Insurance
Insurance
PD 1460
PRELIMINARIES
A.
Definition of Contract of
Insurance
B. Requisites of Insurance Contract
C. Concealment and Representation
D. Kinds of Policy
E. Warranties in Insurance Contract
F. Double Insurance
G. Reinsurance Contract
H. Marine Insurance
I .Losses
J .Abandonment
K. Kinds of Insurance
L. Motor Vehicle Insurane
-----------------------------------WHAT LAWS GOVERN INSURANCE
(a)
Insurance Code (PD 1460
whose affectivity date is 11 June
1978)
(b)
In
absence
of
applicable
provisions, the Civil Code;
(c)
In
absence
of
applicable
provisions in the Insurance
Code and Civil Code, the
general
principles
on
the
subject in the United States
(Constantino vs. Asia Life
Insurance, 87 Phil 248)
WHAT IS A CONTRACT OF INSURANCE
- It is an agreement whereby
one
undertakes
for
a
consideration to indemnify
another
against
loss,
damage, or liability arising
from
an
unknown
or
contingent event;
- A contract of suretyship
shall also be deemed an
insurance contract if made
by a surety who or which is
doing an insurance business;
Doing an insurance business or
transacting an insurance business is:
(a) making or proposing to make
as
insurer
any
insurance
contract;
(b) making or proposing to make
as surety contract of suretyship
as a vocation and not merely
incidental
to
any
other
legitimate business or activity
of the surety;
(c) doing any business including a
reinsurance
business,
specifically
as
doing
an
insurance business within the
hearing of the Code;
(d) doing or proposing to do any
business
in
substance
equivalent to any of the
foregoing in a manner designed
to evade the provisions of the
Code (section 2);
NATURE AND CHARACTERISTICS OF A
CONTRACT OF INSURANCE
1. It is an ALEATORY contract
2. It is a contract of INDEMNITY for
Non-Life recovery is commensurate
to the loss. It is an investment in
life insurance secured by the
insured as a measure of economic
security for him during his lifetime and
for his beneficiary upon his death
except one secured by the creditor
on the life of the debtor;
3. It is a PERSONAL contract
4. It
is
EXECUTORY
and
CONDITIONAL on part of the
insurer
5. It is one of PERFECT GOOD FAITH
6. It is a contract of ADHESION
insurance companies manage to
impose upon the insured prepared
contracts, which the insured cannot
change. Consequently, they are to
construed as follows:
(a) In case there is no doubt as to
the terms of the insurance
contract, it is to be construed in
its
plain,
ordinary,
and
popular sense;
(b) If
doubtful,
ambiguous,
certain, it is to be construed
strictly against the insurer and
liberally in favor of the insured
because the latter has no voice in
the selection of the words used,
and the language used is
selected by the lawyers of the
Insurer (Qua Chee Gan vs. Law
Union Rock Ins. Co. Ltd. 52 OG
1982)
Illustrations:
a. P Bank obtained insurance against
robbery, which excluded loss by
any criminal act of the insured or
any
authorized
representative.
While transferring funds from one
branch to another, the insureds
armored truck was robbed. The
driver was assigned by a labor
contractor with the insured, while
the security guard was assigned by
an agency contracted by the
insured. Both driver and guard
were found to be involved. Can the
loss be excluded? HELD: The loss
is excluded , the driver/guard
(a)
An existing interest
(b)
(c)
Note:
- Expectancy must be founded on an
actual right to the thing or a valid
contract for it;
- A carrier or depository of any kind
has insurable interest in the thing
held by him such to the extent of his
Whether
one
will
derive
pecuniary
benefit
or
advantage
from
its
preservation or will suffer
pecuniary loss or damage from
its destruction; (Section 17)
INSURABLE
DEPOSITS
INTEREST
IN
BANK
(1)
Life, health
or
accident
insurance
because
they
are
not
contracts of indemnity and
insurable interest is not
required at the time of loss;
(2)
A change of
interest after occurrence of
an injury and results in loss
does not affect the right of
the insured to indemnity;
- After a loss, the liability of
the insurer is fixed
(3)
A change of
interest in one or more
several
distinct
things,
separately insured by one
policy, does not avoid as to
the others (Section 22);
(4)
A change of
interest in one or more
several
distinct
things,
separately insured by one
policy, does not avoid the
insurance as to the insured;
(Section 23)
(5)
A transfer of
interest by one or several
partners, joint owners, or
owners in common, who are
jointly insured to the others,
does not avoid insurance
even though it has been
agreed that the insurance
shall lease upon an allocation
of the thing insured;
Note:
- There must be no stipulation
against it otherwise it is
avoided;
- Transfer to strangers avoid
the policy
(6)
When notwithstanding a
prohibition, the consent of
the insurer is obtained;
(7) When the policy is so framed
that it will insure to the
benefit of whomsoever may
become the owner during the
continuance of the risk;
CONTINUATION OF ELEMENTS
1. Insurable interest;
2. The insured is subject to risk of
loss through the destruction or
impairment of that interest by the
happening of the designated risk;
3. The insurer assumes the risk of
loss;
4. Such assertion is part of a general
scheme to distribute actual loss
every
person,
partnership,
association
or
corporation duly authorized to
transact insurance business as
provided in the code may be an
insurer. It is the party who agrees
to indemnify another upon the
happening
of
specified
contingency;
2. INSURED
party
to
be
indemnified in case of loss (section
6). Anyone except a public enemy
(a nation at war with Philippines
and every citizen subject of such
nation. Reason: the purpose of
war is to cripple the power and
exhaust the resources of the
enemy, and it is inconsistent to
destroy its resources then pay it
the value of what has been
destroyed) may be insured;
2000 BAR EXAM (VIII - a)
Q: May a member of the MORo
Islamic Liberation Front ( MILF ) or its
breakawy group, the Abu Sayaff, be
insured with a company licensed to do
business under the Insurance Code of the
Philippines? Explain?
