ACT NO. 2427 SECTION 9.

Unless the policy otherwise provides,

where a mortgagor of property effects insurance in
AN ACT REVISING THE INSURANCE LAWS his own name providing that the loss shall be
AND REGULATING INSURANCE BUSINESS IN payable to the mortgagee, or assigns a policy of
THE PHILIPPINE ISLANDS 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
PRELIMINARY CHAPTER otherwise avoid the insurance, will have the same
effect, although the property is in the hands of the
SECTION 1. The short title of this Act shall mortgagee, but any act which, under the contract of
be "The Insurance Act." 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
CHAPTER 1
performed by the mortgagor.
Insurance in general
Definition of Insurance
SECTION 10. If an insurer assents to the transfer
of an insurance from a mortgagor to a mortgagee,
SECTION 2. Insurance is a contract whereby one
and, at the time of his assent, imposes further
undertakes for a consideration to indemnify another
obligations on the assignee, making a new contract
against loss, damage, or liability arising from an
with him, the acts of the mortgagor cannot affect
unknown or contingent event.
the rights of said assignee.
What May Be Insured
Insurable Interest
SECTION 3. Any contingent or unknown event,
SECTION 11. Every person has an insurable
whether past or future, which may damnify a
interest in the life and health.
person having an insurable interest, or create a
(a) Of himself;
liability against him, may be insured against subject
to the provisions of this chapter.
(b) Of any person on whom he depends wholly or in
part for education or support;
SECTION 4. The preceding section does not
authorize an insurance for or against the drawing of
any lottery, or for or against any chance or ticket in (c) Of any person under a legal obligation to him for
a lottery drawing a prize.robles virtual law library the payment of money, or respecting property or
services, of which death or illness might delay or
prevent the performance; and
SECTION 5. All kinds of insurance are subject to
the provisions of this chapter so far as the
provisions can apply. (d) Of any person upon whose life any estate or
interest vested in him depends.
Parties to the Contract
SECTION 12. Every interest in property, whether
real or personal, or any relation thereto, or liability
SECTION 6. The person who undertakes to
in respect thereof, of such a nature that a
indemnify another by a contract of insurance is
contemplated peril might directly damnify the
called the insurer, and the person indemnified is
insured, is an insurable interest.
called the insured.
SECTION 13. An insurable interest in property may
SECTION 7. Every person, company, corporation,
consist in:chanroblesvirtuallawlibrary
or association who holds a certificate of authority
from the insurance commissioner, as else where
provided in this Act, may be an insurer. (a) An existing interest;

SECTION 8. Anyone except a public enemy may (b) An inchoate interest founded on an existing
be insured. interest; or
(c) An expectancy, coupled with an existing interest been agreed that the insurance shall cease upon
in that out of which the expectancy arises. an alienation of the thing insured.

SECTION 14. A carrier or depository of any kind SECTION 24. Every stipulation in a policy of
has an insurable interest in a thing held by him as insurance for the payment of loss whether the
such, to the extent of his liability but not to exceed person insured has or has not any interest in the
the value thereof. subject matter of the insurance except in the cases
provided for in section one hundred and sixty-six or
SECTION 15. A mere contingent or expectant that the policy shall be received as proof of such
interest in anything, not founded on an actual right interest, and every policy executed by way of
to the thing, nor upon any valid contract for it, is not gaming or wagering, is void.
insurable.
Concealment and Representations
SECTION 16. The measure of an insurable interest
in property is the extent to which the insured might SECTION 25. A neglect to communicate that which
be damnified by loss or injury thereof. a party knows and ought to communicate, is called
a concealment.
SECTION 17. The sole object of insurance is the
indemnity of the insured, and if he has no insurable SECTION 26. A concealment, whether intentional
interest the contract is void. or unintentional, entitles the injured party to rescind
a contract of insurance.
SECTION 18. An interest insured must exist when
the insurance takes effect, and when the loss SECTION 27. Each party to a contract of insurance
occurs, but need not exist in the meantime. must communicate to the other, in good faith, all
facts within his knowledge which are material to the
SECTION 19. Except in the cases specified in the contract, and which the other has not the means of
next four sections, and in the cases of life, accident, ascertaining, and as to which he makes no
and health insurance, a change of interest in any warranty.
part of a thing insured unaccompanied by a
corresponding change of interest in the insurance, SECTION 28. An intentional and fraudulent
suspends the insurance to an equivalent extent, omission, on the part of one insured, to
until the interest in the thing and the interest in the communicate information of matters proving or
insurance are vested in the same person.robles tending to prove the falsity of a warranty, entitles
virtual law library the insurer to rescind.

SECTION 20. A change of interest in a thing SECTION 29. Neither party to a contract of
insured, after the occurrence of an injury which insurance is bound to communicate information of
results in a loss, does not affect the right of the the matters following, except in answer to the
insured to indemnify for the loss. inquiries of the other:chanroblesvirtuallawlibrary

SECTION 21. A change of interest in one or more (a) Those which the other knows;
of several distinct things, separately insured by one
policy, does not avoid the insurance as to the (b) Those which, in the exercise of ordinary care,
others. the other ought to know, and of which the former
has no reason to suppose him ignorant;
SECTION 22. A change of interest, by will or
succession, on the death of the insured, does not (c) Those of which the other waives
avoid an insurance; and his interest in the communication;
insurance passes to the person taking his interest
in the thing insured. (d) Those which prove or tend to prove the
existence of a risk excluded by a warranty, and
SECTION 23. A transfer of interest by one of which are not otherwise material; and
several partners, joint owners, or owners in
common, who are jointly insured, to the others, (e) Those which relate to a risk excepted from the
does not avoid an insurance, even though it has policy, and which are not otherwise material.
SECTION 30. Materiality is to be determined not by SECTION 42. When a person insured has no
the event, but solely by the probable and personal knowledge of a fact, he may nevertheless
reasonable influence of the facts upon the party to repeat information which he has upon the subject,
whom the communication is due, in forming his and which he believes to be true, with the
estimate of the disadvantages of the proposed explanation that he does so on the information of
contract, or in making his inquiries. others, or he may submit the information, in its
whole extent, to the insurer; and in neither case is
SECTION 31. Each party to a contract he responsible for its truth, unless it proceeds from
of insurance is bound to know all the general an agent of the insured, whose duty it is to give the
causes which are open to his inquiry, equally with intelligence.
that of the other, and which may affect either the
political or material perils contemplated; and all SECTION 43. A representation is to be deemed
general usages of trade. false when the facts fail to correspond with its
assertions or stipulations.
SECTION 32. The right to information of material
facts may be waived, either by the terms of SECTION 44. If a representation is false in a
insurance or by neglect to make inquiries as to material point, whether affirmative or promissory,
such facts, where they are distinctly implied in other the injured party is entitled to rescind the contract
facts of which information is communicated. from the time when the representation becomes
false.
SECTION 33. Information of the nature or amount
of the interest of one insured need not be SECTION 45. The materiality of a representation is
communicated unless in answer to an inquiry, determined by the same rules as the materiality of
except as prescribed by section forty-nine. a concealment.

SECTION 34. Neither party to a contract of SECTION 46. The provisions of sections twenty-
insurance is bound to communicate, even upon five to forty-seven, inclusive, of this chapter apply
inquiry, information of his own judgment upon the as well to a modification of a contract of insurance
matters in question. as to its original formation.robles virtual law library

SECTION 35. A representation may be oral or SECTION 47. Whenever a right to rescind a
written. contract of insurance is given to the insurer by any
provision of this chapter, such right must be
SECTION 36. A representation may be made at the exercised previous to the commencement of an
same time with issuing the policy, or before it. action on the contract.

SECTION 37. The language of a representation is The Policy

to be interpreted by the same rules as the language
of contracts in general. SECTION 48. The written instrument, in which a
contract of insurance is set forth, is called a policy
SECTION 38. A representation as to the future is to of insurance.
be deemed a promise, unless it appears that it was
merely a statement of belief or expectation. SECTION 49. A policy of insurance must
specify:chanroblesvirtuallawlibrary
SECTION 39. A representation cannot be allowed
to qualify an express provision in a contract of (a) The parties between whom the contract is
insurance; but it may qualify an implied warranty. made;

SECTION 40. A representation may be altered or (b) The amount to be insured except in the cases of
withdrawn before the insurance is effected, but not open or running policies;
afterwards.
(c) The rate of premium;
SECTION 41. A representation must be presumed
to refer to the date on which the contract goes into (d) The property or life insured;
effect.
(e) The interest of the insured in property insured, if provides that the object of the policy may be from
he is not the absolute owner thereof; time to time defined, especially as to the subjects of
insurance, by additional statements or
(f) The risks insured against; and indorsements.

