GENERAL CONCEPTS: Sec. 1. Name of Decree: The Insurance Code of 1978 Laws Governing Insurance: 1. PD 1!

"#: Insurance Co$e of 1%&' w/c Construction of Insurance Code follows that of the law of California (except for Ch. 5 was taken from the law of ew !ork". (. Ar)s. (#11 )o (#1(* CC: Insurance Hot tip: #rt. $%1$& CC' #n( person for)idden from recei*in+ an( donation under #rt. 7,9 cannot )e named )eneficiar( of a life insurance polic( )( the person who cannot make an( donation to him. +. Ar)s. (#(1 )o (#(&* CC: Life Annui), !. Ar). (1'"* CC: Com-u.sor, /o)or 0e1ic.e Lia2i.i), Insurance 3. Ar)s. !+* -ar. !* 3#* "!* 4ami., Co$e' -e*ocation of irre*oca)le )eneficiaries in terminated marria+es. RELATED CASES an$ 56RISPR6DENCE: Constantino v. Asia Life: on.pa(ment of premiums *oids polic( e*en if due to war. /e follow the 01 -ule. 2unctual pa(ments important since insurer calculates on the )asis of prompt pa(ments. Time is of the essence. o premium& no insurance. Insular Life v. Ebrado: 2erson for)idden from recei*in+ donation cannot )e named )eneficiar(. 3onations )etween persons +uilt( of adulter(/concu)ina+e *oid. Common.law spouse )arred from recei*in+ proceeds. In)er-re)a)ion of Insurance Con)rac)s' 1trictl( a+ainst insurer& li)erall( in fa*or of insured. Qua Chee Gan v. Law Union: 4asoline not specificall( mentioned in prohi)ited articles. 56ils7 usuall( means lu)ricants. #m)i+uities or o)scurities must )e strictl( interpreted a+ainst the part( that caused them. 8 of insurance is a 8 of adhesion. Construed strictl( a+ainst insurer& li)erall( in fa*or of insured. Ty v. Filipinas Cia de e!uros: /here insurance co. defines 5partial disa)ilit(7 as loss of either hand )( amputation& insured cannot reco*er for temporar( disa)ilit(. o am)i+uit(& literal meanin+ must appl(.

Sec. (. Defini)ion of Terms: A. CONTRACT O4 INS6RANCE #n a+reement where)( one undertakes for a consideration to indemnif( another a+ainst loss& dama+e or lia)ilit( arisin+ from an unknown or contin+ent e*ent. (1ec. $& par. $ of the Insurance Code" # contract of insurance is an a+reement )( which one part( (insurer" for a consideration (premium" paid )( the other part( (insured"& promises to pa( mone( or its e9ui*alent or to do some act *alua)le to the latter (or his nominee"& upon the happenin+ of a loss& dama+e& lia)ilit(& or disa)ilit( arisin+ from an unknown or contin+ent e*ent. (Vance, op. cit., p. 83)

E.emen)s of insurance con)rac): 1." Consent of parties CAYEN CERVANCIA CABIGUEN, PSU SCHOOL OF LAW Page 1

$." ,." ;."

a." Insurer )." Insured 6):ect' Transfer or distri)ute risk of loss& dama+e& lia)ilit( or disa)ilit( from insured to insurer Cause/consideration' 2remiums I 10-#<=> I T>->1T' Insured possesses an interest of some kind suscepti)le of pecuniar( estimation.

C.assifica)ions of insurance con)rac)s: 1." =ife a." Indi*idual )." 4roup life c." Industrial life $." on.life a." ?arine )." @ire c." Casualt( ,." Contracts of suret(ship and )ondin+