A: A member of the MILF or the Abu
Sayyaf may be insured with a company
licensed to do business under the
Insurance Code of the Philippines. What
is prohibited to be insured is a public
enemy. A public enemy is a citizen or
national of a country with which the
Philippines is at war. Such member if the
MILF or the Abu Sayyaf is not a citizen or
national of another country, but of the
Philippines.
SC RULING
Condition 3 is what is known as other
insurance clause which is a valid
provision allowed by the insurance code
in order to prevent in an increase in the
moral hazard and to serve as a warranty
that no other insurance exists. Its
incorporation in fire policies prevents over
insurance and adverts the perpetration of
fraud. Its violation will thus avoid the
policy. However, in order to constitute a
violation, the other insurance must be
upon the same subject matter, the same
interest therein, and the same risk.
Double insurance exists where
the same person is insured by several
insurers separately in respect of the same
subject and interest.
The court ruled that since the
stocks in trade insured with PFIC were
mortgaged property, separate insurances
covering different insurable interests
maybe obtained by the mortgagor and
mortgagee. The insurable interests of a
mortgagor and mortgagee are separate
and distinct, thus no double insurance
exists since the policies of PFIC do not
cover the same interest as that covered
under the policy of Country Bankers
Insurance Corp. The non-disclosure of the
policies with PFIC was not fatal to
Armandos right to recover on his policy
with Country Bankers Insurance Corp.
has
been
performed
by
the
mortgagor. Example: If notice of
loss is required, the mortgagee may
give it;
d. Upon the occurrence of the loss, the
mortgagee is entitled to recover to
the extent of his credit and the
balance if any to be paid to the
mortgagor, since such is for both
their benefits;
e. Upon recovery by the mortgagee,
his credit is extinguished;
If on the other hand, (section 9), the
insurer assents to the transfer of the
insurance from the mortgagor to the
mortgagee, and at the time of his assent,
imposes further qualifications on the
assignee, making a new contract with
him, the acts of the mortgagor cannot
affect the rights of the assignee Note
the Union Mortgage Clause creates
the relation of insured and insurer
between mortgagee and the insurer
independent of the contract of the
mortgagor. In such case, any act of the
mortgagor can no longer affect the rights
of the mortgagee the insurance contract
is now independent of that with the
mortgagor;
WHAT IS THE EFFECT OF INSURANCE
PROCURED
BY
THE
MORTGAGEE
WITHOUT REFERENCE TO THE RIGHT OF
THE MORTGAGOR
a. The mortgagee may collect from
the insurer upon the occurrence
of the loss to the extent of his
credit;
b. Unless otherwise stated, the
mortgagor cannot collect the
balance of the proceeds after the
mortgagee is paid;
c. The insurer, after payment to the
mortgagee, becomes subrogated
to the rights of the mortgagee
against the mortgagor and may
collect the debt to the extent paid
to the mortgagee;
d. The mortgagee after payment
cannot collect anymore from the
mortgagor BUT if he is unable to
collect in full from insurer, he can
recover from the mortgagor;
e. The mortgagor is not released
from the debt because the
insurer is subrogated in place of
the mortgagee;
3.
A
prior
conviction
for
adultery/concubinage is not
required, it can be proven by
proponderance of evidence in the
same
action
nullifying
the
designation. Note the cases of
Insular Life vs. Ebrado, 80 SCRA
181, where a common law wife of
the insured who is married could
not be named as a beneficiary and
MUST
THE
BENEFICIARY
HAVE
INSURABLE INTEREST ON THE LIFE
OF THE INSURED
- It is recognized that the insured
may name anyone he chooses
except
those
disqualified
to
receive donations as a beneficiary
in his life insurance, even if he is a
stranger and has no insurable
interest in the life of the insured.
The designation, however, must be
in GOOD FAITH AND WITHOUT
FRAUD OR INTENT TO ENTER INTO
A WAGERING CONTRACT.
Beneficiary in life and property
insurance (2005 bar exams)
Philippine American Life Insurance
Company v. Pineda (175 SCRA 416)
SC Ruling:
Under the law, the beneficiary designated
in a life insurance contract cannot be
changed without his or her consent
because of the beneficiarys vested
interest in the policy. In this regard, it is
worth nothing that the beneficiary
designation indorsement which forms
part of the policy in the name of Rodolfo
Dimayuga states that the designation of
the beneficiaries is irrevocable and no
right or privilege under the policy may be
exercised, or agreement made with the
insurance company to any change in or
amendment to the policy without the
consent
of
the
said
beneficiary.
Accordingly, based on the provisions of
the contract and the law applicable, it is
only with the consent of all the
beneficiaries
that
any
change
or
amendment to the policy concerning the
irrevocability of beneficiaries may be
legally and validly effected.
Insurable interest on property
Spouses Nilo Cha v. CA Aug.
18, 1997 2009 bar exams
SC RULING:
1. The lessor cannot validly be a
beneficiary of the fire insurance
policy taken by the spouses Cha. It
has no insurable interest on the
If
the
designation
is
irrevocable,
the
legal
representatives
of
the
beneficiary may recover unless it
was stipulated that the benefits
are payable only if living. If
designation is revocable, and
no change is made, the benefits
passes to the estate of the
insured. The rule holds also if
benefits were payable only if
living or if surviving and
the beneficiary dies before the
insured;
CONCEALMENT
WHAT IS CONCEALMENT?
