Chapter II CLASSES OF INSURANCE

TitIe I MARINE INSURANCE

Sub-TitIe 1- A DEFINITION
Sec. 99. Marine Insurance incIudes:
1) Insurance against Ioss of or damage to:

(a) VesseIs, craft, aircraft, vehicIes, goods, freights, cargoes, merchandise, effects,
disbursements, profits, moneys, securities, choses in action, evidences of debts,
vaIuabIe papers, bottomry, and respondentia interests and aII other kinds of property
and interests therein, in respect to, appertaining to or in connection with any and aII
risks or periIs of navigation, transit or transportation, or whiIe being assembIed,
packed, crated, baIed, compressed or simiIarIy prepared for shipment or whiIe
awaiting shipment, or during any deIays, storage, transhipment, or reshipment
incident thereto, incIuding war risks, marine buiIder's risks, and aII personaI property
fIoater risks;
(b) Person or property in connection with or appertaining to a marine, inIand marine,
transit or transportation insurance, incIuding IiabiIity for Ioss of or damage arising
out of or in connection with the construction, repair, operation, maintenance or use
of the subject matter of such insurance (but not incIuding Iife insurance or surety
bonds nor insurance against Ioss by reason of bodiIy injury to any person arising
out of ownership, maintenance, or use of automobiIes);
(c) Precious stones, jeweIs, jeweIry, precious metaIs, whether in course of
transportation or otherwise;
(d) Bridges, tunneIs and other instrumentaIities of transportation and communication
(excIuding buiIdings, their furniture and furnishings, fixed contents and suppIies
heId in storage); piers, wharves, docks and sIips, and other aids to navigation and
transportation, incIuding dry docks and marine raiIways, dams and appurtenant
faciIities for the controI of waterways.

"Marine protection and indemnity insurance," - insurance against, or against IegaI
IiabiIity of the insured for Ioss, damage, or expense incident to ownership, operation,
chartering, maintenance, use, repair, or construction of any vesseI, craft or
instrumentaIity in use of ocean or inIand waterways, incIuding IiabiIity of the insured
for personaI injury, iIIness or death or for Ioss of or damage to the property of
another person.

Transportation nsurance concerned with perils of property incidental to or in transit BUT
not include normal motor vehicle insurance which is separately treated by law.

Major Divisions:
1. Ocean marine insurance oldest written; deals with primarily with the insurance
of sea perils
a. Risk connected with navigation, to w/c ship, cargo freightage, profts or
other insurable interest in movable property, may be exposed during a
certain voyage or a fixed period of time
b. SCOPE
i. Ships/hulls
ii. Goods/cargoes
iii. Earnings freight, passage money, commissions or profits
iv. Liability incurred by the owner or any party interested in or
responsible for the insured property by reason of marine
perils
c. All risks or losses may be insured EXCEPT repugnant to public policy
are positively prohibited
i. General marine insurance w/c does not state the risks
assured is valid and covers the usual marine risks
ii. "all other perils extends only to marine damage of like kind
to those enumerated
1. freight perils insured agaitns shall not prevent
the ship from earning full freight for the insured on
that voyage
a. NOT take that the goods shall be
delivered in a sound or merchantable
state or that the vessel shall be safe
from the dangers of the sea
2. Vessel engages only for the ability of the vessel
to perform her voyage and to bear damage w/c the
vessel may sustain in making the voyage
3. Time not contain an engagement that a voyage
undertaken by the insured w/n the prescribed
period shall be performed before the expiration of
the policy
a. ONLY that the ship is capable of
performing the oyage undertaken
notwithstanding any loss or injury w/c
may occur to her
4. r may except liability from certain causes
iii. GR: goods are presued to be shipped under deck, or below
the weather deck of the vessel.
O f on deck, they are not covered by the policy UNLESS
as special notice of stowage is given to the underwriter
and accepts the enhanced risk
4 Deck not designed to carry goods but to
make the holds watertight and to protect
cargo laden in the holds
4 Subject to weather and sea damage and the
hazard of being washed overboard
4 No legal right to load good on deck and if
they do, such goods are at the shipowner's
risk UNLESS w/ the consent of the cargo
owner
4 Underwriters cant be expected w/o special
notice to assume risk n such goods and will
be released from the contract if th r's subject
is so loaded
EXCEPT some goods are required
to be on deck so that they will not
endanger the other cargo; so they
can be easily thrown overboard
d. PERLS of SEA (finals)
O ncludes only those casualties due to unusual violence or extraordinary
action of wind and wave, or other extraordinary causes connected to
navigation.
O Embrances all kinds of marine casualty
4 shipwreck, foundering, stranding, collision, and every specia of
damage done to the ship or goods at sea by violent action of
winds and waves
4 losses by jettisoning cargo to save vessel rendered unworthy
during a voyage and not fault of captain
4 barratry willful misconduct by the master or crew pursuance of
some unlawful or fraudulent purpose w/o consent of the owners
and to prejudice interest; criminally gross
O NOT covered
4 Losses from ordinary wear and tear ir damage incidental to
voyage mear fac that it is due to the violence of some marine
force does not bring it to the protection of the policy if is is not
UNUSUAL or UNEXPECTED.
ncluded carrying away of mast or loss of anchor due to
storm
O t is a relative term and the meaning may vary depending on circumstances
ex. P 323
O nsurer is liable inly if the perils of the sea is the proximate cause of the loss
O Ex. P 324

e. PERLS of SHP loss in the ordinary course of events
1. Natural and inevitable action of the sea
2. Ordinary wear and tear of the ship
3. Negligent failure of the ship's owner to provide the vessel with proper
equipment to convey cargo under ordinary conditions
a. GR: everything w/c happens through the inherent vice of the
thing, or by the act of the owner, master, shipper shall not be
reputed a peril if not otherwise borne by the policy
i. Owner of damaged cargo must look to the
shiowner for redress and not to the insurer



2. nland Marine nsurance land or over the land transportation perils of
property shipped by railroads, motor trucks, airplanes, and other means of
transportation
a. Lake,river and other inland waterway transportationand other
waterborne perils outside those risks that fall definitely w/n the ocean
marine category
b. Nationwide Definition
i. Property insurance on goods in transit by railroad, express,
mail, motor tuck, aircraft and partly by water
1. Protection against the water transit peril is
SOMETMES included under inland marine
policies along with protection against the other
contingencies
ii. Property insurane om goods of certain specified times even
though not in the course of transportation
1. Ex. Jewelry floater covering "all risk; goods in the
hands of a dry cleaner
iii. " on fixed property bridges, tunnels; piers, dry docks and
marine railways and aids to communication radio and TV
commercial equipment
c. " on a few means of transportation small boats, railroad cars, and the
like; vessels by the ocean marine departments, airplanes by aviaton
insurers, and motor vehicles by automobile insurers
d. liability insurance to protect transportation carriers, warehousemen,
processors, and other bailees from the consequences of legal
responsibility for property customers while in their custody
f. Class of inland marine insurance
a. Property in transit frequently exposed to loss while it is in
transportation from one location to another
b. Bailee liability protection for persons who have temporary custody of
the good or personal property of others, sych as carriers, laundry men,
warehousemen, and garage keepers
c. Fixed transpo property bridges tunnels et al. held essential part of
transpo system???
d. Floater provides insurance to follow the insuredproperty wherever it
may be located, subject always to territorial limits f the contract
jewelry, furs, works of art
i. Have been issued fro property that is seldom moved
O May be in the form of property/liability insurance

All Risk Marine nsurance Policy insures against all causes of conceivable loss or
damage EXECPT as other wise excluded in the policy or due to fraud or intentional
misconduct on the part of d
O Covers all losses during the voyage whether arising from a marine peril or not
including pilferage losses during the war,
O Avoids putting uon the insured the burden of establishing that the loss was due to peril
falling w/n the policy's coverage.
O GR: the insurance company has the burden of proving that the loss is caused by the
risk excluded and for want of such proof, the company is liable



