INSURANCE CODE: A.

Principal Law PD 612 , promulgated on December 18, 1974; -amended by PD 1460 which consolidated PD 612 and the Insurance Code. -amended by BP 874 on June 12, 1985; -followed by Act no. 2427, which was later amended by PD 63; *ACT 2427 was taken verbatim from the Insurance Law of Califoria; -hence decisions of Californian Courts persuasive effect on courts in the Philippines.

and determine whether to rehabilitate or liquidate the company within 30 days; 5. Ensure that the insurance laws are faithfully executed. ADJUDICATIVE FUNCTIONS a. Jurisdiction claims and complaints involving: 1.loss, damage, or liability of an insurer under any policy or insurance contract; 2. liability of a reinsurer; 3.liability under the contract of suretyship; 4. liability of mutual benefit association to its members 5. counterclaims against the insured; 6. cross-claim against a co-party 7. third-party claims by the insurer against another party. NOTES: Sec. 416 adjudicative functions of the IC is concurrent with Civil Courts; the filing of the complaint with the Commissioner shall PRECLUDE the civil courts from taking cognizance of the case. Appeals of decisions rendered by the IC in the exercise of its adjudicative authority shall be APPEALABLE and is under the exclusive appellate jurisdiction of the Court of Appeals. RTC have jurisdiction if the insurance claims is over php 100,000.00; An insured may invoke the Regulatory Authority of the IC and determine whether or not the insurer violated the Insurance Code, AND at the same time, litigate the substantive aspects of its insurance claims against the insurer before the RTC where the claim is in excess of Php 100,000.00. *When insurance claim commences? -from the time of the denial of the insureds claim either expressly or impliedly.

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*SUPPLEMENTARY LAWS: 1. Civil Code a. Art. 1962 acceptance by letter SHALL NOT BIND the person making the offer, except from the time it came to his knowledge; b. Art. 2012 persons barred by the civil code from receiving donations are also disqualified as beneficiaries in a life insurance policy, by the person who cannot make a donation to him. c. Art. 739- declares as void those donations made between persons who are guilty of adultery or concubinage at the time of donation. d. Art. 2011 The contract of insurance is governed by special laws. Matters not expressly provided for in such special laws shall be regulated by this Code. 2. Mutual Insurance On work 3. RA 8291 GSIS Act of 1997 4. RA 656 Property Insurance Law; 5. RA 8282 SSS Act of 1997 6. RA 3124 Industrial Life Insurance; 7. PD 317 Insurance Cooperatives; 8. PD 1467, as amended RA 8175 on Crop Insurance *Implementing Office Insurance Commissioner -is an administrative agency vested with regulatory power as well as with adjudicatory authority. *TWO FOLD POWER OF THE Insurance Commission -. Under its Adjudicatory Authority -has original jurisdiction to adjudicate and settle insurance claims, and complaints where the amount being claimed does NOT EXCEED in any single claim of Php 100,000.00, (sec. 416), in concurrence with MTC and MCTC. -Commissioner has regulatory authority to revoke or to suspend the CA of an insurance company upon findings of legal grounds, as provided under Section 241 and 247 of the Insurance Code. *Functions of the INSURANCE COMMISSIONER:v(I-RISE) (ADMINISTRATIVE FUNCTIONS) 1. Issue the following: a. Certificate of Authority to qualified insurers; b. Rulings, instructions, circulars, orders, and decisions for the enforcement of the provisions of the Code. (subject to the approval of the SF) 2. Regulate the sale and issuance of variable contracts to license persons selling insurance; 3. Impose fines and penalties for violations of the Code and rules. 4. Stop operations of an insolvent Insurance company

B. BINDING EFFECT OF DECISION , ORDER OR RULING: -shall have the force and effect of a judgment -appealable to the Court of Appeals within 15 days from notice of the award, judgment, final order or resolution or from date of its last publication, or from the denial of the MR, or new trial; -a decision which has become final may be the subject of a writ of execution which may be served and enforced by a Sheriff.

NATURE OF INSURANCE:
*WHAT IS A CONTRACT OF INSURANCE? -an agreement whereby one undertakes for a consideration to INDEMNIFY another against a loss, damage or liability arising from an unknown or contingent event. -also called a contract of adhesion. Philamcare vs. CA a contract of suretyship is an insurance contract if the surety is doing an insurance business; *WHAT ARE THE ELEMENTS OF AN Insurance Contract? (ITARP) 1. Insurable interest on the part of the insured; 2. The insured is subject to a risk of loss by the happening of the designated peril;

3. Assumption of such risk by the insurer. 4. Risk assumed is part of the general scheme to distribute actual losses among a large group of persons bearing a similar risk. 5. payment of premium in consideration of the insurers promise by the insured. SURETYSHIP a contract whereby a person binds himself SOLIDARILY with the principal debtor for the fulfillment of an obligation. *WHAT ARE CONTRACTS OF ADHESION? -contracts where almost all provisions are drafted by one party only, usually a corporation. -called a contract of adhesion because the participation of the other part is to affix his signature, or his adhesion thereto. -any ambiguity in contracts of adhesion, like an insurance contract is resolved against the insurer, and liberally in favor of the insured. -if there is no ambiguity, the contract is construed in their plain, ordinary and popular sense. *WHEN CONTRACT OF INSURANCE ARE PERFECTED? when assented by both parties, either in person or by their agents. -premiums on the policy must be paid before the contract can be valid and binding. *TEST TO DETERMINE Whether a contract is an IC or not? (ENA) 1.Exact nature of the agreement in the light of the occurrence, contingency or circumstances under which the performance becomes a requisite. 2. Nature of the promise; 3. Act required to be performed; *WHAT includes Doing or Transacting Business: 1. Making or proposing as: -an insurer; -a surety, as a vocation, and not as a mere incident to any other legitimate business of the surety; 2. Doing any other insurance business like reinsurance and similar acts; 3. Doing or proposing to do any business equivalent to the above; *What constitutes an Insurance Company? -shall include individuals, partnerships, associations or corporations, engaged as PRINCIPALS in the insurance business, except Mutual Benefit Associations. *WHAT IS A MUTUAL INSURANCE COMPANY OR ASSOCIATION? (Bar) is a cooperative that promotes the welfare of its own members -does not operate for profit, but for the mutual benefit of its members-policy holders; -receive their insurance at cost; -reasonably and properly guarding and maintaining the stability and solvency of their company; -economic benefits filter to the cooperative members either equally or proportionally, distributed among members in correlation with the resources of the association utilized.