-
Concealment is a neglect to
communicate that which a party
knows and ought to communicate
(Section 26);
BASIS OF PROVISIONS ON
CONCEALMENT/REPRESENTATION
-
Fundamental characteristic of a
contract of insurance that it is one
of perfect/utmost good faith;
(b)
(c)
(d)
(b)
Promissory which is a
statement by the insured
concerning what is to happen
during
the
term
of
the
insurance;
REPRESENTATION
WHAT IS REPRESENTATION?
Oral or written statement of a fact
or a condition affecting the risk made by
the insured to the insurance company,
tending to induce the insurer to take the
risk (Section 36);
WHEN MAY REPRESENTATION BE
MADE
Since it is an inducement to
entering a contract it must ordinarily be
made at the same time as or before the
insurance of the policy (section 37). Note
that it can also be made after the
issuance of the policy when the purpose
thereof is to induce the insurer to modify
an existing insurance contract as the
provisions also apply to a modification
(Same with concealment)
HOW SHOULD REPRESENTATION BE
CONSTRUED
The language of a representation is
to be interpreted by the same rules as the
language of the contracts in general
(section 38). Hence, it need not be
literally true and correct/accurate in every
respect, rather, it is sufficient if it is
substantially or materially true. In case of
a promissory representation, it is
sufficient if it is substantially complied
with;
Affirmative which is an
affirmation of a fact existing
when the contract begins;
CAN A REPRESENTATION BE
WITHDRAWN OR ALTERED
Yes, as long as the insurance has
not yet been effected and the insurer has
not yet been induced to issue the policy.
If withdrawn or altered afterwards, the
contract can be rescinded as the insurer
has already been led to issue the policy
(section 41);
TO WHAT DATE DOES A
REPRESENTATION REFER
It must be presumed to refer to the
date on which the contract goes into
effect (section 42);
Note: There is no false
representation if it is true at the time
the contract takes effect although false
at the time it is made;
WHEN IS A REPRESENTATION SAID
TO BE FALSE
When the facts fail to correspond
with its assertions or stipulations (Section
44);
MUST THE INSURED COMMUNICATE
INFORMATION OF WHICH HE HAS NO
PERSONAL KNOWLEDGE BUT MERELY
RECEIVES THE SAME FROM OTHERS?
When a person has no personal
knowledge of facts he may or may not
communicate such information to the
insurer. If he does communicate, he is not
responsible for its truth (section 43).
Hence, there can be no
misrepresentation;
WHEN IS THE INSURED REQUIRED TO
DISCLOSE INFORMATION FROM A
3RD PERSON
When the information material to
the transaction was acquired by an agent
(b)
Examples:
(a)
(b)
REQUISITES OF INCONTESTABILITY
CLAUSE
The requisites are:
(1)
(2)
non-payment of premiums;
lack of insurable interest;
that the cause of death was
excepted or not covered by the
terms of the policy;
that the fraud was of a
particular vicious type such as:
a. policy
was
taken
in
furtherance of a scheme to
murder the insured;
(5)
(6)
(7)
b. where
the
insured
substituted another for the
medical examination;
c. where
the
beneficiary
feloniously
killed
the
insured;
violation of a condition in the
policy relating to military or
naval service in time of war;
the necessary notice or proof of
death was not given;
action is not brought within
time specified in the policy,
which in no case should be less
than 1 year as per section 63;
POLICY
DEFINE POLICY
It is the written instrument in which
a contract of insurance is set forth
(Section 49.);
HOW IS IT CONSTRUED, WHAT IF THE
INSURED DOES NOT UNDERSTAND
THE CONTENTS OF THE POLICY?
Generally in favor of the insured
and against the insurer. The burden of
proving that the terms of the policy have
been explained is upon the party seeking
to enforce it. The claim of the beneficiary
that since the insured was illiterate and
spoke Chinese only, she could not be held
guilty of concealment because the
application and policy was in English
(Tang vs. CA, 90 SCRA 236);
FORM OF THE POLICY
It shall be printed and may contain
blank spaces and any word, phrase,
clause or mark, sign, symbol, signature,
or number necessary to complete it shall
be written in the blank spaces (Section
50). If there are riders, clauses,
warranties or endorsements purporting to
be part of the contract of insurance and
which are pasted or attached to the policy
is not binding on the insured unless the
descriptive title of the same is also
mentioned and written on the blank
spaces provided in the policy. Note: if
pasted or attached to the original policy
at the time it was issued the signature
of the insured is not necessary to make it
binding. If after the original policy is
issued, it must be counter-signed by the
insured unless applied for by the insured;
No rider, clauses, or warranties, or
endorsements shall be attached, printed
or stamped on the policy unless the form
of such application has been approved by
the insurance commissioner;
Riders are forms attached to the policy
when the company finds it necessary to
alter or amend the applicants answer to
any question in the application;
Clauses are forms containing additional
stipulations;
Warranties are written
statement/stipulations inserted on the
face of the contract or incorporated by
proper words or reference where the
insured contracts as to the existence of
(4)
(5)
(6)
(7)
(2)
(3)
(4)
Insurance
companies
may
impose a deposit premium
equivalent to at least 25% of
the estimated premium but in
no case less than Php500.00;
(2)
IS PAYMENT OF A PREMIUM
PAYMENT FOR THE COVER NOTE
NECESSARY TO BE PROTECTED
AGAINST RISK INSURED AGAINST?
