Gulf Resorts Inc. vs. Philippine Charter Insurance Corporation [G.R. No.

156167 May 16, 2005] Facts: Gulf Resorts is the owner of the Plaza Resort situated at Agoo, La Union and had its properties in said resort insured originally with the American Home Assurance Company (AHAC). In the first 4 policies issued, the risks of loss from earthquake shock was extended only to petitioner’s two swimming pools. Gulf Resorts agreed to insure with Phil Charter the properties covered by the AHAC policy provided that the policy wording and rates in said policy be copied in the policy to be issued by Phil Charter. Phil Charter issued Policy No. 31944 to Gulf Resorts covering the period of March 14, 1990 to March 14, 1991 for P10,700,600.00 for a total premium of P45,159.92. the break-down of premiums shows that Gulf Resorts paid only P393.00 as premium against earthquake shock (ES). In Policy No. 31944 issued by defendant, the shock endorsement provided that “In consideration of the payment by the insured to the company of the sum included additional premium the Company agrees, notwithstanding what is stated in the printed conditions of this policy due to the contrary, that this insurance covers loss or damage to shock to any of the property insured by this Policy occasioned by or through or in consequence of earthquake (Exhs. "1-D", "2-D", "3-A", "4-B", "5-A", "6-D" and "7-C"). In Exhibit "7-C" the word "included" above the underlined portion was deleted. On July 16, 1990 an earthquake struck Central Luzon and Northern Luzon and plaintiff’s properties covered by Policy No. 31944 issued by defendant, including the two swimming pools in its Agoo Playa Resort were damaged.

paid against earthquake shock only on the two swimming pools in all the policies issued by AHAC.

Issue: Whether or not the policy covers only the two swimming pools owned by Gulf Resorts and does not extend to all properties damaged therein

Held: YES. All the provisions and riders taken and interpreted together, indubitably show the intention of the parties to extend earthquake shock coverage to the two swimming pools only. An insurance premium is the consideration paid an insurer for undertaking to indemnify the insured against a specified peril. In fire, casualty and marine insurance, the premium becomes a debt as soon as the risk attaches. In the subject policy, no premium payments were made with regard to earthquake shock coverage except on the two swimming pools. There is no mention of any premium payable for the other resort properties with regard to earthquake shock. This is consistent with the history of petitioner’s insurance policies with AHAC.

UCPB v Masagana G.R. No. 137172. April 4, 2001 Facts: In our decision of 15 June 1999 in this case, we reversed and set aside the assailed decision[1] of the Court of Appeals, which affirmed with modification the judgment of the trial court (a) allowing Respondent to consign the sum of P225,753.95 as full payment of the premiums for the renewal of the five insurance policies on Respondent’s properties; (b) declaring the replacement-renewal policies effective and binding from 22 May 1992 until 22 May 1993; and (c) ordering Petitioner to pay Respondent P18,645,000.00 as indemnity for the burned properties covered by the renewal-replacement policies. The modification consisted in the (1) deletion of the trial court’s declaration that three of the policies were in force from August 1991 to August 1992; and (2) reduction of the award of the attorney’s fees from 25% to 10% of the total amount due the Respondent.

Petitioner advised respondent that it would be making a claim under its Insurance Policy 31944 for damages on its properties. Respondent denied petitioner’s claim on the ground that its insurance policy only afforded earthquake shock coverage to the two swimming pools of the resort. The trial court ruled in favor of respondent. In its ruling, the schedule clearly shows that petitioner paid only a premium of P393.00 against the peril of earthquake shock, the same premium it had

