I.

GENERAL PROVISIONS (Sections 1-2)

A. Concept, Purpose and History

1. Contract of Insurance

“SEC. 2. Whenever used in this Code, the following terms shall have the respective meanings hereinafter set forth or
indicated, unless the context otherwise requires:

“(a) A contract of insurance is an agreement whereby one undertakes for a consideration to indemnify another against
loss, damage or liability arising from an unknown or contingent event.

“A contract of suretyship shall be deemed to be an insurance contract, within the meaning of this Code, only if made by a
surety who or which, as such, is doing an insurance business as hereinafter provided.

 Elements of an Insurance Contract:

(1) The insured has an insurable interest
(2) The insured is subject to a risk of loss by the happening of the designed 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 (Principle of risk distribution)
(5) In consideration of the insurer’s promise, the insured pays a premium

 An insurance contract is a contract whereby one party, for a consideration known as the premium, agrees to indemnify
another for loss or damage which he may suffer from a specified peril.  An "all risks" insurance policy covers all kinds
of loss other than those due to willful and fraudulent act of the insured.  Thus, when private respondents issued the "all
risks" policies to petitioner Mayer, they bound themselves to indemnify the latter in case of loss or damage to the goods
insured. Such obligation prescribes in ten years, in accordance with Article 1144 of the New Civil Code and not one (1)
year under Section 3(6) of the Carriage of Goods by Sea Act. (Meyer Steel Pipe vs. CA GR No. 124050, 6/19/1997)

2. Doing or Transacting Insurance Business

 Meaning
“(b) The term doing an insurance business or transacting an insurance business, within the meaning of this Code, shall
include:

(1) Making or proposing to make, as insurer, any insurance contract;

(2) 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;

(3) 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;

(4) 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 the application of the provisions of this Code, the fact that no profit is derived from the making of insurance
contracts, agreements or transactions or that no separate or direct consideration is received therefor, shall not be
deemed conclusive to show that the making thereof does not constitute the doing or transacting of an insurance
business.

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  Health Maintenance Organizations are not engaged in the insurance business. An HMO is an entity that provides, offers or
arranges for coverage of designated health services needed by plan members for a fixed prepaid premium . To determine whether
an HMO is an insurance business or not, one test – principal object and purpose test – may be applied, that is to
determine whether the assumption of risk and indemnification of loss (which are elements of an insurance business) are
the principal object and purpose of the organization or whether they are merely incidental to its business. If these are
the principal objectives, the business is that of insurance. But if they are merely incidental and service is the principal
purpose, then the business is not insurance. HMO’s principal object and purpose is service rather than indemnity.
Accordingly, its health care programs are designed to prevent or to minimize the possibility of any assumption of
risk on its part. Thus, its undertaking under its agreements is not to indemnify its members against any loss or damage
arising from a medical condition but, on the contrary, to provide the health and medical services needed to prevent
such loss or damage. Moreover, petitioner is not supervised by the Insurance Commission but by the Department of
Health. (Phil Health Care Providers vs CIR, GR No. 154514, 7/28/2005)

 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." By definition then, Steamship Mutual as a P & I Club is a mutual insurance association
engaged in the marine insurance business. 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. Likewise, although
Pioneer is already licensed as an insurance company, it needs a separate license to act as insurance agent for Steamship
Mutual. (White Gold Marine vs. Pioneer Insurance GR No. 154514, 7/28/2005) Section 299 of the Insurance Code clearly
states:
SEC. 299 (now 307) No person shall act as an insurance agent or as an insurance broker in the solicitation or procurement of
applications for insurance, or receive for services in obtaining insurance, any commission or other compensation from any
insurance company doing business in the Philippines or any agent thereof, without first procuring a license so to act from the
Commissioner, which must be renewed annually on the first day of January, or within six months thereafter. .

3. Interpretation of Insurance Contracts

Illustrations:
(1) Even if a contract contains all the elements of insurance if the primary purpose is rendering of service, it is NOT a
contract of insurance (e.g. law firm promises to represent clients in all suits in consideration of periodical payments).
But if a corporation, in consideration of a stipulated amount, agrees to defend a physician against all suits for damages
for malpractice is deemed engaged in the business of insurance.

(2) An insurance company which granted mortgage and other kinds of loans is not converted into a lending institution.
Such is one of several means of investment allowed to insurance companies.

(3) Test to determine an insurance contract: It is NOT by what it is called but by

(a) The nature of the promise
(b) The act required to be performed
(c) The exact nature of the agreement in the light of the occurrence, contingency or circumstances under which the
performance becomes requite.

Mutual Insurance Company

 Is a cooperative enterprise where the members are both the insurer and insured
 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 paid where the profits are divided among themselves, in proportion to their
interest.

Protection and Indemnity (P & I) Club

 Is a form of insurance against third party liability, where the third party is anyone other than the P & I club
members.

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Q: In return for the 20 years of faithful service of X as house helper to Y, the latter promised to pay P100k to X’s heirs if the
formers dies in an accident by fire. X agreed. Is this an Insurance Contract?
 No, since Y actually made a conditional donation in X’s favor.

Cases:

1. In the case of Rizal Surety vs CA 336 SCRA 12, 7/18/2000. Indeed, the stipulation as to the coverage of the fire insurance policy
under controversy has created a doubt regarding the portions of the building insured thereby. Article 1377 of the New Civil
Code provides: "Art.1377. The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the
obscurity" Conformably, it stands to reason that the doubt should be resolved against the petitioner, Rizal Surety Insurance
Company, whose lawyer or managers drafted the fire insurance policy contract under scrutiny. Citing the aforecited provision
of law in point, the Court in Landicho vs. Government Service Insurance System, ruled: "This is particularly true as regards
insurance policies, in respect of which it is settled that the 'terms in an insurance policy, which are ambiguous, equivocal, or
uncertain x x x are to be construed strictly and most strongly against the insurer, and liberally in favor of the insured so as to
effect the dominant purpose of indemnity or payment to the insured, especially where forfeiture is involved, and the reason for
this is that the 'insured usually has no voice in the selection or arrangement of the words employed and that the language of the
contract is selected with great care and deliberation by experts and legal advisers employed by, and acting exclusively in the
interest of, the insurance company.'

2. In construing the words used descriptive of a building insured, the greatest liberality is shown by the courts in giving effect to
the insurance. In view of the custom of insurance agents to examine buildings before writing policies upon them, and since a
mistake as to the identity and character of the building is extremely unlikely, the courts are inclined to consider that the policy
of insurance covers any building which the parties manifestly intended to insure, however inaccurate the description may be.
Notwithstanding, therefore, the misdescription in the policy, it is beyond dispute, that what the parties manifestly intended to
insure was the new oil mill. The object of the court in construing a contract is to ascertain the intent of the parties to the contract
and to enforce the agreement which the parties have entered into. In determining what the parties intended, the courts will read
and construe the policy as a whole and if possible, give effect to all the parts of the contract , keeping in mind always, however,
the prime rule that in the event of doubt, this doubt is to be resolved against the insurer. In determining the intent of the parties
to the contract, the courts will consider the purpose and object of the contract. (American Home Assurance vs. Tantuco GR No.
138941, 10/8/2001)

3. It is a basic rule in the interpretation of contracts that the terms of a contract are to be construed according to the sense and
meaning of the terms which the parties thereto have used. In the case of property insurance policies, the evident intention of the
contracting parties, i.e., the insurer and the assured, determine the import of the various terms and provisions embodied in the
policy. It is only when the terms of the policy are ambiguous, equivocal or uncertain, such that the parties themselves disagree
about the meaning of particular provisions, that the courts will intervene. In such an event, the policy will be construed by the
courts liberally in favor of the assured and strictly against the insurer. (Pan Malayan Insurance vs. CA, GR No. 810256, 4/3/1990)

B. Nature and Characteristics of Insurance Contract

1. Aleatory (Civil Code- insurance, life annuity and gambling)

 Insurance is an aleatory contract whereby one undertakes for a consideration to indemnify another against loss,
damage or liability arising from an unknown or contingent event.
 The insured pays a fixed premium for the duration of the policy period and the amount of the premiums paid to the
insurer is not necessarily the same amount as what the insured will get upon the happening of an uncertain future
event.
 It is not a commutative contract under the terms of which each of the parties is supposed to give an exact equivalent,
either in obligation or performance, to the other

Case:
(1) For peace of mind and as a hedge against possible loss, many people now secure fire insurance. This is an aleatory
contract. By such insurance, the insured in effect wagers that his house will be burned, with the insurer assuring him

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 against the loss, for a fee. If the house does burn, the insured, while losing his house, wins the wager. The prize is the
recompense to be given by the insurer to make good the loss the insured has sustained.(Malayan Insurance vs. Arnaldo &
Pinca GR No L-67835, 10/12/1987)

2. Contract of Indemnity
 An insurer indemnifies the insured based on the loss or injury the latter actually suffered from. If there is no loss or
injury, then there is no obligation on the part of the insurer to indemnify the insured.
 This is consistent with the principle of indemnity which proscribes the insured from recovering greater than the loss.

Case:
(1) An insurer indemnifies the insured based on the loss or injury the latter actually suffered from. If there is no loss or
injury, then there is no obligation on the part of the insurer to indemnify the insured. Should the insurer pay the
insured and it turns out that indemnification is not due, or if due, the amount paid is excessive, the insurer takes the
risk of not being able to seek recompense from the alleged wrongdoer. This is because the supposed subrogor did not
possess the right to be indemnified and therefore, no right to collect is passed on to the subrogee. As regards the
determination of actual damages, "[i]t is axiomatic that actual damages must be proved with reasonable degree of
certainty and a party is entitled only to such compensation for the pecuniary loss that was duly proven." (Loadstar
Shipping Co. Inc. vs. Malayan Insurance Co. Inc. GR no. 185565, 11/26/2014)

3. Contract of Investment for Life Insurance

 For life insurance, the insurance is more of an investment, a form of security for the insured or his beneficiaries. There is
no amount pegged for the value of human life, as opposed to property.

4. Personal
 The insurer takes into consideration the personal circumstances of the insured, including his state of health, when it
approves the policy.
Case:
(1) Section 50 of the Insurance Act which provides that" (t)he insurance shall be applied exclusively to the proper interest
of the person in whose name it is made" 1 cannot be validly seized upon to hold that the same includes the beneficiary.
The word interest" highly suggests that the provision refers only to the insured" and not to the beneficiary, since a
contract of insurance is personal in character. 2 Otherwise, the prohibitory laws against illicit relationships especially on
property and descent will be rendered nugatory, as the same could easily be circumvented by modes of insurance.
Rather, the general rules of civil law should be applied to resolve this void in the Insurance Law Article 2011 of the
New Civil Code states: "The contract of insurance is governed by special laws. Matters not expressly provided for in
such special laws shall be regulated by this Code." When not otherwise specifically provided for by the Insurance Law,
the contract of life insurance is governed by the general rules of the civil law regulating contracts. 3 And under Article
2012 of the same Code, "any person who is forbidden from receiving any donation under Article 739 cannot be named
beneficiary of a life insurance policy by the person who cannot make a donation to him." Common-law spouses are,
definitely, barred from receiving donations from each other. (Insular Life vs. Ebrado GR No. L-44059, 10/28/1977)

5. Executory and Conditional on the part of the insurer but executed on the part of the insured
 The insured, upon payment of the premium, has no more responsibility but to await for the happening of the insured
peril. The insurer, on the other hand, would have to await for the happening of the insured peril before liability could
arise.

