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The Policy
Rescission of insurance contracts
What is a preliminary policy/cover note?
Sec48(a) action to rescind o Has terms and conditions of policy that will be
issued. Insurance company cannot collect
If insurer has right to rescind, insurer must rescind prior to separate premium on preliminary policy and
commencement of action on the contract actual policy.
Tender of premiums and notice that the policy is cancelled o Common in car insurance and marine insurance
before suit is deemed a rescission Because there is still some delay or
information to be determined (ex.
Sec 48(b) incontestability clause looking for third-party liability in car
insurance first [give to LTO the cover
If a life insurance policy has been in force for at least 2
note] or looking for adequate carrier for
years since first effect or last reinstatement insurer is
goods for marine goods since the o There must be a maximum amount mentioned. It
policy depends on the state of the boat is a maximum liability of the insurer.
What must be the form of policies? o So there can be an amount mentioned, but you
o Must be in printed form. It cant be handwritten still have to quantify the value within this amount.
anymore. Before you issue a new policy, the What is a Valued policy?
terms and conditions have to be approved by o One expressing a policy that the thing be valued
insurance commission. at a specified sum
What is the rule on riders and additional attached Ex. Marine policies are usually this
clauses? What is a Running policy?
o Does not bind insured UNLESS the descriptive o Successive insurances
name/title of the rider or clause is mentioned and Ex. Goodyear, instead of getting
written on the blank spaces in the policy insurance whenever it ships tires to
What is the rule on additional riders or clauses issued distributors, it gets a running policy that
after the original? covers all of these
o Must be countersigned by the insured or owner o In any case, it would have to notify the insurance
o N.B. No need for signature of insured for earlier company which would issue an indorsement, for
riders and additional clauses it to be covered
When must a policy be issued upon issue of cover What is the rule on validity of agreements limiting
note? times for commencing action?
o Within 60 days, the policy must be issued. o In general, a clause in an insurance policy that
If the cover note extends beyond 60 action upon the policy must be brought upon by
days, written agreement of insured must the insured within a certain period is valid
be obtained. o But if the period fixed is less than one year from
But now: there is a circular that allows the time cause of action accrues, the stipulation
cover notes to extend beyond 60 days. is void (the period becomes the default 10 years,
Who receives insurance proceeds? from a written contract)
o Applied exclusively to person in whose name or In industrial life insurance period
for whose benefit the policy is made cannot be less than 6 months from
o If description is so general that it may accrual of cause of action
comprehend any class or persons, only he who o When does cause of action accrue?
can show it was intended to include him can From rejection of the claim by the
claim the benefit. insurer, because prior to this, there is no
When does insurance taken by one partner or part- necessity to bring suit yet
owner apply to the interest of his co-partners or co- o What if the clause says that action must be
owners? brought one year from loss?
o The terms of the policy must be applicable to the Its void, because you have to submit
joint or common interest your claim to the insurer first, and this
Rules on interpretation: takes time. The insurer might decide
o If the provision is clear, there is no room to beyond one year sometimes. In this
interpret case, the action given to the insured will
o Tantoco Terminal: had two mills. Old mill was be less than 1 year from the time cause
insured. When the new mill was finished it was of action accrues.
insured. The policy however mentioned the old o N.B. One year period to file a case is not like
mill. Burned. Insurer refused. period for appeal. Asking for reconsideration
HELD: Clearly they intended the new from the company does not suspend running of
mill to be insured, not the old one even if the period.
the policy says otherwise. When can non-life policies be cancelled?
o Fortune: Security guard and driver of armored o 1. Only with prior notice AND
van had possession of the money. They stole o 2. On the following grounds:
money. Insurance company refused to pay 1. Non-payment of premium
because it claimed they were not employees of 2. Conviction of crime from acts
the company, but the agency. increasing hazard insured against
HELD: The insurance company pays. 3. Discovery of fraud/material
The very purpose of the insurance is to misrepresentation
insure against acts of those holding the 4. Discovery of willful or reckless acts
money, which in this case are the two. increasing hazard insured against
What is an Open policy?