-members become debtors for whatever premium they have promised the company in the event that the company fails before the policies expire. The Quasi-appearance profit will not change its character, but remains an overpayment , as a benefit to which the member-policy holder is entitled.

CHARACTERISTICS of an INSURANCE CONTRACT: (CAVPECS) 1. Compensatory - only actual loss or damage is compensated; 2. Aleatory -chance is a predominant factor; 3. Voluntary -depends on the willingness of the parties to enter into it; 4. Personal -binds only the parties to its and its assignee; 5. Executory -the insurer merely promises to pay when the risks attaches; 6. Contract of perfect good faith for both parties; 7. Synallagmatic -both parties have reciprocal obligations of equal value to each other; *Life insurance is not a contract of indemnity but a contract to pay a sum certain in money, in the event of death, for life cannot be a subject of valuation nor the loss is adjustable on any principle of indemnity. -the happening of the event is the only contingent element; *In Property Insurance the loss may or may not occur; when it occurs , it may be total or partial. American Principles: a. Connecticut Rule holds that payment of premium is a condition precedent; the non-performance of which even when performance would be illegal, necessarily defeats the RIGHT to renew the contract. b. New York Rule holds that war between States in which the parties reside, merely SUSPENDS the contract of a Life Insurance, and that upon tender of all premiums due by the insured or his representative after war has been terminated, the contract is REVIVED, and becomes fully OPERATIVE. c. US Rule declares that the contract is NOT merely SUSPENDED, but is abrogated, by reason of non-payment of premiums, since the time of payment is peculiarly the essence of the contract. *Manila vs. Workmen in compulsory insurance, the insurance company is liable for compensation payments, regardless of the conditions in the contract, limiting its coverage, in view of the fact that we follow the FULL COVERAGE rule in compulsory insurance. *PROVISION ON THIRD PARTY LIABILITY: -third party injured may sue the insurer directly; -creates a contractual relation which inures to the benefit of any and every person who may be negligently injured by the named insured, as if such injured person was named in the policy. -from the moment the insured became liable to third person, the insured ACQUIRED interest in the insurance contract, which may be GARNISHED like any other credit.

*An insured who had recovered insurance under the Workmens Compensation Law, is not BARRED from recovering insurance from any other insurance company, as the same cannot be made a limitation to any other insurance which may be procured by the insured, being a compulsory insurance. *Uberrima Fides( Perfect Good Faith) Contract *Personal takes effect only between the parties; EXCEPTION: when there is STIPULATION POUR AUTRUI which provides that third person is allowed to avail himself of a benefit granted to him by the terms of the contract, provided that the contracting parties have clearly and deliberately conferred a favor upon such person. -but, the third person is still NOT a party to the contract, no cause of action against the original parties, and cannot generally demand the enforcement of the same. *BAYVIEW VS. KER an insurance contract provision for Prior arbitration before resort to court action applies only where the insurer disputes his liability not where it totally disclaims liability. *CLASSES OF INSURANCE 1. Life Insurance dependent upon human life; 2. Non-life Insurance (contract of indemnity); -Fire Insurance; -Marine Insurance; -Casualty Insurance; -Suretyship; *In the employee failed or overlooked to state his beneficiary in a retirement insurance, the proceeds will accrues to his estate and will be given to his legal heirs in accordance with law. *Vda de Consuegra vs. GSIS the beneficiary of a life insurance does not automatically become the beneficiary in the retirement insurance UNLESS said person is so DESIGNATED in the application for retirement insurance. *WHAT MAY BE INSURED AGAINST: 1. Future Contingent Event Resulting to Loss or Damage(FCERLD), (Life Insurance, or Fire Insurance) 2. Past Unknown event resulting to Loss or Damage 3. Contingent Liability reinsurance; 4. Fortuitous Event *PARTIES to an INSURANCE CONTRACT 1. The Insurer undertakes to indemnify another by a contract of insurance; -may be a natural person, company, corporation, or association who holds a certificate of authority from the insurance commissioner; -should perform the function for a compensation; *NOTES: Banks cannot be insurers; No domestic insurance company shall be given a certificate of authority UNLESS: -if a corporation with 5M paid up capital -life insurance comp, with a contributed surplus of 1M ; -non-life insurance, half million; -reinsurance companies, 5M;

2. The Insured any person with capacity to contract and having insurable interest in the life or property of the insured; a. Minors-may be insured under certain circumstances, and can exercise the rights and privileges of an owner under the policy. b. Married Woman may take an insurance on her life and that of her children, even without the consent of her husband. c. Public Enemy meaning those to which the Philippines may be at war; cannot be insured. *EFFECT OF WAR on Insurance Contracts: -prevents insurance from being entered into between the citizens and juridical entities of the warring estates; -citizen and alien a. property insurance war abrogates the contract (KENTUCKY RULE) b. Life Insurance war terminates policy, but the insured is still entitled to the EQUITABLE value of the policy arising from the premiums actually paid, when commercial relations are assumed, FOLLOWING US RULE. 3. The Beneficiary designated to receive the proceeds of the policy when the risks attaches. -G.R.: a beneficiary who insures his own life, may designate any person including his estate as his beneficiary, whether or not the beneficiary has an insurable interest in the life of the insured. -the insured SHALL have the right to change the designation of the beneficiary, UNLESS he has expressly designated an IRREVOCABLE BENECIARY. *BAR QUESTION: 1. Insurable interest is necessary at the time the policy becomes effective, when the insurance is taken on the life of a third person, not the insured, and designates himself as the beneficiary . 2. An insured may designate more than one beneficiaries, because beneficiaries designated by the insured ARE NOT required to have any insurable interest on his life. *A father or mother of a minor, who is an insured or beneficiary in a life policy, may exercise, for the said minor, all rights under the policy up to 20,000.00, without need of a court authority or bond. *PERSONS who are DISQUALIFIED as beneficiaries (Sec. 739NCC) 1. persons guilty of adultery or concubinage; 2. persons who have been found guilty of adultery or a concubinage. 3. made to a public officer, his wife, ascendants, or descendants by reason of his office;