On July 14. Makati Tuscany v Court of Appeals. 1992. upon observing the facts. the premiums were paid within the grace period. Also. On June 13. 1992 had been extended or renewed by an implied credit arrangement though actual payment of premium was tendered on a later date and after the occurrence of the risk insured against. 1992. so far as to make the policy binding. Ratio: Section 77 of the Insurance Code provides: No policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid… An exception to this section is Section 78 which provides: Any acknowledgment in a policy or contract of insurance of the receipt of premium is conclusive evidence of its payment. -. The Supreme Court ruled against UCPB in the first case on the issue of whether the fire insurance policies issued by petitioner to the respondent covering the period from May 22. Such a practice had existed up to the time the claims were filed. The policies were effective from May 22. On July 13. Section 77 does not expressly prohibit an agreement granting credit extension. Held: No. 1991 to May 22. Both the Court of Appeals and the trial court found that sufficient proof exists that Masagana. 26. affirmed that there was no valid notice of non-renewal of the policies in 90-day credit term for the payment of premiums. UCPB then rejected Masagana’s claims under the argument that the fire took place before the tender of payment. Section 78 allows waiver by the insurer of the condition of prepayment and makes the policy binding despite the fact that premium is actually unpaid. UCPB filed a motion for reconsideration. Also. no timely notice of nonrenewal was made by UCPB. Most of the premiums have been paid for more than 60 days after the issuance. as there is no proof at all that the notice sent by ordinary mail was received by Masagana.Section 77 may not apply if the parties have agreed to the payment in installments of the premium and partial payment has been made at the time of loss. which states: 26.753. Masagana made its formal demand for indemnification for the burned insured properties. Renewal Clause.Masagana obtained from UCPB five (5) insurance policies on its Manila properties. plaintiff tendered five checks for P225. Issue: Whether Section 77 of the Insurance Code of 1978 must be strictly applied to Petitioner’s advantage despite its practice of granting a 60. A receipt was issued. The Court of Appeals disagreed with UCPB’s argument that Masagana’s tender of payment of the premiums on 13 July 1992 did not result in the renewal of the policies. The Supreme Court.Unless the company at least forty five days in advance of the end of the policy period mails or delivers to the assured at the address shown in the policy notice of its intention not to renew the policy or to condition its renewal upon reduction of limits or elimination of coverages. Masagana’s properties were razed by fire. notwithstanding any stipulation therein that it shall not be binding until premium is actually paid. 1991 to May 22. having been made beyond the effective date of renewal as provided under Policy Condition No.45 as renewal premium payments. both parties should be deemed in estoppel to question the arrangement they have voluntarily accepted. Hence Masagana filed this case. had been granted a 60 to 90-day credit term for the renewal of the policies. . which had procured insurance coverage from UCPB for a number of years. 1992. 1992. Petition denied. the assured shall be entitled to renew the policy upon payment of the premium due on the effective date of renewal. At the very least.

During the subsistence of the insurance he died from massive cerebral hemorrhage. diabetes. The policy was to be effective for a period of one year. or stomach disorder or any other physical impairment. Issue: Whether or not there was misrepresentaion so as to warrant denial of claim. public order or public policy. Estoppel then is the fifth exception. However. good customs. Therefore. since by principle of succession the widow may claim. The former agreed to insure the lives of eligible housing loan mortgagors of DBP. cancer. the clients of Eternal who purchased burial lots from it on installments would be insured by Philamlife. Held: The Supreme Court ruled that there was no sufficient proof that the insured suffered from hypertension. Eternal sent a letter.The Tuscany case has provided another exception to Section 77 that the insurer may grant credit extension for the payment of the premium. high blood pressure. 90-day credit term for the payment of premiums. the widow can be regarded as real party in interest because in mortgage redemption insurance the mortgagor and not the mortgagee is the contracting party.. Philamlife required that Eternal submit certain documents relative to its insurance claim for Chuang’s death. His widow filed a claim. and that to the best of his knowledge he is in good condition. As required under the said policy. The agreement binds the parties. which had consistently granted a 60. He answered in the application form that he has never consulted a physician for heart condition. Eternal transmitted said documents which Philamlife was able to received. When Chuang died. Dr. Estoppel bars it from taking refuge since Masagana relied in good faith on such practice. renewable on a yearly basis. However. Grepalife denied the claim because of concealment since it was discovered that he had high blood. together with the pertinent papers. kidney. Moreover. The mortgagor merely assigns the proceeds to the mortgagee. Eternal submitted a list of all new lot purchasers. there is nothing in Section 77 which prohibits the parties in an insurance contract to provide a credit term within which to pay the premiums. Leuterio applied membership in the group life insurance plan. The amount of insurance coverage depended upon the existing balance of the purchased burial lots. lung. Philippine American Life Insurance Company FACTS: Respondent insurance company entered into a Creditor Group Life Policy agreement with petitioner. That agreement is not against the law. It is a well-settled ruled that the fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the contract. recovery on the policy should be allowed even though the premium is paid after the loss but within the credit term. Eternal Gardens Memorial Park Corporation vs. If the insurer has granted the insured a credit term for the payment of the premium and loss occurs before the expiration of the term. As regards the second issue. Included in this list is a certain John Chuang. to Philamlife which served as an insurance claim for Chuang’s death. Philamlife denied the said claim. Whether or not the widow of Leuterio is a real party in interest . prompting Eternal to file a case before the RTC of Makati ISSUE: Great Pacific Life Assurance Corp vs Court of Appeals Facts: A contract of group life insurance was executed between Grepalife and DBP. including the application of each purchaser and their corresponding unpaid balances. after more than one year. This prompted Eternal to demand insurance claims. It would be unjust if recovery on the policy would not be permitted against Petitioner. Under said policy. Philamlife did not anymore reply to Eternal’s insurance claim.

