PRESIDENTIAL DECREE NO.

612
December 18, 1974 ORDAINING AND INSTITUTING AN INSURANCE CODE OF THE PHILIPPINES

I, Ferdinand E. Marcos, President of the Philippines, by virtue of the powers in me vested by the Constitution, do hereby decree and order the following: GENERAL PROVISIONS Sec. 1. This Decree shall be known as "The Insurance Code". Sec. 2. Whenever used in this Code, the following terms shall have the respective meanings hereinafter set forth or indicated, unless the context otherwise requires: (1) A "contract of insurance" is an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event. A contract of suretyship shall be deemed to be an insurance contract, within the meaning of this Code, only if made by a surety who or which, as such, is doing an insurance business as hereinafter provided. (2) The term "doing an insurance business" or "transacting an insurance business", within the meaning of this Code, shall include: (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 and 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. In the application of the provisions of this Code the fact that no profit is derived from the making of insurance contracts, agreements or transactions or that no separate or direct consideration is received therefor, shall not be deemed conclusive to show that the making thereof does not constitute the doing or transacting of an insurance business. (3) As used in this code, the the "Insurance Commissioner". term "Commissioner" means

Chapter 1 THE CONTRACT OF INSURANCE Title 1 WHAT MAY BE INSURED Sec. 3. Any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest, or create a liability against him, may be insured against, subject to the provisions of this chapter. The consent of the 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 and accident insurance, with any insurance company duly authorized to do business in the Philippines, provided the insurance is taken on his own life and the beneficiary appointed is the minor's estate

or the minor's 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 and privileges of an owner under a policy. All rights, title and 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 for in the policy. Sec. 4. The preceding section does not authorize an insurance for or against the drawing of any lottery, or for or against any chance or ticket in a lottery drawing a prize. Sec. 5. All kinds of insurance are subject to the provisions of this chapter so far as the provisions can apply. Title 2 PARTIES TO THE CONTRACT Sec. 6. Every person, partnership, association, or corporation duly authorized to transact insurance business as elsewhere provided in this code, may be an insurer. Sec. 7. Anyone except a public enemy may be insured. Sec. 8. Unless the policy otherwise provides, where a mortgagor of property effects insurance in his own name providing that the loss shall be payable to the mortgagee, or assigns a policy of insurance to a mortgagee, the insurance is deemed to be upon the interest of the mortgagor, who does not cease to be a party to the original contract, and any act of his, prior to the loss, which would otherwise avoid the insurance, will have the same effect, although the property is in the hands of the mortgagee, but any act which, under the contract of insurance, is to be performed by the mortgagor, may be performed by the mortgagee therein named, with the same effect as if it had been performed by the mortgagor.

Sec. 9. If an insurer assents to the transfer of an insurance from a mortgagor to a mortgagee, and, at the time of his assent, imposes further obligation on the assignee, making a new contract with him, the act of the mortgagor cannot affect the rights of said assignee. Title 3 INSURABLE INTEREST Sec. 10. Every person has an insurable interest in the life and health: (a) Of himself, of his spouse and of his children; (b) Of any person on whom he depends wholly or in part for education or support, or in whom he has a pecuniary interest; (c) Of any person under a legal obligation to him for the payment of money, or respecting property or services, of which death or illness might delay or prevent the performance; and (d) Of any person upon whose life any estate or interest vested in him depends. Sec. 11. The insured shall have the right to change the beneficiary he designated in the policy, unless he has expressly waived this right in said policy. Sec. 12. The interest of a beneficiary in a life insurance policy shall be forfeited when the beneficiary is the principal, accomplice, or accessory in willfully bringing about the death of the insured; in which event, the nearest relative of the insured shall receive the proceeds of said insurance if not otherwise disqualified. Sec. 13. Every interest in property, whether real or personal, or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril might directly damnify the insured, is an insurable interest.

Sec. 14. An insurable interest in property may consist in: (a) An existing interest; (b) An inchoate interest founded on an existing interest; or (c) An expectancy, coupled with an existing interest in that out of which the expectancy arises. Sec. 15. A carrier or depository of any kind has an insurable interest in a thing held by him as such, to the extent of his liability but not to exceed the value thereof. Sec. 16. A mere contingent or expectant interest in anything, not founded on an actual right to the thing, nor upon any valid contract for it, is not insurable. Sec. 17. The measure of an insurable interest in property is the extent to which the insured might be damnified by loss or injury thereof. Sec. 18. No contract or policy of insurance on property shall be enforceable except for the benefit of some person having an insurable interest in the property insured. Sec. 19. An interest in property insured must exist when the insurance takes effect, and when the loss occurs, but not exist in the meantime; and interest in the life or health of a person insured must exist when the insurance takes effect, but need not exist thereafter or when the loss occurs. Sec. 20. Except in the cases specified in the next four sections, and in the cases of life, accident, and health insurance, a change of interest in any part of a thing insured unaccompanied by a corresponding change in interest in the insurance, suspends the insurance to an equivalent extent, until the interest in the thing and the interest in the insurance are vested in the same person. Sec. 21. A change in interest in a thing insured, after the occurrence of an injury which results in a loss, does not affect the right of the insured to indemnity for the loss.