Sub-TitIe 1-B
INSURABLE INTEREST
Sec. 100. The owner of a ship has in aII cases an insurabIe interest in it, even when it
has been chartered by one who covenants to pay him its vaIue in case of
Ioss: Provided, That in this case the insurer shaII be IiabIe for onIy that part of the
Ioss which the insured cannot recover from the charterer.
Sec. 101. The insurabIe interest of the owner of the ship hypothecated by bottomry is
onIy the excess of its vaIue over the amount secured by bottomry.
Sec. 102. Freightage, in the sense of a poIicy of marine insurance, signifies aII the
benefits derived by the owner, either from the chartering of the ship or its
empIoyment for the carriage of his own goods or those of others.
Sec. 103. The owner of a ship has an insurabIe interest in expected freightage which
according to the ordinary and probabIe course of things he wouId have earned but
for the intervention of a periI insured against or other periI incident to the voyage.
Sec. 104. The interest mentioned in the Iast section exists, in case of a charter party,
when the ship has broken ground on the chartered voyage. If a price is to be paid for
the carriage of goods it exists when they are actuaIIy on board, or there is some
contract for putting them on board, and both ship and goods are ready for the
specified voyage.
Sec. 105. One who has an interest in the thing from which profits are expected to
proceed has an insurabIe interest in the profits.
Sec. 106. The charterer of a ship has an insurabIe interest in it, to the extent that he
is IiabIe to be damnified by its Ioss.
Sub-TitIe 1-C CONCEALMENT
Sec. 107. In marine insurance each party is bound to communicate, in addition to
what is required by section twenty-eight, aII the information which he possesses,
materiaI to the risk, except such as is mentioned in Section thirty, and to state the
exact and whoIe truth in reIation to aII matters that he represents, or upon inquiry
discIoses or assumes to discIose.
Sec. 108. In marine insurance, information of the beIief or expectation of a third
person, in reference to a materiaI fact, is materiaI.
Sec. 109. A person insured by a contract of marine insurance is presumed to have
knowIedge, at the time of insuring, of a prior Ioss, if the information might possibIy
have reached him in the usuaI mode of transmission and at the usuaI rate of
communication.
Sec. 110. A conceaIment in a marine insurance, in respect to any of the foIIowing
matters, does not vitiate the entire contract, but mereIy exonerates the insurer from a
Ioss resuIting from the risk conceaIed:
(a) The nationaI character of the insured; (b) The IiabiIity of the thing insured to
capture and detention; (c) The IiabiIity to seizure from breach of foreign
Iaws of trade; (d) The want of necessary documents; (e) The use of faIse
and simuIated papers.
Sub-TitIe 1-D
REPRESENTATION
Sec. 111. If a representation by a person insured by a contract of marine insurance,
is intentionaIIy faIse in any materiaI respect, or in respect of any fact on which the
character and nature of the risk depends, the insurer may rescind the entire contract.
Sec. 112. The eventuaI faIsity of a representation as to expectation does not, in the
absence of fraud, avoid a contract of marine insurance.
Sub-TitIe 1-E IMPLIED WARRANTIES
Sec. 113. In every marine insurance upon a ship or freight, or freightage, or upon any
thing which is the subject of marine insurance, a warranty is impIied that the ship is
seaworthy.
Sec. 114. A ship is seaworthy when reasonabIy fit to perform the service and to
encounter the ordinary periIs of the voyage contempIated by the parties to the
poIicy.
Sec. 115. An impIied warranty of seaworthiness is compIied with if the ship be
seaworthy at the time of the of commencement of the risk, except in the foIIowing
cases:
(a) When the insurance is made for a specified Iength of time, the impIied warranty
is not compIied with unIess the ship be seaworthy at the commencement of
every voyage it undertakes during that time; (b) When the insurance is
upon the cargo which, by the terms of the poIicy, description of the voyage,
or estabIished custom of the trade, is to be transhipped at an intermediate
port, the impIied warranty is not compIied with unIess each vesseI upon
which the cargo is shipped, or transhipped, be seaworthy at the
commencement of each particuIar voyage.
Sec. 116. A warranty of seaworthiness extends not onIy to the condition of the
structure of the ship itseIf, but requires that it be properIy Iaden, and provided with a
competent master, a sufficient number of competent officers and seamen, and the
requisite appurtenances and equipment, such as baIIasts, cabIes and anchors,
cordage and saiIs, food, water, fueI and Iights, and other necessary or proper stores
and impIements for the voyage.
Sec. 117. Where different portions of the voyage contempIated by a poIicy differ in
respect to the things requisite to make the ship seaworthy therefor, a warranty of
seaworthiness is compIied with if, at the commencement of each portion, the ship is
seaworthy with reference to that portion.
Sec. 118. When the ship becomes unseaworthy during the voyage to which an
insurance reIates, an unreasonabIe deIay in repairing the defect exonerates the
insurer on ship or shipowner's interest from IiabiIity from any Ioss arising therefrom.
Sec. 119. A ship which is seaworthy for the purpose of an insurance upon the ship
may, nevertheIess, by reason of being unfitted to receive the cargo, be unseaworthy
for the purpose of the insurance upon the cargo.
Sec. 120. Where the nationaIity or neutraIity of a ship or cargo is expressIy
warranted, it is impIied that the ship wiII carry the requisite documents to show such
nationaIity or neutraIity and that it wiII not carry any documents which cast
reasonabIe suspicion thereon.
Sub-TitIe 1-F THE VOYAGE AND DEVIATION
Sec. 121. When the voyage contempIated by a marine insurance poIicy is described
by the pIaces of beginning and ending, the voyage insured in one which conforms to
the course of saiIing fixed by mercantiIe usage between those pIaces.
Sec. 122. If the course of saiIing is not fixed by mercantiIe usage, the voyage insured
by a marine insurance poIicy is that way between the pIaces specified, which to a
master of ordinary skiII and discretion, wouId mean the most naturaI, direct and
advantageous.
Sec. 123. Deviation is a departure from the course of the voyage insured, mentioned
in the Iast two sections, or an unreasonabIe deIay in pursuing the voyage or the
commencement of an entireIy different voyage.
Sec. 124. A deviation is proper:
(a) When caused by circumstances over which neither the master nor the owner
of the ship has any controI; (b) When necessary to compIy with a warranty,
or to avoid a periI, whether or not the periI is insured against; (c) When
made in good faith, and upon reasonabIe grounds of beIief in its necessity
to avoid a periI; or (d) When made in good faith, for the purpose of saving
human Iife or reIieving another vesseI in distress.
Sec. 125. Every deviation not specified in the Iast section is improper.
Sec. 126. An insurer is not IiabIe for any Ioss happening to the thing insured
subsequent to an improper deviation.
Sub-TitIe 1-G LOSS
Sec. 127. A Ioss may be either totaI or partiaI.
Sec. 128. Every Ioss which is not totaI is partiaI.
Sec. 129. A totaI Ioss may be either actuaI or constructive.
Sec. 130. An actuaI totaI Ioss is cause by:
(a) A totaI destruction of the thing insured; (b) The irretrievabIe Ioss of the thing
by sinking, or by being broken up; (c) Any damage to the thing which
renders it vaIueIess to the owner for the purpose for which he heId it; or
(d) Any other event which effectiveIy deprives the owner of the
possession, at the port of destination, of the thing insured.
Sec. 131. A constructive totaI Ioss is one which gives to a person insured a right to
abandon, under Section one hundred thirty-nine.
Sec. 132. An actuaI Ioss may be presumed from the continued absence of a ship
without being heard of. The Iength of time which is sufficient to raise this
presumption depends on the circumstances of the case.
Sec. 133. When a ship is prevented, at an intermediate port, from compIeting the
voyage, by the periIs insured against, the IiabiIity of a marine insurer on the cargo
continues after they are thus reshipped. Nothing in this section shaII prevent an
insurer from requiring an additionaI premium if the hazard be increased by this
extension of IiabiIity.
Sec. 134. In addition to the IiabiIity mentioned in the Iast section, a marine insurer is
bound for damages, expenses of discharging, storage, reshipment, extra freightage,
and aII other expenses incurred in saving cargo reshipped pursuant to the Iast
section, up to the amount insured. Nothing in this or in the preceding section shaII
render a marine insurer IiabIe for any amount in excess of the insured vaIue or, if
there be none, of the insurabIe vaIue.
Sec. 135. Upon an actuaI totaI Ioss, a person insured is entitIed to payment without
notice of abandonment.
Sec. 136. Where it has been agreed that an insurance upon a particuIar thing, or
cIass of things, shaII be free from particuIar average, a marine insurer is not IiabIe for
any particuIar average Ioss not depriving the insured of the possession, at the port
of destination, of the whoIe of such thing, or cIass of things, even though it becomes
entireIy worthIess; but such insurer is IiabIe for his proportion of aII generaI average
Ioss assessed upon the thing insured.
Sec. 137. An insurance confined in terms to an actuaI Ioss does not cover a
constructive totaI Ioss, but covers any Ioss, which necessariIy resuIts in depriving
the insured of the possession, at the port of destination, of the entire thing insured.
Sub-TitIe 1-H ABANDONMENT
Sec. 138. Abandonment, in marine insurance, is the act of the insured by which, after
a constructive totaI Ioss, he decIares the reIinquishment to the insurer of his interest
in the thing insured.
Sec. 139. A person insured by a contract of marine insurance may abandon the thing
insured, or any particuIar portion thereof separateIy vaIued by the poIicy, or
otherwise separateIy insured, and recover for a totaI Ioss thereof, when the cause of
the Ioss is a periI insured against:
(a) If more than three-fourths thereof in vaIue is actuaIIy Iost, or wouId have to be
expended to recover it from the periI; (b) If it is injured to such an extent as
to reduce its vaIue more than three-fourths; (c) If the thing insured is a
ship, and the contempIated voyage cannot be IawfuIIy performed without
incurring either an expense to the insured of more than three-fourths the
vaIue of the thing abandoned or a risk which a prudent man wouId not take
under the circumstances; or (d) If the thing insured, being cargo or
freightage, and the voyage cannot be performed, nor another ship procured
by the master, within a reasonabIe time and with reasonabIe diIigence, to
forward the cargo, without incurring the Iike expense or risk mentioned in
the preceding sub-paragraph. But freightage cannot in any case be
abandoned unIess the ship is aIso abandoned.
Sec. 140. An abandonment must be neither partiaI nor conditionaI.
Sec. 141. An abandonment must be made within a reasonabIe time after receipt of
reIiabIe information of the Ioss, but where the information is of a doubtfuI character,
the insured is entitIed to a reasonabIe time to make inquiry.
Sec. 142. Where the information upon which an abandonment has been made proves
incorrect, or the thing insured was so far restored when the abandonment was made
that there was then in fact no totaI Ioss, the abandonment becomes ineffectuaI.
Sec. 143. Abandonment is made by giving notice thereof to the insurer, which may
be done oraIIy, or in writing; Provided, That if the notice be done oraIIy, a written
notice of such abandonment shaII be submitted within seven days from such oraI
notice.
Sec. 144. A notice of abandonment must be expIicit, and must specify the particuIar
cause of the abandonment, but need state onIy enough to show that there is
probabIe cause therefor, and need not be accompanied with proof of interest or of
Ioss.
Sec. 145. An abandonment can be sustained onIy upon the cause specified in the
notice thereof.
Sec. 146. An abandonment is equivaIent to a transfer by the insured of his interest to
the insurer, with aII the chances of recovery and indemnity.
Sec. 147. If a marine insurer pays for a Ioss as if it were an actuaI totaI Ioss, he is
entitIed to whatever may remain of the thing insured, or its proceeds or saIvage, as if
there had been a formaI abandonment.
Sec. 148. Upon an abandonment, acts done in good faith by those who were agents
of the insured in respect to the thing insured, subsequent to the Ioss, are at the risk
of the insurer and for his benefit.
Sec. 149. Where notice of abandonment is properIy given, the rights of the insured
are not prejudiced by the fact that the insurer refuses to accept the abandonment.
Sec. 150. The acceptance of an abandonment may be either express or impIied from
the conduct of the insurer. The mere siIence of the insurer for an unreasonabIe
Iength of time after notice shaII be construed as an acceptance.
Sec. 151. The acceptance of an abandonment, whether express or impIied, is
concIusive upon the parties, and admits the Ioss and the sufficiency of the
abandonment.
Sec. 152. An abandonment once made and accepted is irrevocabIe, unIess the
ground upon which it was made proves to be unfounded.
Sec. 153. On an accepted abandonment of a ship, freightage earned previous to the
Ioss beIongs to the insurer of said freightage; but freightage subsequentIy earned
beIongs to the insurer of the ship.
Sec. 154. If an insurer refuses to accept a vaIid abandonment, he is IiabIe as upon
actuaI totaI Ioss, deducting from the amount any proceeds of the thing insured which
may have come to the hands of the insured.
Sec. 155. If a person insured omits to abandon, he may nevertheIess recover his
actuaI Ioss.
Sub-TitIe 1-I MEASURE OF INDEMNITY
Sec. 156. A vaIuation in a poIicy of marine insurance in concIusive between the
parties thereto in the adjustment of either a partiaI or totaI Ioss, if the insured has
some interest at risk, and there is no fraud on his part; except that when a thing has
been hypothecated by bottomry or respondentia, before its insurance, and without
the knowIedge of the person actuaIIy procuring the insurance, he may show the reaI
vaIue. But a vaIuation frauduIent in fact, entitIes the insurer to rescind the contract.
Sec. 157. A marine insurer is IiabIe upon a partiaI Ioss, onIy for such proportion of
the amount insured by him as the Ioss bears to the vaIue of the whoIe interest of the
insured in the property insured.
Sec. 158. Where profits are separateIy insured in a contract of marine insurance, the
insured is entitIed to recover, in case of Ioss, a proportion of such profits equivaIent
to the proportion which the vaIue of the property Iost bears to the vaIue of the whoIe.
Sec. 159. In case of a vaIued poIicy of marine insurance on freightage or cargo, if a
part onIy of the subject is exposed to the risk, the evaIuation appIies onIy in
proportion to such part.
Sec. 160. When profits are vaIued and insured by a contract of marine insurance, a
Ioss of them is concIusiveIy presumed from a Ioss of the property out of which they
are expected to arise, and the vaIuation fixes their amount.
Sec. 161. In estimating a Ioss under an open poIicy of marine insurance the foIIowing
ruIes are to be observed:
(a) The vaIue of a ship is its vaIue at the beginning of the risk, incIuding aII articIes
or charges which add to its permanent vaIue or which are necessary to
prepare it for the voyage insured; (b) The vaIue of the cargo is its actuaI
cost to the insured, when Iaden on board, or where the cost cannot be
ascertained, its market vaIue at the time and pIace of Iading, adding the
charges incurred in purchasing and pIacing it on board, but without
reference to any Ioss incurred in raising money for its purchase, or to any
drawback on its exportation, or to the fIuctuation of the market at the port
of destination, or to expenses incurred on the way or on arrivaI; (c) The
vaIue of freightage is the gross freightage, excIusive of primage, without
reference to the cost of earning it; and (d) The cost of insurance is in each
case to be added to the vaIue thus estimated.
Sec. 162. If cargo insured against partiaI Ioss arrives at the port of destination in a
damaged condition, the Ioss of the insured is deemed to be the same proportion of
the vaIue which the market price at that port, of the thing so damaged, bears to the
market price it wouId have brought if sound.
Sec. 163. A marine insurer is IiabIe for aII the expenses attendant upon a Ioss which
forces the ship into port to be repaired; and where it is stipuIated in the poIicy that
the insured shaII Iabor for the recovery of the property, the insurer is IiabIe for the
expense incurred thereby, such expense, in either case, being in addition to a totaI
Ioss, if that afterwards occurs.
Sec. 164. A marine insurer is IiabIe for a Ioss faIIing upon the insured, through a
contribution in respect to the thing insured, required to be made by him towards a
generaI average Ioss caIIed for by a periI insured against; provided, that the IiabiIity
of the insurer shaII be Iimited to the proportion of contribution attaching to his poIicy
vaIue where this is Iess than the contributing vaIue of the thing insured.
Sec. 165. When a person insured by a contract of marine insurance has a demand
against others for contribution, he may cIaim the whoIe Ioss from the insurer,
subrogating him to his own right to contribution. But no such cIaim can be made
upon the insurer after the separation of the interests IiabIe to the contribution, nor
when the insured, having the right and opportunity to enforce the contribution from
others, has negIected or waived the exercise of that right.
Sec. 166. In the case of a partiaI Ioss of ship or its equipment, the oId materiaIs are to
be appIied towards payment for the new. UnIess otherwise stipuIated in the poIicy, a
marine insurer is IiabIe for onIy two-thirds of the remaining cost of repairs after such
deduction, except that anchors must be paid in fuII.
TitIe 2 FIRE INSURANCE
Sec. 167. "fire insurance" - insurance against Ioss by fire, Iightning, windstorm,
tornado or earthquake and other aIIied risks, when such risks are covered by
extension to fire insurance poIicies or under separate poIicies.
O Fire insurance contract of indemnity by w/c insurer for a stipulated premium
agrees to indemnify the insured against loss of, or damage to, a property caused
by HOSTLE FRE
O Fire and extended coverage protect loss by lightning, windstorm, etc but only
when such risks are covered by extension to fire insurance policies or under
separate policies
4 Additional premiums
4 May ve attached by endorsements
O Nature Essentially a contract of indemnity
O Fire spontaneous combustion; rapid oxidation to produce a flame or glow
4 Always caused by combustion but combustion does not always
produce fire
4 Not considered as a natural disaster or calamity since it is almost
always arises form some actof man.
4 Spontaneous internal development w/o the action of an external
agent
4 Presence of heat, steam or even smoke- evidence of fire but not prove
existence
O Risk or losses covered the scope and coverage of a fire insurance policy and
the intention of the parties, as indicated by their contract controls
4 Extended coverage bringing certain additional risks, or all other risk
not excluded w/n the coverage of the policy.
May extend to coverage to indirect or consequential losses
O ndirect Loss Coverage
4 Standard fire contract agreement to repay the insured for DRECT
LOSS
4 The attachment of a consequential loss form to the standard fire policy
extends the coverage to such consequential loss
Special coverage insurance is known as loss of profits
insurance or business interruption insurane
4 Kinds of ndirect Loss
Physical damage caused to other property which is not
usually covered by the basic insurance policy
O Ex.spoilage, loss of valuable documents
Loss of earnings due to the interruption of business by
damage to insured's property
Extra expense or additional expenditure or charges incurred
bu the insured following damage or destruction of buildings
or contents by an insured peril ex.temporary home or
expense of demolition
O Where the hazard is fire alone and the subject is an unfinished vessel, never
afloat for a voyage, the contract to insure is a fire risk, especially the absence of
an express agreement that it shall have the incidents of marine policy or where it
insures matrials in a shipyard for use in constructing vessels
4 Same policy insures against fire, a vessel while moored and in use
as a hospital
O Distinction
Marine Fire
Rules on constructive toall loss and
abandonment
not apply
Partial loss of a thing insured for less
than its actual value, the d is a co-
insurer of the uninsured portion
Coinsurer only if expressly agreed by
the partues