or P314.206.000. On 8 October 1987. Held: NO.05. Inc.000. 13 July 1983. the first on 6 February 1984 for P52. 270 SCRA 242 (1997). After some incidents. represented by American International Underwriters (Phils.05 was again paid on installments on 13 April 1983. and no risk attached to the policy. it should be construed liberally in favor of the insured and strictly against the insurer. On this renewed policy. Court of Appeals.103.which replaced and renewed the previous policy. (AHAC). Limitations of liability should be regarded with extreme jealousy and must be construed in such a way as to preclude the insurer from noncompliance with its obligations. and in its answer with amended counterclaim. the trial court dismissed the complaint and the counterclaim. and (3) Subject to no loss prior to premium payment. the Court of Appeals rendered a decision modifying that of the trial court by ordering Tuscany to pay the balance of the premiums due on Policy AH-CPP921-651. Tuscany further claimed that the policy was never binding and valid. this Court held that: Indemnity and liability insurance policies are construed in accordance with the general rule of resolving any ambiguity therein in favor of the insured. (AIUI) issued in favor of Makati Tuscany Condominium Corporation (Tuscany) Insurance Policy AH-CPP-9210452 on the latter's building and premises. Both parties appealed from the judgment of the trial court. Court of Appeals [GR 95546.. If there be any loss such is not covered.00 and the second. The subject policies are valid even if the premiums were paid on installments. 20 May 1982. being a contract of adhesion.103. and 21 November 1983. Tuscany and AHAC moved for summary judgment. with a total premium of P466. in Malayan Insurance Corporation v. Tuscany admitted the issuance of Insurance Policy AH-CPP-9210651. Consequently. It then pleaded a counterclaim for P152. American Home Assurance Co. Tuscany refused to pay the balance of the premium. AH-CPP9210596. On 20 January 1984. Tuscany filed the petition. sought the refund of P924. stated the following reservations: (2) Acceptance of this payment shall not waive any of the company rights to deny liability on any claim under the policy arising before such payments or after the expiration of the credit clause of the policy. All payments were likewise accepted by AHAC. 6 November 1992] Facts: Sometime in early 1982. as well as the two (2) previous policies. HELD: It must be remembered that an insurance contract is a contract of adhesion which must be construed liberally in favor of the insured and strictly against the insurer in order to safeguard the latter’s interest.10 representing the premium payments for 1982-85.00. on 6 June 1984 for P100. The premium in the amount of P466.000.103. for a period beginning 1 March 1982 and ending 1 March 1983.Whether or not Philamlife assured the risk of loss without approving the application. 21 June 1982 and 16 November 1982. On 10 February 1983. par excellence. Thereafter. Thus. 9 September 1983.103.). for a term covering 1 March 1903 to 1 March 1984. A contract of insurance. Tuscany made two installment payments. both accepted by AHAC. and affirming the denial of the counterclaim. AHAC filed an action to recover the unpaid balance of P314. 3 August 1983. in other words. any ambiguity therein should be resolved against the insurer. The records . Makati Tuscany Condominium Corporation vs. the policy was again renewed and AHAC issued to Tuscany Insurance Policy AH-CPP-9210651 for the period 1 March 1984 to 1 March 1985. Issue: Whether payment by installment of the premiums due on an insurance policy invalidates the contract of insurance. The premium was paid on installments on 12 March 1982. In its answer with counterclaim. AHAC issued to Tuscany Insurance Policy No.05 plus legal interest until fully paid. Thereafter.00 for the premiums already paid for 1984-85. where the contract or policy is prepared by the insurer. all of which were accepted by AHAC.05 for Insurance Policy AH-CPP-9210651. It explained that it discontinued the payment of premiums because the policy did not contain a credit clause in its favor and the receipts for the installment payments covering the policy for 1984-85.