7. 8DOING AN INS6RANCE 76SINESS OR TRANSACTING AN INS6RANCE 76SINESS9 (1ec. $& par. ;" 1. ?akin+ or proposin+ to make& as insurer& an( insurance contractA $. ?akin+ or proposin+ to make& as suret(& an( contract of suret(ship as a *ocation& not as a mere incident to an( other le+itimate )usiness of a suret(A ,. 3oin+ an( insurance )usiness& includin+ a reinsurance )usinessA ;. 3oin+ or proposin+ to do an( )usiness in su)stance e9ui*alent to an( of the fore+oin+ 6T>' @act that no profit deri*ed from contract/transaction is not deemed conclusi*e to show that no insurance )usiness was transacted. C. Commissioner: The Insurance Commissioner. "hila#life v. Ansaldo: The insurance commissioner has the authorit( to re+ulate the )usiness of insurance (see definition above". The contract of a+enc( is not include w/in the meanin+ of the insurance )usiness and so the insurance commissioner has no :urisidiction. 6T>' The 9uasi.:udicial power of the Commissioner is limited )( law to claims and complaints in*ol*in+ an( loss& dama+e or lia)ilit( for w/c an insurer ma( )e answera)le under an( kind of polic( or contract of insurance. Bence& this power does not co*er the relationship affectin+ the insurance compan( and its a+ents )ut is limited to ad:udicatin+ claims and complaints filed )( the insured a+ainst the insurance compan(. "hila#$are v. CA: Bealth care a+reement is a contract of insurance. It has the followin+ elements' 1. The insured has an insura)le interest (his own health"A $. The insured is su):ect to a risk of loss )( the happenin+ of the desi+nated peril (incurs expenses of hospitaliCation/out.patient ser*ices"A ,. The insurer assumes the riskA ;. 1uch assumption of risk is part of a +eneral scheme to distri)ute actual losses amon+ a lar+e +roup of persons )earin+ a similar riskA and 5. In consideration of the insurerDs promise& the insured pa(s a premium.

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C:ARACTERISTICS O4 AN INS6RANCE CONTRACT %The Insuran$e Code of the "hilippines Annotated& 'e$tor de Leon& ())( ed.* 1. Consensua. E it is perfected )( the meetin+ of the minds of the parties. $. 0o.un)ar, E the parties ma( incorporate such terms and conditions as the( ma( deem con*enient. ,. A.ea)or, E it depends upon some contin+ent e*ent. ;. 6ni.a)era. E imposes le+al duties onl( on the insurer who promises to indemnif( in case of loss. 5. Con$i)ional E It is su):ect to conditions the principal one of which is the happenin+ of the e*ent insured a+ainst. F. Con)rac) of in$emni), E >xcept life and accident insurance& a contract of insurance is a contract of indemnit( where)( the insurer promises to make +ood onl( the loss of the insured. 7. Persona. E each part( ha*in+ in *iew the character& credit and conduct of the other. 8. Pro-er), in Lega. Con)em-.a)ion. the( are in nature of propert( and do not represent a personal a+reement )etween the insurer and the insured. RE;6ISITES O4 A CONTRACT O4 INS6RANCE %The Insuran$e Code of the "hilippines Annotated& 'e$tor de Leon& ())( ed.* 1. # su):ect matter which the insured has an insura)le interest. $. >*ent or peril insured a+ainst which ma( )e an( future contin+ent or unknown e*ent& past or future and duration for the risk thereof. ,. # promise to pa( or indemnif( in a fixed or ascertaina)le amount. ;. # consideration known as 5premium7. 5. ?eetin+ of the minds of the parties. Princi-.e of 6)mos) Goo$ 4ai)1 #n insurance contract re9uires utmost +ood faith (uberrimae fidei) )etween the parties. The applicant is en:oined to disclose an( material fact& which he knows or ou+ht to know. Reason: #n insurance contract is an aleator( contract. The insurer relies on the representation of the applicant& who is in the )est position to know the state of his health. III. Con)rac) of In$emni), It is the )asis of all propert( insurance. The insured who has insura)le interest o*er a propert( is onl( entitled to reco*er the amount of actual loss sustained and the )urden is upon him to esta)lish the amount of such loss (Reviewer on Commercial Law, rofessors !undian" and #$uino) Ru.es: 1. #pplies onl( to propert( insurance except when the creditor insures the life of his de)tor. $. =ife insurance is not a contract of indemnit(. ,. Insurance contracts are not wa+erin+ contracts. (1ec. ;" Con)rac) of A$1esion <4ine Prin) Ru.e

