Insurance Tambasacan

Insurance Law notes with Atty. Tambasacan

Insurance laws adopted in the Philippines:  P.D 1460, law governing insurance in the Philippines.  in the absence of applicable provisions in the Insurance code of 1978, provisions in the civil code regarding contracts shall govern.  In the absence of applicable provisions in both laws, the general principles prevailing on the subjects in the United States, particularly in California where our insurance laws were based will be applied.

(I.) Organizational structures or powers/ Jurisdiction of the Insurance Commission:

 Powers of Insurance Commissioner: Title 1: Administrative and Adjudicatory Powers Sec. 414 and 415:

1. to see that all laws relating to insurance, insurance companies and other insurance matters, mutual benefit associations, and trusts for charitable uses are faithfully executed 2. to perform the duties imposed upon him by this Code, and shall, notwithstanding any existing laws to the contrary, 3. have sole and exclusive authority to regulate the issuance and sale of variable contracts as defined in section 232 and 4.

to provide for the licensing of persons selling such contracts, and to issue such reasonable rules and regulations governing the same

5. To issue such rulings, instructions, circulars, orders and decision as he may deem necessary to secure the enforcement of the provisions of this Code, subject to the approval of the Secretary of Finance. Except as otherwise specified, decisions made by the Commissioner shall be appealable to the Secretary of Finance.

6. In addition to the administrative sanctions provided elsewhere in this Code at his discretion, to impose upon the insurance companies, their

directors and/or officers and/or agents, for any willful failure or refusal to comply with, or violation of any provision of this Code, or any order, instruction, regulation, or ruling of the Insurance Commissioner, or any commission or irregularities, and/or conducting business in an unsafe or unsound manner as may be determined by the Insurance Commissioner, the following: (a) fines not in excess of five hundred pesos a day; and (b) suspension, or after due hearing, removal of directors and/or officers and/or agents. 7. to adjudicate claims and complaints involving any loss, damage or liability for which in insurer may be answerable under any kind of policy or contract of insurance, or for which such insurer may be liable under a contract of suretyship, or for which a reinsurer may be sued under any contract of reinsurance it may have entered into; or for which a mutual benefit association may be held liable under the membership certificates it has issued to its members, where the amount of any such loss, damage or liability, excluding interest, cost and attorney's fees, being claimed or sued upon any kind of insurance, bond, reinsurance contract, or membership certificate does not exceed in any single claim one hundred thousand pesos. -The insurer or surety may, in the same action file a counterclaim against the insured or the obligee.

-The insurer or surety may also file a cross-claim against a party for any claim arising out of the transaction or occurrence that is the subject matter of the original action or of a counterclaim therein. With leave of the Commissioner, an insurer or surety may file a third-party complaint against its reinsurers for indemnification, contribution, subrogation or any other relief, in respect of the transaction that is the subject matter of the original action filed with the Commissioner.  Jurisdiction of Insurance Commission: The party filing an action pursuant to the provisions of this section thereby submits his

person to the jurisdiction of the Commissioner. The Commissioner shall acquire jurisdiction over the person of the impleaded party or parties in accordance with and pursuant to the provisions of the Rules of Court.

A full and complete record shall be kept of all proceedings had before the commissioner, or the officers thereof designated by him, and all testimony shall be taken down and transcribed by a stenographer appointed by the Commissioner.

The authority to adjudicate granted to the Commissioner under this section shall be concurrent with that of the civil courts, but the filing of a complaint with the Commissioner shall preclude the civil courts from taking cognizance of a suit involving the same subject matter.

A transcribed copy of the evidence and proceeding, or any specific part thereof, of any hearing taken by a stenographer appointed by the Commissioner, being certified by such stenographer to be a true and correct transcript of the testimony on this hearing of a particular witness, or of a specific proof thereof, carefully compared by him from his original notes, and to be a correct statement of evidence and proceeding had in such hearing so purporting to be taken and subscribed, may be received as evidence by the Commissioner and by any court with the same effect as if such stenographer were present and testified to the facts so certified. (As amended by Presidential Decree No. 1455).

Any decision, order or ruling rendered by the Commissioner after a hearing shall have the force and effect of a judgment. Any party may appeal from a final order, ruling or decision of the Commissioner by filing with the Commissioner within thirty days from receipt of copy of such order, ruling or decision a notice of appeal to the Intermediate Appellate Court in the manner provided for in the Rules of Court for appeals from the Regional Trial Court to the Intermediate Appellate Court. (As amended by Batas Pambansa Blg. 874). As soon as a decision, order or ruling has become final and executory, the Commissioner shall motu proprio or on motion of the interested party, issue a writ of execution requiring the sheriff or the proper officer to whom it is directed to execute said decision, order or award, pursuant to Rule thirty-nine of the Rules of Court.

8. For the purpose of any proceeding under this section, the Commissioner, or any officer thereof designated by him, empowered to administer oaths and affirmation, subpoena witnesses, compel their attendance, take evidence, and require the production of any books, papers, documents, or contracts or other records which are relevant or material to the inquiry. In case of contumacy by, or refusal to obey a subpoena issued to any person, the Commissioner may invoke the aid of any court of first instance within the jurisdiction of which such proceeding is carried on, where such person resides or carries on his own business, in requiring the attendance and testimony of witnesses and the production of books, papers, documents, contracts or other records. And such court may issue an order requiring such person to appear before the Commissioner, or officer designated by the Commissioner, there to produce records, if so ordered or to give testimony touching the matter in question. Any failure to obey such order of the court may be published by such court as a contempt thereof.

Commissioner has concurrent jurisdiction with the regular courts to hear and decide claims for which an insurer may be answerable under any kind of policy or contract of insurance where the amount of the loss, damage , or liability excluding interest, costs…

Appeal of a party affected by a final order, decision or judgement of the insurance commissioner shall be taken to the Ca with 15 days from notice.

Insurance commissioner’s resolutions and orders which were issued in the performance of administrative and regulatory duties and functions should have been appealed to the office of the secretary of finance.

Cases:

1. Republic v. del Monte motors- duty to hold security deposit

- The securities required by the Insurance Code to be deposited with the Insurance Commissioner are intended to answer for the claims of all policy holders in the event that the depositing insurance company becomes insolvent or otherwise unable to satisfy their claims. The security deposit must be ratably distributed among all the insured who are entitled to their respective shares; it cannot

be garnished or levied upon by a single claimant, to the detriment of the others. Security deposits are: 1) answerable for all the obligations of the depositing insurer under its insurance contracts; (2) at all times free from any liens or encumbrance; and (3) exempt from levy by any claimant. regulatory powers, the commissioner is authorized to (1) issue (or to refuse to issue) certificates of authority to persons or entities desiring to engage in insurance business in the Philippines;16 (2) revoke or suspend these certificates of authority upon finding grounds for the revocation or suspension;17 (3) impose upon insurance companies, their directors and/or officers and/or agents appropriate penalties -- fines, suspension or removal from office -- for failing to comply with the Code or with any of the commissioner's orders, instructions, regulations or rulings, or for otherwise conducting business in an unsafe or unsound manner.18 Included in the above regulatory responsibilities is the duty to hold the security deposits under Sections 19119 and 203 of the Code, for the benefit and security of all policy holders. In relation to these provisions, Section 192 of the Insurance Code states:

w/n the security deposit held by the insurance commissioner pursuant to sec 203 of the insurance code may be levied or garnished in favor of only one insured.

2. Philamlife v. Ansaldo- lack of jurisdiction on issues between insurance company and its agents

Facts: This case arose from a letter complaint of private-respondent commissioner , alleging certain problems encountered by agents, supervisors, managers and public consumers of the petitioner as a result of certain practices of the company

Issue: whether or not the resolution of the legality of the contract of agency falls within the jurisdiction of the insurance commissioner. Held: The general regulatory power of the insurance commissioner is described in sec. 414 of the insurance code while sec. 415, on the other hand, authorizes the commissioner, at his discretion, to impose upon insurance companies, their directors and or comply with, or violation of any provisions of this code the following fines (a) fines (b) suspension The definition of “doing an insurance business”. See sec. 416, a reading of the said section shows that the quasi judicial power of the insurance commissioner is limited by law “to claims and complaints involving any loss, damage, or liability for which insurer may be answerable under any kind of policy or contract of insurance,xxx”. Hence, this power does not cover the relationship affecting the insurance company and its agents but is limited to adjudicating claims and complaints filed by the insured against the insurance company. In insurance company there are two classes of agents who sell its insurance policies: 1. Salaried employees who keep definite hours and work under the control and supervision of the company and (2) registered representatives, who work on commission basis. The first category, the relationship between the insurance company and its agents is governed b the contract of employment an the provisions of the labor code, while under the second category, the same s governed by the contract of agency and the provisions of the civil code. Dispute over the latter are cognizable under the regular courts

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contribution to a fund form which the losses insured by any of them will be compensated.

 Nature and characteristics of Insurance contract: 1. It is aleatory. The liability of the insurer depends upon some contingent event. But it is not a gambling contract or a contract of chance.

(II.) Definition of the Insurance contract

 Agreement whereby one undertakes for a consideration to indemnify another against loss, damage, or liability arising from an unknown or contingent event And a device which distributes the risk of loss among all the insured.



Elements of Insurance Contract:

a. Insured possess an interest of some kind susceptible of pecuniary estimation, known as insurable interest b. Insured is subjected to risk of loss through the destruction or impairment of that interest by the happening of designated perils c. Insurer assumes that risk of loss

2. It is a contract of indemnity for non life insurance; an investment in life insurance. Nonlife insurance- insured cannot make a profit by securing more than his actual loss Life insurance- the contract is more of an investment of the insured, as a measure of the economic security for him during his lifetime and for his beneficiary after his death.

3. It is personal. Each party contract s having in view the character, credit and conduct of the other

4. It is executory and conditional on the part of the insurer. It is executed as to the insured after his payment of the premium. It is executory and conditional on the part of the insurer because upon the happening of the peril insured against and the conditions having been met, he has the obligation to execute the contract by paying the insured.

d. Such assumption is part of the general scheme to distribute actual losses among large group of persons bearing somewhat similar risks and

e. As consideration/s for the insurer’s promise, the insured makes a ratable contribution called a premium , to a general insurance fund

 Premium- paid to the insurer by each person belonging to a large of group of persons exposed to risk is a

5. It is one of perfect goodfaith. This requirement is not for the insured alone but even more so for the insurer, since it its dominant bargaining position carries with it a stricter responsibility.

6. It is a contract of adhesion. Insurance companies manage to impose upon the insured prepared agreements in printed form which the insured may not change.

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 The term doing an insurance business includes: a. Making or proposing to make as insurer any insurance contract b. Making or proposing to make as surety, any contract of suretyship as a vocation and not merely incidental to any other legitimate business or activity of the surety c. Dong any kind business including reinsurance business specifically recognized as constituting the doing of an insurance business and 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 this code.

-In applying the provisions of this code, the fact that no profit is derived from the contract or transaction or that no separate or direct consideration is received for such contract or transaction shall not be deemed conclusive to show that no insurance business was transacted.

Cases: 1. Cir v. Phil American Accident Insurace

- The CTA held that respondents are not taxable as lending investors because the term "lending investors" does not embrace insurance companies. The CTA traced the history of the tax on lending investors, as follows: Originally, a person who was engaged in lending money at interest was taxed as a money lender. [Sec. 1464(x), Rev. Adm. Code] The term money lenders was defined as including "all persons who make a practice of lending money for themselves or others at interest." [Sec. 1465(v), id.] Under this law, an insurance company was not considered a money lender and was not taxable as such. To quote from an old BIR Ruling: "The lending of money at interest by insurance companies constitutes a necessary incident of their regular business. For this

reason, insurance companies are not liable to tax as money lenders or real estate brokers for making or negotiating loans secured by real property. (Ruling, February 28, 1920; BIR 135.2)" (The Internal Revenue Law, Annotated, 2nd ed., 1929, by B.L. Meer, page 143) The same rule has been applied to banks. "For making investments on salary loans, banks will not be required to pay the money lender’s tax imposed by this subsection, for the reason that money lending is considered a mere incident of the banking business. [See Ruling No. 43, (October 8, 1926) 25 Off. Gaz. 1326)" (The Internal Revenue Law, Annotated, id.) definition of the term remains the same. [Sec. 1464(x), Rev. Adm. Code, as finally amended by Com. Act No. 215, and Sec. 1465(v) of the same Code, as finally amended by Act No. 3963] The same law is embodied in the present National Internal Revenue Code (Com. Act No. 466) without change, except in the amount of the tax. [See Secs. 182(A) (3) (dd) and 194(u), National Internal Revenue Code.] It is a well-settled rule that an administrative interpretation of a law which has been followed and applied for a long time, and thereafter the law is re-enacted without substantial change, such administrative interpretation is deemed to have received legislative approval. In short, the administrative interpretation becomes part of the law as it is presumed to carry out the legislative purpose.5 The CTA held that the practice of lending money at interest is part of the insurance business. CA 466 already taxes the insurance business. The CTA pointed out that the law recognizes and even regulates this practice of lending money by insurance companies. The CTA observed that CA 466 also treated differently insurance companies from lending investors in regard to fixed taxes. Under Section 182(A)(3)(gg), insurance companies were subject to the same fixed tax as banks and finance companies. The CTA reasoned that insurance companies were grouped with banks and finance companies because the latter’s lending activities were also integral to their business. In contrast, lending investors were taxed at a different fixed tax under Section 182(A)(3)(dd) of CA 466. The

CTA stated that "insurance companies xxx had never been required by respondent [CIR] to pay the fixed tax imposed on lending investors xxx."6 The dispositive portion of the Decision of 5 January 1995 of the Court of Tax Appeals ("CTA Decision") reads: WHEREFORE, premises considered, petitioners Philippine American Accident Insurance Co., Philippine American Assurance Co., and Philippine American General Insurance Co., Inc. are not taxable on their lending transactions independently of their insurance business. Accordingly, respondent is hereby ordered to refund to petitioner[s] the sum of P7,985.25, P7,047.80 and P14,541.97 in CTA Cases No. 2514, 2515 and 2516, respectively representing the fixed and percentage taxes when (sic) paid by petitioners as lending investor from August 1971 to September 1972.

2. White gold Marine Services v. Pioneer Insurance - coverage for its vessels from The Steamship Mutual Underwriting Association (Bermuda) Limited (Steamship Mutual) through Pioneer Insurance and Surety Corporation (Pioneer). Subsequently, White Gold was issued a Certificate of Entry and Acceptance.[3] Pioneer also issued receipts evidencing payments for the coverage. When White Gold failed to fully pay its accounts, Steamship Mutual refused to renew the coverage. Steamship Mutual thereafter filed a case against White Gold for collection of sum of money to recover the latter's unpaid balance. White Gold on the other hand, filed a complaint before the Insurance Commission claiming that Steamship Mutual violated Sections 186[4] and 187[5] of the Insurance Code, while Pioneer violated Sections' 299,[6] 300[7] and 301[8] in relation to Sections 302 and 303, thereof. The Insurance Commission dismissed the complaint. It said that there was no need for Steamship Mutual to secure a license because it was not engaged in the insurance business. It explained that Steamship Mutual was a Protection and Indemnity Club (P & I Club). Likewise, Pioneer need not obtain another license as insurance agent and/or a broker for Steamship Mutual because Steamship Mutual was not engaged in the insurance business. Moreover, Pioneer was already licensed, hence, a separate license

solely as agent/broker of Steamship Mutual was already superfluous. Simply, the basic issues before us are (1) Is Steamship Mutual, a P & I Club, engaged in the insurance business in the Philippines? (2) Does Pioneer need a license as an insurance agent/broker for Steamship Mutual? Is Steamship Mutual engaged in the insurance business? Section 2(2) of the Insurance Code enumerates what constitutes doing an insurance business' or 'transacting an insurance business' . These are: (a) making or proposing to make, as insurer, any insurance contract; (b) making, or proposing to make, as surety, any contract of suretyship as a vocation and not as merely incidental to any other legitimate business or activity of the surety; (c) doing any kind of business, including a reinsurance business, specifically recognized as constituting the doing of an insurance business within the meaning of this Code; (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 this Code. ... The same provision also provides, 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 preclude the existence of an insurance business.[12]chanroblesvirtuallawlibrary The test to determine if a contract is an insurance contract or not, depends on the nature of the promise, the act required to be performed, and the exact nature of the agreement in the light of the occurrence, contingency, or circumstances under which the performance becomes requisite. It is not by what it is called. [13]chanroblesvirtuallawlibrary Basically, an insurance contract is a contract of indemnity. In it, one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event. [14]chanroblesvirtuallawlibrary In particular, a marine insurance undertakes to indemnify the assured against marine losses, such as the losses incident to a marine adventure.[15] Section 99[16] of the Insurance Code enumerates the coverage of marine insurance. Relatedly, a mutual insurance company is a cooperative enterprise where the members are both the insurer and insured. In it, the members all contribute, by a system of premiums or assessments, to the creation of

a fund from which all losses and liabilities are paid, and where the profits are divided among themselves, in proportion to their interest.[17] Additionally, mutual insurance associations, or clubs, provide three types of coverage, namely, protection and indemnity, war risks, and defense costs. [18]chanroblesvirtuallawlibrary A P & I Club is 'a form of insurance against third party liability, where the third party is anyone other than the P & I Club and the members.[19] By definition then, Steamship Mutual as a P & I Club is a mutual insurance association engaged in the marine insurance business. The records reveal Steamship Mutual is doing business in the country albeit without the requisite certificate of authority mandated by Section 187[20] of the Insurance Code. It maintains a resident agent in the Philippines to solicit insurance and to collect payments in its behalf. We note that Steamship Mutual even renewed its P & I Club cover until it was cancelled due to non-payment of the calls. Thus, to continue doing business here, Steamship Mutual or through its agent Pioneer, must secure a license from the Insurance Commission. Since a contract of insurance involves public interest, regulation by the State is necessary. Thus, no insurer or insurance company is allowed to engage in the insurance business without a license or a certificate of authority from the Insurance Commission. [21]chanroblesvirtuallawlibrary

 Suretyship, when deemed to be one of Insurance (sec. 175) Definition: Contract of suretyship is 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 third party called the obligee. It includes official recognizances, stipulations, bonds or undertakings issued by any company by virtue of and under the provisions of Act No. 536, as amended by Act No. 2206 

Contract of Suretyship, when deemed to be one of Insuranceif such surety makes or proposes to make suretyship contracts as a vocation and not merely incidental to any other legitimate business or activity of the surety.

 Doctrine of Estoppel (by deed or pais) know the difference (art. 1431,cc)



Where inequitable conduct is shown by an insurance firm, it is stopped from enforcing forfeitures or exemptions in its favor, in order to forestall (prevent) fraud or imposition on the insured

 If an insurance company had led the insured to believe that he could qualify under a certain insurance and the latter entered into a contract of insurance policy paying the premiums due, the insurer could not thereafter, in any litigation arising as such representation be permitted to contend that the insured as not qualified.

Cases: 1. DBP v. Ca- agent’s misrepresentation as to eligibility for insurance

Facts:

Juan Dans, together with his wife Candida, his son and daughter in law, applied for a loan of P 500,00.00 with the DBP, Basilan Branch. As the principal mortgagor, Dans, then 76 years old was advised by DBP to obtain a mortgagor redemption insurance (MRI) with the DBP mortgage Redemption Insurance Pool. Dans died of cardiac arrest, the DBP, upon notice relayed this to DBP MRI POOL, the latter notified the former that Dans was not eligible for MRI coverage being over the acceptance age of 60 yrs old.

Held:

Undisputably, the power to approve MRI applications is lodged with the DPB MRI pool. The pool however, did not approve the application of Dans. There is also no showing that it accepted the sum of money which DPB credited to its account with full knowledge that it was payment for Dan’s premium. There was as a result no perfected contract of insurance; hence the DPB MRI pool cannot be held liable.

DPB, could be liable. DBP was wearing 2 legal hats, the first as a lender and the second as insurance agent. As an

insurance agent, DBP made Dans go through the motion of applying for aid insurance, thereby leading him and his family to believe that they have already fulfilled all the requirements for the MRI and that issuance of their policy was forthcoming. Despite of his knowledge that dan would not be qualified. Reimbursed dan’s family with legal interest.

1st, I the case of a life or industrial life policy whenever the grace period provision applies 2nd, 78. An acknowledgment in a policy or contract of insurance or the receipt of premium is conclusive evidence of its payment, so far as to make the policy binding, notwithstanding any stipulation therein that it shall not be binding until the premium is actually paid. 3rd, if the parties have agreed to the payment in installments of the premium and partial payment has been made at the time of loss

2. UCPB v. Masagana Telamart-granting of credit term in premium payment

- the sc ruled that an insurance policy other than life issued originally or on renewal, is not valid and binding until actual payment of the premium, and any agreement to the contrary is void- the parties may not agree expressly or impliedly on the extension credit or time to pay the premium and consider the policy binding before actual payment. However, upon motion the decision was reconsidered and set aide, stating that there are five exceptions to sec 77.

Petitioner decide not to renew the policies upon expiration , the risk insured against happened , respondent file claim. The issue in this case is whether the fire insurance policies issued by the petitioner had expired on the latter date or had been extended or renewed by an implied credit arrangement though actual payment of premium was tendered on a latter date after the occurrence of the risk.

Petitioner for years had been granting respondent a 60-90 day credit term within which to pay the premiums on the renewed policies. The said premiums were paid within the 90-60 day credit term and were duly accepted by the

- 5 exceptions to sec 77, Sec. 77. An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the peril insured against. Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid, except in the case of a life or an industrial life policy whenever the grace period provision applies.

4th, the insurer may grant credit extension for the payment of the premium. Means that if the insurer has granted the insured a credit term for the payment of the premium and loss occurs before the expiration of the term, recovery on the policy should be allowed even though the premium is paid after the loss but within the credit term. 5th , estoppels, it would be unjust and in equitable if recovery on the policy would not be permitted against petitioner , which had consistently granted a 60-90 day credit term for the payment of premium despite its full awareness of sec. 77. Estoppels bars it from taking refuge under said section.