*VESTED RIGHT OF A BENEFICIARY: -the designation of beneficiary in a life policy is REVOCABLE unless the insured EXPRESSLY provides that it is irrevocable. -should be measured on its full face value, and NOT on its cash surrender value, and beneficiaries MAY CONTINUE paying the same; -beneficiaries are entitled to AUTOMATIC extended term on paid up insurance options; -CANNOT be divisible at any given time. EXCEPTION: Life policy under GSIS, whereby the law makes the proceeds liable to Attachment, Garnishment, and other legal processes, when obligations or indebtedness to the GSIS and the employer is concerned. *EFFECT OF IRREVOCABLE DESIGNATION: -the insured cannot: a. Take the cash surrender value; b. Assign the policy; c. Change the beneficiary; d. Attach or execute on the policy; e. Add a new beneficiary; (except when the irrevocable beneficiary consented to the same) -because the irrevocably designated beneficiary acquired from date of the policy vested rights. Section 11 of the Insurance Code for the designation to be irrevocable, the INSURED should expressly state the irrevocable designation in the policy itself. PNB vs. CA failure on the part of an irrevocable beneficiary to collect from the insurer, within a considerable period of time, it is BARRED from enforcing the obligation of the insured. *DISTRIBUTION OF Policy Proceeds if Premiums are paid through Salaries: 1. Given to the specified person as beneficiary, the premium is immaterial; 2. where the estate of the Insured is the Beneficiary: -proceeds are still conjugal if the premiums are paid from the salaries of the insured, and from other conjugal funds, or properties. *BENEFICIARY OF LIFE INSURANCE on the LIFE of ANOTHER PERSON: -the person who wanted to insure another MUST HAVE INSURABLE INTEREST in the life of that person, as specified by law, at the time the policy was taken. *BENEFICIARY OF PROPERTY INSURANCE: -must have an insurable interest over the subject matter on the insurance existing at the time the policy was taken, and at the time the loss took place. *WHAT IS INSURABLE INTEREST? -interest found in the subject matter insured, where a person has a relation, connection or concern; where he derives pecuniary benefit or advantage from its preservation, or will suffer pecuniary loss or damage, from its destruction, termination or injury, by the happening of the event insured against. -essential to the validity and enforceability of the contract of insurance; otherwise the policy is VOID.

*WHAT IS INSURABLE INTEREST in LIFE? - is the interest in which the person has in his life, or the interest in which he may have in the lives of the other persons who: a. depends on him for education and support; b. under a legal obligation to pay him in money; c. upon whose life any estate or interest vested in him depends. *WHEN MAY A PERSON HAVE AN INSURABLE INTEREST in the Life of another? (in order to prevent the insurer from destroying the life of the insured, and to prevent the contract from becoming wagering contract) 1. when such other person is whom he depends for education and support; 2. when such other person has legal obligation to him for payment of money, property or service. 3. when such other person whose life, any estate or interest vested in him depends. (legatee of a usufruct insuring the life of the usufructuary on whose death the usufruct will be extinguished.) *When insurable interest should exist? -in LIFE INSURANCE, the insurable interest over the life of another must exist at the time the insurance is taken.; -PROPERTY INSURANCE, insurable interest must exist at the time the insurance is taken, and when the loss occurs, but need not exist in the meantime. *DIFFERENCES between the Insurable Interest in Life and Property Insurance? a. In life insurance, the insurable interest must exist at the time the insurance was taken; while in Property Insurance, the insurable interest must exist at the time the insurance was taken, and when the loss occurs. b. In life insurance taken on the insureds life, the beneficiary need not have an insurable interest on the life of the insured; while in property insurance, the beneficiary must have an insurable interest in the property insured. c. In life insurance, there is no limit to the amount of the insurable interest; while in property insurance, insurable interest is limited to the actual value of the interest in the property. *INSURABLE INTEREST IN MORTGAGED PROPERTIES: (sec. 8) -mortgagor has an insurable interest on his property as owner up to the FULL VALUE of his property, (except in marine insurance) -mortgagees insurable interest is only up to the extent of the credit; -mortgagor who takes insurance on the property in his own right, the mortgagor continues to be a party to the contract, and any act of his which would avoid the policy will thus, avoid the same. -any act which under the contract is required for a mortgagor to perform, may be performed by the mortgagee with the same effect as if it had been performed by the mortgagee.

*WHEN NO ASSIGNMENT was made to the Mortgagee? -the mortgagor will RECOVER from the insurer and the policy taken by the mortgagor shall be applied exclusively to his interest; *NOTE: Assignment of the policy to a mortgagee DOES NOT constitute payment, but is merely affording the mortgagee a greater security for the settlement of the mortgagors obligation. *WHAT IS MORTGAGE REDEMPTION? -is the kind of life insurance procured by the mortgagor with the mortgagee as the beneficiary, up to the extent of the formers indebtedness. *EFFECT of INSURANCE Procured by the Mortgagee? (MAB) 1. Mortgagee may collect from the insurer upon the occurrence of the loss, only up to the extent of his credit; 2. Automatic subrogation by the insurer to the rights of the mortgagee against the mortgagor. 3. Balance of the proceeds of the policy after payment of the interest to the mortgagee cannot be collected by the mortgagor unless stated in the policy; 4. Collecting full amount of credit relieves the mortgagor from his liability to the mortgagee, unless the latter is unable to collect the full amount thereof; 5. Mortgagor is not released from his debt since the insurer I SUBROGATED to the mortgagees right over his credit. *SECTION 9 if the insurer ASSENTS to the transfer of the insurance policy from a mortgagor to a mortgagee, and upon the time of his assent, imposes further obligation to the assignee, the making of new contract with him, the act of the mortagaor cannot be the rights said assignee. *WHAT IS THE UNION MORTGAGE CLAUSE? -creates the relation of the insured and the insurer between the mortgagee and the insurance company INDEPENDENT of the contract with the mortgagor. -EFFECTS: mortgagee shall not be affected or prejudiced by any ACT or NEGLECT by the mortgagor. *WHY CONSENT IS NECESSARY? absence of consent in the contract renders it VOID, unless subsequently ratified by the insured. *WHAT IS ENDOWMENT INSURANCE/ -is a contract to pay a sum certain to the insured if he LIVES a certain length of time, or of he dies before that time, to some other person indicated beneficiary. -interest of the beneficiary is a CONTINGENT ONE, meaning, the benefits of the policy will ACCRUE only to the beneficiary in case the insured DIES before the end of the period designated in the policy. *WHEN BENEFICIARY PREDECEASES the INSURED? a. If Irrevocable has vested interest in the policy; -proceeds will be given to the representatives of the IB

