSES OF DEATH OF INSURED 1. Suicide Insurer is liable in the following cases: 1. If committed after two years from the date of the policy’s issue or its last reinstatement; 2. If committed in a state of insanity regardless of the date of the commission unless suicide is an excepted peril. (Sec. 180-A) 3. If committed after a shorter period provided in the policy Any stipulation extending the 2-year period is null and void. 2. At the hands of the law (E.g. by legal execution)
It is one of the risks assumed by the insurer under a life insurance policy in the absence of a valid policy exception. (Vance,p.572 cited in de Leon, p. 107) Note: Justice Vitug believes that death by suicide (if the insured is sane) or at the hands of the law obviates against recovery as being more in consonance with public policy and as being implicit under Section 87, ICP. (Pandect of Commercial Law and Jurisprudence, 1997 ed. P. 191) 3. Killing by the beneficiary GENERAL RULE: The interest of a beneficiary in a life insurance policy shall be forfeited when the beneficiary is the principal accomplice or accessory in willfully bringing about the death of the insured, in which event, the nearest relative of the insured shall receive the proceeds of said insurance if not otherwise disqualified. (Sec. 12) EXCEPTIONS: 1. Accidental killing 2. Self-defense 3. Insanity of the beneficiary at the time he killed the insured If the premiums paid came from conjugal funds, the proceeds are considered conjugal. If the beneficiary is other than the insured’s estate, the source of premiums would not be relevant. (Del Val v. Del Val, 29 Phil 534) The measure of indemnity in life or health insurance policy is the sum fixed in the policy except when a creditor insures the life of his debtor. (Sec. 183) IS THE CONSENT OF THE BENEFICIARY NECESSARY TO THE ASSIGNMENT OF A LIFE INSURANCE POLICY? It depends. If the designation of the beneficiary is irrevocable, the beneficiary’s consent is essential because of his vested right. If the designation is revocable, the policy may be assigned without such consent because the beneficiary only has a mere expectancy to the proceeds. (The Insurance Code of the Philippines Annotated, Hector de Leon, 2002 ed.) Cash Surrender Value As applied to a life insurance policy, it is the amount the insured in case of default, after the payment of at least 3 full annual premiums, is entitled to receive if he surrenders the policy and releases his claims upon it. LIFE INSURANCE Contract of investment not of indemnity Valued policy May be transferred or assigned to any person even if he has no insurable interest Consent of insurer is not essential to validity of assignment Contingency that is contemplated is a certain event, the only uncertainty being the time when it will take place A long-term contract and cannot be cancelled by the insurer Beneficiary is under no obligation to prove actual financial loss
FIRE INSURANCE Contract of indemnity Open or valued policy The insurable interest of the transferee or assignee is essential Consent of insurer must be secured in the absence of waiver Contingency insured against may or may not occur
May be cancelled by either party and is usually for a term of one year Insured is required to submit proof of his actual pecuniary loss as a condition precedent to collecting the insurance.
XXII. VARIABLE CONTRACT Any policy or contract on either a group or individual basis issued by an insurance company providing for benefits or other contractual payments or values thereunder to vary so as to reflect investment results of any segregated portfolio of investment. XXIII. INSURANCE COMMISSIONER Main agency charged with the enforcement of the Insurance Code and other related laws. Functions: 1. ADJUDICATORY/QUASI-JUDICIAL a. Exclusive original jurisdiction – Any dispute in the enforcement of any policy issued pursuant to Chapter VI (CMVLI). (Sec. 385, par. 2) b. Concurrent original jurisdiction (with the RTC) – Where the maximum amount involved in any single claim is P100,000 (Sec. 416), except in case of maritime insurance which is within the exclusive jurisdiction of the RTC. (BP 129; admiralty & maritime jurisdiction) Where the amount exceeds P100,000, the RTC has jurisdiction. The Insurance Commissioner has no jurisdiction to decide the legality of a contract of agency entered into between an insurance company and its agent. The same is not covered by the term “doing or transacting insurance business” under Sec 2, ICP, neither is it covered by Sec. 416 of the same Code which grants the Commissioner adjudicatory powers (Philippine American Life Insurance Co. v. Ansaldo, 234 SCRA 509). 2. ADMINISTRATIVE/REGULATORY
a. b. c. d. e.
Enforcement of insurance laws Issuance, suspension or revocation of certificate of authority Power to examine books and records, etc. Rule-making authority Punitive INSURANCE CODE (PD 1460)
Who is the officer in charged with the implementation of laws of the Insurance Code? The officer charged is the Insurance Commissioner of the Insurance Commission
What are the Administrative functions of the Insurance Commissioner? The Commissioner has the following functions: A. Administrative function (CRISPFe)
To issue Certificate of authority to qualified insurers
To Regulate the sale and issuance of variable contracts, to license persons selling them and to issue rules and regulations governing the same
To Issue rulings, instructions circulars, orders and decisions for the enforcement of the provisions of the code subject to approval of the Secretary of Finance.
To stop the operation of an insolvent insurance company and determine within 30 days whether to rehabilitate or liquidate the company.
To impose appropriate fines and Penalties on insurance companies and on their officers and agents for refusal to comply with any order, instruction… of the Commissioner , or for mismanagement
6. To see that all insurance laws are Faithfully executed B. Adjudicative function (Jurisdiction) The Commissioner has the power to adjudicate claims and complaints for amounts not exceeding P100k per claim involving: 1. Loss, damage or liability of insurer under any policy or insurance contract 2. Liability of a reinsurer 3. Liability under the contract of suretyship 4. Liability of a mutual benefit association to its members 5. Counterclaims against the insured 6. Cross-claims against a co-party 7. Third party claims by the insurer against another party. This authority is concurrent with the courts, but filing of the complaint with the Commissioner shall preclude the civil courts from taking cognizance. The final order or decision of the Commissioner shall have the force and effect of a judgment, and may be appealed to the Court of Appeals within 15 days from notice of the award judgment, or of denial of motion for reconsideration or new trial. The decision may be subject of a writ of execution Claims in excess of P100k – RTC Cause of action commences from the time of the denial of his claim by the insurer, express or implied (Sun vs. CA 195 SCRA 193) What is a Contract of Insurance? "Contract of Insurance" is:
an agreement whereby one undertakes for a consideration to indemnify another against (1) loss, (2) damage or (3) liability arising from an (1) unknown or (2) contingent event.
• What does the doing/transacting insurance business mean? "Doing an insurance business" or "transacting an insurance business" shall include (RISO)
doing any kind of business, including a Reinsurance business, specifically recognized as constituting the doing of an insurance business within the meaning of this Code;
making or proposing to make, as insurer, any Insurance contract;
Others - doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this Code.
making or proposing to make, as surety, any contract of Suretyship as a vocation and not as merely incidental to any other legitimate business or activity of the surety;
The fact that no profit is derived from the making of insurance contracts, agreements or transactions or that no separate or direct consideration is received therefor, shall not be deemed conclusive to show that the making thereof does not constitute the doing or transacting of an insurance business.
What are the Characteristics of an Insurance Contract? (C3UVAP2) 1. Consensual – perfected by the meeting of minds 2. Conditional – subject to conditions – happening of the event insured against and/or other conditions like payment of premium 3. Contract of Indemnity – promise of insurer to make good a loss 4. Unilateral – impose legal duties only on the insurer who promises to indemnify in case of loss 5. Voluntary – willingness of the parties Note However that under the Motor Vehicle Insurance, Third Party Liability Insurance is mandatory for vehicle registration 6. Aleatory – depends on some contingent event 7. Personal – it binds only the parties to it and their assignees Note Stipulations pour autrui or a provision in favor of a third person not a party to the contract. Under this doctrine, a third person is allowed to avail himself of a benefit granted to him by the terms of the contract, provided that the contracting parties have clearly and deliberately conferred a favor upon such person 8. Contract of perfect good faith for both parties (uberrima fides)
What are the classes of Insurance? 1. Life Insurance 2. Non-life Insurance a. Fire Insurance b. Marine Insurance c. Casualty Insurance d. Suretyship
What are the Elements of Contract of Insurance
Insurable interest of the insured – interest of some kind susceptible of pecuniary or monetary estimation
Insured subject to loss through the destruction or impairment of that interest by the happening of designated perils Insurer assumes the risk of loss Such assumption is part of a general scheme to distribute actual losses among a large group of persons bearing somewhat similar risk
What are the Requisites of contract of Insurance
Subject matter in which the Insured has an insurable interest
A promise to damnify in a fixed or ascertainable amount Payment of premium Meeting of minds of the parties Note: No policy of insurance shall be issued or delivered unless in the form previously approved by the Insurance Commissioner.