Sec. 22. A change of interest in one or more several distinct things, separately insured by one policy, does not avoid the insurance as to the others. Sec. 23. A change on interest, by will or succession, on the death of the insured, does not avoid an insurance; and his interest in the insurance passes to the person taking his interest in the thing insured. Sec. 24. A transfer of interest by one of several partners, joint owners, or owners in common, who are jointly insured, to the others, does not avoid an insurance even though it has been agreed that the insurance shall cease upon an alienation of the thing insured. Sec. 25. Every stipulation in a policy of insurance for the payment of loss whether the person insured has or has not any interest in the property insured, or that the policy shall be received as proof of such interest, and every policy executed by way of gaming or wagering, is void. Title 4 CONCEALMENT Sec. 26. A neglect to communicate that which a party knows and ought to communicate, is called a concealment. Sec. 27. A concealment whether intentional or unintentional entitles the injured party to rescind a contract of insurance. (As
amended by Batasang Pambansa Blg. 874)

Sec. 28. Each party to a contract of insurance must communicated to the other, in good faith, all facts within his knowledge which are material to the contract and as to which he makes no warranty, and which the other has not the means of ascertaining. Sec. 29. An intentional and fraudulent omission, on the part of one insured, to communicate information of matters proving or tending to prove the falsity of a warranty, entitles the insurer to rescind.

Sec. 30. Neither party to a contract of insurance is bound to communicate information of the matters following, except in answer to the inquiries of the other: (a) Those which the other knows; (b) Those which, in the exercise of ordinary care, the other ought to know, and of which the former has no reason to suppose him ignorant; (c) Those of which the other waives communication; (d) Those which prove or tend to prove the existence of a risk excluded by a warranty, and which are not otherwise material; and (e) Those which relate to a risk excepted from the policy and which are not otherwise material. Sec. 31. Materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due, in forming his estimate of the disadvantages of the proposed contract, or in making his inquiries. Sec. 32. Each party to a contract of insurance is bound to know all the general causes which are open to his inquiry, equally with that of the other, and which may affect the political or material perils contemplated; and all general usages of trade. Sec. 33. 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 which information is communicated. Sec. 34. Information of the nature or amount of the interest of one insured need not be communicated unless in answer to an inquiry, except as prescribed by section fifty-one. Sec. 35. Neither party to a contract of insurance is bound to communicate, even upon inquiry, information of his own judgment upon the matters in question.

FACTS: On September 24, 1917, Mr Joaquin Herrer made an application to Sun Life Assurance Company of Canada through its office in Manila for a life annuity. Two day later he paid the sum of 6,000.00 to the manager of the companys Manila office and was given a receipt therefor . On November 26, 1917, the head office of the insurance company gave notice of acceptance by cable to Manila. On the same date the Manila office prepared a letter notifying Mr. Herrer that his application had been accepted and this was placed in the ordinary channels for transmission, but as far known, was never actually mailed and was never received by the applicant. Mr. Herrer died on December 20, 1917. ISSUE: Whether the contract of life annuity was perfected. HELD The court held that the contract for a life annuity was not perfected because it had not been proved satisfactorily that the acceptance of the application even came to the knowledge of the applicant. An acceptance of an offer of insurance not actually or constructively communicated to the proposer does not make a contract. Only the mailing of acceptance completes the contract of insurance, as the locus pnitenti is ende d when the acceptance has passed beyond the control of the party. When a letter or other mail matter is addressed and mailed with postage prepaid there is a rebuttable presumption of fact that it was received by the addressee as soon as it could have been transmitted to him in the ordinary course of the mails. But if any one of these elemental facts fails to appear, it is fatal to the presumption.

Insular Life v. Ebrado - Insurance Proceeds

80 SCRA 181
Facts:
> Buenaventura Ebrado was issued by Insular Life Assurance Co. a whole life plan for P5,882.00 with a rider for Accidental Death Benefits for the same amount. > Ebrado designated Carponia Ebrado as the revocable beneficiary in his policy, referring to her as his wife. > Ebrado died when he was accidentally hit by a falling branch of tree. > Insurer by virtue of the contract was liable for 11,745.73, and Carponia filed her claim, although she admitted that she and the insured were merely living as husband and wife without the benefit of marriage. > Pascuala Ebrado also filed her claim as the widow of the deceased insured. > Insular life filed an interpleader case and the lower court found in favor of Pascuala.

Issue:
Between Carponia and Pascuala, who is entitled to the proceeds?

Held:
Pascuala. It is quite unfortunate that the Insurance Act or our own Insurance Code does not contain a specific provision grossly resolutory of the prime question at hand. Rather, the general rules of civil law should be applied to resolve this void in the insurance law. Art. 2011 of the NCC states: The contract of insurance is governed by special laws. Matters not expressly provided for in such special laws shall be regulated by this Code. When not otherwise specifically provided for in the insurance law, the contract of life insurance is governed by the general rules of civil law regulating contracts.