6. Contract of perfect good faith (Uberrima Fides)

 The contract of insurance is one of perfect good faith, 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.
 Uberrima fides means good faith; absolute and perfect candor or openness and honesty; the absence of any concealment
or deception, however slight.
 It is a well settled rule of law that an insurer which with knowledge of facts entitling it to treat a policy as no longer in
force, receives and accepts a premium on the policy, estopped to take advantage of the forfeiture. Further, the contract
of insurance is one of perfect good faith ( uferrimal fidei) not for the insured alone, but equally so for the insurer; in fact, it

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 is mere so for the latter, since its dominant bargaining position carries with its stricter responsibility. (Qua Chee Gan vs.
Law union and Rock Insurance 98 Phil 95, 12/17/1955)

7. Contract is considered a risk-distributing devise or *Synallagmatic or reciprocal or bilateral

 An essential characteristic of an insurance is its being synallagmatic, a highly reciprocal contract where the rights and
obligations of the parties correlate and mutually correspond.
 The insurer assumes the risk of loss which an insured might suffer in consideration of premium payments under a risk-
distributing device (Principle of risk distribution).
Case:

(1) In Tibay vs. CA GR No. 119655, 5/24/1996. The contract of insurance is primarily a risk distributing device, a mechanism
by which all members of a group exposed to a particular risk contribute premiums to an insurer. From these
contributory funds are paid whatever losses occur due to exposure to the peril insured against. Each party therefore
takes a risk: the insurer, that of being compelled upon the happening of the contingency to pay the entire sum agreed
upon, and the insured, that of parting with the amount required as premium, without receiving anything therefor in
case the contingency does not happen. Clearly the Policy provides for payment of premium in full. Accordingly, where
the premium has only been partially paid and the balance paid only after the peril insured against has occurred, the
insurance contract did not take effect and the insured cannot collect at all on the policy. This is fully supported by Sec.
77 of the Insurance Code which provides —

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

8. Contract of Adhesion or Fine Print Rule

 One wherein a party, usually a corporation, prepares the stipulations in the contract, while the other party merely
affixes his signature or adhesion.
 In these types of contracts, the parties do not bargain on equal footing, the weaker party’s participation being reduced
to the alternative to take it or leave it. Thus, these contracts are viewed as traps for the weaker party whom the courts of
justice must protect. As such, any ambiguity is resolved against the insurer or construed liberally in favor of the
insured.

C. Doctrine of Estoppel (Art. 1431, NCC)

 This is anchored on the rule that an admission or representation is rendered conclusive upon the person making it, and
cannot be denied or disproved as against the person relying thereon.
 A party is precluded from denying his own acts, admissions or representations to the prejudice of the other party in
order to prevent fraud and falsehood.

Cases:
(1) Dans, who was already 76 years old, was advised by DBP to take a mortgage redemption insurance (MRI) after taking a
loan from it. Dans acquiesced. The DBP MRI Pool however rejected the application as he was over the acceptance age
limit of 60 years at the time of application and informed DBP about it. Unfortunately, Dans had already died. As an
insurance agent, DBP made Dans go through the motion of applying for said insurance, thereby leading him and his
family to believe that they had already fulfilled all the requirements for the MRI and that the issuance of their policy
was forthcoming. Apparently, DBP had full knowledge that Dan’s application was never going to be approved. (DBP
vs. CA, 231 SCRA 370, 3/21/1994)

(2) Songco, who just finished Grade 1, owned a private jeepney. The private agent of Filedmen’s Insurance made him
however believe that he could take a common carrier liability insurance for his private jeep. During the effectivity of the
policy, Songco, who was on board his jeep, figured in an accident and died. Fieldmen could not, therefore, in any

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 litigation arising out of such representation, be permitted to change its stand to the detriment of the heirs of the insured.
As estoppel is primarily based on the doctrine of good faith and the avoidance of harm that will befall the innocent
party due to its injurious reliance, the failure to apply it in this case would result in a gross travesty of justice.
(Fieldmen’s Insurance vs. Songco, GR No L-24833, 9/23/1968)

(3) Masagana Telemart procured insurance coverage from UCPB for a number of years and gad been granted a 60 to 90
day credit term for the renewal of the policies. Time came that the properties insured were burnt by fire and the
insurance premiums for the renewal of the policy were belatedly paid, following the practice. The insured may grant
credit extension for the payment of the premium. This simply 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 low but within the credit term. (UCPB vs. Masagana Telemart, 356
SCRA 307, 4/4/2001) Note: Sec. 77 now allows a 90 day credit extension under broker and agency agreements with duly
licensed intermediaries.

D. Construction of insurance contracts (Doctrine of ambiguity)

 A contract of insurance, being a contract of adhesion, par excellence, any ambiguity should be resolved against the
insurer; in other words, it should be construed liberally in favor of the insured and strictly against the insurer.
Limitations of liability should be regarded with extreme jealousy and must be construed in such a way as to preclude
the insurer from non-compliance with its obligations.

 The basis are as follows:

(a) Article 1377, NCC- The interpretation of obscure words or stipulations in a contract shall not favor the party
who caused the obscurity.

(b) Sec. 17, Rule 130 of the ROC- Of two constructions, which preferred-When the terms of an agreement have
been intended in a different sense by the different parties to it, that sense is to prevail against either party in
which he supposed the other understood it, and when different constructions of a provision are otherwise
equally proper, that is to be taken which is the most favorable to the party in whose favor the provision was
made.

Instances of ambiguities:
1) Ambiguity as to the amount to be paid
2) Ambiguity as to the effectivity of the policy
3) Ambiguity as to the peril insured against
4) Ambiguity as to the area insured

E. Subrogation (Art. 2027, NCC)- from UST reviewer 2017

Article 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. If the amount
paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the
deficiency from the person causing the loss or injury.

Principle of Subrogation
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 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. (NCC, Art. 2207)

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The insurer, upon happening of the risk insured against and after payment to the insured is subrogated to the rights and
cause of action of the latter. As such, the insurer has the right to seek reimbursement for all the expenses paid. (Eastern
Shipping Lines vs. Prudential Guarantee and Assurance, Inc., G.R. No. 174116, September 1, 2009)

NOTE:
(a) The principle of subrogation inures to the insurer without any formal assignment or any express stipulation to that
effect in the policy. Said right is not dependent upon nor does it grow out of any private contract. Payment to the
insured makes the insurer a subrogee in equity. (Malayan Insurance Co., Inc. v. CA, G.R. No. L-36413, Sept. 26, 1988)

(b) Incapacity of the insured will not affect the capacity of the subrogee because capacity is personal to the holder.
(Lorenzo Shipping v. Chub and Sons, Inc., G.R. No. 147724, June 8, 2004)

Purposes of subrogation
1. To make the person who caused the loss legally responsible for it.
2. To prevent the insured from receiving double recovery from the wrongdoer and the insurer.
3. To prevent the tortfeasors from being free from liability and is thus founded on consideration of public policy.

Rules on subrogation
1. Applicable only to property insurance – the value of human life is regarded as unlimited and therefore, no recovery from a
third party can be deemed adequate to compensate the insured’s beneficiary.
2. The right of insurer against a third party is limited to the amount recoverable from latter by the insured.

Rules on indemnity
1. Applies only to property insurance except when the creditor insures the life of his debtor.
2. Insurance contracts are not wagering contracts or gambling contracts.

NOTE: Under the collateral source rule, if an injured person receives compensation for his injuries from a source wholly
independent of the tortfeasor, the payment should not be deducted from the damages which he would otherwise collect
from the tortfeasor. It finds no application to cases involving no-fault insurances under which the insured is indemnified
for losses by insurance companies, regardless of who was at fault in the incident generating the losses. Here, it is clear that
MMPC is a no-fault insurer. Hence, it cannot be obliged to pay hospitalization expenses of the dependents of its
employees which had already been paid by separate health insurance providers of said dependents. (Mitsubishi Motors
Philippines Salaried Employees Union vs. Mitsubishi Motors Corporation G.R. No. 175773, June 17, 2013, in Divina, 2014)

When amount paid by the insurance company does not fully cover the injury or loss
The aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury. (NCC, Art. 2207)

Instances where the right of subrogation does not apply

1. Where the insured by his own act releases the wrongdoer or third party liable for loss or damage from liability

 Since the insurer can be subrogated to only such rights as the insured may have, should the insured, after
receiving payment from the insurer, release the wrongdoer who caused the loss, the insurer loses his rights
against the latter. But in such a case, the insurer will be entitled to recover from the insured whatever it has
paid to the latter, unless the release was made with the consent of the insurer (Manila Mahogany Mfg. Corp vs.
CA and Zenith Insurance G.R. No. L-52756 October 12, 1987).  In this case, plaintiff claimed Zenith the sum of P
5,000 and from SMC (wrongdoer) the amount of P 4,500 and executed as release of claim. The court ordered
plaintiff to return to Zenith the amount of P 5,000 although it only asked for P 4,500.00

2. The insurer loses his rights against the wrongdoer since the insurer can only be subrogated to only such rights as the
insured may have

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 3. Where the insurer pays the insured the value of the loss without notifying the carrier who has in good faith settled the
insured claim for loss

4. Where the insurer pays the insured for a loss or risk not covered by the policy

5. Life insurance

6. For recovery of loss in excess of insurance coverage

NOTE: Since the insurer can be subrogated to only such rights as the insured may have, should the insured, after
receiving payment from the insurer, release the wrongdoer who caused the loss, the insurer loses his rights against the
latter. But in such a case, the insurer will be entitled to recover from the insured whatever it has paid to the latter, unless
the release was made with the consent of the insurer. (Manila Mahogany Manufacturing Corporation v. Court of Appeals, G.R.
No. L-52756, October 12, 1987)

Payment by insurer operates as equitable assignment:

The payment by the insurer to the insured operates as an equitable assignment to the insurer of all the remedies that the
insured may have against the third party whose negligence or wrongful act caused the loss. The right of subrogation is
not dependent upon, nor does it grow out of, any privity of contract. It accrues simply upon payment by the insurance
company of the insurance claim. When it is not disputed that the insurance company indeed paid, then there is valid
subrogation in its favor. (Malayan Insurance Co., Inc., vs. Rodelio Alberto, et al., G.R. No. 194320, February 1, 2012)

Extent of amount the insurer can claim:

 Having been subrogated merely to the rights of the consignee, the insurer’s recovery necessarily should be
limited to what was recoverable by the insured (Rizal Surety vs. Manila Railroad G.R. No. L-24043, April 25, 1968). In
this case, the management contract pegged the amount recoverable at P500.00 but the insurer paid a total of
P16,680.70.