Payment of premium – ratable contribution to a general insurance fund as consideration to the insurer’s promise
Peril Insured against – contingent or unknown event, past or future and a duration for the risk thereof
What may be insured against? 1. A Future Contingent Event resulting in loss or damages e.g. destruction of a building from fire in Fire Insurance or the death of the insured in a Life Insurance policy Note that the word “Loss” embraces injury or damage. A loss may be partial or total 2. A Past Unknown Event resulting in loss or damage This is best exemplified in a Marine Insurance where at the time the policy is executed, the vessel subject of the insurance may have already sunk, but that fact was unknown to the parties at the time of the execution of the policy 3. Contingent Liability This is best illustrated in Reinsurance where the liability of the insurer is in turn insured by him with a second insurer. Note that Drawing of any lottery, or for/against any chance or ticket in a lottery drawing a prize may not be insured. A contract of insurance is a contract of indemnity and not a wagering or gambling contract
Who are the parties to an Insurance Contract 1. Insurer 2. The Insured 3. Beneficiary
Insurer – is the person, natural or juridical, who holds a certificate of authority from the Insurance Commissioner and who undertakes to indemnify another by a contract of insurance o Banks cannot be insurers o Paid-up capital requirement for insurance companies P2M and a contributed surplus of • P1M for life insurance • P500k for non-life insurance P5M in case of reinsurance co. o For Insurance Cooperative, recommendation from the Cooperative Development Authority is required o An Insurance agent should perform the function for a compensation Insured • Generally, any person with capacity to contract and having an insurable interest in he life property insured may be the insured
A married woman may take insurance on her life or on that of her children without need of her husband’s consent
A public enemy cannot be insured. • Public enemy means any citizen or juridical entity of the country with which the Philippines may be at war Effects of War on Insurance Contracts 1. War prevents an insurance contract from being enter into between citizens and juridical entities of the warring states 2. For existing insurance contracts, the rules are: a. Property Insurance – war abrogates the contract (Kentucky Rule) b. Life Insurance – war terminates the policy, but the insured is entitled to the equitable value of the policy arising from the premiums actually paid, when commercial relations are resumed (U.S. Rule) I. BENEFICIARY The insurance proceeds shall be applied exclusively to the proper interest of the person in whose name or for whose benefit it is made unless otherwise specified in the policy Beneficiary • The beneficiary is the person designated to receive the proceeds of the policy when the risk attaches. • He may be the (1) insured himself in the property insurance or (2) the insured or (3)a third person in life insurance • The father or mother of a minor who is an insured or beneficiary of a life policy, may exercise, for said minor, all rights under the policy up to P20k without the need of a court authority or a bond (sec 180) A.
Beneficiary of one who insures his own life As a general rule, the insured who insures his own life may designate any person, including his estate as his beneficiary, whether or not the beneficiary has an insurable interest in the life of the insured The Insured has the right to change the designation of the beneficiary, unless he has expressly designated an irrevocable beneficiary in his policy
What are the effects if the designation of beneficiary is irrevocable The insured cannot 1. Assign the policy 2. Take the cash surrender value 3. Allow his creditors to attach execute on the policy 4. Add a new beneficiary or 5. Change the irrevocable designation to revocable, even though the change is just and reasonable Ratio: The irrevocability of the designated beneficiary and his heirs have acquired from the date of the policy vested rights over the policy (Philam vs. Pineda 175 SCRA 201)
As a general rule: the proceeds of a life insurance policy belong to the designated beneficiary to the exclusion of the heirs of the insured (Picar vs GSIS 33 SCRA 324) • Exception: Persons Disqualified as Beneficiaries A beneficiary in life insurance is like a donee, hence, the civil code provision on the disqualifications of a donee shall apply. Donations made between the following persons are void 1. Donation between persons guilty of adultery or concubinage 2. Donations between persons found guilty of the same criminal offense, in consideration thereof 3. Donations made to a public officer or his wife, descendants and ascendants, by reason of his office. • When does the interest of the beneficiary forfeited The interest of the beneficiary in a life insurance policy shall be forfeited when the beneficiary is the Principal, Accomplice, or accessory in willfully bringing about the death of the insured In this event, he nearest relative of the insured shall receive the proceeds of said insurance if not otherwise disqualified The nearest relatives of the insured in the order of enumeration are the following: 1. Legitimate children 2. Parents 3. Grandparents illegitimate children 4. Surviving spouse 5. Brothers and sisters of the full blood 6. Brothers and sisters of the half blood 7. Nephews and nieces. NOTES: (a) Where a specified person is beneficiary, the proceeds will inure to the beneficiary. Q: A took out a life insurance policy and designated his wife, B, as the sole beneficiary. All the premiums of the policy were paid out from his salaries. A died intestate leaving B and 3 children. Divide the proceeds of the policy (1961 Bar) A: All of the proceeds of the policy will go to the designated policy, B. The source of the premium here is immaterial (Miravite, 2002ed., p200) (b) If the premiums are paid from (1) salaries of the insured or (2) other conjugal properties or funds, and the beneficiary is the estate of the insured, the proceeds of the life insurance policy is considered conjugal. B.
Beneficiary if Life Insurance on the life of another person. Where a policy is taken by a third person on the life of the insured, and said third person designates himself as the beneficiary, the third person must have an insurable interest on the life of the insured, at the time the policy became effective.
Beneficiary of Property Insurance The beneficiary of the property insurance must have an insurable interest over the subject matter of the insurance existing at the time the policy was taken and at the time the loss tool place II. INSURABLE INTEREST
What is “insurable Interest” as referred in the Code? Insurable interest is a right or relationship In regard to the subject matter of the insurance Such that the insured will derive
pecuniary benefit or advantage from its preservation and 2. will suffer pecuniary loss or damage from its destruction or injury by the happening of the event insured against
A . Insurable Interest in Life Define Insurable Interest in Life? Insurable interest in life is the interest which a person has 3. In his life or 4. In the lives of other persons a. Of his spouse and of his children b. On whom he depends wholly or in part for education or support (Wife insuring Husband’s life) c. Under legal obligation to him to pay money, to deliver property or to render service (Creditor insuring the life of its Debtor) d. Upon whose file any estate or interest vested upon him. (Legatee of a usufruct insuring the life of the usufructuary) • A corporation has an insurable interest in the lives of its officers when the death or illness of said officers would materially and injuriously affect the corporation. • The corporation and the heirs of the manager can insure the life of the manager-decedent in agreed proportion, since both have insurable interest over the life of the latter
When Insurable Interest should exist? It must exist at the time the insurance is taken.
B. Insurable Interest in property Rule: No contract or policy of insurance on property shall be enforceable except for the benefit of some person having insurable interest in the property insured Insurable interest Life insurance Property Insurance Insurable interest must exist only at the time Insurable interest must exist at the time the policy is taken the policy is taken and at the time the loss occurs The beneficiary need not have an insurable The beneficiary must have an insurable interest in the interest on the insured’s life property insured There is no limit to the amount of insurable Insurable interest is limited to the actual value of the interest interest in the property
• What is considered as an insurable interest in property? Insurable interest in property is every interest in property whether real or personal, or any relation thereto, or liability in respect thereof, of such a nature that the contemplated peril might directly cause damage to the insured •
What does insurable interest in property consist of An insurable interest in property consist of 1. An existing interest 2. An inchoate interest founded on an existing interest 3. An expectance coupled with an existing interest in that out of which the expectance arises
Examples of an insurable inchoate right in the property 1. Contractor’s interest to the completed building for unpaid construction cost 2. Lessor’s interest on the improvements made by the lessee 3. Naked owner’s interest over the property which another person has beneficial title Note: A mere contingent or expectant interest in anything, not founded on an actual right to the thing, nor upon any valid contract for it, is not insurable (e.g. property which one expects to inherit or that of a general or unsecured creditor insuring the property of his debtor who is alive even though destruction of such property would render worthless any judgment he might obtain note further in the latter case, the creditor can insure the property of a deceased debtor since all personal liability ceases with the death of the debtor. The proceedings to subject the estate to the payment of the debt of the deceased are against all who have an interest in the property. Of course, an unsecured creditor has an insurable interest in the life of his debtor ) The vendee-consignee of goods in transit under a perfected contract of sale is vested with an equitable title to the goods even before receipt by him of the goods to constitute an insurable interest in the property (Fil Merchants vs CA 179 SCRA 638) A carrier or depositary of any kind has an insurable interest in a thing held by him as such, to the extent of his liability but not exceed the value thereof. •
To what extent is the insurable interest of a mortgagor in a mortgaged property? Of a mortgagee? a. The mortgagor has an insurable interest on his property as owner up to the full value of his property, irrespective of any mortgage on said property in general. b. The insurable interest of a mortgagee is up to the extent of his credit. NOTE: Each may take separate insurances over the same property up to the extent of their respective insurable interests. Where the mortgagee independently of the mortgagor insured his won interest in the mortgaged property, he is entitled to the proceeds of the policy in case of loss before payment of the mortgage. But in such case, the mortgagee is not allowed to retain his claim against the mortgagor but it passes by subrogation to the insurer to the extent of the insurance paid. In other words, the payment of the insurance to the mortgagee does not relieve the mortgagor form his principal obligation but only changes the creditor.
