"a a sg Oey ’ ' y, SUPPLEMENT to the REVIEWER ON COMMERCIAL LAW. 2013 Ed., by Jase Sundiang Sr. and Timoteo B. Aquino and ESSENTIALS ‘OF INSURANCE LAW, 2009 Ed., by Timoteo B. Aquino COMPARATIVE PRESENTATION OF NEW INSURANCE CODE PROVISIONS (RA 10607) and PROVISIONS OF THE INSURANCE CODE OF 1978 (PD 1460) By JOSE R SUNDIANG, SR. and TIMOTEO B, AQUING ~ -PD NEW PROVISIONS - RAJOLD PROVISIONS | 10607 1406 REPRESENTATION 7 THE SECOND S SECTIU. WAIVER Wis DELETED. Sec. 45. If a representation is false in a material point, whether affirmative or promissory. the injured party is entitled to rescind the contract from the time when the representation becomes false, [The right to rescind granted by this Code to the insurer is waived by the aceeptance of premium payments despite knowledge of the ground for rescission. (As amended by Batas Pambansa Big. 872.) SEC 45 Ifa representation is false ing maternal pomt, whether affirmative 01 promissory, the injured party is entitled to rescind the from the time when the ramon Ix contes false.’ ‘ i" ND THK PROVISION ALLOWING TYPRURITTEN, GROUP! INSURANCE was DELETED POLICY SECS) The policy shall be in Prited form which may contain Blank spaces and any word phrase clase aniek sign. symbol signature, number or wonl necessary to complete the conteact of mswrance xball be wntion on the blawk spaces movade | therein. clause warntnty or sit purporting ia be part of thy conteact ot insurances and which 1S pasted or attached (9 sand policy 18: fot Winding on the insured unless the descvaptise ute or name of the vrley clause, warranty er ondoreement is also mentioned and waiter an the blink spaces provided inthe pole Unless applet fre by the insured or owner any reter clause, warranty or endorsement ssued afler the original countersigned by the which pokey shall t anu " owner. countersigns his aemsemem to the contents of euch enter warranty or eadarsoment “Notwithstanding the foregoing, the policy way be in electronic form subject (6 the pertinent provisions of Republic Act No. 8792, otherwise known as (ho “Flectrome Commerce Act’ and (o sich rules and regulations ws may be prescribed by the Comnussioner shall be in contain Sec. 50. ‘The p printed form which may blank spaces: and any word, phrase, clause, mark, sign, symbol, signature number. or sword necessary to complete the contraet of insurance shall be written on the blank spaces provided therein Any nder lau warranty of endorsement purporting to be part of the contract of insurance and which is pasted or attached to said policy is hot binding on the insured, driless the descriptive utle or name of the rider, clause. warranty or endorsement is also mentioned and written of the blank spaces provided an the poliey Unless applied for by the insured or owner. any rider, clause, warranty or endorsement issued after the original policy shall be countersigned by the insured or owner, which counter signature shalt be taken as his agreement to the contents of such rider, clauses, warranty or endorsement . {Group insurance and group annuity policies, however, may be typewnitten and need not be in printed form]‘ ’ ' ta Mh ' ‘. ' Li KINDS OF POLICIES ass 3 OPEN POLICY ‘NOW| INCLUDES A STATEMENT. THAT THE AMOUNT OF INSURANCE MERELY 'RBSEATS THE MANIMUM Li. ANIL SEC. An open policy is one an whieh the value of the thing insured iw not agreed upon and the amount of the insurance merely represents the maurer's maximum liability. ‘The value of such thing insured shall be ascertained at the time of the loss. CANCELLATION OF POLICY 4 NEW GROUND TO CANCEL TH POLICY 4THER INSURANCE rH TOPAL INSURANCE, SOF THE VALUE OF NSURED fit No polo of insurance other thin fe shall be cancelled by the insure: except pon prior notice ther { to the insured, and no. notice of cuncellation shall be effective unless it is based on the occurrence, after the effective date of the policy, of one ur more of the following fa) Nonpayment of premium: “iy) Convichon of a erine arising out of acts increasing the hazard insured ae ste) Diseavery of fraud or material nusrepresentat ion “ul Tnscowery of willful or reckless at owissions increasing the fj insured against: Sec 60. An open policy is one in which the value of the thing insured is not agreed won, but. is left to be ascertained in ease of Joss. See. 64, No policy of insurance other than life shall be cancelled by the insurer except upon prior notice thereof ta the insured, and no notice of cancellation shall be effective unless it is based on the occurrence, after the effective date of the policy, of one or more of he following’ (a) nonpayment of prémium: (b) conviction of a crime arising ‘out of acts increasing the hazard insured against (cb discovery of fraud or