(g) The period during which the insurance is to SECTION 60. An acknowledgment in a policy of the
continue. receipt of premium is conclusive evidence of its
payment, so far as to make the policy binding,
SECTION 50. The insurance shall be applied notwithstanding any stipulation therein that it shall
exclusively to the proper interest of the person in not be binding until the premium is actually paid.
whose name it is made unless otherwise specified
in the policy. SECTION 61. An agreement made before a loss,
not to transfer the claim of a person insured against
SECTION 51. When an insurance is made by an the insurer, after the loss has happened is void.
agent or trustee, the fact that his principal or
beneficiary is the person really insured may be Warranties
indicated by describing him as agent or trustee, or
by other general words in the policy. SECTION 62. A warranty is either expressed or
implied.
SECTION 52. To render an insurance, effected by
one partner or part owner, applicable to the interest SECTION 63. A warranty may relate to the past,
of his copartners, or of other part owners, it is the present, the future, or to any or all of these.
necessary that the terms of the policy should be
such as are applicable to the joint or common SECTION 64. No particular form of words is
interest. necessary to create a warranty.

SECTION 53. When the description of the insured SECTION 65. Every express warranty, made at or
in a policy is so general that it may comprehend before the execution of a policy, must be contained
any person or any class of persons, he only can in the policy itself, or in another instrument signed
claim the benefit of the policy who can show that it by the insured and referred to in the policy, as
was intended to include him. making a part of it.

SECTION 54. A policy may be so framed that it will SECTION 66. A statement in a policy, of a matter
inure to the benefit of whomsoever, during the relating to the person or thing insured, or to the risk,
continuance of the risk, may become the owner of as a fact, is an express warranty thereof.
the interest insured.
SECTION 67. A statement in a policy, which
SECTION 55. The mere transfer of a thing insured imports that it is intended to do or not to do a thing
does not transfer the policy, but suspends it until which materially affects the risk, is a warranty that
the same person becomes the owner of both the such act or omission shall take place.
policy and the thing insured.
SECTION 68. When, before the time arrives for the
SECTION 56. A policy is either open, valued, or performance of a warranty relating to the future, a
running. loss insured against happens, or performance
becomes unlawful at the place of the contract, or
SECTION 57. An open policy is one in which the impossible, the omission to fulfill the warranty does
value of the thing insured is not agreed upon, but is not avoid the policy.
left to be ascertained in case of loss.
SECTION 69. The violation of a material warranty,
SECTION 58. A valued policy is one which or other material provision of a policy, on the part of
expresses on its face an agreement that the thing either party thereto, entitles the other to rescind.
insured shall be valued at a specified sum.

SECTION 59. A running policy is one which

contemplates successive insurances, and which
SECTION 70. A policy may declare that a violation by which the aggregate sum insured in all the
of specified provisions thereof shall avoid it, policies exceeds the insurable value of the thing at
otherwise the breach of an immaterial provision risk,
does not avoid the policy.
Loss
SECTION 71. A breach of warranty, without fraud,
merely exonerates an insurer from the time that it SECTION 77. An insurer is liable for a loss of which
occurs, or where it is broken in its inception a peril insured against was the proximate cause;
prevents the policy from attaching to the risk. although a peril not contemplated by the contract
may have been a remote cause of the loss; but he
Premium is not liable for a loss of which the peril insured
against was only a remote cause.
SECTION 72. An insurer is entitled to payment of
the premium soon, as the thing insured is exposed SECTION 78. An insurer is liable where the thing
to the peril insured against. insured is rescued from a peril insured against, that
would otherwise have caused a loss, if in the
SECTION 73. A person insured is entitled to a course of such rescue the thing is exposed to a
return of premium, peril not insured against, which permanently
deprives the insured of its possession, in whole or
(a) To the whole premium, if no part of his interest in part; or where a loss is caused by efforts to
in the thing insured be exposed to any of the perils rescue the thing insured from a peril insured
insured against; against.robles virtual law library

(b) Where the insurance is made for a definite SECTION 79. Where a peril is specially excepted in
period of time and the insured surrenders his a contract of insurance, a loss, which would not
policy, to such portion of the premium as have occurred but for such peril, is thereby
corresponds with the unexpired time, at a pro-rata excepted; although the immediate cause of the loss
rate, unless a short period rate has been agreed was a peril which was not excepted.
upon and appears on the face of the policy, after
deducting from the whole premium any claim for SECTION 80. An insurer is not liable for a loss
loss or damage under the policy which has caused by the willful act or through the connivance
previously accrued: Provided, That no holder of a of the insured; but he is not exonerated by the
life insurance policy may avail himself of the negligence of the insured, or of his agents or
privileges of this paragraph without sufficient cause others.
as otherwise provided by law.
Notice of Loss
SECTION 74. If a peril insured against has existed,
and the insurer has been liable for any period, SECTION 81. In case of loss upon an insurance
however short, the insured is not entitled to return against fire, an insurer is exonerated, if notice
of premiums, so far as that particular risk is thereof be not given to him by some person
concerned. insured, or entitled to the benefit of the insurance,
without unnecessary delay.
SECTION 75. A person insured is entitled to a
return of the premium when the contract is SECTION 82. When preliminary proof of loss is
voidable, on account of the fraud or required by a policy; the insured is not bound to
misrepresentation of the insurer, or of his agent or give such proof as would be necessary in a court of
on account of facts, the existence of which the justice; but it is sufficient for him to give the best
insured was ignorant without his fault; or when, by evidence which he has in his power at the time.
any default of the insured other than actual fraud,
the insurer never incurred any liability under the SECTION 83. All defects in a notice of loss, or in
policy. preliminary proof thereof, which the insured might
remedy, and which the insurer omits to specify to
SECTION 76. In case of an over-insurance by him, without unnecessary delay, as grounds of
several insurers, the insured is entitled to a ratable objection, are waived.
return of the premium, proportioned to the amount
SECTION 84. Delay in the presentation to an Reinsurance
insurer of notice or proof of loss is waived, if SECTION 88. A contract of reinsurance is one by
caused by any act of his, or if he omits to take which an insurer procures a third person to insure
objection promptly and specifically upon that him against loss or liability by reason of such
ground. original insurance.

SECTION 85. If a policy requires, by way of SECTION 89. Where an insurer obtains
preliminary proof of loss, the certificate or testimony reinsurance, he must communicate all the
of a person other than the insured, it is sufficient for representations of the original insured, and also all
the insured to use a reasonable diligence to the knowledge and information he possesses,
procure it, and in case of the refusal of such person whether previously or subsequently acquired, which
to give it, then furnish reasonable evidence to the are material to the risk.
insurer that such refusal was not induced by any
just grounds of disbelief in the facts necessary to SECTION 90. A reinsurance is presumed to be a
be certified. contract of indemnity against liability, and not
merely against damage.
Double Insurance
SECTION 91. The original insured has no interest
SECTION 86. A double insurance exists where the in a contract of reinsurance.
same person is insured by several insurers
separately in respect to the same subject and CHAPTER II
interest. Marine insurance