When is an insurance on the interest of the mortgagor
The insurance is on the mortgagor’s interest where the mortgagor takes insurance on the property in his own right making the loss payable to the mortgagee How? The mortgagor may: i. Take insurance on the property, and assign the same to the mortgagee (this operates merely as an equitable transfer of the policy so as to enable the assignee to recover the proceeds) ii. Constitute the mortgagee as beneficiary as his interest may appear NOTE: In case of fire, marine and casualty insurance, the assignment must be with the consent of the insurer because it is a personal contract. (Note that life insurance may be freely assigned before or after loss occurs to any person whether he has an insurable interest or not) •
What are the effects of insurance taken in the on the interest of thee mortgagor? The effects are: a. Mortgagor continues to be a party to the contract b. Any act by the mortgagor prior to the loss which would avoid the policy, will thus avoid the policy, even if the property is in the hands of the mortgagee c. Any act which under the contract of insurance is to be performed by the mortgagor (e.g. payment of premium) may be performed by the mortgagee with the same effect, as if performed by the mortgagor. d. In case of loss, the mortgagee is entitled to the proceeds to the extent of his credit, consequently, the debt is extinguished.
What is the effect If the mortgagor assigns the policy to the mortgagee with the insurer’s consent, but the latter imposes new conditions on the assignee? If at the time of the assent, the insurer imposes further obligations on the assignee making a new contract with him, the act of the mortgagor cannot affect the rights of said assignee.
Take note of the distinctions between the assignment or transfer of:
The Policy itself which transfers the fights to the contract to another insured
The subject matter of the insurance, such as a house insured under a fire policy which ahs the effect of suspending the insurance (infra)
The proceeds of the policy after the loss has happened , which involves a money claim under, or a right of action on the policy
When insurable interest should exist? It must exist at the time the policy is taken and at the time the loss incurred but it need not exist in the meantime Ratio: To prevent a person from taking out an insurance policy on property upon which he has no insurable interest and collecting the proceeds of said policy in case of loss of the property. In such a case, the contract of insurance is a mere wager which is void. (Cha vs CA 277 SCRA 690)
What is the effect of a change of interest on the thing insured? A change in the interest in any part of a thing insured unaccompanied by a corresponding change of interest in the insurance, suspends the insurance to an equivalent extent, until the interest in the thing and the interest in the insurance are vested in the same person. Note: Mere transfer of a thing insured does not transfer the policy but suspends it until the same person becomes the owner of both the policy and the thing insured. For a transferee to have an insurable interest over a policy undertaken by the transferor, the insurance policy should be assigned to him, when he bought the property. A change of interest in a thing insured, after the occurrence of an injury which results in a loss, does not affect the right of the insured to indemnity for the loss A change of interest, by will or succession, on the death of the insured, does not avoid an insurance; and his interest in the insurance passes to the person taking his interest in the thing insured. Otherwise stated, the insurance on property passes automatically, on the death of the insured , to the heir, legatee or devisee who acquires interest in the thing insured. A transfer of interest by one of several partners, joint owners etc. who are jointly insured, will not avoid the insurance even though it has been agreed that the insurance shall cease upon an alienation of the thing insured. A change of interest where there are several things separately insured by one policy, does not avoid the insurance as to the others Example: A insured his car for P100k and jeep for P85k under the single policy, the sale of one will not affect the insurance of the car. BUT if the car and jeep were not separately valued in the policy , the sale of the jeep without the insurer’s consent affects also the insurance of the car
What stipulations are prohibited in an insurance policy? Stipulations for the payment of loss whether the person insured has or has not any interest in the subject matter of the insurance 2. Stipulation that the policy shall be received as proof of insurable interest. 1.
• What is the amount of insurance? The measure of an insurable interest in property is the extent to which the insured might be damnified by loss or injury thereof. •
In cases where the property is insured for less than its true or market value, what are the rules to be followed?
In case of total loss: The property owner is entitled to receive the face value of the policy but in no case exceeding the market value of the property.
In case of partial loss: The property owner is entitled only the amount in proportion to his loss and the market value of the property as against the to face value of the policy. Ratio An owner of property who insures the same for less that its true value is co-insurer for the uninsured portion of the property if the policy is a valued one.
HOWEVER if the policy is an open one, the owner exceeding the face value of the policy
can collect the actual partial loss not
Example: X has a property worth P10,000. He insures it against fire for P8,000. How much shall he collect from then insurance in case of total loss? If there is Partial loss in the amount of P6,000? In case of total loss – P 8,000 – face value of the policy In case of partial loss - open policy – P6,000 – the actual partial loss not exceeding the face value of the policy In case of partial loss – valued policy – 6/10 of P8,000 or P4,800- the amount in proportion to his loss and the market value of the property as against the to face value of the policy. III CONCEALMENT • What is Concealment? Concealment is a neglect to communicate that which a party knows and ought to communicate to the other party. • What are the requisites for concealment? For concealment to vitiate a contract of insurance, the following must be present 1. the matter concealed must be material 2. there must be an obligation for the insured to reveal the concealed matter to the insurer • What matters must be communicated even in the absence of inquiry? Each party to a contract of insurance must communicate in good faith all facts within his knowledge only when: 1. They are material to the contract 2. The other has not the means of ascertaining the said facts 3. As to which the party with the duty to communicate makes no warranty. • What is the test of materiality? A fact is material if knowledge of it would have affected the decision of the insurer to enter into the contract, in estimating the risk, or in fixing the premium Note: Matters relating to the health of the insured are material and relevant to the approval and issuance of the life insurance policy as they definitely affect the insurer’s action on the application (Sunlife vs CA 245 SCRA 268) It is well-settled that the insured need not die of the disease he had failed to disclose to the insurer, as it is sufficient that his non-disclosure misled the insurer in forming his estimates of the risk of proposed insurance policy or in making inquiries (ibid) Lack of understanding by the illiterate insured of the statements and her application as to her state of good health does not negate the insurer’s right to rescind (Tang vs CA 90 SCRA 236) Concealment exists where the assured had knowledge of a fact material to the risk, and honesty, good faith, and fair dealing requires that he should communicate it to the assured, but he designedly and intentionally withholds the same. •
What are the matters which one has no duty to disclose?
Neither party to a contract of insurance is bound to communicate information of the matters following, except in answer to the inquiries of the other: 1. Those which are already known to the insurer 2. Those which, in the exercise of ordinary care, are ought to be known to the insurer or his agent, 3. Those undisclosed facts which are not material 4. Those which each party is bound to know: - general causes – eg. public events; and - general usages of trade - eg. rules of navigation all risks connected with navigation)
Information or the nature or amount of the interest of one insured except if insured is a lessee or a mortgagee (read sec 51) Those of which the insurer waives communication The right to information of material facts may be waived, either: a. Expressly – by the terms of the insurance b. Impliedly – by neglect to make inquiry as to such facts, where they are distinctly implied in other facts of which information is communicated (Fact disclosed that one was confined in the hospital. The insurer did not inquire as to the cause of confinement, the latter is in estoppel) Judgment upon the matters in question – eg. Opinion, speculation or expectation (How long will you live?)