b. If revocable the proceeds are passed to the Estate of the insured. SECTION 12 policy shall be forfeited is the beneficiary is the principal, accessory or accomplice in the willful bringing about the death of the insured; -nearest relative of the insured shall receive the proceeds of the policy, if not otherwise disqualified. -applicable only in life insurance. *WHAT CONSISTS INSURABLE INTEREST In PROPERTY? -every interest in property, real or personal, in any relation or liability in respect thereof, of such nature that a contemplated peril might directly damnify the insured. -which may consists in: a. an existing interest; b. an inchoate interest, arising from an existing interest; -its an interest in real estate which is not a present interest, but which may ripen into a vested estate, if not barred, extinguished, or divested. c. an expectancy, coupled with an existing interest, from which mere expectancy arises. NOTE: When an expectancy NOT INSURABLE? (sec. 16) -when it is not founded on an actual right to the thing nor upon any valid contract for it. *TEST OF INSURABLE INTEREST IN PROPERTY? -W/N the insured has the right , interest or title in relation thereto; -w/n the insured will derive benefit from the preservation and continued existence of the property or will suffer a direct pecuniary loss from its destruction or injury from the peril insured against. *WHAT is the MEASURE of INSURABLE INTEREST in property? -the extent to which the injured might be damnified by the loss or injury thereof. -that insurance is a contract of indemnity applies only to property insurance. *WHAT CHANGES in INTEREST does not avoid the IPC? a. change after the occurrence of the injury or loss; b. change in one or more of several distinct things, separately insured by one policy; c. change of interest by will or succession on the death of the insured. *CHANGE of INTEREST, definition. -an ABSOLUTE TRANSFER of the insureds entire interest in the property insured, to one NOT previously interested or insured. -must be made EXPRESSLY by the insured and with the insurers consent. *WHEN POLICY NOT SUSPENDED? a. prohibited b. change after the occurrence of the injury or loss; c. change in one or more of several distinct things, separately insured by one policy; d. change of interest by will or succession on the death of the insured.

*WHAT IS GAMING or WAGER POLICY? -one in which the person who benefit the contract was issued has no pecuniary interest in the subject matter insured. CONCEALMENT: (sec. 26) -the neglect to communicate that which a party knows and ought to communicate. Uberrimae Fidei contract of utmost Good Faith -means most abundant good faith; absolute and perfect candor, openness or honesty; and the absence of concealment or deceit however slight. *TIME OF COMMUNICATION -at the time of the effectivity of the policy or after acquiring knowledge of such concealment , but before the effectivity of the policy. EXCEPTIONS: 1. when the policy provides that if the application is approved and issued, it shall be in force from the date of application; 2. when changes occurs after the consummation of the insurance ORALLY although the formal policy has not been issued yet. *EFFECT of CONCEALMENT a. vitiates the policy b. rescission of the policy contract on the ground of concealment. -insurer has the duty to establish concealment with satisfactory and convincing evidence. *REQUISITES of the FACTS to be COMMUNICATED: (sec. 28) (KAWI) 1. known to each or either of the parties; 2. ascertaining such fact is beyond the means of the other party. 3. warranty to such facts was not made by the other party; 4. information is material to the contract. SECTION 29 matters covered with warranty need not be revealed; -FRAUDULENT INTENT is necessary when the fact concealed proves or tend to prove the falsity of a warranty to entitle the other party to RESCIND. *WHAT ARE THE FACTS WHICH THE OTHER PARTY OUGHT TO KNOW? (GANP) 1. General causes which are open to inquiry, which may either affect the political, or material perils contemplated; 2. All general usages of Trade; 3. Notorious facts which creates reasonable presumption that the insurer has knowledge thereof; 4. Public Knowledge. *WHEN COMMUNICATIONS may be waived? 1. Expressly under the terms of the insurance policy 2. Impliedly there was neglect to make inquiries as to such facts distinctly implied in other facts of which information was communicated. *WHAT IS A MATERIAL FACT? -is a fact where the knowledge or ignorance of it will influence the judgment of the insurer in deciding whether he

will enter into the contract, or in estimating the degree and character of the risk in fixing the premium. -material fact operates as an inducement to the insurer to enter into the contract; *WHAT IS THE TEST OF MATERIALITY? -Whether knowledge of the true facts would have influenced the prudent insurer in determining whether to accept the risk in fixing the amount of the premiums. REPRESENTATION (sec. 36) -may be oral or written -may be made anytime, or before the issuance of the policy; -it is an oral or written statement of fact or condition affecting the risk made by the insured to the insurance company, tending to induce the insurer to assume the risk. -must be substantially and materially true. *NATURE OF REPRESENTATION - Collateral Matter which induces the execution of a contract of insurance; *KINDS OF REPRESENTATION: 1. Affirmative affirmation of facts when the contract begins 2. Promissory statement by the insured concerning what is to happen during the terms of the insurance. *CONSTRUCTION OF REPRESENTATION -need not be literally true and accurate; -it suffices that they are substantially or materially true and that they are substantially complied with. *STATEMENT OF BELIEF or EXPECTATION vs. Promissory Representation: a. SBE is of contingent nature, and are not susceptible to present knowledge; while PR is a promise to be performed after the contract has come to its existence; b. RE/SBE will not avoid the policy unless made Fraudulently, while PR will entitle the injured party to rescind the contract, from the time the representation becomes false. *Representation may be altered or withdrawn before the insurance is effected, but not afterwards. POLICY (sec. 44) -is an instrument which the contract of insurance is set forth. -maybe verbal or on writing, partly verbal or partly writing; -must be submitted to the Insurance Commission for approval or disapproval; -not necessary for the perfection of an insurance contract; *Contents of an Insurance Policy: (PARPRIP) 1. parties; 2. amount of insurance, except in open or running policies; 3. rate of premium; 4. property or life insured. 5. risk insured against 6. interest of the insured in the property if he is not the absolute owner; 7. period during the insurance is to continue.