3. Fieldmen’s v. Songco- agent’s misrepresentation as to eligibility for insurance

- jeepney was insured through the inducement of the agent of the insurance company, the agent let them entered into the insurance policy even if their vehicle is a private owned and not public one. The insurer had led the insured to believe that he could qualify under the common carrier liability insurance.

How ambiguities are construed (art 1377,cc) Ambiguities or obscurities must be strictly interpreted against the party that caused them. As the insurance policy is prepared solely by the insurer, the ambiguities shall be construed against it and in favor of the insured.

Cases:

be construed liberally in favor of the insured 1. As to amount to be paid Del Rosario v. Equitable - ambiguities must be strictly interpreted against the party that caused them. There was no definite amount as to how much should be entitle to them ang nakalagay lang 1-3,000,

2. As to effectivity date Landicho v. GSIS - on june 1, 1964, the gsis issued in favor of landicho an optional life additional insurance policy. Upon his death, Me landicho filed a clam but it was denied upon the ground that the policy had never been in force. Whether or not the insurance policy in question has never been in force not a single premium having been paid before. Ruling is regarding ambiguities and gsis induced the insured to believe that the policy was in forceby accepting .

Eternal gardens v. Philamlife

and strictly against the insurer in order to safeguard the latters interest. Thus, in Malayan Insurance Corporation v. Court of Appeals, this Court held that:

Indemnity and liability insurance policies are construed in accordance with the general rule of resolving any ambiguity therein in favor of the insured, where the contract or policy is prepared by the insurer. A contract of insurance, being a contract of adhesion, par excellence, any ambiguity therein should be resolved against the insurer;

3. As to Peril insured against Malayan vs. CA - the perils clause includes not only “arrest” caused by political acts of a seizing state but also by ordinary legal process such as a lawsuit on ownership and possession of the goods.

- May the inaction of the insurer on the insurance application be considered as approval of the application?

4. As to Area insured

- FFECTIVE DATE OF BENEFIT.

Rizal Surety v. Ca

The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a loan with the Assured. However, there shall be no insurance if the application of the Lot Purchaser is not approved by the Company.

- the contract of insurance is one of perfect good faith (uberrima fides) not for the insured alone, but equally so for the insurer, in fact it is more so for the latter, since its dominant bargaining position carries with it stricter responsibility.

An examination of the above provision would show ambiguity between its two sentences. The first sentence appears to state that the insurance coverage of the clients of Eternal already became effective upon contracting a

The issue here is that its fire insurance policy sued upon covered only the contents of the four-span building, which was partly burned and not the damage caused by the fire on the two-story annex building. In case of ambiguities.

loan with Eternal while the second sentence appears to require Philamlife to approve the insurance contract before the same can become effective. It must be remembered that an insurance contract is a contract of adhesion which must

Gulf case

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(III.)

What may be insured (sec.3) -Any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest, or create a liability against him, may be insured against, subject to the provisions of this chapter. The consent of the husband is not necessary for the validity of an insurance policy taken out by a married woman on her life or that of her children. Any minor of the age of eighteen years or more, may, notwithstanding such minority, contract for life, health and accident insurance, with any insurance company duly authorized to do business in the Philippines, provided the insurance is taken on his own life and the beneficiary appointed is the minor's estate or the minor's father, mother, husband, wife, child, brother or sister. The married woman or the minor herein allowed to take out an insurance policy may exercise all the rights and privileges of an owner under a policy. All rights, title and interest in the policy of insurance taken out by an original owner on the life or health of a minor shall automatically vest in the minor upon the death of the original owner, unless otherwise provided for in the policy. Sec. 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. Sec. 5. All kinds of insurance are subject to the provisions of this chapter so far as the provisions can apply



Parties to a contract (sec.6)

Every person, partnership, association, or corporation duly authorized to transact insurance business as elsewhere provided in this code, may be an insurer.

 7)

Public enemy may not be insured (sec

Anyone except a public enemy may be insured As in ordinary contracts, only persons who have the capacity to enter into a contract may be insured.

A public enemy- is a nation at war with the Philippines and includes every citizen or subject of such nation. A mob however numerous it may be, or robbers, whoever they may be, are never considered as a public enemy.

However, in the interest of justice and in the absence of specific provision in the insurance law, require that the premium paid by the respondent for the period covered by its policy from Dec. 11, 1941, should be returned.

B. Insurable Interest of mortgagor separate from the mortgagee ( sec 8 and 9, 10) –see note

Case: A corporation organized in the Philippines whose majority t\stockholders are German subjects became an enemy corporation upon the outbreak of war between the United States and Germany.

Filipinas Cia de Seguros v. Christern

Facts: On October 11, 1941, Respondent obtained from the petitioner fire policy. On February 27, 1942, During the Japanese military occupation the building was burned.

Held:

There is no question that majority of the stockholders of the respondent corporation were german subjects. This being so, we have to rule that said respondent became an enemy corporation upon the outbreak of the war between the United States and Germany.

The respondent having became an enemy corporation on Dec 10,1941, the insurance policy issued in its favor on October 1, 1941 by the petitioner had ceased to be valid and enforceable, and since the insurance goods were burned after December 1-0, 1941 and during the war, the respondent was not entitled to any indemnity under said policy from the petitioner.

(IV.)

Insurable interest

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Definition of insurable interest: 

3. Any act of the mortgagor, prior to the loss which would otherwise render the insurance null and void (e.g. the mortgagor violated the policy by storing inflammable materials in the insured property) still renders it null and void although the property is in the hands of the mortgagee and the proceeds are payable to the mortgagee

A person has an insurable interest in the subject matter insured where he has such relation or connection, or concern in it, that he will derive pecuniary benefit or advantage from its preservation and will suffer pecuniary loss or damage from its destruction, termination, or injury by the happening of the event insured against.

 Insurable interest of mortgagor separate from mortgagee (sec 8 and 9)

4. Any act which, under the contract of insurance Is to be performed by the mortgagor (example, the policy required a notice of proof of loss from the insured, like mortgagor) may be performed by the mortgagee with same effect

(-sec. 8, recognizes that both the mortgagor and the mortgagee have each a separate and distinct insurable interest in the mortgaged property and they may take out separate policies with the same or different insurance companies)  Extent of mortgagor’s (debtor) and mortgagee’s (creditor) insurable interest

5. In case of loss, the mortgagee is entitled to the proceeds to the extent of his credit, the remainder, if any, shall accrue to the mortgagor.

-Mortgagor, may insure the mortgaged property up to its full value -Mortgagee, only to the extent of the debt secured

6. Upon recovery by the mortgagee to the extent of his credit, the debt is extinguish and the mortgagor is released from his indebtedness.

 Insurance taken by mortgagor (debtor) -Mortgagor may take an insurance payable, to himself and to the mortgagee

a. If the mortgagor takes an insurance payable to himself or for his own benefit: only he can recover from the insurer but the mortgagee has a lien on the proceeds by virtue of the mortgagee

b. If the mortgagor takes an insurance the mortgagee or when the mortgagor assigns the policy taken by him to the mortgagee, unless the policy otherwise provides, the legal effects are: 1. Insurance is still deemed to be upon the interest of the mortgagor

2. Mortgagor does not cease to be a party of the original contract

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Insurance taken by mortgagee

A mortgagee insures his own interest in the mortgaged property without reference to the right of the mortgagor, legal effects are:

1. Mortgagee is entitled to the proceeds of the policy in case of loss, to the extent of his credit

2. If the proceeds are more than the total amount of the credit, mortgagor has no right to collect the balance

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3. Proceeds are equal to the total amount of the credit, mortgagee can no longer recover the mortgagor’s indebtedness , since the insurer is subrogated to the mortgagee’s rights

services, of which death or illness might delay or prevent the performance; and (d) Of any person upon whose life any estate or interest vested in him depends 

Sec. 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.

4. Proceeds are less than the total amount of the credit, mortgagee may still recover from the mortgagor for the deficiency

5. Upon payment, insurer is subrogated to the rights of the mortgagee against the mortgagor to the extent of the amount paid. The insurer can therefore collect the debt of the mortgagor to the mortgagee.

 Transfer of insurance with approval of insurer (sec 9)

Gen rule: mortgagor does not cease to be a party to the insurance contract and his acts still affect the policy

Exception:, under sec 9, If an insurer assents to the transfer of an insurance from a mortgagor to a mortgagee, and, at the time of his assent, imposes further obligation on the assignee, making a new contract with him, the act of the mortgagor cannot affect the rights of said assignee.

Designation of beneficiary

-Limitations and Disqualifications, a person may take a life insurance on his life payable to any person called the beneficiary even though said beneficiary is a stranger and has no insurable interest in insured’s life, unlike if you take an insurance policy on the life of another and assign yourself as beneficiary, you must have an insurable interest with the insured for public policy purposes.

-any person who is forbidden from receiving any donation under art. 739 cannot be named beneficiary of a life insurance policy by the person who cannot make any donation, the ff donations are void:

1. Between persons who were guilty of adultery and concubinage at the time of the donation 2. Bet. Persons found guilty of the same criminal offense 3. Made to a public officer or his wife, descendants or ascendants by reason of his office. Case:

 Sec. 10. Every person has an

insurable interest in the life and health: (a) Of himself, of his spouse and of his children; (b) Of any person on whom he depends wholly or in part for education or support, or in whom he has a pecuniary interest; (c) Of any person under a legal obligation to him for the payment of money, or respecting property or

1. Insular life assurance co v. Ebrado

Facts: Deceased husband ebrado was issued by petitioner insurance company a whole-life plan with a rider for accidental death benefits designated as revocable beneficiary his common law wife. Another woman who claimed to be the legal wife, file her claim as the widow of the deceased insured.

proceeds of said insurance if not otherwise disqualified. Held: A common law wife of the insured who has a legal wife is disqualified as beneficiary. Article 2012 of the civiI code states that, any person who is forbidden from receiving donations under art 739 cannot be named as beneficiary of a life insurance policy by the person who cannot make a donation to him. In this case, prohibition number 1 applies. It is not required that there be a previous conviction for adultery/concubinage to apply.

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Sec. 18. No contract or policy of insurance on property shall be enforceable except for the benefit of some person having an insurable interest in the property insured

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Only beneficiaries entitled to proceeds:

Case: 1. Heirs of maramag v. maramag

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In case of failure to designate a beneficiary or where such designation is void, the proceeds of the insurance will go to the estate of the insured.

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Beneficiary dies ahead of the insured As a rule insured has right to change it unless he has expressly waived such right:

1. If there is no such express waiver therefore the beneficiary does not have a vested interest in the policy. In this case, if the beneficiary dies ahead, the beneficiary’s estate or legal representatives derive no interest from him, and the right to the proceeds passes to the estate of the insured. 2. if the right to change the beneficiary has been expressly waived, said beneficiary has a vested interest in the policy and if he dies ahead of the insured, his representatives or heirs are entitled to the proceeds upon the death of the insured. (effects of irrevocable designation of beneficiaries)

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Forfeiture of Interest of the Beneficiary Sec. 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 which event, the nearest relative of the insured shall receive the

Legitimate family has no right to recover insurance proceeds from the designated beneficiary- the illegitimate family. No prohibition exist in naming as beneficiaries the children of the illicit relationships by the insured, the shares of the other wife will either be forfeited by the court for the violation of art. 739 or by the insurers themselves, must be awarded to the said illegitimate children or designated beneficiaries, to the exclusion of the petitioners. It is only in case where the insured failed to designate any beneficiary or when the designated ones were disqualified by law, that the insurance policy proceeds shall redound to the benefit of the estate of the insured.

 Distinction of insurable interest In life from property: Life Property Unlimited except Limited to the those taken by the actual value of the creditor on the life interest on the of the debtor property It is sufficient that Must exist both at insurable interest the time the exist at the time insurance takes the insurance effect and at the takes effect but time of loss not when the loss occurs Expectancy of the The expectancy benefit may be must be coupled sufficient even if with an existing there is no legal legal basis basis  Illustrations of what is insurable interest Sec. 14. An insurable interest in property may consist in: (a) An existing interest;

(b) An inchoate interest founded on an existing interest; or (c) An expectancy, coupled with an existing interest in that out of which the expectancy arises. Sec. 15. A carrier or depository of any kind has an insurable interest in a thing held by him as such, to the extent of his liability but not to exceed the value thereof.

(b) An inchoate interest founded on an existing interest; or (c) An expectancy, coupled with an existing interest in that out of which the expectancy arises. Private respondents interest is based on the perfected contract of sale. The perfected contract of sale between him and the shipper of the goods operates to vest in him an equitable title even before delivery or before he performed the conditions of the sale.

Sec. 16. A mere contingent or expectant interest in anything, not founded on an actual right to the thing, nor upon any valid contract for it, is not insurable. Sec. 17. The measure of an insurable interest in property is the extent to which the insure might be damnified by loss or injury thereof . Cases: 1. Filipino Merchants Insurance vs. Ca Facts: This is an action brought by the Choa Tick Seng the consignee of the shipment of fishmeal loaded on board the vessel and unloaded at the port of Manila and seeks to recover from the defendant Filipino merchants damages to said shipment which has been insured by the defendant insurance company.

2. Ong Lim Sing v. Feb leasing and finance corporation Facts: FEB Leasing and Finance Corporation (FEB) entered into a lease1[3] of equipment and motor vehicles with JVL Food Products (JVL). Under the contract, JVL was obliged to pay FEB an aggregate gross monthly rental. JVL defaulted in the payment of the monthly rentals. FEB filed a Complaint with the Regional Trial Court of Manila, docketed for sum of money, damages. JVL and Lim admitted the existence of the lease agreement but asserted that it is in reality a sale of equipment on installment basis, with FEB acting as the financier.JVL and Lim claimed that this intention was apparent from the fact that they were made to believe that when full payment was effected, a Deed of Sale will be executed by FEB as vendor in favor of JVL and Lim as vendees. FEB purportedly assured them that documenting the transaction as a lease agreement is just an industry practice and that the proper documentation would be. effected as soon as full payment for every item was made

Issue: RTC- sale whether or not private respondent cho tick seng as consignee of the goods in transit has an insurable interest.

CA- lease Issue and held:

Held: Yes, vendee or consignee or buyer of the goods in transit under an invoice, has an insurable interest in said goods. Sec. 13, defines insurable interest in property as 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. in principle, anyone has an insurable interest in property who derives a benefit from its existence or would suffer loss from its destruction whether he has or has not any title in, or lien upon or possession of the property. Insurance interest in property may consist in: a) An existing interest;

Whether or not a sale or lease. the subject lease agreement is a contract of adhesion, such a contract is not void per se.It is as binding as any ordinary contract. A party who enters into an adhesion contract is free to reject the stipulations entirely.2[22] If the terms thereof are accepted without objection, then the contract serves as the law between the parties. Validity of the lease. the validity of between FEB and JVL should be upheld. JVL entered into the lease contract with full knowledge of its terms and conditions. the parties are free to agree to such stipulations, clauses, terms, and conditions as they may want to include

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in a contract.As long as such agreements are not contrary to law, morals, good customs, public policy, or public order, they shall have the force of law between the parties. Whether petitioner as a lessee has an insurable interest over the subject matter or not. Stipulation in Section 143 of the lease contract, that the equipment shall be insured at the cost and expense of the lessee against loss, damage, or destruction from fire, theft, accident, or other insurable risk for the full term of the lease, is a binding and valid stipulation. Petitioner, as a lessee, has an insurable interest in the equipment and motor vehicles leased. Section 17 of the Insurance Code provides that the measure of an insurable interest in property is the extent to which the insured might be damnified by loss or injury thereof.It cannot be denied that JVL will be directly damnified in case of loss, damage, or destruction of any of the properties leased.

3. Guisano Cagayan vs. Insurance Company of North america Facts: Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue Jeans. Levi Strauss (Phils.) Inc. (LSPI) is the local distributor of products bearing trademarks owned by Levi Strauss & Co.. IMC and LSPI separately obtained from respondent fire insurance policies with book debt endorsements. The insurance policies provide for coverage on "book debts in connection with ready-made clothing materials which have been sold or delivered to various customers and dealers of the Insured anywhere in the Philippines. The policies defined book debts as the "unpaid account still appearing in the Book of Account of the Insured 45 days after the time of the loss covered under this Policy. Petitioner is a customer and dealer of the products of IMC and LSPI. On February 25, 1991, the Gaisano Superstore Complex in Cagayan de Oro City, owned by petitioner, was consumed by fire. Included in the items lost or destroyed in the fire were stocks of ready-made clothing materials sold and delivered by IMC and LSPI.

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respondent filed a complaint for damages against petitioner. It alleges that IMC and LSPI filed with respondent their claims under their respective fire insurance policies with book debt endorsements; that as of February 25, 1991, the unpaid accounts of petitioner on the sale and delivery of ready-made clothing materials with IMC was P2,119,205.00 while with LSPI it was P535,613.00; that respondent paid the claims of IMC and LSPI and, by virtue thereof, respondent was subrogated to their rights against petitioner; that respondent made several demands for payment upon petitioner but these went unheeded. RTC- merchandise remains the property of the vendor until the purchase price is fully paid", IMC and LSPI retained ownership of the delivered goods and must bear the loss. CA-set aside rtc. Issue: As to HOLDING THAT THE INSURANCE IN THE INSTANT CASE WAS ONE OVER CREDIT: when the words of a contract are plain and readily understood, there is no room for construction.22 In this case, the questioned insurance policies provide coverage for "book debts in connection with ready-made clothing materials which have been sold or delivered to various customers and dealers of the Insured anywhere in the Philippines."23 ; and defined book debts as the "unpaid account still appearing in the Book of Account of the Insured 45 days after the time of the loss covered under this Policy. Thus, what were insured against were the accounts of IMC and LSPI with petitioner which remained unpaid 45 days after the loss through fire, and not the loss or destruction of the goods delivered. W/n THE COURT OF APPEALS ERRED IN HOLDING THAT ALL RISK OVER THE SUBJECT GOODS IN THE INSTANT CASE HAD TRANSFERRED TO PETITIONER UPON DELIVERY THEREOF. The present case clearly falls under paragraph (1), Article 1504 of the Civil Code: ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk until the ownership therein is transferred to the buyer, but when the ownership therein is transferred to the buyer the goods are at the buyer's risk whether actual delivery has been made or not, except that: (1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance of the contract and the

ownership in the goods has been retained by the seller merely to secure performance by the buyer of his obligations under the contract, the goods are at the buyer's risk from the time of such delivery;

Thus, when the seller retains ownership only to insure that the buyer will pay its debt, the risk of loss is borne by the buyer.27 Accordingly, petitioner bears the risk of loss of the goods delivered. IMC and LSPI did not lose complete interest over the goods. They have an insurable interest until full payment of the value of the delivered goods. Unlike the civil law concept of res perit domino, where ownership is the basis for consideration of who bears the risk of loss, in property insurance, one's interest is not determined by concept of title, but whether insured has substantial economic interest in the property. See sec 13 and 14 Anyone has an insurable interest in property who derives a benefit from its existence or would suffer loss from its destruction.30 Indeed, a vendor or seller retains an insurable interest in the property sold so long as he has any interest therein, in other words, so long as he would suffer by its destruction, as where he has a vendor's lien.31 In this case, the insurable interest of IMC and LSPI pertain to the unpaid accounts appearing in their Books of Account 45 days after the time of the loss covered by the policies. W/n THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS AUTOMATIC SUBROGATION UNDER ART. 2207 OF THE CIVIL CODE IN FAVOR OF RESPONDENT This rule is based on the principle that the genus of a thing can never perish. Genus nunquan perit.36 An obligation to pay money is generic; therefore, it is not excused by fortuitous loss of any specific property of the debtor The subrogation receipt, by itself, is sufficient to establish not only the relationship of respondent as insurer and IMC as the insured, but also the amount paid to settle the insurance claim. The right of subrogation accrues simply upon payment by the insurance company of the insurance claim.41 Respondent's action against petitioner is squarely sanctioned by Article 2207 of the Civil Code which provides: Art. 2207. 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  when insurable interest in property must exist (sec 19) An interest in property insured must exist when the insurance takes effect, and when the loss occurs, but not exist in the meantime; and interest in the life or health of a person insured must exist when the insurance takes effect, but need not exist thereafter or when the loss occur  change of insurable interest, sec 20: Except in the cases specified in the next four sections, and in the cases of life, accident, and health insurance, a change of interest in any part of a thing insured unaccompanied by a corresponding change in interest in the insurance, suspends the insurance to an equivalent extent, until the interest in the thing and the interest in the insurance are vested in the same person.

Exceptions: Sec. 21. A change in interest in a thing insured, after the occurrence of an injury which results in a loss, does not affect the right of the insured to indemnity for the loss. Sec. 22. A change of interest in one or more several distinct things, separately insured by one policy, does not avoid the insurance as to the others. Sec. 23. A change on interest, by will or succession, on the death of the insured, does not avoid an insurance; and his interest in the insurance passes to the person taking his interest in the thing insured. Sec. 24. A transfer of interest by one of several partners, joint owners, or owners in common, who are jointly insured, to the others, does not avoid an insurance even though it has been agreed that the insurance shall cease upon an alienation of the thing insured.

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- reason for this provision is that concealment misleads or deceives the insurer into accepting the risk, or accepting it at the rate of premium agreed upon.

Sec. 46: see sec. 31 The materiality of a representation is determined by the same rules as the materiality of a concealment.