Sec. 168. An aIteration in the use or condition of a thing insured from that to which it
is Iimited by the poIicy made without the consent of the insurer, by means within the
controI of the insured, and increasing the risks, entitIes an insurer to rescind a
contract of fire insurance.
Sec. 169. An aIteration in the use or condition of a thing insured from that to which it
is Iimited by the poIicy, which does not increase the risk, does not affect a contract
of fire insurance.
nsurer may rescind contract of fire insurance when:
1. Use or condition of the thing is specifically limited or stipulated in the policy
2. Such use or condition is altered
a. ncrease risk the contract of insurance rests is changed and therefore
there can be NO recovery
b. Still liable if the increase in hazard was no longer existing at the time of
loss unless there is a breach of warranty that no hazardous goods
should be stored or kept in the property insured.
c. NOT avoid if
i. No increase in risk
1. Different use in property w/c is not of a dangerous
character
2. Doesn't differ materially from the use specified in
the policy eventhough additional premiums are
demanded,
ii. Questioned articles required by insured's business. Ex,
benzine
iii. ds property would be useless if questioned acts were
prohibited
3. Alteration is made w/o consent of the insurer
4. " made by means w/n the control of insured
a. not relieved from liability caused by accident or cause over which d
has no control
b. presumption of knowledge d on acts of tenants substantially and
permanently affecting conditions of property soa s to constitute
increase in risk
5. " increases the risk
a. implied promise or undertaking on the part of the insured that he will
not change the premises or character of the business carried there, so
as to increase the risk of loss by fire insurance policies
b. increase of hazard insured property is put to some new use and the
new use increases the chance of loss
c. there must be an actual increase of risk which is substantial in
character BUT not necessary that the increased risk should have
caused or contributed to the loss
p. 399 75 and 169?
Sec. 170. A contract of fire insurance is not affected by any act of the insured
subsequent to the execution of the poIicy, which does not vioIate its provisions,
even though it increases the risk and is the cause of the Ioss.
Sec. 171. If there is no vaIuation in the poIicy, the measure of indemnity in an
insurance against fire is the expense it wouId be to the insured at the time of the
commencement of the fire to repIace the thing Iost or injured in the condition in
which at the time of the injury; but if there is a vaIuation in a poIicy of fire insurance,
the effect shaII be the same as in a poIicy of marine insurance.
Sec. 172. Whenever the insured desires to have a vaIuation named in his poIicy,
insuring any buiIding or structure against fire, he may require such buiIding or
structure to be examined by an independent appraiser and the vaIue of the insured's
interest therein may then be fixed as between the insurer and the insured. The cost
of such examination shaII be paid for by the insured. A cIause shaII be inserted in
such poIicy stating substantiaIIy that the vaIue of the insured's interest in such
buiIding or structure has been thus fixed. In the absence of any change increasing
the risk without the consent of the insurer or of fraud on the part of the insured, then
in case of a totaI Ioss under such poIicy, the whoIe amount so insured upon the
insured's interest in such buiIding or structure, as stated in the poIicy upon which
the insurers have received a premium, shaII be paid, and in case of a partiaI Ioss the
fuII amount of the partiaI Ioss shaII be so paid, and in case there are two or more
poIicies covering the insured's interest therein, each poIicy shaII contribute pro rata
to the payment of such whoIe or partiaI Ioss. But in no case shaII the insurer be
required to pay more than the amount thus stated in such poIicy. This section shaII
not prevent the parties from stipuIating in such poIicies concerning the repairing,
rebuiIding or repIacing of buiIdings or structures whoIIy or partiaIIy damaged or
destroyed.
OPEN POLCY
O in the absence of express valuation in a fire insurance policy, the insured is only
entitled to recover the amount of actual loss sustained
4 burden on the insured to establish the amount of such loss y
preponderance of evidence
O liability of the of r shall nor exceed what it wou;d cost to repair or replace the
thing insured w/ matrial kind and quality with proper deduction for depreciation
considering the age or condition of the thing before the oss
O personal property market value of such will be applied to determine actual loss

VALUED POLCY
O value conclusive between the parties in the adjustment of either atrial or total loss
of the insured had an insurable interest and was not guilty of fraud
O valuation of buildings and structure insured shall be fixed
4 total loss insured to recover full amount so insured as stated in the
policy; exist if fire reners property wholly unfit for use as building
4 partial loss full amount of partial loss written in the policy
O pro rata payment of loss if insured under 2+ policies.
Co-insurance Clause requires the insured to maintain insurance to an amount equal to
the value or specified percentage of the value of the insured property under the penaltyof
becoming co-insurer of such deficiency
O divides potential risk between the insured and the insurer in case of partial loss
or destruction?? P. 404

Option to Rebuild Clause option to reinstate or replace the property damaged instead of
paying the amount of loss or damage
O should be exercised w/n time stipulated in the policy or w/n reasonable time
O choice should be communicated to the insured or it will have no effect
O r after electing to rebuild, can be compelled to perform his undertaking even
costs exceed the original amount of insurance
Sec. 173. No poIicy of fire insurance shaII be pIedged, hypothecated, or transferred
to any person, firm or company who acts as agent for or otherwise represents the
issuing company, and any such pIedge, hypothecation, or transfer hereafter made
shaII be void and of no effect insofar as it may affect other creditors of the insured.
O Consent of or notice to insurer NOT required after the loss has occurred to
pledge, hypothecate,or transfer a fire insurance policy or rights thereunder
4 GR: the assignee acquires no greater rights against the under than had
the one to whom the policy was issued
O Prohibiition against the transfer of a policy to any person or company who acts as
agent or otherwise represents the insurer
4 VOD pledge etc. and no effect as it may affect other creditors of the
insured.

CASUALTY INSURANCE

S174. CasuaIty Insurance
O insurance covering Ioss or IiabiIity arising from accident or mishap
O excIuding certain types of Ioss w/c by Iaw or custom are considered as
faIIing excIusiveIy w/n the scope of other types of insurance such as fire or
marine
O incIudes but not Iimited to:
4 empIoyer's IiabiIity insurance
4 workmen's compensation
4 pubIic IiabiIity
4 motor vehicIe
4 pIate gIass
4 burgIary and theft
4 personaI accident and heaIth insurance as written by non-Iife
insurance companies and other simiIar

Risk or Losses covered
1. CasuaIty = accident - might be presumed to incIude any Ioss or damage
when an accident is the cause of the Ioss
a. ExcIudes Iosses arising from accident w/c are w/n the coverage of
the other types of insurance mentoned
2. BurgIary, robbery & theft insurance - great moraI hazard w/ many
restrictions to reduce the hazard
a. ExcIuded usuaIIy are those in the ID's service and empIoyment -
to guard against IiabiIity shouId the theft be committed by one
having unrestricted access to the property
b. EXCEPT compuIsory motor vehicIe insurance, there are no other
provisions appIicabIe to casuaIty insurance or to robbery
insurance in particuIar
c. Governed by generaI provisions on aII types of insurance
d. The rights and obIigations of the parties must be determined by
the terms of their contract, taking into consideration its purpose
and aIways in accordance w/ the generaI purpose of insurance

2 GeneraI Divisions
1. Insurance against specified periIs w/c may affect the person and/or
property of the insured
a. PersonaI accident, robbery/theft, damage/Ioss of motor vehivIes,
insoIvency, defaIcation of empIoyees
2. " w/c may give rise to IiabiIity on the part of the insured for cIaims for
injuries to others or damage to their property
a. workmen's compensation, motor vehicIe IiabiIity, professionaI,
products

LiabiIity Insurance - contract of indemnity for the benefit of the insured and those in
privity w/ him, or those to whom the Iaw upon the grounds of pubIic poIicy extends
the indemnity against IiabiIity
O indemnity is provided to the ID w/ respect of his IegaI IiabiIity to pay
damages, usuaIIy arising out of negIigence or nuisance and occasionaIIy,
under contract