*What is a RIDER? attached to the insurance policy which modifies the conditions therein either expanding , restricting or excluding certain conditions from the coverage. *KINDS OF POLICY: 1. Open Policy value of the thing insured is not agreed upon but is only determined at the time of loss; 2. Valued Policy definite valuation is agreed by the parties and is written on the face of the policy; 3. Running Policy/Floating Policy contemplates successive insurances and provides that the subject of the insurance be defined from time to time; *Cancellation of Non-life Policy GROUNDS: -non-payment of premium; -conviction of a crime out of acts increasing the hazard insured against; -fraud or material representation; -willful or reckless acts or omissions increasing the risk insured against; -physical changes in the property insured making it uninsurable; -determination by the Commissioner that the policy would violate the Insurance Code. REQUISITES OF CANCELLATION (Sec. 65) -notice of cancellation based on the occurrence of one or more of the grounds mentioned, and stating the same in the notice; -must be in writing, mailed or delivered to the insured at the address shown in the policy;

b. Life Insurance if a third person takes the policy, the BENEFICIARY must have insurable interest; In case of ASSIGNMENT< the assignee NEED NOT HAVE insurable interest.

PREMIUM
-is the consideration paid to an insurer for undertaking to indemnify the insured against a specified peril. G.R. No insurance policy issued or renewed is valid and binding UNTIL ACTUAL PAYMENT of the premium. Any agreement to the contrary is VOID> Ex. 1. Whenever grace period applies (industrial or life insurance) 2. acknowledgement that premium has been paid; 3. parties have agreed to pay the premium by installments. 4. credit term has been granted. *Is payment of the premium by a post-date check allowed? -NO., *WHEN THE INSURED is ENTITLED to Return of PREMIUMS: a. non-exposure to the risks insured against. b.contract is voidable due to fraud or misrepresentation by the insurer, or due to the existence of fact s which the insured is ignorant without fault. c.insurer never incurred liability d. surrender of the policy before the termination of the period agreed upon. e.over-insurance; f. rescission is granted due to the insurers breach of contract.

TYPES OF INSURANCE CONTRACTS: 1. Life Insurance a. Individual b. Group c. Industrial 2. Non-life insurance a. Marine b. Fire c. Casualty 3. Contract of Suretyship *Can a depositary insure the things deposited to him? -yes, as he is responsible to the things deposited to him hence has an insurable interest over them. *OPEN or LOSS OF PAYABLE MORTGAGE CLAUSE: -the mortgagor does not cease to be a party to the contract. -the mortgagee is only a beneficiary under the contract and recognized as such by the insurer but not made a party to the contract itself. *INSURABLE INTEREST of Beneficiary vs. Assignee of the Policy a. Property Insurance the beneficiary and the assignee must have INSURABLE INTEREST. Consent of the insurer must be secured before the assignment.

*OTHER INSURANCE CLAUSE provides that the policy shall be void if the insured should procure other insurances without the consent of the insurer. -this is made in order to prevent over-insurance and thus avert the possibililty of perpetration of fraud. -may be waived expressly or impliedly, through a clearly indicative intent to waive such a right. *INCONTESTABILITY CLAUSE provides that a life insurance policy made payable on the death of the insured, which shall have been in force during the lifetime of the insured for a period of 2 years, from the date of issue, or of its last reinstatement, the INSURER can no longer prove that the policy is void ab initio or is rescinddible by reason of the fraudulent concealment or misrepresentation of the insured or his agent. -REQUISITES: a. a Life insurance policy; b. in force during the lifetime of the insured for 2 years from its issue or of its last reinstatement. -Defenses that are NOT BARRED by IClause: a. Non-payment of premiums; b. insurable interest is lacking; c. cause of death was an excepted risk;

d. violations of the condition in the policy relating to naval or military service; e. failure of the beneficiary to furnish proof of death or to comply with any condition imposed by the policy after the loss has happened. f. vicious type of fraud. g. action was not brought within the time specified.

a. by Treaty by prior agreement between the insured and insurer, whereby the latter will accept the insurance ceded by the person originally insured; b. Facultative the reinsurer may refuse to accept the ceded policy; *DIFFERENCE between Policy of Insurance and Reinsurance: a. Policy embodies the terms and stipulations in the contract of insurance, while a Reinsurance, is a contract of procuring a third person by the insurer to insure him against a loss or liability by reason of the original insurance. b. Policy is a written and formal evidence of a contract of insurance, while in every Reinsurance, the original contract of insurance and the contract of reinsurance are covered by separate policies; *DOUBLE INSURANCE vs. REINSURANCE; a. DI involves the same interest, while RI is the insurance of different interest; b. in DI, the insurer remains in such capacity, while in RI, the insurer becomes an insured ; c. in DI, the insured in the first contract of insurance is the nd party in interest in the 2 contract of insurance, while in RI, the original insured has no interest in the reinsurance contract; d. in DI, the subject of insurance is property, while in RI, the subject is the original insurers risk; e. in DI, the insured has to give his consent; while in RI, the consent of the original insured is NOT necessary. CASH SURRENDER VALUE part of the premium that is set aside which is mandatory upon insurance company; -purposely to enable the insurer to be able to pay all claims, whenever there will be many deaths or claims. LOSS and CLAIMS SETTLEMENT PROXIMATE CAUSE any cause that produces the injury in a natural and continuous sequence, unbroken by any efficient intervening cause, such that the result would not have occurred otherwise. a. Proximate and Immediate Cause; -insurer is Liable when: Proximate cause of the loss is the peril insured against, except when the proximate cause is an excepted peril; Loss due to the negligence of the insured, except when negligence is so gross amounting to willful act. Loss due to the rescuing of the thing from the peril insured, but the thing was exposed to a peril not insured against, and deprives the insured from possession thereof, in whole or in part. KINDS of LOSSES: (PAC) 1. Actual Total Loss entitles the insured to full recovery; 2. Constructive Total loss when the insured exercise the right of abandonment, with notice to the insurer; 3. Partial Loss carries with it co-insurance; the insured shall bear part of the loss; *WHEN INSURER NOT LIABLE for A LOSS?