 Sec 28: Each party to an insurance contract must communicate to the other in good faith, all facts: a) which are within his knowledge b) which are material to the contract c.) which the other party has not the means of ascertaining; and d) as to which the party with the duty to communicate makes no warranty

V. Concealment and Misrepresentation

 Concealment and Misrepresentation entitles injured party to rescind (sec 27 in relation to sec 46)

Sec. 27: A concealment whether intentional or unintentional entitles the injured party to rescind a contract of insurance. (As amended by Batasang Pambansa Blg. 874

- in the case of saturnino v. Phim American life, it was ruled that in order to avoid a policy it is not necessary to show actual fraud on the part of the insured because a concealment…

-it is optional on the injured party to rescind the insurance contract by reason of concealment of not.

- Concealment requires knowledge of the fact concealed by the party charged with concealment. Such knowledge must be proven by the party claiming the existence of concealment. If the fact allegedly concealed is not within his knowledge, there is no concealment.

There must be knowledge of the fat concealed at the time the insurance takes effect for concealment to after the affectivity of the policy does not entitle the other party to rescind the contract.

- if the fact concealed is of such a nature that had the insurer known of it, it would not have accepted the risk or would gave demand a higher premium, or could have lad down different terms or at least would have made further inquiries before deciding to assume the risk, such fact is material and its non-disclosure entitles the other party to rescind the contract although the cause of the death or loss was entirely independent of such concealed fact.

- if the other party has the means of ascertaining the non-disclosed fact like public events under sec. 32 or when the insurer had very means to ascertain the nondisclosed fact the other facts already

communicated but neglects to make inquiries, the right to the information is waived under sec. 33.

1. Grepalife vs. Ca- concealment of hypertension Facts:

- there is no need to disclose facts on which the insured make a warranty, express or implied, because where a fact is covered by a warranty, it is superfluous to require disclosure.

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Sec. 29. An intentional and fraudulent omission, on the part of one insured, to communicate information of matters proving or tending to prove the falsity of a warranty, entitles the insurer to rescind.

- although facts or matters concerning which the insured has made a warranty need not be disclosed. The facts which tend to …must be disclosed.

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Sec. 30. Neither party to a contract of insurance is bound to communicate information of the matters following, except in answer to the inquiries of the other:

(a) Those which the other knows;

(b) Those which, in the exercise of ordinary care, the other ought to know, and of which the former has no reason to suppose him ignorant;

(c) Those of which the other waives communication;

A contract of group life insurance was executed between petitioner Great Pacific Life Assurance Corporation (hereinafter Grepalife) and Development Bank of the Philippines (hereinafter DBP). Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP. On November 11, 1983, Dr. Wilfredo Leuterio, a physician and a housing debtor of DBP applied for membership in the group life insurance plan. In an application form, Dr. Leuterio answered questions concerning his health condition as follows: 7. Have you ever had, or consulted, a physician for a heart condition, high blood pressure, cancer, diabetes, lung; kidney or stomach disorder or any other physical impairment? Answer: No. If so give details _____________. 8. Are you now, to the best of your knowledge, in good health? Answer: [x] Yes [ ] NO. 4 On November 15, 1983, Grepalife issued Certificate No. B-18558, as insurance coverage of Dr. Leuterio, to the extent of his DBP mortgage indebtedness amounting to eighty-six thousand, two hundred (P86,200.00) pesos.1âwphi1.nêt On August 6, 1984, Dr. Leuterio died due to "massive cerebral hemorrhage." Consequently, DBP submitted a death claim to Grepalife. Grepalife denied the claim alleging that Dr. Leuterio was not physically healthy when he applied for an insurance coverage on November 15, 1983. Grepalife insisted that Dr. Leuterio did not disclose he had been suffering from hypertension, which caused his death. Allegedly, such nondisclosure constituted concealment that justified the denial of the claim. Issue:

(d) Those which prove or tend to prove the existence of a risk excluded by a warranty, and which are not otherwise material; and

(e) Those which relate to a risk excepted from the policy and which are not otherwise material

CASES:

1. Whether the Court of Appeals erred in holding petitioner liable to DBP as beneficiary in a group life insurance contract from a complaint filed by the widow of the decedent/mortgagor? 2. Whether the Court of Appeals erred in not finding that Dr. Leuterio concealed that he had hypertension, which would vitiate the insurance contract? 3. Whether the Court of Appeals erred in holding Grepalife liable in the amount of eighty six thousand, two hundred

(P86,200.00) pesos without proof of the actual outstanding mortgage payable by the mortgagor to DBP. Held: 1). Petitioner alleges that the complaint was instituted by the widow of Dr. Leuterio, not the real party in interest, hence the trial court acquired no jurisdiction over the case. It argues that when the Court of Appeals affirmed the trial court's judgment, Grepalife was held liable to pay the proceeds of insurance contract in favor of DBP, the indispensable party who was not joined in the suit. To resolve the issue, we must consider the insurable interest in mortgaged properties and the parties to this type of contract. The rationale of a group insurance policy of mortgagors, otherwise known as the "mortgage redemption insurance," is a device for the protection of both the mortgagee and the mortgagor. On the part of the mortgagee, it has to enter into such form of contract so that in the event of the unexpected demise of the mortgagor during the subsistence of the mortgage contract, the proceeds from such insurance will be applied to the payment of the mortgage debt, thereby relieving the heirs of the mortgagor from paying the obligation. 7 In a similar vein, ample protection is given to the mortgagor under such a concept so that in the event of death; the mortgage obligation will be extinguished by the application of the insurance proceeds to the mortgage indebtedness. 8 Consequently, where the mortgagor pays the insurance premium under the group insurance policy, making the loss payable to the mortgagee, the insurance is on the mortgagor's interest, and the mortgagor continues to be a party to the contract. In this type of policy insurance, the mortgagee is simply an appointee of the insurance fund, such loss-payable clause does not make the mortgagee a party to the contract See sec 8. The insured private respondent did not cede to the mortgagee all his rights or interests in the insurance, the policy stating that: "In the event of the debtor's death before his indebtedness with the Creditor [DBP] shall have been fully paid, an amount to pay the outstanding indebtedness shall first be paid to the creditor and the balance of sum assured, if there is any, shall then be paid to the beneficiary/ies designated by the debtor." 10 When DBP submitted the insurance claim against petitioner, the latter denied payment thereof, interposing the defense of concealment committed by the insured. Thereafter, DBP collected the debt from the mortgagor and took the necessary action of foreclosure on the residential lot of private respondent. 11 In Gonzales La O vs.

Yek Tong Lin Fire & Marine Ins. Co. held:

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we

Insured, being the person with whom the contract was made, is primarily the proper person to bring suit thereon. * * * Subject to some exceptions, insured may thus sue, although the policy is taken wholly or in part for the benefit of another person named or unnamed, and although it is expressly made payable to another as his interest may appear or otherwise. * * * Although a policy issued to a mortgagor is taken out for the benefit of the mortgagee and is made payable to him, yet the mortgagor may sue thereon in his own name, especially where the mortgagee's interest is less than the full amount recoverable under the policy, And in volume 33, page 82, of the same work, we read the following: Insured may be regarded as the real party in interest, although he has assigned the policy for the purpose of collection, or has assigned as collateral security any judgment he may obtain. 13 And since a policy of insurance upon life or health may pass by transfer, will or succession to any person, whether he has an insurable interest or not, and such person may recover it whatever the insured might have recovered, 14 the widow of the decedent Dr. Leuterio may file the suit against the insurer, Grepalife. 2). The fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the contract. 18 Misrepresentation as a defense of the insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the insurer. 19 In the case at bar, the petitioner failed to clearly and satisfactorily establish its defense, and is therefore liable to pay the proceeds of the insurance. Petitioner's claim is without merit. A life insurance policy is a valued policy. 20 Unless the interest of a person insured is susceptible of exact pecuniary measurement, the measure of indemnity under a policy of insurance upon life or health is the sum fixed in the policy. . In private respondent's memorandum, she states that DBP foreclosed in 1995 their residential lot, in satisfaction of mortgagor's outstanding loan. Considering this supervening event, the insurance proceeds shall inure to the benefit of the heirs of the deceased person or his beneficiaries. Equity dictates that DBP should not unjustly enrich itself at the expense of another (Nemo cum alterius detrimenio protest). Hence, it cannot collect the insurance proceeds, after it already foreclosed on the mortgage. The

proceeds now rightly belong to Dr. Leuterio's heirs represented by his widow

(2) whether private respondent Ngo Hing concealed the state of health and physical condition of Helen Go, which rendered void

Petition denied. Held:

2. Grepalife vs. Ca- fact that insured is a mongoloid concealed Facts: March 14, 1957, private respondent Ngo Hing filed an application with the Great Pacific Life Assurance Company (hereinafter referred to as Pacific Life) for a twenty-year endownment policy in the amount of P50,000.00 on the life of his one-year old daughter Helen Go. Said respondent supplied the essential data which petitioner Lapulapu D. Mondragon, Branch Manager of the Pacific Life in Cebu City wrote on the corresponding form in his own handwriting . Mondragon finally type-wrote the data on the application form which was signed by private respondent Ngo Hing. The latter paid the annual premuim the sum of P1,077.75 going over to the Company, but he reatined the amount of P1,317.00 as his commission for being a duly authorized agebt of Pacific Life. Upon the payment of the insurance premuim, the binding deposit receipt was issued to private respondent Ngo Hing. Likewise, petitioner Mondragon handwrote at the bottom of the back page of the application form his strong recommendation for the approval of the insurance application. Then on April 30, 1957, Mondragon received a letter from Pacific Life disapproving the insurance application. The letter stated that the said life insurance application for 20-year endowment plan is not available for minors below seven years old, but Pacific Life can consider the same under the Juvenile Triple Action Plan, and advised that if the offer is acceptable, the Juvenile Non-Medical Declaration be sent to the company. The non-acceptance of the insurance plan by Pacific Life was allegedly not communicated by petitioner Mondragon to private respondent Ngo Hing. Instead, on May 6, 1957, Mondragon wrote back Pacific Life again strongly recommending the approval of the 20-year endowment insurance plan to children, pointing out that since 1954 the customers, especially the Chinese, were asking for such coverage. It was when things were in such state that on May 28, 1957 daughter died of influenza with complication of bronchopneumonia. Issue: (1) whether the binding deposit receipt constituted a temporary contract of the life insurance in question;

1.) At the back of Exhibit E are condition precedents required before a deposit is considered a BINDING RECEIPT. These conditions state that: A. If the Company or its agent, shan have received the premium deposit ... and the insurance application, ON or PRIOR to the date of medical examination ... said insurance shan be in force and in effect from the date of such medical examination, for such period as is covered by the deposit ..., PROVIDED the company shall be satisfied that on said date the applicant was insurable on standard rates under its rule for the amount of insurance and the kind of policy requested in the application. D. If the Company does not accept the application on standard rate for the amount of insurance and/or the kind of policy requested in the application but issue, or offers to issue a policy for a different plan and/or amount ..., the insurance shall not be in force and in effect until the applicant shall have accepted the policy as issued or offered by the Company and shall have paid the full premium thereof. If the applicant does not accept the policy, the deposit shall be refunded. E. If the applicant shall not have been insurable under Condition A above, and the Company declines to approve the application the insurance applied for shall not have been in force at any time and the sum paid be returned to the applicant upon the surrender of this receipt. (Emphasis Ours). The aforequoted provisions printed on Exhibit E show that the binding deposit receipt is intended to be merely a provisional or temporary insurance contract and only upon compliance of the following conditions: (1) that the company shall be satisfied that the applicant was insurable on standard rates; (2) that if the company does not accept the application and offers to issue a policy for a different plan, the insurance contract shall not be binding until the applicant accepts the policy offered; otherwise, the deposit shall be reftmded; and (3) that if the applicant is not ble according to the standard rates, and the company disapproves the application, the insurance applied for shall not be in force at any time, and the premium paid shall be returned to the applicant. Clearly implied from the aforesaid conditions is that the binding deposit receipt in question is merely an acknowledgment, on behalf of the company, that the latter's branch office had received from the applicant the

insurance premium and had accepted the application subject for processing by the insurance company; and that the latter will either approve or reject the same on the basis of whether or not the applicant is "insurable on standard rates." Since petitioner Pacific Life disapproved the insurance application of respondent Ngo Hing, the binding deposit receipt in question had never become in force at any time. As held by this Court, where an agreement is made between the applicant and the agent, no liability shall attach until the principal approves the risk and a receipt is given by the agent. The acceptance is merely conditional and is subordinated to the act of the company in approving or rejecting the application. Thus, in life insurance, a "binding slip" or "binding receipt" does not insure by itself (De Lim vs. Sun Life Assurance Company of Canada, 41 Phil. 264). In the absence of a meeting of the minds between petitioner Pacific Life and private respondent Ngo Hing over the 20-year endowment life insurance in the amount of P50,000.00 in favor of the latter's one-year old daughter, and with the non-compliance of the abovequoted conditions stated in the disputed binding deposit receipt, there could have been no insurance contract duly perfected between thenl Accordingly. a contract of insurance, like other contracts, must be assented to by both parties either in person or by their agents ... The contract, to be binding from the date of the application, must have been a completed contract, one that leaves nothing to be dione, nothing to be completed, nothing to be passed upon, or determined, before it shall take effect. There can be no contract of insurance unless the minds of the parties have met in agreement and this first place, there was no contract perfected between the parties who had no meeting of their minds 2.) this Court is of the firm belief that private respondent had deliberately concealed the state of health and piysical condition of his daughter Helen Go. Wher private regpondeit supplied the required essential data for the insurance application form, he was fully aware that his one-year old daughter is typically a mongoloid child. Such a congenital physical defect could never be ensconced nor disguished. Nonetheless, private respondent, in apparent bad faith, withheld the fact materal to the risk to be assumed by the insurance compary. As an insurance agent of Pacific Life, he ought to know, as he surely must have known. his duty and responsibility to such a material fact. Had he diamond said significant fact in the insurance application fom Pacific Life would have verified the same and would have had no choice but to disapprove the application outright.

The contract of insurance is one of perfect good faith uberrima fides meaning good faith, absolute and perfect candor or openness and honesty; the absence of any concealment or demotion, however slight [Black's Law Dictionary, 2nd Edition], not for the alone but equally so for the insurer (Field man's Insurance Co., Inc. vs. Vda de Songco, 25 SCRA 70). Concealment is a neglect to communicate that which a partY knows aDd Ought to communicate (Section 25, Act No. 2427). Whether intentional or unintentional the concealment entitles the insurer to rescind the contract of insurance (Section 26, Id.: Yu Pang Cheng vs. Court of Appeals, et al, 105 Phil 930; Satumino vs. Philippine American Life Insurance Company, 7 SCRA 316). Private respondent appears guilty thereof. We are thus constrained to hold that no insurance contract was perfected between the parties with the noncompliance of the conditions provided in the binding receipt, and concealment, as legally defined 3. Philamcare vs. Ca- no concealment present Facts: Ernani Trinos, deceased husband of respondent Julita Trinos, applied for a health care coverage with petitioner Philamcare Health Systems, Inc. In the standard application form, he answered no to the following question: Have you or any of your family members ever consulted or been treated for high blood pressure, heart trouble, diabetes, cancer, liver disease, asthma or peptic ulcer? (If Yes, give details).1 The application was approved for a period of one year from March 1, 1988 to March 1, 1989. Accordingly, he was issued Health Care Agreement No. P010194. Under the agreement, respondent’s husband was entitled to avail of hospitalization benefits, whether ordinary or emergency, listed therein. He was also entitled to avail of "outpatient benefits" such as annual physical examinations, preventive health care and other out-patient services. Upon the termination of the agreement, the same was extended for another year from March 1, 1989 to March 1, 1990, then from March 1, 1990 to June 1, 1990. The amount of coverage was increased to a maximum sum of P75,000.00 per disability.2 During the period of his coverage, Ernani suffered a heart attack and was confined at the Manila Medical Center (MMC) for one month beginning March 9, 1990. While her husband was in the hospital, respondent

tried to claim the benefits under the health care agreement. However, petitioner denied her claim saying that the Health Care Agreement was void. According to petitioner, there was a concealment regarding Ernani’s medical history. Doctors at the MMC allegedly discovered at the time of Ernani’s confinement that he was hypertensive, diabetic and asthmatic, contrary to his answer in the application form and eventually, respondent’s husband died. RTC- in favor of private respondents and Caaffirmed rtc Issue: Raising the primary argument that a health care agreement is not an insurance contract; hence the "incontestability clause" under the Insurance Code6 does not apply. Held: See sec 2(1), an insurance contract exists where the following elements occur: 1. The insured has an insurable interest; 2. The insured is subject to a risk of loss by the happening of the designated peril; 3. The insurer assumes the risk; 4. Such assumption of risk is part of a general scheme to distribute actual losses among a large group of persons bearing a similar risk; and 5. In consideration of the insurer’s promise, the insured pays a premium And see sec. 3 and sec. 10. 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.9 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. Petitioner cannot rely on the “invalidation of agreement”, failure to disclose intentional or unintentional shall automatically invalidate agreement. The answer assailed by petitioner was in response to the question relating to the medical history of the applicant. This largely depends on opinion rather than fact, especially coming from respondent’s husband who was not a medical doctor.

Where matters of opinion or judgment are called for, answers made in good faith and without intent to deceive will not avoid a policy even though they are untrue.14 Thus, (A)lthough false, a representation of the expectation, intention, belief, opinion, or judgment of the insured will not avoid the policy if there is no actual fraud in inducing the acceptance of the risk, or its acceptance at a lower rate of premium, and this is likewise the rule although the statement is material to the risk, if the statement is obviously of the foregoing character, since in such case the insurer is not justified in relying upon such statement, but is obligated to make further inquiry. There is a clear distinction between such a case and one in which the insured is fraudulently and intentionally states to be true, as a matter of expectation or belief, that which he then knows, to be actually untrue, or the impossibility of which is shown by the facts within his knowledge, since in such case the intent to deceive the insurer is obvious and amounts to actual fraud.15 (Underscoring ours) The fraudulent intent on the part of the insured must be established to warrant rescission of the insurance contract.16 Concealment as a defense for the health care provider or insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the provider or insurer. In any case, with or without the authority to investigate, petitioner is liable for claims made under the contract. Having assumed a responsibility under the agreement, petitioner is bound to answer the same to the extent agreed upon. In the end, the liability of the health care provider attaches once the member is hospitalized for the disease or injury covered by the agreement or whenever he avails of the covered benefits which he has prepaid. Under Section 27 of the Insurance Code, "a concealment entitles the injured party to rescind a contract of insurance." The right to rescind should be exercised previous to the commencement of an action on the contract.17 In this case, no rescission was made. Besides, the cancellation of health care agreements as in insurance policies require the concurrence of the following conditions: 1. Prior notice of cancellation to insured;

2. Notice must be based on the occurrence after effective date of the policy of one or more of the grounds mentioned; 3. Must be in writing, mailed or delivered to the insured at the address shown in the policy; 4. Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon request of insured, to furnish facts on which cancellation is based.18 None of the above pre-conditions was fulfilled in this case. When the terms of insurance contract contain limitations on liability, courts should construe them in such a way as to preclude the insurer from noncompliance with his obligation.19 Being a contract of adhesion, the terms of an insurance contract are to be construed strictly against the party which prepared the contract – the insurer. This is equally applicable to Health Care Agreements. The phraseology used in medical or hospital service contracts, such as the one at bar, must be liberally construed in favor of the subscriber, and if doubtful or reasonably susceptible of two interpretations the construction conferring coverage is to be adopted, and exclusionary clauses of doubtful import should be strictly construed against the provider Finally, petitioner alleges that respondent was not the legal wife of the deceased member considering that at the time of their marriage, the deceased was previously married to another woman who was still alive. The health care agreement is in the nature of a contract of indemnity. Hence, payment should be made to the party who incurred the expenses  Insured need not die of disease he failed to disclose

general causes which are open to his inquiry, equally with that of the other, and which may affect the political or material perils contemplated; and all general usages of trade. - insurer need not disclose public events such as that a nation is at war, laws political conditions..  33)

Waiver of Material Information (sec.

Sec. 33: The right to information of material facts may be waived, either by the terms of the insurance or by neglect to make inquiry as to such facts, where they are distinctly implied in other facts of which information is communicated - a party is not bound to disclose material facts the disclosure of which are waived: a) expressly, by the terms of the policy b.) impliedly, by neglect to make inquiries as to such facts which can be distinctly implied in the other facts already communicated Case: Ng Gan Zee vs. asian Crusader- insurer failed to conduct further inquiries on surgery disclosed by insured. Facts: Kwong nam secured a 2o-year old endowment insurance policy on his life from the respondent, kwong died of cancer of the liver with mestastasis. The alleged false statements given by Kwong Nam are as follows: operated on for a Tumor (mayoma) of the stomach. Operation was 2 years ago. Held:



Test of Materiality (Sec 31)

Sec. 31: Materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due, in forming his estimate of the disadvantages of the proposed contract, or in making his inquiries. - materiality is determined not by the vent but by the probable or reasonable influence of the facts on the judgment of the parties in entering into an insurance contract. 

Sec. 32. Each party to a contract of insurance is bound to know all the

Misrepresentation as a defense is an affirmative defense. The duty to establish such a defense by satisfactory and convincing evidence rests upon the defendant. The evidence before the court does not clear and satisfactorily establish that defense. Kwong nam had informed insurer’s medical examiner that the tumor for which he was operated on was “associated with ulcer of the stomach”. In the absence of evidence that the insured had sufficient medical knowledge as to enable him to distinguish between peptic ulcer and a tumor, his statement that said tumor was a associated with ulcer of stomach should be construed as an expression made in good faith of his belief as the nature of his ailment.

