Insurance Code

Republic Act
No. 10607
(PRESIDENTIAL
DECREE
NO. 612)

GENERAL PROVISIONS
A contract of insurance is an agreement whereby one
undertakes for a consideration to indemnify another against
loss, damage or liability arising fr. an unknown or contingent
event.
A contract of suretyship shall be deemed to be an insurance
contract, only if made by a surety who or w/c, as such, is
doing an insurance business as hereinafter provided.
NOTE :

The term doing an insurance business or transacting an insurance business means

(a) Making or proposing to make, as insurer, any insurance contract;
(b) Making or proposing to make, as surety, any contract of suretyship as a vocation & not as merely
incidental to any other legitimate business or activity of the surety;
(c) Doing any kind of business, including a reinsurance business, specifically recognized as constituting
the doing of an insurance business within the meaning of this Code;
(d) Doing or proposing to do any business in substance equivalent to any of the foregoing in a manner
designed to evade the provisions of this Code.

THE CONTRACT OF INSURANCE: What may

be insured ?
Any contingent or unknown event, whether past
or future, w/c may damnify a person having an
insurable interest, or create a liability against him,
may be insured against, subject to the provisions of
Sec.
3
of
the
Insurance
Code.

NOTE :

The consent of the husband is not necessary for the validity of an insurance policy taken out by a
married woman on her life or that of her children.
Any minor of the age of eighteen years or more, may, notwithstanding such minority, contract for life,
health & accident insurance, w/ any insurance company duly authorized to do business in the
Philippines, provided the insurance is taken on his own life & the beneficiary appointed is the minors
estate or the minors father, mother, husband, wife, child, brother or sister.
The married woman or the minor herein allowed to take out an insurance policy may exercise all the
rights & privileges of an owner under a policy.
All rights, title & interest in the policy of insurance taken out by an original owner on the life or health
of a minor shall automatically vest in the minor upon the death of the original owner, unless otherwise
provided .

THE CONTRACT OF INSURANCE: Who are the parties

to the contract?
Every person, partnership, association, or corporation
duly authorized to transact insurance business, may
be an insurer.
Exemption: A public enemy.
NOTE :

If an insurer assents to the transfer of an insurance fr. a mortgagor to a mortgagee, &, at

the time of his assent, imposes further obligation on the assignee, making a new contract
w/ him, the act of the mortgagor cannot affect the rights of said assignee.

THE CONTRACT OF INSURANCE: INSURABLE

INTEREST

LIFE AND HEALTH

Every person has an insurable interest in the life & health:

(a)
Of himself, of his spouse & 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 w/c death or illness might delay or prevent the performance; &
(d)
Of any person upon whose life any estate or interest vested in him depends.

PROPERTY (Real or Personal)

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 w/ an existing interest in that out of w/c the expectancy
arises. NOTE :
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, & every policy executed by way of gaming or wagering, is void.

THE CONTRACT OF INSURANCE: CONCEALMENT

A neglect to communicate that w/c a party knows & ought to
communicate, is called a concealment. A concealment whether
intentional or unintentional entitles the injured party to rescind a
contract of insurance. (As amended by Batasang Pambansa Blg.
874)
Each party to a contract of insurance must communicated to the other, in good
faith, all facts within his knowledge w/c are material to the contract & as to w/c
he makes no warranty, & w/c the other has not the means of ascertaining.
:
NOTES
Materiality
is to be determined not by the event, but solely by the probable & 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.
Each party to a contract of insurance is bound to know all the general causes w/c are open to his
inquiry, equally w/ that of the other, & w/c may affect the political or material perils contemplated; &
all general usages of trade.
The right to information of material facts may be waived, either by the terms of the insurance or by
neglect to make inquiry as to such facts, where they are distinctly implied in other facts of w/c
information is communicated.

THE CONTRACT OF INSURANCE: REPRESENTATION

When a person insured has no personal knowledge of a fact, he
may nevertheless repeat information w/c he has upon the subject, &
w/c he believes to be true, w/ the explanation that he does so on the
information of others; or he may submit the information, in its whole
extent, to the insurer; & in neither case is he responsible for its
truth, unless it proceeds fr. an agent of the insured, whose duty it is
NOTES:the information.
to give
A representation is to be deemed false when the facts fail to correspond w/ its assertions
or stipulations.
If a representation is false in a material point, whether affirmative or promissory, the
injured party is entitled to rescind the contract fr. the time when the representation
becomes false. The right to rescind granted to the insurer is waived by the acceptance of
premium payments despite knowledge of the ground for rescission.
The materiality of a representation is determined by the same rules as the materiality of
a concealment.

THE CONTRACT OF INSURANCE: THE POLICY

The written instrument in w/c a contract of insurance
is set forth, is called a policy of insurance.
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 & rates
upon w/c 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; &
(g)
The period during w/c the insurance is to continue.