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 ?ost of the terms of the contract do not result from mutual ne+otiations )etween the parties as the( are prescri)ed )( the insurer in final printed form to which the insured ma( 5adhere7 if he chooses )ut which he cannot chan+e. (Ri%al !uret& and 'nsurance Co., vs. C#, 33( !CR# )*) Princi-.e of Su2roga)ion It is a process of le+al su)stitution where the insurer steps into the shoes of the insured and he a*ails of the latterDs ri+hts a+ainst the wron+doer at the time of loss. The principle of su)ro+ation is a normal incident of indemnit( insurance as a le+al effect of pa(mentA it inures to the insurer without an( formal assi+nment or an( express stipulation to that effect in the polic(. 1aid ri+ht is not dependent upon nor does it +row out of an( pri*ate contract. 2a(ment to the insured makes the insurer a su)ro+ee in e9uit(. (+ala&an 'nsurance Co., 'nc. v. C#, )(, !CR# ,3(- see also #rt. **./, 0CC) Pur-oses: (12e 'nsurance Code of t2e 2ilippines #nnotated, Hector de Leon, *..* ed.) 1. To make the person who caused the loss le+all( responsi)le for it. $. To pre*ent the insured from recei*in+ a dou)le reco*er( from the wron+doer and the insurer. ,. To pre*ent tortfeasors from )ein+ free from lia)ilities and is thus founded on considerations of pu)lic polic(. Ru.es: 1. #pplica)le onl( to propert( insurance. $. The insurer can onl( reco*er from the third person what the insured could ha*e reco*ered. T1ere can 2e no su2roga)ion in cases: 1. /here the insured )( his own act releases the wron+doer or third part( lia)le for the loss or dama+eA $. /here the insurer pa(s the insured the *alue of the loss without notif(in+ the carrier who has in +ood faith settled the insuredDs claim for lossA ,. /here the insurer pa(s the insured for a loss or risk not co*ered )( the polic(. ( an +ala&an 'nsurance Compan& v. C#, )83 !CR# ,3) ;. In life insurance 5. @or reco*er( of loss in excess of insurance co*era+e CONSTR6CTION O4 INS6RANCE CONTRACT The am)i+uous terms are to )e construed strictl( a+ainst the insurer& and li)erall( in fa*or of the insured. Bowe*er& if the terms are clear& there is no room for interpretation. (Calanoc vs. Court of #ppeals, 48 2il. /4) DISTING6IS:ING ELE/ENTS O4 AN INS6RANCE CONTRACT 1. The insured possesses an insura)le interest suscepti)le of pecuniar( estimationA $. The insured is su):ect to a risk of loss throu+h the destruction or impairment of that interest )( the happenin+ of desi+nated perilsA ,. The insurer assumes that risk of lossA ;. 1uch assumption is part of a +eneral scheme to distri)ute actual losses amon+ a lar+e +roup or su)stantial num)er of persons )earin+ somewhat similar risksA and CAYEN CERVANCIA CABIGUEN, PSU SCHOOL OF LAW Page ;

5. The insured makes a rata)le contri)ution (premium" to a +eneral insurance fund. 6T>' # contract possessin+ onl( the first , elements a)o*e is a risk.shiftin+ de*ice. If all the elements& it is a risk.distri)utin+ de*ice. PER4ECTION O4 AN INS6RANCE CONTRACT #n insurance contract is a consensual contract and is therefore perfected the moment there is a mee)ing of min$s with respect to the o):ect and the cause or consideration. 6T>' /hat is )ein+ followed in insurance contracts is what is known as the 5co+nition theor(7. Thus& 5an acceptance made )( letter shall not )ind the person makin+ the offer except from the time it came to his knowled+e7. (5nri$ue% vs. !un Life #ssurance Co. of Canada, 3) 2il. *(4) <indin+ Recei-). # mere acknowled+ment on )ehalf of the compan( that its )ranch office had recei*ed from the applicant the insurance premium and had accepted the application su):ect to processin+ )( the head office. Cover No)e <A$ In)erim . # concise and temporar( written contract issued to the insurer throu+h its dul( authoriCed a+ent em)od(in+ the principal terms of an expected polic( of insurance. Pur-ose: It is intended to +i*e temporar( insurance protection co*era+e to the applicant pendin+ the acceptance or re:ection of his application. Dura)ion: ot exceedin+ F% da(s unless a lon+er period is appro*ed )( Insurance Commissioner (1ec. 5$". Ri$ers. 2rinted stipulations usuall( attached to the polic( )ecause the( constitute additional stipulations )etween the parties. (#n" 6io7 C2ip vs. !prin"field, ,( 2il. */,)