SECTION 87. Where the insured is overinsured by Definition of Marine Insurance

double insurance —
SECTION 92. Marine insurance is an insurance
(a) The insured, unless the policy otherwise against risks connected with navigation, to which a
provides, may claim payment from the insurers in ship, cargo, freightage, profits, or other insurable
such order as he may select, up to the amount for interest in movable property, may be exposed
which the insurers are severally liable under their during a certain voyage or a fixed period of time.
respective contracts;
Insurable Interest
(b) Where the policy under which the insured claim
is a valued policy, the insured must give credit as SECTION 93. The owner of a ship has in all cases
against the valuation for any sum received by him an insurable interest in it, even when it has been
under any other policy without regard to the actual chartered by one who covenants to pay him its
value of the subject matter insured; value in case of loss: Provided, That in this case
the insurer shall be liable for only that part of the of
(c) Where the policy under which the insured claims the loss which the insured cannot recover from the
is an unvalued policy he must give credit, as charterer.
against the full insurable value, for any sum
received by him under any other policy; SECTION 94. The insurable interest of the owner of
a ship hypothecated by bottomry is only the excess
(d) Where the insured receives any sum in excess of its value over the amount secured by bottomry.
of the valuation in the case of valued policies and
the insurable value in the case of unvalued policies, SECTION 95. Freightage, in the sense of a policy
he must hold such sum in trust for the insurers, of marine insurances signifies all the benefit
according to their right of contribution among derived by the owner, either from the chartering of
themselves; the ship or its employment for the carriage of his
own goods or those of others.
(e) Each insurer is bound, as between himself and
the other insurers, to contribute ratably to the loss SECTION 96. The owner of a ship has an insurable
in proportion to the amount for which he is liable interest in expected freightage which according to
under his contract. the ordinary and probable course of things he
would have earned but for the intervention of a peril
insured against or other peril incident to the (d) The want of necessary documents; and
voyage.
(e) The use of false and simulated papers.
SECTION 97. The interest mentioned in the last
section exists, in the case of a charter party, when Representations
the ship has broken ground on the chartered SECTION 104. If a representation, by a person
voyage, and if a price is to be paid for the carriage insured by a contract of marine insurance, is
of goods when they are actually on board, or there intentionally false in any material respect, or in
is some contract for putting them on board, and respect of any fact on which the character and
both ship and goods are ready for the specified nature of the risk depends the insurer may rescind
voyage. the entire contract.

SECTION 98. One who has an interest in the thing SECTION 105. The eventual falsity of a
from which profits are expected to proceed, has an representation as to expectation does not, in the
insurable interest in the profits. absence of fraud, avoid a contract of insurance.

SECTION 99. The charterer of a ship has an Implied Warranties

insurable interest in it, to the extent that he is liable
to be damnified by its loss. SECTION 106. In every marine insurance upon a
ship or freight, or freightage, or upon anything
Concealment which is the subject of marine insurance, a
warranty is implied that the ship is seaworthy.
SECTION 100. In marine insurance each party is
bound to communicate, an addition to what is SECTION 107. A ship is seaworthy, when
required by section twenty-seven, all the reasonably fit to perform the services, and to
information which he possesses, material to the encounter the ordinary perils of the voyage,
risk, except such as is mentioned in section twenty- contemplated by the parties to the policy.
nine, and to state the exact and whole truth in
relation to all matters that he represents, or upon SECTION 108. An implied warranty of
inquiry discloses or assumes to disclose. seaworthiness is complied with if the ship be
seaworthy at the time of the commencement of the
SECTION 101. In marine insurance, information of risk except in the following
the belief or expectation of a third person, in cases:chanroblesvirtuallawlibrary
reference to a material fact, is material.
(a) When the insurance is made for a specified
SECTION 102. A person insured by a contract of length of time, the implied warranty is not complied
marine insurance is presumed to have had with unless the ship be seaworthy at the
knowledge, at the time of insuring, of a prior loss, of commencement of every voyage she may
the information might possibly have reached him in undertake during that time; and
the usual mode of transmission, and at the usual
rate of communication. (b) When the insurance is upon the cargo, which,
by the terms of the policy, or the description of the
SECTION 103. A concealment in a marine voyage, or the established custom of the trade, is to
insurance, in respect to any of the following be transshipped at an intermediate port, the implied
matters, does not vitiate the entire contract, but warranty is not complied with, unless each vessel
merely exonerates the insurer from a loss resulting upon which the cargo is shipped, or transshipped,
from the risk concealed. be seaworthy at the commencement of its particular
voyage.
(a) The national character of the insured;
SECTION 109. A warranty of seaworthiness
(b) The liability of the thing insured to capture and extends not only to the condition of the structure of
detention; the ship itself, but requires that it be properly laden,
and provided with a competent master, a sufficient
(c) The liability to seizure from breach of foreign number of competent officers and seamen, and the
laws of trade; requisite appurtenances and equipment, such as
ballast, cables, and anchors, cordage and sails, (a) When caused by circumstances over which
food, water, fuel, and lights, and other necessary or neither the master nor the owner of the ship has
proper stores and implements for the voyage. any control;

SECTION 110. Where different portions of the (b) When necessary to comply with a warranty, or
voyage contemplated by a policy differ in respect to to avoid a peril whether insured against or not;
the things requisite to make the ship seaworthy
therefor, a warranty of seaworthiness is complied (c) When made in good faith, and upon reasonable
with if, at the commencement of each portion, the grounds of belief in its necessity to avoid a peril; or
ship is seaworthy with reference to that portion.
(d) When made in good faith, for the purpose of
SECTION 111. When a ship becomes unseaworthy saving human life, or relieving another vessel in
during the voyage to which an insurance relates, distress.
an unreasonable delay in repairing the defect
exonerates the insurer from liability from any loss SECTION 118. Every deviation not specified in the
arising therefrom. last section is improper.

SECTION 112. A ship which is seaworthy for the SECTION 119. An insurer is not liable for any loss
purpose of an insurance upon the ship may, happening to a thing insured subsequently to an
nevertheless, by reason of being unfitted to receive improper deviation.
the cargo, be unseaworthy for the purpose of
insurance upon the cargo. Loss