What are the consequences of concealment? The rule is concealment whether intentional or unintentional entitles the injured party to rescind a contract of insurance. However, an intentional and fraudulent omission, on the part of one insured, to communicate information of matters proving or tending to prove the falsity of a warranty is required to entitle the insurer to rescind Note: Good faith is no defense in concealment (Sunlife vs CA 245 SCRA 268) Exceptions: 1. Incontestability clause: In life insurance, after a policy has been in force for at least two years, the insurer cannot rescind the policy due to fraudulent concealment or misrepresentation of the insured. If the insured dies within two years from the effectivity of the policy, rescission due to concealment or misrepresentation of material matters may still be invoked by the insurer, provided done within two years from the effectivity of the policy 2. Certain concealments in Marine Insurance The following matters although concealed will not vitiate the contract of marine insurance except when they are caused the loss. a. National character of insured b. Liability of insured thing to capture or detention c. Liability to seizure form breach of foreign laws d. Want of necessary documents e. Use of false or simulated papers
IV REPRESENTATION • What is representation? A representation is an oral or written statement of a fact or condition made by the insured at the time of or prior to the issuance of the policy, affecting the risk made by the insured to the insurer, tending to induce the insurer to assume the risk •
Distinguish Misrepresentation with Concealment Misrepresentation Concealment Insured makes a statement of fact which is Insured maintains silence when he ought to speak untrue •
What are the kinds of representation? 1. Oral 2. Written 3. Affirmative representation 4. Promissory representation
• What is an affirmative representation? It is any allegation as to the existence or non-existence of a fact when the contract begins •
What is a promissory representation?
It is any promise to be fulfilled after the contract has come into existence or any statement concerning what is to happen during the existence of the insurance. A promissory representation is substantially a condition or a warranty. A promissory representation maybe: 1. 1 Used to indicate a parole or oral promise made in connection with the insurance, but not incorporated in the policy. - the non-performance of such a promise cannot be shown by the insurer in defense of an action on the policy, but proof that the promise was made with fraudulent intent will serve to defeat the insurance 2. As an undertaking by the insured, inserted in the policy but not specifically made a warranty. •
Distinguish Warranty and Representation Warranty It is part of contracts It is expressly set forth in the policy itself or incorporated therein by reference It is conclusively presumed material It must be strictly complied with
Representation It is mere collateral inducement, but it may qualify an implied warranty It may be oral or written in another instrument It must be proved to be material It is requires only substantial truth or compliance
• When is representation made? A representation may be made at the time of or before issuance of the policy. It may be altered or withdrawn before issuance of the policy, but not afterwards Note: A representation must be presumed to refer to the date on which the contract goes into effect Hence:
There is NO FALSE representation it is true at the time the contract takes effect although false at the time it was made.
There is FALSE representation if it is true at the time it was made but false at the time the contract takes effect – in this case the insurer is entitled to rescind •
When is a representation deemed to be false? A representation is deemed to be false when the facts fail to correspond with its assertions or stipulations.
• What is misrepresentation? A misrepresentation in insurance is a statement: 1. As a fact of something which is untrue 2. Which the insured states with knowledge that it is untrue and with intent to deceive, or which he states positively as true without knowing it to be true and which has the tendency to mislead 3. where such fact in either case is material to the risk NOTE: An insured who has no personal knowledge of a fact may communicated such information which he has, and believes it to be true, upon the subject matter with the explanation that said information was obtained from 3rd persons. In this case he is not responsible if the information turns out to be false. Except if the information proceeds from an agent of the insured whose duty is to give information to his principal. This is so because knowledge of the agent is also knowledge of the principal •
What is the effect of false representation or misrepresentation|? If the representation is false on a material point, the injured party is entitled to rescind from the time when the representation becomes false. HOWEVER, the right to rescind given to the insurer is waived by the acceptance of premium payments despite knowledge of the ground of rescission • What is the test of materiality? Materiality is determined by the probable and reasonable influence of the facts on the party to whom communication is due, in forming his estimate of the contract, the risk and the premium NOTE: When the original contract of insurance was modified by reason of concealment or misrepresentation on the part of the insured especially when modification pertains to material points, upon discovery of such concealment or misrepresentation, the insurer is allowed to rescind said modification. • When is the right to rescind available? In order that the insurer may rescind a contract of insurance, such right must be exercised prior to the commencement of an action on the contract. (Example, if the insured filed an action to collect amount of the insurance, it can no longer rescind the contract)
Incontestability clause Incontestability means that after the requisites are shown to exist, the insurer shall be estopped from contesting the policy or setting up any defense, except as is allowed of the ground of public policy. Requisites: 1. The policy is a life insurance policy 2. It is payable on the death of the insured 3. It has been in force during the lifetime of the insured for at least 2 years from its date of issue or of its last reinstatement NOTE: The period of two years for contesting a life insurance policy may be shortened but it cannot be extended by stipulation • Effect when the policy becomes incontestable When the policy of life insurance becomes incontestable, the insurer may not refuse to pay the same by claiming that: 1. The policy is void ab initio (voidable) 2. It is rescissible by reason of the fraudulent concealment of the insured or his agent or 3. It is rescissible by reason of the fraudulent misrepresentations of the insured or by his agent • Defenses not barred by incontestable clause The incontestability of a policy under the law is not absolute. The insurer may still contest the policy of the following grounds: 1. That the person taking the insurance lacked insurable interest as required by law 2. The cause of the death of the insured is an excepted risk 3. That the premiums have not been paid 4. That the conditions of the policy relating to military or naval service have been violated 5. The fraud is of a particularly vicious type, as when the policy was taken out in furtherance of a scheme to murder the insured, or where the insured substitutes another person for the medical examination or where the beneficiary feloniously kiss the insured 6. The beneficiary failed to furnish proof of death or to comply with any condition imposed by the policy after the loss has happened 7. The action was not brought within the time specified V. WARRANTIES • What is a warranty? A warranty is a statement or promise stated in the policy itself or incorporated therein by reference, whereby the insured expressly contracts as to the present or future existence or certain facts, circumstances or conditions, the literal truth of which is essential to the validity of the contract of insurance • What does warranty relate to? It may relate to the past, the present, the future or to any or all of these. •
What are the kinds of warranties?
Affirmative warranty where the insured asserts the existence of a matter at or before the issuance of the policy
Promissory warranty where the insured promise or undertakes that certain matters shall exist or will be done or omitted after the policy takes effect
Express warranty where the assertion or promise is clearly set forth in the policy or incorporated therein by reference
Implied warranty where the assertion or promise is not expressly set forth in the policy, but because of the general tenor of the terms of the policy, or from the very nature of the insurance contract, a warranty is necessarily inferred or understood.
• What is the required form to create a warranty? There is no particular form or words necessary to create a warranty. Whether a warranty is constituted or not depends upon the intention of the parties, the nature of the contract or the words used thereto. Incase of doubt, the statement is presumed to be a mere representation and not a warranty. • When should an express warranty be made? It should be made at or before the execution of a policy • Where should an express warranty be contained? Express warranty may be contained either: 1. In the policy itself
In another instrument signed by the insured and referred to in the policy as making part of it. Mere reference is not sufficient to give warranty.
Note: A statement in a policy, of a matter relating to the person or thing insured, or to the risk as a fact is an express warranty. A statement which is in the nature of an opinion or belief is not a warranty • What is a promissory warranty? It is a statement in a policy that a thing which is material to the risk is intended to be done or not to be done after the policy takes effect. As a general rule: the non-performance of a promissory warranty entitles the other party to rescind the contract: Exceptions to the rule are: 1. Loss occurs before the time arrives for the performance of the promissory warranty 2. Performance becomes unlawful before the time arrives for the performance of the promissory warranty 3. Performance becomes impossible before the time arrives for the performance of the promissory warranty •
What happens when there is violation of material warranty or to other material provisions of the policy? All breaches of warranty give to the insurer the right to rescind the contract. This rule is true even if the violation of the material warranty did not contribute to the loss. If fraud intervenes in the breach, the insurer is freed from liability form the start, as the contract is fraud ab initio. The insured is not entitled to the return of the premiums paid. If there is no fraud in the breach, the insurer is freed from the contract the moment the breach occurs, and is entitled to retain the premiums corresponding to the period up to the time of the breach. But if the breach was done at the time of the inception of the policy, the insured cannot recover for any loss arising thereafter, but all premiums should be returned to the insured VI. THE POLICY • Define Policy of Insurance. A policy of insurance is the written instrument in which a contract of insurance is set forth. It is the formal written instrument evidencing the contract of insurance entered between the insured and the insurer. • What form is the policy be embodied? The policy shall be in printed form which may contain blank spaces on which words numbers and other matters necessary to complete the contract of insurance shall be written on. However, Group insurance and groupannuity policies may be typewritten and need not be in printed form. • What is a rider in a contract of insurance? A rider is a printed or typed stipulation contained on a slip of paper attached to the policy and forming an integral part of the policy. •
What is the effect of a rider, clause, warranty or endorsement purporting to be a part of the contract and pasted on the policy? As a general rule, these attached papers becomes part of a contract of insurance. However it will not bind the insured unless it is properly referred to therein in the policy. If the rider etc is issued after the original policy was in force shall not bind the insured unless it countersigned by the insured. • What are cover notes or interim policies? Cover notes or interim policies or binding slips may be issued to bind the parties temporarily pending the issue of the policy. It is intended to give temporary protection pending the investigation of the risk by the insurer or until the issue of formal policy. These notes are good for 60 days only, unless renewed with the written approval of the Insurance Commissioner • What are the contents of the policy? A policy contains, among others the following 1. The parties 2. Amount of insurance (except in open or running policies) 3. Rate of premium 4. The property or life insured 5. The interest of the insured in the property if he is not the owner 6. Risk insured against 7. Duration of the insurance •
May an agent undertake a contract of insurance in favor of its principal?