Cover note held to be binding
despite the absence of a premium
payment for its issuance. No separate
premiums are intended or required to be
paid on a cover note because they do
not contain particulars of the
property insured that would serve as
the basis for the computation of
premiums such being the case no
premium can be fixed. The cover notes
should not be treated as a separate policy
but should be integrated in the regular
policy subsequently issued so that
premiums on the regular policy should
include that for the cover note (Pacific
Timber vs. CA, 112 SCRA 199);
2009 BAR EXAM (IV)
Antarctica
Life
Assurance
Corporation (ALAC) publicly offered a
specially designed
insurance
policy
covering persons between the ages of 50
to 75 who may be afflicted with serious
and debilitating illnesses. Quirico applied
for insurance coverage, stating that he
was already 80 years old. Nonetheless,
ALAC approved his application.Quirico
then requested ALAC for the issuance of a
cover note while he was trying to raise
funds to pay the insurance premium.
ALAC granted the request. Ten days after
he received the cover note, Quirico had a
heart seizure and had to be hospitalized.
He then filed a claim on the policy.
a. Can ALAC validly deny the
claim on the ground that the
insurance coverage, as publicly
offered, was available only to
persons 50 to 75 years of age?
Why or why not? (2%)
b. Did ALACs issuance of a
cover note result in the perfection
of an insurance contract between
Quirico and ALAC? Explain. (3%)
Answer:
a.
no.
there
was
no
concealment on the part of quirico
as to his age.
b. yes, one of the exception of
the cash and carry rule is in life
insurance when the grace period
applies. in the case at bar, the
(3)
(5)
(6)
(2)
(2)
(3)
Discovery
of
representation;
(4)
(5)
Physical
changes
in
the
property insured which the
result in the property being
uninsurable;
(6)
Courts;
Insurance Commissioner, who
has concurrent jurisdiction with
courts for claims not exceeding
Php100,000.00;
(3)
POEA/DOLE have the power to
compel a surety to make good
on a solidary undertaking in the
same proceeding where the
liability of the principal obligor
is determined.
Note that the claim becomes
action upon filing with the court;
material
Notes:
(1)
(2)
(2)
(2)
(3)
WARRANTIES
Defined
It is a statement or promise stated
in the policy or incorporated
therein by reference, whereby the
insured expressly or impliedly
(Section 67) contracts as to the
past, present or future (Section
68) existence of certain facts,
conditions or circumstances the
literal truth of which is essential
to the validity of the contract;
Note:
(1)
Whether a warranty is
constituted or not depends
upon the intention of the
parties, the nature of the
FORM
No particular form of words is
necessary to create a warranty (Section
69). What is essential is what the parties
intend a statement to be and if so
intended as a warranty it must be
included as part of the contract;
(4)
(2)
The
loss
happens;
(2)
The
performance
becomes
unlawful at the place of the
contract;
The
performance
becomes
impossible;
(3)
insured
against
DISTINGUISHING IT FROM
REPRESENTATIONS
WARRANTY
REPRESENTATIO
N
- A warranty is
part
of
the
contract;
- A warranty is
expressly
set
forth
in
the
policy
or
incorporated
therein
by
reference;
-Representation
is
merely
a
collateral
inducement
thereto;
-A Representation
my be oral or
written
in
another
statement;
- A
warranty
must
strictly
and
literally
performed;
- Representation
must
be
substantially
true;
- A warranty
presumed
material;
is
- A representation
must be shown
to be so;
- A
breach
of
warranty is a
breach of the
contract itself
- (mis)representati
on is a ground to
rescind
the
contract;
PREMIUM
DEFINED
The agreed price for assuming and
carrying the risk;
(2)
(3)
4.
5.
(3)
(4)
(5)
(6)
(2)
(2)
(3)
Insurance
Corp.
v.
Chemoil
Lighterage Corp., Jun. 29, 2005 G.R.
No. 136888)
RECOGNIZING
THAT
THERE
ARE
PROBLEMS IN DETERMINING PROXIMATE
CAUSE NOTE THE FOLLOWING RULES:
(a) If there is a single cause which is
an insured peril, clearly it is the
proximate cause and there is
liability;
REQUIREMENT OF CERTIFICATION OR
TESTIMONY OF A THIRD PERSON
In the giving of preliminary proof of
loss, a certification or testimony of a third
person other than the insured is required,
it is sufficient for the insured to use
REASONABLE DILIGENCE to procure it. In
case of REFUSAL to give it, the insured
can furnish REASONABLE EVIDENCE to
the insurer that such refusal WAS NOT
INDUCED BY ANY JUST GROUNDS OF
DISBELIEF in the facts necessary to be
certified or testified ONCE SHOWN or
GIVEN the requirement may be dispensed
with (Section 92).
WHAT HAPPENS AFTER PAYMENT BY THE
INSURER SUBSEQUENT TO GIVING OF
NOTICE OF LOSS
In property insurance, after the insured
has received payment from the insurer of
the loss covered by the policy, the
insurance company is SUBROGATED to
the rights of the insured against the
wrongdoer or the person who has violated
the contract. The right of subrogation
accrues upon payment of the insurance
claim.
NOTE: Subrogation takes effect by
operation of law and does not require the
consent of the wrong doer (Firemans Fire
Insurance vs. Jamilla & Company, 70
SCRA 323).
THERE IS NO SUBROGATION IN:
(a) Life insurance as it is not a
contract of indemnity
(b) When proximate cause of the loss
is the insured himself
(c) When the insurer pays to the
insured a loss not covered by the
policy;
The insured is no longer to
collect from the wrongdoer if
the amount that he received
from the insurer has fully
compensated for the loss;
SUBROGATION (ART. 2207, NEW
CIVIL CODE)
PHILIPPINE AMERICAN GEN.
INSURANCE CO. VS. CA & FELMAN
SHIPPING LINES, JUNE 11,1997.