material misrepresentation: (d) discovery of willful or reckless acte or omissions increasing) Physical changes in the prope insured which result in the property becoming uninsurable: “(0 Discovery of other insurance coverage that makes the total insurance in excess of the value of the property insured: or ig oA rminauon by Commussioner that the continuation of the policy would violate or would place the msurer 1 violation of this Code det the | PREMIUM % PREMIUM EXTENSIC is. Kow RECOGNI SALARY DEDUCTION FOR GOVERNMENT EMPLOYEES IS NOW ALSO ALLOWED. SEC ‘An insurer is entitled to payment of the premium as soon as the thing insured 1s exposed to the peal insured against Norgthstanding any agreement to the woatrary. no policy or contract of an insurance insurance issued by binding unless company is valid and fad until the premmum thereof has heen paid except in the ease of a life or an industrial Life policy whenever the grace period provision applies, oF whenever under the broker and neency agrecments with duly licensed intermediaries, @ ninety (G0)-day credit extension is given. No credit extension to a duly licensed intermediary should exceed ninety (G0) days from date of issuance of the pohey. Tithe hazard insured agai changes in the result in the rable: oF (e)_ physical property insured which property becoming unins! (9 a determination by the Commissioner that the continuation of the policy would violate oF would place the insurer 1 violation of this Code Sec. 77. An insurer is entitled to payment of the premium as soon 88 the thing insured is exposed to the peril insured against. Notwithstanding any agreement 10 the contrary, no policy or contract of jneurance issued by an insurance company is valid and binding unless thereof has and until the premium been paud, excep in the ease of a life or an industrial fife policy whenever the grace period provision applies EeI ‘ SEC. 78 Employees of the Republic of the Philippines, including its political subdivisions and instrumentalities, and government™ owned or “controlled corporations, may pay their insurance premiums and loan obligations through salary deduction. Provided, That the | treasurer, cashier, paymasler OF official of the entity employing the | government employee is authorized, notwithstanding the provisions of any existing law, rules and regulations to the contrary, to make deductions from the salary, wage or income of | the latter pursuant to the agreement |between the insurer and the i geverament employee and to remit such deductions to the insurer j concerned, and collect such reasonable fee for its services. bk BOL DISALLOWING PREMIUM SEC 82 A person insured is entitled to a return of tke premium when the contgact. —s—voidable, and subsequently annulled under the provisions of the Civil Code; or on account of the — fraud or misrepresentation of the meurer, oF of hes agent. of on account of facts, or the existence pf which the insured aean ignorant of without his fault: or when by any default of the insured other than aefual fraud, the insurer never incuered any liability under the policw RETURN OF ‘A person insured is not entitled to a return of premium if the policy is ADDITIONAL PARAGRAPTT| a_claim is (NO EQUIVALENT PROVISION OF "THE NEW SEC. 78) Sec. 81. A person insured is entitled to return of the premium when the contract is voidable, on account of fraud or misrepresentation of the insurer, or of his agent, or on account of facts, the -existence of which the insured was ignorant without his faylt; or when by any default of the insured other than actual fraud, the insufer never incurred any liability under the policy.“denied by reason of fraud. —— 5.02 FUTURE PREMIUMS SEC. 84 An insurer may contract and accept payments, in addition to regular premium, for the purpose of paying future premiums on ‘the policy or to increase the benefits thereof. DOUBLE INSURANCE 6 MO! D EEFECT OF DOUBLE, INSURANCE by double msurance: otherwise provides, order amount for which the insurers contracts. the 2: insured, insured claims is an unwalued policy, rece wed by hiny under any policy: PROVISION ON | | Sec 94 Where the insured is | SEC 9G Where the inswed in a overinsured by double insurance poles other than hfe is over insured fa) The insured, unless” *the “aT ‘ si (a) The insured. unless the paticy potiey otherwise provides, may claim _ claim | payment from the insurers in 8! pavment from the lasirerd 16 anch vars he may eelect, up to the te he may select, vp t0 the | amount for which the insurers te are ‘severally liable under their respective veverally Liable under theu* respect" | contracts: (b) Where the policy under (hb) Where the policy under which the | yyich the insured claims is @ valued ineuged