Yes. The agent or trustee when making an insurance contract for and in behalf of his principal should indicate that he is merely acting in a representative capacity by signing as such agent or trustee, or by other general terms in the policy • May a partner in a partnership insure partnership property? Yes. Insurable interest in the property of a partnership exists in both partnership and the partners and a partner has an insurable interest in the firm’s property which will support a policy taken out thereof for his own benefit • What extent does the contract of insurance cover undertaken by a partner? A partner who insures partnership property in his own name limits the contract to his individual share unless the terms of the policy clearly show that the insurance was meant to cover also the shares of the other partners. • How are ambiguities in an insurance contract construed? Contract of insurance is a contract of adhesion, thus any ambiguity therein should be resolved against the insurer, otherwise stated, it should be construed liberally in favor of the insured and against the insurer In Cebu vs William 306 SCRA 762 the Supreme Court held: “although in this jurisdiction, contracts of adhesion have been consistently upheld as valid per se as binding as an ordinary contract, the court recognizes instances when reliance on such contracts cannot be favored especially where the facts and circumstances warrant that subject stipulations be disregarded. The facts and circumstances vis-à-vis the nature of the provision sought to be enforced should be considered, bearing in mind the principles of equity and fair play.” In Rizal vs CA 336 SCRA 12, Supreme court said: “ it is settled that the terms in an insurance policy, which are ambiguous, equivocal, or uncertain are to be construed strictly and most strongly against the insurer, and liberally in favor of the insured so as to effect the dominant purpose of indemnity or payment to the insured, especially where forfeiture is involved, and the reason for this is that the insured usually has no voice in the selection or arrangement of the words employed and that the language of the contract is selected with great care and deliberation by experts and legal advisers employed by and acting exclusively in the interest of the insurance company. •
What are the kinds/classes of policies in non-life insurance?
Open or unvalued policy is one in which the value of the thing insured is not agreed upon, but is left to be ascertained in case of loss. In other words, it is one in which a certain agreed sum is written on the face of the policy not as the value of the property insured, but as the maximum limit of recovery in case of destruction the peril insured against.
Valued policy is one which expresses on its face an agreement that the thing insured shall be valued at a specified sum. In the absence of fraud or mistake, such value will be paid in case of total loss of the property, unless the insurance is for a lower amount.
Running policy is one which contemplates successive insurances and which provides that the subject of the policy may from time to time be defined
What are the requisites for a valid cancellation of non-life insurance? 1. Written prior notice to the insured, stating the facts and 2. For any of the following grounds 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 willful 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. A determination by the commissioner that the policy would violate the insurer
VII PREMIUM • Define premium. Premium is the consideration paid an insurer for undertaking to indemnify the insured against a specified peril • When is the insurer entitled to payment of the premium? As soon as the thing insured is exposed to the peril insured against • What is the effect of the nonpayment of premium? The policy or contract of insurance is not valid and binding. • Is this absolute? No. The exceptions are the following: 1. Life and Industrial Life policy whenever the grace period provision applies(sec 77)
2. Written acknowledgment of the receipt of premium by insurer (sec 78) 3. Payment in installments of the premium and partial payment made at the time of loss 4. Credit extension for the payment of premium 5. Estoppel – reliance in good faith on the practice of the insurance company NOTES: Grace period: Life insurance – 30 days or 1 month within which the payment of any premium after the first may be made Industrial life insurance -4 weeks and where the premiums are payable monthly, either 30 days or 1 month Written acknowledgment in a policy or contract of insurance of the receipt or premium is conclusive evidence of its payment, so far as to make the policy binding, notwithstanding any stipulation therein that it shall not be binding until the premium is actually paid Effect on nonpayment 1. Of First premium – prevents the inception of the policy 2. Of subsequent premiums- it does not affect the validity of the contract unless, by express stipulation, it is provided that the policy shall in any event be suspended or shall lapse. • When is the insured entitled to recover premiums? The insured is entitled to a return of the whole premium: 1. If the thing insured was never exposed to the risk insured against 2. When the contract is voidable due to the fraud or misrepresentation of the insurer or his agent 3. When the contract is voidable because of the existence of facts of which the insured is ignorant without his fault 4. When the insurer never incurred any liability under the policy because of the default of the insured other that actual fraud The insured is entitled to a ratable return of premium on the following cases: 1. Where the insurance is made for a definite period of time and the insured surrenders policy before termination 2. Where there is over-insurance by several insurers NOTES Where the insurance is for a definite period of time and the insured cancels his policy by surrendering the policy, the insured is entitled to recover the premiums already paid equivalent to the unexpired term at a pro rata rate Exception to this rule: a. Where the insurance is not for a definite period b. Where the policy is a life policy
Where a short period rate has been agreed upon Short period rate is that percentage, as agreed upon by the parties and appearing on the face of the policy, which the insurer shall retain from the premium in the event that the policy is surrendered by the insured for cancellation.
The premiums to be returned where there is over-insurance by several insurers shall be proportioned to the amount by which the aggregate sum insured in all the policies exceeds the value of the thing Example: X insures his house which has an insurable value of P1,500,000 as follows: Insurer Amt of Insurance Premiums paid A Co. P 1,200,000 P 24,000 B. Co 600,000 12,000 Aggregate sum P1,800,000. In this case, there is an over insurance of P300,000, the amount by which the aggregate sum insured in the two policies exceeds the insurable value of the house. The proportion is P300k to P1800k or 1/6. Hence, 1/6 of P24k or P4k is what A co must return; and 1/6 of P12k or P2k is what B co must return
VIII DOUBLE INSURANCE • When does double insurance exists? A double insurance exists where the same person is insured by several insurers separately in respect to the same subject and interest • What are its requisites? There is no double insurance unless the following requisites exist: 1. The person insured is the same 2. Two or more insurers insuring separately 3. The subject matter is the same 4. The interest insured is also the same and
The risk or peril insured against is likewise the same
Distinguish Double Insurance from Over-insurance Double Insurance Over-Insurance In double insurance, there may be no over-insurance as when There is over-insurance when the amount of the sum total of the amounts of the policies issued does not the insurance is beyond the value of the exceed the insurable interest of the insured insured’s insurable interest There are always several insurers There may be only one insurer involved THEREFORE, double insurance and over-insurance may exist at the same time or neither may exist at all • What is the binding effect of stipulation against double insurance? A policy which contains no stipulation against additional insurance is not invalidated by the procuring of such insurance. However, a stipulation that insurance shall be avoided if additional insurance is procured without the insurer’s consent is valid and reasonable, and any breach thereof will prevent a recovery on the policy •
What are the effects of Double insurance? The insured can insure with two or more companies unless prohibited by prior policy Where he is allowed, but over-insurance results, he can claim in case of loss, only up to the agreed valuation (in valued policy) or up to the full insurable value (in open policy) from any, some or all insurers, without prejudice to the insurers ratably apportioning the payments The insured can also claim a ratable return of the premiums on the over-insured amount Unrevealed other insurances, when required, is a material concealment/misrepresentation and gives to the insurer the right to rescind
IX. REINSURANCE • What is a contract of reinsurance? Reinsurance is a contract by which an insurer procures a third person to insure him against loss or liability by reason of such original insurance • What is the nature of contract of reinsurance? A reinsurance is presumed to be a contract of indemnity against liability and not merely against damage. The subject of the contract of reinsurance is the insurer’s risk and not the property insured under the original policy. The reinsurer agrees to indemnify the insurer , not against the actual payment made but against liabilities incurred •
Distinguish Reinsurance and Double Insurance Reinsurance The insurer becomes the insured in relation to the reinsurer The subject of the insurance is the original insurer’s risk It is an insurance of different interest The original insured has no interest in the contract of reinsurance which is independent of the original contract of insurance
Double Insurance The insurer remains as the insurer The subject of the insurance is the property It involves the same interest The insured is the party in interest in all the contracts