SC RULING:
It
ordered
Felman
to
pay
Phialamgen P 755, 250.00 plus interest
pursuant to Art. 2207 0f the Civil Code
which provides:
Answer:
A.
Taking
out
insurance covering the same
property, same insurable interest
and same risk with three insurance
companies is double insurance
recognized under sec 93 of ICP.
However,
in
American
Home
Assurance Corp vs. Chua June 28,
1999, the court referred to the
common inclusion of the other
insurance clause in the fire
insurance
policies
requiring
disclosure of co-insurance of the
same property with other insurers.
DOUBLE INSURANCE
When does double insurance exist?
- Where the same person is
insured by several insurers
separately in respect to the
same
subject
or
interest
(Section 91).
other
insurance clause stipulating that
non-disclosure of double insurance
will avoid the policy. ( Geagonia v.
Country Bankers Insurance )6
February, 1995. As there is no
indication
of
a
contractual
prohibition on double or other
insurance, all insurance contracts
over the building are deemed valid
and enforceable.
OVER
INSURANCE
- there must be
two or more
insurers;
- one insurer
sufficient;
is
- the
total
amount of the
policies
need
not exceed the
value of the
insurable
interest;
REINSURANCE
- occurs
when
an
insurer
procures a 3RD person to insure
him against loss or liability by
reason
of
such
original
insurance. (Section 95)
WHEN IS REINSURANCE
COMPULSORY?
1. When a non-life insurer insured in
any one risk or hazard an amount
exceeding 20% of its net worth, the
insurer needs reinsurance of the
excess over such limit (Section 215
(1))
2. When a foreign insurance company
withdraws from the Philippines, it
should cause its primary liabilities
under policies insuring residents of
the Philippines to be reinsured by
another company authorized to
transact an insurance business in
the Philippines;
DOUBLE INSURANCE VS. REINSURANCE
DOUBLE
REINSURANCE
INSURANCE
- the
insurer
- insurer
remains an insurer
becomes
the
insured
- subject matter is
property
- same interest and
risk is insured with
another
- the
subject
matter is the
insurers
risk
or liability
- different
interest
and
risk
are
insured
It is presumed to be a
contract of indemnity against
liability, and merely against
damage (Section 97).
As a RULE, the reinsurer is
not liable to the reinsured
for a loss under an original
policy if the reinsured is not
liable
to
the
original
policyholder.
PROVIDED,
it
does
not
exceed
the
amount
of
reinsurance;
Example: A insures his house valued
at 1 million to X insurance for 1.5
Million. X insurance reinsured with Z
insurance for 1.2 million. The house
burns. The liability of Z insurance is
only up to 1 million, which is the
liability of X Insurance. What if the
original insured and insurance
company settles for less, the liability
of Z Insurance is still only up to what
is paid by X Insurance OTHERWISE,
the original insurer profits and thus
violates that the principle that is a
contract of indemnity.
WHAT IS THE INTEREST OF THE ORIGINAL
INSURED IN THE CONTRACT OF
REINSURANCE?
-
CLASSES OF INSURANCE
MARINE
INSURANCE
loss
or
(a)
Vessels, craft, aircraft,
vehicles,
goods
freight,
cargoes, merchandise effects,
disbursements, profits, moneys,
securities,
loses
in
action,
evidences of debt, valuable
papers,
bottomry
or
respondentia interest and all
other kind of property and
interests therein, in respect to,
appertaining to or in connection
with any and all risks or perils
of
navigation,
transit
or
transportation or while being
assembled,
packed,
crated,
baled, compressed, or similarly
prepared for shipment or while
awaiting shipment or during
any
delays,
storage,
transshipment or reshipment
incident thereto,
(b) Person
or
property
in
connection with or appertaining
to marine, island marine, transit
or
transportation
insurance,
including liability for loss or in
connection
with
the
construction, repair, operation,
maintenance, use of the subject
matter of the insurance. (But
not including life insurance, or
surety bonds nor insurance
against loss by reason of bodily
injury to any person arising out
of the ownership, maintenance,
use of automobiles)
(c)
Precious
stones,
jewels, jewelry, precious metals
whether in the course of
transportation or otherwise;
(d) Bridges, tunnels or other
instrumentalities
of
transportation
and
communications
(excluding
buildings, their furniture and
furnishings, fixed contents,
and supplies held in storage),
piers, wharves, docks, slips,
and other aids to navigation
and transportation including
dry docks, marine railways,
dams
and
appurtenant
facilities for the control of
waterways;
AND Marine Protection and
Indemnity Insurance meaning
insurance against, or against
legal liability of the insured for
loss, damage or expense
incident to ownership,
operation, chartering,
maintenance, use, repair, or
construction of any vessel,
craft or instrumentality in use
in ocean or island waterways,
including liability of the
insured for personal injury,
illness or death or for loss or
damage to the property of
another person (section 99).
NOTE: That marine insurance is
really TRANSPORTATION INSURANCE
that is a kind of insurance that is
concerned with the perils of property
in (or incidental to) transit as
opposed to property perils at a
generally fixed location. But does not
include normal motor vehicle
insurance which is treated
separately by law;
providing
protection
to persons who have
temporary custody of
goods
or
personal
property of others;
(c)
Fixed
transportation
property providing
protection
to
fixed
property
considered
aids to the movement
of
property,
like
bridges and tunnels,
and
(d)
Floater
providing
protection to personal
property
(such
as
precious
stones,
jewelry, works of art)
whenever it may be
located subject always
to territorial limits of
the contract and need
not necessarily be in
the
course
of
transportation.