THE CONTRACT OF INSURANCE: WARRANTIES

A warranty is either expressed or implied. A warranty may relate
to the past, the present, the future, or to any or all of these. No
particular form of words is necessary to create a warranty.
EXPRESSED WARRANTY - A statement in a policy of matter relating to the
person or thing insured, or to the risk, as a fact, is an express warranty thereof.
A statement in a policy w/c imparts that it is intended to do or not to do a thing
w/c materially affects the risk, is a warranty that such act or omission shall take
NOTES:
place.
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.
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.
A breach of warranty without fraud merely exonerates an insurer fr. the time that it
occurs, or where it is broken in its inception, prevents the policy fr. attaching to the risk.

THE CONTRACT OF INSURANCE:

PREMIUM

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 &
binding unless & 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.
A person insured is entitled to a return of premium, as follows:
(a)
To the whole premium if no part of his interest in the thing insured be exposed to any of
the perils insured against;
(b)
Where the insurance is made for a definite period of time & the insured surrenders his
policy, to such portion of the premium as corresponds w/ the unexpired time, at a pro rata rate,
unless a short period rate has been agreed upon & appears on the face of the policy, after
deducting fr. the whole premium any claim for loss or damage under the policy w/c has previously
accrued; Provided, That no holder of a life insurance policy may avail himself of the privileges of

THE CONTRACT OF INSURANCE:

LOSS

An agreement not to transfer the claim of the insured against the insurer
after the loss has happened, is void if made before the loss except as
otherwise provided in the case of life insurance.
Unless otherwise provided by the policy, an insurer is liable for a loss of w/c
a peril insured against was the proximate cause, although a peril not
contemplated by the contract may have been a remote cause of the loss;
but he is not liable for a loss w/c the peril insured against was only a
remote cause.
An insurer is liable where the thing insured is rescued fr. a peril insured
against that would otherwise have caused a loss, if, in the course of such
rescue, the thing is exposed to a peril not insured against, w/c permanently
deprives the insured of its possession, in whole or in part; or where a loss is
caused by efforts to rescue the thing insured fr. a peril insured against.
An insurer is not liable for a loss caused by the willful act or through the
connivance of the insured; but he is not exonerated by the negligence of
the insured, or of the insurance agents or others.

THE CONTRACT OF INSURANCE:

NOTICE OF LOSS

In case of loss upon an insurance against fire, an insurer is exonerated, if notice

thereof be not given to him by an insured, or some person entitled to the benefit of
the insurance, without unnecessary delay.
When a preliminary proof of loss is required by a policy, the insured is not bound to
give such proof as would be necessary in a court of justice; but it is sufficient for him
to give the best evidence w/c he has in his power at the time.
All defects in a notice of loss, or in preliminary proof thereof, w/c the insured might
remedy, & w/c the insurer omits to specify to him, without unnecessary delay, as
grounds of objection, are waived.
Delay in the presentation to an insurer of notice or proof of loss is waived if caused
by any act of him, or if he omits to take objection promptly & specifically upon that
ground.
If the policy requires, by way of preliminary proof of loss, the certificate or testimony
of a person other than the insured, it is sufficient for the insured to use reasonable
diligence to procure it, & in case of the refusal of such person to give it, then to

THE CONTRACT OF INSURANCE: DOUBLE

INSURANCE
A double insurance exists where the same person
is insured by several insurers separately in respect
to the same subject & interest.
NOTES:

Where the insured is overinsured by double insurance:

(a)
The insured, unless the policy otherwise provides, may claim payment fr. the insurers in such order as he may
select, up to the amount for w/c the insurers are severally liable under their respective contracts;
(b)
Where the policy under w/c the insured claims is a valued policy, the insured must give credit as against the
valuation for any sum received by him under any other policy without regard to the actual value of the subject matter
insured;
(c)
Where the policy under w/c the insured claims is an unvalued policy he must give credit, as against the full
insurable value, for any sum received by him under any policy;
(d)
Where the insured receives any sum in excess of the valuation in the case of valued policies, or of the insurable
value in the case of unvalued policies, he must hold such sum in trust for the insurers, according to their right of contribution
among themselves;
e)
Each insurer is bound, as between himself & the other insurers, to contribute ratably to the loss in proportion to the
amount for w/c he is liable under his contract.

THE CONTRACT OF INSURANCE:

REINSURANCE

A contract of reinsurance is one by w/c an insurer

procures a third person to insure him against loss or
liability by reason of such original insurance.
NOTES:

Where an insurer obtains reinsurance, except under automatic reinsurance

treaties, he must communicate all the representations of the original
insured, & also all the knowledge & information he possesses, whether
previously or subsequently acquired, w/c are material to the risk.
A reinsurance is presumed to be a contract of indemnity against liability,
& not merely against damage.
The original insured has no interest in a contract of reinsurance.