INSURANCE LAW

Course Outline
Atty. Mary Ann L. Reyes

Suggested Textbook: The Insurance Code of the Philippines by Hector S. de Leon (2019)

PART ONE

GENERAL PRINCIPLES

I. Introduction

A. History of insurance
B. Laws governing insurance

1. RA 10607, The Insurance Code

2. Article 739, 2011, 2012-2017, 2186, 2207, New Civil Code
3. Insurance Code, RA 10607 (amending PD 612 as amended)
4. Family Code
5. Section 185, Corporation Code
6. GSIS Act, SSS Act
7. RA 3591 (PDIC Law)
8. Compulsory Insurance Coverage for Agency-Hired Migrant Workers under the
Migrant Workers Act (RA 8042)

Read: Enriquez vs. Sunlife Assurance, 41 Phil 269 (1920)

Insular Life vs. Ebrado, 80 SCRA 181 (1977)
Filipinas-Compania de Seguros de Nava vs Mandanas, 17 SCRA 210 (1966)

C. General concept of insurance

1. Contract of Insurance Defined (Sec. 2, IC)

2. Event or Peril Insured Against (Sec. 3, IC)
3. Test of insurance
4. Mutual insurance companies vs mutual benefit associations (Sec. 190, 403-
404,406, IC); mutual life insurance companies vs. incorporated stock life
insurance company (Sec. 268-269, 280)

Read: White Gold Marine Services vs. Pioneer Insurance, GR No. 154514, 28 July 2005;
Steamship Mutual Underwriting vs Sulpicio Lines, GR 196072, Sept. 20, 2017

5. Doing an insurance business (Sec. 2, IC)

Read: White Gold vs Pioneer Insurance

6. Suretyship (Sec. 2, IC)

7. Pre-need plans (RA 9829), HMO contracts (EO 192, s. 2015); IC Circular 2016-
41 dated July 29, 2016)
8. Variable contracts (Sec. 238b, 239, IC)
9. Bancassurance (Sec. 375, IC)

D. Characteristics

1. risk distributing device

2. contract of adhesion (fine print rule)

Read: Villa Crista Monte Realty vs Equitable PCI Bank (when valid)

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 Rizal Surety and Insurance Co. vs CA, GR 112360, July 18, 2000
Fortune Insurance and Surety Co. vs. CA, GR 115278, May 23, 1995
Gulf Resorts vs Philippine Charter, GR No. 155167, May 16, 2005
Eternal Gardens Memorial vs. Philamlife, GR No. 166245, April 9, 2008
The Insular Life vs. Khu, GR 195176, April 18, 2016

3. aleatory (Art. 2010, Civil Code)

4. contract of indemnity (Sec. 4, RA 10607); exceptions

Read: Verendia vs. CA, GR 75605, Jan. 22, 1993

Philamlife Health Systems vs CA, GR 125678, March 18, 2002

5. uberrimae fides contract

Read: Verendia vs CA

E. Elements of insurance

1. Insurable interest
2. Risk of loss
3. Assumption of risk
4. Distribution of losses
5. Premium

Read: Gulf Resorts vs. Philippine Charter Insurance Corp.

F. Subject matter of a contract of insurance

G. Event or peril insured against [Sec. 3(1), Sec. 86-88, IC]
H. Risk, defined; pure vs. speculative risk; past event; distinguished from fortuitous
event and condition, loss, peril, hazard
I.`Right of subrogation (Art. 2207, Civil Code)

1. Requisites
2. Exceptions to the subrogation rule

Read: Manila Mahogany Manufacturing Corp. vs. CA, GR L-52756, Oct. 12, 1987
Federal Express Corp. vs. American Home Assurance, Aug. 18, 2004
Keppel Cebu Shipyard vs Pioneer Insurance, Sept. 25, 2009
Malayan Insurance vs Alberto, GR 194320, Feb. 1, 2012
Asian Terminals vs First Lepanto, GR 185964, June 16, 2014
Aboitiz Shipping vs Insurance Company, GR 168402, Aug. 6, 2008
2001 Customs Brokers vs Philam Insurance, June 10, 2020
Standard Insurance vs. Cuaresma, GR 200055, Sept. 10, 2014
Pan Malayan vs. CA, GR 81026, April 3, 1990
Oriental Assurance vs Ong, GR 189524, Oct. 11, 2017