NOTE: Marine Insurance may be in
form of property insurance,
indemnifying the insured for loss or
damage to property (Par.1, Section 99)
or liability insurance, protecting the
insured against the consequences of
legal liability for loss or damage to
property or for personal injury,
illness or death of a person (Par.2,
Section 99);
WHAT RISKS ARE INSURED AGAINST?
-
The
basic
risk
insured
against is commonly known
as PERILS OF THE SEA (all
kinds of marine casualties
and damages done to the
ship or goods at sea by the
violent action of the winds
or waves, one that could not
be foreseen and is not
attributable to the fault of
anybody.
It is to be construed as
creating a special insurance
and extending to all risk
than
are
usually
contemplated and will cover
all losses except such that
may arise from intentional
fraud,
intentional
misconduct,
or
that
otherwise excluded. It may
include all losses whether
BOTTOMRY/RESPONDENTIA
DEFINITION OF TERMS
(a)
(b)
chartering of a ship;
its employment for the
carriage of his own goods
or
those
of
others
(Section 102)
the
are
has
the
EFFECT OF CONCEALMENT
While concealment as a rule
entitles the injured party to
rescind, the rule must yield
to section 110 as it does
not vitiate the contract but
merely
exonerates
the
insurer from a loss resulting
from the risks concealed as
related to:
(a)
the national character of
the insured;
(b)
the liability of the thing
insured to capture and
detention;
(c)
the liability to seizure
from breach of laws of
foreign laws of trade;
(d)
the want of necessary
documents ;
(e)
the use of false/simulated
documents
-
A
party
is
bound
to
communicate, in addition to
what is required by section
28
(facts
within
his
knowledge, material to the
contract, other party has
not
the
means
of
ascertaining, as to which
party
with
a
duty
to
communicate
makes
no
warranty) information that he
possesses, that are material
to the risk AND, to state the
EXACT and WHOLE TRUTH in
relation to all matters that he
represents, or upon inquiry
discloses or assumes to
disclose EXCEPT those that
the insurer knows or those
in the exercise of ordinary
care, the other ought to
know, and which the former
has no reason to suppose
him to be ignorant under
Section 30 (Section 107);
or
Marine Insurance
-
Belief
or
belief of a 3RD
person
or
own
judgment
of
the insured is
not material
and need not
be
communicate
d
(section
35);
expectation
of 3RD person
in reference
to a material
fact
is
material and
has
to
be
communicate
d;
The
concealment
of any of the
matters
stated
in
section
110
merely
exonerates
the
insurer
from loss, if
the
results
from the fact
concealed;
REPRESENTATION IN MARINE INSURANCE
- A
causal
connection
between the
fact
concealed
and cause of
loss
is
not
necessary for
the insurer to
rescind;
If the representation is
intentionally
false
in
any
material respect, or, in respect
of any fact on which the
character and nature of the
risk depends, the insurer
may rescind (Section 111).
But the eventual falsity of a
representation as to an
expectation does not in the
absence of fraud avoid the
contract (section 112).
The
warranty
of
seaworthiness extends not
only to the condition of the
structure of the ship, but it
requires that:
(a)
(b)
(c)
it be properly laden or
loaded with cargo;
is
provided
with
a
competent
master,
sufficient
number
of
officers and seamen;
it must have the requisite
equipment
and
appurtenances
like
ballast, cables, anchors,
cordage,
sails,
food,
water, fuel, lights and
other
necessary
and
proper
stores
and
implements
for
the
voyage (section 116);
Note that when a ship becomes
unseaworthy during the voyage
it will not avoid the policy
as long as there is no
unreasonable delay in repairing
the defect. Otherwise the
insurer is exonerated on the
ship or the ship owners
interest from any liability
from
any
loss
arising
therefrom
(section
118).
Hence, if loss is not one due
to the defect or peril was
not increased by the defect
insurer is liable;
Also, while a ship may be
seaworthy for purposes of
insurance on it, it may by
reason of being unfitted to
receive
cargo,
be
unseaworthy
for
the
purpose of insurance on the
cargo (section 119).
vessel
(section
120).
This
warranty
arises
only
when
nationality or the neutrality of the
vessel or cargo is expressly
warranted;
3. That the vessel shall not make
any improper deviation from
the intended voyage;
HOW IS THE INTENDED VOYAGE
DETERMINED
(a)
(b)
WHAT IS DEVIATION
is a departure from the
course of the voyage as
defined by section 121 and
122 or an unreasonable
delay
in
pursuing
the
voyage
or
the
commencement
of
an
entirely different voyage
(section 123);
WHEN IS DEVIATION PROPER
-
(a)
When
it
is
caused
by
circumstances over which
neither the master nor the
owner of the ship has any
control;
Example: An ailment strikes
the crew of the vessel;
(b)
(c)
insured subsequent to an
improper deviation (section
126). This applies whether
the risk has been increased
or diminished.
the
abandonment
becomes
ineffectual (section 142);
(2)
It is equivalent to a transfer
by the insured of his
interest to the insurer, with
all the chances of recovery
and indemnity (section 146)
Note though, if the insurer
pays for a loss as if it were
an actual total loss, he is
entitled to whatever may
remain of the thing insured,
or its proceeds or salvage
as if there has been a
formal abandonment. Here
the insurer has opted to pay for
total
actual
loss
notwithstanding
the
absence
on
actual
abandonment;
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 (section 148). The
agents of the insured become
agents of the insurer. This
retroacts to the date of the
loss when abandonment is
effectively made;
EFFECTIVITY OF ABANDONMENT
(1)
Abandonment
becomes
effective
upon
the
acceptance of the insurer.