Ex. a bus company that always o 3. Grace period in life and industrial life policies
gets into accidents every week by default, there is a 30 day grace period. But it
5. Physical changes in property that can be increased
makes it uninsurable o 4. Grant of credit by the insurer to the insured
6. Determination by Commissioner that Masagana added this. There was a
continuation of policy will place the market insuring its premises with UCPB
insurer in violation of the code since 1988, and every year there is
Ex. Maximum risk it can insure usually a 60-90 credit period to pay
is 20% of its net worth (Ex. renewal. The market burned within the
100M net worth, so they can period and UCPB paid the premiums a
issue up to 20M). It can issue day after. The insurer was held liable.
policies beyond that but it must o 5. Estoppel
be reinsured. As in Masagana where UCPB always
Notice of cancellation: granted Masagana a credit period.
o 1. Must be in writing What is Cash Surrender Value?
o 2. State ground for cancellation o Amount of cash the insurer receives upon
o 3. State that if the insured asks for the facts as surrender of the life insurance policy prior to
basis, the insurer will disclose maturity
When can there be automatic renewal in a non-life What is Paid-up Insurance?
policy? o When the insured defaults, he gets the cash
o Insured can automatically renew the policy as surrender value. The insurer then applies the
long as he is willing to pay the premium cash surrender value to check how much
o Except: 45 days before expiration of policy, the insurance it can buy until the end of the policy.
insurer informs him that it will not renew o Can the insured apply for reinstatement at the
If insurer does not do this, insured can end of the policy?
renew as a matter of right Yes, but he has to undergo medical
Policy written for term longer than 1 year, it will be treated examination again to show he is
as written for successive terms of 1 year insurable, and pay the premium in
o Ex. construction contract requires policy covering arrears
the building as it is completed. There were 2 What are the rules on refund of premium?
fires, and 3 years. It will be treated as if it is o Insured entitled to a refund of the premium if no
expiring at every anniversary of the policy. part of the interest was exposed to the peril
Ex. Insured shipment of rice was never
Premiums shipped
o What if the insurance is for a particular period
When is the insurer entitled to the payment of the and there was surrender prior to the end of
premium? the period?
o As soon as the thing insured is exposed to the Entitled to refund corresponding to
peril insured against unexpired time
What is the effect of payment of premium to the Deducting any previous payment of the
liability of the insurer? insurer due to losses
o Notwithstanding any agreement to the contrary, o What the exception to partial refund rule?
no policy is binding until the premium has been In life insurance, because the insurance
paid. on human life is not divisible. So no
What are the exceptions? matter how short, the insured is not
o 1. An acknowledgement under the policy that the entitled to a return of the premium.
premium has been paid is conclusive evidence, o X insured a shipment of goods from Manila to
even if there is no actual payment yet Cebu. Can he can cancel it halfway, i.e. when
But this does not estop the insurer from it is in Romblon, and ask for refund of
recovering the payments afterwards premium?
o 2. Payment in installments No. The insurer was already exposed to
Makati Tuscany: In fact, if only a few the risk; he cannot ask or the return of
installments were paid, the insurer can the premium. It is not divisible.
sue to collect the rest o What if the contract is avoided due to fault of
Tibay: The policy provided that it will not the insurer?
be binding until all installments have Insured gets the premium returned.
been paid. Thus, here, Makati Tuscany
does not apply.
o Avoided due to fault of the insured, but not Ex. fire insurance policy covers store
actual fraud? and stocks in trade. The house across
Insured gets return of premium, if the the street caught fire. Everyone
insurer did not incur any liability. congregated. While distracted, robbers
Ex. Pre-condition for fire insurance over broke into the store and stole the stocks
house is to build a firewall. Insured in trade. Fire is just a remote cause.
didnt get to build it, so the policy never o 4. Loss, the proximate cause of which is an
attached. excepted risk
o Avoided due to fault of insured, with actual Fire insurance policies say that they do
fraud? not cover loss due to coup detat,
No return. rebellion, riots, etc.
