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InsuranceLaw Outline
InsuranceLaw Outline
Course Outline
Atty. Raoul Creencia
During the pre-Spanish era, the concept of insurance was unknown in the country. As a
result, every loss was borne by the person or the family who suffered the misfortune.
Eventually, during the Spanish era, insurance, in its present concept, was introduced in
the Philippines when Lloyd’s of London appointed Strachman, Murray & Co., Inc. as its
representative here. At that time, the laws on insurance were found in the relevant
provisions of the Spanish Code of Commerce; and in the Spanish Civil Code.
Life insurance was eventually introduced in this country in 1898 with Sun Life Assurance
of Canada’s entry in the local insurance market. In 1906, the First domestic non-life
insurance company, the Yek Tong Lin Insurance Company, was organized. A few years
later in 1910, the first domestic life insurance company, the Insular Life Assurance Co.,
Ltd., began its operations.
In 1914, during the American Regime, the Philippine Legislature enacted the Insurance
Act (Act 2427), which took effect on 1 July 1915. This repealed the provisions of the
Spanish Code of Commerce on Insurance.
On 18 December 1974, Presidential Decree (PD) 612 was promulgated, ordaining and
instituting the Insurance Code of the Philippines, thereby repealing Act 2427. PDs 63,
123 and 317 were later issued, amending PD 612. Finally, PD 1460 which took effect on
June 11, 1976 consolidated all insurance laws into a single code, known as the Insurance
Code of 1978.
Social insurance
Social insurance was established in 1936 with the enactment of Commonwealth Act 186
which created the Government Service Insurance System (GSIS), covering government
employees. GSIS started operations in 1937. Presidential Decree 1146 (Revised
Government Service Insurance Act of 1977) was passed in 1977, but was later amended
by Republic Act 8291 in 1997.
For non-government employees, another law was enacted in 1954, i.e. -- Republic Act
1161, which provided for the organization of the Social Security System (SSS) covering
employees of the private sector. In 1997, Republic Act 8282 (Social Security Act of 1997)
was passed, which now governs the SSS.
Enriquez v. Sun Life Insurance of Canada
G.R. L-15895 (November 29, 1920)
While, as just noticed, the Insurance Act deals with life insurance, it is silent as to the
methods to be followed in order that there may be a contract of insurance. On the other
hand, the Civil Code, in Article 1802, not only describes a contact of life annuity
markedly similar to the one we are considering, but in two other Articles, gives strong
clues as to the proper disposition of the case. For instance, Article 16 of the Civil Code
provides that "In matters which are governed by special laws, any deficiency of the
latter shall be supplied by the provisions of this Code." On the supposition, therefore,
which is incontestable, that the special law on the subject of insurance is deficient in
enunciating the principles governing acceptance, the subject-matter of the Civil code, if
there be any, would be controlling. (underscoring supplied)
This is a novel question in insurance law: Can a common- law wife named as beneficiary
in the life insurance policy of a legally married man claim the proceeds thereof in case of
death of the latter?
In essence, a life insurance policy is no different from a civil donation insofar as the
beneficiary is concerned. Both are founded upon the same consideration: liberality. A
beneficiary is like a donee, because from the premiums of the polic y which the insured
pays out of liberality, the beneficiary will receive the proceeds or profits of said
insurance. As a consequence, the proscription in Article 739 of the new Civil Code
should equally operate in life insurance contracts. The mandate of Article 2012 cannot
be laid aside: any person who cannot receive a donation cannot be named as beneficiary
in the life insurance policy of the person who cannot make the donation. Under
American law, a policy of life insurance is considered as a testament and in construing
it, the courts will, so far as possible treat it as a will and determine the effect of a clause
designating the beneficiary by rules under which wills are interpreted.
2. Concept of Insurance
Section 2. Whenever used in this Code, the following terms shall have the respective
meanings hereinafter set forth or indicated, unless the context otherwise requires:
In the application of the provisions of this Code, 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.