6T>' In case of conflict )etween a rider and the printed stipulations in the polic(& the rider pre*ails& as )ein+ a more deli)erate expression of the a+reement of the contractin+ parties. (C. #lvendia, 12e Law of 'nsurance in t2e 2ilippines, )4(8 ed.) C.auses= #n a+reement )etween the insurer and the insured on certain matter relatin+ to the lia)ilit( of the insurer in case of loss. ( rof. 8e Leon, p.)88) En$orsemen)s= #n( pro*ision added to the contract alterin+ its scope or application. ( rof. 8e Leon, p.)88) POLIC> O4 INS6RANCE= The written instrument in which a contract of insurance is set forth. (1ec. ;9" Con)en)s: <Sec. 31 1. 2arties $. #mount of insurance& except in open or runnin+ policiesA ,. -ate of premiumA ;. 2ropert( or life insuredA 5. Interest of the insured in the propert( if he is not the a)solute ownerA F. -isk insured a+ainstA and 7. 3uration of the insurance Persons en)i).e$ )o recover on )1e -o.ic, <sec. 3+"'

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 The insurance proceeds shall )e applied exclusi*el( to the proper interest of the person in whose name or to whose )enefit it is made& unless otherwise specified in the polic(. ?in$s: 1. OPEN POLIC> E *alue of thin+ insured is not a+reed upon& )ut left to )e ascertained in case of loss. (1ec. F%" The actual loss& as determined& will represent the total indemnit( due the insured from the insurer except onl( that the total indemnit( shall not exceed the face *alue of the polic(. (8evelopment 'nsurance Corp. vs. '#C, )33 !CR# (*) $. 0AL6ED POLIC> E definite *aluation of the propert( insured is a+reed )( )oth parties& and written on the face of polic(. (1ec. F1" In the a)sence of fraud or mistake& the a+reed *aluation will )e paid in case of total loss of the propert(& unless the insurance is for a lower amount. ,. R6NNING POLIC> E contemplates successi*e insurances and which pro*ides that the o):ect of the polic( ma( from time to time )e defined (1ec. F$" T>PES O4 INS6RANCE CONTRACTS =ife insurance 1" Indi*idual life (1ecs. 179E18,& $$7" $" 4roup life (1ecs. 5%& last par.& $$8" ," Industrial life (1ecs. $$9E$,1" ;" on.life insurance

5" ?arine (1ecs. 99E1FF" F" @ire (1ecs. 1F7E17," 7" Casualt( (1ec. 17;" 8" Contracts of )ondin+ or suret(ship (1ecs. 175E178" ote' Bealth and accident insurance are either co*ered under life (1ec. 18%" or casualt( insurance. (1ec. 17;". ?arine& fire& and the propert( aspect of casualt( insurance are also referred to as propert( insurance. PARTIES TO INS6RANCE CONTRACT 1" Insurer = 2erson who undertakes to indemnif( another. for @or a person to )e called an insurance a+ent& it is necessar( that he should perform the function compensation. (#isporna vs. C#, ))3 !CR# 3,4) $" Insure$ . The part( to )e indemnified upon the occurrence of the loss. Be must ha*e capacit( to contract& must possess an insura)le interest in the su):ect of the insurance and must not )e a pu)lic enem(. su):ect A -u2.ic enem,= a nation with whom the 2hilippines is at war and it includes e*er( citiCen or of such nation.

," 7eneficiar, . # person desi+nated to recei*e proceeds of polic( when risk attaches. Ru.es in )1e $esigna)ion of )1e 2eneficiar,:

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LI4E: # person who insures his own life can desi+nate an( person as his )eneficiar(& whether or not the )eneficiar( has an insura)le interest in the life of the insured su):ect to the limitations under #rt. 7,9 and #rt. $%1$ of the CC. Reason' in essence& a life insurance polic( is no different form a ci*il donation insofar as the )eneficiar( is concerned. <oth are founded on the same consideration of li)eralit(. ('nsular Life 5brado, 8. !CR# )8)) # person who insures the life of another person and name himself as the )eneficiar( must ha*e insura)le interest in such life. (1ec. 1%" #s a +eneral rule& the desi+nation of a )eneficiar( is re*oca)le unless the insured expressl( the ri+ht to re*oke in the polic(. (1ec. 11"