DEVICES USED to ascertain and control the risk or loss: a. Correct estimation of risk; b. Delimitation of the risk; c/ Control of the risk to guard against the increase of risk; d. Determine if loss occurs, and if so, the amount thereof. *Devices used by the INSURER for ascertaining or controlling the risk? a. Concealment b. Condition c. Representation d. Exception specifies the risks excluded which would have been included under the general language describing the risks assumed. e. Warranty DOUBLE INSURANCE /REINSURANCE *WHAT IS DOUBLE INSURANCE exists where one person is insured by several insurers, separately in respect to the same subject and interest; -not prohibited by law, but may be prohibited by other insurance clause. *REQUISITES of double insurance: (TOSIR) a. Two or more insurers insuring separately; b. Only one insured; c. Subject matter is the same; d. Interest insured is the same; e. Risk or peril insured against is the same *EFFECTS OF DOUBLE INSURANCE/OVERINSURANCE: -insured can claim only up to the agreed valuation or up to the full insurable value from any, some or all of the insurers; -insured can also from the insurers the excess of the premium he paid, before or after the loss. OVER-INSURANCE insuring the property more than the value of the insurable interest , with the same insurance company. RULE: Insurer is bound only to pay the amount of the value of the property lost. The insured can recover the excess of the premium paid. *WHAT IS REINSURANCE/REINSURANCE CESSION a rd contract whereby the insurer procures a 3 person to insure him against loss or liability by reason of such original insurance. -is an insurance against possible liability and serves to keep the insurer solvent, against possibility of big losses. *HOW REINSURANCE IS DONE?

a.Willful act or gross negligence on the part of the insured; b. Loss due to connivance of the agent and the insured; c. Loss where the excepted peril is the proximate cause; *LIABILITY OF THE INSURER if the INSURED COMMITTED FELONY insurable and the insurer is liable on the ground that such acts are accidental. -but liability as a consequence of a deliberate criminal act is NOT INSURABLE> *NOTICE of SETTLEMENT stipulation in the policy requiring that the consent of the insurer must first be obtained before any payment by the person responsible for the loss is settled is valid. *CLAIMS SETTLEMENT a. Life Insurance immediate payment of policy upon maturity; - if maturity is on death of the insured, claim shall be made within 60 days after presentation of the claim and the filing of the proof of the death of the insured; b. Property Insurance claims shall be made within 30 days after presentation of proof, and ascertainment of the loss either by agreement of the parties, or by arbitration. *EFFECTS OF DELAY OF THE INSURER: -upon finding of the Court, or the Commissioner: -beneficiary is entitled to : a. the payment of interest for the duration of the delay, that is twice the value of the legal interest; b. attorneys fees and litigation expenses. c. damages under the NCC; *EXAMPLES OF UNFAIR CLAIMS SETTLEMENT By the INSURER: - results to revocation or certification of CA. 1. Misrepresentation as to the coverage; 2. Unreasonable delay in acknowledging communication 3. No promptness in investigation 4. Bad faith in settling clear and reasonable claims 5. Compelling the insured to sue, when the amount recoverable is less than the value of the expenses for the suit. PRESCRIPTION: -10 years in the absence of express stipulation in the policy; -parties may agree on a shorter period, provided it is not less than one year from the time the cause of action accrues; -the cause of action accrues from the final rejection of the claim of the insured, and not from the time of the loss. Jimenez vs. CA notice of claim must be filed within 6 months from the date of accident otherwise, the claim shall be deemed waived. -actions must be brought in proper cases, with the Commission or the Courts, within one year from the denial of the claim, otherwise, the claimants right of action shall prescribe.

RIGHT OF SUBROGATION -a normal incident of indemnity property insurance as a legal effect of payment. -it inures to the insurer without any formal assignment or any express stipulation; -upon payment of the insurer to the insured, it is subrogated pro tanto to any right of action which the insured may have against the person or circumstances/peril insured against, which caused the loss. -payment to the insured makes the insurer an assignee inequity, meaning it simply accrues upon payment of the insurance company of an insurance claim.

*CASES where there is no right of subrogation: 1. releasing of the wrong doer by the insured; 2/ payment of the insurer to the insured for a risk not covered by the policy; 3. Life Insurance; 4. Recovery of loss in excess of insurance coverage.

*MARINE INSURANCE: INCLUDES:

a. bottomry, effects, crafts, aircrafts, merchandise, evidence of debts, vehicles, vessels, actions, money, freightage, interest respondentia, cargoes, securities, appertaining to or in connection with any perils or risks of navigation, transit or transportation, OR while being packed, assemble, crated, compressed or baled, or while awaiting shipment, or during delays, storage, transshipment, or reshipment, including war risks, marine builders risks and all personal property floaters risks. b. persons connected with marine insurance, contructions, repair and maintenance. c. precious stone, jewelry and metals; d. bridge, tunnel, and piers, and furnishing as an aid to navigation. MARINE PROTECTION AND INDEMNITY INSURANCE -insurance against loss , damage, or expenses, incident to ownership and operation of marine vessels, crafts or instrumentalities, used in the ocean or inland waterways, and the liability of the insured for such losses. *INSURABLE INTEREST in MARINE INSURANCE: (SECFP) 1. Shipowner on the vessesl (sec. 100); 2. Excess of the value of the vessel over the bottomry loan 3. Charterer(sec. 106); 4. freightage; 5. Profits; *WHAT ARE IMPLIED WARRANTIES IN MARINE INSURANCE? (SNNPP) 1. Seaworthiness at the time of the inception of the insurance; -if the ship is hypothecated by a bottomry loan, the insurable interest is only up to the extent of the value of the vessel over the loan. 2. No deviation unless proper; 3. Non-engagement in any illegal ventures; 4. Possession of documents of neutrality or nationality; 5. Presence of Insurable Interest ALL RISK MARINE INSURANCE covers all risks other than those due to the willful and fraudulent act of the insured., or unless expressly excepted. The burden of proof is on the INSURER.

SUBROGATION is the substitution of one person in the place of another, with reference to a lawful claim or right which could be legal or conventional.