Ex. Insured claimed he had a firewall, o 5. Loss where the insured is guilty of gross
but he really did not. negligence
Can there be return of the premium due to over SMC hired a shipping company to
insurance? transport thousand cases of beer. The
o Yes. The insured gets a ratable return of the SMC rep met the captain and told the
premium. latter that the boat should be moved to a
o Ex. a house worth 10M is insured for 10M with X, safer place since there is a typhoon
5M with Y, 5M with Z. Paid premiums: 10K to X, brewing. The captain ignored it and tied
5K to Y, 5K to Z. He is entitled to return of the barge to the wharf. During the
premium: 5K from X, 2.5K from Y, 2.5K from Z. typhoon the rope broke, the barge was
Agreement not to transfer the policy after loss has cut loose.
occurred is void, because at that time, the liability has Burden is on the insurer to prove that it is an excepted risk
accrued. It is a chose in action. o But for fire insurance, the burden is on the
insured to prove that it is not under an exempted
Loss, claims settlement, subrogation risk
o Ratio: because the thing is in possession of the
When will the occurrence of the peril insured against insured, so he can best give an explanation for
make the insurer liable? the loss
o 1. If it is the immediate cause.
How must notice to the insurer of loss be given?
Ex. Insured against fire. Faulty wiring
o 1. Notice must be given without unnecessary
exploded (proximate cause) and led to
delay
fire.
If reported an unreasonable time later
o 2. If it is the proximate cause of the immediate
ex. 6 months opportunity is gone
cause
Usually policies have a provision that
Ex. Insured against fire. Fire broke out
claims must be filed within a certain
and burned down a tree, which fell and
time. Beyond that, barred.
destroyed a house. Delay in presentation of a claim/proof of
o 3. If it is damaged in the process of rescuing the
loss is waived if the insurance company
insured against the peril insured against.
did not invoke that as a reason to deny
Ex. Saving insured furniture from a
the claim
house fire. When they were brought out,
o 2. When proof is required, insured is not required
they were stolen. Insurer is liable.
to give proof that stands in court
Ex. Fire broke out in neighbors house.
Noda: police report should be sufficient
To prevent the fire from spreading to the
Defects in the notice or substantiation
other house contained insured furniture,
thereof which the insurer didnt specify
the firemen pointed their hoses. The are waived, because the insured is
furniture was soaked and damaged
usually a layman
insurer is liable.
o 3. If the policy requires a certificate, and the
When is the insurer not liable even if there is loss? insured cannot produce it, it is enough to say that
o 1. The insurer is not liable for loss caused by he cannot produce it not because the document
connivance of insured is prejudicial but because he could not procure it
Ex. told someone to steal his car, sell I cannot submit the report not because
parts, and claim insurance the contents of the report are prejudicial,
o 2. Loss from unlawful act not liable but because the investigator is abroad
Ex. committed arson and cannot be found
o 3. Loss in which peril insured against is only a
remote cause
What is the rule on subrogation and release of Owner cannot recover more than 10M,
liability? the value of the house
o General rule: when the insurer pays the insured, If owner recovered 10M from X, X can
the insurer becomes subrogated to the rights of ask for 2.5M from Y and 2.5M from Z.
the insured and can run after the wrongdoer In the same way, depending on who the
o But the insurer will be discharged from its liability owner collects from, they have to
to the insured if the insured committed any act reimburse each other in the said
that would prevent the insurer from recovering proportions.
from the wrongdoer o In car insurance policies, there is a usual clause
In motor vehicle insurance, the insured that for over-insurance you can just collect
settled with the wrongdoer for P2500. proportionately. So two insurers covering a car
The insured still claimed from the worth P500K can only be liable for P250K each,
insurer, which paid. The insurer ran and nothing more.