SECTION 113. Where the nationality or neutrality SECTION 120. A loss may be either total or partial.
of a ship or cargo is expressly warranted, it is
implied that the ship will carry the requisite SECTION 121. Every loss which is not total is
documents to show such nationality, or neutrality, partial.
and that it will not carry any documents which cast
reasonable suspicion thereon.
SECTION 122. A total loss may be either actual or
constructive.
The Voyage and Deviation
SECTION 123. An actual total loss is caused
SECTION 114. When the voyage contemplated by by:chanroblesvirtuallawlibrary
a policy is described by the places of beginning and
ending, the voyage insured is one which conforms
(a) A total destruction of the thing insured;
to the course of sailing fixed by mercantile usage
between those places.
(b) The loss of the thing by sinking, or by being
broken up;
SECTION 115. If the course of sailing is not fixed
by mercantile usage, the voyage insured by a
policy is the way between the places specified (c) Any damage to the thing which renders it
which, to a master of ordinary skill and discretion, valueless to the owner for the purposes for which
would seem the most natural, direct, and he held it; or
advantageous.
(d) Any other event which entirely deprives the
SECTION 116. Deviation is a departure from the owner of the possession, at the port of destination,
course of the voyage insured, mentioned in the last of the thing insured.
two sections, or an unreasonable delay in pursuing
the voyage, or the commencement of an entirely SECTION 124. A constructive total loss is one
different voyage. which gives to a person insured a right to abandon,
under section one hundred and thirty-two.
SECTION 117. A deviation is
proper:chanroblesvirtuallawlibrary SECTION 126. An actual loss may be presumed
from the continued absence of a ship without being
heard of; and the length of time which is sufficient
to raise this presumption depends on the (a) If more than three-fourths thereof in value is
circumstances of the case. actually lost, or would have to be expended to
recover it from the peril;
SECTION 126. When a ship is prevented, at an
intermediate port, from completing the voyage, by (b) If it is injured to such an extent as to reduce its
the perils insured against, the master must make value more than three-fourths;
every exertion to procure, in the same or a
contiguous port, another ship, for the purpose of (c) If the thing insured, being a ship, the
conveying the cargo to its destination; and the contemplated voyage cannot be lawfully performed
liability of a marine insurer thereon continues after without incurring an expense to the insured of more
they are thus reshipped. than three-fourths the value of the thing
abandoned, or without incurring a risk which a
SECTION 127. In addition to the liability mentioned prudent man would not take under the
in the last section a marine insurer is bound for circumstances; or
damages, expenses of discharging, storage,
reshipment, extra freightage, and all other (d) If the thing insured, being cargo or freightage,
expenses incurred in saving cargo reshipped the voyage cannot be performed nor another ship
pursuant to the last section, up to the amount procured by the master, within a reasonable time
insured. and with reasonable diligence, to forward the cargo,
without incurring the like expense or risk. But
SECTION 128. Upon an actual total loss, a person freightage cannot in any case be abandoned,
insured is entitled to payment without notice of unless the ship is also abandoned.
abandonment.
SECTION 133. An abandonment must be neither
SECTION 129. Where it has been agreed that partial nor conditional.
an insurance upon a particular thing, or a class of
things, shall be free from particular average, loss SECTION 134. And abandonment must be made
not depriving the insured of the possession, at the within a reasonable time after receipt of reliable
port destination, of the whole of such thing, or class information of the loss, but where the information is
of things, even though it becomes entirely of a doubtful character the insured is entitled to a
worthless; but he is liable for his proportion of all reasonable time to make inquiry.
general average loss assessed upon the thing
insured. SECTION 135. Where the information upon which
an abandonment has been made proves incorrect,
SECTION 130. An insurance confined in terms to or the thing insured was so far restored when the
an actual total loss, does not cover a constructive abandonment was made that there was then in fact
total loss, but covers any loss which necessarily no total loss, the abandonment becomes
results in depriving the insured of the possession, ineffectual.
at the port of destination, of the entire thing insured.
SECTION 136. Abandonment is made by giving
Abandonment notice thereof to the insurer, which may be done
orally, or in writing.
SECTION 131. Abandonment is the act by which,
after a constructive total loss, a person insured by SECTION 137. A notice of abandonment must be
contract of marine insurance declares to the insurer explicit, and must specify the particular cause of the
that he relinquishes to him his interest in the thing abandonment, but need state only enough to show
insured. that there is probable cause therefor, and need not
be accompanied with proof of interest or of loss.
SECTION 132. A person insured by a contract of
marine insurance may abandon the thing insured, SECTION 138. An abandonment can be sustained
or any particular portion thereof separately valued only upon the cause specified in the notice thereof.
by the policy, or otherwise separately insured and
recover for a total loss thereof, when the cause of
the loss is a peril insured
against:chanroblesvirtuallawlibrary
SECTION 139. An abandonment is equivalent to a SECTION 149. A valuation in a policy of
transfer, by the insured of his interest, to the marine insurance is conclusive between the parties
insurer, with all the chances of recovery and thereto in the adjustment of either a partial or total
indemnity. loss, if the insured has some interest at risk, and
there is no fraud on his part; except that when a
SECTION 140. If a marine insurer pays for a loss thing has been hypothecated by bottomry or
as if it were an actual total loss, he is entitled to respondentia, before its insurance, and without the
whatever may remain of the thing insured, or its knowledge of the person actually procuring the
proceeds or salvage, as if there had been a formal insurance, he may show the real value. But a
abandonment. valuation fraudulent in fact entitles the insurer to
rescind the contract.
SECTION 141. Upon an abandonment, acts done
in good faith by those who were agents of the SECTION 150. A marine insurer is liable upon a
insured in respect to the thing insured, subsequent partial loss, only for such proportion of the amount
to the loss, are at the risk of the insurer, and for his insured by him as the loss bears to the value of the
benefit. whole interest of the insured in the property
insured.
SECTION 142. Where notice of abandonment is
properly given, the rights of the insured are not SECTION 151. Where profits are separately
prejudiced by the fact that the insurer refuses to insured in a contract of marine insurance, the
accept the abandonment. insured is entitled to recover, in case of loss, a
proportion of such profits equivalent to the
SECTION 143. The acceptance of an proportion which the value of the property lost
abandonment may be either express or implied bears to the value of the whole.
from the conduct of the insurer. The mere silence of
the insurer after notice is not to be construed as an SECTION 152. In case of a valued policy of marine
acceptance. insurance on freightage or cargo, if a part only of
the subject is exposed to risk the valuation applies
SECTION 144. The acceptance of an only in proportion to such part.
abandonment, whether express or implied, is
conclusive upon the parties, and admits the loss SECTION 153. When profits are valued and
and the sufficiency of the abandonment. insured by a contract of marine insurance, a loss of
them is conclusively presumed from a loss of the
SECTION 145. An abandonment once made and property out of which they were expected to arise,
accepted is irrevocable, unless the ground upon and the valuation fixes their amount.
which it was made proves to be unfounded.
SECTION 164. In estimating a loss under an open
SECTION 146. On an accepted abandonment of a policy of marine insurance the following rules are to
ship, freightage earned previous to the loss belongs be observed:chanroblesvirtuallawlibrary
to the insurer of said freightage; but freightage
subsequently earned belongs to the insurer of the (a) The value of a ship is its value at the beginning
ship. of the risk including all articles or charges which
add to its permanent value, or which are necessary
SECTION 147. If an insurer refuses to accept a to prepare it for the voyage insured;
valid abandonment, he is liable as upon an actual
total loss, deducting from the amount any proceeds (b) The value of cargo is its actual cost to the
of the thing insured which may have come to the insured, when laden on board, or where that cost
hands of the insured. cannot be ascertained, its market value at the time
and place of lading, adding the charges incurred in
SECTION 148. If a person insured omits to purchasing and placing it on board, but without
abandon, he may nevertheless recover his actual reference to any losses incurred in raising money
loss. for its purchase, or to any drawback on its
exportation, or to the fluctuations of the market at
Measure of Indemnity the port of destination, or to expenses incurred on
the way or on arrival;
(c) The value of freightage is the gross freightage, (b) Between one and three years. — One-third to
exclusive of primage, without reference to the cost be deducted off repairs to and renewal of
of earning it; and woodwork of hull, masts, and spars, furniture,
upholstery, crockery, metal and glassware, also
(d) The cost of insurance is in each case to be sails, rigging, ropes, sheets, and hawsers (other
added to the value thus estimated. than wire and chain), awnings, covers and painting.
One-sixth to be deducted off wire rigging, wire
SECTION 155. If cargo insured against partial loss ropes, and wire hawsers, chain cables and chains,
arrives at the port of destination in a damaged donkey engines, steam winches and connections,
condition, the loss of the insured is deemed to be steam cranes and connections; other repairs in full.
the same proportion of the value which the market
price at that port, of the thing so damaged, bears to (c) Between three and six years. — Deductions as
the market price it would have brought if above under clause (b), except that one-sixth be
sound.robles virtual law library deducted off ironwork of masts and spars and
machinery (inclusive of boilers and their
SECTION 156. A marine insurer is liable for all the mountings).
expenses attendant upon a loss which forces the
ship into port to be repaired; and where it is (d) Between six and ten years. — Deductions as
stipulated in the policy that the insured shall labor above under clause (c), except that one-third be
for the recovery of the property, the insurer is liable deducted off ironwork of masts and spars, repairs
for the expense incurred thereby, such expense, in to and renewal of all machinery (inclusive of boilers
either case, being in addition to a total loss, if that and their mountings), and all hawsers, ropes,
afterwards occurs. sheets, and rigging.

SECTION 157. A marine insurer is liable for a loss (e) Between ten and fifteen years. — One-third to
falling upon the insured, through a contribution in be deducted off all repairs and renewals, except
respect to the thing insured, required to be made by ironwork of hull and cementing and chain cables,
him towards a general average loss called for by a from which one-sixth to be deducted. Anchors to be
peril insured against. allowed in full.