3. Prescription of Action in Subrogation

Read: Filcon Ready Mixed Inc. vs Vergara, July 15, 2020 (four years)
Henson vs. UCPB General Insurance, August 14, 2019 (four years)
Vector Shipping Corp. vs American Home Assurance Co., July 3, 2013 (10
years)

4. Presentation of insurance policy in subrogation suits

Read: 2100 Customs Brokers vs Philam Insurance, June 10, 2020

J. Kinds of insurance

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II. Contract of Insurance

A. Requisites (Art. 1318, New Civil Code)

B. Perfection (Art. 1319, NCC)

a. Cognition theory

Read: Development Bank of the Philippines vs. CA, GR. 100937, March 21, 1994
Enriquez vs. Sun Life Insurance of Canada, GR. 15895, Nov. 29, 1920
Great Pacific Life Assurance vs. CA, GR Nos. 31845 & 31873, April 30, 1979

C. Parties to a contract of insurance (Sec. 6, 7, IC)

1. insurer (Sec. 190-197, Sec. 288-289, IC)
2. insured
3. beneficiary [who can be designated] (Art. 739, 2012, Civil Code; Sec. 11, 12,
53-57, IC; Art. 64 and 225, Family Code)

Read: Insular Life vs Ebrado

4. Art. 38, NCC (capacity of contracting parties)

5. rule on married women (Sec. 3, IC)
6. rule on minors (Sec. 182, IC; Art. 225, Family Code)
7. public enemy (Sec. 7, IC)

Read: Filipinas Compania de Seguros vs Christern, May 25, 1951

8. prohibited acts of insurers (Sec. 193, IC)

D. Subject matter of insurance (Sec. 3, IC )

E. Insurance not a wagering contract (Sec. 4, IC)

III. Insurable Interest

A. Concept of insurable interest in general

B. Reason for the requirement of insurable interest
C. Insurable interest in life insurance (Sec. 10, IC)
D. Insurable interest in property insurance (Sec. 13 –18, IC)

1. Kinds of insurable interest in property

Read: Gaisano Cagayan vs. Insurance Company, GR No. 147839, June 8, 2006
UCPB General vs Asgard Corrugated, GR 244407, Jan. 26, 2021
Pioneer Insurance vs Tan, GR 239989, July 13, 2020

2. Insurable interest in case of mortgaged property (Sec. 8, 9, IC)

a. standard or union mortgage clause
b. open mortgage or loss payable clause

Read: Geagonia vs. CA, February 6, 1995

RCBC vs. CA, 289 SCRA 292, April 20, 1998

3. Separate insurable interest of mortgagor and mortgagee

Read: Great Pacific Life vs CA, 316 SCRA 677, Oct. 13, 1999

4. When must insurable interest in life, property exist (Sec. 19, IC)

Read: Lalican vs Insular Life Assurance, Aug. 25, 2009

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 5. Insurable interest of beneficiary in property, life insurance

6. Effect of change of interest in the thing insured (Sec. 20-24, 53, 57, 58,
184, 185, 395, IC)

7. Assignee in life, property insurance (Sec. 18, 184-185, IC)

Read: Spouses Cha vs. CA, August 18, 1997

IV. Devices for ascertaining and controlling risk and loss

A. Concealment

1. Concept (Sec. 26, IC)

2. Duty to communicate (Sec. 28)
3. Test of materiality (Sec. 31)
4. Effect of concealment (Sec. 27 & 29)
5. Matters which need not be communicated (Sec. 30, 32, 34, & 35)
6. Waiver of information (Sec. 33)
7. Is good faith a defense