after the wrongdoer, which raised the
defense that there was a settlement. Reinsurance
The insurer thus can recover from the
What is reinsurance?
insured because it paid by mistake.
o Insurer obtains another insurance to cover for
o What are the grounds when there is no
loss for liability due to the original insurance
subrogation?
o The reinsurer is a liability insurer
1. Insured by his own act releases the
o What is retrocession?
wrongdoer from liability
Subsequent layers after the first
2. Insurer mistakenly paid for an
reinsurance
excepted risk
3. Life insurance Two types:
o Treaty
4. Recovery of loss in excess of
o Facultative case by case
insurance coverage
Can a reinsurer intervene in the original action?
Double insurance o A reinsurer cannot intervene in the case of
insurer and insured because the reinsurer has his
Requisites: own interest anyway. So he has to wait until the
o 1. Insured must be the same original insurer sues the reinsurer to recover, if it
Ex. mortgagor mortgagee not the wants to raise defenses.
same Insurance is covered by the rule of uberrimae fides
o 2. Several insurers What is the nature of a contract of reinsurance?
If someone takes an insurance from o It is presumed to be against liability, not
Insurer X, then takes another after 6 damages. So even if the original insurer fails to
months, no double insurance pay, the reinsurer will be liable to pay.
o 3. Same subject matter Most of the time, there is a clause that says that the
Ex. factory and stocks in trade not the original reinsurance need not litigate with every reinsurer.
same If the original insurer paid, the reinsurers will pay too.
o 4. Same interest They will rise and fall with the fortunes of the original
Ex. Insured property with proceeds insurer.
payable to him, then mortgaged same Can the insured sue the reinsurer directly?
property with proceeds payable to the o No. There is no privity of contract between them.
mortgagee for his interest no double What is the exception?
insurance o The cut-through clause
o 5. Risk is the same Insured can go straight to the reinsurer
Ex. against fire, and then against o Ok in California, invalid in England
earthquake not the same
What is the consequence of double insurance? Marine insurance
o Usually there is a clause in insurance policies
that will release insurers from liability if there is What is an all-risk policy?
double insurance o All the insured has to prove is that the property
What is the consequence of over-insurance? was lost; no need to prove that it was due to
o The insurers can ask for reimbursement based fortuitous events.
on proportionate liability o The only defense the insurer can raise is that the
o Ex. A house worth 10M is insured for 10M with X, loss was due to misconduct of the insured.
5 M with Y, 5M with Z: What is its not an all-risk policy?
o It only covers perils of the sea. Rule on concealment is stricter, because the ship is
Perils of the sea: usually in the high seas so the insurer is at a disadvantage
o 1. Connected with navigation harder to inspect.
o 2. Unusual movement of the sea/winds What is the different rule as to concealment in marine
There must be a fortuitous event. A insurance?
normal typhoon is not a fortuitous event. o Usually, the cause of the loss need not be due to
It does not cover perils of the ship. What are these? the fact concealed. But for the following matters,
o If the ship is not sea worthy, or that the cause is concealment does not avoid the policy EXCEPT if
due to the poor condition of the ship. these were also the cause of the loss:
o Ex. if it springs a leak. 1. National character of the insured
What is barratry? 2. Liability of the thing to
o Insuring against the willful misconduct of the capture/detention
master or crew, not mere wrong judgment. 3. Liability to seizure due to breach of
o A ship captain cuts loose a barge. Was this foreign laws
barratry? 4. Want of necessary documents
Just an error of judgment. There has to 5. Use of false/simulated papers
be willful misconduct by the master or o Ex. Insured conceal that certain important
crew of the ship. So the insured cannot documents are missing. The vessel encountered
claim from the barratry clause. a perfect storm and sank. The insurer is still
When is arrest of the ship recoverable from? liable even if there was concealment, because
o Covers arrest of the ship by administrative or the fact concealed was not the cause of the loss.