chums is a valued policy; @”Y | policy, Uhe insured must Sco erodit um received by him under any other | 4. against the valuation for any sum Rolicr shall be deducted from the | reosived by him under any eet poey Tne policy without regard to| policy without regard to the aul ne Pa of the eubyect mattcr | Poive of the subject matter insured: () Where the poligy under fe) Where the-policy under which the | wich the insured claims is an . | Unvalued policy he must give credit. any sum received by him under any | ac against the full insurable value, paler shall be deducted against the | Yor any sum received by him under full insurable value, for any sum any policy’ (a) Where the insured receives any sum in excess of the valuation in (@) Where the insured receives any sum in-escess of the valuation in the | the case of valued policis i} . th | case of valued policies. oF of the | incurable value policies, or of the in_the case ofincurable value in the case of | uunvalued policies, he must hold such sum om trust for the insurers, according to their right of ihut ion among themselves, com vs) Bach insurer is bound, as leiween himself and the other insurers, to contribute ratably to the propertion to the amount for ashich he is liable under his contract MINORS: LIFE INSURANCE MODIFIED PR ENTATIVE OF MINORS ‘SEC 182. An insurance upon life may be made payable on the death of the person, or on his surviving a specified period, or otherwise contingently. on the continuance or cessation of fe ivery contract or pledge for the | payment of endowments or annuities shall be considered a life insurance contract for purposes of this Code In the absence of a judicial guardian, the father, or in the latter's absence or incapacity. the mother, of any minor, who is an insured or @ beneficiary under a contract of life, unvalued policies, he must hold such sum in trust for the insurers, according to their right of contribution among themselves: (c) Each insurer is bound, as between himself and the other insurers, to contribute ratably to the Joss in proportion to the amount for which he is liable under his: contract Sec. 180. An insurance upon hfe may be made payable on the death of .e person, or on his surviving # specified period, or otherwise contingently on the continuance or cessation of life Every contract or pledge for the payment of endowments or annuities shall be considered a life insurance ‘contract for purpose of this Code. In the absence of a judicial guardian, the father, or in the latter's absence or incapacity, the mather, or any minor, who is an insured or @ beneficiary under a contract of life health, or accident insurance, may exercise, in behalf of said minor, any ight. under the policy, without necessity of court authority ‘or the rrving of a bond, where the interest of the minor in the particular act involved does not exceed Five hundred thousand pesos (P500,000.00) or in euch reasonable amount as may be determined by the health or accident insurance, may exercise, in behalf of said minor, any right under the policy, without necessity of court authority or the giving of a bond, where the interest of the minor in the particular act involved does not exceed twenty thousand pesos. Such right may include, but shall not be limited to, obtaining a policy loan, surrendering Commissioner. _ fight _may | A’ " ' include, but shall not be limited 1, obtaining a policy loan, surrendering the policy. receiving the proceeds of the Policy, and giving the minor's consent to any transaction on the policy Im the absence or in case of the incapacity of the father or mother, | the grandparent, the eldest brother or sister at least eighteen (18) years of age, or any relative who has actual custody of the minor insured or beneficiary, shall act a8 a guardian without need of a court order or judicial appointment as such guardan, as long ab Buch person is not otherwise disqualified or | incapacitated. Payment made by the insurer pursuant to this section shall relieve such insurer of any bability under the contract |COMPULSORY MOTO? | VEHICLE LIABILITY | INSURANCE [3°NO FAULT INDEMD P15,900.00 SEC 391 Any chim for deth or injury to any passenger or third party pursuant to the provisions of thie chapter shall be paid with: at the necessity of proving faut or negligence of any kind? Pr vaded, “That for purposes of this sectin: “(a) The total indemnity in respect of any person shall not be les than Fifteen thousand pesos (P15,000.00): ‘The following proofs of los: when [pobnitiel under oath. shill be ! a t ' f> CY, receiving the proceed of the policy, and giving the sinor's consent ta any transaction oo the pabey Sec. 378. Any claim for death or injury to any pagsenger or third party