(c) As used in this Code, the term Commissioner means the Insurance
Commissioner.
• Test of Insurance:
White Gold Marine Services Inc. v. Pioneer Insurance and Surety Corp.
G.R. 154514 (July 28, 2005)
In the case at bar, the insurable interest of respondent’s husband in obtaining the
health care agreement was his own health. The health care agreement was in the nature
of non- life insurance, which is primarily a contract of indemnity. Once the member
incurs hospital, medical or any other expense arising from sickness, injury or other
stipulated contingent, the health care provider must pay for the same to the extent
agreed upon under the contract.
SEC. 403. Any society, association or corporation, without capital stock, formed
or organized not for profit but mainly for the purpose of paying sick benefits to
members, or of furnishing financial support to members while out of employment, or of
paying to relatives of deceased members of fixed or any sum of money, irrespective of
whether such aim or purpose is carried out by means of fixed dues or assessments
collected regularly from the members, or of providing, by the issuance of certificates of
insurance, payment of its members of accident or life insurance benefits out of such
fixed and regular dues or assessments, but in no case shall include any society,
association, or corporation with such mutual benefit features and which shall be carried
out purely from voluntary contributions collected not regularly and/or no fixed
amount from whomsoever may contribute, shall be known as a mutual benefit
association within the intent of this Code.
White Gold Marine Services Inc. v. Pioneer Insurance and Surety Corp.
G.R. 154514 (July 28, 2005)
b. Contract of Adhesion
c. Aleatory
d. Contract of Indemnity
The consent of the spouse is not necessary for the validity of an insurance
policy taken out by a married person on his or her life or that of his or her children.
All rights, title and interest in the policy of insurance taken out by an
original owner on the life or health of the person insured shall automatically vest
in the latter upon the death of the original owner, unless otherwise provided for
in the policy.
Section 4. The preceding section does not authorize an insurance for or against the
drawing of any lottery, or for or against any chance or ticket in a lottery drawing a prize.
One of Abundant Good Faith -- it requires the parties to the contract to disclose conditions
affecting the risk.
4. Elements of Insurance
a) Insurable Interest
b) Risk of Loss
c) Assumption of Loss
d) Distribution of Losses
e) Premium
a. Insurable Interest
- In Life Insurance
o Himself
o His spouse
o His children
o Any person on whom he depends wholly or in part for education
o Any person on whom he depends wholly or in part for support
o Any person under a legal obligation to him for the payment of money, or
respecting property or services, of which death or illness might delay or
prevent the performance
o Any person upon whose life any estate vested in him depends
o Any person upon whose life any interest vested in him depends
Section 11. The insured shall have the right to change the beneficiary he designated
in the policy, unless he has expressly waived this right in said policy. Notwithstanding
the foregoing, in the event the insured does not change the beneficiary during his lifetime,
the designation shall be deemed irrevocable.
Section 12. 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 such a case, the share forfeited shall pass on to the other
beneficiaries, unless otherwise disqualified. In the absence of other beneficiaries, the
proceeds shall be paid in accordance with the policy contract. If the policy contract is
silent, the proceeds shall be paid to the estate of the insured.
Section 13. Every interest in property, whether real or personal, or any relation
thereto, or liability in respect thereof, of such nature that a contemplated peril might
directly damnify the insured, is an insurable interest.
- In Property Insurance
b. Risk of Loss
Loss in insurance means the injury means the 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.
c. Distribution of Loss
d. Premium
[P]remium is the elixir vitae of the insurance business because by law the insurer
must maintain a legal reserve fund to meet its contingent obligations to the public,
hence, the imperative need for its prompt payment and full satisfaction. All actuarial
calculations and various tabulations of probabilities of losses under the risks insured
against are based on the sound hypothesis of prompt payment of premiums. Upon
this bedrock insurance firms are enabled to offer the assurance of security to the
public at favorable rates [Tibay v. Court of Appeals G.R. 119655 (May 24, 1996)]
Arturo P. Valenzuela, et al. vs. v. Court of Appeals, G.R. 83122 (October 19, 1990)
The designated peril in insurance is the specific cause of loss that is insured
against.