Read: Sun Life Insurance vs CA and Bacani, June 22, 1995

Malayan Insurance vs PAP, GR 200784, Aug. 7, 2013
Insular Life vs. Heirs of Alvarez, GR 207526, Oct. 3, 2018
Philamcare Health Systems vs. CA, March 8, 2002
Vda de Canilang vs CA, GR 92492, June 17, 1993
Florendo vs. Philam Plans, GR 186983, Feb. 22, 2012

B. Representation

1. Concept
2. When made (Sec. 37, 47, IC)
3. Kinds of representation (Sec. 36, 37, 39)
4. How interpreted (Sec. 38, 40)
3. Test of materiality (Sec. 46, 31)
4. Effect of alteration or withdrawal (Sec. 41)
5. Time to which representation refers (Sec. 42)
6. Effect when representation is obtained from third persons
(Sec. 43)
7. When presumed false; effect of falsity (Sec. 44, 45)
8. Effect of misrepresentation as to age (Sec. 233d, IC)

Read: Insular Life vs Heirs of Alvarez

Malayan Insurance vs PAP
Manulife vs Ybanez, GR 204736, Nov. 28, 2016

C. Remedies available in case of concealment or false representation

1. When rescission by the insurer may be exercised (Sec. 27, 29, 45, 48)

Read: The Insular Life vs Heirs of Alvarez, GR 207526, Oct. 3, 2018

2. When life insurance policy becomes incontestable (Sec. 48)

a. requisites for incontestability
b. rationale
c. defenses not barred by incontestability

Read: Tan vs CA, June 29, 1989

Manila Bankers Life vs Aban, GR 17566, July 29, 2013

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 Sunlife vs Sibya, June 8, 2016
Floirendo vs Philam Plans, GR 186983, Feb. 22, 2012

D. Warranties

1. Concept; distinguished from representation (Sec. 69, 72)

2. Kinds of warranties (Sec. 67, 68, IC)
3. Express warranty (Sec. 70, 71)
3. Promissory warranty (Sec. 73)
4. Effect of breach (Sec. 74, 75, 76)

Read: Prudential Guarantee vs Trans-Asia Shipping, June 20, 2006

E. Conditions, Exclusions, Exceptions

Read: Country Bankers Insurance vs. Lianga Bay, January 25, 2002

V. The Policy of Insurance

A. Definition and form (Sec. 49-50, 232-237, IC; E-Commerce Act)

B. Fine print rule
C. Contents of the policy (Sec. 51, 53-58)
D. Papers attached to the policy and their binding effect (Sec. 50)
E. Kinds of policy (Sec. 59-62)
F. Cover notes (Sec. 52)

Read: Pacific Timber vs CA, GR L-38613, Feb. 25, 1982

Great Pacific Life vs CA, GR L-31845, April 30, 1979

G. Cancellation of policy (Sec. 64, 65)

H. Renewal of policy (Sec. 66)
I. Reinstatement of policy

Read: Lalican vs. Insular Life, GR 183526, Aug. 25, 2009

The Insular Life vs. Khu, GR 195176, April 18, 2016

J. Prescription of action (Art. 1144-45, Civil Code)

Read: HH Hollero vs. GSIS, HR 152334, Sept. 24, 2014

K. Reformation of policy

Read: Makati Tuscany vs Multi Realty Devt Corp, GR 146726, April 18, 2018

L. Time to commence action on the policy; effect of stipulation (Sec. 63)

Read: Philam Life vs Judge Valencia, GR 139776, Aug. 1, 2002

VI. Premium

A. Concept
B. When insurer entitled to premium (Sec. 77)
C. Exceptions to cash to carry rule (Sec. 77, 79, 233-234, 236, IC)

Read: Makati Tuscany vs CA, GR 95546, Nov. 6, 1992

UCPB vs Masagana Telamart, GR 137172, April 4, 2001
American Home Insurance vs Chua, GR 130421, June 28, 1999

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 B. Effect of non-payment of premium; Exceptions (Sec. 77, 79, RA 10607; Art.
1306, NCC)

Read: Tibay vs CA, GR 119655, May 24, 1996

Phil. Phoenix Surety vs Woodworks, GR L-22684, Aug. 31, 1967
Marques vs Far East Bank, GR 171379, Jan. 10, 2011