-

Sec 33, see. It has been held that where, “upon the face of the application, a question appears to be not answered at all or to be imperfectly answered, and the insurers issue a policy without any further inquiry, they waive the imperfection of the answer and render the omission to answer more fully immaterial. Sec. 34 Information of the nature or amount of the interest of one insured need not be communicated unless in answer to an inquiry, except as prescribed by section fifty-one. Gen rule on communication of insurable interest: The insured is not required to communicate the nature of the amount or extent of his insurable interest in the life or property insured to the insurer. Exception: a) when the insurer makes inquiry from the insured of the nature or amount of the latter’s insurable interest, whether in life or property insurance b) sec, 51, the insurance policy must specify, among others, “(e) the interest of the insured in property insured, if he is not the absolute owner thereof” - a trustee, mortgagee or a building contractor must communicate his particular insurable interest in the property insured even if no inquiry thereto is made by the insurer.



Sec. 35. Neither party to a contract of insurance is bound to communicate, even upon inquiry, information of his own judgment upon the matters in question

-Only material facts are required to be disclosed and not mere opinion, speculations, intention or expectation.

Representation- is an oral or written statement of a material fact, made by the insured to the insurer at the time of, or before the issuance of the policy to induce the latter to issue said policy.

Misrepresentation- or false representation in insurance is a statement of a material point or matter which is false and made by the insured to deceive the insurer into entering into an insurance contract.

Misrepresentation Active form of deceit because here the insured makes an oral or written false statement to induce the insurer to issue the policy Sc ruled that the deceit made by the insured as both a concealment and a false representation, use interchangeably

Concealment Passive form of deceit because the insured neglects of fails to disclose a material fact in securing the insurance  Sc ruled that Concealment of a material fact is equivalent to a false representation that such fact does not exist

Similarities: both entitle the injury party to rescind the contract which requires that: 1. require that the fact concealed or misrepresented must be a material fact 2. may be committed intentionally and unintentionally

 Sec. 38. The language of a representation is to be interpreted by the same rules as the language of contracts in general.

 Sec. 39. A representation as to the future is to be deemed a promise, unless it appears that it was merely a statement of belief or expectation.



Sec. 36. A representation may be oral or written. Kinds of Representation: 

37. A representation may be made at the time of, or before, issuance of the policy

1. affirmative, which is an affirmation as to the existence or non-existence of a fact when the contract begins Eg: affirmation in the policy by the insured that he is in good helth at the time of the contract I an affirmative representation

and the insurer still issues the policy, it is not rescissible anymore.

- however, after the insurance is effected as induced by the representation, it cannot anymore be altered or withdrawn. If the false representation is withdrawal afterwards, the contract remains rescissible at the option of the injured party.

2. Promissory, which is a promise by the insured concerning what I to happen during the existence of the insurance. Eg: a promise of the insured in the policy that he will install additional fire extinguishers in the building insured at a stipulated future date is a promissory representation.



Sec. 40. A representation cannot qualify an express provision in a contract of insurance, but it may qualify an implied warranty.

- if a policy expressly provides that al floors in the building insured have water sprinkler devices, a representation by the insured before the insurance takes effect that two of the floors did not have such sprinklers does not qualify the express provision in the contract. The insured cannot recover from the insurer. - a representation is a mere collateral inducement to a contract. It is not a part of the contract.

-under sec. 113, in every marine insurance a warranty is implied that the ship is seaworthy. A representation of the insured that the vessel’s communications facilities were out of order at the time policy was issued qualifies the implied warranty of seaworthiness. The insured can still recover from the insurer.

 Sec. 41. A representation may be altered or withdrawn before the insurance is effected, but not afterwards.

- a representation is allowed to be altered and withdrawn so long as the insurance has not been effected because the insurer has not yet been induced to issue the policy. If the misrepresentation is withdrawn or corrected before the insurance takes effect



Incontestability clause

Sec. 48. Whenever a right to rescind a contract of insurance is given to the insurer by any provision of this chapter, such right must be exercised previous to the commencement of an action on the contract.

After a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of two years from the date of its issue or of its last reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindible by reason of the fraudulent concealment or misrepresentation of the insured or his agent.

Gen rule: Sec. 48. Whenever a right to rescind a contract of insurance is given to the insurer by any provision of this chapter, such right must be exercised previous(before) to the commencement of an action on the contract.

Exception: Lack of insurable interest, non -payment of premiums, fraud of a vicious (cruel) type

A. when rescission may be exercised

1. where there is a right to rescind the insurance contract, such right must be exercised prior to the commencement of an action on the contract.

2. the insurer may rescind the contract even after the loss and filing of the claim provided it is done before the insured files an action against the insurer.

3. however, a defense to an action to recover insurance that the insurance was secured through concealment or misrepresentation is not in the nature of an action to rescind and hence not barred by the provision.

B. Incontestability in life insurance policy

- in life insurance , where the policy which is payable on the death of the insured has been in force during the lifetime of the insured for a period of two years from the date of issue or of its last reinstatement, the insurer cannot prove that the policy is void or rescissible by reason of concealment or misrepresentation.

-the incontestability of a life insurance policy under this section only refers to concealment and misrepresentation but does not bar the insurer to prove that the policy is void or rescissible on the ff grounds: a.) lack of insurable interest b.) non-payment of premiums c.) that the cause of death is an expected risk or d.) that the fraud committed was of a particularly vicious type as when the insured substituted himself with another during the medical examination or where the policy was taken in furtherance of a scheme to murder the insured.

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

Significance of policy: contents (sec. 50 and 51)

Sec. 50. The policy shall be in printed form which may contain blank spaces; and any word, phrase, clause, mark, sign, symbol, signature, number, or word necessary to complete the contract of insurance shall be written on the blank spaces provided therein. Any rider, clause, warranty or endorsement purporting to be part of the contract of insurance and which is pasted or attached to said policy is not binding on the insured, unless the descriptive title or name of the rider, clause, warranty or endorsement is also mentioned and written on the blank spaces provided in the policy. Unless applied for by the insured or owner, any rider, clause, warranty or endorsement issued after the original policy shall be countersigned by the insured or owner, which countersignature shall be taken as his agreement to the contents of such rider, clause, warranty or endorsement. Group insurance and group annuity policies, however, may be typewritten and need not be in printed form.

- if the rider, etc is pasted or attached to the original policy at the time it was issued, the signature of the insurance is not necessary to make it binding.

- if the rider, etc. is executed after the original policy was issued, it must be counter-signed by the insured to be binding unless said rider,etc. was applied for by the insured himself. VI. Policy

- Sec. 49. The written instrument in which a contract of insurance is set forth, is called a policy of insurance

- under art. 1332 CC, the obligation to how that the terms of the policy had been fully explained to the insured who is unable to understand the language of the contract, when fraud or mistake is alleged, devolves on the party seeking to enforce it.

- no application form, rider etc shall be attached to, printed or stamped upon such policy unless the form of such application, etc. has been approved by the insurance commission

- it is a well settled rule that in case repugnance exists between written and printed portions of a policy, the written portion prevails, and there can be no question that as far as nay inconsistency exist, the type “rider” prevails over the printed clause it covers.

-

Sec. 51. A policy of insurance must specify:

(a) The parties between whom the contract is made;

(b) The amount to be insured except in the cases of open or running policies;

(c) The premium, or if the insurance is of a character where the exact premium is only determinable upon the termination of the contract, a statement of the basis and rates upon which the final premium is to be determined;

Commissioner may promulgate rules and regulations governing such extensions for the purpose of preventing such violations and may by such rules and regulations dispense with the requirement of written approval by him in the case of extension in compliance with such rules and regulations.

Cover note- merely written memorandum of the most important terms of a preliminary contract of insurance, intended to give temporary protection pending the investigation of the risk by the insurer or until the issuance of a formal policy. It is also known as a “binding slip”, binding receipt or binder.

(d) The property or life insured;

- the insurance comm. May promulgate rules and regulations concerning such extensions and may dispense with the requirement of written approval by him of such extensions.

(e) The interest of the insured in property insured, if he is not the absolute owner thereof;

- pursuant to the authority granted by this section, insurance comm. Has promulgated the ff rules:

(f) The risks insured against; and

a.) a cover note is valid and binding for 60 days whether or not premium therefor has been paid,but it may be cancelled by either party upon at least 7 days notice to the other party

(g) The period during which the insurance is to continue. - incorrect spelling of the names of parties do not affect the policy. An error in the designation of the name of the insured in the absence of fraud does not invalidate the policy.



Cover notes ( Sec. 52) Sec. 52. Cover notes may be issued to bind insurance temporarily pending the issuance of the policy. Within sixty days after the issue of the cover note, a policy shall be issued in lieu thereof, including within its terms the identical insurance bound under the cover note and the premium therefor. Cover notes may be extended or renewed beyond such sixty days with the written approval of the Commissioner if he determines that such extension is not contrary to and is not for the purpose of violating any provisions of this Code. The

b) if the cover note is not so cancelled, a regular policy of insurance shall, within 60 days after the issuance of such cover note, be issued in lieu thereof, including within its terms the identical insurance bound under the cover note and the premium therefor. c.) a cover note may be extended beyond the 60 day period with the written approval of the insurance comm. Which approval however, may be dispensed with upon the certification of the president, v-pres or gen magr of the insurance company that the risk involved and the extension do not violate the insurance code or any circular ruling

d.) insurance companies may impose on cover notes a deposit premium equivalent to at least 25 % of the estimated premium of the intended insurance coverage but in no case less than 500.00.

-

Cases:

1. De lim v. Sun life, acknowledgement receipt not a cover note or binding receipts did not give rise to temporary insurance

Facts:

Luis Lim applied to sun life for a life insurance designated his wife as beneficiary. The first premium was paid by lim and upon payment of the company issued what was called a provisional policy. Lim died after the issuance of provisional policy but before the approval of the application by home office of the insurance company.

Held:

The clause in the application and the receipt given by the solicitor general, which are to be read together ,stipulate expressly that the insurance shall become effective only when the “application hall be approved and the policy duly signed by the secretary of the head office of the company and issued”. It constituted no agreement at all for preliminary or temporary insurance.

2. Pacific Timber export v. Ca- cover note not treated as a separate policy or cover note created temporary insurance

Held: The court upholds PTECs submission that the cover note was not without consideration. The fact that no separate premium was paid on the cover note before the loss insured against occurred, does not militate against the validity of PTECS contention, for no such premium could have been paid, since by the nature of the cover note, it did not contain, as all cover notes do not contain particulars of the shipment that would serve as a basis for the computation of the premiums. No separate premiums are intended or required to be pain on a cover note.

If the note is to be treated as a separate policy instead of integrating it to the regular policies subsequently issued, the purpose and function of the cover note would be set at naught or rendered meaningless, for it is in real sense a contract, not a mere application for insurance which is a mere offer.

The non=payment of premium on the cover note is therefore, no cause for the petitioner to lose what is due it as if there had been payment of premium, for nonpayment by it was not chargeable against its fault. Had all the logs been lost during the loading operations, but after the issuance of the cover note, liability on the note would have already arisen even before payment of premium.

Where a policy is delivered without requiring payment of the premium, the presumption is that a credit was intended and the policy is valid.

Facts:

Plaintiff secured temporary insurance from defendant insurance company for its exportation of board of feet of logs to be shipped to Japan. Defendant issued a cover note insuring said cargo. After the issuance of the cover note but before the issuance of said marine policies, some of the logs intended to be exported were lost during loading operations.

Issue: W/n the cover note was null and void for lack of valuable consideration.



Sec. 53. The insurance proceeds shall be applied exclusively to the proper interest of the person in whose name or for whose benefit it is made unless otherwise specified in the policy.



Sec. 54. When an insurance contract is executed with an agent or trustee as the insured, the fact that his principal or beneficiary is the real party in interest may be indicated by describing the insured as agent or trustee, or by other general words in the policy.

Kinds of Insurance Policies - if an agent or trustee secures an insurance in his name without indicating his principal, the agent is deemed to have take the insurance for his own benefit and interest and the principal has no right of action against the insurer.



Sec. 55. To render an insurance effected by one partner or part-owner, applicable to the interest of his copartners or other part-owners, it is necessary that the terms of the policy should be such as are applicable to the joint or common interest.

- if the co-partner takes an insurance in his name without indicating that said insurance applies also to the interest of the other co-partners , the insurance is deemed to be limited only to the individual share of the co-partner only.

 Sec. 56. When the description of the insured in a policy is so general that it may comprehend any person or any class of persons, only he who can show that it was intended to include him can claim the benefit of the policy.

 Sec. 57. A policy may be 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.

- the transfer of the property will not suspend the insurance and instead the insurance is deemed transfer together with the property. Exception to sec. 20.



Sec. 58. The mere transfer of a thing insured does not transfer the policy, but suspends it until the same person becomes the owner of both the policy and the thing insured.

1. Sec. 60. An open policy is one in which the value of the thing insured is not agreed upon, but is left to be ascertained in case of loss. 2. Sec. 61. A valued policy is one which expresses on its face an agreement that the thing insured shall be valued at a specific sum. 3. Sec. 62. A running policy is one which contemplates successive insurances, and which provides that the object of the policy may be from time to time defined, especially as to the subjects of insurance, by additional statements or indorsements. Valued policy Proof of the value of the thing after the loss is not necessary The parties have conclusively stipulated that the property insured is valued at a specific sum

Open Policy Upon loss, the insured must prove the value of the property insured The value of the property insured is not agreed upon but is left to be ascertained in case of loss.

- running policy, “floating policy”, is intended to provide indemnity for property which cannot be covered by specific insurance because of its frequent change in location and quantity. Usually issued on a constantly changing quantity of stocks-in-trade.  Agreement to limit the time to commence an action

Sec. 63. A condition, stipulation, or agreement in any policy of insurance, limiting the time for commencing an action thereunder to a period of less than one year from the time when the cause of action accrues, is void.

- cause of action accrues at the time the claim is rejected by the insurer. Actions may be filed in: a) regular courts of justice b) office of the insurance commissioner

 Sec. 59. A policy is either open,

c) Poea or dole

valued or running. - when the agreement is contrary to sec. 63 and therefore void or when no period to

bring the action has been stipulated, an insurance policy being a written contract, the insured may bring the action within 10 years (art 1144,NCC) from the time ten cause of action accrues.

Cases:

1. Eagle star v. chia Yu- period reckoned from happening of the loss or a stipulation that suit must be brought within one year from the happening of the loss cannot be given effect.

Facts:

Atkins shipped 14 bales of assorted underwear consigned to respondent in manila. The shipment was insured against all risk by Eagle. The vessel arrived at manila out of 14, 4 was missing and three of those delivered was damaged. Respondent claimed indemnity but was declined by carrier and afterwards the insurer.

Facts:

To guarantee the Asingan Farmer’s cooperation against loss on account of personal dishonesty, amounting to estafa or larceny of its sec-treas, ladines alpha insurance issued its bond with said ladines as principals and alpha insurance as solidary surety.

Asingan assigned its rights to agricultural credit cooperative and financing administration (ACCFA), with approval of the principal and the surety. During the affectivity of the bond ladines misappropriated some of the funds. ACCFA now claim against the insurer but their claim was denied, a suit was filed.

Issue: w/m the suit must be dismissed as it was filed more than one year made from the loss under the 8th condition of the bond.

Held:

Issue: W/N plaintiff’s action has prescribed.

Held: Plaintiff’s cause of action did not accrue until his claim was finally rejected by the insurance company. This is because before such final rejection, there was no real necessity for bringing suit. As the policy provides that the insured should file his claim, first with the carrier and then the insurer, he has a right to wait for his claim to be finally decided before going to court. The law does not encourage unnecessary litigation. The suit was filed within 12 months from that date, the action ahs not prescribed.

Note: a suit filed against the agent of the insurer is not a suit against the insurer which interrupts the prescriptive period.

A fidelity bond is in effect, in the nature of a contract of insurance against loss from misconduct, and is governed by the same principles of interpretation. The year for instituting action in court must reckoned from the time of Apelles’s refusal to comply with its bond; it cannot be counted from the creditors filing of the claim of loss, for that does not import that the surety company will refuse to pay. The 8th condition of the bond is null and void.

3. Sun Insurance v. Ca- the contention of the insured that the 1 year prescriptive period does not start to run until the petition for reconsideration on the rejection in the first instance had been resolved by the insurer is untenable.

Facts: 2. ACCFA v. Alpha- a condition that suit must be brought within one year from the time of making claim for the loss is void and action may be brought within 10 years.

Private respondent tan took from the plaintiff a property insurance policy to

cover his interest in the electrical supply store of his brother housed in a building.4 days after the issuance of the policy, the building was burned including the insured store. Upon claim, petitioner wrote denying the claim, tan wrote seeking for reconsideration and the same was denied.

Sec. 65. All notices of cancellation mentioned in the preceding section shall be in writing, mailed or delivered to the named insured at the address shown in the policy, and shall state (a) which of the grounds set forth in section sixty-four is relied upon and (b) that, upon written request of the named insured, the insurer will furnish the facts on which the cancellation is based. -Requisites for cancellation of policy

Held:

The insured’s cause of action or his right to file claim either in the insurance commission or in a court of competent jurisdiction commences from the time of the denial of his claim by the insurer, either expressly or impliedly. The rejection to should be construed as the rejection in the first instance.

 Cancellation of Policy ( 64 and 65)

Sec. 64. No policy of insurance other than life shall be cancelled by the insurer except upon prior notice thereof to the insured, and no notice of cancellation shall be effective unless it is based on the occurrence, after the effective date of the policy, of one or more of the following:

(a) non-payment of premium; (b) conviction of a crime arising out of acts increasing the hazard insured against; (c) discovery of fraud or material misrepresentation; (d) discovery of willful or reckless acts or omissions increasing the hazard insured against; (e) physical changes in the property insured which result in the property becoming uninsurable; or (f) a determination by the Commissioner that the continuation of the policy would violate or would place the insurer in violation of this Code.

1. a cancellation of an insurance policy other than life to be valid must have the ff requisites: a) there must be prior notice thereof to the insured b) said notice must be based on the grounds as provided by sec 64 and shall so state said grounds c) said notice must be in writing, mailed or delivered to the named insured at the address shown in the policy; and d) if requested in writing by the insured, the insurer must furnish the facts on which the cancellation is based. 2. if there is no prior notice of if the cancellation is not based on the grounds as provided by sec. 64, the cancellation shall be ineffective. 

Requisites for renewal of policy

1. an insurance policy other than life is renewed provided: a) the insurer does not mail or deliver to the insured at least 45 days before its expiry date a notice of its intention either: 1) not to renew the policy or 2) to condition its renewal upon reduction of limits or elimination of coverages; and b) payment of the premium due on the effective date of renewal.

Sec. 66. In case of insurance other than life, unless the insurer at least forty-five days in advance of the end of the policy period mails or delivers to the named insured at the address shown in the policy notice of its intention not to renew the policy or to condition its renewal upon reduction of limits or elimination of coverages, the named insured shall be entitled to renew the policy upon payment of the premium due on the effective date of the renewal. Any policy written for a term of less than one year shall be considered as if written for a term of one year. Any policy written for a term longer than one year or any policy with no fixed expiration date shall be considered as if written for successive policy periods or terms of one year.

VII. Warranties

- a statement or promise stated in the policy itself or incorporated therein by reference, whereby the insured expressly contracts as to the present or future existence of certain facts, circumstances, or conditions, the literal truth of which is essential to the validity of the contract of insurance

 Sec. 67. A warranty is either expressed or implied.



Sec. 68. A warranty may relate to the past, the present, the future, or to any or all of these.



Kinds of warranties

1) affirmative- the insured asserts the existence of a matter at or before the issuance of the policy

2) promissory- the insured promises or undertakes that certain matters shall exist or will be done or omitted after the policy takes effect

3) express- the assertion or promise is clearly set forth in the policy or incorporated therein by reference

4) Implied- the assertion or promise is not expressly set forth in the policy but because of the general tenor or of the terms of the policy or from the very nature of the insurance contract, a warranty is necessarily inferred or understood.



Warranty v. misrepresentation

Warranty A part of the contract Either expressly set forth in the policy

Misrepresentation Merely a collateral inducement thereto May be oral, or written in another

itself or incorporated therein by reference Must be strictly and literally performed Presumed material A breach of warranty is a breach of the contract itself



instrument



May only be substantially true Must be shown to be so Misrepresentation is a ground for rescinding the contract.

Sec. 73. When, before the time arrives for the performance of a warranty relating to the future, a loss insured against happens, or performance becomes unlawful at the place of the contract, or impossible, the omission to fulfill the warranty does not avoid the policy.

Gen rule: the non performance of a promissory warranty entitles the other party to rescind the contract

Sec. 69. No particular form of words is necessary to create a warranty.

Exceptions: omission to fulfill the promissory warranty does not avoid the policy when :

- the use of the word “warranty” is not necessary to establish a warranty. Whether a warranty is constituted or not depends upon the intention of the parties, the nature of the contract or the words used thereto.

1) a loss insured against happens, - in case doubt, the statement is presumed to be a mere representation and not a warranty.

2) performance becomes unlawful at the place of the contract 3) performance becomes impossible



Sec. 70. Without prejudice to section fifty-one, every express warranty, made at or before the execution of a policy, must be contained in the policy itself, or in another instrument signed by the insured and referred to in the policy as making a part of it. - it may also be contained in a rider. A rider is an part of the policy and hence, warranty contained in the rider is a part of the policy and hence, a warranty contained in the rider need not be signed by the insured unless such rider was issued after the original policy took effect.  Sec. 71. A statement in a policy of matter relating to the person or thing insured, or to the risk, as a fact, is an express warranty thereof. - Statements in the applications or medical examination are representations only and not warranties, if the application or medical examination is not incorporated in the policy or made a part of it by reference.  Sec. 72. A statement in a policy which imparts that it is intended to do or not to do a thing which materially affects the risk, is a warranty that such act or omission shall take place. - a promissory warranty is a statement in the policy that a thing which is material to the risk is intended to be done or not done after the policy takes effect.



Violations of warranties entitles the other party to rescind (sec. 74 to 76)

 Sec. 74. The violation of a material warranty, or other material provision of a policy, on the part of either party thereto, entitles the other to rescind

-the above rule is true even if the violation of the material warranty did not contribute to the loss

- in one case, the keeping of alcohol and varnish which was necessary for the preservation of furnitures in a salable condition does not violates the warranty prohibiting the storage of inflammable materials

- in another case, the warranty prohibiting the storage of hazardous or inflammable materials is not violated by a deposit in small quantities of such materials which was needed for daily use.