Acceptance may either be
express or implied from the
conduct of the insurer. The
mere silence of the insurer for
an unreasonable length of time
after notice shall be construed
acceptance
(section
150).
Once accepted, it is conclusive
between the parties. The loss
is admitted together with the
sufficiency
of
the
abandonment (section 151). It
is
also
irrevocable
upon
(2)
No
abandonment
of
freightage unless ship is
also abandoned;
On an accepted abandonment
involving a ship, freightage
earned previous to the loss
belongs to the insurer of the
freightage, that subsequently
earned belongs to the insurer
of the ship (section 153).
Example: The contemplated
voyage of the transport of
cargo is from point X to point
Y. In between, a loss occurs
and the ship is abandoned.
The freightage already
earned from point X until the
point of loss, belongs to the
insurer of the freightage. If
the ship is subsequently
repaired, and continues on to
point Y the freightage due
belongs to the insurer of the
ship;
(3)
(b)
RIGHT OF SUBROGATION
-
(a)
(b)
received
indemnity
from
the
insurance company for the injury or
loss arising out of the wrong or
breach of contract complained of,
the insurance company shall be
subrogated to the rights of the
insured against the wrongdoer or
the person who has violated the
contract. If the amount paid by the
insurance company does not fully
cover the injury or loss, the
aggrieved party shall be entitled to
recover the deficiency from the
person causing the loss or injury.
(1)
IF
THE
POLICY IS OPEN
(a) The value of the ship is the
value at the beginning of
the
risk,
including
all
articles or charges which
add to its permanent value
or which are necessary to
prepare it for the voyage
insured;
(b) The value of the cargo is its
actual cost to the insured,
when laden on board where
the
cost
cannot
be
ascertained,
its
Market
Value at the time and place
of
lading.
Adding
the
charges
incurred
in
purchasing and placing it on
board
but
without
reference
to
any
loss
incurred in raising money
FIRE INSURANCE
COVERAGE IN FIRE INSURANCE
Insurance against fire includes
loss or damage due to lightning,
windstorm, tornado, earthquake or other
allied risks when such risks are
covered by extensions to the fire
insurance policy or under separate
policies (section 167). Hence, while it
is not limited to loss or damage due
to fire, coverage as to other risks is
not automatic;
2001 BAR EXAM (N0.XVII)
Q: JQ, owner of the condominium
unit, insured the same against fire with
XYZ Insurance Corp. and made the loss
payable to his brother. MLQ. In case of
loss by fire of the said condominium unit,
who may recover on the fire insurance
policy? State the reasons for your
answer?
A: JQ can recover on the fire
insurance policy for the loss of the said
condominium unit. He has the insurable
interest as owner-insured. As beneficiary
in the fire insurance policy, MLQ cannot
recover on the fire insurance policy. For
the beneficiary to recover on the fire or
property insurance policy, it is required
that he must have insurable interest in
the property insured. In this case, MLQ
does not have insurable interest in the
condominium unit.
FIRE DEFINED
In insurance, it is defined as
the active principle of burning,
characterized by heat and light
combustion. Combustion without
visible light or glow is not fire.
Example: Damage caused by smoke
from a lamp when no ignition
occurred outside the lamp.
To allow recovery, it must be
the proximate of the damage or loss
and fire must be hostile if it:
a.
b.
c.
proper
place
but
because
of
the
unsuitable
material
used to light it and it
becomes
inherently
dangerous
and
uncontrollable;
-as opposed to friendly fire one
that burns in a place where it is
intended to burn and employed for
the ordinary purpose of lighting,
heating, or manufacturing. But the
policy itself may limit or restrict
coverage to losses under ordinary
conditions but not those due to
extra-ordinary circumstances or
abnormal conditions like war,
invasion, rebellion, civil war or
similar case. In these cases recovery
is still possible;
ALTERATION DEFINED
Is a change in the use or
condition of a thing insured from
that to which it is limited by the
policy, made without the consent of
the insurer, by means within the
control of the insured, and
increasing the risk, which entitles
the insurer to rescind the contract of
insurance (section 168);
-From the foregoing definition,
the REQUISITES must be present to
constitute an alteration so as to
allow the rescission of the contract
to wit:
(a)
There is an alteration in
the said use or condition;
(c)
The alteration is without
the
consent
of
the
insurer;
(d)
The alteration is made by
means
within
the
insureds control. If the
alteration be by accident
or means beyond the
control of the insured,
the requisite is not met.
Example: The alteration is made by a
tenant with the consent or
knowledge of the insured, the
insurer cannot rescind;
(e)
public
liability,
motor
vehicle liability, plate glass
liability, burglary and theft,
personal
accident
and
health insurance as written
by non-life companies and
other substantially similar
insurance (section 174);
DEFINITIONS
EMPLOYERS LIABILITY
-
WORKMENS COMPENSATION
-
is insurance secured by an
employer for the benefit of
his employees and laborers
for
loss
resulting
from
injuries,
disablement,
or
death
through
industrial
accident,
casualty,
or
disease in connection with
their employment. Note that
most if not all types of this
insurance is underwritten by
the GSIS or the SS.