SECTION 158. When a person insured by a (f) Over fifteen years. — One-third to be deducted
contract of marine insurance has a demand off all repairs and renewals. Anchors to be allowed
against others for contribution, he may claim the in full. One-sixth to be deducted off chain cables.
whole loss from the insurer, subrogating him to his
own right to contribution. But no such claim can be (g) Generally. — The deductions (except as to
made upon the insurer after the separation of the provisions and stores, machinery, and boilers) to be
interests liable to contribution, nor when the regulated by the age of the ship, and not the age of
insured, having the right and opportunity to enforce the particular part of her to which they apply. No
contribution from others, has neglected or waived painting bottom to be allowed if the bottom has not
the exercise of that right. been painted within six months previous to the date
of accident. No deduction to be made in respect of
SECTION 159. In the case of a partial loss of a ship old material which is repaired without being
or its equipment, the old materials are to be applied replaced by new, and provisions and stores which
towards payment for the new, and unless other have not been in use.
conditions are stipulated in the policy, a marine
insurer is liable for the remaining cost of repairs, 2. In the case of wooden or composite
less deductions from such cost to be made in ships:chanroblesvirtuallawlibrary
accordance with the following When a ship is under one year old from date of
rules:chanroblesvirtuallawlibrary original register at the time of accident no deduction
new for old shall be made. After that period a
1. In the case of iron or steel ships, from date of deduction of one third shall be made, with the
original register to the date of following exceptions:chanroblesvirtuallawlibrary
accident:chanroblesvirtuallawlibrary Anchors shall be allowed in full. Chain cables shall
(a) Up to one year old. — All repairs to be allowed be subject to a deduction of one-sixth only.No
in full, except painting or coating of bottom, from deduction shall be made in respect of provisions
which one-third is to be deducted. and stores which had not been in use.Metal
sheathing shall be dealt with by allowing in full the case shall the insurer be required to pay more than
cost of a weight equal to the gross weight of metal the amount thus stated in such policy. This section
sheathing stripped off, minus the proceeds of the shall not prevent the parties from stipulating in such
old metal. Nails, felt, and labor metalling are subject policies concerning the repairing, rebuilding, or
to a deduction of one-third. replacing buildings or structures wholly or partially
CHAPTER III damaged or destroyed.
Fire Insurance
SECTION 160. An alteration in the use or condition CHAPTER IV
of a thing insured from that to which it is limited by Life and Health Insurance
the policy made without the consent of the insurer,
by means within the control of the insured, and SECTION 165. An insurance upon life may be
increasing the risk, entitles an insurer to rescind a made payable on the death of the person, or on his
contract of fire insurance. surviving a specified period, or otherwise
contingently on the continuance or cessation of life.
SECTION 161. An alteration in the use or condition
of a thing insured from that to which it is limited by Every contract or pledge for the payment of
the policy, which does not increase the risk, does endowments or annuities shall be considered a life
not affect a contract of fire insurance. insurance contract for the purposes of this Act.

SECTION 162. A contract of fire insurance is not SECTION 166. A policy of insurance upon life or
affected by any act of the insured subsequent to health may pass by transfer, will, or succession to
the execution of the policy, which does not violate any person, whether he has an insurable interest or
its provisions, even though it increases the risk and not, and such person may recover upon it whatever
is the cause of a loss. the insured might have recovered.