C. When insured entitled to return of premiums (Sec. 80-83)

D. Payment through salary deduction (Sec. 78)
E. Future premiums (Sec. 84)

VII. Persons entitled to recover on the policy

A. Beneficiary (Sec. 11-12, 53-54, 56-58, 182, IC; Art. 64, 225, Family Code)
B. Limitations on the appointment of beneficiary (Art 2012, 739, NCC)

Read: Vda de Consuegra vs GSIS, GR L-28093, Jan. 30, 1971

Bonifacio Bros vs Mora, May 29, 1967
Insular Life vs Ebrado, Oct. 28, 1977
Heirs of Maramag vs Maramag, GR 181132, June 5, 2009

C. Rule where insurance is made by an agent or trustee (Sec. 54)

D. Rule where insurance if made by partner or part owner (Sec. 55)

VIII. Loss

A. Transfer of policy, claim (Sec. 85, 175, 184-185, IC)

B. Proximate cause (Sec. 86-88)
C. When insurer not liable (Sec. 89)

Read: UCPB General vs Asgard Corrugated, GR 244407, Jan. 26, 2021

D. Notice and proof of loss (Sec. 90-94)

E. Common insurance policy stipulations relative to loss (deductible clause in motor
vehicle insurance, franchise clause in marine cargo insurance, co-insurance in
marine and fire insurance)

IX. Double Insurance

A. Definition and requisites (Sec. 95, IC)

Read: Malayan Insurance vs Phil. First Insurance, July 11, 2012

Mitsubishi Motors Employees Union vs MMPC, June 17, 2013
Geagonia vs CA, GR 114427, Feb. 6, 1995

B. When prohibited

Read: American Home Assurance vs. Chua, GR 130421, June 28, 1999

C. Distinguished from over-insurance

D. Stipulation against double insurance
E. Rules for payment where there is over-insurance by double insurance (Sec. 96)

X. Reinsurance

A. Definition (Sec. 97, 190, 228, 288, IC)

B. Nature (Sec. 99, 100)
C. When mandatory (Sec. 221, 283, IC)
C. Distinguished from double insurance

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 D. Duty of reinsured to disclose facts (Sec. 98)

PART TWO

SPECIFIC TYPES OF INSURANCE

XI. Marine Insurance

A. Definition
B. Scope of marine insurance (Sec. 101, IC)

Read: 2100 Customs Brokers vs Philam, GR 223377, Dec. 14, 2020

C. Risks or losses covered in marine insurance

perils of the sea vs. perils of the ship

Read: La Razon vs Union Insurance, GR 13983, Sept. 1, 1919

Roque vs. IAC, GR L-66935, Nov. 11, 1985
Cathay Insurance vs CA, GR 76145, June 30, 1987

all risks vs named perils policy

Read: Filipino Merchants vs CA, GR 85141, Nov. 28, 1989

barratry, jettison, inchmaree clause

Read: Cebu Shipyard vs William Lines, GR 132607, May 5, 1999

Roque vs. IAC (barratry)

D. Insurable interest in marine insurance

Shipowner’s insurable interest (Sec. 102)

Rule where vessel is chartered (Sec. 102)
Charter party; kinds

Read: Caltex vs Sulpicio Lines, GR 131166, Sept. 30, 1999

Charterer’s insurable interest (Sec. 108)

Clauses in charter party (Jason clause, clause paramount)
Rule where vessel hypothecated by bottomry (Sec. 103)
Insurable interest in freightage (Sec. 104-106)
Interest in the thing and in profits (Sec. 107)

E. Concealment

1. Meaning of concealment in marine insurance

2. Duty to communicate (Sec. 109)
3. Opinions or expectations of third persons (Sec. 110; relate to Sec. 28, 30)
4. When concealment does not vitiate the entire contract (Sec. 112)
5. Presumption as to knowledge (Sec. 111)