 Made by the master or upon his authority; Result is successful; Sacrifice is Necessary; PERILS OF NAVIGATION includes all perils in making landing, in consequence of improper towage, unless occasioned or acquiesced by the insured. WAR RISKS extends to perils due to directly hostile actions; Does not extend to the aggravation or increase of a maritime risks of war operations. NOT WAR RISKS collision of a wreck of a ship sunk by an enemy. BUILDERs RISKS covers damage to ways from launching as well as damage to the ship. PERILS OF THE SEA, vs PERILS OF THE SHIP a. PERILS OF THE SEA -includes only those casualties due to the unusual violence or extraordinary causes, connected with navigation; -arise from overwhelming power which cannot be guarded against by the ordinary exertion of human skill or prudence. -one that could not be foreseen and not attributable to the fault of anybody. b. PERILS OF THE SHIP losses or damages resulting from: -natural and inevitable action of the sea; -ordinary wear and tear of the ship; -negligence and failure of the ship owner to provide the vessel with necessary equipment to convey the cargo under ordinary condition. NOTE: In the absence of stipulation, the risks insured against are only Perils of the Sea. The INSURED is bound to prove that the cause of the loss is a peril of the sea. *WHAT IS BARRATRY? willful misconduct on the part of the master or crew, in pursuance of some unlawful or fraudulent purpose, without the consent of the owners, and to the prejudice of the owners interest. -may be covered by the policy; -when so covered, proof is necessary to prove that the act is willful and intentional. *MATTERS concealed but did not vitiate the MARINE INSURANCE, (except when it caused the Loss): (WULLN) a. National character of the insured; b.Liability of the insured thing to capture or detention; c. Liability to seizure for breach of foreign laws; d. Want of necessary documents; e. Use of False or Simulated Papers. GENERAL AVERAGE LOSS vs. PARTICULAR AVERAGE LOSS: a. GENERAL AVERAGE LOSS(GAL) -damages or expenses deliberately caused by the master of the vessel or upon his authority, in order to save the vessel , the cargo or both, at the same time, from a real or known risk. *REQUISITES: Common danger to the vessel and cargo; Part of the vessel or cargo was deliberately sacrificed, for the benefit or safety of all; PARTICULAR AVERAGE LOSS (PAL) -includes all expenses and damages caused to the vessel and her cargo, which DOES NOT INURE to the common benefit and profit of all persons interested in the vessel and the cargo. -losses which do not entitle the unfortunate owners to receive contribution from other owners concerned with the venture as where a vessel accidentally runs aground, and goes to pieces after the cargo is saved. *WHAT IS CO-INSURANCE CLAUSE? a. Property Insurance -a stipulation which provides that where the property is insured LESS THAN its value, the insured is considered a Coinsurer for the difference between the amount of the insurance and the value of the property; b. Marine Insurance co-insurance exist when: -Partial Loss; -Amount of insurance is less than the value of the property insured; c. Fire Insurance must be expressly stipulated; SEAWORTHINESS -reasonably fit to perform service, and to encounter ordinary perils of the voyage, contemplated by the parties to the policy; -WARRANTY of SEAWORTHINESS: -extends not only to the condition of the structure of the ship, but also to the master and the crew and other implements for the voyage. *WHEN SHIP SHOULD BE SEAWORTHY? -at the time of the commencement of the risk, except in the following: a. Time Policy - implied warranty is nOT COMPLIED unless the vessel is seaworthy at the commencement of every voyage it undertakes during that time; b. when insurance is upon the cargo at the commencement of each particular voyage; c. When different portion of the voyage are contemplated at the commencement of each portion; d. when the ship was seaworthy at the commencement of the voyage, but becomes unseaworthy during the voyage, an unreasonable delay in repairing the defect exonerates the insurer on ship, or shipowners interest from liability arising therefrom.

*APPLICABILITY OF IMPLIED WARRANTY OF SEAWORTHINESS TO CARGO OWNERS: -fact of unseaworthiness unknown to the Insured is IMMATERIAL in ordinary Marine Insurance, and may not be used as a defense by the insured in order to recover from the policy.

*EFFECT OF PAYMENT: -operates as a WAIVER on the Insurers right to enforce the implied warranty of seaworthiness. -waiver extends only in favor of the insured; -Insurer can still claim payment from the common carrier for breach of contract based on the insurers right of subrogation. INCHMAREE CLAUSE cover loss or damage to the hull or machinery through negligence of the captain, etc, explosions, breakage of shafts, and the latent defect of the machinery and the hull. CHARTER PARTY a contract by virtue of which, the owner or the agent of the vessel, binds himself to transport the merchandise or person for a fixed price. *LOAN ON BOTTOMRY or RESPONDENTIA -loan in which the repayment of the sum loaned and the premium stipulated, DEPENDS upon the safe arrival of the goods to the port. Loan on Bottomery security is the vessel Loan on Respondentia security is the cargo *What is the Insurable Interest of the vessel hypothecated by Bottomry? -excess of the value of the vessel over the amount of the secured bottomry; *RIGHTS OF THE INSURER and the LENDER: -the value of what may be saved or salvaged after a loss, shall be DIVIDED between the lender and the insurer in proportion to the legitimate interest of each one of them, taking into consideration the principal amount of the loan. *INSURABLE INTEREST OF LENDER IN BOTTOMRY/ -only to the extent of the amount of the loan granted; -results in the extinguishment of the loan, and accordingly, the lender stands to suffer damage by the loss of the vessel or the cargo. *DEVIATION departure of the vessel from the course of voyage, or an unreasonable delay in pursuing voyage, or the commencement of an entirely different voyage. *WHEN DEVIATION IS PROPER? 1. when it is due to circumstances outside the control of the ship captain or owner; 2. done to comply with a warranty; 3. made in good faith to avoid peril; 4. made to save human life or another distressed vessel. FREIGHTAGE benefits derived by the ship owner from chartering of the ship or carriage of goods or of others. -insurable if expected; but if payable at any event, whether the ship is lost or not, the shipowner has no insurable interest on the freightage. LOSS and ABANDONMENT: a. Actual Total Loss -total destruction -loss by sinking; -damage rendering the thing valueless;