SECTION 163. If there is no valuation in the policy, SECTION 167. Notice to an insurer of a transfer or
the measure of indemnity in an insurance against bequest thereof is not necessary to preserve the
fire is the expense it would be to the insured at the validity of a policy of insurance upon life or health,
time of the commencement of the fire to replace the unless thereby expressly required,
thing lost or injured in the condition in which it was
at the time of the injury; but the effect of a valuation SECTION 168. Unless the interest of a person
in a policy of fire insurance is the same as in a insured is susceptible of exact pecuniary
policy of marine insurance. measurement, the measure of indemnity under a
policy of insurance upon life or health is the sum
SECTION 164. Whenever the insured desires to fixed in the policy.
have a valuation named in his policy, insuring any
building or structure against fire, he may require CHAPTER V
such building or structure to be examined by the Insurance Companies
insurer and the value of the insured's interest
therein shall be thereupon fixed by the parties. The SECTION 169. In addition to the duties now
cost of such examination shall be paid for by the imposed upon him by law, the Insular Treasurer
insured. A clause shall be inserted in such policy shall act as Insurance Commissioner and in
stating substantially that the value of the insured's addition to his present official title he shall hereafter
interest in such building or structure has been thus be designated as Insurance Commissioner ex
fixed. In the absence of any change increasing the officio.
risk without the consent of the insurer or of fraud on
the part of the insured, then in case of a total loss SECTION 170. For the purposes of this chapter
under such policy, the whole amount so insured unless the context otherwise requires the
upon the insured's interest in such building or terms "company" or "insurance company" shall
structure, as stated in the policy upon which the include all corporations, associations, partnerships,
insurers have received a premium, shall be paid, or individuals engaged as principals in the
and in case of a partial loss the full amount of the insurance business, excepting fraternal and
partial loss shall be so paid, and in case there are benevolent orders and societies. "Domestic
two or more policies covering the insured's interest companies" shall include companies formed,
therein, each policy shall contribute pro rata to the organized or existing under the laws of the
payment of such whole or partial loss. But in no
Philippine Islands. "Foreign companies" when used SECTION 174. The Insurance Commissioner shall
without limitation shall include companies formed, at least once a year and whenever he considers the
organized, or existing under any laws other than public interest so demands, cause an examination
those of the Philippine Islands. to be made into the financial condition of every
domestic insurance company. Such company shall
SECTION 171. It shall be the duty of the Insurance submit to the examiner all such books, papers, and
Commissioner to see that all laws relating to securities as he may require and such examiner
insurance and insurance companies are faith fully shall also have the power to examine the officers of
executed and perform the duties imposed upon him such corporation under oath touching its business
by this Act. and financial condition, and the authority of any
such company to transact business in the
He may issue such rulings, instructions, and orders Philippine Islands that refuses to allow such
as he may deem necessary to secure the examination, shall be revoked by
enforcement of the provisions of this Act, subject to the Insurance Commissioner, and such company
the approval of the Secretary of Finance and shall not thereafter be allowed to transact further
Justice. business in the Philippine Islands until it has fully
complied with the provisions of this section.
SECTION 172. After the becoming effective of this
Act, no foreign or domestic insurance company SECTION 175. If the Insurance Commissioner is of
shall transact any new business in the Philippine the opinion upon examination or other evidence
Islands until after it shall have obtained a certificate that any foreign or domestic insurance company is
of authority for that purpose from the Insurance in an unsound condition, or that it has failed to
Commissioner. No such certificate of authority shall comply with any provision of law obligatory upon it,
be granted to any such company until the or that its condition is such as to render its
Insurance Commissioner shall have satisfied proceedings hazardous to the public or to its policy
himself by such examination as he may make and holders or that its actual assets exclusive of its
such evidence as he may require that such capital are less than its liabilities, including
company is qualified by the laws of the Philippine unearned premiums and reinsurance reserve, the
Islands to transact business herein. Said certificate Insurance Commissioner is authorized, subject to
of authority shall expire on the last day of June of appeal to the Secretary of Finance and Justice, to
each year and shall be renewed annually if the revoke or suspend all certificates of authority
company is continuing to comply with all of the granted to such insurance company, its officers or
provisions of this chapter. Before issuing such agents, and no new business shall thereafter be
certificate of authority, the Insurance Commissioner done by such company or for such company by its
must be satisfied that the name of the company is agents in the Philippine Islands while such
not that of any other known company transacting a revocation, suspension or disability continues or
similar business, or a name so similar as to be until its authority to do business is restored by the
calculated to mislead the public. Every company Insurance Commissioner.
receiving any such certificate of authority shall be The decision of the Secretary of Finance and
subject to the insurance laws of the Philippine Justice in all such cases shall be final.
Islands and to the jurisdiction and supervision of
the Insurance Commissioner. An appeal may be SECTION 176. The Insurance Commissioner must
taken from any decision of the Insurance cause every company, before engaging in the
Commissioner, refusing to grant such certificate of business of insurance, to file in his office as
authority to the Secretary of Finance and Justice follows:chanroblesvirtuallawlibrary
whose decision shall be final.
(a) A certified copy of the last annual statement or a
SECTION 173. The Insurance Commissioner shall verified financial statement exhibiting the condition
require each insurance company to keep its books, and affairs of such company.
records, accounts, and vouchers in such manner
that he or his authorized representatives may (b) If incorporated under the laws of the Philippine
readily verify its annual statement and ascertain Islands, a copy of the articles of incorporation and
whether the company is solvent and has complied by-laws and any amendments to either, certified by
with the provisions of this chapter. the chief of the division of archives, patents,
copyrights, and trademarks to be a copy of that
which is filed in his office.
(c) If incorporated under any laws other than those business in the Philippine Islands, that if at any
of the Philippine Islands, a copy of the articles of time said company shall leave the Philippine
incorporation and by-laws and any amendments to Islands, or cease to transact business therein, or
either if organized or formed under any law shall be without an agent in the Philippine Islands
requiring such to be filed, duly certified by the on whom any notice, proof of loss, summons, or
officer having the custody of same, or if not so other legal process may be served, then in any
organized, a copy of the law, charter, or deed of action or proceeding arising out of any business or
settlement under which the deed of organization is transactions which occurred in the Philippine
made, duly certified by the proper custodian Islands, service of any notice provided by law, or
thereof, or proved by affidavit to be a copy; also, a insurance policy, proof of loss, summons, or other
certificate under the hand and seal of the proper legal process may be made upon the Insurance
officer of such state or country having supervision Commissioner, and that such service upon the
of insurance business therein, if any there be, that Commissioner shall have the same force and effect
such corporation or company is organized under as if made upon the company."
the laws of such state or country, with the amount Whenever such service of notice, proof of loss,
of capital stock or assets and legal reserve required summons, or other legal process shall be made
by this Act. upon the Insurance Commissioner, he must, within
ten days thereafter, transmit by mail, postage paid,
(d) If not incorporated, a certificate setting forth the a copy of such notice, proofs of loss, summons, or
nature and character of the business, the location either legal process to the company at its home or
of the principal office, the names of the persons principal office. The sending of such copy by the
and of those composing the company, firm, or commissioner shall be a necessary part of the
association, the amount of actual capital employed service of the notice, proof of loss, or other legal
or to be employed therein, and the names of all process.
officers and persons by whom the business is or
may be managed.robles virtual law library SECTION 178. No foreign insurance company shall
engage in business in the Philippine Islands unless
The certificate must be verified by the affidavit of possessed of paid up unimpaired capital (or assets)
the chief officer, secretary, agent, or manager of and reserve not less than that herein required of
the company; and if there are any written articles of domestic insurance companies; and no insurance
agreement or company, a copy thereof must company organized or existing under the
accompany such certificate. government or laws other than those of the
Philippine Islands or any state of the United States
SECTION 177. The Insurance Commissioner must shall engage in business in the Philippine Islands
require as a condition precedent to the transaction until it shall have deposited with the Insurance
of insurance business in the Philippine Islands by Commissioner for the benefit and security of its
any foreign insurance company, that such company policy holders and creditors in the Philippine
file in his office a written power of attorney Islands securities, satisfactory to the Insurance
designating some person who shall be a resident of Commissioner consisting of bonds of the United
the Philippine Islands, on whom any notice States or of the Philippine Islands or of the city of
provided by law or by any insurance policy, proof of Manila or of municipalities in the Philippine Islands
loss, summons, and other process may be served authorized by law to issue bonds, or of the
in all actions or other legal proceedings against government in which such company is organized,
such company, and consenting that service upon or other good securities to the actual market value
such agent shall be admitted and held as valid as if of one hundred thousand pesos: Provided, That if
served upon the foreign company at its home a company organized or existing under the laws of
office. Any such foreign company shall, as a further any government outside of the United States and
condition precedent to the transaction of insurance the Philippine Islands shall have made a deposit
business in the Philippine Islands, make and file with the insurance department of some one of the
with the Insurance Commissioner an agreement or States of the United States of securities of the
stipulation, executed by the proper authorities of character above described to the actual market
said company in form and substance as value of at least four hundred thousand pesos, in
follow:chanroblesvirtuallawlibrary exclusive trust for the benefit and security of all the
"The (name of company) does hereby stipulate and company's policy holders and creditors in the
agree in consideration of the permission granted by United States and its possessions, each deposit
the Insurance Commissioner to it to transact shall be held to be in lieu of the deposit required by
this, And: Provided, Further, That it shall be a SECTION 181. Immediately upon approval of the
sufficient compliance with the provisions of this annual statements by the Insurance Commissioner,
section if the deposit herein required be made with every insurance company doing business in the
the Chief of the Bureau of Insular Affairs of the War Philippine Islands shall publish in two papers of
Department at Washington or with a safe deposit general circulation in the city of Manila, one
company designated by that officer, which published in English and one in the Spanish
company shall agree to hold the securities so language, a full synopsis of its annual financial
deposited subject to the control of the Chief of the statement showing fully the condition of its
Bureau of Insular Affairs as the representative of business, and setting forth its resources and
the insurance commissioner of the Philippine liabilities.
Islands.
SECTION 182. Every life insurance company,
SECTION 179. The Insurance Commissioner shall doing business in the Philippine Islands, shall
hold the securities deposited as aforesaid, for the annually make a valuation of all policies, additions