 If the assured's right of action is limited or restricted by lawful contract between him and the person sought to be
made responsible for the loss, a suit by the insurer, in the light of the assured, is subject to like limitations or
restrictions (St. Paul Fire and Marine Insurance vs. Macondray G.R. No. L-27796 March 25, 1976)

 As the subrogee of the shipper, the insurer is contractually bound by the terms of the Charter party.  Any claim of
inconvenience or additional expense on its part should not render the arbitration clause unenforceable (National
Union Fire Insurance vs. Stolt-Nielsen, G.R. No. 87958, April 26, 1990).

Remedy if the amount paid by insurer does not fully cover the loss
 If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be
entitled to recover the “deficiency” (i.e. total loss less insurance proceeds) from the person causing the loss or
injury (FF Cruz vs. CA, G.R. No. L-52732 August 29, 1988)

F. Types of Insurance
1. Life insurance
 Is insurance on human lives and insurance appertaining thereto or connected therewith. It includes health and
accidental insurance, being connected to life.
 This excludes health care agreement since it is in the nature of non-life insurance, which is primarily a contract of
indemnity. Once the members incur hospital, medical or any other stipulated contingent, the health care provide
must pay for the same to the extent agreed upon under the contract.

2. Non-Life
 All other insurances like marine, fire and casualty insurance

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III. WHAT MAY BE INSURED AGAINST (Sections 3-5)

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 spouse is not necessary for the validity of an insurance policy taken out by a married person on his
or her life or that of his or her children.
All rights, title and interest in the policy of insurance taken out by an original owner on the life or health of the person
insured shall automatically vest in the latter upon the death of the original owner, unless otherwise provided for in the policy.

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

A. Perils Covered
(1) A future contingent event resulting in loss or damage (e.g. possible destruction of cargo)
(2) A past unknown event resulting in loss or damage (e.g. fact of past sinking of vessel unknown to the parties)
(3) Contingent liability (e.g. reinsurance)

 Contingent means something that might or might not happen.

 Unknown event pertains to the time frame for its happening (e.g. death is certain but nobody knows when)
 To be covered, the past event must be unknown to both parties and they must expressly stipulate that a prior loss is
insured by the policy.
 The event may also damnify or injure/cause damage (i.e. fire insurance obtained by owner of the house) to the insured or
create liability against him (e.g. third party liability taken by owner of the car for injury to third persons)
 When does liability accrue? Upon occurrence of the injury or event upon which the liability depends

B. Marital consent
 This is not necessary for an insurance policy taken by the spouse on his/her life or that of his/her children.

C. Effect of death of the owner of the original policy

 In case the original owner of a policy taken on the life or health of an insured should predecease the latter, all rights,
title and interest in the policy shall automatically vest in the insured, unless otherwise provided for in the policy.

 Ex. Husband took an insurance on the life of his wife and designated himself as beneficiary. The husband died. The
wife would then acquire title or interest over the policy, unless the policy provides otherwise.

III. PARTIES TO AN INSURANCE CONTRACT (sections 6-9)

A. Insurer/Underwriter
SEC. 6. Every corporation, partnership, or association, duly authorized to transact insurance business as elsewhere
provided in this Code, may be an insurer.

 He is the party who agrees to indemnify another upon the happening of an unknown or contingent event

Insurance Law Tambasacan and *DLSU Page 9

  The business of insurance may be carried on by individuals just as much as by corporations and associations.
 For a person to be called an insurance agent, it is necessary that he should perform the function for compensation.
(Aisporna v. Court of Appeals)*

B. Insured/Assured
SEC. 7. Anyone except a public enemy may be insured.

 He is the party to be indemnified in case of loss

 Requisites:
(i) Capacity to contract;
(ii) Possess an insurable interest in the subject of the insurance;
(iii) Must not be a public enemy:
 A public enemy is a nation at war with the Philippines and includes its citizens or subjects. Such term does
not include robbers, thieves and riotous mobs. This is in order to cripple the power and exhaust the resources
of the enemy. (hence, members of the Abusayyaf, NPA or MILF are still insurable)

 The policy is null and void. 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 US and Germany. (Filipinas Compania de Seguros vs. Christern, Huenfield & co. 89 Phil 54)
 The terms insured and assured are generally used interchangeably; but technically, insured refers to the owner or
property insured or the person whose life is the subject of the contract of insurance; while assured refers to the
person for whose benefit the insurance is granted.*

C. Beneficiary
 He is the person who is supposed to receive the proceeds of an insurance policy.
 It is possible that there are only two persons involved such when the beneficiary and the insured are one and the same.

Article 2015. NCC. If cheating or deceit is committed by the winner, he, and subsidiarily the operator or manager of the
gambling house, shall pay by way of exemplary damages, not less than the equivalent of the sum lost, in addition to
the latter amount. If both the winner and the loser have perpetrated fraud, no action for recovery can be brought by
either.

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. Notwithstanding the foregoing, in the event the insured does not change the
beneficiary during his lifetime, the designation shall be deemed irrevocable.

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 such a case, the share forfeited shall
pass on to the other beneficiaries, unless otherwise disqualified. In the absence of other beneficiaries, the proceeds shall
be paid in accordance with the policy contract. If the policy contract is silent, the proceeds shall be paid to the estate of
the insured.

D. Mortgagor/Mortgagee

SEC. 8. Unless the policy otherwise provides, where a mortgagor of property effects insurance in his own name providing that
the loss shall be payable to the mortgagee, or assigns a policy of insurance to a mortgagee, the insurance is deemed to be upon
the interest of the mortgagor, who does not cease to be a party to the original contract, and any act of his, prior to the loss,
which would otherwise avoid the insurance, will have the same effect, although the property is in the hands of the mortgagee,
but any act which, under the contract of insurance, is to be performed by the mortgagor, may be performed by the mortgagee
therein named, with the same effect as if it had been performed by the mortgagor.

Insurance Law Tambasacan and *DLSU Page 10

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 obligations on the assignee, making a new contract with him, the acts of the mortgagor cannot affect the rights
of said assignee.

SEC. 13. Every interest in property, whether real or personal, or any relation thereto, or liability in respect thereof, of such
nature that a contemplated peril might directly damnify the insured, is an insurable interest.

 Who can procure? The mortgagor and mortgagee have each an independent insurable interest:
(a) both interests may be covered by one policy or
(b) each may take out a separate policy covering his interest, either at the same time or at separate times

 Coverage of insurable interest:

(a) Mortgagor- full value of the mortgaged property even though the mortgage debt is equivalent to the full value of
the property.

(b) Mortgagee- to the extent of the debt, since the property is relied upon as security, and in insuring he is not
insuring the property but his interest or lien.
 His insurable interest is prima facie the value mortgaged and extends only the amount of the debt, not
exceeding the value of the mortgaged property.

 Insurance by mortgagor of his own interest

A. Own benefit
 In case of loss, the insurance proceeds do not inure to the benefit of the mortgagee who has no greater right
than unsecured creditors

B. Insurance for benefit of mortgagee taken by mortgagor- he may be made a beneficial payee in several ways:
(a) Assignee of the policy with the consent of the insurer
(b) Mere pledgee even without consent of insurer
(c) The original policy may contain a mortgage clause
(d) A rider making the policy payable to a mortgagee “as his interest may appear” may be attached
(e) A “standard mortgage clause” containing a collateral independent contract between mortgagee and insurer may
be attached
(f) The policy, though by its terms payable absolutely to the mortgagor, may have been procured by a mortgagor
under a contract duty to insure for the mortgagee’s benefit, in which case the mortgagee acquires an equitable
lien upon the proceeds.
(g) Policy obtained by mortgagor with “loss payable clause” in favor of mortgagee as his interest may appear, the
mortgagee is only a beneficiary under the contract, recognized by the insurer but not made a party to the
contract
 In this case, any act of the mortgagor which defeats his right will also defeat the right of the mortgagee.
This kind of policy covers only such interest as the mortgagee has at the issuing of the policy.

Effects of Loss Payable Clause

a. The contract is deemed to be upon the interest of the mortgagor; hence, he does not cease to be a party to the
contract.

b. Any act of the mortgagor prior to the loss, which would otherwise avoid the insurance affects the mortgagee even
if the property is in the hands of the mortgagee.

c. Any act, which under the contract of insurance is to be performed by the mortgagor, may be performed by the
mortgagee with the same effect.

Insurance Law Tambasacan and *DLSU Page 11

 d. In case of loss, the mortgagee is entitled to the proceeds to the extent of his credit.

e. Upon recovery by the mortgagee to the extent of his credit, the debt is extinguished.

Standard Or Union Mortgage Clause Open Or Loss Payable Mortgage Clause

Subsequent acts of the mortgagor cannot Acts of the mortgagor affect the mortgagee because
affect the rights of the assignee the former does not cease to be a party to the contract.

IV. INSURABLE INTEREST (Sections 10-25)

A. Insurable Interest
 Is that which a person is deemed to have in the subject matter insured, where he has a relation or connection with or
concern in it, such that the person will derive pecuniary benefit or advantage from the preservation of the subject
matter insured and will suffer pecuniary loss or damage from its destruction, termination or injury by the happening of
the event insured.
 The existence of an insurable interest gives a person the legal right to insure the subject matter of the policy of insurance

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 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.

B. Insurable interest in life

 Insurable interest exists where there is reasonable ground, founded on the relations of the parties, either pecuniary or
contractual or by blood of affinity, to expect some benefit or advantage from the continuance of the life of the insured.
 Even if there is insurable interest, consent of the insured must be secured to obviate danger to the public. Consent is
strong evidence of good faith of the person procuring the insurance.

(1) Interest on one own’s life

 A person can insure his own life and generally, designate anyone as beneficiary. Possession by the beneficiary of
insurable interest on the life of the insured is not required as designation of beneficiary is founded on the liberality
of the insured.
(2) Interest on one’s spouse
 Presumed to be the legal spouse as it is derived from the FC provision on support and NCC provision on
prohibited donations.
(3) Interest on one’s children
 There is no requirement as to what kind of children, hence, the law does not make any qualification as to whether
the children be legitimate or illegitimate or minor or of legal age.
(4) Interest based on dependence for education
 Under Art. 195 of the FC, the following are obliged to support each other:
(a) The spouses
(b) Legitimate ascendants and descendants
(c) Parents and their legitimate children and the legitimate and illegitimate children of the latter
(d) Parents and their illegitimate children and the legitimate and illegitimate children of the latter

Insurance Law Tambasacan and *DLSU Page 12

 (e) Legitimate brothers and sisters, whether of full or half blood
Under Art. 196, brothers and sisters not legitimately related, whether of the full or half blood are bound to support
each other except only when the need for support of the brother or sister, being of age, is due to a cause imputable
to the claimant’s fault or negligence.
(5) Interest based on pecuniary interest
 A corporation can take an insurance upon the life of important official to indemnify it against loss in case of his
death
 Employer does not automatically have insurable interest over the life of its employee. The death of the employee
should materially and injuriously affect the company.
 A partner in a partnership can insure the life of his other partners regardless of whether he is a capitalist or
industrial partner.
(6) Legal obligation for payment of sum of money
 A creditor can insure the life of his debtor to the extent of the indebtedness
(7) Estate dependent on life of insured
 Ex. usufruct

Amount:
GR: There is no limit in the amount the insured can insure his life
XPN: In a creditor-debtor relationship where the creditor insures the life of his debtor, the limit of insurable interest is
equal to the amount of the debt.