it was the duty of the insured to know the terms of the contract he or she is entering into. During the effectivity. and such an agreement is not contrary to morals. effective and binding. Certainly. while the import of Section 77 is that prepayment of premiums is strictly required as a condition to the validity of the contract. a sister of the insured and the beneficiary in the policy. Tuscany may not be allowed to renege on its obligation to pay the balance of the premium after the expiration of the whole term of the third policy (AH-CPP-9210651) in March 1985. Carmen O. The trial court dismissed the complaint and ordered edillon to pay P1000. Petitioner Regina L. although paid on installments. filed her claim for the proceeds of the insurance. the insurer accepted all the installment payments. Lapuz applied with Manila Bankers for insurance coverage against accident and injuries. Her claim having been denied. At the very least. the insured is not entitled to a refund of the premiums paid if the insurer was exposed to the risk insured for any period. She paid the sum of P20. Regina L.clearly show that Tuscany and AHAC intended subject insurance policies to be binding and effective notwithstanding the staggered payment of the premiums. good customs. Thus. 1904. Issue: Whether or not the acceptance by the insurance corporation of the premium and the issuance of the corresponding certificate of insurance should be . The initial insurance contract entered into in 1982 was renewed in 1983. however brief or momentary. then in 1984. It appearing from the peculiar circumstances that the parties actually intended to make the three (3) insurance contracts valid. The reason was that a policy of insurance being a contract of adhesion. basic principles of equity and fairness would not allow the insurer to continue collecting and accepting the premiums. 1982 Facts: Carmen O. So is an understanding to allow insured to pay premiums in installments not so proscribed. Such acceptance of payments speaks loudly of the insurer's intention to honor the policies it issued to Tuscany. Edillon. The policy was to be effective for 90 days. the Court was not prepared to rule that the request to make installment payments duly approved by the insurer. public order or public policy. The insured could not have been qualified under the conditions stated in said contract and should have asked for a refund of the premium. hence the policy became void. Edillon v Manila Bankers Life G. Lapuz died in a vehicular accident in the North Diversion Road. Moreover.R. L-34200 September 30. Section 78 of the Insurance Code in effect allows waiver by the insurer of the condition of prepayment by making an acknowledgment in the insurance policy of receipt of premium as conclusive evidence of payment so far as to make the policy binding despite the fact that premium is actually unpaid.00 representing the premium for which she was issued the corresponding receipt. where the risk is entire and the contract is indivisible. would prevent the entire contract of insurance from going into effect despite payment and acceptance of the initial premium or first installment. but does not expressly prohibit an agreement granting credit extension. Edillon instituted this action in the trial court. No. both parties should be deemed in estoppel to question the arrangement they have voluntarily accepted. In those 3 years. The insurance corporation relies on a provision contained in the contract excluding its liability to pay claims under the policy in behalf of "persons who are under the age of sixteen (16) years of age or over the age of sixty (60) years" They pointed out that the insured was over sixty (60) years of age when she applied for the insurance coverage. Section 77 merely precludes the parties from stipulating that the policy is valid even if premiums are not paid. She gave the date of her birth as July 11. and later deny liability on the lame excuse that the premiums were not prepaid in full.

even before the policies were issued. it became impossible to transact further payments. The insured nevertheless was able to borrow P 234 from the policy. Peralta was the beneficiary. Ruiz died on 1945. Held: Yes. 1950] Facts: FIRST CASE: Respondent Corporation was paid P 176.” Constantino vs. Ratio: The age of Lapuz was not concealed to the insurance company. if it is silent as to the mode of payment. lasting for 20 years. is so contrary to the dictates of honesty and fair dealing.000 which lasted for 20 years.04 as annual premium by Arcadio Constantino in exchange for policy no.involved a violation of the provision of the policy requiring the payment of premiums before the insurance shall become effective. . though it knows as it must. Petition granted. [GR# L-1670 August 31. no further premiums were made. It is usually held that where the insurer. However after the first payment. Capital Insurance & Surety Co.. Respondent Corporation issued on 1938 another insurance policy no. due to the war (Japanese occupation) Respondent Corporation had to close down its branch in the country. a requirement for the payment of the first or initial premium in advance or actual cash may be waived by acceptance of a promissory note. Her application clearly indicated her age of the time of filing the same to be almost 65 years of age. “. would invalidate the contract from its very inception. . There was sufficient time for the private respondent to process the application and to notice that the applicant was over 60 years of age and cancel the policy. Petitioner Paz Constantino was made beneficiary.. A check given subsequent by the insured as partial payment of the premium was dishonored for lack of funds. Despite such deviation from the terms of the policy. the insurance corporation received her payment of premium and issued the corresponding certificate of insurance without question. 93212 on 1941 for P 3. To allow a company to accept one's money for a policy of insurance which it then knows to be void and of no effect. the insurer was held liable.. Asia Life Insurance Co. Inc. The insurance company was aware. In other words. It inaction to revoke the policy despite a departure from the exclusionary condition contained in the said policy constituted a waiver of such condition. the insurance corporation is already deemed in estoppel. similar to Que Chee Gan vs. The company issued the policy upon the execution of a promissory note for the payment of the premium. has knowledge of existing facts which. and the insurer is stopped thereafter from asserting the breach of such conditions. promissory notes received by the company must be deemed to have been accepted in payment of the premium.. Under the circumstances. if insisted on. SECOND CASE: Similarly.. such knowledge constitutes a waiver of conditions in the contract inconsistent with the known facts. Thereafter the insured died on 1944. [GR# L-1669 August 31. vs. Regular payments were made however due also to the war. is that although one of conditions of an insurance policy is that "it shall not be valid or binding until the first premium is paid".000. Despite such information which could hardly be overlooked. at the time of the issuance of a policy of insurance. 1950] Peralta vs.deemed a waiver of the exclusionary condition of coverage stated in the policy. Asia Life Insurance Co. 78145 for Spouses Ruiz and Peralta also for P 3. that the assured believes it to be valid and binding. Later. Law Union Insurance. that in the premises insured there were only two fire hydrants contrary to the requirements of the warranty in question.