vs. an wai*ed

The interest of a )eneficiar( in a life insurance polic( shall )e forfeited when the )eneficiar( is the principal accomplice or accessor( in willfull( )rin+in+ a)out the death of the insured in which e*ent& the nearest relati*e of the insured shall recei*e the proceeds of said insurance if not otherwise dis9ualified. (1ec. 1$" PROPERT>: The )eneficiar( of propert( insurance must ha*e an insura)le interest in such propert(& which must exist not onl( at the time the polic( takes effect )ut also when the loss occurs. (1ec. 1, and 18". Effec)s of Irrevoca2.e Designa)ion Of 7eneficiar, Insure$ canno): 1" #ssi+n the polic( $" Take the cash surrender *alue of the polic( ," #llow his creditors to attach or execute on the polic(A ;" #dd new )eneficiar(A or 5" Chan+e the irre*oca)le desi+nation to re*oca)le& e*en thou+h the chan+e is :ust and reasona)le. 6T>' The insured does not e*en retain the power to destro( the contract )( refusin+ to pa( the premiums for the )eneficiar( can protect his interest )( pa(in+ such premiums for he has an interest in the fulfillment of the o)li+ation. (Vance, p. ((,, cited in de Leon, p. ).), *..* ed.) INS6RA7LE INTEREST A. In Genera. # person has an insura)le interest in the su):ect matter if he is so connected& so situated& so circumstanced& so related& that )( the preser*ation of the same he shall deri*e pecuniar( )enefit& and )( its destruction he shall suffer pecuniar( loss& dama+e or pre:udice. 7. Life >*er( person has an insura)le interest in the life and health' of himself& of his spouse and of his childrenA of an( person on whom he depends wholl( or in part for education or supportA of an( person under a le+al o)li+ation to him to pa( mone( or respectin+ propert( or ser*ices& of which death or illness mi+ht dela( or pre*ent performanceA and of an( person upon whose life an( estate or interest *ested in him depends. (1ec. 1%" @1en i) s1ou.$ eAis): /hen the insurance takes effectA not thereafter or when the loss occurs. Amoun): GENERAL R6LE: There is no limit in the amount the insured can insure his life. CAYEN CERVANCIA CABIGUEN, PSU SCHOOL OF LAW Page 7

the

EBCEPTION: In a creditor.de)tor relationship where the creditor insures the life of his de)tor& limit of insura)le interest is e9ual to the amount of the de)t.

ote' If at the time of the death of the de)tor the whole de)t has alread( )een paid& the creditor can no lon+er reco*er on the polic( )ecause the principle of indemnit( applies. C. Pro-er), >*er( interest in propert( whether real or personal& or an( relation thereto& or lia)ilit( in respect thereof& of such nature that the contemplated peril mi+ht directl( damnif( the insured (1ec. 1,"& which ma( consist in' an existin+ interestA an( inchoate interest founded on an existin+ interestA or an expectanc( coupled with an existin+ interest in that out of which the expectanc( arises. (1ec. 1;" @1en i) s1ou.$ eAis): /hen the insurance takes effect and when the loss occurs& )ut need not exist in the meantime. Amoun): The measure of insura)le interest in propert( is the extent to which the insured mi+ht )e damnified )( loss or in:ur( thereof. (1ec. 17" I 10-#<=> I T>->1T I =I@> I 10-#<=> I T>->1T I 2-62>-T! ?ust exist onl( at the time the polic( takes effect and need not ?ust exist at the time the polic( exist takes at the time of loss effect and when the loss occurs

0nlimited except in life insurance effected )( creditor on life of =imited to actual *alue of interest in de)tor. propert( insured.

The expectation of )enefit to )e deri*ed from the continued

#n expectation of a )enefit to )e

existence of life need not ha*e an( le+al )asis whate*er. deri*ed from the continued # existence reasona)le pro)a)ilit( is sufficient without more. of the propert( insured must ha*e a le+al )asis.

The )eneficiar( need not ha*e an insura)le interest o*er the life of The )eneficiar( must ha*e insura)le the insured if the insured himself secured the polic(. Bowe*er& if the interest o*er the thin+ insured. life insurance was o)tained )( the )eneficiar(& the latter must ha*e insura)le interest o*er the life of the insured.

SPECIAL CASES 1" In case of a carrier or $e-osi)ar, : # carrier or depositor( of an( kind has an insura)le interest in a thin+ held )( him as such& to the extent of his lia)ilit( )ut not to exceed the *alue thereof (1ec. 15"