Notes:
a. If at the time of the death of the debtor the whole debt has already been paid, the creditor can no longer recover on the
policy because the principle of indemnity applies.

b. Each person has unlimited interest in his own life, whether the insurance is for the benefit of himself or another.

c. The beneficiary designated need not have any interest in the life of the insured when person takes out policy on his own
life. But if a person obtains a policy on the life of another and names himself as the beneficiary, he must have insurable
interest therein.

C. Time when insurable interest in life must exist

 Interest in life or health of a person insured must exist when the insurance takes effect, but need not exist thereafter or
when the loss occurs.
 Acquisition of insurable interest later own does not cure the defect (ex. BF insured GF, later they married)
 Ex. a man insured his wife. The wife died and it was discovered that she’s a transgender. Can the husband recover? Yes if
the insurer does not file for annulment of the insurance contract.

D. Designation of beneficiary in life insurance

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. Notwithstanding the foregoing, in the event the insured does not change the beneficiary
during his lifetime, the designation shall be deemed irrevocable.

 The insured have the right to change the beneficiary he designated in the policy, unless he has expressly waived this
right in said policy. Notwithstanding, in the event the insured does not change the beneficiary during his lifetime, the
designation shall be deemed irrevocable.

Type of designation:
1. Revocable

Insurance Law Tambasacan and *DLSU Page 13

  When the policy is silent, the presumption is that the designation is revocable, meaning, the insured can change the
beneficiary at will.

2. Irrevocable. Effects: The insured cannot

(a) Assign the policy
(b) Take the cash surrender value of the policy
(c) Allow creditors to attach or execute on the policy
(d) Add a new beneficiary- it will diminish the interest of the beneficiary
(e) Change the beneficiary
(f) Change the designation from irrevocable to revocable

Why? The beneficiary had acquired vested rights over the policy.

 Note: The insured does not even retain the power to destroy the contract by refusing to pay the premiums for the
beneficiary can protect his interest by paying such premiums for he has an interest in the fulfillment of the
obligation.

Exceptions on irrevocable beneficiary:

(1) In cases of void marriages, the innocent spouse may revoke the designation of the other spouse who acted in bad faith
as a beneficiary in any insurance policy, even if such designation be stipulated as irrevocable.

(2) 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. The share forfeited shall pass on to:
(a) other beneficiaries unless otherwise disqualified
(b) In the absence of other beneficiaries, the proceeds shall be paid in accordance with the policy contract
(c) If the policy contract is silent, the proceeds shall be paid to the estate of the insured.

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 such a
case, the share forfeited shall pass on to the other beneficiaries, unless otherwise disqualified. In the
absence of other beneficiaries, the proceeds shall be paid in accordance with the policy contract. If the
policy contract is silent, the proceeds shall be paid to the estate of the insured.

Who can become a beneficiary? Anyone except those forbidden by law under Art. 739 of the NCC:
(1) Those made between persons who are guilty of adultery or concubinage at the time of the donation
(2) Those made between persons found guilty of the same criminal offense, in consideration thereof. The action for nullity
brought by the spouse of the donor or done and the guilt of the door and done may be proved by preponderance of
evidence in the same action.
(3) Those made to a public officer or his wife, descendants and ascendants, by reason of his office.

 Reason: A life insurance policy is no different form a civil donation insofar as the beneficiary is concerned. Both
are founded on the same consideration of liberality. [Insular Life v. Ebrado]

E. Insurable interest in property

SEC. 13. Every interest in property, whether real or personal, or any relation thereto, or liability in respect thereof, of
such nature that a contemplated peril might directly damnify the insured, is an insurable interest.

Carrier or Depositary
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.

Insurance Law Tambasacan and *DLSU Page 14

  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.

SEC. 17. The measure of an insurable interest in property is the extent to which the insured might be damnified by loss or
injury thereof.

 Insurable interest in property does not necessarily imply a property interest in, or a lien upon, or possession of the
subject matter of the insurance and neither the title nor a beneficial interest is requisite to the existence of such an
interest.
 It is sufficient that the insured is so situated with reference to the property that he would be liable to loss should it be
injured or destroyed by the peril against which it is insured.
 Anyone has an insurable interest in property who derives benefit from its existence or would suffer loss from its
destruction
 The measure of an insurable interest in property is the extent to which the insured might be damnified by loss or injury
thereof.

Basis of insurable interest in property

 Based on sound public policy
 To prevent a person from taking out an insurance policy on property upon which he has no insurable interest and
collecting the proceeds of said policy in case of loss of the property.

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.

(1) An existing interest

 This could refer to ownership, or the interest of a mortgagor or mortgagee on a property, or that of a carrier or
depository, or a buyer in a perfected contract of sale, or a lessee in the property subject of the lease.

Case:
1. IMC (maker of wrangler jeans) and LSPI (distributor of Levi’s), obtained fire insurance policies on book debts in
connection with ready -made clothing materials which have been sold or delivered to various customers and
dealers. Book debts refer to the unpaid account still appearing in the book of account of the insured 45 days after
the time of the loss. The jeans which were delivered to Gaisano were however burned. Considering that the jeans
were already delivered to the buyer, does the unpaid seller still possesses insurable interest over it?
Yes. A vendor or seller retains an insurable interest in the property sold so long as he has nay interest therein,
in other words, so long as he would suffer by its destruction, as where he has a vendor’s lien. 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.
Also, the insurance in this case is not for loss of goods by fire but for Gaisano’s accounts with IMC and LSPI
that remained unpaid 45 days after the fire. (Gaisano Cagayan vs. Insurance Company of Northern America,490 SCRA
286, 6/8/2006)

(2) An inchoate interest founded on an existing interest

 Mere inchoate interest is insufficient.
 This means interest which is not a present interest but which may ripen into a vested estate, if not barred,
extinguished, or divested.
 The inchoate interest must be founded on an existing interest.
 Examples: a partner in a firm on its future profits, judgment creditor on debtor’s property, a mortgage creditor on
debtor’s mortgaged property. In this case, the owner and the creditor/mortgagee can apply for separate policies. A
general creditor has no insurable interest in any of the specific properties of a debtor.

Insurance Law Tambasacan and *DLSU Page 15

(3) An expectancy coupled with an existing interest in that out of which the expectancy arises.
 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. 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.
 A child cannot procure an insurance policy over properties he may inherit while the testator is still alive because in
succession, interest based on the will is transmitted only after death.

 Ex.( di ko gets) A owns house worth 50k insured for 100k. A obtained loan of 100k from B with the insured
property as mortgage. The loan was not paid, hence, the property was sold in public auction and B as highest
bidder. B insured it for 120k with another insurance company. A borrowed from C to redeem the property and
assigned the insurance to C. before redemption, the house was burned. Who can recover?

(a) A has insurable interest in his house, an existing interest, but only for 50k, the value of the said house. But
when he assigned it to C, A had no more interest in his insurance policy, and A cannot recover on it.
(b) As to B, his insurable interest is the amount of the mortgage, which is 100k.
(c) As to C, he has no insurable interest, being mere contingent or expectant interest not found on an actual
right or valid contract to A’s house.

Amount:
 The measure of insurable interest in property is the extent to which the insured might be damnified by loss or
injury thereof.

F. Time when insurable interest in property must exist

 An interest in property insured must exist when the insurance takes effect AND when the loss occurs, but need not
exist in the meantime.

“SEC. 19. An interest in property insured must exist when the insurance takes effect, and when the loss occurs,
but need 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 occurs.

Examples:
(1) A’s land and building was levied for his debt to B of 500k. The land was sold at public auction and B was the highest
bidder. On 3/18/2003, B registered it with the ROD. On 1/27/2004, A insured the same property. A failed to redeem the
property on 3/18/2004. On 3/19/2004, the building was destroyed by fire. The insurer refused to pay.
(a) Is the insurer legally justified in refusing payment? Yes. At the time of the loss, A was no longer the owner of
the property since he failed to redeem the same. Insurable interest must exist at the time of the issuance of the
policy AND at the time of loss.
(b) Is B, the buyer, entitled to collect? No, while at the time of loss, he had insurable interest in the building, as he
became the owner thereof, B did not have any interest in the policy. There was no automatic transfer clause in
the policy to give him interest.

(2) X insured his house worth 100k for 50k on 9/1/2003. X obtained loan of 20k from Y. Y insured the house for 20k because
the loan was without security. On 9/10/2003, X sold the house to Y without transferring his policy. On 9/27/2003, the
house was destroyed. Can X and Y recover on their policies?
No, they cannot. X cannot recover because he had no insurable interest at the time the loss occurred as he had
already sold the house. Y cannot recover under his own policy because he had no insurable interest at the time he
procured the insurance, not being the owner of the house or a mortgagee.

(3) A insured his house worth 500k for 250k for the period 1/1/1977-1/1/1978. The house was levied for B and to whom the
same was adjudicated during the auction sale for 150k. B insured the house for 150k for 3/16/1977-3/16/1978. The house
was burned on 4/1/1977. May A recover under his policy?

Insurance Law Tambasacan and *DLSU Page 16

 Yes. A judgment creditor whose property has been seized on execution has insurable interest until the right to
redeem has been lost. A can redeem the property within the 12-month period. As it has not yet elapsed, he still has
insurable interest in the house at the time of loss.

G. Designation of a beneficiary in property insurance

 As opposed from life insurance, the beneficiary in property insurance must possess insurable interest in the subject of
the insurance.
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.

Examples:
(1) Yuri, owner of a condominium unit insured the same against fire with XYZ insurance and made the loss payable to
his brother, Jacob. In case of loss by fire, who may recover?
Yuri can recover. He has the insurable interest as owner-insured. As beneficiary in the fire insurance policy, Jacob
cannot recover. It is required that he must have insurable interest in the property insured.

