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San Beda College of Law 30 MEMORY A AID IN COMMERCIAL LAW
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
7.
Personal Personal each party having in view the character, credit and conduct of the other.
“DOING “DOING AN INSURA INSURANCE NCE BUSINE BUSINESS SS OR TRANSACTING AN INSURANCE BUSINESS” (Sec. 2, !". 4) !. "aking or proposing to make, as insurer, any insurance contract# 2. "aking or pro propos posing to make, as surety, any contract of suretyship as a vocation, not as a mere incident to any other legiti legitimat mate e busine business ss of a surety# $. %oing any insurance business, including a reinsurance business# &. %oing or proposing to do any business in substance e'uivalent to any of the foregoing II. C#ARACTERISTICS OF AN INSURANCE CONTRACT CONTRACT (The Insurance Code of the Philippines Annotated, Hector de Leon, 2002 ed.) !. Consensual Consensual it is perfected by the meeting of the minds of the parties. 2. Voluntary the parties may incorporate such terms and conditio tions as they may dee deem convenient. $. Aleatory it depe depend ndss upon upon some some contingent event. &. &. nilateral imposes legal duties only on the the insu insure rerr wh who o prom promis ises es to indemnify in case of loss. ). Conditional It is sub*ect to cond condit itio ions ns the the prin princi cipa pall one one of which is the happening of the event insured against. +. Contract Contract of inde!nity inde!nity -cept life and accident accident insuranc insurance, e, a contract contract of insurance is a contrac tractt of inde indemn mnit ity y wh wher ereb eby y the the insu insure rerr promises to make good only the loss of the insured.
RE$U E$UISITES OF A CONTRACT OF INSURANCE INSURANCE (The Insurance Code of the Philippines Annotated, Hector de Leon, 2002 ed.) !. A sub*ect matter which the insured has an insurable interest. 2. vent or peril insured against which may be any futur ture contin tingent ent or unkn unknow own n even event, t, past past or futu future re and and a duration for the risk thereof. $. A promise to pay or indemnify in a fi-ed or ascertainable amount. &. A consideration known as premium/. ). "eeting of the minds of the parties. % CARDINAL PRINCIPLES IN INSURANCE !. Insurable Interest 2. 0rinciple of 1tmost ood 3aith An insurance contract re'uires utmost good good fait faith h (u"erri!ae u"erri!ae fidei fidei betwee between n the parties. 4he applicant is en*oined en*oined to disc disclo lose se any any mater materia iall fact fact,, wh whic ich h he knows or ought to know. #eason on$$ An insur insuranc ance e contra contract ct is an #eas aleatory contract. 4he insurer relies on the representation of the applicant, who is in the best position to know the state of his health. $. Contract of Indemnity It is the basis of all property insurance. 4he insured who has insurable interest over over a prop proper erty ty is only only enti entitl tled ed to recov ecover er the amou amoun nt of actu actual al los loss sustained and the burden is upon him to esta estab blis lish the amou amoun nt of such uch los loss (#e%ie&er on Co!!ercial La&, Professors 'undian and Auino) #ules$ a. Applies only to property insur nsuran ance ce e-ce e-cept pt when the the credit creditor or insure insuress the life life of his debtor. b. 5ife 5ife insu insura ranc nce e is not not a contr contrac actt of indemnity. c. Insurance contracts are not wagering contracts. (Sec. & &. Contract of Adhesion (3ine 0rint 6ule
COMMERCIAL LAW COMMITTEE CHAIRPERSON : Garny Luisa Alegre ASST. CHAIRPERSON Jayson : Jayson O’S Ramos EDP: ea!ri" I. Ramos S#JECT HEADS: $ari%&elle De 'era (Nego!ia)le Ins!rumen!s La*+, Jose -ernano Lla/e (Insuran%e+, Alri%& Del Rosario (Trans0or!a!ion La*s+, S&irley $ae Ta)ang%ura1 on 'in%en! Agus!in (Cor0ora!ion La*+, 2arl S!e/en Co (S0e%ial La*s+, Jo&n Lemuel Ga!ula (an3ing La*s+, Ro)es0ierre Ro)es0ierre C # (La* on In!elle%!ual Pro0er!y+ Pro0er!y+
San Beda College of Law 31 MEMORY A AID IN COMMERCIAL LAW "ost