Distinguish Reinsurance and Co-insurance Co-insurance is the percentage in the value of the insured property which the insured himself assumes or undertakes to act as insurer to the extent of the deficiency in the insurance of the insured property. In case of loss or damage, the insurer will be liable only for such proportion of the loss or damage as the amount of insurance bears to the designated percentage of the value of the property insured. Reinsurance is where the insurer procures a third party, called the reinsurer, to insure him against liability by reason of such original insurance. Basically, a reinsurance is an insurance against liability which the original insurer may incur in favor of the original insured •
Distinguish Reinsurance and Reinsurance Treaty Reinsurance Reinsurance Treaty A reinsurance policy is a contract of indemnity A reinsurance treaty is merely an agreement between two one insurer makes with another to protect the insurance companies where one agrees to cede and the other first insurer from a risk it has already assumed to accept reinsurance business pursuant to provisions specified in the treaty. It is a Contract of insurance It is a contract for insurance • What are the matters which the reinsured must communicate to the reinsurer? The insurer who obtains reinsurance, except under automatic reinsurance treaties, must communicate the following to the reinsurer: a. All the representations of the original insured
b. All the knowledge and information he possesses, whether previously or subsequently acquired, which are material to the risk • What does “automatic reinsurance treaties” refer to? This refers to a case when two or more insurance companies agree in advance that each will reinsure a part of any line of insurance taken by the other, such contract is self executing and the obligation attaches automatically on acceptance of a risk by the reinsured. In this case, the obligation to communicate is not necessary due to the self-executing and automatic feature of such insurance. • What is meant by facultative reinsurance agreement? A facultative reinsurance agreement is a contract wherein the reinsurer may or may not accept participation in the risk insured. The term “facultative” is used in reinsurance contracts and it is so used in this particular case merely to define the right of the reinsurer to accept or not to accept participation in the risk insured. But once the share is accepted, the obligation is absolute and the liability assumed thereunder can be discharged by the one and only way – payment of the share of losses. There is neither alternative nor substitute prestation (Equitable Insurance vs Rural Insurance 4 SCRA 343) • Does the original insured has interest in a contract of reinsurance? None. The original insured has no interest in a contract of reinsurance. Reinsurance is a contract solely between the reinsured and the reinsurer and creates no privity of contract between the reinsurer and the original insured. However, if the contract of reinsurance is made directly for the benefit of the reinsured’s policyholders or if the reinsurer assumes and agrees to perform the reinsured’s contracts, the reinsurer becomes directly liable to the policyholders. It is necessary for the original insured to accept and communicate acceptance of such benefit to the reinsurer before revocation NOTE: A reinsurer is entitled to avail of every defense which the reinsured may avail of against the original insured (Gibson vs Revilla 38 SCRA 219) X. LOSS • Define loss in contract of insurance Loss is the injury or damage sustained by the insured from the perils insured against • What is Proximate cause? Proximate cause is the active efficient cause which sets in motion a train of events which in turn brings about a result without the intervention of any force operating and working actively from a new and independent force • What is a remote cause? Remote cause is a cause that does not necessarily or immediately produce an event or injury • When is the insurer liable for losses? The insurer is liable for: 1. Loss the proximate cause of which is the peril insured against although the peril not contemplated by the contract may not have been a remote cause of the loss 2. Loss the immediate cause of which is the peril insured against except where the proximate cause is an excepted peril 3. Loss through the negligence of the insured or of the insured’s agents or others, and
Loss in the course of efforts to rescue the thing from the peril insured against although the cause of loss is not a peril insured against..
When is 1. Loss 2. Loss 3. Loss
What are the prerequisites for the recovery for loss in insurance against fire?
the insurer liable for losses? by the insured’s willful act due to connivance of the insured; and where the excepted peril is the proximate cause
Notice of loss which must be immediately given unless delay is waived expressly or impliedly by the insurer
Proof of loss according to the best evidence obtainable. Delay may be also waived expressly or impliedly by the insurer All defects in a notice of loss, or in preliminary proof thereof, which the insured might remedy, and which the insurer omits to specify to him, within reasonable time, as grounds of objection, are waived.
When is the insurer of property against fire exonerated from liability?
When no notice is given by the insured or by any other person entitled to the benefit of the insurance, within a reasonable time. • What kind of proof is needed for preliminary proof of loss? When preliminary proof of loss is required in the policy, it is sufficient that the insured gives the best evidence which he has in his power and not evidence necessary in a court of justice.
XI. PAYMENT OF CLAIMS A.
Where insured outlives maturity due, the claim is payable immediately on maturity of the policy. This is true in endowment insurance
Where policy matures by Insured’s death, the claim is payable within 60 days after presentation of the claim and filing of proof of death of the insured. In case of unreasonable delay, the insured is entitled to (1) Attorney’s fees (2) expenses incurred by reason of the unreasonable withholding (3) interest at the legal interest rate (6%) per annum as fixed by the monetary board (4)amount of the claim., (5) moral damages if bad faith or fraud is present and (6) exemplary damages if the act is wanton and oppressive.
Please note that for cases involving loss or injury, any person having any claim upon the policy shall, without delay present a written notice of claim within six (6) months from date of accident to the insured, otherwise, the claim shall be deemed waived. Action or suit for recovery of damages due to loss or injury must be brought, in proper cases, with the Commissioner of the Courts within one (1) year from denial of claim, otherwise, the claimant’s right of action shall prescribe
If amount of loss is determined by agreement or by arbitration, the claim is payable within 30 days after proof of loss is received by the insurer.
If ascertainment of loss is not made within 60 days, the claim is payable within 90 days from receipt of proof of loss by the insurer, if not paid, unreasonable delay is presumed (Cathay vs CA 174 SCRA 11)
Please note the 1 year prescriptive period to file an action after denial of claim. The prescriptive period is not suspended by the filing of a request for reconsideration after denial of claim (Sun vs CA 195 SCRA 193)
Compulsory Motor vehicle liability Insurance 1. The insurance company will indemnify any authorized driver who is driving the motor vehicle of the insured and in the event of death of said driver, the company shall likewise indemnify his personal representatives and the company may at his option make indemnity payable directly to the claimants or heirs of claimants. In other words, under the compulsory vehicle liability insurance, direct payments may be made by the insurer to an accident victim of an insured vehicle 2. Pour autrui clauses inure to the benefit of any person injured by the person insured as if he were named in the policy
Note: Article 2207 of the Civil Code makes it clear that the insurance company that has paid the indemnity for the injury or loss sustained by the property insured “shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract.” The insurer who pays the insured is an assignee in equity of the insured against the offender. (Malayan vs CA 165 SCRA 536)
As a general rule: Payment by the insurer to the insured for loss under the policy entitles the insurer to be subrogated to the rights of the insured against the wrongdoer. The exceptions are: 1. Where the insured releases the wrongdoer from liability 2. Where the insurer pays without notifying the carrier, which in good faith had already paid the insured, and 3. Where the insurer pays the insured for a loss which is not included in the risk insured against, by the policy (Pan Malayan vs. CA 184 SCRA 54) Where the insured was paid by the insurer, the latter is subrogated to all rights of the former against the wrongdoer. If the insured after being paid by the insurer, releases the wrongdoer without the insurer’s consent, the insurer loses his right of subrogation against the wrongdoer. The insurer will however be entitled to recover from the insured what the insured originally received from the insurer as the proceeds of the policy (Manila vs. CA 154 SCRA 650)
CLASSES OF INSURANCE •
MARINE INSURANCE -Insurance against risks connected with navigation, to which a ship, cargo, freightage, profits or others insurable interest in movable property, may be exposed during a certain voyage or a fixed period of time. Coverage of Marine Insurance: 1. loss or damage to aircraft 2. Loss or damage goods & merchandise for shipment 3. Persons in connection w/ marine insurance 4. Precious stones, jewels, jewelry, precious metals 5. Bridges, tunnels, & other instrumentalities of navigation Perils of Navigation -perils in making landings in river navigation and damage from rain in consequence of improper stowage. War risks -perils due directly to some hostile action, military maneuver, operational war danger Builders risks -damage to ways from launching as well as damage to the ship. Perils of the sea -all kinds of marine casualties & damages done to the ship or goods at sea by the violent action of the winds or waves; not foreseen & not attributable to the fault of anybody. Perils of the ship -losses or damages resulting from: a) natural and inevitable action of the sea b) ordinary wear and tear of ship c) negligent failure of the ship's owner to provide the vessel w/ proper equipment to convey the cargo under ordinary conditions. Inchmaree clause -provision in the policy that the insurance shall cover loss of, damage to, the hull or machinery through negligence of the master, charterers, engineers, or pilots, or through explosions, bursting of boilers, breakage of shafts, or through any latent defect in the machinery or hull not resulting from want of due diligence.