Case:
(1) Spouses Cha entered into a lease contract with CKS Dev’t Corp. as lessor. One of the stipulations in the lease contract
was a prohibition on taking fire insurance by the lessee without approval of the lessor. In case the lessee shall obtain
insurance without the consent of the lessor then the policy shall be deemed assigned and transferred to the lessor.
Notwithstanding this stipulation, the spouses Cha insured against loss by fire their merchandise inside the leased
premises. Who can recover?
CKS cannot be validly a beneficiary of the fire insurance policy taken by the spouses over their merchandise. This
insurable interest over said merchandise remains with the insured, the Cha spouses. The automatic assignment of the
policy to CKS under the provision of the lease contract is void for being contrary to law or public policy. (Sps. Cha vs.
CA, GR No. 124520, 8/18/1997)

H. Insurable interest in life vs. property

Basis Life Property

1. Amount to be insured Unlimited, except one taken by Limited to actual value of interest in
creditor on life of debtor the property.
2. When it must exist Must exist at the time insurance take Must exist both at the time insurance
effect but not when the loss occurs takes effect and at the time of loss, but
need not exist in the meantime.
3. As to beneficiary Beneficiary need not possess insurable Beneficiary must possess insurable
interest on the life of the insured interest on the property
4. As to expectation of benefit Expectation of benefit to be derived Expectation must have legal basis.
from continued existence of life need
not have any legal basis

Examples:
1. IS, an elderly bachelor with no known relatives, obtained life insurance coverage for 250k from Starbrite Ins. Corp. he
also insured his residential house for twice that amount with the same corporation. He immediately assigned all his rights
to the insurance proceeds to BX, a friend-companion living with him. Three years later, IS died in a fire that gutted his
insured house two days after he sold it. There is no evidence of suicide or arson or involvement of BX in these events. BX
demanded payment of the insurance proceeds from the two policies, the premiums which IS had been faithfully paying

Insurance Law Tambasacan and *DLSU Page 17

during all the time he was alive. Starbrite refused payment, contending that BX had no insurable interest and thus not
entitled to receive the proceeds from IS insurance coverage on his life and also on his property.
Starbrite is correct with respect to the insurance coverage on the property of IS. The beneficiary in the property
insurance must have an insurable interest in the property insured. BX, a mere friend-companion of IS, has no insurable
interest in the house of IS. Not only that, even BX has no more insurable interest in the house as the loss occurred after the
sale of the house.
As to the life insurance policy, BX is entitled to receive the proceeds. There is no requirement that the beneficiary
should have insurable interest in the life of IS, as it was IS himself who took the insurance on his own life.

2. On 1/4/1983, Mr. P joined Alpha corp. as president of the company. Alpha took out a life insurance on the life of Mr. P
with Mutual Insurance company, designating Alpha as beneficiary. Alpha also carried a life insurance with Beta
insurance company on a house owned by it but temporarily occupied by Mr. P, again with Alpha as beneficiary, On
9/1/1983, Mr. P resigned from Alpha and purchased the house he is occupying. A few days later, a fire occurred resulting
in the death of Mr. P and destruction of the house.
Alpha can recover against Mutual in the life insurance policy as its insurable interest in the life of the person insured
existed when the insurance took effect/ Insurable interest need not exist thereafter or when the loss occurred.
Alpha cannot recover from Beta since an interest in property insured must exist not only when the insurance takes
effect but also when the loss occurred. Since Alpha is no longer the owner of the house, it has no longer insurable interest
in the property.

I. Effect of change of insurable interest

GR: Change of interest in any part of a thing insured unaccompanied by a corresponding change of interest in the
insurance, suspends the insurance to an equivalent extent, until the interest in the thing and the interest in the insurance
are vested in the same person.

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 of 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.

Examples:
(1) Mr. A owns a house and insured it against fire. During the pendency of the fire insurance, MR. A sold the house to
Mr. X. The house is then destroyed by fire. As an effect of the sale, there is change of interest over the house. Mr. A
cannot recover from the insurance taken as he had already sold it to Mr. X. Mr. A did not sustain any loss, as he is no
longer the owner. On the other hand, Mr. X cannot likewise recover from the insurance taken by Mr. A because he
was not the one who took the insurance policy. Following the basic concept of relativity of contracts, the same could
only bind the parties, their heirs or assigns.
(2) N owns a condominium unit presently insured with Holy Insurance for 1million. N later sells the condo to O.
Somehow, O fails to obtain the transfer of the insurance policy to his name from N. Subsequently, fire destroys
completely the condo unit. Who may collect?
Neither N nor O may collect.
Although N had insurable interest when the insurance took effect, he had no more insurable interest at the time of
loss. A change of interest in any part of a thing insured unaccompanied by a corresponding change of interest in the
insurance, suspends the insurance to an equivalent extent, until the interest in the thing and the interest in the
insurance are vested in the same person.
O cannot recover as he had no insurance contract on the said condo unit bought from N.

Exceptions:
(1) Presence of automatic transfer clause

Insurance Law Tambasacan and *DLSU Page 18

  It means that interest in the policy shall follow interest in the property.
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.

Example:
(a) A mortgagor took a fire insurance policy. The same provided that the loss was “payable to the San Miguel
Brewery, mortgagee, as its interest may appear, remainder to whomsoever, during the continuance of the
risk, may become the owner of the interest insured.” The mortgagor sold the property without assignment of
the insurance to him. The new owner can recover, as the policy was framed that it will inure to the benefit of
the new owner.
(b) A house and lot is covered by real estate mortgage in favor of Z Bank. The bank required that the house be
insured. The owner of the policy failed to indorse nor assign the policy to the bank. However, the deed of
REM has an express provision which says that the insurance policy is also indorsed with the signing of the
REM. Will this be sufficient?
The express provision contained in the deed of REM to the effect that the policy is also indorsed is
sufficient.

Case:
1. In San Miguel Brewery vs. Law Union & Rock Insurance Co. (40 Phil 674 1/19/1920), the policy was framed where
the name of the San Miguel Brewery appeared as the assured, and contained no reference to any other interest in the
property. It likewise provided the usual clause requiring assignments to be approved and noted on the policy. As a
result, Harding, the new owner, was unable to recover as there was no reference to the new owner.

(2) Life, accident and health insurance

 This is an exception considering that insurable interest is required only when the insurance takes effect, but need
not exist thereafter or when the loss occurs. Thus, there is no effect when there is change of insurable interest later
on.

(3) Change of interest in the thing insured after the loss

 After the loss occurs, the right of the insured under the policy had already become fixed and subsequent
conveyance cannot affect the insurer’s liability. Moreover, it is only required that possession of insurable interest
must be at the time the insurance took effect and at the time of loss, not at the time of sale or disposition of the
property.

SEC. 21. A change of 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.

Example:
1. A has a house and insured it for a year against fire on March 1. On July 2, the house was destroyed but nonetheless,
a buyer took interest on it and bought it on July 5. A filed a claim on July 7. Even if A is no longer the owner, A can
still recover as the cessation of insurable interest happened only after the loss occurred.

2. X owned a house and lot. X insured the house. The house got burned. Then he sold the partially burnt house and
the lot to Y. X is still entitled to the proceeds of the insurance policy because what is material is that at the time of the
loss, X is the owner of the house and lot.

(4) Change of interest in policy insuring several things separately insured by one policy does not avoid the insurance a to
others
SEC. 22. A change of interest in one or more of several distinct things, separately insured by one policy, does not
avoid the insurance as to the others.

Insurance Law Tambasacan and *DLSU Page 19

 Example:
A own two houses situated in the same compound for which A took a single fire insurance policy and was
charged with a single premium. A sold one house and the other one was burned later on by fire. A can still recover
from the fire insurance as the contract is divisible.

(5) Change of interest in policy by will or succession on the death of the insured.
SEC. 23. A change of 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.
 The interest of the deceased insured merely passes to his heirs thus the latter would be receiving the proceeds in
case of loss.
Example:
A’s father insured the family mansion against fire. During the effectivity of the policy, he died. A, being the only heir,
acquired ownership over the mansion. In case the mansion is burned, A can recover as the interest of his father
passed to him by virtue of succession.

(6) Transfer of interest by one of several partners or owners to the others does not avoid the insurance even though it has
been agreed that the insurance shall cease upon alienation of the thing.
 This covers only a situation where the transfer of interest is made by a partner or co-owner to a fellow partner or
co-owner. This rule does not apply if the transfer is in favor of a third person or stranger.

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.

Example:
A and B are sisters and co-owners of a house which the two inherited from their parents. The two jointly insured the
house against fire. B, during the effectivity of the policy, decided to sell her share to A. In case the house is destroyed
by fire, A can still collect as there is no suspension of the policy. But if B sells her interest over the house to a third
person, the policy is suspended in so far as the portion sold to the third person.

J. Insurable interest of mortgagor and mortgagee over mortgaged property

 The mortgagor and mortgagee have each an insurable interest in the property mortgaged and this interest is
separate and distinct from the other.
 Thus, insurance taken by one in his own name only and in his favor alone, does not inure to the benefit of the
other.
 In case both of them take out separate insurance policies on the same property, or one policy covering their
respective interest, the same is not open to the objection that there is double insurance.
 Mortgagor- Has an insurable interest therein to the extent of its value, even if the mortgage debt equals such value
since he is the owner.
 Reason: Loss or destruction of the property insured will not extinguish the mortgage debt.
 Mortgagee- Interest is only up to the extent of the debt and the interest continues until the mortgage debt is
extinguished.

Note: The lessor cannot be validly a beneficiary of a fire insurance policy taken by a lessee over his merchandise, and the
provision in the lease contract providing for such automatic assignment is void for being contrary to law and public
policy. (Sps. Cha v. Court of Appeals)

Insurance Law Tambasacan and *DLSU Page 20

K. Void stipulations
SEC. 25. Every stipulation in a policy of insurance for the payment of loss whether the person insured has or has not any
interest in the property insured, or that the policy shall be received as proof of such interest, and every policy executed by
way of gaming or wagering, is void.

(1) Stipulation for payment of loss whether person insured has or has no interest in the property insured.
(2) Stipulation that the policy shall be received as proof of such interest.
(3) Gaming or wagering policy.
 The prohibition is founded on the possibility that the interested party might be tempted to bring about the happening
of the event insured against.

V. CONCEALMENT
 Is neglect to communicate that which a party knows and ought to communicate.
 Exists where the assured had knowledge of a fact material to the risk and honesty, good faith and fair dealing requires
that he should communicate it to the assurer, but he designedly and intentionally withholds the same.
 Basis: Insurance contract is one of perfect good faith

SEC. 26. A neglect to communicate that which a party knows and ought to communicate, is called a concealment.

SEC. 27. A concealment whether intentional or unintentional entitles the injured party to rescind a contract of
insurance.

A. Matters that must be communicated in good faith

(1) Facts which are within his knowledge
 A party must have knowledge of the concealed fact at the time of the effectivity of the policy. But if he acquired
knowledge thereof after the application but before its effectivity, he is guilty of concealment if he fails o disclose it. On
the other hand, information obtained after effectivity need not be discloses as the insurer could no longer be influenced
in making its decision, as the policy had already been issued.
 When concealment of material fact determined? At any time before the policy becomes effective.