-total deprivation of owner of possession of thing insured; b. Constructive Total Loss the insured may ABANDON the goods or vessel to the insurer, and claim for the whole insured value , or he may, without abandoning the goods, or the vessel, claim for partial loss. -actual loss of more than of the value of the object; -damage reducing value by more than of the value of the vessel and of cargo; -expenses of shipment exceed of value of cargo; C. ABANDONMENT act of the insured after a constructive total loss, declares the relinquishment to the insurer of his interest to the thing insured; *REQUISITES for a Valid ABANDONMENT: (CAMFANE) a. Constructive Total Loss exist; b. Actual relinquishment by the person insured of his interest to the thing insured; c. Made within a reasonable time after receipt of reliable information of the loss; d. Factual; e. Abandonment is neither partial nor conditional; f. Notice is given to the insurer, orally or in writing; g. Explicit notice of abandonment, specifying the particular cause of abandonment. FIRE INSURANCE: -contract of indemnity by which the insurer, for a consideration agrees to indemnify the insured against a loss or damage to property by fire; -may also include damage by lightning, windstorm, tornado and earthquake and other allied risks, when the same are covered by the extension of the fire insurance policy. *What is the EXTENT of the INSURERS LIABILITY in an Open Policy? -the actual total loss represents the total indemnity due and payable by the insurer, but shall not exceed the total value of the policy. ALTERATION when the thing insured is used other than what it is limited in the policy, without the consent of the insurer, by the means within the control of the insured, thereby increasing the risks, ENTITLES the insurer to RESCIND in a contract of fire insurance, pursuant to the following requisites: (SAMAMM) Special limitation is imposed as to the use of the thing insured; Alteration of the use of the thing insured; Made without the consent of the insurer Alteration increases the risks; Made within the control of the insured; -if made by the agent without the consent of the insured the policy is AVOIDED; -if made by the tenant with knowledge of the insured the policy shall be forfeited. Made a violation of a material provision in the policy; FRIENDLY FIRE vs. HOSTILE FIRE: a. Friendly Fire fire burns in the place where it is supposed to be; (loss resulting is not insurable)

*What is a Motor Vehicle? b. Hostile Fire fire that escapes and burns in a place where it is not supposed to be; insurable; *NOTE: Increase of risk alone WILL NOT ENTITLE the insurer to rescind the contract; there must be a showing of violating the contract; Measure of Indemnity in a Fire insurance: -extent to which it would take the insured to replace the thing lost or destroyed in its original condition; -if there is value, then recovery is to the extent of the value of the thing insured, but in case shall exceed the amount of recovery stipulated in the contract; *OPTION TO REBUILD CLAUSE made when the parties agreed to repair, rebuild or replace the damaged buildings and structures wholly or partially, instead of the payment of the value thereof; *Can Fire Insurance be Transferred? NO. otherwise it will be VOID, and has no effect, as it may affect other conditions of the insured. *WHAT ARE PRIMA FACIE EVIDENCE OF ARSON? (SISDOTS) 1. Simultaneous fire broke out at the same time in two or more places; 2. Inflammable keeping of inflammable materials in excess of need; 3. Suspicious finding of electrical, mechanical or chemical fire causing devices; 4. Demand for money for desistance of the suit filed to recover; 5.Overinsurance building was insured more than the value of property insured; 6. Two or more fire claims covered in the same period; 7. Substantial withdrawal of stocks which are insured; . CASUALTY INSURANCE covers the loss or liability arising from accident or mishap, excluding those falling under other types of insurance such as fire or marine, -examples: Employers Liability Insurance; Workmens Compensation Insurance; Public Liability Insurance Motor vehicle Liability Insurance. -may provide liability for third person by way of stipulation rd Pour Autrui whereby 3 persons may directly sue the insurer upon the occurrence of the loss; -if the insurer pays the third person, the right of subrogation operates. a. COMPULSORY MOTOR VEHICLE LIABILITY INSURANCE -primarily intended to provide compensation for the death or bodily injuries suffered by innocent third parties, or passengers as a result of the negligent operation and use of motor vehicles. *how protection is complied? 1. insurance policy 2. surety cash bond; 3. cash bond; *Passenger any fare paying person transported and conveyed by a motor vehicle for transportation. *What is the Purpose of Compulsory Third Party Liability Insurance? -to give immediate financial assistance to the victims. *WHAT IS THE NO FAULT CLAUSE? -provides that the injured third party or passenger has the option to file a claim for the death or injury without the necessity of proving fault or negligence of any kind, under the following conditions: a. total indemnity does not exceed Php 15,000.00 b. Submission of Proof of Loss -police report -death cert -medical report c. claim may be made against one motor vehicle only *From whom should the injured recover? a. Against the INSURER of the vehicle to which the occupant is riding , mounting, or dismounting from; b. Against the INSURER of the directly offending vehicle, if the victim is not an OCCUPANT; c. In all cases, the right of the party paying the claim to recover against the owner of the vehicle responsible for the accident shall be maintained. TIME TO FILE and PROCESS CLAIM a. Period of Notice to File -6 months from the date of the accident, otherwise waived. b. Prescriptive Period -must be filed with the Insurance Commission within one year from the denial of the claim. c. IF there be an Agreement, payment shall be made within five working days after reaching an agreement. d. If there is NO AGREEMENT , the insurance policy will pay only the No-Fault indemnity, without prejudice to the claimant in pursuing his claim further. *May a third person sue the Insurer directly? -IT DEPENDS. rd a. Yes, if the policy provides for indemnity against 3 party liability; b. NO, if the policy provides reimbursement after actual payment by the insured, or for indemnity against loss; *AUTHORIZED DRIVER CLAUSE stipulations that the driver, other than the insured owner, MUST BE DULY LICENSED, to drive the vehicle, otherwise, the insurer is excused from liability. *THEFT CLAUSE provides that the insurer, is liable when the vehicle is unlawfully taken, and the insured can recover even if the thief has no drivers license. SURETYSHIP:

Kinds of Bonds 1. Fidelity Bond bond against loss from misconduct; 2. Fidelity Guaranty Insurance one agrees to indemnify the insured against loss arising from want of integrity, fidelity, or other persons holding positions in trust. VARIABLE CONTRACT -policy or contract on either group or individual basis, issued by an insurance company providing for the benefits r other contractual payment, -provides for benefits or values thereunder to vary so as to reflect investment results of any segregated portfolio of investment. REVOCATION OF CERTIFICATE OF AUTHORITY: *Grounds (Sec. 247) (FUPIM) 1. Failure to comply with the provisions of the law; 2. Unsound condition of the company; 3. Proceedings are hazardous to the public or policyholders; 4. Impairment or deficiency in the assets; 5. Margin of solvency in the company is deficient; *WHAT is MARGIN OF SOLVENCY? -excess of admitted assest, minus the paid up capital over liabilities and reserve.

*What is a Boldereaux? -books where the re-insured enters the risks that the reinsurer is supposed to assume.