F. Representations

1. Effect of false representation by the insured (Sec. 113)

2. Effect of false representation as to expectation (Sec. 114)

G. Implied Warranties in Marine Insurance

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 1. Seaworthiness (Sec. 115)

a. what constitutes seaworthiness (Sec. 116, 118, 121)

b. when complied with; exceptions (Sec. 117)
c. when voyage consists of different portions (Sec. 119)
d. rule where ship becomes unseaworthy in the course of the
voyage (Sec. 120)
e. cargo worthiness (Sec. 121)

Read: Roque vs IAC, GR L-66935, Nov. 11, 1995

Santiago Lighterage vs CA, GR 139629, June 21, 2004
Caltex vs Sulpicio Lines, Sept. 30, 1999
Delsan vs. American Home Assurance, GR 149019, Aug. 15, 2006

2. Warranty that necessary documents are carried (Sec. 122)

3. Warranty against improper deviation

a. meaning of deviation (Sec. 125)

b. when proper (Sec. 126)
c. effect of improper deviation (Sec. 127)
d. loss subsequent to improper deviation (Sec. 128)

H. Loss

1. Kinds of losses (total or partial, Sec. 129-130)

2. Kinds of total loss (actual and constructive) (Sec. 131-134)
3. When ship prevented from completing voyage (Sec.135)
4. Liability for damages in case of reshipment of cargo (Sec. 136)
5. Right to payment upon an actual total loss (Sec. 137)
6. Scope of insurance against actual total loss (Sec. 139)
7. When constructive total loss exists (Sec. 141)
8. Concept of abandonment and its requisites (Sec. 140-157)
9. Averages

1. Kinds of average (particular and general)

2. Requisites of general average
3. Insurer’s liability for general average (Sec. 166-167)
4. Jason Clause
10. Measure of Indemnity (Sec. 158-168)
11. One-third for new for old rule in marine insurance (Sec. 168)

XII. Fire Insurance

A. Definition and scope of fire insurance (Sec. 169, IC)

B. Risks or losses covered
C. Effect of alteration in the thing insured (Sec. 170-172)

Read: Malayan Insurance vs PAP, Aug. 7, 2013

C. Measure of indemnity (Sec. 173-174)

D. Co-insurance clause
E. Prohibitions (Sec. 175 in relation to Sec. 85)

XIII. Casualty Insurance

A. Concept (Sec. 176, IC)

B. Kinds of Casualty Insurance
C. Theft and Robbery Insurance

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 Read: Fortune Insurance and Surety Co. vs. CA, GR 115278, May 23, 1995

D. Personal Accident and Health Insurance

Read: Finman vs CA, Sept. 2, 1992

Sun Insurance vs CA, July 17, 1992
Biagtan vs The Insular Life, GR L-25579, March 29, 1972
Vda de Gabriel vs CA, GR 103883, Nov. 14, 1996

E. Glass Insurance
F. Employers Liability Insurance
G. Comprehensive Motor Vehicle Insurance
H. Compulsory Motor Vehicle Liability Insurance (Sec. 386-387, 389 IC)

Read: Alliance of Non-Life Insurance Workers vs Mendoza, GR 206159, Aug. 26, 2020

a. Third Party Defined (Sec. 386c, IC)

b. Limit of liability (Sec. 390, IC; IC MC 04-2006)
c. No Faulty Indemnity Clause (Sec. 391; IC MC 04-2006)
d. Change of Ownership (Sec. 395)
e. Notice of Claim/Prescription of Action (Sec. 397-398)
f. Direct Liability of Insurer to Third Party

Read: Heirs of George Poe, April 7, 2009

Tiu vs Arriesgado, GR 138060, Sept. 1, 2004
Vda de Maglana vs Consolacion, GR 60506, Aug. 6, 1992

g. Authorized Driver Clause

Read: Villacorta vs IC, GR L-54171, Oct. 28, 1980

h. Theft Clause

Read: Malayan Insurance vs Alberto, Feb. 1, 2012

Paramount Insurance vs Remonduelaz, GR 173773, Nov. 28, 2012

I. Insurable Interest in Liability Insurance

J. Meaning of “accident” and “accidental” in casualty insurance
K. Basis and extent of insurer’s liability
L. No action clause, cooperation clause