(2) Those which are material to the contract

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 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 of the information withheld does not depend on the state of mind of the insured. Neither does it depend on
the actual or physical events which ensue.
 Though the facts concealed had no bearing to the cause of death of the insured, it is well settled that the insured need
not die of the disease he had failed to disclose to the insurer. It is sufficient that his non-disclosure misled the insurer in
forming his estimates of the risks of the proposed insurance policy or in making inquiries.
Cases:
(a) Bacani took a non-medical life insurance policy with Sun Life. When asked questions regarding his state of health, he
limited his answer to having a consultation for cough and flu only. He died in a plane crash. It was later learned that
before he applied for insurance, he was diagnosed for renal failure and subjected to urinalysis, ultra-sonography and

Insurance Law Tambasacan and *DLSU Page 21

 hematology tests. Though the facts concealed had no bearing to the cause of death of the insured, it is well-settled that
the insured need not die of the disease he had failed to disclose to the insurer. It is sufficient that his non-disclosure
misled the insurer in forming his estimates of the risks of the proposed insurance policy or in making inquiries. (Sunlife
Assurance of Canada vs. CA, GR No. 105135)

(b) The properties of PAP were insured against fire. These were originally safekept at Sanyo Factory but were later moved
to the Pace Factory without notice and consent to Malayan Insurance. These were lost in a fire. Transfer of the location
of the subject properties, without notice and without the insurer’s consent, after the renewal of the policy, constitutes
concealment, misrepresentation and a breach of a material warranty.
There was an increase in the hazard insured against, as the old location is a factory of automotive/computer parts
and factory of zinc and aluminum die cast and plastic gear for copy machine which has a rate of 0.449% but the new
area, which is a factory that repacks silicone sealant to plastic cylinders has a rate of 0.657%. There is increase in the
hazard as indicated by an increase in the rate. (Malayan Insurance co vs. PAP GR no. 200784)

(3) Those to which the insured makes no warranty

(4) Those to which the insurer has no means of ascertaining

SEC. 28. Each party to a contract of insurance must communicate to the other, in good faith, all facts within his
knowledge which are material to the contract and as to which he makes no warranty, and which the other has
not the means of ascertaining.

The parties are not bound to communicate information regarding the following matters, except in answer to the inquiries of the
other.
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;
(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.

1) Those which the other knows

 Following the theory of imputed knowledge, knowledge of the agent is knowledge of the principal. Nonetheless, even
if the other party already knew of the fact but despite that, still chooses to make further inquiries on the things he
already knew, the other party is bound to give truthful answers. Failure to do so would constitute concealment.
 Ex. if the face of the policy bore the annotation “co-insurance declared”, the insured may recover since there is no
concealment. The annotation is a notice to the insurer as to the existence of other insurance contracts on the property
insured.

2) 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
“SEC. 32. Each party to a contract of insurance is bound to know all the 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.

 Constructive notice is likewise given to parties on the following matters:

(a) General causes which are open to his inquiry which may affect the political or material perils contemplated.
(b) General usages of trade.

Insurance Law Tambasacan and *DLSU Page 22

3) Those of which the other waives communication
SEC. 33. The right to information of material facts may be waived, either by the terms of insurance or by neglect to
make inquiry as to such facts, where they are distinctly implied in other facts of which information is communicated.
- see Ng Gan zee vs. Asian Crusader Life Assn.

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

5) Those which relate to a risk expected from the policy and which are not otherwise material.

6) Information of the nature or amount of the interest of one insured, except as prescribed by Section 51. But even if a party
makes an inquiry, parties are not bound to communicate information of his own judgment upon the matters in question.
 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.

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 51.

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.

B. Effects of concealment: Rescission

SEC. 27. A concealment whether intentional or unintentional entitles the injured party to rescind a contract of
insurance.

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.

 Basis of the rule on vitiation of contracts due to concealment: It misleads or deceives the insurer into accepting the risk, or
accepting it at the rate of premium agreed upon. The insurer, relying upon the belief that the assured will disclose every
material fact within his actual or presumed knowledge, is misled into a belief that the circumstance does not exist, and he is
thereby induced to estimate risk upon a false basis that it does not exist.

 Good faith is not a defense in concealment

 The fraudulent intent on the part of the insured must be established to warrant rescission of the insurance contract.
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.

Test of Materiality
GENERAL RULE: It is 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 advantages of the proposed contract, or in
making his inquiries.

EXCEPTIONS: Incontestability Clause; and Matters under Sec.110 (marine insurance)

 The waiver of medical examination in a non-medical insurance contract renders even more material the
information required of the applicant concerning the previous conditions of health and diseases suffered. (Sunlife
v. Sps. Bacani,)

Insurance Law Tambasacan and *DLSU Page 23

  Where matters of opinion or judgment are called for, answers made in good faith and without intent to deceiver
will not avoid the policy even though they are untrue.
 Reason: The insurer cannot rely on those statements. He must make further inquiry. (Philamcare Health Systems v.
Court of Appeals)

When is the right to rescind lost?

 The right of the insurer to rescind is only lost if the beneficiary has commenced an action on the policy (same with
misrepresentation)

VI. REPRESENTATION

A. Definition
 Is an oral or written statement of a material matter, made by the insured to the insurer, either at the time of
issuance of the policy or before issuance of the policy, in order to induce the insurer to issue the policy
 It is but a mere collateral inducement for the insurer to enter into a contract of insurance.
 It is an active form of deceit as compared to concealment which is passive only.

Requisites of Misrepresentation:
a. The insured stated a fact which is untrue;
b. Such fact was stated with knowledge that it is untrue and with intent to deceive or which he states positively as
true without knowing it to be true and which has a tendency to mislead; and
c. Such fact in either case is material to the risk.

Characteristics:
a. It is not a part of the contract but merely a collateral inducement to it;
b. It may be oral or written;
c. It is made at the same time of issuing the policy or before but not after;
d. It may be altered or withdrawn before the insurance is effected but not afterwards;
e. It always refers to the date the contract goes into effect.

Kinds:
(1) As to form- oral vs. written
SEC. 36. A representation may be oral or written.

(2) As to when made- at the time of issuance of policy vs. before issuance of the policy
SEC. 37. A representation may be made at the time of, or before, issuance of the policy.

(3) As to effectivity date- present (affirmative) vs. future (promise)

(a) Affirmative – Affirmation of a fact when the contract begins.
(b) Promissory – Promise to be performed after policy was issued.

(4) As to content-factual vs. statement of belief or representation

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.

 A representation of intention does not avoid the policy (e.g. the vessel usually sails middle of August with
normally 10 tons of cargo. Later, it departed first week of September and with only 10 tons of cargo)

Insurance Law Tambasacan and *DLSU Page 24

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

B. Rules as to representation
(1) It cannot qualify an express provision in a contract of insurance, but it may qualify an implied warranty
“SEC. 40. A representation cannot qualify an express provision in a contract of insurance, but it may qualify
an implied warranty.
 An express provision, similar to an express warranty is found in the contract itself, hence, representations
cannot override it as representations are mere collateral inducements.
Ex. If policy expressly provides that every floor of the building must have a fire extinguisher, a
representation that some floors do not have fire extinguishers cannot prevail over the express
provision. There can be no recovery in case of loss for violation of an express provision.

 Implied warranties are not found in the contract, hence can be qualified by representation
Ex. If there is a representation that the drain pipe of a ship is defective, that representation qualifies
the implied warranty of seaworthiness, allowing recovery for the insured.

(2) It may be altered or withdrawn before the insurance is effected, but not afterwards
SEC. 41. A representation may be altered or withdrawn before the insurance is effected, but not afterwards.
 Alteration or withdrawal is allowed before the insurance is effected as the insurer has not yet been
induced to issue the policy.

(3) It must be presumed to refer to the date on which the contract goes into effect
SEC. 42. A representation must be presumed to refer to the date on which the contract goes into effect.

Ex. On Jan. 1, the insured applied for insurance and said that there are fire extinguishers installed in every floor.
The truth is, these are not yet installed. However, when the insurance policy was issued and made effective on
Feb 1, all of the fire extinguishers are already installed. There is no falsity then.

(4) When a person insured has no personal knowledge of fact,

(a) he may nevertheless repeat information which he has upon the subject, and which he believes to be true,
with the explanation that he does so on the information of others or
(b) he may submit the information, in its whole extent, to the insurer
 In neither case is he responsible for its truth

 The insured who has no personal knowledge of a fact but merely receives information from others
and communicates the same to the insurer is not responsible for its truth. The same constitutes
merely hearsay evidence.

“SEC. 43. When a person insured has no personal knowledge of a fact, he may nevertheless repeat
information which he has upon the subject, and which he believes to be true, with the explanation that he
does so on the information of others; or he may submit the information, in its whole extent, to the
insurer; and in neither case is he responsible for its truth, unless it proceeds from an agent of the insured,
whose duty it is to give the information.

Exceptions
(a) When the information was acquired by the agent of the insured whose duty is to give the information
(Theory of imputed knowledge)

Insurance Law Tambasacan and *DLSU Page 25

 (b) In marine insurance, the information as to the belief or expectation of a third person, in reference to a
material fact is material and must be communicated (Sec. 108)

(5) The facts must correspond with its assertions or stipulations; otherwise, considered as false.
SEC. 44. A representation is to be deemed false when the facts fail to correspond with its assertions or
stipulations.
 Literal truth is not necessary; the representation must be substantially true and accurate.

C. Effects of misrepresentation
 If a representation is false in a material point, whether affirmative or promissory, the injured party is entitled to
rescind the contract from the time when the representation becomes false.

SEC. 45. If a representation is false in a material point, whether affirmative or promissory, the injured party is
entitled to rescind the contract from the time when the representation becomes false.

Test of materiality:
SEC. 46. The materiality of a representation is determined by the same rules as the materiality of a concealment.
 The materiality of a representation is determined by the same rules as the materiality of a concealment. Thus, the
effect of misrepresentation is the same with that of concealment-rescission of the contract on the part of the
insurer.

Note: Where the insured merely signed the application form and made the agent of the insurer fill the same for him, it
was held that by doing so, the insured made the agent of the insurer his own agent and he was responsible for his acts
for that purpose. [Insular Life v. Feliciano, G.R. No. L-47593, September 13, 1941]

SEC. 47. The provisions of this chapter apply as well to a modification of a contract of insurance as to its original
formation.

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 (2) 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 rescindable by reason of the fraudulent concealment or
misrepresentation of the insured or his agent.
 A failure to exercise the right of rescission cannot prejudice any defense to the action which the concealment may
furnish.
 Where any of the material representations are false, the insurer’s tender of the premium and notice that the policy
is cancelled, before the commencement of suit thereon, operate to rescind the contract of insurance.

D. Incontestability clause
 The insurer has two years from date of issuance of the insurance contract or of its last reinstatement within which
to contest the policy, whether or not the insured still lives within such period. After two years, the defenses of
concealment or misrepresentation, no matter how patent or well-founded, no longer lie.
 Rationale: Congress felt this was a sufficient answer to the various tactics employed by insurance companies to
avoid liability.
 Sec. 48 prevents a situation where the insurer knowingly continues to accept annual premium payments on life
insurance, only to later on deny a claim on the policy on specious claims of fraudulent concealment and
misrepresentation.

Insurance Law Tambasacan and *DLSU Page 26

  “during the lifetime” does not mean that the insurer can only contest the validity of the insurance policy within 2
years and during the lifetime of the insured. As long as the insured dies within the 2-year period from its
issuance, the incontestability clause does not set in.
XPN: case of Sun Life of Canada vs. Sibya, GR No. 211212, 6/8/2016. In this case, the insured died just merely
three months from issuance of the policy yet the court held that the insurer loses its right to rescind the
policy. The death of the insured within the 2-year period will render the right of the insurer to rescind the
policy nugatory. As such, the incontestability period will now set in.
 Note: Considering the clash of the current ruling with all previous doctrines, an MR was filed by Sun
life and still pending as of the moment.