executive order as settled in English What is the different rule as to belief of a third person
jurisprudence. But in Malayan our SC included as to marine insurance?
arrest by court order. o Marine insurance belief of a third person as
What is the insurable interest of the owner of a vessel regards what is material
that has been chartered? o Ex. surveyor saying that the ship is not seaworthy
o Only the amount which the charterer did not MUST BE DISCLOSED it is material
agree to cover, in case of loss. What is the rule on misrepresentation as to
o Ex. the ship is worth 10M. The charterer agreed expectation?
to pay 5M in case of loss. The insurable interest o If there is no fraud, misrepresentation as to
is 5M. expectation does not avoid the policy.
What is freight? o Ex. The insurer asks the owner when the vessel
o It is the expected profits of the owner of a ship will go out to sea, and the latter said April. The
which has been chartered to ship goods. These vessel only went to sea on June. The
expected profits (freight) can be insured. misrepresentation was not tainted with fraud and
o What is the insurable interest of the does not avoid the policy.
charterer?
To the extent that can be indemnified for Subject Ordinary Marine insurance
his loss. insurance
o O is the owner of a boat. C chartered it,
Concealment Can rescind even Five exceptional
agreeing to pay P500K if the vessel arrives
if concealed fact grounds apply
safely and C was able to solicit goods paying
was not cause of
freight of P600K. The vessel sinks. What
happens? loss
C need not pay O, because the ship did
Belief of a third Need not be Must be disclosed;
not arrive safely.
person disclosed; material
C can only collect 100K because that is
immaterial
the profit which was lost.
Insurer answers for general average Misrepresentation as Can rescind If there is no fraud,
o Those who were saved will contribute to the to expectation cannot rescind
general average
o Insurance policy will cover share in general Implied warranties N/A Four implied
average warranties
o DOES NOT cover particular average automatically
Ex. fruits became rotten due to nature of apply
the fruits
What is the presumption on knowledge of loss? Loss is either total or partial
o There is a presumption if the knowledge of the Total loss is either:
loss could have been received by the owner in o A. Actual total loss
usual rate of communication. Actual loss of the thing, renders it
What are the implied warranties? valueless
o 1. Sea worthy Examples of total loss:
May there be a waiver of warranty of 1. Total destruction
seaworthiness? o Ex. the ship burned
Yes. If there is a waiver, even 2. Loss by sinking or being
if the ship is not seaworthy, the broken up
insurer is still liable. o The ship sank or was
o 2. will not deviate broken up, making it
o 3. Will not engage in illegal ventures irretrievable
o 4. It will carry necessary papers if nationality was 3. Damage to thing rendering it
expressly warranted valueless for the purpose it was
When is a ship seaworthy? shipped
o If it can perform the services and encounter the o Ex. palay got wet and
peril of the voyage contemplated. became seedlings
o Warranty of seaworthiness extends from the hull o Ex. a race horse
also that it is properly laden, and the broke its legs, so it
complement of the vessel (master, etc.) is fit cannot race anymore
When must a ship be seaworthy? 4. Any other event depriving
o At the start of the voyage the owner of possession of the
o If there are different portions of the voyage, it thing at the port of destination
must be seaworthy in all such portions o Ex. Ship was ordered
o If it is an insurance of cargo taken by different seized
ships, all the ships must be seaworthy Is there need for abandonment for
o What if the ship becomes unseaworthy during actual total loss?
the voyage? No, the insurer become liable
There must be no delay in the repairs; upon actual total loss
else, the insurer is discharged. o B. Constructive total loss
What must the voyage route follow? Unique in marine insurance
o Usual maritime usage Abandonment is act of insured after
o If none, then the most natural, direct, and constructive total loss. He relinquishes
advantageous his share to the insurer
If damage is more than of value of
Deviation property insured, insured can declare
constructive total loss
Three types of deviation?