pursuant to the provisions of this chapter shall be paid without the necessity of proving fault or negligence of any kind: J’rovided. ‘That for purposes of this section @ The total indemnity om respect of any person shall not exceed five thousand pesos: Gi) The following proofs of loas when submitted under oath, shall be — —___Lwhen ebm iieeerathe claim: ~(1) Police report of accident: and “(2 Death certificate and evidence eutficient to establish the proper paveo! or (i) Medical report and evidence of | iiectical or hospital disbursement in respect of which refund is claimed. to! Claim may be made against one motor vehicle only. In the case of an occupant of a vehicle, claim, shall lie against the insurer of the vehicle in jwhich the occupant is _ riding Tmvunting or diemounting from In any other casé, claim shall lie against | tne msurer of the directly offending j vehicle. In all cases, the right of the party paying the claim to recover agamst the owner of the vehicle responsible for the accident shall be maintained | | ' CLAIMS SETTLEMENT ni evidence to substantiate | sufficient evidence b eh) es jo substantiate the claim: (@) Police report of accidents and (b) Death certificate and evidence sufficient to establish the proper payee: OF () Medical report and evidence of medical or hospital disbursement in respect of which refund is claimed. (it) Claim may be made against one motor vehicle only, In the case of gn occupant of a vehicle, claim shall lie against the insurer of the vehicle in which the occupant is riding. jnounting or dismounting from In any other ease, claim shall he against the insurer of the directly offending vehicle. In all cases, the right af the party paying the claim to recover hgainst the owner of the vehicle responsible for the accident shall be maintained. {beaten [9 NEW PROVISION IMPOSING CRIMINAL LIABILITY = RE FRAUDULENT CLAIMS SEC, 251. It is unlawful to ta) Present or cause t be presented any fraudulent claim for the pavment of a loss under a contract of insuranos: and” “) Fraudulently prepare, make or scribe any writing with intent to Jresent ox use the same, or to allow it tu be presented in support of any such claim. Any person who vwlates this section shall be pumshed by a [rin not exceeding twice the ainount“Gisimed or imprigonment of two C2 | vears, o both. at the discretion of the 187 Microinsurance 4 cal product or service that meets the risk protection needs of the poor where “ta) The amount of contributions, premiums, fees or charges, computed on a daily basis, does not exceed nand a half percent (7.5%) of the | current daily minimum wage rate for | nonagricultural workers an Metro | I jpienl and | (b) The maximum sum of guaranteed | a benefits is not more than one thousand (1000) times of the current daily minimum wage rate for| |i workers in Metzo! Manila mutual benefit, association shall engage inthe business of micrginsurance unless it possesses all the > requirements as may be prescribed by the Commissioner. The Commission-r shall issue such rules and regulations governing | microinsurance : [FINANCIAL REPORTING FRAMEWORK SEC. 188. No insurance company or 1 | NEW PROVISION ~ HH companies regulated by | Commission. unless otherwise , squire by law. shoul comply with |gen _ the financial reporting frameworks adopted by the Commission for purposes of creating the statutory financial reporte and the annual statements to be submitted to the Commission = Financial reporting framework means a set of accounting: and reporting principles. standards interpretations and pronouncements what must be adopted in the preparation and submussion of the statutory financial statements aad reports required by the Commussion This financial reporting framework is fot the same as the financial reporting fran-work used to prepare the financial statements that the Securities and Exchange Commission may require. The main purpose of the statutory statements as to present important information about the level of risk and solvency situation of insurers. In prescribing — the applicabl> statutory financial reporting framework. the Commissioner shall take into account international standards concerning solvency and insurance company reporting as well as generally accepted actuarial —_principles concerning financial —_reporting promulgated ty the Actuarial Society of the Philippines. “The assets and — investments discussed in Sections 204 to 215 shall be accounted in accordance with this section. " “The valuaticn of reserves shall be accounted for in accordance with Title 5 of this Code. —- INSURERS@ INDIVIDUAL FROM THOSE INCLUDED IN THE ‘TERM INSURER. jthe term dasurer or insurance company shall include all partnerships, ssociations, cooperatives. or —_ corporations, including government owned or controlled corporations cr entities engaged as principals in the insurance business, excepting mutual benefit associations Unless the | eantext otherwise requires, the term: sional [shall also inelude prof lyeingurers defined in Section 288 | Domestic company shail include companies formed, organized oF [existing under the laws of the Philippines. Foreren company when used without imitation shall inelude companies formed. organized. or existing under any laws othor than those of the PEZippines ection 185 providing SEC. 190. For purposca of this Code, | Sec 184. For purposes of this |code, the term = “wsurer” OF “insurance company” shall include all | individuals, partnerships, associations, or corporations, including goyernmentowned OF controlled corporations oF entities, engaged as princt in. the insurance business, excepting mutual benefit associations Unless the context otherwise requu the terms | shall also include professional | reinsurers defined in section two hundred eighty. “Domestic compans”| shall include companies formed, | organized or existing under the laws of the Philippines. “Foreiga company | when used without limitation shall include companies formed, organized, | or existing under any Inws other than those of the Philippines. vals SEC. 194. Except as provided in Section 269, no" now domestic life or non-life insurance company shall, in a stock corporation, engage in business m the Philippines unless possessed of a paid-up capital equal to. at Ivast One billion pesos (P'1,000,000,000.00): /rovided, That a ‘4A NOTE: The ol for a definition of an insurance corporation was deleted 7 |GAPITALIZATION . | 13. NEW CAPITALIZATION a ~ REQUIREMEST x Sec 188. Except as provided in section 1wo hundred eighty-one, no domestic insurance company shall, in a stock corporation, engage in business in the Philippines unless possessed of a paid-up capital st equal to at least five million pesos' ropes 1 be ‘domestic insurance company already | Provided, That a domestic insurance doing business in the Philppines | company already doing business in i ital shall have a net worth by June 30, 2013 of Two hundred fifty million pesos (P250,000,000.00). Furthermore, said company must have by December 31, 2016, an additional Three hundred million pesos (P300,000,000.00) in net worth: by December 31, 2019, an additional | nineteen hundred seventy:nine and |Three hundred fifty million pesos five milion pesos by December (P350,000,000.00) in net worth; and | thirty-one, nineleen hundred eighty by December 31, 2022, an additional | Provided, further. thas the Secretary stock which is less than shall have a pad-up capital stock of at least three million pesos by December thirtyrone, nineteen hundred seventy-eight. four million pesos by December — thirty-one. | Four hundred million _ pesos | of Finance may. upon (P-400,000,000.00) in net worth. | recomme' ndation of the Insurance | Commissioner. increase such [-The Commissioner may, as a pre : ee nn ce ieee mie cas insurance company. In addition to the | Peauirement, 1S ae eA ay paid-up copital stock. require the | Cpditiens, 8 Te see od ‘stockholders to pay in cash to the amount which, in his opinion, woul) Sus, in propecia 40 ‘hens | reasonably assure the safety of the subscription interests a contributed | a of the policyholders and the surplus fund of not less than One | PUPTC hundred million pesos! The Commissioner may. as a pre’ | (P100,000,000.00), fle may also! Loensing requirement of a new require such company to submit to | insurance company, in addition to the him a business plan showing the | paid-up capital stock, require the company’s estimated receipts and | stockholders to pay in cash to the dlisbygsements, as well as the basis | company in proportion to their (herein, for the next succeeding | subscription interests a contributed three (2) years surplus fund of not less than one “It organized as a mutual company, | millon Pesos, jn the case of a life ie ae of auch ‘net woth, it’ most. | masrancs epapeny, O12 fess than ioe aallable total racerbena equity |O*t bundied. Somes pesos. 