of the terms of the contract do not not resu result lt from from mutu mutual al nego negoti tiat atio ions ns between een the parties as they they are prescribed by the insurer in final printed form to which the insured may adhere/ if he choo choose sess but but wh whic ich h he cann cannot ot change. (6i7al Surety and Insurance Co., vs. CA, $$+ SC6A !2 ). 0rinciple of Subrogation processs of legal legal substi substitut tution ion It is a proces where the insurer steps into the shoes of the insured and he avails of the latter8s rights against the wrongdoer at the time of loss. 4he principle of subrogation is a normal inci incide dent nt of indem indemni nity ty insu insura ranc nce e as a legal effect of payment# it inures to the insurer without any formal assignment or any e-press stipulation to that effect in the policy. Said right is not dependent upon nor does it grow out of any private contract. 0ayment to the insured makes the the insur nsurer er a subr ubrogee ogee in e'uit e'uity y. ("alayan Insurance Co., Inc. v. CA, !+) SC6A )$+# see also Art. 229:, ;CC Purposes$ Purposes$ (The Insurance Code of the Philippines Annotated, Hector de Leon, 2002 ed.) !. 4o mak make e the perso person n who cau cause sed d the loss legally responsible for it. 2. 4o prevent the insured from receiving a double recovery from the wrongdoer and the insurer. insurer. $. 4o prev preven entt tort tortfe feas asor orss from from bein being g free free from from liab liabil ilit itie iess and and is thus thus founded on considerations of public policy. #ules$ !. Applicable only to property insurance. 2. 4he insurer can only recover from the third person what the insured could have recovered. $. 4here can be no subrogation in cases< a. =here ere the insured by his own act act releases the wrongdoer or third party liable for the loss or damage# b. =here =here the the insur insurer er pays pays the the insure insured d the value of the loss without notifying the carrier who has in good faith settled the insured8s claim for loss# c. =here =here the the insur insurer er pays pays the the insur insured ed for for a loss or risk not covered by the policy. (0an (0an "alaya "alayan n Insura Insurance nce Compan Company y v. CA, !>& SC6A )& d. In life life insu insura ranc nce e
e. 3or recovery of loss in e-cess of insurance coverage
CONSTRUCTION OF INSURANCE CONTRACT 4he 4he ambi ambig guous uous term termss are are to be constr construed ued strict strictly ly agains againstt the insur insurer er,, and and liber liberal ally ly in favo favorr of the the insu insure red. d. ?owever, if the terms are clear, there is no room for interpretation. (Calanoc vs. Court of Appeals, @> 0hil. :@ III. III. DISTIN DISTINGUI GUIS#I S#ING NG ELE&EN ELE&ENTS TS OF AN INSURANCE CONTRACT !. 4he 4he insu insure red d poss posses esse sess an insura"le interest susc suscep epti tibl ble e of pecu pecuni niar ary y estimation# 2. 4he insured is sub*ect to a ris* of loss through the destruction or impair impairmen mentt of that that interes interestt by the happening of designated perils# $. 4he insurer assu!es that ris* of loss# loss # &. Such assumptio assumption n is part of a eneral sche!e sche!e to distri distri"ut "ute e actual actual losses losses among among a large large group group or substa substanti ntial al number of persons bearing somewhat similar risks# and ). 4he insured makes a ratable contribution ( pre!iu! pre!iu! to a general insurance fund. A contract possessing only the first $ elements elements above is a ris*+shiftin de%ice. If all the elements, it is a ris*+ distri"utin de%ice. de%ice. (The Insurance Code of the Philippines Annotated, Hector de Leon, 2002 ed.) I'. I'. PERF PERFEC ECTI TION ON OF AN INSU INSURA RANC NCE E CONTRACT An insurance contract is a consensual contract and is therefore perfected the moment there is a meeting of minds with respect to the ob*ect and the cause or consideration. =hat =hat is being being follow followed ed in insura insurance nce contr ontra acts cts is what is know known n as the the co coni niti tion on theo theory ry-. 4hus, an acceptance made by letter shall not bind the person making the offer e-cept from the the time time it came came to his his know knowled ledge ge/. /. (nri'ue7 vs. Sun 5ife Assurance Co. of Canada, &! 0hil. 2+@ B*+ Rece A mere acknowledgment on behalf of the company that its branch office had
COMMERCIAL LAW COMMITTEE CHAIRPERSON : Garny Luisa Alegre ASST. CHAIRPERSON Jayson : Jayson O’S Ramos EDP: ea!ri" I. Ramos S#JECT HEADS: $ari%&elle De 'era (Nego!ia)le Ins!rumen!s La*+, Jose -ernano Lla/e (Insuran%e+, Alri%& Del Rosario (Trans0or!a!ion La*s+, S&irley $ae Ta)ang%ura1 on 'in%en! Agus!in (Cor0ora!ion La*+, 2arl S!e/en Co (S0e%ial La*s+, Jo&n Lemuel Ga!ula (an3ing La*s+, Ro)es0ierre Ro)es0ierre C # (La* on In!elle%!ual Pro0er!y+ Pro0er!y+
San Beda College of Law 32 MEMORY AID IN COMMERCIAL LAW received from the applicant the insurance premium and had accepted the application sub*ect to processing by the head office.