LiabiIity Insurance
1. for quasi-deIict or non-fuIfiIIment of contract - financiaI responsibiIity that
one party has to another party as a consequence of doing or faiIing to do
something
a. may invoIve negIigence or breach
b. a civiI injury
2. CriminaI negIigence - arising out of negIigence w/c are aIso criminaI; on
the ground that such acts are accidentaI
a. DeIiberate criminaI acts are NOT insurabIe; however, if he does
nto pay damages, the injured 3p can recover against the insurer

InsurabIe interest in IiabiIity insurance - GR: it must be supported by an insurabIe
interest in the insured, aIthough there is some authority to the contrary
O Found in the interest the ID has in the safety of persons who may maintain,
or in the freedom from damage of property w/c may becomes the basis of
suits against him in case of their injury or destruction
O Depend upon whether he may be charged by Iaw w/ the IiabiIity against
which insurance is taken out
O Assuming one quaIifies as an Id, it is aIways supported by an insurabIe
interest

LiabiIity Insurance ActuaI Ioss/strict indemnity
O LiabiIity attaches regardIess of
actuaI Ioss at that time
O Operative as soon as the
IiabiIity of the person
indemnified arrises irrespective
of W/N he suffered actuaI Ioss
O 3p IiabiIity- IR assumes
obIigation of paying injured 3p
to whom the ID is IiabIe>
4 from the moment the
ID becomes IiabIe to
3p, the ID acquired an
interest on the
insurance contract
w/c may be garnished
Iike any other credit
O Action does not Iie untiI an
actuaI Ioss is sustained by the
injured
O 3p cannot proceed againt the
IR, the contract being soIeIy to
reimburse the ID for IiabiIity
actuaIIy discharged by him
through payment to 3p
O prior payment by the insured is
necessary in order that the
obIigation of the insurer may
arise
4 3p to whom the ID is
IiabIe can sue directIy
the IR upon the
occurrence of the
injury or event upon
w/c the IiabiIity
depends -protect
against insoIvency of
the ID


Basis and extent of IR's IiabiIity
O direct IiabiIity of the IR under indemnity contract against 3p doesn't mean
that the IR can be soIidariIy IiabIe w/ the ID but based on contract; the of
the ID is based on tort.
O 3p IiabiIity f the insurer is onIy up to the extent of the insurance
O Any award beyond the insurance overage wouId aIready be the soIe IiabiIity
of the ID and/or the other parties at fauIt.
O Right of insurer to be subrogated to the rights of the ID against the 3p
responsibIe for the IR's IiabiIity under the poIicy therefore, the IR has the
right to
O be reimbursed by his co-soIidary debtors for the share w/c corresponds to
each


ACCIDENT & HEALTH INSURANCE
1. Purpose
a. Accident - reimburses the ID for pecuniary Ioss suffered as a
resuIt of injuries sustained in an accident.
b. HeaIth - reimburses the ID for pecuniary Ioss arising out of
disease-reIated iIIness
i. Both- " for medicaI and hospitaI expenses; and/or
sometimes earnings as a resuIt of incapacity
2. Often combined in the same poIicy w/c protects the insured from Ioss from
either kind of disabiIity
a. Accident- suppIements Iife insurance
b. If death cause by accident- "doubIe indemnity" or 2x the amount
of the poIicy's face vaIue
c. "Major MadicaI" - expanded coverage for catastrophic medicaI
expenses
3. The ID's beneficiary has the burden of proof in demonstrating that the
cause of death is due to the covered periI.
a. The burden shifts to the IR once estabIished, to show any
excepted periI that may be stipuIated
4. Accident/accidentaI - have not acquired technicaI meaning and construed
by the courts in ordinary and common acception
a. Defn - happens by chance or fortuitousIy w/o intention or design.
And w/c is unexpected, unusuaI or unforeseen
b. Accident
i. event that takes pIace w/o one's foresight or
expectation; proceeds from an unknown cause or is an
unusuaI effect of a known cause and therefore not
expected
ii. W/O human agency or if through human agency an
event w/c under the circumstances is unusuaI to and not
expected by the person to whom it happens
iii. Not excIude w/o quaIifications events resuIting in
damage or Ioss die to the fauIt, reckIessness or
negIigence of 3p - not necessariIy synonymous w/ the
concept of "no fauIt"

GR: death or injury w/c does not resuIt from accident or accidentaI means w/n the
terms of an accident poIicy if it is the naturaI resuIt of the ID's voIuntary act,
unaccompanied by anything unforeseen except the death/injury

EX:
O Where the death or injury is not the naturaI or probabIe resuIt of the
insured's voIuntary act, or if something unforeseen occurs in the doing of
the act w/c produces the injury, the resIting death is w/n the protection of
poIicies insuring against death or injury from accident

Suicide and WiIIfuI exposure to needIess periI
O VoIuntary exposure to voIuntary danger - negate the accidentaI character
of whatever foIIowed from the known danger
4 Tightrope w/o safety device, Russian rouIIete
4 the mere act of the insured of pointing the gun to his tempIe
beIieving it was not Ioaded and fired it and resuIted to his death
was heId to be an accident - when there is nothing in the poIicy
that reIieved the insurer to pay the indemnity if the insured is
shown to have contributed to his own accident

IntentionaI - excepts ntentionaI injuries infIicted by the insured or any other person
impIies the exercise of reasoning facuIties, consciousness or voIition
O if poIicy excIudes intentionaI injury - intention of the person infIicting
injury that is controIIing
O ex. P 417-418

No Action CIause
O poIicy requires that suit and finaI judgement be first obtained against the ID
O expressIy disaIIows suing th einusrer as a co-defendant of the ID in a suit
to determine the Iatter's IiabiIity to the 3p
O BUT cannot prevaiI over ROC on joinder of causes of action atIeast w/
respect to 3p not a party to the contract by a "no action cIause"

SURETYSHIP

Sec. 175. A contract of suretyship - an agreement whereby a party caIIed the surety
guarantees the performance by another party caIIed the principaI or obIigor of an
obIigation or undertaking in favor of a third party caIIed the obIigee. It incIudes
officiaI recognizances, stipuIations, bonds or undertakings issued by any company
by virtue of and under the provisions of Act No. 536, as amended by Act No. 2206.
Suretyship - one undertakes to answer under specified terms an conditions, for the
debt, defauIt or miscarriage of another (principaI/obIigor), such as faiIure to perform
a contract ir certain duties, or for breach of trust, negIigence and the Iike, in favor of
a 3p.
Co-suretyship - 2+ parties become co-sureties in a singIe bond.
UnIimited - each co-surety assumes soIidary IiabIe and Iimited when their obIigation
is joint

?? Act 536
??Corporate Suretyship

Sec. 176. The IiabiIity of the surety or sureties shaII be joint and severaI with the
obIigor and shaII be Iimited to the amount of the bond. It is determined strictIy by the
terms of the contract of suretyship in reIation to the principaI contract between the
obIigor and the obIigee. (As amended by PresidentiaI Decree No. 1455).
Nature of IiabiIity of Surety
1. Surety Bond - evidence of the contract of surety; a promiseto guarantee
the debt/obIigation of the obIigor
2. The IiabiIity if surety/ies under a boind is soIidary - upon defauIt of the
principaI, the surety becomes primariIy IiabIe to the obIige who has a right
to demand payment under the terms and conditions of the bond
3. Limited to the amount of the bond
4. ContractuaI - Determined strictIy by the terms of the (a) contract of
suretyship in reIation to (b) principaI contract bet OR & OE
a. A coIIateraI contract - basis is the principaI contract or
undertaking w/c it secures
b. Any misrepresentation made by the bond appIicant cannot
therefore, defeat the rights of the OE
c. Indemnity Agreement - The OR executes a 3
rd
contract in faor og
the surety
SURETYSHIP PROPERTY INSURANCE
1. Accessory contract -
dependent on the existence of
a principaI contract
2. There are aIways 3 parties -
obIigor, obIigee, surety
3. More of a credit accomodation
w/ the surety assuming primary
IiabiIity
4. Surety is entitIed to
reimbursement from the
principaI and his guarantors for
Ioss it may suffer under the
contract
5. Bond can onIy be canceIIed by
or with the consent of the
obIigee or by the
Commissioner or by a court of
1. PrincipaI contract in itseIf
2. 2 parties - IR and ID
3. Contract of Indemnity
4. No right of recovery for the
Ioss the insurer may sustain
except when the insurer is
entitIed to subrogation.
However, the 3p against whom
the insurer may proceed is not
a party to a contract
5. May be canceIIed unitaraIIy
either by the IR or by the ID on
grounds provided by Iaw
6. Does not need acceptance of
3p
7. #isk-distributing device -
premium considered a ratabIe
competent jurisdiction
6. Requires acceptance of the
obIigee before it becomes vaIid
and enforceabIe
7. #isk-shifting device - premium
paid is in the nature of a
service fee
contribution to a common fund

SURETYSHIP GUARANTY
1. surety assumes IiabiIity as a
reguIar party to the
undertaking
2. surety is primariIy IiabIe
3. surety is not entitIed to the
benefit of exhaustion of the
debtor's assets
4. surety undertakes to pay if the
principaI DOES NOT PAY
1. guarantor depends upon an
independent agreement to pay
if the primary debtor faiIs to do
so
2. " secondariIy IiabIe
3. "has the rifht to have aII the
property of the debtor and IegaI
remedies against the debtor
first exhausted before he can
be compeIIed to pay the
creditor
4. " binds himseIf to pay of the
principaI DOES NOT PAY.


Sec. 177. The surety is entitIed to payment of the premium as soon as the contract of
suretyship or bond is perfected and deIivered to the obIigor.
No contract of suretyship or bonding shaII be vaIid and binding unIess and untiI the
premium therefor has been paid, except where the obIigee has accepted the bond, in
which case the bond becomes vaIid and enforceabIe irrespective of whether or not
the premium has been paid by the obIigor to the surety
Provided, That if the contract of suretyship or bond is not accepted by, or fiIed with
the obIigee, the surety shaII coIIect onIy reasonabIe amount, not exceeding fifty per
centum of the premium due thereon as service fee pIus the cost of stamps or other
taxes imposed for the issuance of the contract or bond: Provided, however, That if
the non-acceptance of the bond be due to the fauIt or negIigence of the surety, no
such service fee, stamps or taxes shaII be coIIected.
In the case of a continuing bond, the obIigor shaII pay the subsequent annuaI
premium as it faIIs due untiI the contract of suretyship is canceIIed by the obIigee or
by the Commissioner or by a court of competent jurisdiction, as the case may be.