-in one case, it was ruled that gasoline was not specifically mentioned among the

prohibited articles listed in the so-called “hemp warranty”. The clause relied upon by the insurer speaks of “oil” and is ambiguous and uncertain. Besides, the gasoline kept by the insured was only incidental to his business, being no more than a customary 2 days’ supply for the five or six motors vehicles used for transporting the copra and hemp stored in the warehouse.

 Sec. 75. A policy may declare that a violation of specified provisions thereof shall avoid it, otherwise the breach of an immaterial provision does not avoid the policy.

Immaterial provision declared to be material avoids policy if violated

- the parties may agree that a violation of any provision of the policy, even if not material ,shall avoid it.

- by said stipulation, an immaterial provision in the policy is converted into a material provision

 Sec. 76. A breach of warranty without fraud merely exonerates an insurer from the time that it occurs, or where it is broken in its inception, prevents the policy from attaching to the risk.

Case:

1. Union Manufacturing co v. Phil Guaranty- duty to disclose existence of other policies/ violation of a material provision of the policy requiring notice of present or future co-insurers (74)

Facts:

Petitioner(UMC) obtained certain loans from the republic bank. To secure the payment thereof, Petitioner executed real and chattel mortgages on certain properties. Republic bank procured from the defendant phil guaranty, an insurance coverage on loss against fire over the properties of Petitioner.

A fire occurred in the premises of Petitioner, they now filed its claim with defendant which was denied by the defendant on the ground that it failed to disclose other insurances that company has applied for.

Issue: w/n republic bank can recover

Held: -General Rule: fraud is not essential in a breach of warranty. Under sec 74, a mere violation of a material warranty even without fraud entitles the other party to rescind.

-under this sec., a breach or warranty without fraud exonerates the insurer from the time that the breach occurs. If there is fraud, the policy is voided ab initio and the insured is not entitled to the return of the premium

- also, a breach of warranty without fraud exonerates the insurer where the warranty is broken in its inception thereby preventing the policy from attaching to the risk.

They cannot recover for violations of a material provision of the policy requiring notice of present or future co-insurers and it appearing that while the policy of the defendant was in full force and effect the Petitioner secured other fire insurance policies without the written consent of the defendant endorsed on the policy, both cannot recover from the same policy of the defendant because the same is null and void.

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VIII. Premium

- is the agreed price or consideration paid by the insured to the insurer for undertaking to indemnify the former against a specified peril



When must premium be paid:

Sec. 77. An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the peril insured against. Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid, except in the case of a life or an industrial life policy whenever the grace period provision applies

- in no premium is paid even if the thing insured is already exposed to the peril, the insurance contract is not effective and the insurer has no right to collect the premium.

By express provision of law, an insurance contract requires as one of its essential requisites the payment of the premium for the contract to be valid and binding.



-this section, the law establishes a legal fiction of payment. Sec. 78 should be interpreted as an exception to sec. 77.

Effect of non-payment Cases:

- no insurance policy is valid and binding unless and until the premium thereof has been paid, notwithstanding any agreement to the contrary. Hence, the non-payment of premium does not merely suspend but puts an end to an insurance contract.

1. Phil phoenix vs. woodworks- no partial payment

Gen rule: non-payment of premiums cannot be excused by an act of God, by sickness or incapacity of the insured, or by war, since the time of payment of premium is peculiarly of the essence of the contract.

Except: where the failure to pay was due to the wrongful conduct of the insurer as the act of the insurer or his agent in refusing the tender of a premium properly made, it will necessarily estop the insurer from claiming a forfeiture of the policy for non-payment of premium.



Effect of check payment - there was valid payment of premium even if check was encashed after the occurrence of the fire.



Effect of partial payment

- of the premium made the policy effective during the whole period of the policy.

-payment of the premium to the insurance agent or broker is payment to the insurance company



Sec. 78. An acknowledgment in a policy or contract of insurance or the receipt of premium is conclusive evidence of its payment, so far as to make the policy binding, notwithstanding any stipulation therein that (although the said policy said) it shall not be binding until the premium is actually paid.

2. UCPB vs. Masagana- non- payment of premiums: estoppels/ the supreme court ruled that an insurance policy, other than life, issued originally or on renewal, is not valid and binding until actual payment of the premium, and any agreement to the contrary is void- the parties may not agree expressly or impliedly on the extension of credit or time to pay the premium and consider the policy binding before actual payment. However, upon motion for reconsideration, the decision was reconsidered and set aside, stating that there are five exceptions to sec. 77.

-

4. Tibay vs. Ca- partial payment/ where the parties expressly stipulated that the policy is not in force until the premium has been fully paid, the payment of partial premium by the assured should not be considered the payment required by the law and the stipulation of the parties-rather, it must be taken in the concept of a deposit to be held in trust by the insurer until such time that the full amount has been tendered and duly receipt for 3. Phil phoenix vs. woodworks- partial payment of the premium made the policy effective during the whole period of the policy



Grace period in payment of premiums (sec 227, 228 and 230)

Sec. 227. In the case of individual life or endowment insurance, the policy shall contain in substance the following conditions: (a) A provision that the policyholder is entitled to a grace period either of thirty days or of one month within which the payment of any premium after the first may be made, subject at the option of the insurer to an interest charge not in excess of six per centum per annum for the number of days of grace elapsing before the payment of the premium, during which period of grace the policy shall continue in full force, but in case the policy becomes a claim during the said period of grace before the overdue premium is paid, the amount of such premium with interest may de deducted from the amount payable under the policy in settlement; (b) A provision that the policy shall be incontestable after it shall have been in force during the lifetime of the insured for a period of two years from its date of issue as shown in the policy, or date of approval of last reinstatement, except for nonpayment of premium and except for violation of the conditions of the policy relating to military or naval service in time of war; (c) A provision that the policy shall constitute the entire contract between the parties, but if the company desires to make the application a part of the contract it may do so provided a copy of such application shall be indorsed upon or attached to the policy when issued, and in such case the policy shall contain a provision that the policy and the application therefor shall constitute the entire contract between the parties; (d) A provision that if the age of the insured is considered in determining the premium and the benefits accruing under the policy, and the age of the insured has been misstated, the amount payable under the policy shall be such as the premium would have purchased at the correct age; (e) If the policy is participating, a provision that the company shall periodically ascertain and apportion any divisible surplus accruing on the policy under conditions specified therein; (f) A provision specifying the options to which the policyholder is entitled to in the event of default in a premium

payment after three full annual premiums shall have been paid. Such option shall consist of:

(1) A cash surrender value payable upon surrender of the policy which shall not be less than the reserve on the policy, the basis of which shall be indicated, for the then current policy year and any dividend additions thereto, reduced by a surrender charge which shall not be more than one-fifth of the entire reserve or two and one-half per centum of the amount insured and any dividend additions thereto; (2) One or more paid-up benefits on a plan or plans specified in the policy of such value as may be purchased by the cash surrender value; (g) A provision that at anytime after a cash surrender value is available under the policy and while the policy is in force, the company will advance, on proper assignment or pledge of the policy and on sole security thereof, a sum equal to, or at the option of the owner of the policy, less than the cash surrender value on the policy, at a specified rate of interest, not more than the maximum allowed by law, to be determined by the company from time to time, but not more often than once a year, subject to the approval of the Commissioner; and that the company will deduct from such loan value any existing indebtedness on the policy and any unpaid balance of the premium for the current policy year, and may collect interest in advance on the loan to the end of the current policy year, which provision may further provide that such loan may be deferred for not exceeding six months after the application therefor is made; (h) A table showing in figures cash surrender values and paid-up options available under the policy each year upon default in premium payments, during at least twenty years of the policy beginning with the year in which the values and options first become available, together with a provision that in the event of the failure of the policyholder to elect one of the said options within the time specified in the policy, one of said options shall automatically take effect and no policyholder shall ever forfeit his right to same by reason of his failure to so elect;

(i) In case the proceeds of a policy are payable in installments or as an annuity, a table showing the minimum amounts of the installments or annuity payments; (j) A provision that the policyholder shall be entitled to have the policy reinstated at any time within three years from the date of default of premium payment unless the cash surrender value has been duly paid, or the extension period has expired, upon production of evidence of insurability satisfactory to the company and upon payment of all overdue premiums and any indebtedness to the company upon said policy, with interest rate not exceeding that which would have been applicable to said premiums and indebtedness in the policy years prior to reinstatement. Any of the foregoing provisions or portions thereof not applicable to single premium or term policies shall to that extent not be incorporated therein; and any such policy may be issued and delivered in the Philippines which in the opinion of the Commissioner contains provisions on any one or more of the foregoing requirements more favorable to the policyholder than hereinbefore required. This section shall not apply to policies of group life or industrial life insurance.

b) date of approval of last reinstatement in case of reinstatement

- incontestability clause does not apply and the insurer can still claim:

a) for non-payment of premium b) for non-liability for violation by the insured of the conditions of the policy relating to military or naval service in time of war

3) policy as entire contract provision or policy and application as entire contract provision

- policy entire contract provision, where the policy ic constituted as the entire contract between the parties - policy and application as entire contract provision, where both the policy and the application for said policy are constituted as the entire contract between parties

4) misstatement of age provision

A. certain provisions to be contained in individual life or endowment insurance

1.) grace period

- the policy holder is entitled to a grace period to pay the premium, after payment of the first premium, of thirty days or one month from due date, during which period the policy is in full force

2) incontestability clause

- under this clause, the policy shall be incontestable after being in force for two years either from:

- if the age of the insured is misstated, the amount payable under the policy shall be such as the premium would have purchased at the correct age. The policy is not voided.

5) dividend option provision

-life insurance contracts may be “participating” or “non participating” at the choice of the policy holder. If it is “participating” the company shall periodically apportion any divisible surplus accruing on the policy and the amount given to the policy holder. The amount returned to the policy holder is called a “policy dividend”

- these dividends may either a) date of issue of the original policy

a) paid in cash b) applied to the next premium

c)retained with the company to accumulate interest at the option of the policy holder

b) any unpaid balance of the premium for the current policy year

6) policy surrender option provision c) interest in advance of the loan to the end of the current policy year - the policyholder who has paid three annual premiums but later defaults may have the following options:

-violation of this policy loan clause by the insurance company entitles the policyholder to rescind the contract

a) to secure the cash surrender value payable upon surrender of the policy 8) a table cash surrender values and paid-up options available b) instead of receiving cash, to have it applied to a paid –up cash , insurance for a reduced amount

c) instead of receiving cash, to have it applied to an extended term insurance

7) policy loan provision

- at any time after a cash surrender value becomes available, the policyholder is given the right or privilege to secure a loan from the insurance company, on proper assignment or pledge of the policy and on the sole security thereof

-the amount of the loan may be, at the option of the policyholder:

- the insurance policy is required to contain a table showing in figures the cash surrender values and paid-up options available under the policy each year upon default in premium payments

-it shall also contain a provision that if the policyholder fails to elect an option within the specified time, one of said options shall automatically take effect and no policyholder shall ever forfeit his right to the same by reason of his failure to elect

9) reinstatement clause

- the policy holder is entitled to have his policy reinstated at any time within 3 years from the default of premium payment under certain conditions

a) equal to the cash surrender value

b)less than the cash surrender value

- the insurance company may deduct or collect from such loan the ff:

a) any existing indebtedness of the insurance policy

Sec. 228. No policy of group life insurance shall be issued and delivered in the Philippines unless it contains in substance the following provisions, or provisions which in the opinion of the Commissioner are more favorable to the persons insured, or at least as favorable to the persons insured and more favorable to the policy-holders: (a) A provision that the policyholder is entitled to a grace period of either

thirty days or of one month for the payment of any premium due after the first, during which grace period the death benefit coverage shall continue in force, unless the policyholder shall have given the insurer written notice of discontinuance in advance of the date of discontinuance and in accordance with the terms of the policy. The policy may provide that the policyholder shall be liable for the payment of a pro rata premium for the time the policy is in force during such grace period; (b) A provision that the validity of the policy shall not be contested, except for non-payment of premiums after it has been in force for two years from its date of issue; and that no statement made by any insured under the policy relating to his insurability shall be used in contesting the validity of the insurance with respect to which such statement was made after such insurance has been in force prior to the contest for a period of two years during such person's lifetime nor unless contained in written instrument signed by him; (c) A provision that a copy of the application, if any, of the policyholder shall be attached to the policy when issued, that all statements made by the policyholder or by persons insured shall be deemed representations and not warranties, and that no statement made by any insured shall be used in any contest unless a copy of the instrument containing the statement is or has been furnished to such person or to his beneficiary; (d) A provision setting forth the conditions, if any, under which the insurer reserves the right to require a person eligible for insurance to furnish evidence of individual insurability satisfactory to the insurer as a condition to part or all of his coverage; (e) A provision specifying an equitable adjustment of premiums or of benefits or of both to be made in the event that the age of a person insured has been misstated, such provision to contain a clear statement of the method of adjustment to be used; (f) A provision that any sum becoming due by reason of death of the person insured shall be payable to the beneficiary designated by the insured, subject to the provisions of

the policy in the event that there is no designated beneficiary, as to all or any part of such sum, living at the death of the insured, and subject to any right reserved by the insurer in the policy and set forth in the certificate to pay at its option a part of such sum not exceeding five hundred pesos to any person appearing to the insurer to be equitably entitled thereto by reason of having incurred funeral or other expenses incident to the last illness or death of the person insured; (g) A provision that the insurer will issue to the policyholder for delivery to each person insured an individual certificate setting forth a statement as to the insurance protection to which he is entitled, to whom the insurance benefits are payable, and the rights set forth in paragraphs (h), (i) and (j) following; (h) A provision that if the insurance, or any portion of it, on a person covered under the policy ceases because of termination of employment or of membership in the class or classes eligible for coverage under the policy, such person shall be entitled to have issued to him by the insurer, without evidence of insurability, an individual policy of life insurance without disability or other supplementary benefits, provided application for the individual policy and payment of the first premium to the insurer shall be made within thirty days after such termination and provided further that:

(1) the individual policy shall be on any one of the forms, except term insurance, then customarily issued by the insurer at the age and for an amount not in excess of the coverage under the group policy; and (2) the premium on the individual policy shall be at the insurer's then customary rate applicable to the form and amount of the individual policy, to the class of risk to which such person then belongs, and to his age attained on the effective date of the individual policy.

(i) A provision that if the group policy terminates or is amended so as to terminate the insurance of any class of insured persons, every person insured thereunder at the date of

such termination whose insurance terminates and who has been so insured for five years prior to such termination date shall be entitled to have issued to him by the insurer an individual policy of life insurance subject to the same limitations as set forth in paragraph (h), except that the group policy may provide that the amount of such individual policy shall not exceed the smaller of (a) the amount of the person's life insurance protection ceasing less the amount of any life insurance for what he is or becomes eligible under any group policy issued or reinstated by the same or another reinsurer within thirty days after such termination, and (b) two thousand pesos; (j) A provision that if a person insured under the group policy dies during the thirty-day period within which he would have been entitled to an individual policy issued to him in accordance with (h) and (i) above and before such individual policy shall have become effective, the amount of life insurance which he would have been entitled to have issued to him as an individual policy shall be payable as a claim under the group policy whether or not application for the individual policy or the payment of the first premium has been made; (k) In the case of a policy issued to a creditor to insure debtors of such creditor, a provision that the insurer will furnish to the policyholder for delivery to each debtor insured under the policy a form which will contain a statement that the life of the debtor is insured under the policy and that any death benefit paid thereunder by reason of his death shall be applied to reduce or extinguish indebtedness. The provisions of paragraphs (f) to (j) shall not apply to policies issued to a creditor to insure his debtors. If a group life policy is on a plan of insurance other than term, it shall contain a non-forfeiture provision or provisions which in the opinion of the Commissioner is or are equitable to the insured or the policyholder: Provided, That nothing herein contained shall be so construed as to require group life policies to contain the same non-forfeiture provisions as are required of individual life policies. A. group life insurance - is one where a a specified number of persons usually the employees of a particular company, are insured under a single contract, as a low cost mass protection insurance. There is usually no medical examination made of the persons insured. they pay a uniform premium, usually deducted from their salaries, and the

death of any member will give rise to the insurer’s liability to pay the beneficiary of the particular deceased.

Sec. 229. The term "industrial life insurance" as used in this Code shall mean that form of life insurance under which the premiums are payable either monthly or oftener, if the face amount of insurance provided in any policy is not more than five hundred times that of the current statutory minimum daily wage in the City of Manila, and if the words "industrial policy" are printed upon the policy as part of the descriptive matter. An industrial life policy shall not lapse for non-payment of premium if such nonpayment was due to the failure of the company to send its representative or agent to the insured at the residence of the insured or at some other place indicated by him for the purpose of collecting such premium: Provided, That the provisions of this paragraph shall not apply when the premium on the policy remains unpaid for a period of three months or twelve weeks after the grace period has expired. Sec. 230. In the case of industrial life insurance, the policy shall contain in substance the following provisions: (a) A provision that the insured is entitled to a grace period of four weeks within which the payment of any premium after the first may be made, except that where premiums are payable monthly, the period of grace shall be either one month or thirty days; and that during the period of grace, the policy shall continue in full force, but if during such grace period the policy becomes a claim, then any overdue and unpaid premiums may be deducted from any amount payable under the policy in settlement; (b) A provision that the policy shall be incontestable after it has been in force during the lifetime of the insured for a specified period, not more than two years from its date of issue, except for non-payment of premiums and except for violation of the conditions of the policy relating to naval or military service, or services auxiliary thereto, and except as to provisions relating to benefits in the event of disability as defined in the policy, and those granting additional insurance specifically against death by accident or by accidental means, or to additional insurance against loss of, or loss of use of, specific members of the body;

(c) A provision that the policy shall constitute the entire contract between the parties, or if a copy of the application is endorsed upon and attached to the policy when issued, a provision that the policy and the application therefor shall constitute the entire contract between the parties, and in the latter case, a provision that all statements made by the insured shall, in the absence of fraud, be deemed representations and not warranties; (d) A provision that if the age of the person insured, or the age of any person, considered in determining the premium, or the benefits accruing under the policy, has been misstated, any amount payable or benefit accruing under the policy shall be such as the premium paid would have purchased at the correct age; (e) A provision that if the policy is a participating policy, the company shall periodically ascertain and apportion any divisible surplus accruing on the policy under the conditions specified therein; (f) A provision that in the event of default in premium payments after three full years' premiums have been paid, the policy shall be converted into a stipulated form of insurance, and that in the event of default in premium payments after five full years' premiums have been paid, a specified cash surrender value shall be available, in lieu of the stipulated form of insurance, at the option of the policyholder. The net value of such stipulated form of insurance and the amount of such cash value shall not be less than the reserve on the policy and dividend additions thereto, if any, at the end of the last completed policy year for which premiums shall have been paid (the policy to specify the mortality table, rate of interest and method of valuation adopted to compute such reserve), exclusive of any reserve on disability benefits and accidental death benefits, less an amount not to exceed two and onehalf per centum of the maximum amount insured by the policy and dividend additions thereto, if any, at the end of the last completed policy year for which premiums shall have been paid (the policy to specify the mortality table, rate of interest and method of valuation adopted to compute such reserve), exclusive of any reserve on disability benefits and accidental death benefits, less an amount not to exceed two and onehalf per centum of the maximum amount insured by the policy and dividend additions thereto, if any,

when the issue age is under ten years, and less an amount not to exceed two and one-half per centum of the current amount insured by the policy and dividend additions thereto, if any, if the issue age is ten years or older, and less any existing indebtedness to the company on or secured by the policy; (g) A provision that the policy may be surrendered to the company at its home office within a period of not less than sixty days after the due date of a premium in default for the specified cash value, provided that the insurer may defer payment for not more than six months after the application therefor is made; (h) A table that shows in figures the non-forfeiture benefits available under the policy every year upon default in payment of premiums during at least the first twenty years of the policy, such table to begin with the year in which such values become available, and a provision that the company will furnish upon request an extension of such table beyond the year shown in the policy; (i) A provision that specifies which one of the stipulated forms of insurance provided for under the provision of paragraph (f) of this section shall take effect in the event of the insured's failure, within sixty days from the due date of the premium in default, to notify the insurer in writing as to which one of such forms he has selected; (j) A provision that the policy may be reinstated at any time within two years from the due date of the premium in default unless the cash surrender value has been paid or the period of extended term insurance expired, upon production of evidence of insurability satisfactory to the company and payment of arrears of premiums with interest at a rate not exceeding six per centum per annum payable annually; (k) A provision that when a policy shall become a claim by death of the insured, settlement shall be made upon receipt of due proof of death, or not later than two months after receipt of such proof; (l) A title on the face and on the back of the policy correctly describing its form;

(m) A space on the front or the back of the policy for the name of the beneficiary designated by the insured with a reservation of the insured's right to designate or change the beneficiary after the issuance of the policy. The policy may also provide that no designation or change of beneficiary shall be binding on the insurer until endorsed on the policy by the insurer, and that the insurer may refuse to endorse the name of any proposed beneficiary who does not appear to the insurer to have an insurable interest in the life of the insured. Such policy may also contain a provision that if the beneficiary designated in the policy does not surrender the policy with due proof of death within the period stated in the policy, which shall not be less than thirty days after the death of the insured, or if the beneficiary is the estate of the insured, or is a minor, or dies before the insured, or is not legally competent to give valid release, then the insurer may make any payment thereunder to the executor or administrator of the insured, or to any of the insured's relatives by blood or legal adoption or connections by marriage or to any person appearing to the insurer to be equitably entitled thereto by reason of having incurred expense for the maintenance, medical attention or burial of the insured; and (n) A provision that when an industrial life insurance policy is issued providing for accidental or health benefits, or both, in addition to life insurance, the foregoing provisions shall apply only to the life insurance portion of the policy. Any of the foregoing provisions or portions thereof not applicable to non-participating or term policies shall to that extent not be incorporated therein. The foregoing provisions shall not apply to policies issued or granted pursuant to the non-forfeiture provisions prescribed in provisions of paragraphs (f) and (i) of this section, nor shall provisions of paragraphs (f), (g), (h), and (i) hereof be required in term insurance of twenty years or less but such term policies shall specify the mortality table, rate of interest, and method of computing reserves.