Co-e" Noe (A* Ie") A concise and temporary written contract issued to the insurer through its duly authori7ed agent embodying the principal terms of an e-pected policy of insurance. It is intended to give Purpose$ temporary insurance protection coverage to the applicant pending the acceptance or re*ection of his application. uration$ ;ot e-ceeding +9 days unless a longer period is approved by Insurance Commissioner (Sec. )2. R*e"/ 0rinted stipulations usually attached to the policy because they constitute additional stipulations between the parties. (Ang iok Chip vs. Springfield, )+ 0hil. 2:) In case of conflict between a rider and the printed stipulations in the policy, the rider prevails, as being a more deliberate e-pression of the agreement of the contracting parties. (C. Al%endia, The La& of Insurance in the Philippines, /1 ed.) C!/e/ An agreement between the insurer and the insured on certain matter relating to the liability of the insurer in case of loss. (Prof. e Leon, p./) E*o"/ee/ Any provision added to the contract altering its scope or application. (Prof. e Leon, p./) POLIC OF INSURANCE 4he written instrument in which a contract of insurance is set forth. (Sec. &@ Coe/3
(Sec. %1)
!. Parties 2. Amount of insurance, e-cept in open or running policies# $. R ate of premium# &. Property or life insured#
). Interest of the insured in the property if he is not the absolute owner# +. R isk insured against# and :. Duration of the insurance.
Pe"/o/ ee* o "eco-e" o e oc5 (/ec. %)3 4he insurance proceeds shall be applied e-clusively to the proper interest of the person in whose name or to whose benefit it is made, unless otherwise specified in the policy. 7*/3 !. 0; 05ICB value of thing insured is not agreed upon, but left to be ascertained in case of loss. (Sec. +9 4he actual loss, as determined, will represent the total indemnity due the insured from the insurer e-cept only that the total indemnity shall not e-ceed the face value of the policy. (%evelopment Insurance Corp. vs. IAC, !&$ SC6A +2 2. A51% 05ICB definite valuation of the property insured is agreed by both parties, and written on the face of policy. (Sec. +! 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. $. 61;;I; 05ICB contemplates successive insurances and which provides that the ob*ect of the policy may from time to time be defined (Sec. +2
'. TPES OF INSURANCE CONTRACTS !. Life insurance a. Individual life (Secs. !:@!>$, 22: b. roup life (Secs. )9, last par., 22> c. Industrial life (Secs. 22@2$! 2. 3on+life insurance a. "arine (Secs. @@!++ b. 3ire (Secs. !+:!:$ c. Casualty (Sec. !:& $. Contracts of "ondin or suretyship (Secs. !:)!:> Noe3 !. ?ealth and accident insurance are either covered under life (Sec. !>9 or casualty insurance. (Sec. !:&. 2. "arine, fire, and the property aspect of casualty insurance are also referred to as property insurance.