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$" In case of a mor)gage$ -ro-er),: The mort+a+or and mort+a+ee each ha*e an insura)le interest in the propert( mort+a+ed and this interest is separate and distinct from the other. ?ort+a+or E #s owner& has an insura)le interest therein to the extent of its *alue& e*en thou+h the mort+a+e de)t e9uals such *alue. The reason is that the loss or destruction of the propert( insured will not extin+uish the mort+a+e de)t. ?ort+a+ee E Bis interest is onl( up to the extent of the de)t. 1uch interest continues until the mort+a+e de)t is extin+uished. The lessor cannot )e *alidl( a )eneficiar( of a fire insurance polic( taken )( a lessee o*er his merchandise& and the pro*ision in the lease contract pro*idin+ for such automatic assi+nment is *oid for )ein+ contrar( to law and pu)lic polic(. (C2a vs. Court of #ppeals, **/ !CR# (4.) 1T# 3#-3 6- 0 I6 ?6-T4#4> C=#01> 62> 6- =611 2#!#<=> ?6-T4#4> C=#01> #cts of the mort+a+or affect the mort+a+ee. 1u)se9uent acts of the mort+a+or cannot affect the ri+hts of the assi+nee Effec)s of Loss Pa,a2.e C.ause 1" The contract is deemed to )e upon the interest of the mort+a+orA hence& he does not cease to )e a part( to the contract. $" #n( act of the mort+a+or prior to the loss& which would otherwise a*oid the insurance affects the mort+a+ee e*en if the propert( is in the hands of the mort+a+ee. ," #n( act& which under the contract of insurance is to )e performed )( the mort+a+or& ma( )e performed )( the mort+a+ee with the same effect. In case of loss& the mort+a+ee is entitled to the proceeds to the extent of his credit. ;" 0pon reco*er( )( the mort+a+ee to the extent of his credit& the de)t is extin+uished. 5" In case a mort+a+ee insures his own interest and a loss occurs& he is entitled to the proceeds of the insurance )ut he is not allowed to retain his claim a+ainst the mort+a+or as the claim is dischar+ed )ut it passes )( su)ro+ation to the insurer to the extent of the mone( paid )( such insurer. ( alileo vs. Cosio) RIS?: /hat ma( )e insured a+ainst' 1" 4u)ure con)ingen) even) resu.)ing in .oss or $amage E >x. 2ossi)le future fire $" Pas) unCnown even) resu.)ing in .oss or $amage E >x. @act of past sinkin+ of a *essel unknown to the parties ," Con)ingen) .ia2i.i), E >x. -einsurance PRE/I6/ PA>/ENTS Consideration paid an insurer for undertakin+ to indemnif( the insured a+ainst a specified peril. <asis of the ri+ht of the insurer to collect premiums' #ssumption of risk. GENERAL R6LE: o polic( issued )( an insurance compan( is *alid and )indin+ until actual pa(ment of premium. #n( a+reement to the contrar( is *oid. (1ec. 77" EBCEPTIONS: 1" In case of life or industrial life insurance& when the +race periods appliesA (1ec. 77" CAYEN CERVANCIA CABIGUEN, PSU SCHOOL OF LAW Page 9 Reason: ?ort+a+or does not cease to )e a part( to the contract. (1ecs. 8 and 9"

$" /hen the insurer makes a written acknowled+ment of the receipt premiumA (1ec. 78" 6T>' 1ection 77 ma( not appl( if the parties ha*e a+reed to the pa(ment of the premium in instalments and partial pa(ment has )een made at the time of the loss. (?akati Tuscan( Condominium Corp. *. C#& $15 1C-# ;F$" ," /here a credit term has )een a+reed upon. (9C : vs. +asa"ana 1elemart, 3.8 !CR# *,4) ;" /here the parties are )arred )( estoppel. (9C : vs. +aa"ana 1elemart, 3,( !CR# 3./) 6T>' 1ection 77 merel( precludes the parties from stipulatin+ that the polic( is *alid e*en if the premiums are not paid. (+a7ati 1uscan& Condominium Corp. v. C#, *), !CR# 3(*) Effec) of AcCnow.e$gmen) of Recei-) of Premium in Po.ic,: Conclusi*e e*idence of its pa(ment& so far as to make the polic( )indin+& notwithstandin+ an( stipulation therein that it shall not )e )indin+ until the premium is actuall( paid. (1ec. 78" ENTITLE/ENT O4 INS6RED TO RET6RN O4 PRE/I6/S PAID @1o.e: 1." If the thin+ insured was ne*er exposed to the risks insured a+ainstA (1ec. 79" $." If contract is *oida)le due to the fraud or misrepresentation of insurer or his a+entsA (1ec. 81" ,." If contract is *oida)le )ecause of the existence of facts of which the insured was i+norant without his faultA (1ec. 81" ;." /hen )( an( default of the insured other than actual fraud& the insurer ne*er incurred lia)ilit(A (1ec. 81" 5." /hen rescission is +ranted due to the insurerDs )reach of contract. (1ec. 7;" )efore Pro ra)a: /hen the insurance is for a definite period and the insured surrenders his polic( the termination thereofA EAce-)ions: 1. 2olic( not made for a definite period of time $. 1hort period rate is a+reed upon life insurance polic( ,. /hen there is o*er.insurance (1ec. 8$"A Ins)ances w1en -remiums are no) recovera2.e: 1" /hen the risk has alread( attached and the risk is entire and indi*isi)le. $" In life insurance. ," /hen the contract is rescinda)le or rendered *oid a) initio )( the fraud of the insured. /hen the contract is ille+al and the parties are in pari delicto. 2->?I0? =e*ied and paid to meet anticipated losses. 2a(ment is not enforcea)le a+ainst #11>11?> T Collected to meet actual losses. 2a(ment is enforcea)le once Page 1%