 Instances where insured is entitled to return of premiums paid (sec. 79-82)

 Sec. 79. A person insured is entitled to a return of premium, as follows:

(a) To the whole premium if no part of his interest in the thing insured be exposed to any of the perils insured against; (b) Where the insurance is made for a definite period of time and the insured surrenders his policy, to such portion of the premium as corresponds with the unexpired time, at a pro rata rate, unless a short period rate has been agreed upon and appears on the face of the policy, after deducting from the whole premium any claim for loss or damage under the policy which has previously accrued; Provided, That no holder of a life insurance policy may avail himself of the privileges of this paragraph without sufficient cause as otherwise provided by law

 Sec. 80. If a peril insured against has existed, and the insurer has been liable for any period, however short, the insured is not entitled to return of premiums, so far as that particular risk is concerned.

 Sec. 81. A person insured is entitled to return of the premium when the contract is voidable, on account of fraud or misrepresentation of the insurer, or of his agent, or on account of facts, the existence of which the insured was ignorant without his fault; or when by any default of the insured other than actual fraud, the insurer never incurred any liability under the policy.

 Sec. 82. In case of an over-insurance by several insurers, the insured is entitled to a ratable return of the premium, proportioned to the amount by which the aggregate sum insured in all the policies exceeds the insurable value of the thing at risk. - When the insured is entitled to a return of premiums paid insured is entitled to recover premiums already made in the ff instances:

1) when no part of the interest of the thing insured has been exposed to any of the perils insured against

-the assumption of risk is one of the essential elements of an insurance contract. If there is no assumption of risk because the thing insured was not

exposed to the peril insured against, no valid insurance contract was effected and the premium may be recovered.

ex: when a vessel in insured for a certain voyage and said voyage did not proceed, the insured is entitled to a return of the premium.

-where the risk in entire and the contract is indivisible, the insured is not entitled to a return of the premium if the insurer was not exposed to the peril for any period, however short

ex: x insured his cargo from manila to tokypo japan. The vessel with the cargo left manila and 7 days away from Tokyo, x surrendered the policy. X cannot recover the premium because the risk was entire and indivisible and the insurer had been exposed to the risk already.

2) where the insurance is made for a definite period of time and the insured surrenders his policy before the expiration of that period

- where the insurance is made for a definite period of time and the insured surrenders his policy, he can recover a portion of the premium as corresponds with the unexpired time

Ex: x pays P 1,200 as premium for one year for a fire policy on his building. After the lapse of 6 months, x surrenders the policy. X is entitled to a return of p600 from the premium paid, corresponding to the unexpired portion of 6 months - the rule does not apply where:

for specified short times or premium at short time basis. When said short period rate is agreed upon, the amount recoverable upon surrender will not be the amount corresponding to the unexpired period, but only the balance after deducting the percentage to be retained by the insurer as stated in the short rate table.

- life insurance policy is a indivisible contract and hence the insured cannot recover the premiums paid. However, he is entitled to receive the “cash surrender value” of his policy after three full annual premiums shall have been paid.

3) where the contract is voidable on account of the fraud or misrepresentation of the insurer or of his agent

4) when the contract is voidable on account of facts, the existence of which the insured was ignorant of without his fault

- when at the time the insurance is taken the insured, who was ignorant of the facts, did not have insurable interest in the thing insured, the insured is entitled to a return of the premium

5) when by any default of the insured other than actual fraud, the insurer never incurred any liability under the policy; and

- x insured his vessel for a trip to Japan and paid the premium in advance. The vessel was destroyed before the trip. X is entitled to recover the premium paid.

a) the insurance is not for definite period b) a short period rate has been upon; or

agreed

c) the policy is a life insurance

policy

- short period rates are those usually found in a table of figures in the policy stipulating the amount or rate of premium

-however, the insured is not entitled to recover the premium f the policy is annulled by reason of the fraud or misrepresentation of the insured.

6) in case of an over-insurance by several insurers

- in case of over-insurance, ie: an insurance in excess of the amount of the insurable interest of the insured, by several insurers, the insured is entitled to a ratable return of the premium , proportioned to the amount by which the aggregate sum insured n all the policies exceeds the insurable value of the thing at risk.

use, repair, or construction of any vessel, craft or instrumentality in use of ocean or inland waterways, including liability of the insured for personal injury, illness or death or for loss of or damage to the property of another person.

XII. Marine Insurance

 Sec. 99. Marine Insurance includes: (1) Insurance against loss of or damage to: (a) Vessels, craft, aircraft, vehicles, goods, freights, cargoes, merchandise, effects, disbursements, profits, moneys, securities, choses in action, evidences of debts, valuable papers, bottomry, and respondentia interests and all other kinds 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, transhipment, or reshipment incident thereto, including war risks, marine builder's risks, and all personal property floater risks; (b) Person or property in connection with or appertaining to a marine, inland marine, transit or transportation insurance, including liability for loss of or damage arising out of or in connection with the construction, repair, operation, maintenance or use of the subject matter of such insurance (but not including life insurance or surety bonds nor insurance against loss by reason of bodily injury to any person arising out of ownership, maintenance, or use of automobiles); (c) Precious stones, jewels, jewelry, precious metals, whether in course of transportation or otherwise; (d) Bridges, tunnels and other instrumentalities of transportation and communication (excluding buildings, their furniture and furnishings, fixed contents and supplies held in storage); piers, wharves, docks and slips, and other aids to navigation and transportation, including dry docks and marine railways, dams and appurtenant facilities for the control of waterways. (2) "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,

1.) “marine insurance”

- is defined by enumerating what matters it includes

-in the previous insurance act, it was defined as insurance against risk connected with navigation to which a ship or cargo may be exposed during a certain voyage.

2) marine insurance under the insurance code covers not only property exposed to risk of marine navigation but also those which are exposed to risk not connected with marine navigation such as insurance against loss or damage to

-Aircraft -goods while being assembled, packed, crated, baled, compressed or similarly prepared for shipment or while awaiting shipment,, not yet in the course of transportation - Precious stones, jewels, jewelry, precious metals, whether in course of transportation or otherwise - Bridges, tunnels and other instrumentalities of transportation and communication



Property covered

- any property or interest enumerated in this section

- term “goods and merchandise” in a marine policy includes all articles which are carried on the ship for commercial purposes. They do not include the clothing of the passengers

of the crew unless shipped as part of the cargo, nof food and other provisions intended for the consumption of the passengers, unless these are expressly included in the policy

legal process such as a lawsuit on ownership and possession of the goods

-rusting of a cargo of steel pipes in the course of a voyage is a peril of the sea - freightage- signified all the benefits derived by the owner, either from the chartering of the ship for its employment for the carriage of his own goods or those of others. It will not be covered by the policy unless expressly indicated.

Case:

Cathay Insurance co V. CA 

Risk insured against

-insurer is liable for all losses proximately caused by the prerils covered by the marine policy

- these risk not only perils of the sea but also fire, enemies pirates, thieves, jettison, suprisals, takings at sea, arrest, restraints, and detainments of all kings, princess, and people of what nation, condition or quality so ever, barratry of the master and mariners and of all other perils, losses and misfortunes, that have or shall come t the hurt, detriment, or damage of the said goods and merchandise, ship or any part thereof. 

Perils of the ship

- fire may not be considered a natural disaster since it almost arises from some act of man. - losses or damages resulting from A) natural and inevitable action of the sea b) ordinary wear and tear of a ship 

“Perils of the sea”

c) negligent failure of the ship’s owner to provide the vessel with proper equipment to convey the cargo under ordinary conditions

- those casualties due to the violent action of the winds and waves

- shipwreck, foundering, stranding, collision, and every specie of damage done to the ship or goods at sea by the violent action of the winds and waves

- if perils of the ship are not expressly included in the policy, the insurer is not liable for a loss caused by a peril of the ship

 -includes not only arrest caused by political acts or a seizing state but also by ordinary

Inchmaree clause- provicion in the policy that the insurance shall cover loss or damage to the hull or

machinery through negligence of the master, charters, mariners, engineers or pilots or thoruhg explosions, bursting of boilers, breakage of shafts or through any latent defect in the hull or machinery not resulting from want of due diligence

been chartered by one who covenants to pay him its value in case of loss: Provided, That in this case the insurer shall be liable for only that part of the loss which the insured cannot recover from the charterer. 1) Insurable interest of the shipowner in the vessel



All risk clause This insurable interest continues even if:

-a provision of the marine insurance policy creates a special type of insurance which extends coverage to risk not usually contemplated and avoids putting upon the insured the burden of establishing that the loss was due to the peril falling within the policy’s coverage.

•

Other risk

1) Barratry- is a willful act of the master or crew in pursuance of some fraudulent or unlawful purpose, without the consent of the owner, and to the prejudice of his interest.

Ex. Burning of the ship, violation of revenue laws subjecting the ship to penalties or unlawfully selling the cargo

2) “takings at sea, arrest, restraints, and detainments of all kings, princess, and people” Means extraordinary acts of sovereign authority in times of war or under other unusual international conditions like blockades and embargoes



Insurable interest of the ship owner, cargo owner, and charterer (sec 100-106)

A) the vessel has been chartered by one who covenenats to pay shipowner the vessels’ value in case of loss B) shipowner has mortgaged the vessel to another -if the vessel is chartered and the charterer covenants to pay the owner in case of loss, the insurer shall be liable for only the part of the loss which the insured cannot recover from the charterer.

 2) Insurable interest of the charterer -to the extent that he is liable to be damnified by its loss Sec. 101. The insurable interest of the owner of the ship hypothecated by bottomry is only the excess of its value over the amount secured by bottomry. “a loan on bottomry”- a loan which is payable only if the vessel given as security for said loan arrives safely at port fro contemplated voyage “respondentia loan”- a loan which is payable only upon the safe arrival in a port of the gods given as security 1) insurable interest of the shipowner When a vessel is hypothecated by way of bottomry, the owner has an insubale interest only in th excess of the vessel’s value over the amount of the bottomry loan. This is because when the vessel bottomed is lost, the owner need not pay the loan and is therefore benefited to the extent of the amount of the loan obtained and the loss he actually suffers is only the difference between the actual value of the vessel and the bottomry loan. 2) insurable interest of the lender on bottomry

INSURABLE INTEREST Sec. 100. The owner of a ship has in all cases an insurable interest in it, even when it has

As security to the extent of the loan

Sec. 102. Freightage, in the sense of a policy of marine insurance, signifies all the benefits derived by the owner, either from the chartering of the ship or its employment for the carriage of his own goods or those of others. Sec. 103. The owner of a ship has an insurable interest in expected freightage which according to the ordinary and probable course of things he would have earned but for the intervention of a peril insured against or other peril incident to the voyage. A. insurable interest in a freightage 1. the shipowner may insured expected freightage if there is a risk of not being able to collect the same by the happening of the peril insured against 2. however, where freight is payable whether the vessel is lost or not, the shipowner has no insurable interest in such freight Sec. 104. The interest mentioned in the last section exists, in case of a charter party, when the ship has broken ground on the chartered voyage. If a price is to be paid for the carriage of goods it exists when they are actually on board, or there is some contract for putting them on board, and both ship and goods are ready for the specified voyage. 1. in case the vessel is chartered, the shipowner’s insurable interest in expected freightage exist from the time the ship has broken ground on the chartered voyage.

Example: see the book 

Concealment and Misrepresentation; not necessary that the loss be a consequence of the matter concealed (sec. 107)

CONCEALMENT Sec. 107. In marine insurance each party is bound to communicate, in addition to what is required by section twenty-eight, all the information which he possesses, material to the risk, except such as is mentioned in Section thirty, and to state the exact and whole truth in relation to all matters that he represents, or upon inquiry discloses or assumes to disclose. 1) the rules on concealment in marine insurance are stricter than that of ordinary insurance. To constitute concealment in marine insurance, it is sufficient that the insured is in possession of the material fact concealed although he may not aware of it, which is a requirement in concealment in ordinary insurance. 2) ex: if the agent failed to notify his principal of the loss of a cargo and the latter after the loss but ignorant thereof, secured insurance “lost or not” on the venture, such insurance will be void on the ground of concealment. Sec. 108. In marine insurance, information of the belief or expectation of a third person, in reference to a material fact, is material.

2. in case the vessel is employed for the carriage of goods without a charter party, the shipowner’s insurable interest in expected freightage , exist when the goods are actually on board , or there is some contract putting them on board and both vessel and goods are ready for the specified voyage.

Sec. 109. A person insured by a contract of marine insurance is presumed to have knowledge, at the time of insuring, of a prior loss, if the information might possibly have reached him in the usual mode of transmission and at the usual rate of communication.

Sec. 105. One who has an interest in the thing from which profits are expected to proceed has an insurable interest in the profits.

Sec. 110. A concealment in a marine insurance, in respect to any of the following matters, does not vitiate the entire contract, but merely exonerates the insurer from a loss resulting from the risk concealed:

-I.I on expected profits

(a) The national character of the insured;

-example:

(b) The liability of the thing insured to capture and detention;

The owner of a cargo or merchandise transported by a vessel has an insurable interest not only on the value of the merchandise but also on the expected profits from the future sale of the merchandise which may be adversely affected by the perils of the sea. Sec. 106. The charterer of a ship has an insurable interest in it, to the extent that he is liable to be damnified by its loss.

(c) The liability to seizure from breach of foreign laws of trade; (d) The want of necessary documents; (e) The use of false and simulated papers.

REPRESENTATION

 Sec. 111. If a representation by

a person insured by a contract of marine insurance, 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 the entire contract.

Sec. 112. The eventual falsity of a representation as to expectation does not, in the absence of fraud, avoid a contract of marine insurance 

Implied warranties

Sec. 113. In every marine insurance upon a ship or freight, or freightage, or upon any thing which is the subject of marine insurance, a warranty is implied that the ship is seaworthy.

Case: Roque vs. Iac-seaworthiness of the vessel or a warranty is implied that the ship is seaworthy in every marine insurance upon a ship or freight( cargo/ shipments) or freightage or upon anything which is the subject of marine insurance



When vessel is sea worthy ( 114-120)

Sec. 114. A ship is seaworthy when reasonably fit to perform the service and to encounter the ordinary perils of the voyage contemplated by the parties to the policy. -this section adopts the principle that seaworthiness is a relative term depending on the nature of the ship, the voyage, and the service in which she is at the time engaged. Sec. 115. An implied warranty of seaworthiness is complied with if the ship be seaworthy at the time of the of commencement of the risk, except in the following cases: (a) When the insurance is made for a specified length of time, the implied warranty is not complied with unless the ship be seaworthy at the commencement of every voyage it undertakes during that time; (b) When the insurance is upon the cargo which, by the terms of the policy, description of the voyage, or established custom of the trade, is to be transhipped at an intermediate port, the implied warranty is not complied with unless each vessel upon

which the cargo is shipped, or transhipped, be seaworthy at the commencement of each particular voyage. Gen rule: commencement of the risk Exceptions: 1) insurance is made for a specified length of time, the ship must be seaworthy at the commencement of every voyage it undertakes during that time 2) insurance is upon cargo required to be transshipped, each vessel upon which the cargo is shipped or transshipped. Must be seaworthy at the commencement of each particular voyage and 3) where different portions of the voyage contemplated differ in respect to the things required to make the ship seaworthy therefor, the ship must be seaworthy at the commencement of each portion with reference to that portion

Sec. 116. A warranty of seaworthiness extends not only to the condition of the structure of the ship itself, but requires that it be properly laden, and provided with a competent master, a sufficient number of competent officers and seamen, and the requisite appurtenances and equipment, such as ballasts, cables and anchors, cordage and sails, food, water, fuel and lights, and other necessary or proper stores and implements for the voyage. Sec. 117. Where different portions of the voyage contemplated by a policy differ in respect to the things requisite to make the ship seaworthy therefor, a warranty of seaworthiness is complied with if, at the commencement of each portion, the ship is seaworthy with reference to that portion. A. Seaworthiness required at commencement of each portion of voyage 1) this is an exception to the general rule that seaworthiness of the vessel is required only at the commencement of the risk 2 hence, seaworthiness is required at the commencement of each portion of the voyage with reference to said portions Sec. 118. When the ship becomes unseaworthy during the voyage to which an insurance relates, an unreasonable delay in repairing the defect exonerates the insurer on ship or shipowner's interest from liability from any loss arising therefrom. A. unseaworthiness during the voyage

1) if the ship is seaworthy at the start of the voyage, unseaworthiness during the voyage does not avoid the policy.

master of ordinary skill and discretion, would mean the most natural, direct and advantageous.

2) however, an unreasonable delay in repairing the defect causing unseaworthiness during the voyage exonerates (absolves) the insurer on ship or shipowner’s interest from liability from any loss arising therefrom

 Deviation; when it is proper ( sec. 123 to 124)

Sec. 119. A ship which is seaworthy for the purpose of an insurance upon the ship may, nevertheless, by reason of being unfitted to receive the cargo, be unseaworthy for the purpose of the insurance upon the cargo. A. Seaworhtiness as to cargo 1) a ship which is seaworthy for an insurance upon the ship, may, by reason of being unfitted to receive the cargo, be unseaworthy for an insurance upon cargo 2) it was stated that the vessel was unseaworthy for cargo because of a defective pipe which the shipowner failed to repair, with the result that water entered the vessel and the cargo was damaged. Therefore the insurer of the cargo was not liable.

Sec. 120. Where the nationality or neutrality of a ship or cargo is expressly warranted, it is implied that the ship will carry the requisite documents to show such nationality or neutrality and that it will not carry any documents which cast reasonable suspicion thereon.

A. Implied warranty that requisite documents on nationality or neutrality are carried

Sec. 123. Deviation is a departure from the course of the voyage insured, mentioned in the last two sections, or an unreasonable delay in pursuing the voyage or the commencement of an entirely different voyage. A. example 1) departure from the course of sailing fixed by mercantile usage or 2) departure from the most natural, direct and advantageous course if no course has been fixed by mercantile usage Sec. 124. A deviation is proper: (a) When caused by circumstances over which neither the master nor the owner of the ship has any control; (b) When necessary to comply with a warranty, or to avoid a peril, whether or not the peril is insured against; (c) When made in good faith, and upon reasonable grounds of belief in its necessity to avoid a peril; or (d) When made in good faith, for the purpose of saving human life or relieving another vessel in distress. Note: deviation is proper if it does not vitiate the marine policy Every deviation not specified in sec. 124 is improper

- implied warranty under this section only arises when the nationality or neutrality of the vessel or cargo is expressly warranted.

THE VOYAGE AND DEVIATION Sec. 121. When the voyage contemplated by a marine insurance policy is described by the places of beginning and ending, the voyage insured in one which conforms to the course of sailing fixed by mercantile usage between those places. Sec. 122. If the course of sailing is not fixed by mercantile usage, the voyage insured by a marine insurance policy is that way between the places specified, which to a

Sec. 125. Every deviation not specified in the last section is improper. Sec. 126. An insurer is not liable for any loss happening to the thing insured subsequent to an improper deviation.

LOSS Sec. 127. A loss may be either total or partial. Sec. 128. Every loss which is not total is partial.

Sec. 129. A total loss may be either actual or constructive.

part was so rusty as to be of no value even for use in another machinery

Sec. 130. An actual total loss is cause by:

Sec. 133. When a ship is prevented, at an intermediate port, from completing the voyage, by the perils insured against, the liability of a marine insurer on the cargo continues after they are thus reshipped. Nothing in this section shall prevent an insurer from requiring an additional premium if the hazard be increased by this extension of liability.

(a) A total destruction of the thing insured; (b) The irretrievable loss of the thing by sinking, or by being broken up; (c) Any damage to the thing which renders it valueless to the owner for the purpose for which he held it; or (d) Any other event which effectively deprives the owner of the possession, at the port of destination, of the thing insured. Sec. 131. A constructive total loss is one which gives to a person insured a right to abandon, under Section one hundred thirtynine. A. Constructive total loss which is also known as “technical total loss” is one which gives the insured the right to abandon the thing insured by relinquishing to the insurer his interest in such thing, entitling him to recover for a total loss threof. In turn, the insurer acquires all the rights over the thing insured. he can salvage it, repair it, sell it and recover from those who caused its loss.

Sec. 134. In addition to the liability mentioned in the last section, a marine insurer is bound for damages, expenses of discharging, storage, reshipment, extra freightage, and all other expenses incurred in saving cargo reshipped pursuant to the last section, up to the amount insured. Nothing in this or in the preceding section shall render a marine insurer liable for any amount in excess of the insured value or, if there be none, of the insurable value. Sec. 135. Upon an actual total loss, a person insured is entitled to payment without notice of abandonment. 