COMMERCIAL LAW COMMITTEE CHAIRPERSON : Garny Luisa Alegre ASST. CHAIRPERSON : Jayson O’S Ramos EDP: ea!ri" I. Ramos S#JECT HEADS: $ari%&elle De 'era (Nego!ia)le Ins!rumen!s La*+, Jose -ernano Lla/e (Insuran%e+, Alri%& Del Rosario (Trans0or!a!ion La*s+, S&irley $ae Ta)ang%ura1 on 'in%en! Agus!in (Cor0ora!ion La*+, 2arl S!e/en Co (S0e%ial La*s+, Jo&n Lemuel Ga!ula (an3ing La*s+, Ro)es0ierre C # (La* on In!elle%!ual Pro0er!y+
San Beda College of Law 33 MEMORY AID IN COMMERCIAL LAW
'I. PARTIES TO INSURANCE CONTRACT 1. Insurer + 0erson who undertakes to indemnify another. 3or a person to be called an insurance agent, it is necessary that he should perform the function for compensation. (Aisporna vs. CA, !!$ SC6A &)@ 2. Insured 8 4he party to be indemnified upon the occurrence of the loss. ?e must have capacity to contract, must possess an insurable interest in the sub*ect of the insurance and must not be a public enemy. A public enemy+ a nation with whom the 0hilippines is at war and it includes every citi7en or sub*ect of such nation. . Beneficiary D A person designated to receive proceeds of policy when risk attaches. designation of the 6ules in the beneficiary< a. 5I3 i. A person who insures his o&n life can designate any person as his beneficiary, whether or not the beneficiary has an insurable interest in the life of the insured sub*ect to the limitations under Art. :$@ and Art. 29!2 of the ;CC. #eason$ in essence, a life insurance policy is no different form a civil donation insofar as the beneficiary is concerned. Eoth are founded on the same consideration of liberality. (Insular 5ife vs. brado, >9 SC6A !>! ii. A person who insures the life of another person and name himself as the beneficiary must have an insurable interest in such life. (Sec. !9 iii. As a general rule, the designation of a beneficiary is revocable unless the insured e-pressly waived the right to revoke in the policy. (Sec. !! iv. 4he 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 dis'ualified. (Sec. !2 b. 06064B 4he beneficiary of property insurance must have an insurable interest in such property, which must e-ist not only at the time the policy takes effect but also when the loss occurs. (Sec. !$ and !>.
E99ec/ o9 I""e-oc!:e De/+!o O9 Bee9c!"5 Insured cannot< 1. Assign the policy 2. Take the cash surrender value of the policy 3. Allow his creditors to attach or e-ecute on the policy# 4. Add new beneficiary# or 5. Change the irrevocable designation to revocable, even though the change is *ust and reasonable. 4he 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. 114, cited in de Leon, p. /0/, 2002 ed.) 'II. INSURABLE INTEREST A. In General A person has an insurable interest in the sub*ect 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 pre*udice. B. Life very person has an insurable interest in the life and health< a. of himself, of his spouse and of his children#
COMMERCIAL LAW COMMITTEE CHAIRPERSON : Garny Luisa Alegre ASST. CHAIRPERSON : Jayson O’S Ramos EDP: ea!ri" I. Ramos S#JECT HEADS: $ari%&elle De 'era (Nego!ia)le Ins!rumen!s La*+, Jose -ernano Lla/e (Insuran%e+, Alri%& Del Rosario (Trans0or!a!ion La*s+, S&irley $ae Ta)ang%ura1 on 'in%en! Agus!in (Cor0ora!ion La*+, 2arl S!e/en Co (S0e%ial La*s+, Jo&n Lemuel Ga!ula (an3ing La*s+, Ro)es0ierre C # (La* on In!elle%!ual Pro0er!y+
San Beda College of Law 34 MEMORY AID IN COMMERCIAL LAW b. of any person on whom he depends wholly or in part for education or support# c. of any person under a legal obligation to him to pay money or respecting property or services, of which death or illness might delay or prevent performance# and d. of any person upon whose life any estate or interest vested in him depends. (Sec. !9 ;e /o* e! #eason$ 4he 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. #eason$ 4he insurer approved the policy based on the personal 'ualification 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. 2) #eason< 4he moral ha7ards are as great as those of property insurance. C#ANE OF INTEREST IN T#E T#ING INSURED 4he 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. )> #eason< Insurance contract is personal. 5636#AL #L6$ 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 e'uivalent e-tent, until the interests in the thing
COMMERCIAL LAW COMMITTEE CHAIRPERSON : Garny Luisa Alegre ASST. CHAIRPERSON : Jayson O’S Ramos EDP: ea!ri" I. Ramos S#JECT HEADS: $ari%&elle De 'era (Nego!ia)le Ins!rumen!s La*+, Jose -ernano Lla/e (Insuran%e+, Alri%& Del Rosario (Trans0or!a!ion La*s+, S&irley $ae Ta)ang%ura1 on 'in%en! Agus!in (Cor0ora!ion La*+, 2arl S!e/en Co (S0e%ial La*s+, Jo&n Lemuel Ga!ula (an3ing La*s+, Ro)es0ierre C # (La* on In!elle%!ual Pro0er!y+
San Beda College of Law 3! MEMORY AID IN COMMERCIAL LAW and the interest in the insurance are vested in the same person. (Sec. 29
67C6PTI83'$
!. In life, health and accident insurance.(Sec. 29# 2. Change in interest in the thing insured after occurrence of an in*ury which results in a loss. (Sec. 2!# $. Change in interest in one or more of several distinct things separately insured by one policy. (Sec. 22# &. Change of interest, by will or succession, on the death of the insured. (Sec. 2$# ). 4ransfer of interest by one of several partners, *oint owners, or owners in common, who are *ointly insured, to others. (Sec. 2&# +. =hen 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. ):# :. =hen there is an e-press prohibition against alienation in the policy, in case of alienation, the contract of insurance is not merely suspended but avoided. (Art. !$9+, ;CC.