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the insured.

le*ied unless otherwise a+reed upon.

ot a de)t.

It )ecomes a de)t once properl( le*ied unless otherwise a+reed.

TRANS4ER O4 POLIC> 1. Life Insurance: It can )e transferred e*en without the consent of the insurer except when there is a stipulation re9uirin+ the consent of the insurer )efore transfer. (1ec. 181" Reason: The polic( does not represent a personal a+reement )etween the insured and the insurer. (. Pro-er), insurance: It cannot )e transferred without the consent of the insurer. Reason: The insurer appro*ed the polic( )ased on the personal 9ualification and the insura)le interest of the insured. +. Casua.), insurance : It cannot )e transferred without the consent of the insurer. ( aterson cited in de Leon p. 8*) Reason' The moral haCards are as +reat as those of propert( insurance. C:ANGE O4 INTEREST IN T:E T:ING INS6RED The mere (a)solute" transfer of the thin+ insured does not transfer the polic(& )ut suspends it until the same person )ecomes the owner of )oth the polic( and the thin+ insured. (1ec. 58" Reason: Insurance contract is personal. GENERAL R6LE: # chan+e of interest in an( part of a thin+ insured unaccompanied )( a correspondin+ chan+e of interest in the insurance suspends the insurance to an e9ui*alent extent& until the interests in the thin+ and the interest in the insurance are *ested in the same person. (1ec. $%" EBCEPTIONS: 1" In life& health and accident insurance.(1ec. $%"A $" Chan+e in interest in the thin+ insured after occurrence of an in:ur( which results in a loss. (1ec. $1"A ," Chan+e in interest in one or more of se*eral distinct thin+s separatel( insured )( one polic(. (1ec. $$"A ;" Chan+e of interest& )( will or succession& on the death of the insured. (1ec. $,"A 5" Transfer of interest )( one of se*eral partners& :oint owners& or owners in common& who are :ointl( insured& to others. (1ec. $;"A F" /hen a polic( is so framed that it will inure to the )enefit of whomsoe*er& durin+ the continuance of the risk& ma( )ecome the owner of the interest insured. (1ec. 57"A 7" /hen there is an express prohi)ition a+ainst alienation in the polic(& in case of alienation& the contract of insurance is not merel( suspended )ut a*oided. (#rt. 1,%F& CC". CAYEN CERVANCIA CABIGUEN, PSU SCHOOL OF LAW Page 11