6. Risk
Any contingent or unknown event, whether past or future, which may damnify a
person having an insurable interest, or create liability against the insured.
All risk policies. Filipino Merchants Insurance Co., Inc. v. Court of Appeals and Choa
Tiek Seng, G.R. 85141, November 28, 1989.
Article 1174
Article 1179
Article 1185
Loss is the end result of the risk insured against. It involves diminution of value
or disappearance of value resulting from a risk.
Peril is the specific cause of loss that is insured against while risk is the
uncertainty that the property or person insured will be lost or damaged by reason of the
designated or some peril.
Hazards are circumstances or conditions that create or increase the risk of loss.
Hazards may either be:
Physical hazard – physical condition of the thing or the person that increases the
chance of loss.
Article 2207 (New Civil Code): If the plaintiff's property has been insured, and he has
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.
a) Claims Settlement
b) Fraudulent Claim
c) Subrogation
o Requisites of Subrogation
o Limitations
§ Aboitiz Shipping Corporation v. Insurance Company of North America,
G.R. 168402 (August 6, 2008)
§ Federal Express Corporation v. American Home Assurance Company, G.R.
150094 (August 18, 2004)
§ Atlantic Mutual Insurance Company v. Manila Port Service, G.R. L-
16271 (October 31, 1961)
§ Keppel Cebu Shipyard, Inc. Pioneer Insurance and Surety Corporation,
G.R. 180880-81 (September 18, 2012)
§ Cebu Shipyard and Engineering Works, Inc. v. William Lines, Inc., G.R.
132607 (May 5, 1999)
§ Malayan Insurance Company, Inc. v. Court of Appeals, et al., G.R. L-
36413 (September 26, 1988)
§ Manila Mahogany Manufacturing Corporation v. Court of Appeals and
Zenith Insurance Corporation, G.R. 52756 (October 12, 1987)
• Where the insured by his own act releases the wrongdoer or third party liable
for loss or damage from liability;
• The insurer loses his rights against the wrongdoer since the insurer can only be
subrogated to only such rights as the insured may have;
• Where the insurer pays the insured the value of the loss without notifying the
carrier who has in good faith settled the insured claim for loss.
8. Contract of Insurance
Double Insurance:
o Section 95, Insurance Code: A double insurance exists where the same
person is insured by several insurers separately in respect to the same
subject and interest.
xxx
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Emilio Gonzalez La’O v. Yek Tong Lin Fire and Marine Insurance Company, Ltd.
G.R. 33131 (December 30, 1930)
Reinsurer:
Section 97, Insurance Code: A contract of reinsurance is one by which an insurer
procures a third person to insure him against loss or liability by reason of such original
insurance.
Fieldmen’s Insurance Company, Inc. v. Asia Surety and Insurance Company, Inc.
G.R. L-23447 (July 31, 1970)
Oriental Assurance Corporation v. Court of Appeals and Panama Saw Mill Co., Inc.
G.R. 94052 (August 9, 1991)
Filipino Merchants Insurance Co., Inc. v. Court of Appeals and Choa Tiek Seng
G.R. 85141 (November 28, 1989)
a) Concept
b) Property Insured
c) Alteration
a) General Concepts
b) Kinds
Teresa vda. De Fernandez, et al. v. The National Life Insurance Company of the
Philippines [G.R. L-9146; January 27, 1959]
c) Annuity
d) Suicide
e) Accidental Death Benefit Clause
Sun Life Insurance Office, Ltd. v. Court of Appeals and Nerissa Lim
G.R. 92383 (July 17, 1992)
Malayan Insurance Co., Inc. v. Philippine First Insurance Co. Inc. and Reputable
Forwarder Services, Inc. [G.R. 184300 (July 11, 2012)]