Read: Guingon vs Del Monte, GR L-22042, Aug. 17, 1967

XIV. Suretyship

A. Definition (Sec. 177, RA 10607); two relationships in suretyship

B. Kinds of surety bonds
C. Nature of liability of surety (Sec. 178)

Read: Cellpage vs The Solid Guaranty Inc., GR 226731, June 17, 2020
FGU Insurance vs. Roxas, GR 189526, Aug. 9, 2017

D. Distinctions between suretyship and property insurance (Sec. 179)

Read: American Home Insurance vs FF Cruz, GR 174926, Aug. 10, 2011

XV. Life Insurance

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 A. Definition (Sec. 181, IC)
B. Kinds of life insurance (Sec. 182)
C. Life insurance of minor (Sec. 182)
D. Liability of insurer in case of suicide (Sec. 183)
E. Right to assign life insurance policy (Sec. 184, 185)
F. Measure of indemnity (Sec. 186)
G. Contents of life insurance policy; non-default options (grace period provision,
incontestable clause, misstatement as to age provision, provision on default,
reinstatement clause) Sec. 233f

XVI. Microinsurance

A. Definition (Sec. 187, IC)

XVII. Claims Settlement

A. Unfair claim settlement practices (Sec. 247, IC; additional practices in IRR)
B. Claims for life insurance policies (Sec. 248)
C. Claims for non-life insurance policies (Sec. 249)
D. Delay in payment of claims (Sec. 250, IC)
E. Prescription of action

Read: Tio Khe Chio vs. CA, GR 76101, September 30, 1991
Finman General Assurance vs CA, GR 138737, July 12, 2001
Prudential Guarantee vs. Trans-Asia Shipping Lines, Inc. GR 151890, June 20,
2006

PART THREE

THE BUSINESS OF INSURANCE

XVIII. The Insurance Commission

A. Administrative and Adjudicatory Powers (Sec. 250, 254, 437-439, RA IC)

Read: Malayan Insurance vs Lin, GR 207277, Jan. 16, 2017

B. Appeal from IC ruling (Sec. 439)

C. Violations of Insurance Code; Prescription of Action (Sec. 442-443)
D. Conservatorship

Read: Icon Development Corp. vs. National Life Insurance, March 9, 2020

E. Regulation of Insurance Business (Sec. 192, 193)

F. Prohibited Acts of Insurers
G. Prohibited Acts of Insured (Sec. 251)
H. Financial Regulation (capitalization requirement, margin of solvency, dividend
policy, legal reserves, limit of single risk, security deposit; Sec. 194, 197, 200, 201.
217, 221)
I. Requirements for foreign insurance companies (resident agent, capitalization) Sec.
196
J. What are adjusters; requirements
K. Other prohibited acts (twisting, rebate, hidden agreement, additional inducement,
discrimination)
L. Insurance companies under AMLA

Part Four

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 OTHER SPECIAL LAWS

XIX. Pre-Need Code (RA 9829)

A. Definition of pre-need plans, pre-need companies; kinds of pre-need plans

B. Registration of pre-need plans
C. Licensing of sales counselor and general agent
D. Default and termination
E. Claims settlement, unfair claims settlement practices
F. Trust Fund

Read: SEC vs College Assurance Plan, GR 202052, March 7, 2018

SEC vs Laigo, GR 188639, Sept. 2, 2015

G. Power to adjudicate claims

Read: SEC vs. Laigo

XV. HMOs (EO 192)

A. Definition of HMO
B. Registration of HMOs
C. Are HMOs engaged in the insurance business

XVI. Compulsory insurance for agency-hired oversease Filipino workers (RA 10022 amending
RA 8042; insurance guidelines on Rule XVI of Omnibus Rules implementing RA 8042 as
amended by RA 10022)

A. Who are entitled

B. Minimum insurance benefits
C. Qualification/disqualification of participating insurers
D. Policy duration
E. Non-applicability of incontestable and suicide clauses
F. Who pays the premium/return of premium

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