PUBLIC LIABILITY
-
CASUALTY INSURANCE
CASUALTY INSURANCE DEFINED
PLATE GLASS
-
is
insurance
that
indemnifies
the
insured
against loss caused by the
accidental breaking of plate
glass, windows, doors or
show cases;
PERSONAL ACCIDENT
-
is
insurance
against
expense, loss of time and
suffering
from
accidents
that cause a physical injury;
SURETYSHIP
(2)
DEFINITION
(3)
An agreement whereby a
party
called
the
surety
guarantees the performance
by another party called the
principal or obligor of an
obligation or undertaking in
favor of a 3RD party called
the obligee (section 175);
Includes
official
recognizances, bonds or
undertakings issued by any
company under act no. 536,
as amended by act no. 2206
(government transactions
by authorized companies)
(1)
HEALTH
ENDOWMENT
-
ANNUITY
-
LIFE INSURANCE
DEFINITION
-
WHEN IS IT PAYABLE
An insurance upon life may
be made payable upon:
(a)
death of the person; or
(b)
his surviving a specified
period; or
(c)
otherwise,
contingently
on the continuance or
cessation of life;
-
(1)
(2)
(3)
COMMON KINDS
WHOLE LIFE/ORDINARY LIFE/STRAIGHT
LIFE
-
TERM POLICY
-
(1)
insured
is
not
the
intended victim, insurer
is liable (Calanoc vs. CA,
98 Phil 79). What must be
considered is that death
or injury is not the
natural or probable result
of the insureds voluntary
act
(Finman
General
Assurance
Corporation
vs. CA, 213 SCRA 493) as
opposed to an act of the
insured
to
confront
burglars (Balagtan vs.
Insular Life Assurance
Company, 44 SCRA 58).
c. By public policy when the
insured is executed for a
crime committed;
(2)
It is not necessary to
preserve the validity of the
policy
unless
thereby
Yes, if he designated as an
irrevocable beneficiary as
he has acquired a vested
right;
BUSINESS INSURANCE
ORGANIZATION, CAPITALIZATION AND
AUTHORIZATION
REQUIREMENTS FOR A CERTIFICATE OF
AUTHORITY FROM THE INSURANCE
COMMISSION
(a) Qualified by Philippines Laws to
transact insurance business;
(b) Has a name that is not in
anyway
similar
to
another
company;
(c) If
organized
as
a
stock
corporation, it should have a
paid up capital of no less that
Php5,000,000.00;
(d) If it is organized as a mutual
company (one whose capital
funds are not contributed by
stockholders
but
by
policy
holders) it must have available
cash
assets
of
at
least
Php5,000,000.00
above
all
liabilities for losses reported,
expenses, taxes, legal reserves
of all outstanding risks, and the
contributed surplus fund equal
to the amounts required of
stock
corporations
(Php1,000,000.00
if
a
life
insurance
company
or
Php500,000.00, if a non life
insurance company).
(e) If a foreign insurance company,
it must appoint a resident
agent, deposit securities and
maintain
a
legal
(Section 184-193);
reserve
MARGIN OF SOLVENCY
-
COMPULSORY
CLE
LIABILITY
MOTOR
VEHI
INSURANCE
transportation of passengers
for
compensation,
including
school buses) or owner of a
motor vehicle (actual legal
owner of a motor vehicle in
whose name the vehicle is
registered with the LTO) would
be considered as unlawfully
operating a motor vehicle (is
any vehicle as defined in
Section (3) RA 4136 which is
propelled by any power other
than muscular power using
public
high
ways
with
exceptions:
(a)road rollers, holley cars,
street sweepers, sprinkles,
lawn movers, bulldozers,
graders,
forklifts,
amphibian trucks or cranes
not
used
on
public
highways;
(b)Those that run on rails or
trucks;
(c) Tractor,
trailers
(when
propelled or intended to be
propelled
by
an
attachment to a motor
vehicle is classified as a
motor
vehicle
without
power
rating),
traction
engines of all kinds used
exclusively for agricultural
purposes) Unless there is:
(1) policy
of
insurance
(contract of insurance
against passenger or
3RD party liability for
death or body injury
arising
from
motor
vehicle accidents); or
(2) guaranty in cash; or
surety bond
Compliance by the motor vehicle
owner or the land transportation
operator is monitored as the Land
Transportation Office shall not allow
registration or renewal of
registration without compliance with
section 374 (section 376);
DISTINGUISHED FROM OWN DAMAGE
COVERAGE AND COMPREHENSIVE MOTOR
VEHICLE INSURANCE
(a)
(b)
(c)
commissioner,
but
the
authority of the insurance
company
to
engage
in
casualty or surety lines of
business shall be withdrawn
immediately (section 379);
CANCELLATION OF THE POLICY
(a)
(b)
PAYMENT OF CLAIMS
-
(c)
MAGLANA
VS.
SC RULING:
Where an insurance policy insures
directly against liability, the insurers
liability accrues immediately upon the
occurrence of the injury or even upon
which the liability depends, and does not
depend upon the recovery of judgment by
the insured party against the insured.
The underlying reason behind the third
party liability of the Compulsory Motor
Vehicle Liability Insurance is to protect
the injured person against the insolvency
of the insured who causes such injury,
and to give such injured person a certain
beneficial interest in the proceeds of the
policy.
However, the direct liability
of the insurer under the indemnity
contracts against third party liability does
not mean that the insurer can be held
solidarily liable with the insured and/or
the other parties found at fault. The
liability of the insurer is based on contract
and the liability of the
insured
is
based on tort. If the insurer was to be
4.
NON-FAULT
CLAUSE
IN
COMPULSORY MOTOR
VEHICLE
INSURANCE POLICY (2000 Bar
Exam)
Proof of fault or negligence is not
necessary for the payment of any claim
for death or injury to a passenger or to a
third party. The maximum amount of
indemnity is P 10, 000.00 upon
submission of death certificate, medical
certificate and police report.
The
purpose is in order to give immediate
assistance to the victim of motor vehicle
accidents and/or the dependents specially
if they are poor, regardless of the
financial capability of the owner of the
motor vehicle or operator responsible for
the accident.
This does not include
property damage.
- The claim is collected from
the insurer of the vehicle where the