RuIes on the Payment of Premiums:
1. premium becomes a DEBT as soon as the contract of suretyship or bond is
perfected and deIivered to the obIigor
2. NOT vaIid or binding unIess and untiI the premium therefor has been paid
3. Where the obIige has ACCEPTED the bond, it shaII be vaIid and enforceabIe
notwithstanding that the premium has not been paid.
4. If the contract of suretyship or bond is not accepted by or fiIed w/ the
obIige, the surety shaII coIIect onIy a reasonabIe amount
5. If the non-acceptance of the bond be due to the fauIt or negIigence of the
surety, no service fee, stamps, or taxes imposed shaII be coIIected by the
surety
6. Continuing bond ( for a term Ionger than 1 year or w/ no fixed expiration
date), the obIigor shaII pay the subsequent annuaI premium as it daIIs due
untiI the contract is canceIIed.
7. Premium of the consideration for furnishing the bond ot guaranty and the
obIigation to pat the same subsists for as Iong as the IiabiIity of the surety
shaII exist.
Ex. P 428-429

Types of Surety Bonds
1. Contract bonds - connected w/ construction and suppIy contracts
a. Protection of the owner against defauIt by the contractor to
compIy with his contract or hi spossibIe faiIure to pay materiaI
men, Iaborers, and subcontractors
b. Surety - answer for a faiIure of the principaI to perform in
accordance w/ the terms and specifications of the contract
c. 2 Bonds
i. performance bond - covers faithfuI performance of the
contract
ii. payment bond - covers the pament of Iaborers and
materiaI men
d. ObIigates the surety to hoId himseIf responsibIe for the
performance of an express obIigation of the principaI
2. FideIity bonds - pay an empIoyer for Ioss growing out of a dishonest act of
hIS empIoyee
a. IndustriaI bond - required by private empIoyers to cover Ioss
through dishonesty of empIoyees
b. PubIic OfficiaI Bond - required of pubIic officers for the faithfuI
performance of their duties and as a condition of entering upon
their offices
i. OridinariIy incIudes officers who have custody of pubIic
funds
ii. Requirement is to protect pubIic funds
c. the obIigation of the empIoyee to be honest with his empIoyer is
IMPLIED rather than contractuaI
3. JudiciaI bonds - requiredin connection w/ judiciaI proceedings
a. Injunction, attachment, repIevin, baiI bonds and appeaI bonds
b. To indemnify the adverse party against damages resuIting from
the proceeding
i. See footnote p. 430
Conditions of a bond specidief and required in the provisions of the stature or
reguIation providing for the submission of the bond are incorporated or buiIt into aII
bonds tendered inder that statute or reguIation, even though not here set out in
printer's ink.

Sec. 178. Pertinent provisions of the CiviI Code of the PhiIippines shaII be appIied in
a suppIetory character whenever necessary in interpreting the provisions of a
contract of suretyship.

O A2047 CiviI Code - suretyship> if a person binds himseIf soIidariIy with the
principaI debtor
O SoIidary debtor himseIf is the principaI debtor

TitIe 5 LIFE INSURANCE
Sec. 179. Life insurance - insurance on human Iives and insurance appertaining
thereto or connected therewith.

Sec. 180. An insurance upon Iife may be made payabIe on:
1. the death of the person,
2. or on his surviving a specified period,
3. or otherwise contingentIy on the continuance or cessation of Iife.
Every contract or pIedge for the payment of endowments or annuities shaII be
considered a Iife insurance contract for purpose of this Code.

In the absence of a judiciaI guardian, the father, or in the Iatter's absence or
incapacity, the mother, or any minor, who is an insured or a beneficiary under a
contract of Iife, heaIth or accident insurance, may exercise, in behaIf of said minor,
any right under the poIicy, without necessity of court authority or the giving of a
bond, where the interest of the minor in the particuIar act invoIved does not exceed
twenty thousand pesos. Such right may incIude, but shaII not be Iimited to, obtaining
a poIicy Ioan, surrendering the poIicy, receiving the proceeds of the poIicy, and
giving the minor's consent to any transaction on the poIicy.

Life Insurance - insurance payabIe on the death (see footnote) of a person, or on his
surviving a specified period, or otherwise contingentIy on the continuance or
cessationof Iife
O mutuaI agreement by w/c a party agrees to pay a given sum on the
happening of a particuIar event contingent on the duration of humanIife, in
consideration of the payment of a smaIIer sum immediateIy, or in periodicaI
payment by the other party
O contract to make specific payments to pay to a certain person, the
beneficiary, upon the death of a certain person, the beneficiary, upon the
death of a person whose Iife has been insured.
Parties InvoIved - but 1 person might occupy aII 3 positions by naming his estate as
bebenficary or each of the 3 positions may be heId by a separate party.
1. Owner of the PoIicy
a. has the power to name or change the beneficiary
b. assign the poIicy (under certain conditions)
c. cash it in for its surrender vaIue
d. use it as coIIateraI in obtaining a Ioan
e. has the obIigation to pay the premiums
2. Cestui que vie - whose Iife is the subject of the poIicy
3. Beneficiary - to whom the proceeds are paid

Nature of Life Insurance
1. LiabiIity absoIuteIy certain
a. ContempIates the certain payment of a specified sum at an
uncertain time
b. Premiums a pre caIucuIated that in accordance with the insured's
expectancy of Iife under a specified mortaIity tabIe, there wiII be
paid to the insurer in premiums and interest thereon a sum equa
to an amount to become due on the death of the insured
c. The event upon w/c the payment is to be made is absoIuteIy
cetain to happen at some future time.
d. Unsure onIy pays buck money heId in trust for the ID pIus interest
Iess expenses.
e. Premature death does the insurance payment embrace the
eIement of indemnity
2. Amount of insurance
a. DifficuIt to fix any sort of pecuniary vaIue upon Iife.
b. EXCEPT when the interest grows out of an obIigation to pay a
fixed amount of money, there is no Iimit as to the amount of
insurance w/c may IegaIIy be pIaced upon the Iife of any person
even though that person might be one whose Iife was rather a
burden upon the party I interest than a benefit possessing a
pecuniary vaIue
3. A Iife poIicy insurance is treated substantiaIIy as a vaIued poIicy - the
poIicy is purchased and the vaIue pIaced on the ID is basicaIIy decided by
the amount the purchaser is wiIIing to pay in premiums.
a. Amount affected by: age, heaIth, and occupation
4. Direct pecuniary Ioss not required
a. Beneficiaries have no obIigation to demonstrate as a condition
precedent to recovery a direct pecuniary Ioss as a resuIt of death
of the insured
b. Life poIicy is more od an investment rather than a mere contract
of indemnity - the measure of recovery is the face amount of the
poIicy and not the vaIue of the insured's Iife
c. It agrees to pay a certain stated amount rather than an amount
determined after the Ioss to be a repayment for Ioss
LIFE INSURANCE FIRE AND MARINE INSURANCE
1. Not a contract of indemnity
EXCEPT that effected by a
creditor on Iife of debtor
2. VaIued poIicy
3. May be transferred or assigned
to nay person even if he has no
insurabIe interest
4. UnIess expressIy required, the
consent of the insurer is not
essentiaI to the vaIidity of the
assignment of a Iife poIicy
5. InsurabIe interest in the Iife or
heaIth of the person insured
need not exist after the
insurance take sefect ot when
the Ioss occurs EXECPT that
effected by a creditor on Iife of
a debtor
6. InsurabIe interest need not
have any IegaI basis
7. Contingency contempIated
(death) is a certain event, the
onIy thing uncertain is the time
of occurrence
1. contracts of indemnity
2. may be open or vaIued
3. transferee or assignee must
have an insurabIe interest in
the thing insured
4. consent, in the absence of
waiver by the insurer is
essentiaI in the assignment of
a fire or marine poIicy
5. insurabIe interest in the
property insured must exist not
onIy when the insurance takes
effect but aIso when the Ioss
occurs
6. insurabIe interest musthave
IegaI basis
7. contingency insured against
may or may not occur
8. IiabiIity is uncertain - the
happening of the periI ID
against is uncertain; the
amount ID wiII have to be paid
sooner or Iater
9. may be canceIIed by either ID
8. LiabiIity of payment of the IR to
make payment is certain, onIy
the time of payment is
uncertain
9. May be terminated by the ID,
can't be terminated by the IR -
usuaIIy a Iong term contract
10. "Ioss" to the beneficiary
caused by the death of the ID
can seIdom be measured
accurateIy in terms of cash
vaIue
11. beneficiary is under no
obIigation to prove actuaI
financiaI Ioss as a resuIt of
death of the insured in order to
coIIect the insurance
or IR an is usuaIy for a term of
1 year
10. Reverse of 10
11. ID is required to submit proof
of his actuaI pecuniary Ioss as
a condition precedent to
coIIecting the insurance

Exemption of Iife insurance poIicies from execution
O RuIe 39, Sec. 12 - aII moneys, benefits, priviIeges or annuities accruing or
in any manner growing out of any Iife insurance are exemt from execution
regardIess of the amount of annuaI premiums paid. (see p 438)
AppIication of Exemption to accident insurance
1. Accident insurance is regarded as Iife insurance when one of the risks
insured in the Iatter is the death of the ID by accident
a. Exemption aIso appIies to those w/c aIthough intended primariIy
to indemnify the risks arising from accident, Ike wise insure
against the Ioss of Iife due to accidentaI causes or do wiIIfuI and
criminaI act of another, w/c as such, is not strictIy accidentaI in
nature
2. Beneficiary has the burden of proof that the cause of death is due to the
covered periI and once estabIished the burden shifts to IR
a. Accident insurance not Iikended to ordinary Iife insurance where
the death wiII be compensabIe whatever the cause thereof

Kinds of Life Insurance PoIicy
1. Ordinary Iife poIicy
O Id is required to pay a certain fixed premium annuaIIy or at more
frequent intervaIs throughout his entire Iife
O beneficiary is entitIed to receive payment under the poIicy after the
death of the Id
O paid-up- when Id reaches the age of 100
O the uItimate payment of insurance proceeds is as certain as death
itseIf
O cash surrender vaIue - the incIusion of an investment feature when the
poIicy is canceIIed by the owner or it Iapses through nonpayment of
premiums
i. sometimes permits Id to borrow against the vaIue w/o
surrender of the poIicy - for the whoIe duration of Iife
and carries the Iowest rate premium
O regular/whole life, straight life, cash-value insurance
2. Limited Life Payment PoIicy - limited premium insurance or cash value
insurance
O Premiums are payabIe onIy during a Iimited period of years usuaIIy 10,
15, or 20 - when specified number of premium payments have been
made, the insurance is fuIIy paid for
O AIso payabIe at the death of ID
O If ID die w/n the specified period, his beneficiary is entitIe to aII the
proceeds of the poIicy w/o any IiabiIity for the unpaid premiums.
O Premiums are proportionateIy higher due to the Iimited number of
payments to be made.
3. Term insurance poIicy - temporary insurance; essentiaIIy pure insurance
O Covers onIy if the insured dies during a Iimited period.
O Has a fixed or specific term, such as 2, 5, or 10 years.
O If Id dies w/n the period specified, the poIicy is paidd to the beneficiary
O If he survives the period, the contract terminates or expires at the end
of the time period.
O Premium paid is Ievied during the specified terms and increases w/
each renewaI term or the amount of coverage decIines and this is
because a person ages, the risk of death increases
O Premium is LOWER - possibiIity that the insurer may not be obIiged to
pay anything in proceeds whatsoever if the insured survives the term
O No Ioan vaIue/ eIement of investment - no provision for payment of
cash surrender vaIue or investment upon surrender or Iapse of poIicy
O May be given the option to convert the poIicy to one of whoIe Iife or
endowment Iife.
4. ndowment Policy - Ir binds himseIf to pay a fixed sum to the Id if he
survives for a specific period or if he dies w/n such period, to some othe
rperosn indicated.
O Premium is HIGHER - cash vaIues of the poIicy grow more rapidIy
O Id stands a chance of being paid the proceeds of the poIicy whiIe stiII
aIive abd after receiving the face amount of the poIicy, stiII coverage
wiII terminate
O Increasing cash surrender vaIue but with high premiums - payment is
required even after the end of the term if the Id is stiII Iiving -
Iump/annuity
O Term + annuity - usefuI in retirement pIanning
O Endowment contracts = insurance contracts

Scope of Iife insurance
1. Life insurance - protection of the id's famiIy, creditors, or other againts
pecuniary Ioss w/c may be the outgrowth of the death of the Id.
a. Attempts to provide protection from the cessation of the current
earning power of Id
b. Economic death - permanent Ioss of the earning capacity
i. ActuaI death - casket death
ii. Living death - permanent disabiIity
iii. Retirement death - Iiving beyond the period of earning
capacity
2. HeaIth, accident ad disabiIity insurance - benefits for hospitaI or edicaI
expenses or Ioss of time or earning power because of injury or iIIness
a. May be issues by either Iife or non-Iife insurance companies
b. HeaIth - provide specific periodic income to disabIed - contracts
of indemenity; contracts of indemnity - cover medicaI expenses;
onI medicaI expenses incurred by the Id are paid.