ASCERTAIN/ENT AND CONTROL O4 RIS? AND LOSS A. 4our Primar, Concerns of )1e Par)ies: 1" Correct estimation of the riskA $" 2recise delimitation of the riskA ," Control of the riskA ;" 3eterminin+ whether a loss occurred and if so& the amount of such loss. 7. Devices use$ for ascer)aining an$ con)ro..ing risC an$ .oss: 1. Concea.men) D # ne+lect to communicate that which a part( knows and ou+ht to communicate (1ec. $F" ReEuisi)es: 1" # part( knows a fact which he ne+lects to communicate or disclose to the other. $" 1uch part( concealin+ is dut( )ound to disclose such fact to the other. ," 1uch part( concealin+ makes no warrant( as to the fact concealed. ;" The other part( has not the means of ascertainin+ the fact concealed. /a)eria. Effec)s: >ntitles insurer to rescind& e*en if the death or loss is due to a cause not related to the concealed matter (1ec. $7". ote' 4ood @aith is not a defense in concealment. 1ec. $7 clearl( pro*ides that& 5the concealment whether intentional or unintentional entitles the in:ured part( to rescind the contract of insurance.7 Tes) of /a)eria.i),: 3etermined not )( the e*ent& )ut solel( )( the pro)a)le and reasona)le influence of the facts upon the part( to whom the communication is due& in formin+ his estimate the ad*anta+es of the proposed contract& or in makin+ his in9uiries (1ec. ,1". EAce-)ion )o Sec. +1: 1" Incontesta)ilit( clause $" ?atters under 1ec.11% (marine insurance" 6T>' The wai*er of medical examination in a non.medical insurance contract renders e*en more material the information re9uired of the applicant concernin+ the pre*ious conditions of health and diseases suffered. (!unlife v. !ps. :acani, *3( !CR# *(8). The ri+ht to information of material facts ma( )e wai*ed& either )( the terms of the insurance or )( ne+lect to make in9uiries as to such facts where the( are distinctl( implied in other facts of which information is communicated. (1ec.,," /here matters of opinion or :ud+ment are called for& answers made in +ood faith and without intent to decei*e will not a*oid the polic( e*en thou+h the( are untrue. -eason' The insurer cannot rel( on those statements. Be must make further in9uir(. (2hilamcare Bealth 1(stems *s. C#& 4.-. o. 1$5F78& ?arch 18& $%%$". (. Re-resen)a)ions E @actual statements made )( the insured at the time of& or prior to& the issuance of the polic( to +i*e information to the insurer and induce him to enter into the insurance contract. The( are considered an acti*e form of concealment. ReEuisi)es of a fa.se re-resen)a)ion <misre-resen)a)ion : CAYEN CERVANCIA CABIGUEN, PSU SCHOOL OF LAW Page 1$

of

1" The insured stated a fact which is untrue. $" 1uch fact was stated with knowled+e that it is untrue and with intent to decei*e or which he states positi*el( as true without knowin+ it to )e true and which has a tendenc( to mislead. ," 1uch fact in either case is material to the risk. C1arac)eris)ics: ?in$s: 1" A44IR/ATI0E E affirmation of a fact when the contract )e+insA and $" PRO/ISSOR> E promise to )e performed after polic( was issued. Effec) of /isre-resen)a)ion: the in:ured part( is entitled to rescind from the time when the representation )ecomes false. Tes) of /a)eria.i),' 1ame as that in concealment. /here the insured merel( si+ned the application form and made the a+ent of the insurer fill the same for him& it was held that )( doin+ so& the insured made the a+ent of the insurer his own a+ent and he was responsi)le for his acts for that purpose. ('nsular Life #ssur. Co. vs. ;eliciano, /3 2il. 3(4) +. @arran)ies E 1tatement or promise )( the insured set forth in the polic( or )( reference incorporated therein& the untruth or non.fulfillment of which in an( respect& and without reference to whether insurer was in fact pre:udiced )( such untruth or non.fulfillment& renders the polic( *oida)le )( the insurer. Pur-ose: To eliminate potentiall( increasin+ haCards which ma( either )e due to the acts of the insured or to the chan+e to the condition of the propert(. ?in$s: a. EBPRESS E an a+reement expressed in a polic( where)( the insured stipulates that certain facts relatin+ to the risk are or shall )e true& or certain acts relatin+ to the same su):ect ha*e )een or shall )e done. ). I/PLIED = it is deemed included in the contract althou+h not expressl( mentioned. >xample' In marine insurance& seaworthiness of the *essel. Effec)s of 2reac1 of warran),: a. ?aterial the GENERAL R6LE' Giolation of material warrant( or of a material pro*ision of a polic( will entitle other part( to rescind the contract. (1ec. 7;" EBCEPTIONS: 1" =oss occurs )efore the time of performance of the warrant(. $" The performances )ecome unlawful at the place of the contract. CAYEN CERVANCIA CABIGUEN, PSU SCHOOL OF LAW Page 1, It is not a part of the contract )ut merel( a collateral inducement to it. It ma( )e oral or written. It is made at the same time of issuin+ the polic( or )efore )ut not after. It ma( )e altered or withdrawn )efore the insurance is effected )ut not afterwards. It alwa(s refers to the date the contract +oes into effect.

," 2erformance )ecomes impossi)le. (1ec. 7," ). Immaterial (ex. 6ther insurance clause" GENERAL R6LE: It will not a*oid the polic(. EBCEPTION: /hen the polic( expressl( pro*ides or declares that a *iolation thereof will a*oid it. (1ec. 75."

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