benefit and security of all the policy holders of the thereto, unpaid dividends, and all other obligations
company depositing the same, but shall, so long as outstanding on the thirty-first day of December of
the company shall continue solvent, permit the the preceding year. All such valuations shall be
company to collect the interest or dividends on the made upon the net premium basis, according to the
securities so deposited, and, from time to time, with standard adopted by the company, which standard
his assent, to withdraw any of such securities, upon shall be stated in its annual report.
depositing with said commissioner other like
securities, the market value of which shall be equal Such standard of valuation, whether on the net
to the market value of such as may be withdrawn. level premium, preliminary term, any modified
In the event of any company ceasing to do preliminary term, or select and ultimate reserve
business in the Philippine Islands the securities basis, shall be according to a standard table of
deposited as aforesaid shall be returned upon the mortality, with interest at not less than three nor
company's making application therefor and proving more than six per cent compound interest. When
to the satisfaction of the Insurance Commissioner the preliminary term basis is used the term
that it has no further liability under any of its policies insurance shall be limited to the first policy year.
in the Philippine Islands.
The results of such valuation shall be reported to
SECTION 180. Every insurance company, doing the Insurance Commissioner on or before the
business in the Philippine Islands, shall annually on thirtieth day of April of each year accompanied by a
or before the thirtieth day of April, of each year, sworn statement of the company's actuary
render to the Insurance Commissioner a statement certifying to the figures and stating upon what
signed and sworn to by the chief officer of such mortality table it is based, upon what rate of interest
company showing, in such form and detail as may the valuation is made, and the methods used in
be prescribed by the Insurance Commissioner, the arriving at the results obtained: Provided, That in
exact condition of its affairs on the preceding thirty- case the fiscal year of a life insurance company
first day of December: Provided, That in case the does not terminate with the thirty-first day of
fiscal year of an insurance company does not December, it shall be deemed a sufficient
terminate with the thirty-first day of December, it compliance with this section if the valuation herein
shall be deemed a sufficient compliance with this required is made to coincide with the regular fiscal
section if the report is made to coincide with the year of the company. In such case the result of
regular fiscal year of the company. In such case the such valuation shall be reported to the Insurance
report of the company shall be filed with the Commissioner within four months after the close of
Insurance Commissioner within four months after its fiscal year: And Provided, Further, That the
the close of its fiscal year: And, Provided, Insurance Commissioner may in his discretion, and
Further, That the Insurance Commissioner may in upon approval of the Secretary of Finance and
his discretion, and upon approval of the Secretary Justice, grant an extension of not exceeding three
of Finance and Justice, grant an extension of not months, to any company, upon his being satisfied
exceeding three months, to any company, upon his that the period of four months granted by this
being satisfied that the period of four months section is inadequate with regard to said company.
granted by this section is inadequate with regard to
said company. SECTION 183. The aggregate net value of the
policies of such company so ascertained shall be
deemed its reserve liability, to provide for which it (f) A provision specifying the options to which the
shall hold funds in secure investments equal to policy-holder is entitled in the event of default in a
such net value, above all its other liabilities; and it premium payment after three full annual premiums
shall be the duty of the Insurance Commissioner, shall have been paid.
after having verified, to such an extent as he may
deem necessary, the valuation of all policies in (g) A provision that after three full years' premiums
force, to satisfy himself that the company has such have been paid, the company at any time, while the
amount in safe legal securities after all other debts policy is in force, will advance, on proper
and claims against it have been provided for. assignment or pledge of the policy and on the sole
security thereof, at a specified rate of interest, a
SECTION 184. Hereafter no policy of life or sum equal to, or at the option of the owner of the
endowment insurance shall be issued or delivered policy less than, the reserve at the end of the
within the Philippine Islands unless it shall contain current policy year on the policy and on any
in substance the following dividend additions thereto, less a sum not more
provisions:chanroblesvirtuallawlibrary than two and one-half per centum of the amount
insured by the policy and of any dividend additions
(a) A provision that the insured is entitled to a grace thereto; and that the company will deduct from such
either of thirty days or of one month within which loan value any existing indebtedness on the policy
the payment of any premium after the first year may and any unpaid balance of the premium for the
be made, subject at the option of the company to current policy year, and may collect interest in
any interest charge not in excess of six per centum advance on the loan to the end of the current policy
per annum for the number of days of grace year; which provision may further provide that such
elapsing before the payment of the premium, during loan may be deferred for not exceeding six months
which period of grace the policy shall continue in after the application therefor is made. A company
full force, but in case the policy becomes a claim may, in lieu of the provision hereinabove permitted
during the said period of grace before the overdue for the deduction from a loan on the policy of a sum
premium or the deferred premiums of the current not more than two and one-half per centum of the
policy year if any are paid, the amount of such amount insured by the policy and of any dividend
premiums, with interest on any overdue premium, additions thereto, insert in the policy a provision
may be deducted from any amount payable under that one-fifth of the entire reserve may be deducted
the policy in settlement. in case of a loan under the policy, or may provide
therein that the deduction may be the said two and
(b) A provision that the policy shall, in the absence one-half per centum or the one-fifth of the said
of fraud, be incontestable after five years from its entire reserve at the option of the company.
date of issue except for nonpayment of premiums
and except for violation of the conditions of the (h) A table showing in figures the loan values, if
policy relating to military or naval service in time of any, and the options available under the policy
war. each year upon default in premium payments,
during at least the first twenty years of the policy.
(c) A provision that the policy shall constitute the
entire contract between the parties, but if the (i) In case the proceeds of a policy are payable in
company desires to make the application a part of installments or as an annuity, a table showing the
the contract it may do so provided a copy of such amounts of the installments or annuity payments.
application shall be indorsed upon or attached to
the policy when issued, and in such case the policy (j) A provision that the holder of a policy shall be
shall contain a provision that the policy and the entitled to have the policy reinstated at any time
application therefor shall constitute the entire within three years from the date of default unless
contract between the parties. the cash value has been duly paid, or the extension
period expired, upon the production of evidence of
(d) A provision that if the age of the insured has insurability satisfactory to the company and the
been misstated the amount payable under the payment of all overdue premiums and any other
policy shall be such as the premium would have indebtedness to the company upon said policy with
purchased at the correct age. interest at a rate which shall be stipulated in the
policy and not exceeding ten per centum per
(e) A provision that the policy shall participate in the annum, payable annually.
surplus of the company.
Any of the foregoing provisions or portions thereof exceeding ten per cent of its net assets unless it
not applicable to single premium or non has provided for reinsurance of the excess over
participating or term policies shall to that extent not said limit to take effect simultaneously with the
be incorporated therein; and any such policy may original contract.
be issued or delivered in the Philippine Islands
which in the opinion of the insurance commissioner SECTION 188. No policy of fire insurance shall be
contains provisions on any one or more of the pledged, hypothecated, or transferred to any
several foregoing requirements more favorable to person, firm or company who acts as agent for or
the policy holder than hereinbefore required. The otherwise represents the issuing company, and any
provisions of this section shall not apply to policies such pledge, hypothecation, or transfer hereafter
of reinsurance.robles virtual law library made shall be void and of no effect in so far as it
may affect other creditors of the insured.
SECTION 185. Every domestic life insurance
company, conducted on the mutual plan or a plan Agents
in which policy holders are by the terms of their
policies entitled to share in the profits or surplus SECTION 189. No insurance company doing
shall, on all policies of life insurance heretofore or business within the Philippine Islands, nor any
hereafter issued, under the conditions of which the agent thereof, shall pay any commission or other
distribution of surplus is deferred to a fixed or compensation to any person for services in
specified time and contingent upon the policy being obtaining new insurance unless such person shall
in force and the insured living at that time, annually have first procured from the Insurance
ascertain the amount of the surplus to which all Commissioner a certificate of authority to act as an
such policies as a separate class are entitled, and agent of such company hereinafter provided. No
shall annually apportion to such policies as a class person shall act as agent, subagent, or broker, in
the amount of the surplus so ascertained and carry the solicitation or procurement of applications for
the amount of such apportioned surplus, plus the insurance, or receive for services in obtaining new
actual interest earnings and accretions of such insurance any commission or other compensation
fund, as a distinct and separate liabilities of such from any insurance company doing business in the
class of policies on and for which the same was Philippine Islands, or agent thereof, without first
accumulated, and no company or any of its officers procuring a certificate of authority so to act from the
shall be permitted to use any part of such Insurance Commissioner, which must be renewed
apportioned surplus fund for any purpose annually on the first day of January, or within six
whatsoever other than for the express purpose for months thereafter. Such certificate shall be issued
which the same was accumulated. by the Insurance Commissioner only upon the
written application of persons desiring such
SECTION 186. To determine the liability upon the authority such application being approved and
contracts of insurance of any foreign or domestic countersigned by the company such person desires
insurance company, other than life, to represent, and shall be upon a form approved by
the Insurance Commissioner shall require such the Insurance Commissioner, giving such
companies to charge as the liabilities for information as he many require. The Insurance
reinsurance of its outstanding policies, in addition to Commissioner shall have the right to refuse to
the capital stock and all outstanding claims, a sum issue or renew and to revoke any such certificate in
equal to fifty per cent of the gross premiums his discretion. No such certificate shall be valid,
received on policies or risks having not more than a however, in any event after the first day of July of
year to run, and pro rata on all gross premiums the year following the issuing of such certificate.
received having more than a year to run: Provided, Renewal certificates may be issued upon the
That for marine risks the insuring company shall be application of the company.
required to charge as the liability for reinsurance
fifty per centum of the premiums written in the Any person or company violating the provisions of
policies upon yearly risks, and the full amount of this section shall be fined in the sum of five
the premiums written in the policies upon all other hundred pesos. On the conviction of any person
marine risks not terminated. acting as agent, subagent, or broker, of the
commission of any offense connected with the
SECTION 187. No fire or marine insurance business of insurance,
corporation whether foreign or domestic shall the Insurance Commissioner shall immediately
insure on any one risk or hazard to an amount revoke the certificate of authority issued to him and
no such certificate shall thereafter be issued to upon terms and conditions as
such convicted person. follows:chanroblesvirtuallawlibrary