Contract of Iife annuity defined
O AIeatory contract of Iife indemnity - debtor binds himseIf to pay an annuaI
pension or income during the Iife of one or more determinate persons in
conderation of a capitaI consisting of money or other property, whose
ownership is transferred to him at once w/ the burden of the income
Life Insurance Annuity
1. Scientific creation of an estate
2. Estate is created at death
3. Purchaser expects Ir to oay
beneficiary a specified sum
upon his death
4. Ir starts paying upon death of
Id
5. For Iongetivity
6. Beneficiary receives at Id's
death the Iump sum payment
7. "indemnity" - Ir reimburse the
Id's beneficiaries a Iarge sum
upon Id's death
BOTH provide protection from a
substantiaI risk
1. Scientific Iiquidation of estate
2. Estate is fuIIy Iiquidated by
death
3. Purchaser expects his Ir to pay
him a periodic income whiIe he
Iives
4. Ir stops paying upon the death
of the insured
5. Insures against economic
probIems resuIting from Iong
Iife rather than death - for
ransiency
6. Lump sum is paid to the Ir
immediateIy and annuitant
receives the annuity payments
as Iong as he Iives
7. "investment" - may or may not
be profitabIe

Sec. 180-A. The insurer in a Iife insurance contract shaII be IiabIe in case of
suicides onIy when it is committed after the poIicy has been in force for a period of
two years from the date of its issue or of its Iast reinstatement, unIess the poIicy
provides a shorter period: Provided, however, That suicide committed in the state of
insanity shaII be compensabIe regardIess of the date of commission. (As
amended by Batasang Pambansa BIg. 874).

LiabiIity of the IR in case of suicide
1. LiabIe when:
a. Suicide - committed after the poIicy has been in force for a period
of 2 years from the date of its issue or of it Iast reinstatement
b. Commited after a short period provided in the poIicy
c. " in the state of insanity regardIess of the date of commission
UNLESS it is an excepted risk
2. PoIicy CANNOT provide a period Ionger tha 2 years - if ex provided for a 3
year period and the suicide is committed w/n the said period but after 2
years the insurer is IiabIe
3. NOT LiabIe:
a. Not by insanity and committed w/n the 2-year period
b. By reason ofinsanity but it is a exempted risk regardIess of the
date of commission
c. Ir can show that tge poIicy was obtained w/ intention to commit
suicide even in the absence of any suicide excIusion in the poIicy'

Sec. 181. A poIicy of insurance upon Iife or heaIth may pass by transfer, wiII or
succession to any person, whether he has an insurabIe interest or not, and such
person may recover upon it whatever the insured might have recovered.

O AII Iife insurance poIicies are decared by Iaw to be assignabIe regardIess of
whether the assignee has an insurabIe interest in the Iife of the insured or
not - provision denying the right to assign w/o the consent of the Ir is
VOID.
O Not require the insurabIe interest to continue as in the case of fire
insurance - restricts a cIasss of persons who may profit from the death of
the insured thereby reducing to a reasonabIe safe minimum the dangers of
wagering and of murder,
O No insurabIe interest needed where the poIicy is procured by the person
whose Iife is insured on his own initiative
O The courts wiII not, however, permit the process of assignment to be used
as a cIoak to hide an iIIegaI intent to make contracts on human Iife
4 UsuaI evidence - assignment occurred aImost immediateIy after
the poIicy was issued'

Necessity of consent of beneficiary to assignment
1. Waiver of the right to change beneficiary - In a Iife insurance where the
poIicy contains an express waiver of the right to change the beneficiary
acquires a vested and absoIute interest w/c cannot be divested w/o his
consent - Ir x assigne w/o the consent of the beneficiary
2. W/o waiver - - can assign w/o consent; the right is mere expectancy

Sec. 182. Notice to an insurer of a transfer or bequest thereof is not necessary to
preserve the vaIidity of a poIicy of insurance upon Iife or heaIth, unIess thereby
expressIy required.

1. Notice not required by poIicy - not essentiaI in the vaIidity of assignement
2. Notice required - w/o notice, shaII have no effect so far as the insurer is
concerned
a. Insurer w/o notice is reIieved of any responsibiIity in case
payment is made to the beneficiary before receipt of Ir of the
notice
b. Even w/o ntice, assignement is binding upon the assignor and the
assignee
3. Assignment w/ consent of Ir - W/N poIicy expressIy requires the notice of
an assignement or transfer must be given to the insurer, the assignment w/
the consent of the Ir creates in effect a NOVATION. Ex. P 449

Sec. 183. UnIess the interest of a person insured is susceptibIe of exact pecuniary
measurement, the measure of indemnity under a poIicy of insurance upon Iife or
heaIth is the sum fixed in the poIicy.

Measure of Indemnity
O VaIued - amount fixed in the poIicy
O A person can purchase Iife insurance for any amount as Iong as he can pay
the premium EXCEPT when a person insures the Iife of another as where a
creditor insures the Iife of his debtor.
4 Life of debtor - susceptibIe of exact pecuniary measurement or
estimation.