=I. ASCERTAIN&ENT AND CONTROL OF RIS7 AND LOSS A. Fo" P"!"5 Coce"/ o9 e P!"e/3 !. Correct estimation of the risk# 2. 0recise delimitation of the risk# $. Control of the risk# &. %etermining whether a loss occurred and if so, the amount of such loss. B. De-ce/ /e* 9o" !/ce"!+ !* co"o+ "/> !* o//3 1. Coce!e A neglect to communicate that which a party knows and ought to communicate (Sec. 2+ 6e'uisites<
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. 4he other party has not the means of ascertaining the fact concealed. e. "aterial ffects< ntitles insurer to rescind, even if the death or loss is due to a cause not related to the concealed matter (Sec. 2:. Noe3 ood 3aith is not a defense in concealment. Sec. 2: clearly provides that, the concealment whether intentional or unintentional entitles the in*ured party to rescind the contract of insurance./
Te/ o9 &!e"!53 %etermined 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 in'uiries (Sec. $!. -ception to Sec. $!< a. Incontestability clause b. "atters under Sec.!!9 (marine insurance 4he
waiver of medical e-amination in a nonDmedical insurance contract renders even more material the information re'uired of the applicant concerning the previous conditions of health and diseases suffered. (Sunlife v. Sps. Eacani, 2&+ SC6A 2+>. 4he
right to information of material facts may be waived, either by the terms of the insurance or by neglect to make in'uiries as to such facts where they are distinctly implied in other facts of which information is communicated. (Sec.$$ =here
matters of opinion or *udgment are called for, answers made in good faith and without intent to deceiver will not avoid the policy even though they
COMMERCIAL LAW COMMITTEE CHAIRPERSON : Garny Luisa Alegre ASST. CHAIRPERSON : Jayson O’S Ramos EDP: ea!ri" I. Ramos S#JECT HEADS: $ari%&elle De 'era (Nego!ia)le Ins!rumen!s La*+, Jose -ernano Lla/e (Insuran%e+, Alri%& Del Rosario (Trans0or!a!ion La*s+, S&irley $ae Ta)ang%ura1 on 'in%en! Agus!in (Cor0ora!ion La*+, 2arl S!e/en Co (S0e%ial La*s+, Jo&n Lemuel Ga!ula (an3ing La*s+, Ro)es0ierre C # (La* on In!elle%!ual Pro0er!y+
San Beda College of Law 3" MEMORY AID IN COMMERCIAL LAW are untrue. #eason$ 4he insurer cannot rely on those statements. ?e must make further in'uiry. (0hilamcare ?ealth Systems vs. CA, .6. ;o. !2)+:>, "arch !>, 2992.