General average ( sec. 136)

2) examples of partial loss:

Sec. 136. Where it has been agreed that an insurance upon a particular thing, or class of things, shall be free from particular average, a marine insurer is not liable for any particular average loss not depriving the insured of the possession, at the port of destination, of the whole of such thing, or class of things, even though it becomes entirely worthless; but such insurer is liable for his proportion of all general average loss assessed upon the thing insured.

a) where only a part of the cargo is lost

A. Kinds of average

b) where only a portion of the vessel is damaged

a) general

-see sec. 139 B. Partial loss 1) partial loss is any loss which is not total

Sec. 132. An actual loss may be presumed from the continued absence of a ship without being heard of. The length of time which is sufficient to raise this presumption depends on the circumstances of the case. A. examples of actual loss a) where the ship is so badly damaged that it no longer exists as a ship but is only a mass of material b) where the vessel is captured and condemned c) where the vessel is completely burned and d) where a cargo of machinery insured sank with the vessel even if part of the machinery was recovered from the shipwreck but such

b) particular B. General Average 1) under art 809 of the code of commerce, a general average includes all damages and expenses which are deliberately caused in order to save the vessel, its cargo or both at the same time, for real and known risk 2) a general average gives rise to the right of the owner to contribution from those benefited threby or, if he is insured, he has the alternative of seeking indemnity from his insurer, surrogating the latter to his right of cotributon, he losses his alternative 3) a general average is never allowed unless the loss or damage has been incurred for the “common safety” of both vessel and cargo. 4) refloating is not a general average

C. particular average 1) in marine policy, particular average means any partial loss caused by the peril insured against which is not a general average.

without incurring the like expense or risk mentioned in the preceding sub-paragraph. But freightage cannot in any case be abandoned unless the ship is also abandoned. Case:

2) insurer is liable for a particular average unless the policy excludes it. Where it has been stipulated that the insurance shall not cover particular average (FPA- Free from particular average), the marine insurer is not liable for any particular average loss which does not deprive the insured of the possession, at the point of destination, of he whole of such thing, or class of things, even though it becomes entirely worthless; but such insurer is liable for the proportion of all general average loss assessed upon the thing insured, even in the absence of any agreement to that effect

Sec. 137. An insurance confined in terms to an actual loss does not cover a constructive total loss, but covers any loss, which necessarily results in depriving the insured of the possession, at the port of destination, of the entire thing insured.



oriental assurance v. CA- computation based on entire shipment and not per vessel basis.

A) “Abandonment”- the right given by the law to the insured in case of constructive total loss to relinquish to the insurer in the thing insured B) when the insured may exercise right to abandon (sec 139)

Constructive total loss; when it exist

ABANDONMENT Sec. 138. Abandonment, in marine insurance, is the act of the insured by which, after a constructive total loss, he declares the relinquishment to the insurer of his interest in the thing insured. Sec. 139. A person insured by a contract of marine insurance may abandon the thing insured, or any particular portion thereof separately valued by the policy, or otherwise separately insured, and recover for a total loss thereof, when the cause of the loss is a peril insured against: (a) If more than three-fourths thereof in value is actually lost, or would have to be expended to recover it from the peril; (b) If it is injured to such an extent as to reduce its value more than three-fourths; (c) If the thing insured is a ship, and the contemplated voyage cannot be lawfully performed without incurring either an expense to the insured of more than threefourths the value of the thing abandoned or a risk which a prudent man would not take under the circumstances; or (d) If the thing insured, being cargo or freightage, and the voyage cannot be performed, nor another ship procured by the master, within a reasonable time and with reasonable diligence, to forward the cargo,

Sec. 140. An abandonment must be neither partial nor conditional. Sec. 141. An abandonment must be made within a reasonable time after receipt of reliable information of the loss, but where the information is of a doubtful character, the insured is entitled to a reasonable time to make inquiry. Sec. 142. Where the information upon which an abandonment has been made proves incorrect, or the thing insured was so far restored when the abandonment was made that there was then in fact no total loss, the abandonment becomes ineffectual. Sec. 143. Abandonment is made by giving notice thereof to the insurer, which may be done orally, or in writing; Provided, That if the notice be done orally, a written notice of such abandonment shall be submitted within seven days from such oral notice. Sec. 144. A notice of abandonment must be explicit, and must specify the particular cause of the abandonment, but need state only enough to show that there is probable cause therefor, and need not be accompanied with proof of interest or of loss. Sec. 145. An abandonment can be sustained only upon the cause specified in the notice thereof.

Sec. 146. An abandonment is equivalent to a transfer by the insured of his interest to the insurer, with all the chances of recovery and indemnity.

knowledge of the person actually procuring the insurance, he may show the real value. But a valuation fraudulent in fact, entitles the insurer to rescind the contract.

Sec. 147. If a marine 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 had been a formal abandonment.

A. valued marine policy

Sec. 148. Upon an 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. Sec. 149. Where notice of abandonment is properly given, the rights of the insured are not prejudiced by the fact that the insurer refuses to accept the abandonment. Sec. 150. The acceptance of an abandonment may be either 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 as an acceptance. Sec. 151. The acceptance of an abandonment, whether express or implied, is conclusive upon the parties, and admits the loss and the sufficiency of the abandonment.

1) the valuation is conclusive between the parties in the adjustment of either a partial or total loss, unless the insured has no insurable interest or unless there is fraud on the part of the insured, in which case the insurer would have the right to seek rescission of the contract. 2) neither party can give evidence of the real value of the thing insured, except that when a thing has been hypothecated by bottomry or respondentia, before insurance of the valued marine policy, and without the knowledge of the person who actually procured the insurance, in which case the insurer may show the real value but he is now entitled to rescind unless he can prove that the valuation is fraudulent. Sec. 157. 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. Example on the book. P. 279

Sec. 152. An abandonment once made and accepted is irrevocable, unless the ground upon which it was made proves to be unfounded.

Differentiate with fire insurance, when there is no co-insurance and the insurer is liable for the full amount of the partial loss, unless there is a stipulation to the contrary.

Sec. 153. On an accepted abandonment of a ship, freightage earned previous to the loss belongs to the insurer of said freightage; but freightage subsequently earned belongs to the insurer of the ship.

Sec. 158. Where profits are separately insured in a contract of marine insurance, the insured is entitled to recover, in case of loss, a proportion of such profits equivalent to the proportion which the value of the property lost bears to the value of the whole.

Sec. 154. If an insurer refuses to accept a valid abandonment, he is liable as upon actual total loss, deducting from the amount any proceeds of the thing insured which may have come to the hands of the insured. Recovery of actual loss in lieu of abandonment

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Sec. 155. If a person insured omits to abandon, he may nevertheless recover his actual loss.  

MEASURE OF INDEMNITY

Sec. 156. A valuation in a policy of marine insurance in conclusive between the parties thereto in the adjustment of either a partial or total loss, if the insured has some interest at risk, and there is no fraud on his part; except that when a thing has been hypothecated by bottomry or respondentia, before its insurance, and without the

p. 280 Sec. 159. In case of a valued policy of marine insurance on freightage or cargo, if a part only of the subject is exposed to the risk, the evaluation applies only in proportion to such part. Sec. 160. When profits are valued and insured by a contract of marine insurance, a loss of them is conclusively presumed from a loss of the property out of which they are expected to arise, and the valuation fixes their amount. Sec. 161. In estimating a loss under an open policy of marine insurance the following rules are to be observed: (a) The value of a ship is its 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, or 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 for its purchase, or to any drawback on its exportation, or to the fluctuation of the market at the port of destination, or to expenses incurred on the way or on arrival; (c) The value of freightage is the gross freightage, exclusive of primage, without reference to the cost of earning it; and (d) The cost of insurance is in each case to be added to the value thus estimated. “drawback- allowance made by the government upon the duties on imported merchandise when the importer, instead of selling here, re-exports it or the refunding of such duties is already paid Drawback is excluded in determining the value of the freightage in estimating a loss under an open marine policy. “primage”- small allowance or compensation payable to the master or owner of the vessel for the use of his cables for lading and unlading in any port Sec. 162. If cargo insured against partial loss arrives at the port of destination in a damaged condition, the loss of the insured is deemed to be the same proportion of the value which the market price at that port, of the thing so damaged, bears to the market price it would have brought if sound. Sec. 163. A marine insurer is liable for all the expenses attendant upon a loss which forces the ship into port to be repaired; and where it is stipulated in the policy that the insured shall labor for the recovery of the property, the insurer is liable for the expense incurred thereby, such expense, in either case, being in addition to a total loss, if that afterwards occurs. A. when expenses for repair and recovery are borne by insurer 1) if the ship has to make a port to undertake repairs caused by the perils insured against, the marine insurer must bear the attendant expenses. The insurer is also liable for expenses insured for saving the vessel from the perils insured against, such as expenses of launching or raising the vessel of or towing or navigating it into port for her safety. These expenses called “port of refuse expenses”

2) the insurer is also liable for expenses for the recovery of the property if the policy stipulated and imposes upon the insured the duty make to such recovery, aka “the sue and labor clause”, 3) said expenses are to be added to a total loss, if this occurs afterwards. Sec. 164. A marine insurer is liable for a loss falling upon the insured, through a contribution in respect to the thing insured, required to be made by him towards a general average loss called for by a peril insured against; provided, that the liability of the insurer shall be limited to the proportion of contribution attaching to his policy value where this is less than the contributing value of the thing insured. Sec. 165. When a person insured by a contract of marine insurance has a demand against others for contribution, he may claim the whole loss from the insurer, subrogating him to his own right to contribution. But no such claim can be made upon the insurer after the separation of the interests liable to the contribution, nor when the insured, having the right and opportunity to enforce the contribution from others, has neglected or waived the exercise of that right. A. choice of insured in case of general average loss 1) an insured whose property suffered a general average loss may either demand contribution from the other interested parties or claim the whole loss from the insurer, subrogating him to his own right to contribution from the other interested parties 2) no claim for general average loss can be made upon the insurer a) after the separation of interest liable to contribution ex: after the cargo liable for contribution has been removed from the vessel

b) when the insured having the right and opportunity to enforce contribution from others, has neglected or waved the exercise of that right. Sec. 166. In the case of a partial loss of ship or its equipment, the old materials are to be applied towards payment for the new. Unless otherwise stipulated in the policy, a marine insurer is liable for only two-thirds of the remaining cost of repairs after such deduction, except that anchors must be paid in full. -qualify the rule that a partial loss renders the insurer liable for such proportion of the

amount insured by him as the loss bears the value of the whole interest of the insured in the property(sec 157)

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XIII. Fire insurance

A.) Definition:

“fire insurance"

-shall include insurance against loss by fire, lightning, windstorm, tornado or earthquake and other allied risks, when such risks are covered by extension to fire insurance policies or under separate policies.

B) a fire policy does not automatically cover all the other risk mentioned. However, when such other risk are expressly covered by the fire policy, the provisions of law governing fire insurance will govern such policy.

“Fire”

- the active principle of burning, characterized by heat and light combustion.

- combustion which produces heat but no visible glow or light is not fire

C) To recover under a fire policy:

1) fire must be the proximate cause of the damage or loss

2) the loss or damage must be due to a hostile and not a “friendly” fire.

“friendly fire”

- one which burns in a place where it is intended to burn and employed for the ordinary purpose of lighting, heating or manufacturing

1) the policy limits the use or condition of the thing insured - ex: a fire burning in a stove or a lamp, or an explosion due to the ignition of vapor coming in contact with the burning gas lamp is not the result of fire, because the fire within the lamp was friendly.

“hostile fire”

1) burns at a place where it is not intended to burn

2) starts as a friendly fire but becomes hostile if it should escape from the place where it is intended to be and becomes uncontrollable or

3) is a friendly fire which may become hostile not by escaping from its proper place but because of the unsuitable material used to light it and it becomes inherently dangerous and uncontrollable.

-ex: fire in a furnace resulting in damages caused by the heat from such fire to the walls by cracking and blisters

2) there is an alteration in said use or condition

3) alteration is without the consent of the insurer

4) alteration is made by means within the insured’s control and

5) alteration increases the risk of loss

F) When alteration does not affect the insurance contract

-An alteration in the use or condition of a thing insured from that to which it is limited by the policy, which does not increase the risk, does not affect a contract of fire insurance

- however, although increase in the risk of loss as general rule is necessary, D) Fire due to abnormal conditions or extraordinary circumstances:

- fire insurance policy may validly restrict its coverage to losses under ordinary conditions, and exclude those due to extraordinary circumstances or abnormal conditions like war, invasion, rebellion, civil war and similar causes

-however, if the fire is completely unrelated to the extraordinary circumstances or abnormal conditions, the insurer is still liable

E) Right of insurer to rescind in case of alteration in use or conditions of thing insured, provided:

Exception: when the policy provides that a violation of specified provisions would avoid it

G) Insurance contract not affected by insured’s act not in violation of policy

- A contract of fire insurance is not affected by any act of the insured subsequent to the execution of the policy, which does not violate its provisions, even though it increases the risk and is the cause of the loss

Sec. 171.

If there is no valuation in the policy, the measure of indemnity in an insurance against fire is the expense it would be to the insured at the time of the commencement of

the fire to replace the thing lost or injured in the condition in which at the time of the injury; but if there is a valuation in a policy of fire insurance, the effect shall be the same as in a policy of marine insurance.

and in case of a partial loss the full amount of the partial loss shall be so paid,

A) If there is no valuation in the policy or open fire policy

and in case there are two or more policies covering the insured's interest therein, each policy shall contribute pro rata to the payment of such whole or partial loss.

- the measure of indemnity is the expense it would be to the insured at the time of the commencement of the fire to replace the thing lost or injured in the condition in which at the time of the injury

But in no case shall the insurer be required to pay more than the amount thus stated in such policy.

B) if there is a valuation in a policy of fire insurance or Valued fire policy

- the valuation as agreed upon by the parties is conclusive between them in the adjustment of either a partial or total loss in the absence of fraud

Sec. 172.

Whenever the insured desires to have a valuation named in his policy, insuring any building or structure against fire, he may require such building or structure to be examined by an independent appraiser and the value of the insured's interest therein may then be fixed as between the insurer and the insured.

The cost of such examination shall be paid for by the insured. A clause shall be inserted in such policy stating substantially that the value of the insured's interest in such building or structure has been thus fixed.

“option to rebuild or repair clause”

This section shall not prevent the parties from stipulating in such policies concerning the repairing, rebuilding or replacing of buildings or structures wholly or partially damaged or destroyed.

A) How valuation is made

- valuation of the insured’s interest in the thing insured may be made by an independent appraiser and the value of the insured's interest therein may then be fixed as between the insurer and the insured or therefore confirmed by the parties

- A clause shall be inserted in such policy stating substantially that the value of the insured's interest in such building or structure or said valuation has been thus fixed.

B) Arbitration clause In the absence of any change increasing the risk without the consent of the insurer or of fraud on the part of the insured,

then in case of a total loss under such policy, the whole amount so insured upon the insured's interest in such building or structure, as stated in the policy upon which the insurers have received a premium, shall be paid,

- policy may provide that in case of any question, dispute or disagreement in any of the provisions of the policy, which includes any question as to the valuation of the loss, the dispute shall be referred to the decisions of arbitrators

-submission to arbitration is usually made a condition precedent to any claim against the insurer. This clause has been upheld as valid by the Supreme Court and when present, no action can be maintained by the insured unless the award has been made or sought, or unless the company has denied liability on some of the grounds stated in the clause.

C) Prohibition against transfer of fire policy by insured to agent’s of insurer

- after a loss has occurred, the insured has the right to assign his rights under the policy

-this right is subject to prohibition, that No policy of fire insurance shall be pledged, hypothecated, or transferred to any person, firm or company who acts as agent for or otherwise represents the issuing company, and any such pledge, hypothecation, or transfer hereafter made shall be void and of no effect insofar as it may affect other creditors of the insured

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- liability of the insurer under CMVLI is for loss or damage

XIV. Motor Vehicle Liability Insurance

I. COMPULSORY MOTOR VEHICLE LIABILITY INSURANCE (CMVLI)

- where an insurance policy insured directly against liability, the insurer’s liability accrues immediately upon the occurrence of the injury or event upon which the liability depends and does not depend on the recovery of judgment by the injured party against the insured

A) Definitions C) Own damage coverage Passenger" -is any fare paying person being transported and conveyed in and by a motor vehicle for transportation of passengers for compensation, including persons expressly authorized by law or by the vehicle's operator or his agents to ride without fare.

- the insurer had assumed to reimburse the cost of repairing the damage to the insured vehicle.

D) Third party liability coverage

Owner" or "motor vehicle owner" means the actual legal owner of a motor vehicle, in whose name such vehicle is duly registered with the Land Transportation Commission;

- pertains to liabilities arising from the death of, or bodily injuries suffered by 3rd parties

"Land transportation operator" means the owner or owners of motor vehicles for transportation of passengers for compensation, including school buses;

E) Comprehensive motor vehicle insurance policy

Motor vehicle

- any vehicle propelled by any power other than muscular power using the public highways.

B) COMPULSORY MOTOR VEHICLE LIABILITY INSURANCE (CMVLI)

- cover death or bodily injury of a 3rd party or passenger (mandatory under CMVLI), property damage to 3rd parties, and (own) damage to or theft of the vehicle insured

Sec. 375. The Commissioner shall furnish the Land Transportation Commissioner with a list of insurance companies authorized to issue the policy of insurance or surety bond required by this chapter

A) No registration or renewal if no CMVLI -It shall be unlawful for any land transportation operator or owner of a motor vehicle to operate the same in the public highways unless there is in force in relation thereto a policy of insurance or guaranty in cash or surety bond to indemnify the death, bodily injury, of a third-party or passenger, as the case may be, arising from the use thereof.

- Land Transportation Commission shall not allow the registration or renewal of registration of any motor vehicle without a CMVLI, guaranty in cash or surety bond

Sec. 377. Every land transportation operator and every owner of a motor vehicle shall, before applying for the registration or renewal of registration of any motor vehicle, at his option, either secure an insurance policy or surety bond issued by any insurance company authorized by the Commissioner or make a cash deposit in such amount as herein required as limit of liability for purposes specified in section three hundred seventy-four.

(2) In the case of an owner of a motor vehicle, the insurance or guaranty in cash or surety bond shall cover liability for death or injury to third parties in an amount not less than that set forth in the following scale in any one accident: I. Private Cars

(a) Bantam : Twenty thousand pesos; (b) Light : Twenty thousand pesos;

(1) In the case of a land transportation operator,

(c) Heavy : Thirty thousand pesos;

the insurance guaranty in cash or surety bond shall cover liability for death or bodily injuries of third-parties and/or passengers arising out of the use of such vehicle

II. Other Private Vehicles

in the amount not less than twelve thousand pesos per passenger or third party and an amount, for each of such categories, in any one accident of not less than that set forth in the following scale: (or CMVLI amount depends on the authorized passenger capacity of the vehicle but cannot be less than 12, 000 per person) (a) Motor vehicles with an authorized capacity of twenty-six or more passengers: Fifty thousand pesos; (b) Motor vehicles with an authorized capacity of from twelve to twenty-five passengers: Forty thousand pesos; (c) Motor vehicles with an authorized capacity of from six to eleven passengers: Thirty thousand pesos; (d) Motor vehicles with an authorized capacity of five or less passengers: Five thousand pesos multiplied by the authorized capacity. Provided, however, That such cash deposit made to, or surety bond posted with, the Commissioner shall be resorted to by him in cases of accidents the indemnities for which to third-parties and/or passengers are not settled accordingly by the land transportation operator and, in that event, the said cash deposit shall be replenished or such surety bond shall be restored with sixty days after impairment or expiry, as the case may be, by such land transportation operator, otherwise, he shall secure the insurance policy required by this chapter. The aforesaid cash deposit may be invested by the Commissioner in readily marketable government bonds and/or securities.

(a) Tricycles, motorcyles, and scooters : Twelve thousand pesos;

(b) Vehicles with an unladen weight of 2,600 kilos or less : Twenty thousand pesos;

(c) Vehicles with an unladen weight of between 2,601 kilos and 3,930 kilos : Thirty thousand pesos;

(d) Vehicles with an unladen weight over 3,930 kilos : Fifty thousand pesos. The Commissioner may, if warranted, set forth schedule of indemnities for the payment of claims for death or bodily injuries -note this section provides for the minimum amount of CMVLI

Sec. 378. Any claim for death or injury to any passenger or third party pursuant to the provisions of this chapter shall be paid without the necessity of proving fault or negligence of any kind; Provided, That for purposes of this section: (i) The total indemnity in respect of any person shall not exceed five thousand pesos; (ii) The following proofs of loss, when submitted under oath, shall be sufficient evidence to substantiate the claim:

(a) Police report of accident; and

(b) Death certificate and evidence sufficient to establish the proper payee; or (c) Medical report and evidence of medical or hospital disbursement in respect of which refund is claimed; (iii) Claim may be made against one motor vehicle only. In the case of an occupant of a vehicle, claim shall lie against the insurer of the vehicle in which the occupant is riding, mounting or dismounting from. In any other case, claim shall lie against the insurer of the directly offending vehicle. In all cases, the right of the party paying the claim to recover against the owner of the vehicle responsible for the accident shall be maintained.

surety bond, a certificate that a cash deposit has been made with the Commissioner in such amount required as limits of indemnity in section three hundred seventy-seven to answer for the passenger and/or third-party liability of such land transportation operator or owner of the vehicle. No insurance company may issue the policy of insurance or surety bond required under this chapter unless so authorized under existing laws. The authority to engage in the casualty and/or surety lines of business of an insurance company that refuses to issue or renew, without just cause, the insurance policy or surety bond therein required shall be withdrawn immediately A) Prohibition against unjust denial of CMVLI by insurance companies

A) “No- fault indemnity” - insurer may be held liable without the necessity of proving fault or negligence provided:

- no operator or owner shall be unreasonably denied a CMVLI or surety bond by the insurance company. The authority of such insurance company which refuses to issue or renew said CMVLI without just cause shall be withdrawn

a) claim is for death or injury to a 3rd party or passenger

b) the total indemnity in respect to any one person does not exceed P 5,000

c) that the proofs required by law are submitted

B) Where the claim exceeds P 5,000, the insurance company shall pay only P,5000 without prejudice to the claimant to pursue his claim further, in which case, he shall not be required or compelled by the insurance company to execute any quit claim releasing it from liability under the policy

Sec. 380.

No cancellation of the policy shall be valid unless written notice thereof is given to the land transportation operator or owner of the vehicle and to the Land Transportation Commission at least fifteen days prior to the intended effective date thereof.