CHAPTER VI - COMPULSORY MOTOR VEHICLE LIABILITY INSURANCE
SECTION 373. For purposes of this chapter:
(a) "Motor VehicIe" is any vehicIe as defined in section three, paragraph (a) of
RepubIic Act Numbered Four Thousand One Hundred Thirty Six, Otherwise known
as the "Land Transportation & Traffic Code."
(b) "Passenger" is any fare paying person being transported & conveyed in &
by a motor vehicIe for transportation of passengers for compensation, incIuding
persons expressIy authorized by Iaw or by the vehicIe's operator or his agents to
ride without fare.
(c) "Third Party" is any person other than a passenger as defined in this
section & shaII aIso excIude a member of the househoId, or a member of the famiIy
within the second degree of consanguinity or affinity, of a motor vehicIe owner or
Iand transportation operator, as Iikewise defined herein, or his empIoyee in respect
of death, bodiIy injury, or damage to property arising out of & in the course of
empIoyment. (As amended by PresidentiaI Decree No. 1814 & 1981)
(d) "Owner" or "Motor vehicIe owner" means the actuaI IegaI owner of a motor
vehicIe, in whose name such vehicIe is duIy registered w/ the Land Transportation
Commission;
(e) "Land transportation operator" means the owner or owners of motor
vehicIes for transportation of passengers for compensation, incIuding schooI buses;
(f) "Insurance poIicy" or "PoIicy" refers to a contract of insurance against
passenger & thirty party IiabiIity for death or bodiIy injuries & damaged to property
arising fr. motor vehicIe accidents. (As amended by PresidentiaI Decree No. 1455 &
1814)
SECTION 374. It shaII be unIawfuI for any Iand transportation operator or owner
of a motor vehicIe to operate the same in the pubIic highways unIess there is in force
in reIation thereto a poIicy of insurance or guaranty in cash or surety bond issued in
accordance w/ the provisions of this chapter to indemnify the death, bodiIy injury,
&/or damage to property of a third party or passenger, as the case may be, arising
fr. the use thereof. (As amended by PresidentiaI Decree No. 1455 & 1814)
SECTION 375. The Commissioner shaII furnish the Land Transportation
Commissioner w/ a Iist of insurance companies authorized to issue the poIicy of
insurance or surety bond required by this chapter. (As amended by PresidentiaI
Decree No. 1814)
SECTION 376. The Land Transportation Commission shaII not aIIow the
registration or renewaI of registration of any motor vehicIe without first requiring fr.
the Iand transportation operator or motor vehicIe owner concerned the presentation
& fiIing of a substantiating documentation in a form approved by the Commissioner
evidencing that the poIicy of insurance or guaranty in cash or surety bond required
by this chapter is in effect. (As amended by PresidentiaI Decree No. 1455)
SECTION 377. Every Iand transportation operator & every owner of a motor
vehicIe shaII, before appIying for the registration or renewaI of registration of any
motor vehicIe, at his option, either secure an insurance poIicy or surety bond issued
by any insurance company authorized by the Commissioner or make a cash deposit
in such amount as herein required as Iimit of IiabiIity for purposes specified in
section three hundred seventy four.
(1) In the case of a Iand transportation operator the insurance guaranty in cash
or surety bond shaII cover IiabiIity for death or bodiIy injuries of third parties &/or
passengers arising out of the use of such vehicIe in the amount not Iess than tweIve
thousand pesos per passenger or third party & an amount, for each of such
categories, in any one accident of not Iess than that set forth in the foIIowing scaIe
-
(a) Motor vehicIes w/ an authorized capacity of twenty six or more
passengers: Fifty thousand pesos;
(b) Motor vehicIes w/ an authorized capacity of fr. tweIve to twenty five
passengers: Forty thousand pesos;
(c) Motor vehicIes w/ an authorized capacity of fr. six to eIeven passengers:
Thirty thousand pesos;
(d) Motor vehicIes w/ an authorized capacity of five or Iess passengers: Five
thousand pesos muItipIied by the authorized capacity.
Provided, however, That such cash deposit made to, or surety bond posted w/, the
Commissioner shaII be resorted to by him in cases of accidents the indemnities for
w/c to third parties &/or passengers are not settIed accordingIy by the Iand
transportation operator &, in that event, the said cash deposit shaII be repIenished or
such surety bond shaII be restored w/ sixty days after impairment or expiry, as the
case may be, by such Iand transportation operator, otherwise, he shaII secure the
insurance poIicy required by this chapter. The aforesaid cash deposit may be
invested by the Commissioner in readiIy marketabIe government bonds &/or
securities.
(2) In the case of an owner of a motor vehicIe, the insurance or guaranty in
cash or surety bond shaII cover IiabiIity for death or injury to third parties in an
amount not Iess than that set forth in the foIIowing scaIe in any one accident:
I. Private Cars
(a) Bantam : Twenty thousand pesos;
(b) Light : Twenty thousand pesos;
(c) Heavy : Thirty thousand pesos;
II. Other Private VehicIes
(a) TricycIes, motorcycIes, & scooters : TweIve thousand pesos;
(b) VehicIes w/ an unIaden weight of 2,600 kiIos or Iess : Twenty thousand
pesos;
(c) VehicIes w/ an unIaden weight of between 2,601 kiIos & 3,930 kiIos : Thirty
thousand pesos;
(d) VehicIes w/ an unIaden weight over 3,930 kiIos : Fifty thousand pesos.
The Commissioner may, if warranted, set forth scheduIe of indemnities for the
payment of cIaims for death or bodiIy injuries w/ the coverages set forth herein. (As
amended by PresidentiaI Decree No. 1455 & 1814)
SECTION 378. Any cIaim for death or injury to any passenger or third party
pursuant to the provisions of this chapter shaII be paid without the necessity of
proving fauIt or negIigence of any kind; Provided, That for purposes of this section
-
(a) The totaI indemnity in respect of any person shaII not exceed five thousand
pesos;
(ii) The foIIowing proofs of Ioss, when submitted under oath, shaII be sufficient
evidence to substantiate the cIaim:
(a) PoIice report of accident; &
(b) Death certificate & evidence sufficient to estabIish the proper payee; or
(c) MedicaI report & evidence of medicaI or hospitaI disbursement in respect
of w/c refund is cIaimed.
(iii) CIaim may be made against one motor vehicIe onIy. In the case of an
occupant of a vehicIe, cIaim shaII Iie against the insurer of the vehicIe in w/c the
occupant is riding, mounting or dismounting fr.. In any other case, cIaim shaII Iie
against the insurer of the directIy offending vehicIe. In aII cases, the right of the party
paying the cIaim to recover against the owner of the vehicIe responsibIe for the
accident shaII be maintained.
SECTION 379. No Iand transportation operator or owner of motor vehicIe shaII be
unreasonabIy denied the poIicy of insurance or surety bond required by this chapter
by the insurance companies authorized to issue the same, otherwise, the Land
Transportation Commission shaII require fr. said Iand transportation operator or
owner of the vehicIe, in Iieu of a poIicy of insurance or surety bond, a certificate that
a cash deposit has been made w/ the Commissioner in such amount required as
Iimits of indemnity in section three hundred seventy seven to answer for the
passenger &/or third party IiabiIity of such Iand transportation operator or owner of
the vehicIe.
No insurance company may issue the poIicy of insurance or surety bond required
under this chapter unIess so authorized under existing Iaws.
The authority to engage in the casuaIty &/or surety Iines of business of an insurance
company that refuses to issue or renew, without just cause, the insurance poIicy or
surety bond therein required shaII be withdrawn immediateIy. (As amended by
PresidentiaI Decree No. 1455 & 1814)
SECTION 380. No canceIIation of the poIicy shaII be vaIid unIess written notice
thereof is given to the Iand transportation operator or owner of the vehicIe & to the
Land Transportation Commission at Ieast fifteen days prior to the intended effective
date thereof.
Upon receipt of such notice, the Land Transportation Commission, unIess it receives
evidence of a new vaIid insurance or guaranty in cash or surety bond as prescribed
in this chapter, or an endorsement of revivaI of the canceIIed one, shaII order the
immediate confiscation of the pIates of the motor vehicIe covered by such canceIIed
poIicy. The same may be re issued onIy upon presentation of a new insurance
poIicy or that a guaranty in cash or surety band has been made or posted w/ the
Commissioner & w/c meets the requirements of this chapter, or an endorsement or
revivaI of the canceIIed one. (As amended by PresidentiaI Decree No. 1455)
SECTION 381. If the canceIIation of the poIicy or surety bond is contempIated by
the Iand transportation operator or owner of the vehicIe, he shaII, before the poIicy or
surety bond ceases to be effective, secure a simiIar poIicy of insurance or surety
bond to repIace the poIicy or surety bond to be canceIIed or make a cash deposit in
sufficient amount w/ the Commissioner & without any gap, fiIe the required
documentation w/ the Land Transportation Commission, & notify the insurance
company concerned of the canceIIation of its poIicy or surety bond. (As amended by
PresidentiaI Decree No. 1455)
SECTION 382. In case of change of ownership of a motor vehicIe, or change of
the engine of an insured vehicIe, there shaII be no need of issuing a new poIicy untiI
the next date of registration or renewaI of registration of such vehicIe, & provided
that the insurance company shaII agree to continue the poIicy, such change of
ownership or such change of the engine shaII be indicated in a corresponding
endorsement by the insurance company concerned, & a signed dupIicate of such
endorsement shaII, within a reasonabIe time, be fiIed w/ the Land Transportation
Commission.
SECTION 383. In the settIement & payment of cIaims, the indemnity shaII not be
avaiIed of by any accident victim or cIaimant as an instrument of enrichment by
reason of an accident, but as an assistance or restitution insofar as can fairIy be
ascertained.
SECTION 384. Any person having any cIaim upon the poIicy issued pursuant to
this Chapter shaII, without any unnecessary deIay, present to the insurance
company concerned a written notice of cIaim setting forth the nature, extent &
duration of the injuries sustained as certified by a duIy Iicensed physician. Notice of
cIaim must be fiIed within six months fr. date of accident, otherwise, the cIaim shaII
be deemed waived. Action or suit for recovery of damage due to Ioss or injury must
be brought, in proper cases, w/ the Commissioner or the Courts within one year fr.
deniaI of the cIaim, otherwise, the cIaimant's right of action shaII prescribe. (As
amended by PresidentiaI Decree 1814 & Batasang Pambansa BIg. 874)
SECTION 385. The insurance company concerned shaII forthwith ascertain the
truth & extent of the cIaim & make payment within five working days after reaching
an agreement. If no agreement is reached, the insurance company shaII pay onIy the
"no fauIt" indemnity provided in section three hundred seventy eight without
prejudice to the cIaimant fr. pursuing his cIaim further, in w/c case, he shaII not be
required or compeIIed by the insurance company to execute any quit cIaim or
document reIeasing it fr. IiabiIity under the poIicy of insurance or surety bond
issued. (As amended by PresidentiaI Decree No. 1455)
In case of any dispute in the enforcement of the provisions of any poIicy issued
pursuant to this chapter, the adjudication of such dispute shaII be within the originaI
& excIusive jurisdiction of the Commissioner, subject to the Iimitations provided in
section four hundred sixteen.
SECTION 386. It shaII be unIawfuI for a Iand transportation operator or owner of
motor vehicIe to require his or its drivers or other empIoyees to contribute in the
payment of premiums.
SECTION 387. No government office or agency having the duty of impIementing
the provisions of this chapter nor any officiaI or empIoyee thereof shaII act as agent
in procuring the insurance poIicy or surety bond provided for herein. The
commission of an agent procuring the said poIicy or bond shaII in no case exceed
ten per centum of the amount of the premiums therefor.
SECTION 388. Any Iand transportation operator or owner of motor vehicIe or any
other person vioIating any of the provisions of the preceding sections shaII be
punished by a fine of not Iess than five hundred pesos but not more than one
thousand pesos &/or imprisonment for not more than six months. The vioIation of
section three hundred seventy seven by a Iand transportation operator shaII be a
sufficient cause for the revocation of the certificate of pubIic convenience issued by
the Board of Transportation covering the vehicIe concerned.
SECTION 389. Whenever any vioIation of the provisions of this chapter is
committed by a corporation or association, or by a government office or entity, the
executive officer or officers of said corporation, association or government office or
entity who shaII have knowingIy permitted, or faiIed to prevent, said vioIation shaII
be heId IiabIe as principaIs.

Motor vehicIe
O Any vehicIe propeIIed by any power other than muscuIar power using the
pubIic highways
O EXCEPT road roIIers, troIIey cars, street sweepers, sprinkIers, Iawn
mowers, buIIdozers, graders, forkIifts, amphibian trucks, and crnaes f not
used in pubIic highways, vehicIes w/c run onIy on raiIs or tracks and
tractors, traiIers and traction engines used excIusiveIy for agricuIturaI
purposes.
O TraiIers as separate motor vehicIe - when propeIIed or intended to be
propeIIed by attachment to a motor vehicIe

Motor VehicIe LiabiIity Insurance - protection coverage that wiII answer for IegaI
IiabiIity for Iosses and damages for property damage or bodiIy injuries that may be
sustained by another arising from the use and operation of a motor vehicIe by its
owner
O CompuIsory
O S374 -enjoins LTO and MVO not to operate his vehicIe in pubIic highways
unIess there is in force in reIation thereto a poIicy insurance or guaranty in
cash or surety bond to indemnify the death or bodiIy injury of the
3p/passenger
O LTO - wiII register/renew the registration onIy if there is in force in reIation
thereto such insurance or guaranty in cash or surety bond

Need of for CompuIsory 3p Party LiabiIity Insurance
O To assure victims or their dependents financiaI assistance or indemnity
regardIess of the financiaI capabiIity of motor vehicIe owners or operators
responsibIe for the accident sustained
O Insurer has primary IiabiIity and accrues immediateIy upon the occurrence
of the injury or even w/c the IiabiIity depends
O Does not depends on the recovery of judgment by the injured party against
the insured
O Injured/heirs may sue directIy the insurer of the vehicIe
O Answer to the existing need to assure financiaI assistance and reIief of
victims regardIess of the financiaI capabiIity of MVOs responsibIe for such
traffic Iosses
O PD 1814 - onIy incIudes death of or bodiIy injuries to persons invoIved in
the vehicuIar accidents
4 Own damage coverage to the insured motor vehicIe is not aIso
required by Iaw
4 Parties may agree upon a separate insurance to cover damage to
property
Effect of ID's vioIation of poIicy condition on IR's IiabiIity to 3p CompIaint
O IR's IiabiIity to any party attaches during the effectivity of the poIicy in
O No defense that the owner of the insured motor vehicIe has vioIated the
contract - defeat the purpose of the Iaw to protect 3p who are not parties to
the contract who might suffer Ioss or injury on the account of the accident\

Persons subject to CMVLI
1. MVO - the actuaI and IegaI owner in whose name such vehice is registered
with LTO
2. LTOperator - owner of the MV/s being used or coveying passengers for
compensation incIuding schooI buses
Substitutes to CMVLI poIicy
1. Post a surety bond w/ insurance Commisioner - < be made the obIige or
creditor in the bond in such amount or amounts required as Iimits of
indemnity answer for the same Iosses sought to be covered by a CMVLI
poIicy
2. Cash deposit - with IC in such amount/s required as Iimits of indemnity
a. Such surety or cash deposit be restored/repIenished by the
MVO/LTO in the right amount required as Iimit IiabiIity w/n 60 days
adter the impairment or expiry, otherwise he shaII secure the
insurance poIicy required.

Scope of Coverage Required (S 377)
1. MVO - must be comprehensive against 3p IiabiIity for death or bodiIy
injuries
a. If used for transport, shouId incIude passenger IiabiIity
2. LTO - comprehensive against both passenger and 3p IiabiIities for death or
bodiIy injuries; may extend additionaI other risks at its option
a. Excess of the minimum Iimit of coverage - deemed
b. to have been taken on voIuntary basis and not compuIsory

Duty of MVO or LTO contempIating canceIIation of cover
1. written notice - IR/ surety company on his intention to canceI
2. secure simiIar poIicy/bond to repIace that one to be canceIIed before
theother ceases to be effective
3. w/o repIacement - cash deposit with ICr and secure a certification
regarding the deposit and fiIe w/o LTO

Effect of CanceIIation - order confiscation of thepIates of MV concerned upon receipt
of notice and canceI from IR unIess:
1. evidence of a new and vaIid CMVLI cover - either insurance poIicy/
guaranty in cash/ surety bond
2. signed dupIicate of an endorsement or addendum issued by the insurance
company concerned showing revivaI ro consitnuance of the CMLVI cover
3. certification of ICr to amount of cash deposit rd as Iimit of indemnityhas
been made by MVO/LTO

No fauIt indemnity cIaim - the victim of tort can recover for this Ioss from his insurer
w/o regard his own contributory fauIt or the fauIt of the tortfeasor
O purpose: to guarantee compensation or indemnity to persons suffering
Ioss in motor vehicIe insurance
O no need to prove fauIt or negIigence of any kind subject to certain
conditions
4 does not appIy to property damage
4 if the totaI indemnity excess 15k, and there is controversy in
respect thereto, the finding of fauIt may be avaiIed of by the
insurer onIy as to the excess - the first 15k shouId be paid w/o
regard to fauIt
O if the victim is an occupant of the vehicIe - the cIaim shaII Iie against the
insurer of the vehicIe in w/c the occupant is riding, mounting, or
dismounting from
4 mandatory that the cIaim be made against the insurer of such
vehicIe
4 aIIow immediate compensation pending finaI determination
responsibIe for the accident and IiabIe for the victim's injuries or
death - negIigence of the owner of the vehicIe is immateriaI
4 passenger, 3p. occupant - synonymous so Iong they are riding on
or mounting or dismounting MV.
Certificate of Cover - issued by the insurance company concerned in the form
approved by the ICr
O substantiating documentation that wiII be accepted by and fiIed with the
LTC during registration of MV as proof of insurance upon such such MV
O secondary proof and ay be presented during investigation of traffic
accident by MVO or LTO/rep to govt agents charge with traffic enforcement