Insurable Interest in Marine Insurance: Shipowner over the vessel, except that if chartered, the insurance is only up to the amount not recoverable from the charterer .- he also has an insurable on expected freightage; no insurable interest if he will be compensated by charterer in case of loss.
Cargo owner over the cargo & expected profits
Charterer over the amount he is liable to the shipowner, if the ship is lost or damaged during the voyage.
Loan on Bottomry/Respondentia -loan in which under any condition whatever, the repayment of the sum loaned, and of the premium stipulated, depends upon the safe arrival in port of the goods on which it is made, or of the price they may receive in case of accident. • INSURABLE INTEREST ON VESSEL HYPOTHECATED BY BOTTOMRY IN CASE OF 1.Owner/debtor -difference between the actual value of the vessel and the loan on bottomry. 2.Creditor -amount of the loan •
RIGHT OF INSURER & LENDER IN CASE OF LOSS:
value of what may be saved/salvaged shall be divided between the lender & insurer, in proportion to the legitimate interest of each one.
Freightage benefits derived by the owner, either from: a) chartering of the ship b) its employment for the carriage of his own goods or those of others. • a) b)
Time when Insurable Interest on Freightage exists: In case of a charter party, from the time the vessel has broken ground on the chartered voyage If no charter party & price is to be paid for the carriage of goods, from the time said goods are actually on board the vessel or from the time both ship & goods are ready for specified voyage.
In Marine Insurance, insured is required to reveal all information which he possesses material to the risk.
CONCEALMENT THAT DOES NOT VITIATE THE CONTRACT EXCEPT WHEN THEY CAUSED THE LOSS: national character of the insured liability of the thing insured to capture and detention liability to seizure from beach of foreign laws of trade. want of necessary documents use of false & simulated papers
1. 2. 3. 4. 5.
EFFECT OF CONCEALMENT OF MATTERS: exonerates the insurer from a loss EFFECT IF MISREPRESENTATION IS INTENTIONALLY FALSE: rescission of contract by insurer EFFECT OF FALSITY OF REPRESENTATION AS TO EXPECTATION: non-avoidance of a contract of insurance • a) b) c) d)
IMPLIED WARRANTIES IN MARINE INSURANSE: the ship is seaworthy no improper deviation from the agreed voyage will be made vessel will not engage in illegal venture where nationality or neutrality of a ship or cargo is expressly warranted
Seaworthiness relative term depending of the NATURE of the ship, the VOYAGE, & the SERVICE in which she is at the time engaged. Reasonable fitness to perform the service & to encounter the ordinary perils of the voyage contemplated by the parties. EFFECT OF VIOLATION OF IMPLIED WARRANTY OF SEAWORTHINESS: insurer will not be liable for a loss
WHEN REQUIREMENT OF SEAWORTHINESS SATISFIED: General Rule: Seaworthiness of the vessel is required only at the commencement of the risk. Exceptions: 1. insurance is made for a specified length of time 2. insurance is upon the cargo required to be transshipped at an immediate port
a) b) c)
a) b) c)
COURSE OF THE VOYAGE INSURED: one agreed upon by the parties in the absence of agreement, the course of sailing fixed by mercantile usage if the course of sailing is not fixed by mercantile usage, one which to a master of ordinary skill and direction, would seem the most natural, direct & advantageous DEVIATION as defined is: departure from the course of the voyage insured unreasonable delay in pursuing the voyage commencement of an entirely different voyage
DEVIATION IS PROPER: a) when caused by circumstances over which neither the master nor the owner of the ship has any control
b) c) d)
when necessary to comply with warranty, or to avoid a peril, whether or not the peril is insured against when made in good faith, & upon reasonable grounds of belief in its necessity to avoid a peril when made in good faith, for the purpose of saving human life, or relieving another vessel in distress.
EFFECT OF IMPROPER DEVIATION: insurers become immediately absolved from further liability Loss A. TOTAL 1. Actual total loss ( exists when the subject matter of the insurance is wholly destroyed or lost or when it is so damaged as no longer to exist in its original charter) is caused by: a. total destruction of the thing insured b. irretrievable loss of the thing by sinking, or by leaving broken up c. any damage to the thing which renders it valueless d. other event which effectively deprives the owner of the possession 2.
Constructive total loss ("technical total loss") one that gives to a person insured a right to abandon
PARTIAL LOSS loss other than a total loss
presumption of actual loss: continued absence of a ship without being heard.
CONTINUATION OF LIABILITY OF INSURER: whenever the ship upon which the cargo insured was loaded cannot continue the voyage due to the peril insured against, & cargo is loaded on another vessel
ABANDONMENT - necessary only in Constructive Total Loss
Average extraordinary/accidental expense incurred during the voyage for the preservation of the vessel, cargo, or both and all damages to the vessel & cargo from the time it is loaded and the voyage commenced until it ends & the cargo unloaded.
a. b. c. d. e. f. g. 2.
KINDS OF AVERAGE: GROSS/GENERAL AVERAGES include all the damages & expenses which are deliberately caused in order to save the vessel, its cargo, or both at the same time, from real & known risk. Requisites to the Right to claim general average contribution: common danger to the vessel/cargo part of the vessel/ cargo was sacrificed deliberately sacrifice must be for common safety/benefit of all must be made by the master or upon his authority not be caused by any fault of the party asking the contribution must be successful must be necessary SIMPLE/PARTICULAR AVERAGE includes all the expenses & damages caused to the vessel or to her cargo which have not inured to the common benefit & profit of all the persons interested in the vessel & her cargo. Partial loss caused by a peril insured against, which is not a general average loss
''FPA CLAUSE" a situation wherein the insured & insurer stipulated in the policy that the vessel/cargo insured shall be free from particular average effects: a. if damage to the thing insured is a PARTICULAR average, the insured shall not be liable UNLESS the loss suffered is total b. if damage to the thing insured is a GENERAL average, insurer shall be liable whether the loss is partial or total or for the condition of the insured for his proportion of all general average losses assessed upon the thing insured which was saved. •
There is an ACTUAL TOTAL LOSS if the insured is effectively deprived of the use & possession of the property, whether by seizure/capture followed by condemnation/theft.
Abandonment act of the insured by which, after a constructive total loss, he declares the relinquishment to the insurer of his interest in the thing insured
1. 2. 3. 4. 5. 6. 7. • 1. 2. 3. 4. 5. 6.
effect: insured is surrendering to the insurer whatever is left of the property insured, & resorting to the policy for indemnity, insurer then becomes the owner of whatever may remain of the insured thing & the insured may recover a total loss.