What if the ship cannot continue but the cargo is
o 1. Departure from course of the voyage
transferred, what is the effect?
o 2. Unreasonable delay in pursuing the voyage
o The marine policy on the cargo remains
o 3. Commencement of an entirely different voyage
o The insurer is liable for expenses for transfer,
When it is proper to make deviations?
discharge, storage, reshipment, and all other
o 1. Caused by circumstances which neither the
expenses to save the cargo
master or owner has control
o What if loss occurs?
Ex. when there is a typhoon
The insurer is liable for the general
o 2. Necessary to comply with a warranty or avoid
average\
a peril (whether insured against or not)
What are the requisites of abandonment?
Ex. when the engine gets busted
o 1. Actual relinquishment by the person insured of
o 3. Made in GF, upon reasonable belief to avoid a
his interest over the thing insured
peril
o 2. Constructive total loss
Ex. received of reports waiting in
o 3. Unconditional and not partial abandonment
ambush, thus deviated
o 4. Made within reasonable time from receipt of
o 4. Made in GF, to save human life or another ship
information of loss
Once the vessel deviates, even if it returns to the original
o 5. Must be factual
route, the insurer is exonerated.
Ex. So in a case where the shipment of
oranges was reportedly lost, but they
Loss
actually just ripened during the trip and Vessel X was worth 1M but was insured
were sold by the captain, there is no for only 800K. It was damaged to the
factual basis for abandonment extent of 200K. The insured can
o 6. Give notice to insurer whether orally or in recover 160,000 which is 1/5 of 800k
writing (since 200K is 1/5 of 1M)
o 7. Notice of abandonment must specify the What is the difference in what the insured can recover
particular cause if the profits are separately insured and if not?
What is the effect of abandonment? o Profits separately insured: Sugar being shipped is
o The insurer gets all the interest of the insured worth 100M and has expected profit of 120M.
over the vessel (ex. salvage, proceeds of the 50M worth of sugar was destroyed. Insured can
salvage, etc.) recover 60M as insurance for expected profit.
This same effect will result if the insurer (Because for every 5 M of sugar it earns
paid as if there was actual total loss as 6M sugar [100:120], so loss of 50M
if there had been abandonment worth of sugar is loss of 60M in profits)
o Acts done in good faith by the agents of the o Not separately insured: Sugar being shipped is
insured after abandonment is for the risk/benefit worth 100M and has expected profit of 120M.
of the insurer (ex. effort to repair the ship is for 50M worth of sugar was destroyed. Insured can
the risk/benefit of the insurer. So the insurer pays recover of 20M, which is 10M for expected
for it, and if the ship gets repaired, benefits.) profit.
Insurer is liable for those acts of insured in good faith Is a marine insurer liable for expenses attendant upon
o Ex. salvors fee, repairs in GF damage and subsequent repairs?
Acceptance: o Yes, the insurance is liable pursuant to sue and
o If abandonment is proper but insurer refuses labor expenses, because the insurer is
unjustly, it does not prejudice the insured presumed to be willing to incur these expenses to
o Acceptance of the abandonment can be express avoid loss.
or implied Is a marine insurer liable for contribution expenses
Mere silence of insurer after notice is not made by the insured for general average loss?
an acceptance o Yes.
o Acceptance is conclusive and cannot be revoked
[except if the ground is not factual, like the Fire insurance
oranges case]
o What if the insurer unjustly refuses to accept What are the requisites of alteration?
o 1. Change in the use or condition of a thing
the abandonment?
insured
The insured can sell the vessel and earn
o 2. Which is limited by the policy
scrap value. The insurer is liable for the
o 3. Without consent of insurer
balance.
o 4. Through means within control of insured
Upon accepted abandonment, who is entitled to the
o 5. Increasing the risk
earned freightage?
o Freightage earned before the loss to the insurer What is the consequence of alteration?
o The insurer can rescind the contract
of the freightage
o Freightage earned after the loss to the insurer Give an example of alteration that increases the risk.
of the ship o Conversion of a bookstore to a restaurant
Give an example which does not.