Upon receipt of such notice, the Land Transportation Commission, unless it receives evidence of a new valid insurance or guaranty in cash or surety bond as prescribed in this chapter, or an endorsement of revival of the cancelled one, shall order the immediate confiscation of the plates of the motor vehicle covered by such cancelled policy.

Sec. 379. No land transportation operator or owner of motor vehicle shall be unreasonably denied the policy of insurance or surety bond by the insurance companies authorized to issue the same, otherwise, the Land Transportation Commission shall require from said land transportation operator or owner of the vehicle, in lieu of a policy of insurance or

The same may be re-issued only upon presentation of a new insurance policy or that a guaranty in cash or surety band has been made or posted with the Commissioner and which meets the requirements of this chapter, or an endorsement or revival of the cancelled one

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A) CMVLI cancellation by insurance company requires notice to operator or owner and LTC

Sec. 381.

If the cancellation of the policy or surety bond is contemplated by the land transportation operator or owner of the vehicle,

Sec. 383. CMVLI is a for of:

In the settlement and payment of claims, the indemnity shall not be availed of by any accident victim or claimant as an instrument of enrichment by reason of an accident, but as an assistance or restitution insofar as can fairly be ascertained

Sec. 384. he shall, before the policy or surety bond ceases to be effective, secure a similar policy of insurance

or surety bond to replace the policy

or surety bond to be cancelled or make a cash deposit in sufficient amount with the Commissioner

and without any gap, file the required documentation with the Land Transportation Commission, and notify the insurance company concerned of the cancellation of its policy or surety bond

Sec. 382. (change of ownership or engine)

In case of change of ownership of a motor vehicle, or change of the engine of an insured vehicle, there shall be no need of issuing a new policy until the next date of registration or renewal of registration of such vehicle, and

Any person having any claim upon the policy issued, without any unnecessary delay, present to the insurance company concerned a written notice of claim setting forth the nature, extent and duration of the injuries sustained as certified by a duly licensed physician.

Notice of claim must be filed within six months from date of accident, otherwise, the claim shall be deemed waived.

“filing of action within 1 year from denial of claim”

Action or suit for recovery of damage due to loss or injury must be brought, in proper cases, with the Commissioner or the Courts within one year from denial of the claim, otherwise, the claimant's right of action shall prescribe

Sec. 385. provided that the insurance company shall agree to continue the policy, such change of ownership

or such change of the engine shall be indicated in a corresponding endorsement by the insurance company concerned, and a signed duplicate of such endorsement shall, within a reasonable time, be filed with the Land Transportation Commission

The insurance company concerned shall forthwith ascertain the truth and extent of the claim and make payment within five working days after reaching an agreement.

If no agreement is reached, the insurance company shall pay only the "no-fault" indemnity provided in section three hundred

seventy-eight without prejudice to the claimant from pursuing his claim further,

in which case, he shall not be required or compelled by the insurance company to execute any quit claim or document releasing it from liability under the policy of insurance or surety bond issued.

In case of any dispute in the enforcement of the provisions of any policy issued pursuant to this chapter, the adjudication of such dispute shall be within the original and exclusive jurisdiction of the Commissioner, subject to the limitations provided in section four hundred sixteen.

The violation of section three hundred seventy-seven by a land transportation operator shall be a sufficient cause for the revocation of the certificate of public convenience issued by the Board of Transportation covering the vehicle concerned. Sec. 389.

Whenever any violation of the provisions of this chapter is committed by a corporation or association, or by a government office or entity, the executive officer or officers of said corporation, association or government office or entity who shall have knowingly permitted, or failed to prevent, said violation shall be held liable as principals.

Sec. 386.

It shall be unlawful for a land transportation operator or owner of motor vehicle to require his or its drivers or other employees to contribute in the payment of premiums.

II. CASUALTY INSURANCE

Sec. 387. A) Definition

No government office or agency

having the duty of implementing the provisions of this chapter nor any official or employee thereof

shall act as agent in procuring the insurance policy or surety bond provided for herein.

The commission of an agent procuring the said policy or bond shall in no case exceed ten per centum of the amount of the premiums therefor

Sec. 388. Any land transportation operator or owner of motor vehicle or any other person violating any of the provisions of the preceding sections shall be punished by a fine of not less than five hundred pesos but not more than one thousand pesos and/or imprisonment for not more than six months.

- insurance covering loss or liability arising from accident or mishap, excluding certain types of loss which by law or custom are considered as falling exclusively within the scope of other types of insurance such as fire or marine

- includes, but is not limited to:

B) employer's liability insurance

- liability for damages caused workmen arising from injuries by reason of defective conditions or machinery, defect attributable to negligence of the employer or his agents, some act or omission of a fellow workman in obedience to the orders of the employer

C) workmen’s compensation insurance

injured may suffer and also liability which may be created against him compensation for loss resulting from injuries, disablement or death of workmen through industrial accident, disease - authorized driver clause

act, injury or sickness is compensable as :The insured himself

1) personal injury from accident arising out and in the course of employment

2) illness directly caused by employment

3) sickness as the result of employment

: any person driving on the insured’s order or with his permission, provided that the person driving is permitted in accordance with the licensing or other laws or regulations to drive Motor vehicle

:or any person has been permitted and is not disqualified by order of a court or by reason of any enactment or regulation in that behalf from driving such motor vehicle

4) sickness aggravated by the nature of employment :cases

D) Public Liability insurance

- indemnifies against liability on account of injuries to the person or property of another. It may extend to automobiles, elevators, fly wheels, libel, theaters and vessels

E) motor vehicle liability insurance

- insurance against passenger and 3rd party liability for death or bodily injuries and damage to property arising from motor vehicle accidents

-motor vehicle liability insurance should not be confused with insurance for loss or damage on the motor vehicle itself payable to the owner of said insured vehicle.

- at the time of the collision the one driving aside from the owner don’t have valid license, insurer not liable

-purpose of the authorized driver clause:

: a person other than the insured owner, who drives the car on the insured’s order, such as his regular driver or with his permission such as a friend, family or employees of a car service or repair shop msut be duly licensed and have no disqualification to drive.

Note: see “option to repair clause” (p.312)

F) plate glass insurance

-against loss from accidental breaking of plate-glass windows, doors, show cases, etc However, a single policy may contain both insurance on the loss or damage which the

E) burglary and theft insurance

- personal accident insurance

- insurance to cover loss of property through burglary, robbery or theft

:issued by a non-life insurance company is insurance to indemnify the insured against expense, loss of time and suffering from accidents causing him physical injury

-theft in insurance policies does not necessarily have exactly the same meaning as “theft” under the penal statutes, but should usually cover only what is commonly thought of as theft, unless the language of the policy otherwise indicates

-health insurance

: one which indemnifies the insured for expenses and loss occasioned by disease -in robbery policies, in order to reduce the hazard of the insured himself setting up an apparent robbery, the policy sometimes requires that entry into the premises or into a safe must be by violence and that visible marks must be left upon the exterior thereof

- in robbery policies covering stores, a stipulation is often made that a specified number of employees ne in the store at designated hours

- in burglary, robbery, theft insurance, the opportunity to defraud the insurer is so great that insurers have found it necessary to fill up their policies with countless restriction

-Cases:

1) Villacorta

2) Palermo

F) personal accident and health insurance as written by non-life insurance companies, and other substantially similar kinds of insurance.

-when a personal accident and health insurance issued by a life insurance company or in addition to a policy on the life of the insured, it is more of a life insurance rather than a casualty insurance

- when one of the risks insured in a personal accident insurance is the death of the insured by accident, such insurance may also be regarded as a life insurance. In a broader sense, “life insurance” includes accident insurance, since life is insured under either contract.

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XVI. Suretyship (vs. guarantee)

A. Definition

contract of suretyship

-is 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 third party called the oblige

- includes official recognizances, stipulations, bonds or undertakings issued by any company

- suretyship contract is deemed to be an insurance contract only when the surety is engaged in business as such and not merely an isolated transaction

-therefore, a corporation organized for the purpose of guaranteeing performance of contractual obligations of the payment of debts of others is deemed an insurance corporation and thereby subject to all the requirements of the insurance code

B. liability of the surety or sureties shall be joint and several (solidary) with the obligor and shall be limited 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 oblige

-either of them may be compelled to pay the entire obligation and payment of one of them extinguishes the obligation

No contract of suretyship or bonding shall be valid and binding unless and until the premium therefor has been paid, except where the obligee has accepted the bond, in which case the bond becomes valid and enforceable irrespective of whether or not the premium has been paid by the obligor to the surety: Provided, That if the contract of suretyship or bond is not accepted by, or filed with the obligee, the surety shall collect only reasonable amount, not exceeding fifty per centum of the premium due thereon as service fee plus the cost of stamps or other taxes imposed for the issuance of the contract or bond: Provided, however, That if the nonacceptance of the bond be due to the fault or negligence of the surety, no such service fee, stamps or taxes shall be collected. In the case of a continuing bond, the obligor shall pay the subsequent annual premium as it falls due until the contract of suretyship is cancelled by the obligee or by the Commissioner or by a court of competent jurisdiction, as the case may be.

A. Premium payment in suretyship

Genrule: C. Requisites to hold a surety liable on a counter bond are: (p.328) unless and until the premium is paid, the insurance contract is not valid and binding D. nature of the proceedings to recover damages against the surety Except: -upon application of the prevailing party the court must order the surety to show cause why the bond should not respond for the judgment of damages.

when a bond or suretyship contract is issued and accepted by the creditor or oblige, said bond or contract shall be valid and binding whether or not the premium has been paid.

-hearing will be summary and will be limited to such new defense

Sec. 177

B) if the contract or bond is not accepted by, or filed with the oblige, the surety can still collect a reasonable amount not greater than 50 perscent of the premium due as service fee plus stamps or taxes, unless the nonacceptance was due to the surety’s fault or negligence

The surety is entitled to payment of the premium as soon as the contract of suretyship or bond is perfected and delivered to the obligor.

c) where the bond is continuing one

d) where the premium has already paid, the assured obligor cannot recover it on the ground that later on the surety was unable to pay the indebtedness secured by it

Life insurance is insurance on human lives and insurance appertaining thereto or connected therewith

B) When payable: Sec. 178. Pertinent provisions of the Civil Code of the Philippines shall be applied in a suppletory character whenever necessary in interpreting the provisions of a contract of suretyship.

An insurance upon life may be made payable: 1)on the death of the person, 2)or on his surviving a specified period, 3) or otherwise contingently continuance or cessation of life.

on

the

Every contract or pledge for the payment of endowments or annuities shall be considered a life insurance contract for purpose of this Code. In the absence of a judicial guardian, the father, or in the latter's absence or incapacity, the mother, or any minor, who is an insured or a beneficiary under a contract of life, health or accident insurance, may exercise, in behalf of said minor, any right under the policy, without necessity of court authority or the giving of a bond, where the interest of the minor in the particular act involved does not exceed twenty thousand pesos. Such right may include, but shall not be limited to, obtaining a policy loan, surrendering the policy, receiving the proceeds of the policy, and giving the minor's consent to any transaction on the policy. Sec. 180-A. (Rules in Suicide) The insurer in a life insurance contract shall be liable in case of suicides only when it is committed after the policy has been in force for a period of two years from the date of its issue or of its last reinstatement, unless the policy provides a shorter period: Provided, however, That suicide committed in the state of insanity shall be compensable regardless of the date of commission. (As amended by Batasang Pambansa Blg. 874). C) Kinds of Life Insurance

1) Whole life or ordinary life policies Title XVII. Life Insurance

A) Definition

- the insured agrees to pay annual, semiannual or quarterly premiums while he lives. -The insurer agrees to pay the face value of the policy upon the death of the insured

2) Limited payment life policy

- insured agrees to pay premiums only for a specified number of years, usually 10, 15, 20. Should he survives the said periods, he stops paying any further premium, and when he dies, the insurer is to pay the proceeds.

If the insured dies before the expiration of the period, the beneficiary likewise is entitled to the proceeds without paying the premiums for the remainder of the specified period.

2) health insurance may likewise be regarded as life insurance . while health insurance is usually issued by life insurers, injury and illness are also viewed as casualties

3) health, accident and disability are deemed as both life and non-life insurance and such policies may be issued by either a life or nonlife insurance company.

E) Life insurance’ risk covered

3) Term Policy

- the insurer’s liability arises only upon the death of the insured within the agreed term or period. If the latter survives the period, the contract terminates and the insurer is not liable.

1) in life insurance, all causes of death would be covered, unless expressly excluded by law, by the insurance policy or by reasons of public policy

2) a death expressly excluded by law is when the beneficiary is the principal, accomplice, or accessory in willfully bringing about the death of the insured. the beneficiary forfeits his interest in the life policy

4) Endowment Policy

- The insurer agrees to pay certain sum to the insured if he outlives a designated period. If he dies before that time, the proceeds are paid to the beneficiary.

3) a life insurance may expressly exclude de4ath by “assault or murder or as a result of injuries intentionally inflicted by the 3rd person

4) ( Rule in payment of suicide) 5) Life annuity

- by the aleatory contract of life annuity, the debtor binds himself to pay an annual pension or income during the life of one or more determinate persons in consideration of a capital consisting of money or other property, whose ownership is transferred to him at once with the burden of the income. A life annuity is expressly considered a life insurance contract by the insurance code.

D) Life Insurance in relation to accident or health insurance

1) accident insurance may be regarded as life insurance

With the amendment of 180-a, the insurer in a life policy is liable for suicide only when committed after two years from the date of its issue or of its last reinstatement, unless the policy provides a shorter period.

suicide committed in the state of insanity shall be compensable regardless of the date of commission.

5) a life insurance may exclude death in the hands of law.

6) may also exclude “death as a result of military service” or death while in military service. Cause of death would be material in the first case but immaterial in the second.

F) Accident insurance; risk covered (compensability in case of accident)

1) accidents insurance may cover the risk of death alone, or injuries, and medical expenses alone, or may cover all these. It may be an independent contract or it may be supplemental to a life policy

(Notice to assignment)

insurer

in

case

of

Notice to an insurer of a transfer or bequest thereof is not necessary to preserve the validity of a policy of insurance upon life or health, unless thereby expressly required. A) assignment of life policy 1) life or health may pass by transfer, will or succession to any person, whether he has an insurable interest or not. 2) There is no need to give notice to the insurer of such assignment unless expressly required by the policy Sec. 183.

2) An accident insurance policy usually specifies “death by accident means”. Where a crew member of a vessel voluntarily jumped into sea to save a passenger from drowning, but drowned himself, recovery was allowed on the accident policy.

Unless the interest of a person insured is susceptible of exact pecuniary measurement, the measure of indemnity under a policy of insurance upon life or health is the sum fixed in the policy A) Measure of indemnity in life Policy

3) accident insurance may also contain various clauses enumerated accidents. It may exclude accident or death as results from any bodily disease and poisoning.

4) accident insurance may also carry a disability clause wherein the insurer will pay benefits in case of the insured’s disability resulting from an accident. It may cover permanent as well as temporary disability or only one of them.

G) group life insurance, aka: mortagage redemption insurance

- device protection of both mortgagee and mortagagor

Sec. 181. (Transfer of insurance Policies) A policy of insurance upon life or health may pass by transfer, will or succession to any person, whether he has an insurable interest or not, and such person may recover upon it whatever the insured might have recovered. Sec. 182.

1) The measure of indemnity in life policy is the amount specified in the policy. In effect, a life policy is a valid one. 2) Since a person’s interest in his life is not susceptible of exact pecuniary estimation, he can insure his life for any amount as long as he pays the commensurate premium. In case he dies, the amount of indemnity is the sum fixed in the policy.

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Title XVIII. Claims Settlement ( Sec. 241 to 244)

Sec. 241. (1) No insurance company doing business in the Philippines shall refuse, without just cause, to pay or settle claims arising under coverages provided by its policies, nor shall any such company engage in unfair claim settlement practices. Any of the following acts by an insurance company, if committed without just cause and performed with such frequency as to indicate a general business practice, shall constitute unfair claim settlement practices: (a) knowingly misrepresenting to claimants pertinent facts or policy provisions relating to coverage at issue; (b) failing to acknowledge with reasonable promptness pertinent communications with respect to claims arising under its policies; (c) failing to adopt and implement reasonable standards for the prompt investigation of claims arising under its policies; (d) not attempting in good faith to effectuate prompt, fair and equitable settlement of claims submitted in which liability has become reasonably clear; or (e) compelling policyholders to institute suits to recover amounts due under its policies by offering without justifiable reason substantially less than the amounts ultimately recovered in suits brought by them. (2) Evidence as to numbers and types of valid and justifiable complaints to the Commissioner against an insurance company, and the Commissioner's complaint experience with other insurance companies writing similar lines of insurance shall be admissible in evidence in an administrative or judicial proceeding brought under this section. (3) If it is found, after notice and an opportunity to be heard, that an insurance company has violated this section, each

instance of non-compliance with paragraph (1) may be treated as a separate violation of this section and shall be considered sufficient cause for the suspension or revocation of the company's certificate of authority. A) Rules on claims settlement

2) In case of a policy maturing by the death of the insured, the proceeds shall be paid within 60 days after presentation of claim and filing of proof of death after said 60 days, the beneficiary is entitled to interest, unless the refusal to pay is based on the ground that the claim is fraudulent.

1) Insurance companies are enjoined from: a) refusing, without just cause to pay or settle claims arising under their policies b) engaging practices

in

unfair

claim

settlement

2) This section enumerates the acts constituting unfair claim settlement practices which shall be considered sufficient causes for suspension or revocation of the company’s certificate of authority

Sec. 243.

The amount of any loss or damage for which an insurer may be liable, under any policy other than life insurance policy, shall be paid within thirty days after proof loss is received by the insurer and ascertainment of the loss or damage is made either by agreement between the insured and the insurer or by arbitration;

Sec. 242. The proceeds of a life insurance policy shall be paid immediately upon maturity of the policy, unless such proceeds are made payable in installments or as an annuity, in which case the installments, or annuities shall be paid as they become due: Provided, however, That in the case of a policy maturing by the death of the insured, the proceeds thereof shall be paid within sixty days after presentation of the claim and filing of the proof of the death of the insured. Refusal or failure to pay the claim within the time prescribed herein will entitle the beneficiary to collect interest on the proceeds of the policy for the duration of the delay at the rate of twice the ceiling prescribed by the Monetary Board, unless such failure or refusal to pay is based on the ground that the claim is fraudulent. The proceeds of the policy maturing by the death of the insured payable to the beneficiary shall include the discounted value of all premiums paid in advance of their due dates, but are not due and payable at maturity. A. Payment of proceeds in life insurance policy

1) The proceeds in a life insurance policy shall be paid immediately upon maturity of the policy unless such proceeds are made payable in installments or as an annuity, in which case the installments, or annuities shall be paid as they become due

but if such ascertainment is not had or made within sixty days after such receipt by the insurer of the proof of loss, then the loss or damage shall be paid within ninety days after such receipt.

Refusal or failure to pay the loss or damage within the time prescribed herein will entitle the assured to collect interest on the proceeds of the policy for the duration of the delay at the rate of twice the ceiling prescribed by the Monetary Board, unless such failure or refusal to pay is based on the ground that the claim is fraudulent.

A) payment of proceeds in non-life insurance

1) The proceeds under a non-life insurance policy shall be paid within thirty days after proof loss is received by the insurer and ascertainment of the loss or damage is made either by agreement between the insured and the insurer or by arbitration

2) if such ascertainment is not had or made within sixty days after such receipt by the insurer of the proof of loss, then the loss or damage shall be paid within ninety days after such receipt

3) Refusal or failure to pay the loss or damage within the time prescribed herein

will entitle the assured to collect interest unless the claim is fraudulent.

B) Advancement or loan of money by insurer after the loss is not payment

1) a written agreement between the insured and the insurer whereby after the loss the insurer will advance or loan the amount of representing the loss repayable only out of money collected by the insured on account of the loss is valid. Such loan is not a payment of insurance and the insurer is not subrogated to the insured’s rights.

C) Right of Subrogated

1) after payment of loss by the insurance company, it is subrogated to the rights of the insured against third persons whose negligence or wrongful act caused the loss

2) subrogation does not apply to life and accident insurance because they are generally not contracts of indemnity; except when a life insurance is a contract of indemnity, such as a life policy secured by a creditor on the life of the debtor . therefore, subrogation exist generally only in property insurance 3) subrogation is by operation of law and need not be stipulated, although many..

4) the subrogated insurer cannot recover more than what the insured may recover from the 3rd persons causing the loss

5) the insurer is subrogated to whatever rights the insured has against his solidary debtor under 1217 of NCC which gives to a soldary debtor who has paid the entire obligation the right to be reimbursed by his co-debtors for the share which corresponds to each.

Sec. 244. In case of any litigation for the enforcement of any policy or contract of insurance, it shall be the duty of the Commissioner or the Court, as the case may be, to make a finding

as to whether the payment of the claim of the insured has been unreasonably denied or withheld; and in the affirmative case, the insurance company shall be adjudged to pay damages which shall consist of attorney's fees and other expenses incurred by the insured person by reason of such unreasonable denial or withholding of payment plus interest of twice the ceiling prescribed by the Monetary Board of the amount of the claim due the insured, from the date following the time prescribed in section two hundred fortytwo or in section two hundred forty-three, as the case may be, until the claim is fully satisfied; Provided, That the failure to pay any such claim within the time prescribed in said sections shall be considered prima facie evidence of unreasonable delay in payment. A. Unreasonable denial of payment of claim

1) if the payment of the claim has been unreasonably denied or withheld, as found by the insurance commissioner or the court, the insurance company is liable for damages consisting of attorney’s fees and other expenses plus interest of twice the ceiling prescribed by the monetary board

2) There is a prima evidence of unreasonable delay if the insured fails to pay any claim within the time prescribed in sec 242 and 243.