Limitations w/respect to CMVLI cover soIicitation: ShouId not be:
1. govt office/agency having the dutypf impIementing IC on CMVLI shaII act as
agent in procuring poIicy/bomd rqd
2. No officiaI of abovementioned shaII "
3. Commission of such agent shaII not exceed 10% of the amounts of
premiums therefore

Limitations: NOT COVER
Master Private
MVP
Master
CommericaI MVP -
(1 & 2 may be
deIeted and the
risk named therein
+ payment of
additionaI
premium)
Master LTOP Master MotorcycIe
PoIicy
1.Use for hauIing
and/or carrying
Iogs, Iumber, sand,
graveI, bottIed
beverages,
gasoIine and/or
other infIammabIe
materiaIs
Same Same Same
2. Racing,
pacemaking,
reIiabiIity triaI or
speed testing, or
use for any
purpose in
connection w/
motor trade
Same Same Same
3. Carriage of same x Same
passengers for
hire/reward


MALUS system - a vehicIe owner who suffered an accident resuIting in a Ioss during
the immediateIy preceding poIicy period, is required to pay surcharge upon renewaI
of his coverage + basic premium equivaIent to the product of theamount of Ioss paid
muItipIied by the rate of premium of the vehicIe
O The surcharge shaII in no case be Iess than P30

Insured/driver w/o Iicense or w/ expired Iicense
1. Standard authorized driver cIause:
a. Any of the foIIowing
i. ID
ii. Person driving with Id's order /permission provided w/
Iicense and has no dq t drive as motor vehicIe
2. Requirement of a Iicense does not appIy where the person driving is the ID
- an infraction of the Iaw on the part of the ID is a bar to recovery under the
insurance contract. It however renders him subject to penaI provisions
3. Theft cIause - where the car is unIawfuIIy and wrongfuIIy taken /wo the
owner's consent or knowIedge, therefore the authorized driver cIause
shouId not appIy with a different risk.
a. Authorized driver cIause is in contempIation or anticipation of
accident in the IegaI sense and not thatevent of theft.


Art. 2176. Whoever by act or omission causes damage to another, there being fauIt
or negIigence, is obIiged to pay for the damage done. Such fauIt or negIigence, if
there is no pre-existing contractuaI reIation between the parties, is caIIed a quasi-
deIict and is governed by the provisions of this Chapter. (1902a)

Art. 2177. ResponsibiIity for fauIt or negIigence under the preceding articIe is entireIy
separate and distinct from the civiI IiabiIity arising from negIigence under the PenaI
Code. But the pIaintiff cannot recover damages twice for the same act or omission of
the defendant. (n)
Art. 2180. The obIigation imposed by ArticIe 2176 is demandabIe not onIy for one's
own acts or omissions, but aIso for those of persons for whom one is responsibIe.
The father and, in case of his death or incapacity, the mother, are responsibIe for the
damages caused by the minor chiIdren who Iive in their company.
Guardians are IiabIe for damages caused by the minors or incapacitated persons
who are under their authority and Iive in their company.
The owners and managers of an estabIishment or enterprise are Iikewise responsibIe
for damages caused by their empIoyees in the service of the branches in which the
Iatter are empIoyed or on the occasion of their functions.
EmpIoyers shaII be IiabIe for the damages caused by their empIoyees and househoId
heIpers acting within the scope of their assigned tasks, even though the former are
not engaged in any business or industry.
The State is responsibIe in Iike manner when it acts through a speciaI agent; but not
when the damage has been caused by the officiaI to whom the task done properIy
pertains, in which case what is provided in ArticIe 2176 shaII be appIicabIe.
LastIy, teachers or heads of estabIishments of arts and trades shaII be IiabIe for
damages caused by their pupiIs and students or apprentices, so Iong as they remain
in their custody.
The responsibiIity treated of in this articIe shaII cease when the persons herein
mentioned prove that they observed aII the diIigence of a good father of a famiIy to
prevent damage. (1903a)
Art. 2184. In motor vehicIe mishaps, the owner is soIidariIy IiabIe with his driver, if
the former, who was in the vehicIe, couId have, by the use of the due diIigence,
prevented the misfortune. It is disputabIy presumed that a driver was negIigent, if he
had been found guiIty or reckIess driving or vioIating traffic reguIations at Ieast twice
within the next preceding two months.
If the owner was not in the motor vehicIe, the provisions of ArticIe 2180 are
appIicabIe. (n)
Art. 2185. UnIess there is proof to the contrary, it is presumed that a person driving a
motor vehicIe has been negIigent if at the time of the mishap, he was vioIating any
traffic reguIation. (n)
Art. 2186. Every owner of a motor vehicIe shaII fiIe with the proper government office
a bond executed by a government-controIIed corporation or office, to answer for
damages to third persons. The amount of the bond and other terms shaII be fixed by
the competent pubIic officiaI. (n)

THE INSURANCE COMMISSIONER
TitIe 1 ADMINISTRATIVE AND ADJUDICATORY POWERS
Sec. 414. The Insurance Commissioner
O shaII have the duty to see that aII Iaws reIating to insurance, insurance
companies and other insurance matters, mutuaI benefit associations, and
trusts for charitabIe uses are faithfuIIy executed and to perform the duties
imposed upon him by this Code,
O shaII, notwithstanding any existing Iaws to the contrary, have soIe and
excIusive authority to reguIate the issuance and saIe of variabIe contracts
as defined in section two hundred thirty-two
O provide for the Iicensing of persons seIIing such contracts, and to issue
such reasonabIe ruIes and reguIations governing the same.
O issue such ruIings, instructions, circuIars, orders and decision as he may
deem necessary to secure the enforcement of the provisions of this Code,
subject to the approvaI of the Secretary of Finance.
4 Except as otherwise specified, decisions made by the
Commissioner shaII be appeaIabIe to the Secretary of Finance.
Sec. 415. In addition to the administrative sanctions provided eIsewhere in this Code,
the Insurance Commissioner is hereby authorized, at his discretion,:
O to impose upon the insurance companies, their directors and/or officers
and/or agents, for any wiIIfuI faiIure or refusaI to compIy with, or vioIation
of any provision of this Code, or any order, instruction, reguIation, or
ruIing of the Insurance Commissioner, or any commission or irreguIarities,
and/or conducting business in an unsafe or unsound manner as may be
determined by the Insurance Commissioner, the foIIowing:
4 (a) fines not in excess of five hundred pesos a day; and
4 (b) suspension, or after due hearing, removaI of directors and/or
officers and/or agents.
Sec. 416. The Commissioner shaII have the power to:
O adjudicate cIaims and compIaints invoIving:
4 any Ioss, damage or IiabiIity for which in insurer may be
answerabIe under any kind of poIicy or contract of insurance,
4 for which such insurer may be IiabIe under a contract of
suretyship,
4 for which a reinsurer may be sued under any contract of
reinsurance it may have entered into
4 for which a mutuaI benefit association may be heId IiabIe under
the membership certificates it has issued to its members, where
the amount of any such Ioss, damage or IiabiIity, excIuding
interest, cost and attorney's fees, being cIaimed or sued upon
any kind of insurance, bond, reinsurance contract,
4 or membership certificate does not exceed in any singIe cIaim
one hundred thousand pesos.
The insurer or surety may, in the same action:
O fiIe a countercIaim against the insured or the obIigee.
O fiIe a cross-cIaim against a party for any cIaim arising out of the
transaction or occurrence that is the subject matter of the originaI action
or of a countercIaim therein.
With Ieave of the Commissioner, an insurer or surety may:
O fiIe a third-party compIaint against its reinsurers for indemnification,
contribution, subrogation or any other reIief, in respect of the transaction
that is the subject matter of the originaI action fiIed with the
Commissioner.
Jurisdiction:
O The party fiIing an action pursuant to the provisions of this section.The
Commissioner shaII acquire jurisdiction over the person of the impIeaded
party or parties in accordance with and pursuant to the provisions of the
RuIes of Court.
O concurrent with that of the civiI courts, but the fiIing of a compIaint with
the Commissioner shaII precIude the civiI courts from taking cognizance of
a suit invoIving the same subject matter.
O Any decision, order or ruIing rendered by the Commissioner after a
hearing shaII have the force and effect of a judgment.
O Any party may appeaI from a finaI order, ruIing or decision of the
Commissioner by fiIing with the Commissioner within thirty days from
receipt of copy of such order, ruIing or decision a notice of appeaI to the
Intermediate AppeIIate Court in the manner provided for in the RuIes of
Court for appeaIs from the RegionaI TriaI Court to the Intermediate
AppeIIate Court. (As amended by Batas Pambansa BIg. 874).
As soon as a decision, order or ruIing has become finaI and executory, the
Commissioner shaII motu proprio or on motion of the interested party, issue a writ of
execution requiring the sheriff or the proper officer to whom it is directed to execute
said decision, order or award, pursuant to RuIe thirty-nine of the RuIes of Court.
For the purpose of any proceeding under this section, the Commissioner, or any
officer thereof designated by him:
O empowered to administer oaths and affirmation
O subpoena witnesses, compeI their attendance, take evidence, and require
the production of any books, papers, documents, or contracts or other
records which are reIevant or materiaI to the inquiry.
O In case of contumacy by, or refusaI to obey a subpoena issued to any
person, the Commissioner may invoke the aid of any court of first instance
within the jurisdiction of which such proceeding is carried on, where such
person resides or carries on his own business, in requiring the attendance
and testimony of witnesses and the production of books, papers,
documents, contracts or other records.
O And such court may issue an order requiring such person to appear before
the Commissioner, or officer designated by the Commissioner, there to
produce records, if so ordered or to give testimony touching the matter in
question. Any faiIure to obey such order of the court may be pubIished by
such court as a contempt thereof.
O A fuII and compIete record shaII be kept

nsurance regulation to protect public against insolvency or unfair treatment by the R;
classed as a business to protect public interest. Protection through:
1. Legislation PD 1460
2. Administrative Action
a. Licensing check on the insurer's financial condition to ascertain that it
has required capital and surplus
i. Renewal, suspension & revocation
ii. Examinations through his office w/c determine the issuance
of agent's/broker's licenses
3. Examination of nsurance Companies
a. Check assets, liabilities, and reserves
b. Review of almost all underwriting, investment and claim practices
c. nvestigation - w/n insurers or their representatives are meeting
requirements of the law
i. free access to records and books of the insurers and
hearings on such matters as rate violations or unfair trade
practices
ii. issue administrative rulings, advisory opinions w/ regard to
the business conduct of Rs or their agents
iii. declare insolvency of insurer in liquidation or rehab
d. Court Action
i. Review if the notice and order has been complied with for
due process
ii. Discretionary power of CR is subject to MANDAMUS and
injunction'
iii. Cr may petition the ocurts to enforce compliance the law or
his rulings
1. mportant since the rulings/decisions affect he
conductof companies and individual not parties to
the litigation and therefore regulates the business
insurance

Cr general powers and duties regulate and supervise the transaction of insurance
business so as to protect the interest of the public, to execute the insurance laws and to
see that violations of the insurance laws are properly deal w/ or punished

Tessa + nsurance Forms and Claims Settlements