Under Art. 2012, NCC: Any person who is forbidden from receiving any donation under Art. 739 cannot be named beneficiary of a life insurance policy by a person who cannot make any donation to him, according to said article. Under Art. 739, donations between persons who were guilty of adultery or concubinage at the time of the donation shall be void.

In essence, a life insurance policy is no different from civil donations insofar as the beneficiary is concerned. Both are founded on the same consideration of liberality. A beneficiary is like a donee because from the premiums of the policy which the insured pays, the beneficiary will receive

the proceeds or profits of said insurance. As a consequence, the proscription in Art. 739 should equally operate in life insurance contracts.Therefore, since common-law spouses are barred from receiving donations, they are likewise barred from receiving proceeds of a life insurance contract.

hilamcare Health Systems Inc. vs Court of Appeals

on January 15, 2012 00

Insurance Law Representation Concealment Rescission of an Insurance Contract

In 1988, Ernani Trinos applied for a health care insurance under the Philamcare Health Systems. He was asked if he was ever treated for high blood, heart trouble, diabetes, cancer, liver disease, asthma, or peptic ulcer; he answered no. His application was approved and it was effective for one year. His coverage was subsequently renewed twice for one year each. While the coverage was still in force in 1990, Ernani suffered a heart attack for which he was hospitalized. The cost of the hospitalization amounted to P76,000.00. Julita Trinos, wife of Ernani, filed a claim before Philamcare for them to pay the hospitalization cost. Philamcare refused to pay as it alleged that Ernani failed to disclose the fact that he was diabetic, hypertensive, and asthmatic. Julita ended up paying the hospital expenses. Ernani eventually died. In July 1990, Julita sued Philamcare for damages. Philamcare alleged that the health coverage is not an insurance contract; that the concealment made by Ernani voided the agreement. ISSUE: Whether or not Philamcare can avoid the health coverage agreement. HELD: No. The health coverage agreement entered upon by Ernani with Philamcare is a non-life insurance contract and is covered by the Insurance Law. It is primarily a contract of indemnity. Once the member incurs hospital, medical or any other expense arising from sickness, injury or other stipulated contingent, the health care provider must pay for the same to the extent agreed upon under the contract. There is no concealment on the part of Ernani. He answered the question with good faith. He was not a medical doctor hence his statement in answering the question asked of him when he was applying is an opinion rather than a fact. Answers made in good faith will not void the policy. Further, Philamcare, in believing there was concealment, should have taken the necessary steps to void the health coverage agreement prior to the filing of the suit by Julita. Philamcare never gave notice to Julita of the fact that they are voiding the agreement. Therefore, Philamcare should pay the expenses paid by Julita.

Great Pacific Life vs. CA

316 SCRA 677 (1999)

FACTS:

INSURANCE LAW: Parties in Insurance Contract

Great Pacific Life Assurance Corporation (Grepalife) executed a contract of group life insurance with Development Bank of the Philippines (DBP) wherein Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP. One such loan mortgagor is Dr. Wilfredo Leuterio. In an application form, Dr. Leuterio answered questions concerning his test, attesting among others that he does not have any heart conditions and that he is in good health to the best of his knowledge. However, after about a year, Dr. Leuterio died due to massive cerebral hemorrhage. When DBP submitted a death claim to Grep alife, the latter

denied the claim, alleging that Dr. Leuterio did not disclose he had been suffering fromhypertension, which caused his death. Allegedly, such nondisclosure constituted concealment that justified the denial of the claim. Hence, the widow of the late Dr. Leuterio filed a complaint against Grepalife for Specific Performance with Damages. Both the trial court and the Court of Appeals found in favor of the widow and ordered Grepalife to pay DBP. ISSUE:

Whether the CA erred in holding Grepalife liable to DBP as beneficiary in a group life insurance contract from acomplaint filed by the widow of the decedent/mortgagor

HELD: The rationale of a group of insurance policy of mortgagors, otherwise known as the mortgage redemption insurance, is a device for the protection of both the mortgagee and the mortgagor. On the part of the mortgagee, it has to enter into such form of contract so that in the event of the unexpected demise of the mortgagor during the subsistence of themortgage contract, the proceeds from such insurance will be applied to the payment of the mortgage debt, thereby relieving the heirs of the mortgagor from paying the obligation. In a similar vein, ample protection is given to the mortgagor under such a concept so that in the event of death, the mortgage obligation will be extinguished by theapplication of the insurance proceeds to the mortgage indebtedness. In this type of policy insurance, the mortgagee is simply an appointee of the insurance fund. Such loss-payable clause does not make the mortgagee a party to the contract. The insured, being the person with whom the contract was made, is primarily the proper person to bring suit thereon. Subject to some exceptions, insured may thus sue, although the policy is taken wholly or in part for the benefit of another person, such as a mortgagee. And since a policy of insurance upon life or health may pass by transfer, will or succession to any person, whether he has an insurable interest or not, and such person may recover it whatever the insured might have recovered, the widow of the decedent Dr. Leuterio may file the suit against the insurer, Grepalife