Elements:
(a) It is a life insurance policy
(b) It is payable on the death of the insured
(c) The policy is in force for two (2) years from the date of its issue or of its last reinstatement
(d) Policy could no longer be proven void ab initio or is rescindable by the insurer
(e) Grounds are limited only to fraudulent concealment or misrepresentation

Exceptions to incontestability clause:

GR: Incontestability is limited to concealment and representation
XPNs:
(a) Lack of insurable interest
(b) Non-payment of premiums
(c) Cause of death being an excepted risk
(d) The fraud was of a vicious type
(e) Violations of conditions in the policy (e.g. engaging in police work or military service or extreme sports)

 Some policies exclude coverage when there is danger in the nature of one’s work; others would accept but charge
a higher premium.

THE POLICY

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

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.
“Notwithstanding the foregoing, the policy may be in electronic form subject to the pertinent provisions of Republic
Act No. 8792, otherwise known as the ‘Electronic Commerce Act’ and to such rules and regulations as may be prescribed
by the Commissioner.

Insurance Law Tambasacan and *DLSU Page 27

A. Policy Defined
 It is the written instrument in which a contract of insurance is set forth.
 It is not an ordinary writing, as the forms are pre-printed and pre-approved by the Insurance Commission.
 It could also be in electronic form.
 Considering that a policy is not custom-made for the insured, a rider is necessary for that purpose.
 A rider is a printed or typed stipulation contained on a slip of paper attached to the policy and forming an
integral part thereof. As an effect, it modified the policy to fit the needs of the insured.
 If there is a rider, clause, warranty or endorsement purporting to be part of the contract of insurance, the
policy should expressly mention it and the same must be countersigned by the insured unless it was applied
for by him.
 If the approved policy is sent by mail to the insured and the latter dies, is there contract of insurance?
 No. An acceptance of an offer of insurance not actually or constructively communicated to the proposer
does not make a contract. Only the mailing of acceptance completes the contract, as the locus poenitentia is
ended when the acceptance has passed beyond the control of the party.
 When a letter or other mail matter is addresses and mailed with postage prepaid, there is a rebuttable
presumption of fact that it was received by the addressee as soon as it could have been transmitted to him
in the ordinary course of the mails.

Rules in interpretation
(1) If the issue is ambiguity, the policy is liberally interpreted in favor of the insured and strictly against the insurer,
being a contract of adhesion.

(2) If the question revolves on whether the policy was understood by the insured, the rule is different. When one of
the parties is unable to read, or if the contract is in a language not understood by him, and mistake or fraud is
alleged, the person enforcing the contract must show that the terms thereof have been fully explained to the
former.

(3) 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 any inconsistency exists, the typed rider prevails over the printed clause it
covers.

B. Contents of the policy

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;
(d) The property or life insured;
(e) The interest of the insured in property insured, if he is not the absolute owner thereof;
(f) The risks insured against; and
(g) The period during which the insurance is to continue.

C. Cover note

SEC. 52. Cover notes may be issued to bind insurance temporarily pending the issuance of the policy. Within sixty (60)
days after issue of a 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.

Insurance Law Tambasacan and *DLSU Page 28

 Cover notes may be extended or renewed beyond such sixty (60) 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 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.

Cases:
a) Pacific Timber Export vs. CA, 112 SCRA 199, February 25, 1982
All Cover Notes do not contain particulars of the shipment that would serve as basis for the computation
of the premiums. As a logical consequence, no separate premiums are intended or required to be paid 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 a real sense a contract, not a mere application for insurance which is a mere offer. 

b) De Lim vs. Sun Life Assurance of Canada, 41 Phil 263, November 29, 1920
It is of course a primary rule that a contract of insurance, like other contracts, must be assented to by both
parties either in person or by their agents. So long as an application for insurance has not been either accepted or
rejected, it is merely an offer or proposal to make a contract. The contract, to be binding from the date of the
application, must have been a completed contract, one that leaves nothing to be done, 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.
Where an agreement is made between the applicant and the agent whether by signing an application
containing such condition, or otherwise, that no liability shall attach until the principal approves the risk and a
receipt is given by the agent, such acceptance is merely conditional, and it subordinated to the act of the company
in approving or rejecting; so in life insurance a "binding slip" or "binding receipt" does not insure of itself.

Bar Q & A:
ALAC publicly offered a specially designed insurance policy covering persons between ages of 50-70 who may be
afflicted with serious and debilitating illnesses. Q applied stating that he was 80 y/o. Nonetheless, ALAC approved his
application. A Cover Note was issued. He then died 10 days after he received the Cover Note.
(1) Can ALAC deny the claim on the ground that it was available only to 50-75 years of age?
No. ALAC approved the application despite his age. ALAC is then in estoppel.

(2) Was there a perfected contract of insurance thru the issuance of the Cover Note?
Yes. Under the new law, a credit extension of up to 90 days may be given by the insurance company. Here, he
died 10 days after the grant of the request for issuance of Cover Note.

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.

SEC. 55. To render an insurance effected by one partner or part-owner, applicable to the interest of his co-partners 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.

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.

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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.

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.

D. Kinds of insurance policies

SEC. 59. A policy is either open, valued or running.

(1) Open
 One in which the value of the thing insured is not agreed upon, and the amount of the insurance merely
represents the insurer’s maximum liability. The value of the insured thing shall be ascertained at the time of the
loss.
 The actual loss, as determined, will represent the total indemnity due the insured from the insurer except only
that the total indemnity shall not exceed the face value of the policy.

SEC. 60. An open policy is one in which the value of the thing insured is not agreed upon, and the amount of the
insurance merely represents the insurer’s maximum liability. The value of such thing insured shall be ascertained
at the time of the loss.

(2) Valued
 A valued policy is one which expresses on its face an agreement that the thing insured shall be valued at a specific
sum.
 A life insurance is a valued 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.

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.

Open Valued
1. Is proof of value of the thing No, the amount Yes
agreed upon at the onset indicated is only the
maximum recoverable
amount to be used as
basis for premium
payments.
2. Is proof of value of the thing Yes, hence more No
necessary at the time of loss? burdensome
3. Usual kind of insurance Property Life

Bar Q & A: A’s house worth 50k was insured for the same amount. After 10 years, a fire destroyed 1/5 of the house
when the same is worth 100k on account of inflation. How much will A recover? 1/5 of 50k or 10k.

(3) Running
 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.

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  This is usually issued for subjects where there is frequent change in quantity, such as the contents of a warehouse,
department store or supermarket where the value of its contents changes from time to time.

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.

Cases:
a) Development Insurance Corp. vs. IAC, 143 SCRA 62, July 16, 1986
b) Great Pacific Life Assurance vs. CA, 316 SCRA 677, October 13, 1999

E. Prescriptive period for filing claims

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 (1) year from the time when the cause of action accrues, is void.

 The parties may agree to limit the period to commence an action on the contract, but the period should be no less
than 1 year from the time when the cause of action accrues. Otherwise, the stipulation is void.

 The condition in an insurance policy that claims must be presented within 1 year after rejection is not merely a
procedural requirement but an important matter essential to a prompt settlement of claim against insurance
companies as it demands that insurance suits be brought by the insured while the evidence as to the origin and
cause of destruction have not yet disappeared. This is to enable the insurance companies to make proper
assessment of whether or not the insured can recover and if so, to determine the amount recoverable.

 The insured’s cause of action or his right to file a 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. It should not be reckoned from the time of loss, neither will a motion for reconsideration (with the
insurer?) toll the running of the period. If the period agreed upon by the parties is void, the period to be followed
is 10 years instead (Art. 1144, NCC-upon a written contract).

 Ex. of void period with the effect of reducing the prescriptive period…”within 1 year after the delivery of the
goods or the date when the goods should have been delivered”
Cases:
a) Traveler’s Insurance vs CA, 272 SCRA 536, May 22, 1997
b) Jacqueline Jimenez Vda. De Gabriel vs CA, GR No. 103883, Nov. 4, 1996
c) Sun Insurance Office, Ltd. vs. CA, 195 SCRA 193, March 13, 1991
d) Agricultural Credit & Cooperative Financing Administration (ACCFA) vs. Alpha Insurance and Surety Co., Inc., 24 SCRA
151, July 29, 1968
e) Eagle Star Insurance Co. Ltd. vs. Chia Yu, 96 Phil 696, March 31, 1955

F. Grounds for valid cancellation of policy.

“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) Nonpayment of premium;
(b) Conviction of a crime arising out of acts increasing the hazard insured against;

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 (c) Discovery of fraud or material misrepresentation;
(d) Discovery of willful or reckless acts or omissions increasing the hazard insured against;
 Ex. safekeeping of flammable materials, increasing the probability of the occurrence of fire.
(e) Physical changes in the property insured which result in the property becoming uninsurable;
 Ex. a change in the course of the river making the property always submerged under water, henc cannot
be covered anymore by flood insurance.
(f) Discovery of other insurance coverage that makes the total insurance in excess of the value of the property
insured; or
(g) A determination by the Commissioner that the continuation of the policy would violate or would place the
insurer in violation of this Code.

The following conditions must concur:

(1) There must be prior notice of cancellation to the insured;
(2) The notice must be based on the occurrence, after the effective date of the policy, of one or more of the grounds
mentioned in Section 64.
(3) The notice must be (a) in writing, (b) mailed, or delivered to the named insured, (c) at the address shown in the
policy;
(4) It must state (a) which of the grounds mentioned in Section 64 is relied upon and (b) that upon written request of
the insured, the insurer will furnish the facts on which the cancellation is based.

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, or to his broker provided the broker is authorized in writing by the
policy owner to receive the notice of cancellation on his behalf, and shall state:
(a) Which of the grounds set forth in Section 64 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.

G. Requisites for automatic renewal of non-life policy

SEC. 66. In case of insurance other than life, unless the insurer at least forty-five (45) 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 (1) year shall be considered as if written for a term of one (1) year. Any policy written for a
term longer than one (1) year or any policy with no fixed expiration date shall be considered as if written for successive
policy periods or terms of one (1) year.

(1) There is automatic renewal of the policy under the old terms and conditions, upon payment by the insured of the
premiums, unless the insurer, at least 45 days before the end of the policy period, mails or delivers to the insured
notice of its intention not to renew the policy or to condition its renewal upon reduction of limits or elimination of
coverages.

(2) If the policy was for a term of less than 1 year, it shall be considered as if written for a term of 1 year.

(3) If the policy written was for a term longer than 1 year or the policy has no fixed expiration date, it shall be
considered as if written for successive policy periods or terms of 1 year.

VIII. Warranties (Sections 67-76)

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SEC. 69. No particular form of words is necessary to create a warranty.
SEC. 70. Without prejudice to Section 51, 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.
SEC. 71. A statement in a policy, of a matter relating to the person or thing insured, or to the risk, as fact, is an express
warranty thereof.
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.
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.
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.
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.
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.