1 the Tree coubunt tebe deteriiingd by the | cate Ol. 89 inpuremcs, COMPAS, other eee ae Ceaiailision, iaboye. all| (02! Me. He cany also require such Seca “de, losseh reported: | Company to eubantt to birt a business penwes taxes, egal reserve, and | Pla? showing the — company's vnaaite of all sulstanding riaks, | Cumated receipls and disbursements, as well as the basis and the eontribured surplus fund | ))e meen) equal to the amounts required ‘ot therefor, for the next succeeding three years. stock corporations A stock insurance If organized as a mutual company doing business in the Hipp may, _subje in liew of such capital stock. |pertinent law and regulation which now of hereafter may be in force, alter ite orgamzation and transform itself into a mutual insurance company ~The Secretary of Finance may, upon recommendation of the ‘Commissioner, increase such minimum paid-up capital stock or ‘cash assets requirement under eveh terms and conditions as he may impose, to an amount which, in his opinion, would reasonably assure the safety of the wterests of the policyholders and the public. ‘The minimum paid-up capital and net worth requirement must remain unimpaired for the continuance of the license The Commissioner may require the adoption of the risk-based capital approach = and_—other internationally accepted forms of capital framework “For the purpose of this section, net worth shall consist of *G) Paid-up capital *(b) Retained earnings: *() Unimpaired surplus: and (4) Revaluation of assets as may be approved by the Commissioner. “The Commission may adopt for purposes of compliance with eapital build up requirement under this Code the recognition as part of the gapital ‘account, capita] noles or debentures which are subordinate to all credits and senior only to common capital stocks “The President cf the Philippines may order a periodic review every » (2) years the capital structure ect it must have available ‘cash assets of at least five milhon pres above all Yiabilities for bosses reported, expenses, LAXeS, legal reinsurance of all outstanding risks, and the contributed surplus fund equal to the amounts red of tions. A stoc! company doing business Philippines may. subject to the pertinent law and regulations which now are of hereafter: may be in force, alter its orgamzationand transform tel into. a mutual insurange company. (as amended by Presidential Decree No. 1455) in. ‘ 1 ' . tt to determine the capital out adequacy of the local insurance industry from and after the integration and liberalization of the financial services, including insurance, in the ASEAN Region, For this purpose. a review committee consisting of representatives from the Department of Finance (DOF). the Insurance Commission (C), the Economie and Development y (NEDA? the Securities and Exchange Commussion (SEC) and other agencies which the President may designate shall conduct the review and may recommend to the President to adopt for implementation the necessary capital adjustment. }ANCASSURANCE 14 BANCASSURANCE IS NOW ALLOWED Bancassurance means “the presentation and sale to bank | customers by an insurance company | of its insurance products within the | premises of the head office of such | bank duly licensed by the Bangko Sentral ng Pilipinas or any of its) branches under such rules _and| regulations which the Commissioner | and the Bangko Sentral ng Pilipinas may promulgate. (See. 375) ee NO EQUIVALENT PROVISION | TRUSTFUNCTION - 7 INSURANCE COMPANIES CAN| ENGAGE IN| LIMITED TRUST, BUSINESS | SEC, 429. An insurance company may engage in limited trust business, consisting of _ managing _ funds NO SIMILAR PROVISIONoe ey pertai only to retirement and precneed plans, provided it has Preured a Hicense (0 do 20 from the Bangko Sentral ng Pilipinas. This trust business shall be separate @! fhatinet from the general business of the insurance company and shall be subject to rules and regulations a8 tay be promulgated by the Bangko Sentral ng Pilipinas in consultation with the Commissioner, SELF-REGULATORY ORGANIZATIONS 16 RE ORGANIZATIONS —— ARE NOW RECOGNIZED AND REGULATED | UNDER SECTION 430 TO SEC 436 SEC 430, The Commissioner shall have the power to register as a self regulatory organization, OF otherwise Tee licenacs, apd to regulate, supervise, examine, suspend or discontinue, as a condition for the operation of organizations Thogg operations are related 0 or connected with the insurance market such as, but not limited to, sesoeiations of insurance companies, whether life or non'life, reinsurers, actuanes, agents, brokers, dealers, futual benefit, associations, trusts, rating agencies, and other persons regulated by the Commissioner, which are engaged in the business | regulated by this Code. CL NOTES:soy ’ ' i Republic Act No. 10607 likewise made the following changes: a. The number of the provisions from Section 1 to Section 77 are retaine’ ‘The rest of the provision of the Insurance Coste are renumbere |e re'numbering was the result of additional provisions tha intruduced by RA 10607 b. The financial requirements imposed on msurance companies are strengthened, ‘Thus, in addivion to the new _eapitaliaaion requirements. for instance changes were made on the investmen! See, 204, ete. of the new law and Section 198 of old law? and on solvency: “END: