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15462015 RHYS MURILLO Insurance Reviewer Ateneo Law School

15462015 RHYS MURILLO Insurance Reviewer Ateneo Law School

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Insurance Reviewer Ateneo Law School
Insurance Reviewer Ateneo Law School

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INSURANCE REVIEWERAtty. Quimsonpage 1
Most of the content of this reviewer was taken from the Reviewer of Johnbee Sioson (3-B,1994) edited to include new jurisprudence and subject matter discussed in class.
THE INSURANCE CODE OF 1976
(Presidential Decree No. 1460)
GENERAL PROVISIONS
Section 1
. This decree shall be known as the “Insurance Code of 1978”
What is the principle behind insurance?
Insurance is based upon the principle of aiding another from a loss caused by an unfortunate event.
How old is the concept of insurance?
Very old. Benevolent societies organized for the purpose of extending aid to their unfortunate membersfrom a fund contributed by all, have been in existence from the earliest times. They existed among theEgyptians, the Chinese, the Hindus, the Romans, and are known to have been established among the Greeksas early as, believe it or not, 3 B.C.
How did insurance develop in the Philippines?Pre-Spanish Era
- there was no insurance; every loss was borne by the person or the family whosuffered the misfortune.
Spanish era
– Insurance, in its present concept, was introduced in the Philippines when Lloyd’s of London appointed Strachman, Murray & Co., Inc. as its representative here.
1898
– Life insurance was introduced in this country with the entry of Sun Life Assurance of Canada inthe local insurance market.
1906 –
First domestic non-life insurance company, the Yek Tong Lin Insurance Company, was organized
1910 –
First domestic life insurance company, the Insular Life Assurance Co., Ltd., was organized
1939 –
Union Insurance Society of Canton appointed Russel & Surgis as its agent in Manila. The businesstransacted the Philippines was then limited to
non-life insurance.
1936 –
Social insurance was established with the enactment of Commonwealth Act no. 186 whichcreated the Government Service Insurance System (GSIS) which started operations in 1937. The Act coversgov’t employees.
1949
– Government agency was formed to handle insurance affairs, where the Insular Treasurer wasappointed commissioner ex-officio.
1950
– Reinsurance was introduced by the Reinsurance Company of the Orient when it wrote treaties forboth life and non life.
1951
– First workmen’s compensation pool was organized as the Royal Group Incorporated.
1954
– RA 1161 was enacted which provided for the organization of the Social Security System (SSS)covering employees of the private sector.At present, there are 130 insurance companies registered with the Office of the Insurance Commissioner.Of these, 2 are composite insurance companies (engaged in both life and non-life insurance), 23 are lifeinsurance companies, 101 are non-life insurance companies and 4 are reinsurance companies.
How did insurance laws develop in the Philippines?
During the
Spanish Period
, the laws on insurance were found in Title VII of Book II and Section III of TitleIII of Book III of the Spanish Code of Commerce; and in Chapters II and IV of Tile XII of Book IV of the SpanishCivil Code of 1889 (
whew!)
During the
American Regime
, on Dec. 11, 1914, the Phil Legislature enacted the Insurance Act (Act2427). This Act which took effect on July 1, 1915 repealed the provisions of the Spanish Code of Commerceon Insurance.When the Civil Code of the Philippines (RA 386) took effect on August 30, 1950, the provisions of theSpanish Civil Code of 1889 were likewise repealed. For quite a long time, the Insurance Act was thegoverning law on insurance in the Philippines.On Dec. 18, 1974, PD 612 was promulgated, ordaining and instituting the Insurance Code of thePhilippines, thereby repealing Act 2427. PD’s 63, 123 and 317 were issued, amending PD 612. Finally PD1460 which took effect on June 11, 1976 consolidated all insurance laws into a single code and this is whatwe know now as the Insurance Code of 1978.3D SY 2004-2005rhys alexei
 
INSURANCE REVIEWERAtty. Quimsonpage 2
What are the present laws that govern insurance
(
also known as the laws we have to know for exams)
? The laws we have to know are, of course, PD 1460, and Articles 2011-2012, 2021-2027 and 2166 of theNew Civil Code.
What do these Civil Code Provisions say?Art. 2011.
The contract of insurance is governed by special laws. Matters not expressly provided for insuch special laws shall be regulated by this Code.
Art. 2012.
Any person who is forbidden from receiving any donation under Art. 739 cannot be namedbeneficiary of a life insurance policy by a person who cannot make any donation to him, according to saidarticle.
Art. 2021
. The aleatory contract of life annuity binds the debtor to pay an annual pension or incomeduring the life of one or more determinate persons in consideration of a capital consisting of money or otherproperty, whose ownership is transferred to him at once with the burden of income.
Art. 2022
. The annuity may be constituted upon the life of the person who gives the capital, upon thatof a third person, or upon the lives of various persons, all of whom must be living at the time the annuity isestablished.It may also be constituted in favor of the person or persons upon whose life or lives the contract isentered into, or in favor of another or other persons.
Art. 2023.
Life annuity shall be void if constituted upon the life of a person who was already dead at thetime the contract was entered into, or who was at the that time suffering from an illness which caused hisdeath within twenty days following said date.
Art. 2024
. The lack of payment of the income due does not authorize the recipient of the life annuity todemand the reimbursement of the capital or to retake possession of the property alienated, unless there is astipulation to the contrary; he shall have only a right judicially to claim the payment of the income in arrearsand to require a security for the future income, unless there is a stipulation to the contrary.
Art. 2025
. The income corresponding to the year in which the person enjoying it dies shall be pain inproportion to the days during which he lived; if the income should be paid by installments in advance, thewhole amount of the installment which began to run during his life shall be paid.
Art. 2026
. He who constitutes an annuity by gratuitous title upon his property, may provide at the timethe annuity is established that the same shall not be subject to execution or attachment on account of theobligations of the recipient of the annuity. If the annuity was constituted in fraud of creditors, the latter mayask for execution or attachment of the property.
Art. 2027
. No annuity shall be claimed without first proving the existence of the person upon whose lifethe annuity is constituted.
What is so important about the Civil Code Provisions?
Atty. Quimson never fails to ask about
Art. 2012
.
Are there special laws that govern insurance?
 Yes, but Atty. Quimson did not tell us to look them up. However, for reference they are:1.Revised GSIS Act of 1977 (PD 1146, as amended)2.Social Security Act of 1954 ( RA 1161, (as amended)3.The Property Insurance Law ( RA 656, as amended by PD 245)4.Republic Act No. 48985.EO 250; and6.RA 3591
How do we construe the provisions of the Insurance Code (IC)?
Since our present IC is based mainly on the Insurance Act, which in turn was taken verbatim from the lawof California (except for Chap V, which was taken from the law of NY), the courts should follow in3D SY 2004-2005rhys alexei
 
INSURANCE REVIEWERAtty. Quimsonpage 3fundamental points, at least, the construction placed by California Courts on California law (and theconstruction placed by the NY Courts on NY law). This is in accordance with the well settled rule in statutory construction that when a statute has beenadopted from some other state or country, and said statute has previously been construed by the courts of such state or country, the statute is usually deemed to have been adopted with the construction so given.
Cases:(1) Constantino v. Asia Life87 PHIL 248Facts:
Appeal consolidates two cases.
Asia life insurance Company (ALIC) was incorporated in Delaware.
For the sum of 175.04 as annual premium duly paid to ALIC, it issued Policy No. 93912 whereby it insuredthe life of Arcadio Constantino for 20 years for P3T with Paz Constantino as beneficiary.
o
First premium covered the period up to Sept. 26, 1942. No further premiums were paid after thefirst premium and Arcadio died on Sept. 22, 1944.
Due to Jap occupation, ALIC closed its branch office in Manila from Jan. 2 1942-1945.
On Aug. 1, 1938, ALIC issued Policy no. 78145 covering the lives of Spouses Tomas Ruiz and AgustinaPeralta for the sum of P3T for 20 years. The annual premium stipulated was regularly paid from Aug. 1,1938 up to and including Sept. 30, 1940.
o
Effective Aug. 1, 1941, the mode of payment was changed from annually to quarterly and suchquarterly premiums were paid until Nov. 18, 1941.
o
Last payment covered the period until Jan. 31, 1942.
o
 Tomas Ruiz died on Feb. 16, 1945 with Agustina Peralta as his beneficiary.
Due to Jap occupation, it became impossible and illegal for the insured to deal with ALIC. Aside from thisthe insured borrowed from the policy P234.00 such that the cash surrender value of the policy wassufficient to maintain the policy in force only up to Sept. 7, 1942.
Both policies contained this provision:
 All premiums are due in advance and any unpunctuality in makingsuch payment shall cause this policy to lapse unless and except as kept in force by the grace periodcondition.
Paz Constantino and Agustina Peralta claim as beneficiaries, that they are entitled to receive theproceeds of the policies less all sums due for premiums in arrears. They also allege that non-payment of the premiums were caused by the closing of ALIC’s offices during the war and the impossiblecircumstances by the war, therefore, they should be excused and the policies should not be forfeited.
Lower court ruled in favor of ALIC.
Issue:
May a beneficiary in a life insurance policy recover the amount thereof although the insured diedafter repeatedly failing to pay the stipulated premiums, such failure being caused by war?
Held: NO.
Due to the express terms of the policy, non-payment of the premium produces its avoidance. In Glaragav. Sun Life, it was held that a life policy was avoided because the premium had not been paid within the timefixed; since by its express terms, non-payment of any premium when due or within the 31
 
day grace periodipso fact caused the policy to lapse.When the life insurance policy provides that non-payment of premiums will cause its forfeiture, war doesNOT excuse non-payment and does not avoid forfeiture. Essentially, the reason why punctual payments areimportant is that the insurer calculates on the basis of the prompt payments. Otherwise, malulugi sila.It should be noted that the parties contracted not only as to peace time conditions but also as to war-time conditions since the policies contained provisions applicable expressly to wartime days. The logicalinference therefore is that the parties contemplated the uninterrupted operation of the contract even if armed conflict should ensue.
(2) Insular Life v. Ebrado80 SCRA 181
3D SY 2004-2005rhys alexei

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