Measure of indemnity o Conversion of a residential condominium into an
office condominium.
What is the Co-insurance clause? What is a hostile fire and friendly fire?
o It applies by default only to marine insurance. It o Hostile fire fire that escapes and burns in a
has to be stipulated in fire or other insurance. place where it is not supposed to
o The prerequisites are: o Friendly fire fire that burns in a place where it is
1. Loss is partial supposed to burn
2. The property is insured for less than Friendly fire can convert into hostile fire
its total value o X is seeking to recover from the insurer for
o What is the effect? soot marks caused on the wall by a gas stove
The insurer is liable only for the burner. Can X recover?
difference between the amount of No. The marks were caused by friendly
insurance and the value of the property. fire.
o Huh? Give an example na lang. Does co-insurance apply to fire insurance?
o Not by law. But it is a standard clause placed by pay him. The insured recovers from the
companies. insurer.
What is the rule on valuation for fire insurance (if o What if the indemnity is against liability?
there is none provided in the policy)? The insured need not pay first before
o The valuation must reflect depreciation suffered proceeding against the insurer.
by the property before it was burned. Is the insurer liable even if the insured commits
o SMC had a building worth 100M, which criminal negligence?
burned. But instead of depreciating, the o Yes. This is still accidental. What is not covered
value of construction materials that year is intentional or deliberate criminal acts.
skyrocketed. So SMC is trying to recover A guy was showing off his gun. A friend asked if it
insurance based on those new prices. But was loaded, and he said no. To prove it, he pointed
the insurer claimed SMC thus was the gun at himself and pulled the trigger. There was a
underinsured in this case. SMC said that it bullet. He died. Can the heirs collect?
was not, based on the old prices. What o HELD: Yes, because it was accidental.
happens? o JJs viewpoint: No, because he was stupid.
SMC cannot use new valuation for the Sometimes, there is a clause where the insurer will defend
amount to be recovered, and old prices the case on behalf of the insured in court. In a case, the
to disclaim underinsurance. insured sued the insurer not because of the liability clause
What is the effect if the insurance gives the insurer (because the insured was not yet made liable) but
the option to rebuild the property instead of paying? because the insurer was negligent in defending the case.
o This is valid. The contract is novated and it
becomes a contract for a piece of work. Suretyship
o The insurer becomes liable for quality of the work
done. What is suretyship?
o Agreement where surety guarantees the
Casualty insurance performance by another of an undertaking or
obligation in favor of a third party.
If intentional injuries caused by the insured or a third Examples?
person are excepted, what does intentional mean? o Fidelity bond contract of insurance against loss
o Exercise of reasoning faculties, consciousness, from misconduct
and volition of the person. o Fidelity guaranty insurance for consideration,
o It is the intention of the person inflicting the injury one agrees to indemnify the assured against loss
that controls. arising from want of integrity, fidelity, or honesty
o Usual accident policy doesnt cover death or of persons holding positions of trust
injury caused by assault or murder. You have to What is the nature of a suretyship agreement?
pay extra to cover this. o Solidary agreement, but only to the extent of the
What does accident or accidental mean? contractual amount in the bond
o No technical meaning. Something that happens o The court/obligee is not concerned w/n the
by chance or fortuitously, without design or premium has been paid. It will go against the
intention. surety when the obligation is not paid or the
o Is this the same as no fault? insured absconds.