A. Definition of warranty
 It is a statement or promise set forth in the policy or by reference incorporated therein, the untruth or non-
fulfillment of which in any respect, and without reference to whether the insurer was in fact prejudiced by such
untruth or non-fulfillment, renders the policy voidable by the insurer.
 It is part of the contract itself in contrast with representation wherein it is merely a collateral inducement in entering
into a contract.

Perla Compania De Seguros Inc vs. CA, 208 SCRA 487

Prudential Guarantee & Assurance vs. Trans-Asia Shipping Lines, 491 SCRA 411, June 20, 2006

B. Kinds
(1) Express or implied
SEC. 67. A warranty is either expressed or implied.

Express warranties- are found either in the policy itself or in another instrument signed by the insured.
Ex. the insurer (?) warrants that the property had never been grazed by fire.

Implied warranties- are not found in the policy itself but inferred from the nature of the insurance contract.
Ex. the implied warranty of seaworthiness in a marine insurance.

(2) May relate to the past, the present or the future (promissory)
SEC. 68. A warranty may relate to the past, the present, the future, or to any or all of these.

Past- that the house had never been grazed by fire (fire insurance policy)
Present- that the house is being used as a residential home (fire insurance policy)
Future- that the house will not be used for commercial purposes (fire insurance policy)

C. Effect of breach of warranty

1. Non-performance of a promissory warranty avoids the policy, except:
a) Loss occurs before the time arrives for the performance of the warranty

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 Ex. The insured warrants the installation of fire extinguishers in every floor before June 30. However, the
property was destroyed on June 28. The policy is not avoided.

b) Performance becomes unlawful before the time arrives for the performance of the warranty.

c) Performance becomes impossible before the time arrives for the performance of the warranty.
Ex. The insured warrants the installation of fire extinguishers in every floor before June 30. However, the
property was destroyed on June 28 hence it is already impossible to install the fire extinguisher. The
policy is not avoided.

2. Violation of a material warranty, or other material provision of a policy entitles the other to rescind.
 The right to terminate the contractual relations exists even though the violation was not the direct cause of the
loss.
 Ex. failure to disclose taking of other insurances, or the prohibition on transfer of insured property or
safekeeping of hazardous materials (unless incidental to the business see page 155).
 Breach of immaterial

Young vs. Midland Textile Insurance Co., 30 Phil 617, March 31, 1915
Pacific Banking Corp. vs. CA, GR No. 41014, November 28, 1988
Union Manufacturing Co., Inc. vs. Philippine Guaranty Co., Inc. 47 SCRA 276, October 30, 1972
United Merchants Corp. vs. Country Bankers Insurance Inc., GR No. 198588, July 11, 2012

D. Exceptions: Country Bankers Insurance vs Lianga Bay G.R. No. 136914, Jan. 25, 2002
Where a risk is excepted by the terms of a policy which insures against other perils or hazards, loss from such a risk
constitutes a defense which the insurer may urge, since it has not assumed that risk, and from this it follows that an
insurer seeking to defeat a claim because of an exception or limitation in the policy has the burden of proving that the
loss comes within the purview of the exception or limitation set up. If a proof is made of a loss apparently within a
contract of insurance, the burden is upon the insurer to prove that the loss arose from a cause of loss which is
excepted or for which it is not liable, or from a cause which limits its liability.

Premium (Sections 77-84)

“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, or whenever under the broker and agency agreements
with duly licensed intermediaries, a ninety (90)-day credit extension is given. No credit extension to a duly licensed
intermediary should exceed ninety (90) days from date of issuance of the policy.

A. Definition
 Premium is the consideration paid by the insured to the insurer for their latter’s agreement to indemnify the insured in case of
the happening of the designated peril.
 Risks undertaken:
(a) Insured- a member of a group exposed to a particular peril who contributes premiums under risk of receiving nothing
in return in case the contingency does not happen
(b) Insurer-undertakes t pay the entire sum agreed upon in case the contingency happens.
 The risk distributing mechanism operates under a system where by prompt payment of the premiums, the insurer is able to
meet its legal obligation to maintain a legal reserve fund needed to meet its contingent obligations to the public. Therefore,
the premium is the elixir vitae or source of life of insurance business.
Insurance Law Tambasacan and *DLSU Page 34
  Payment by any person, even a stranger is sufficient but a mere stranger by paying premium secures no interest in the
proceeds of the policy.
 Cash and carry doctrine-payment of the premium is necessary for the validity of the policy.

B. Exceptions to Sec. 77
1. Life or industrial life policy whenever the grace period or provision applies
2. 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. (Sec.79)
3. If the parties have agreed to the payment in installments of the premium and partial payment has been made at the
time of loss.
4. Under the broker and agency agreements with duly licensed intermediaries, a 90-day unextnedible credit extension
is given.
5. Estoppel
6. Employees of the RP, including its political subdivisions and instrumentalities, and GOCCs may pay their
insurance premium and loan obligations through salary deductions.
 Provided, that the treasurer, cashier, paymaster or official of the entity employing the government employee
is authorized to make deductions from the salary of the latter pursuant to the agreement between the insurer
and the government employee and to remit such deductions to the insurer concerned, and collect reasonable
fee for its services.

Bar Q & A:
1. Will an insurance policy be binding even if the premium is unpaid? What if it were partially paid?
Generally no. Payment of premium is necessary for the validity of the policy. IF premiums are partially paid, the policy is already
effective.

2. If the insurer has the practice of granting 60-90 day credit term and the insured property was destroyed before the expiration of the
credit term, is the insured entitled to the insurance proceeds?
Yes. The insured may recover as the insurer may grant credit extension for the payment of the premium. This simply 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.

3. GSIS had been paying the quarterly reinsurance premiums but was unable to pay the last quarter. The non-payment of subsequent
installment premiums would not prevent the insurance contract from taking effect; that the parties intended to make the insurance
contract valid and binding is evinced from the fact that the insured paid-and the insurer received-several reinsurance premiums due
thereon, although the former refused to pay the remaining balance. (GSIS vs. Prudential Guarantee & Assurance Inc., GR Nos.
165585 & 176982, November 20, 2013)

4. A policy was issued for a brand new car with a premium of 60k payable in 6 months. Francis only paid the first 2 installments and
failed to pay subsequent installments despite demands. The car was carnapped 5 months after issuance of the policy. Can Francis
recover?
Yes, as payment even of a single installment made the insurance effective already.

Makati Tuscany Condominium Corp. vs. CA, 215 SCRA 462, November 6, 1992

C. Effect of non-payment of premium

Areola vs CA, 236 SCRA 643

D. Effect of partial payment of premium

Tibay vs CA, 257 SCRA 126

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E. Payment of premium by installments
UCPB vs. Masagana Telamart, 356 SCRA 307, April 4, 2001

F. Effect of payments of premium through agent

South Sea Surety vs CA, 244 SCRA 744, 1995

G. Effect of check payment

American Home Assurance Co. vs. Chua, 309 SCRA 250, June 28, 1999
Gaisano vs. Development Insurance and Surety Corp., GR No. 190702, February 27, 2017

H. Return of premium paid

(1) To the whole premium if no part of his interest in the thing insured be exposed to any of the perils insured against
(2) 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, 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.
 Not applicable to life insurance policy since the insurer is only entitled to a return of the cash surrender value of his
policy
(3) When the contract is voidable and subsequently annulled
(a) under the provisions of the Civil Code or
(b) on account of the fraud or misrepresentation of the insurer, or of his agent or
(c) on account of facts or the existence of which the insured was ignorant of without his fault.
Ex. taking life insurance for the life of a friend.
(4) When by any default of the insured other than actual fraud, the insurer never incurred any liability under the policy
Ex. when the insured property is lost before the effectivity of the contract, it is physically impossible for the insurer to incur
any liability therein.
(5) Where an insurance policy ceases to be

Filipinas Compania de Seguros vs. Christern Huenfeld & Co., Inc., 89 Phil 54, May 24, 1951

Loss (Sections 85-94)

A. LOSS – Sec.85-89
Proximate Cause & Immediate Cause
Burden of proof
Loss for which insurer liable – Sec. 87
Loss for which insurer not liable - Sec.89
FGU Insurance Corp. vs. CA, 454 SCRA 337, March 31, 2005

B. Notice and proof of loss (Sections 90-94)

Form
Preliminary proof of loss
Effect of fraudulent claim
Waiver of defects in notice and proof of loss
Waiver of delay in giving notice or proof of loss

Double Insurance (Sections 95-96) and Re-insurance (Sections 97-100)

Definition
Geagonia vs CA, 241 SCRA 152, February 6, 1995

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Double insurance vs. over insurance
Rules in case of over insurance by double insurance
Malayan Insurance Co., Inc. vs. Philippines First Insurance, GR No. 184300, July 11, 2012
Re-insurance vs double insurance
Re-insurance vs co-insurance
Reinsurance policy vs. reinsurance treaty
Philippines American Insurance Co. vs. Auditor General, January 18, 1968, 22 SCRA 135

Particular Insurances

MARINE insurance (Sections 101-168)

Coverage of marine insurance
Special marine insurance contracts
Insurance against all risks
Inchamaree clause
Insurable interest in marine insurance
Concealment and its effects – Sec.109-112
Representation
Implied Warranties – Sec.115-122, ICP
Philamgen vs CA, 273 SCRA 262 (1997)
Seaworthiness
Voyage and Deviation – Sec 123-128
Loss – Actual Total Loss (Sec.130, ICP); Constructive Total Loss (Sec.131, in relation to Sec.139); Abandonment (Sec 138)
Perils of Sea vs Perils of the Ship
Measure of indemnity

Fire Insurance (Sections 169-175)

Coverage
Effects of alteration in use or in condition – Sec. 168
Measure of indemnity
Development Insurance Corp v. IAC, 143 SCRA 62
Transfer of fire policy

Casualty Insurance (Section 176)

“Intentional” vs. “Accidental” as used in Insurance
Compulsory Motor Vehicle Liability Insurance- Sections 386-402
Method of coverage
Vehicles covered
Non-fault indemnity provision – Sec. 378
Total Indemnity shall not exceed P15,000 (Insurance Memo Circular 4-2006)
Proofs of Loss
Time to File & Process Claim Under CTPL – Sec. 384 & 385
Vda de Gabriel vs. CA, 264 SCRA 137 (1996)
Applicability
Authorized Driver Clause
Villacorta v. I.C. 100 SCRA 467 (1980)
Theft Clause
Perla Compania de Seguros vs. CA, 208 SCRA 487 (1992)

Life insurance
Definition – Sec.181, ICP
When payable
Insurance with minor insured or beneficiary
Rules on assignment of policy
Effect of Death of Insured Through:
Suicide – Sec. 183, ICP
Killing of insured by beneficiary

Insurance Law Tambasacan and *DLSU Page 37

Group Insurance
Microinsurance (Sections 187-188)
Insurance Companies, Organization, Capitalization and Authorization (Sections 190-199)

Claims Settlement (Sections 247-249)

When are life insurance proceeds to be paid

When are non-life insurance proceeds to be paid
Effect of payment of insurance proceeds

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