2. Re"e/e!o/ 3actual 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. 4hey are considered an active form of concealment. 6e'uisites of a false representation (misrepresentation< a. 4he 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. Finds< a. A33I6"A4I affirmation of a fact when the contract begins# and b. 06"ISS6B promise to be performed after policy was issued. ffect of "isrepresentation< the in*ured party is entitled to rescind from the time when the representation becomes false. Te/ o9 &!e"!53 Same as that in concealment. =here
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 5ife Assur. Co. vs. 3eliciano, :& 0hil. &+@
. ;!""!e/ Statement or promise by the insured set forth in the policy or by reference incorporated therein, the untruth or nonDfulfillment of which in any respect, and without reference to whether insurer was in fact pre*udiced by such untruth or nonDfulfillment, renders the policy voidable by the insurer. 4o eliminate potentially 0urpose< increasing ha7ards which may either be due to the acts of the insured or to the change to the condition of the property. Finds< a. G06SS an agreement e-pressed 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 sub*ect have been or shall be done. b. I"05I% 8 it is deemed included in the contract although not e-pressly mentioned. -ample< In marine insurance, seaworthiness of the vessel. ffects of breach of warranty< a. "aterial 5636#AL #L6$ iolation of material warranty or of a material provision of a policy will entitle the other party to rescind the contract. (Sec. :& 67C6PTI83'$ a. 5oss occurs before the time of performance of the warranty. b. 4he performances becomes unlawful at the place of the contract. c. 0erformance becomes impossible. (Sec. :$ b. Immaterial (e-. ther insurance clause 5 636#AL #L6$ It will not avoid the policy. 67C6PTI83$ =hen the policy e-pressly provides or declares that a violation thereof will avoid it. (Sec. :) ;ARRANT
REPRESENTATION
0art of the contract
"ere collateral inducement
=ritten on the policy, actually or by reference
"ay be written in the policy or may be oral.
COMMERCIAL LAW COMMITTEE CHAIRPERSON : Garny Luisa Alegre ASST. CHAIRPERSON : Jayson O’S Ramos EDP: ea!ri" I. Ramos S#JECT HEADS: $ari%&elle De 'era (Nego!ia)le Ins!rumen!s La*+, Jose -ernano Lla/e (Insuran%e+, Alri%& Del Rosario (Trans0or!a!ion La*s+, S&irley $ae Ta)ang%ura1 on 'in%en! Agus!in (Cor0ora!ion La*+, 2arl S!e/en Co (S0e%ial La*s+, Jo&n Lemuel Ga!ula (an3ing La*s+, Ro)es0ierre C # (La* on In!elle%!ual Pro0er!y+
San Beda College of Law 3# MEMORY AID IN COMMERCIAL LAW 0resumed material
"ust be proved to be material
"ust be strictly complied with
6e'uires only substantial truth and compliance
4. Co*o/ vents signifying in its broadest sense either an occurrence or a nonDoccurrence that alters the previously e-isting legal relations of the parties to the contract. 4hey may be conditions precedent or conditions subse'uent. ffect of breach< a. Condition precedent prevents the accrual of cause of action b. Condition subse'uent avoids the policy or entitles the insurer to rescind 4he insurer may also protect himself against fraudulent claims of loss and this he attempts to do by inserting in the policy various conditions which take the form of conditions precedent. 3or instance, there are conditions re'uiring immediate notice of loss or in*ury and detailed proofs of loss within a limited period. %. E
B. B!""!"5 C!/e A clause which provides that there can be no recovery on the policy in case of any willful misconduct on the part of the master or crew in pursuance of some unlawful or fraudulent purpose without consent of owners, and to the pre*udice of the owner8s interest. (6o'ue vs. IAC, !$@ SC6A )@+ C. Ic!!"ee C!/e A clause which makes the insurer liable for loss or damage to the hull or machinery arising from the< !. ;egligence of the captain, engineers, etc. 2. -plosions, breakage of shafts# and $. 5atent defect of machinery or hull. (?ar #e%ie& # 2. 4here must be a constructive total loss (Sec. !$@# $. 4he abandonment be neither artial nor conditional (Sec. !&9# &. It must be made within a reasonable ime after receipt of reliable information of the loss (Sec. !&!# ). It must be 9 actual (Sec. !&2# +. It must be made by giving otice thereof to the insurer which may be done orally or in writing (Sec. !&$# and :. 4he notice of abandonment must be e-plicit and must specify the particular cause of the abandonment (Sec. !&&. E99ec/3 !. It is e'uivalent to a transfer by the insured of his interest to the insurer with all the chances of recovery and indemnity (4ransfer of Interest (Sec.!&+ 2. Acts done in good faith by those who were agents of the insured in respect to the thing insured, subse'uent to the loss, are at the risk of the insurer and for his benefit. (4ransfer f Agency(Sec.!&>
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.!)&
CO8INSURANCE 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. !): =hen the property is insured for less than its value, the insured is considered a coDinsurer of the difference between the amount of insurance and the value of the property. Re@/e/3 !. 4he loss is partial# 2. 4he amount of insurance is less than the value of the property insured.
Re/3 !. CoDinsurance applies only to marine insurance 2. 5ogically, there cannot be coD insurance in life insurance. $. CoDinsurance applies in fire insurance when e-pressly provided for by the parties.
CO8INSURANCE
REINSURANCE
A percentage in the value of the insured property which the insured himself assumes to act as insurer to the e-tent of the deficiency in the insurance of the insured property. In case of loss or damage, the insurer will be liable only for such proportion of the loss or damage as the amount of the insurance bears to the designated percentage of the full value of the property insured. (?ar #e%ie& : Aside from compulsory motor vehicle liability insurance, the Insurance Code contains no other provisions applicable to casualty insurance. 4herefore, such casualty insurance are governed by the general provisions applicable to all types of insurance, and outside of such statutory provisions, the rights and obligations of the parties must be determined by their contract, taking into consideration its purpose and always in accordance with the general principles of insurance law. In burglary, robbery and theft insurance, the opportunity to defraud the insurer the moral ha7ard is so great that insurer have found it necessary to fill up the policies with many restrictions designed to reduce the ha7ard. 0ersons fre'uently e-cluded are those in the insured8s service and employment. 4he purpose of the e-ception is to guard against liability should theft be committed by one having unrestricted access to the property. (3ortune Insurance vs. CA, 2&& SC6A 29>
R+ o9 ! "* !"5 "e* o /e e /"e" !. Indemnity against liability A third party in*ured can directly sue the insurer.
2. Indemnity for actual loss or reimbursement after actual payment by the insured A third party has no cause of action against the insurer (Sec. )$, Eonifacio Eros. v. "ora, 29 SC6A 2+!. 4he
insurer is not solidarily liable with the insured. 4he insurer8s liability is based on contract# that of the insured is based on torts. 3urthermore, the insurer8s liability is limited by the amount of the insurance coverage (0an "alayan Insurance Corporation v. CA, !>& SC6A )&.
“INTENTIONAL” -/. “ACCIDENTAL” AS USED IN INSURANCE POLICIES /. Intentional Implies the e-ercise of the reasoning faculties, consciousness and volition. =here a provision of the policy e-cludes intentional in*ury, it is the intention of the person inflicting the in*ury that is controlling. If the in*uries suffered by the insured clearly resulted from the intentional act of the third person, the insurer is relieve from liability as stipulated. (Eiagtan v. the Insular 5ife Assurance Co. 5td., && SC6A )>, !@:2 2. Accidental 4hat which happens by chance or fortuitously, without intention or design, which is une-pected, unusual and unforeseen. NO ACTION CLAUSE A re'uirement in a policy of liability insurance which provides that suit and final *udgment be first obtained against the insured# that only thereafter can the person in*ured recover on the policy. (uingon vs. %el "onte, 29 SC6A !9&$ =I=. CO&PULSOR &OTOR 'E#ICLE LIABILIT INSURANCE (C&'LI) A species of compulsory insurance that provides for protection coverage that will answer for legal liability for losses and damages for bodily in*uries or property damage that may be sustained by another arising from the use and operation of motor vehicle by its owner. 0urpose< 4o give immediate financial assistance to victims of motor vehicle
COMMERCIAL LAW COMMITTEE CHAIRPERSON : Garny Luisa Alegre ASST. CHAIRPERSON : Jayson O’S Ramos EDP: ea!ri" I. Ramos S#JECT HEADS: $ari%&elle De 'era (Nego!ia)le Ins!rumen!s La*+, Jose -ernano Lla/e (Insuran%e+, Alri%& Del Rosario (Trans0or!a!ion La*s+, S&irley $ae Ta)ang%ura1 on 'in%en! Agus!in (Cor0ora!ion La*+, 2arl S!e/en Co (S0e%ial La*s+, Jo&n Lemuel Ga!ula (an3ing La*s+, Ro)es0ierre C # (La* on In!elle%!ual Pro0er!y+
San Beda College of Law 50 MEMORY AID IN COMMERCIAL LAW accidents andMor 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. Nudge, 64C, !+: SC6A $>+. ClaimantsMvictims may be a rd passenger/ or a $ party/ It applies to all vehicles whether public and private vehicles. ;ote< It is the only compulsory insurance coverage under the Insurance Code.