No. It just distinguishes itself from What if the bond is not accepted?
intentional. o The principal-applicant is entitled to return of the
What is the rule on third party liability? premiums paid.
o There can be a provision allowing a third party to o But not entitled to return of taxes paid (ex. DST)
directly sue the insurer. and other service fees, like what was spent to
But the insurer is not solidarily liable; review the application.
just directly liable. The liability of the o What is the exception?
insurer is contractual, not quasi- If there was fault of the insurance
delictual. The liability of the insurer is company, leading to denial of the
limited by the policy. application. Even the taxes paid shall
o If there is no such provision, the contracts are be returned.
separate, so the third person cannot sue the What is a continuing bond?
insurer. o One that will last until the end of the case. The
o What if the indemnity is against actual loss or company is entitled to charge premiums every
payment? year.
The third party cannot sue the insurer,
because it has to wait for the insured to Life insurance
Kinds: Third party excludes
o 1. Ordinary life, general life, or old line policy o Driver, etc.
nd
Insured pays a premium every year until o Relative by affinity/consanguinity within 2
he dies. Surrender value after 3 years. degree
o 2. Limited payment policy o Employee [see qualification]
Insured pays premium for limited period. What if a provision says that final judgment is needed
If he outlives the period, he does not get before liability attaches?
anything. o Its a void provision. If you have to wait until final
o 3. Endowment policy judgment, it will take a really long time.
Insured pays premium for specified What is the no fault clause?
period. If he outlives the period, the face o The injured third party or passenger can claim for
value of the policy is paid to him. If not, death or injury without necessity of proving fault
the beneficiaries receive the benefit. or negligence, under the ff conditions:
o 4. Term insurance o 1. Indemnity shall not exceed P15,000
Insured pays premium only once, and is N.B. this value can adjust please
insured for a specified period. If he check
outlives the period, no person benefits o 2. Ff proof of loss is sufficient to substantiate the
from the insurance. claim:
No cash surrender value. If theres death, death certificate
N.B. kind of like life insurance policies If theres injury, medical certificate
you take before flying commercial In all cases, police report
o 5. Industrial life o 3. Claim is against one motor vehicle only
Insured pays premiums weekly, or From whom must the insured claim against?
monthly, or oftener o If a passenger, mounting, or dismounting the
What is the effect of death of insured through vehicle, against the insurer of the vehicle he is
suicide? riding in
o The insurer is only liable if the insured committed o Else, against the insurer of the directly offending
suicide after the policy has been in force for a vehicle
period of two years from date of issue or last What is the right of the insurer paying under the no-
reinstatement, unless shorter period is provided fault clause?
o If the suicide was committed in a state of insanity, o It can directly claim against the owner of the
the insurer is liable too, regardless of date of offending vehicle
suicide What if the claim exceeds the amount awarded under
the no fault clause?
The business of insurance o If the claim exceeds 15,000, then the insured can
still claim it from the insurer, but he has to prove
Certificate of authority from the Commissioner lasts one
there was negligence or fault.
year
o The insurer cannot ask the insured to waive the
What is the margin of solvency for insurance
rest of the claim as a precondition to pay under
companies?
the no fault clause.
o For a domestic firm, the excess of its admitted
What are the important periods?
assets excluding paid-up capital, over the amount
o Claim from the insurer within 6 months from
of liabilities, unearned premiums, and
accident
reinsurance reserves
o Go to court within 1 year from denial of claim
o For a foreign firm, the excess of its admitted
Importance of a license:
assets in the Philippines excluding security
o If the one recovering is the driver himself, he can
deposits, over the amount of liabilities, unearned
recover damages even if his license is expired.
premiums, and reinsurance reserves
The authorized driver clause does not apply to
Agents and brokers:
the owner.
o Must be licensed
o If it is someone else, who is authorized, he must
Soliciting for compensation without
have a valid license
license criminally liable
o What if the car is unlawfully taken and driven
o Rebate of premiums is also prohibited.
by a person who is not authorized?
o Can agreements regarding kickbacks be
The theft clause applies, and not the
enforced?
authorized driver clause
No, they are illegal.
Ex. a repairman took the car out for a
Compulsory motor vehicle liability insurance joyride