REQUISITES FOR VALID ABANDONMENT: actual relinquishment by the person insured of his interest in the thing insured constructive total loss abandonment must be neither partial nor conditional made within a reasonable time after receipt of reliable information of the loss factual made by giving notice to the insurer which may be done orally or in writing notice of abandonment must be explicit & must specify the particular cause of the abandonment WHEN ABANDONMENT MAY BE MADE: if more than 3/4 of the value of the thing insured is actually lost if more than 3/4 of the value of the thing insured would have to be expended to recover it from the peril if it is injured to such an extent as to reduce its value by more than 3/4 if the thing is insured is a ship & the contemplated voyage cannot be lawfully performed without incurring an expense to be insured of more than 3/4 the value of the thing abandoned. If the thing insured is & the contemplated voyage can't be lawfully performed without incurring risk which a prudent man would not take under the circumstances If the thing insured, being cargo or freightage, the voyage cannot be performed nor another ship procured by the master within reasonable time & with reasonable diligence
RIGHT OF RECOVERY WHEN: abandonment is made recovery of TOTAL LOSS, insurer acquires all interest of the insured
no abandonment recovery only of ACTUAL LOSS
When abandonment becomes ineffectual: information which formed the basis of abandonment proved to be incorrect & there was in fact no total loss
Form of Notice of Abandonment no particular form; may be made orally unless required to be in writing, even notice by telegraph is sufficient if complies with requirements if done orally, insured must submit to the insurer within 7 days from such oral notice, a written notice of the abandonment
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EFFECTS OF ACCEPTANCE OF ABANDONMENT becomes irrevocable UNLESS the ground upon which it owes made proven to be unfounded conclusive upon parties admission of the loss & sufficiency of abandonment
• a) b)
HOW ACCEPTANCE OF ABANDONMENT MADE: express implied from the acts of the insurer mere silence of the insurer for an unreasonable length of time after notice shall be construed as acceptance
EFFECT OF VALUATION: conclusive between the parties provided a) the insured has some interest at the risk b) there is no fraud on his party
Co-insurance form of insurance in which the person who insures his property for less than the entire value is understood to be his own insurer for the difference which exists between value of property & amount of insurance
REQUISITES FOR APPLICATION: insured taken is less than the actual value of the thing insured loss is partial
MARINE INSURANCE There is always co-insurance
FIRE INSURANCE No co-insurance UNLESS expressly stipulated in the policy
Fire insurance - a contract by which the insurer for a consideration agrees to indemnify the insured against loss, or damage to, property by fire, but may include loss by lightning, windstorm, tornado & earthquake & other allied risks, when such risks are covered by extension to fire insurance policies/ under separate policies •
Alteration alteration in the use or condition of thing insured will entitle the insurer to rescind the contract provided following requisites are present: a) use or condition of the thing is specifically limited/stipulated in the policy. b) such case/condition as limited by the policy is altered c) the alteration is made without the consent of the insurer d) alteration is made by means within the control of the insured e) the alteration increases the risk f) violation of a policy provision
Co-insurance clause clause requiring the insured to maintain insurance to an amount equal to a specified percentage of the value of the insured property under penalty of becoming co-insurer to the extent of such deficiency
Fall-off Building Clause clause in fire insurance policy that if the building or any part thereof falls, except as a result of fire, all insurance by the policy shall immediately cease.
Option to Rebuild Clause option of insurer to repair, rebuild or replace buildings/structures wholly or partially damaged or destroyed, instead of the payment of the loss. Alternative obligation, either pay the amount of the loss/ rebuild the building damaged
Casualty Insurance includes all forms of instrument against loss or liability arising from accident/mishap other than those within the scope of other types of insurance
GENERAL DIVISION OF CASUALTY INSURANCE: insurance against specified hazards which may affect the person/property of the insured e.g. personal accident, robbery/theft, damage to or loss of motor vehicle
insurance against specified hazards which may give rise to liability on the part of the insured for claims for injuries to others/damages to their property e.g. workmen's compensation, motor vehicle liability
LIFE INSURANCE Usual object is to provide fund for the benefit of the estate/heirs beneficiaries of insured after the death of the insured
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ACCIDENT/HEALTH INSURANCE Protect against not a loss of life but a loss of time, earning capacity and expenses
Suretyship contract whereby a person binds himself solidarily with principal debtor for the fulfillment of an obligation NATURE OF LIABILITY OF SURETY: solidary limited to the amount of the bond determined by the terms of the contract of suretyship in relation to the principal contract between obligor and obligee
SURETY insurer of debt Undertakes to pay principal dies not pay primary No such rights
SURETY Accessory contract 3 parties: surety, obligor
GUARANTOR insurer of solvency of debtor Binds himself to pay if principal is unable to pay Secondary Can not be compelled to pay the creditor unless the latter has exhausted all the properties of the debtor
PROPERTY INSURANCE Principal contract 2 parties: insurer and insured
and obligee Credit accommodation Surety can recover form principal Bond can be cancelled only with consent of the oblige, commissioner or the court Risk-shifting device premium paid being in the nature of a service fee Requires acceptance of the oblige to be valid
Contract of Indemnity No such right, only right of subrogation May be cancelled unilaterally either by insured or insurer on grounds provided by law Risk-distributing device, premium paid as a ratable contribution to a common fund No need for acceptance by any third party
• a) b)
WHEN SURETY ENTITLED TO SERVICE FEE ONLY: when contract of suretyship/ bond is not accepted by obligee when contract of suretyship/ bond is not filed with obligee
TYPES OF SURETY BONDS Contract bonds a. Performance bonds b. Payment bonds Official Judicial
Life Insurance insurance payable on the death of a person or on his surviving a specified period or otherwise contingently on the continuance or cessation of life. Nature: 1. liability absolutely certain 2. amount of insurance generally no limit 3. direct pecuniary loss not required
KINDS OF LIFE INSURANCE GENERAL, ordinary or old line life insurance fixed for a premium payable, without condition, at stated intervals, a sum certain is to be paid on death, without condition
limited payment life insurance specified premiums are to be paid for a specified period or until the death of insured if it occurs before the expiration of such period, and under which insurer is obligated to pay a specified sum on the death of the insured
ENDOWMENT INSURANCE contract to pay a certain sum to the insured if he lives a certain length of time, or if he dies before that time, to some other person indicated as beneficiary
TERM LIFE INSURANCE insurance for a term of years only, or until insured shall have arrived at a certain age
ADVANCE INSURANCE contract which provides for the payment to the insured of a lump sum immediately, in consideration of his agreement to make certain periodical payments to the insurer for a specified period, or for that end of the period, the performance of insured's obligation being secured by mortgage or deed of trust
TONTINE INSURANCE form of life insurance by which the policyholder under the same plan, that no dividends, return premium, or surrender value shall be received for a term of years called the "tontine period," the entire surplus from all sources being allowed to accumulate to the end of that period, and then divided among all who have maintained their insurance in force and who have survived.
"No-fault" Clause any claim for death or injury shall be paid up to p5,000 without necessity of proving negligence or fault, provided the following proofs of loss under oath are submitted: 1. police report of accident 2. death certificate and evidence sufficient to establish proper payee 3. medical report and evidence of medical or hospital disbursement
CLAIMS UNDER CMVLI a claim shall lie against the insurer of the vehicle in which the occupant is riding, mounting or dismounting from in any other case, against the insurer of the directly offending vehicle
AUTHORIZED DRIVER CLAUSE the clause means that it indemnifies the insured owner against loss or damage to the car but limits the use of the insured vehicle to the insured himself or any person who drives on his order or with his permission the requirement that the person driving the insured vehicle is permitted in accordance with the licensing laws or other laws or regulations to drive the motor vehicle. It is applicable only if the person driving is other than the insured where the car is unlawfully and wrongfully taken without the owner's consent or knowledge, such taking constitutes theft, and thus, it is the theft clause and not the "authorized driver clause" that should apply.
Cooperation Clause clause in an automobile insurance policy which provides in essence that the insured shall give all such information and assistance as the insurer may require, usually requiring attendance at trials or hearings
LIABILITY OF INSURER IF INSURED WAS COMMITTING A FELONY: liabilities arising out of acts of negligence, which are also criminal, are also insurable on the ground that such acts are accidental. Thus, a motor insurance policy covering the insured’s liability for accidental injury caused by his negligence, even though gross and attended by criminal consequences such as homicide through reckless imprudence, will not be void as against public policy. But liability consequences of deliberate criminal acts are not insurable
JURISDICTION OF THE INSURANCE COMMISSIONER Original exclusive jurisdiction with the Insurance Commissioner Notice of claim must be filed within six months from the date of accident. Otherwise the claim shall be deemed waived. Action or suit must be brought in proper cases, with the Commission or the courts within one year from the denial of the claim, otherwise the claimant's right of action shall prescribe
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FUNCTIONS OF THE COMMISSIONER: Adjudicatory functions Administrative Functions includes suspension or revocation of license, power to examine books and records EFFECT OF DEATH OF INSURED THROUGH SUICIDE: in life insurance contract, the insurer is liable in case of suicide in the following cases: 1. if committed after two years from the date of the policy's issue or its last reinstatement 2. if committed after a shorter period provided in the policy 3. if committed in a state of insanity regardless of the date of the commission unless suicide is an excepted peril -
Any stipulation extending the 2-year period is null and void
COMPULSORY MOTOR VEHICLE LIABILITY INSURANCE (CMVLI) is a protection coverage that will answer for legal liability for losses and damages for bodily injuries or property damage that may be sustained by another arising from the use and operation of motor vehicle by its owner purpose: to give immediate financial assistance to victims of motor vehicle and/or their dependents, especially if they are poor regardless of the financial capability of motor vehicle owners or operators responsible for the accident sustained