b. %eath certificate and evidence sufficient to establish proper payee# c. "edical report and evidence of medical or hospital disbursement. $. Claim may be made against one motor vehicle only &. 0roper insurer from which to claim D 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. $:> 4he 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. 4hat 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. (0erla Compania de Seguros, Inc. v. Ancheta, !+@ SC6A !&&
&eo* o9 co-e"!+e !. Insurance policy 2. Surety bond $. Cash deposit P!//e+e" Any fareDpaying person being transported and conveyed in and by a motor vehicle for transportation of passengers for compensation, including persons e-pressly authori7ed by law or by the vehicle8s operator or his agents to ride without fare. (Sec. $:$Hb T"* P!"5 Any person other than the passenger, e-cluding 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 in*ury arising out of and in the course of employment. (Sec. $:$Hc “No8F!” C!/e A clause that allows the victim (in*ured person or heirs of the deceased to an option to file a claim for death or in*ury without the necessity of proving fault or negligence of any kind. 0urpose< 4o guarantee compensation or indemnity to in*ured persons in motor vehicle accidents. 6ules< !. 4otal indemnity D ma-imum of 0),999 2. 0roofs of loss D a. 0olice report of accident#
4his
noDfault claim does not apply to property damage. If the total indemnity claim e-ceeds 0),999 and there is controversy in respect thereto, the finding of fault may be availed of by the insurer only as to the e-cess. 4he first 0),999 shall be paid without regard to fault. (Prof. e Leon, p. :/1) 4he
essence of the noDfault 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 in*uries or death. (I"id.)
SPECIAL CLAUSES A. Ao"e* D"-e" C!/e 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 (illacorta v. Insurance Commissioner
COMMERCIAL LAW COMMITTEE CHAIRPERSON : Garny Luisa Alegre ASST. CHAIRPERSON : Jayson O’S Ramos EDP: ea!ri" I. Ramos S#JECT HEADS: $ari%&elle De 'era (Nego!ia)le Ins!rumen!s La*+, Jose -ernano Lla/e (Insuran%e+, Alri%& Del Rosario (Trans0or!a!ion La*s+, S&irley $ae Ta)ang%ura1 on 'in%en! Agus!in (Cor0ora!ion La*+, 2arl S!e/en Co (S0e%ial La*s+, Jo&n Lemuel Ga!ula (an3ing La*s+, Ro)es0ierre C # (La* on In!elle%!ual Pro0er!y+
San Beda College of Law 51 MEMORY AID IN COMMERCIAL LAW 4he re'uirement 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. Te9 C!/e A clause which includes theft as among the risks insured against. =here the car is unlawfully and wrongfully taken without the owner8s consent or knowledge, such taking constitutes theft, and thus, it is the theft clause/ and not the authori7ed driver clause that should apply (0alermo v. 0yramids Ins., !+! SC6A +::.
C. Cooe"!o C!/e A clause which provides in essence that the insured shall give all such information and assistance as the insurer may re'uire, usually re'uiring attendance at trials or hearings. ==. SURETS#IP An agreement whereby a surety guarantees the performance by the principal or obligor of an obligation or undertaking in favor of an obligee. (Sec. !:) It is essentially a credit accommodation. It is considered an insurance contract if it is e-ecuted by the surety as a vocation, and not incidentally. (Sec. 29 =hen the contract is primarily drawn up by ! party, the benefit of doubt goes to the other party (insuredMobligee in case of an ambiguity following the rule in contracts of adhesion. Suretyship, especially in fidelity bonding, is thus treated like nonDlife insurance in some respects. N!"e o9 !:5 o9 /"e5 !. Solidary# 2. 5imited to the amount of the bond# $. 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. !:+
SURETS#IP
PROPERT INSURANCE
Accessory contract $ parties< surety, obligor and oblige Credit accommodation Surety can recover from principal
0rincipal contract 2 parties< insurer and insured Contract of indemnity Insurer has no such right# only right of subrogation "ay be cancelled unilaterally either by insured or insurer on grounds provided by law ;o need of acceptance by any third party
Eond can be cancelled only with consent of obligee, Commissioner or court 6e'uires acceptance of obligee to be valid 6iskDshifting device# premium paid being in the nature of a service fee
6iskDdistributing device# premium paid as a ratable contribution to a common fund
==I. 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. !:@ 7*/3 (?ar #e%ie&
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