SECTION 190. No insurance company, engaged in The Insurance Commissioner may issue a
business in the Philippine Islands, or any agent certificate of authority to any regularly authorized
thereof, shall make any contract of insurance, or fire or marine insurance agent of the Philippine
agreement as to policy contract, other than is Islands, subject to revocation at any time,
plainly expressed in the policy issued thereon; nor permitting the person named therein to procure
shall any such company or agent, pay or allow, or policies of insurance on risks located in the
offer to pay or allow, as inducement to insurance, Philippine Islands for companies not authorized to
any rebate of premiums payable on the policy, nor transact business in the Philippine Islands.
shall any particular policy holder of the same class
be allowed any advantage in the dividends or other Before the agent named in such certificate of
benefits to accrue thereon, or any valuable authority shall procure any insurance in such
consideration or inducement whatever not specified company there shall be executed and filed in each
in the policy contract of insurance. case with the Insurance Commissioner by the
agent and by the party desiring the insurance
SECTION 191. No agent, subagent, broker, or affidavits setting forth that the party desiring
other person, representing any insurance company insurance is after diligent effort unable to procure,
doing business in the Philippine Islands shall in any in any of the companies authorized to do business
way, directly or indirect-divide or offer to divide his in the Philippine Islands, the amount of insurance
commission or other remuneration, or give or offer necessary.
to give any part of his commission or other
remuneration, or any other consideration as an Every such agent shall keep a separate account of
inducement to insurance; nor shall any such the business done under the authority of this
company or any agent thereof, as to any new section, open at all times to the inspection of any
policies of insurance hereafter issued, make any authorized Government officer; showing the exact
discrimination against any citizen of the Philippine amount and character of such insurance placed for
Islands whereby such citizen of the Philippine any person, firm or corporation, the gross premium
Islands is given less advantageous rates, dividends charged thereon, the companies with which the
or other policy conditions or privileges than are same is placed, the dates of the policies, the terms
accorded to Caucasians because of his race. thereof, and the location of the insured property.
Whoever violates this or the preceding section shall
be fined in the sum of two hundred pesos for each Such agent shall likewise make a yearly report to
such offense and upon conviction the certificate of the Collector of Internal Revenue at the time and in
authority of the company, agent, subagent, or the manner prescribed in section eighty-one of Act
broker as the case may be shall be revoked by the Numbered Twenty-three hundred and thirty-nine,
Insurance Commissioner. showing the entire amount of all premiums received
by the company he represents under the authority
SECTION 192. It shall be unlawful for any person, of this section. And such agent shall pay to the
company or corporation in the Philippine Islands Collector of Internal Revenue a tax equal to twice
either to procure, receive, or forward applications the tax imposed by section seventy-nine of Act
for insurance in or to issue or to deliver or accept Numbered Twenty-three hundred and thirty-nine,
policies of or for any company or companies not which tax shall be paid at the same time and be
having been legally authorized to transact business subject to the same penalty for delinquency as the
in the Philippine Islands, as provided in this tax imposed by said Act Numbered Twenty-three
chapter; and any such person, company or hundred and thirty-nine: Provided, However, That
corporation violating the provisions of this section the provisions of this section shall not apply to
shall be deemed guilty of a penal offense, and, reinsurance.
upon conviction thereof, shall for each such
offense, be punished by a fine of two hundred Insurance Corporations
pesos, or imprisonment for two months, or both in
the discretion of the court: Provided, That SECTION 193. The provisions of Act Numbered
insurance companies not authorized to transact Fourteen hundred and fifty-nine, known as "The
business in the Philippine Islands may be placed Corporation Law" and its amendments, shall apply
to all incorporated insurance companies now or
hereafter engaged in business in the Philippine trust of actually cultivated, improved and
Islands in so far as they do not conflict with the unencumbered agricultural lands in the Philippine
provisions of this chapter. Islands when the amount of such loans is not in
excess of forty per centum of the value of such
SECTION 194. Corporations formed or organized land, or upon bonds or other evidence of debt of
to save any person or persons or other corporation the Government of the United States, or of the
harmless from loss, damage, or liability arising from Philippine Islands, or of the City of Manila, or of
any unknown or future or contingent event, or to municipalities in the Philippine Islands authorized
indemnify or to compensate any person or persons by law to issue bonds, or such other securities,
or other corporation for any such loss, damage, or deposited as collateral, as may be approved by
liability, or to guarantee the contractual obligations the Insurance Commissioner: Provided,
or debts of others, shall be known However, That a life insurance corporation may
as insurance corporations for the purposes of this loan its money upon the security of a policy to an
chapter. amount not exceeding the net reserve value of the
policy at the time said loan is made.
Domestic Insurance Corporations
SECTION 198. No loan by any insurance
SECTION 196. Every insurance corporation corporation on the security of real estate shall be
hereafter formed or organized under the laws of the made unless the title to such real estate shall have
Philippine Islands shall, if a stock corporation, have first been registered in accordance with the Land
a subscribed capital stock equal to at least two Registration Act, or shall be a titulo real duly
hundred and fifty thousand pesos, fifty per centum registered, or have been previously registered
of which must be paid up in cash previous to the under the provisions of the Mortgage Law; that is,
issuance of any policy, and the residue within under the system of registration established by the
twelve months from the date of filing its articles of laws in force on the date of the passage of Act
incorporation. For failure to have its capital stock Numbered Four hundred and ninety-six,
paid up within the time prescribed the corporation entitled "The Land Registration Act."robles virtual
shall not be permitted to take any new risks of any law library
kind or character. If organized as a mutual
company, in lieu of such capital stock, it must have SECTION 199. It shall be the duty of the officers of
available cash assets of at least two hundred and the corporation to report quarterly on the first days
fifty thousand pesos above all liabilities for losses of January, April, July and October of each year to
reported, expenses, taxes, legal reserve, and the Insurance Commissioner a list of such
reinsurance of all outstanding risks. investments as may be made by them, and the
Insurance Commissioner may, if such investments,
Any officer, official, or director of the corporation or any of them, seem injudicious to him, require the
taking or authorizing the taking of any risk for the sale of the same.
corporation in violation of the terms of this section
shall be punished by imprisonment for not less than SECTION 200. Insurance corporations may
one year nor more than five years and by a fine of purchase, hold, own and convey real and personal
not less than one thousand nor more than five property as follows.
thousand pesos.
(a) The lot with the building thereon in which the
SECTION 196. No domestic insurance corporation corporation conducts and carries on its business.
shall adopt the name of any existing company
transacting a similar business or any name so (b) Such property, real and personal, as may have
similar as to be calculated to mislead the public. been mortgaged, pledged, or conveyed to it in good
faith in trust for its benefit by reason of money
SECTION 197. No insurance corporation shall loan loaned by it in pursuance of the regular business of
any of its money or deposits except upon first the corporation, and such real or personal property
mortgages or deeds of trust of unencumbered as may have been purchased by it at sales under
improved real estate, in cities and centers of pledges, mortgages, or deeds of trust for its benefit
population of municipalities in the Philippine Islands on account of money loaned by it, and such real
when the amount of such loan is not in excess of and personal property as may have been conveyed
sixty per centum of the value of such real estate, or to it by borrowers in satisfaction and discharge of
upon the security of first mortgages or deeds of loans made by the corporation to them: Provided,
However, That any real estate purchased by said Philippine Islands to engage in the business of
corporation in payment or by reason of any loan insurance specified in the certificate.
made by said corporation shall be sold by the
corporation within five years after the title thereto General Penalty
has been vested in it.
SECTION 203. Any person who knowingly violates
(c) Bonds and other evidences of debt of the any provision of this chapter for which no penalty is
Government of the United States or of the provided, shall upon conviction punished by a fine
Philippine Islands or of the city of Manila or of any not exceeding five hundred pesos or by
municipality in the Philippine Islands authorized by imprisonment not exceeding five months or by both
law to issue bonds at the reasonable market value such fine and imprisonment in the discretion of the
thereof, and such other securities as may be court.
approved by the Insurance Commissioner.
CHAPTER VI
SECTION 201. No insurance corporation shall Final Provision
declare any dividend except from profits remaining
on hand after retaining SECTION 204. The provisions of sections one
unimpaired:chanroblesvirtuallawlibrary hundred and forty-seven to one hundred and fifty-
(a) The entire paid up capital stock. three, inclusive, of Act Numbered Fourteen
hundred and fifty-nine; Title Eight of Book Two;
(b) In the case of life insurance corporations the Section Third of Title Three, Book Three of the
legal reserve fund required by section one hundred Code of Commerce; and all laws or parts of laws in
and eighty-three of this Act. conflict or inconsistent with this Act, are hereby
repealed.
(c) In the case of corporations other than life the
legal reserve fund required by section one hundred SECTION 205. This Act shall be in effect on and
and eighty-six of this Act. after the first day of July, nineteen hundred and
fifteen.
(d) A sum sufficient to pay all losses reported, or in
the course of settlement, and all liabilities for ENACTED, December 11, 1914.
expenses and taxes.

Conduct of Insurance Business by Persons Not

Incorporated

SECTION 202. No person, partnership, or

association of persons shall engage in the business
of insurance in the Philippine Islands except as
agent of a person or corporation authorized to do
the business of insurance in the Philippine Islands,
unless possessed of the capital and assets
required of an insurance corporation doing the
same kind of business in the Philippine Islands and
invested in the same manner; nor unless the
Insurance Commissioner shall have granted to him
or them a certificate to the effect that he or they
have complied with all the provisions of law which
an insurance corporation doing business in the
Philippine Islands is required to observe.

Every person, partnership, or association receiving

any such certificate of authority shall be subject to
the insurance laws of the Philippine Islands and to
the jurisdiction and supervision of the Insurance
Commissioner in the same manner as if an
insurance corporation authorized by the laws of the