and when called to pay. Moreover. those after the first. Vance of Yaled declares that the United States Rule . An intention to supplement our laws with the prevailing principles of the US arises. Issues: (1) Whether or not the beneficiaries are entitled to recover the amount insured despite non-payment caused by the Japanese occupation. since act 2427. Prof. In said case it was hold that promptness of payment is essential in the business of life insurance since all calculations of the company is based on the hypothesis of prompt payments. The lower court favored Respondent. Contracts of insurance are contracts of indemnity within the terms and condition found therein. Forfeiture for nonpayment is necessary to protect said business from embarrassment otherwise confusion would abound. Compliance to the terms of the policy is a must as it is a condition precedent to the right of recovery. Thus. from the terms of the policy it is clear that non-payment of premium produces avoidance (forfeiture of the policy). where “the contract is not merely suspended but is abrogated by reason of non-payment of premiums since the time of payments is peculiar to the essence of the contract. Philippine law on insurance and the Civil Code) are mostly based from the Civil Code of California. Failure of the insured to do so disqualifies recovery for the loss. Therefore.In both cases the plaintiffs demanded payment but was refused due to Respondent Corporation’s refusal on the ground of non-payment of the premiums. An insurance company for certain considerations guarantee the insured against loss or damage as may be stipulated. (2) Whether or not the periodic payments of the premiums. Thus the terms of the policy determines the insurer’s liability. (2) The annual premium is not a debt. must be followed. nor is it an obligation which the insurer can maintain an action against the insured. nor its settlement governed by the rules on payment of debts. A contract of insurance is sui generis. This means though the insured may hold the insurer to the contract by the fulfillment of the condition. the latter has no power or right to compel the insured to maintain the contract relation longer than the insured may desire. It is optional upon the insured. is not an obligation of the insured so that it is not a debt enforceable by the action of the insurer. And that delinquency cannot be tolerated nor redeemed except at the option of the company. Held: (1) The beneficiaries are not entitled to recover for nonpayment despite the presence of war. Lastly parties contracted both for peace and war times since the policies contained also wartime days. It follows that the parties contemplated uninterrupted operation of the contract even if armed conflict ensues.” Further it would be unjust to permit the insurer to retain the reserve value of the policy or the excess of premiums paid over the actual risk when the policy was still effective as held in the Statham Case which was more logical and juridically sound. the insurer may insist on the fulfillment of said stipulations.

including a reinsurance business. The preceding section does not authorize an insurance for or against the drawing of any lottery. All kinds of insurance are subject to the provisions of this chapter so far as the provisions can apply. the term "Commissioner" means the "Insurance Commissioner". title and interest in the policy of insurance taken out by an original owner on the life or health of a minor shall automatically vest in the minor upon the death of the original owner. wife. any insurance contract. the following terms shall have the respective meanings hereinafter set forth or indicated. Any contingent or unknown event. with any insurance company duly authorized to do business in the Philippines. is doing an insurance business as hereinafter provided. agreements or transactions or that no separate or direct consideration is received therefore. Whenever used in this Code. whether past or future. The consent of the husband is not necessary for the validity of an insurance policy taken out by a married woman on her life or that of her children. notwithstanding such minority. as surety. damage or liability arising from an unknown or contingent event. any contract of suretyship as a vocation and not as merely incidental to any other legitimate business or activity of the surety. which may damnify a person having an insurable interest. mother. Sec. (d) doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this Code. The married woman or the minor herein allowed to take out an insurance policy may exercise all the rights and privileges of an owner under a policy. A contract of suretyship shall be deemed to be an insurance contract. as such. within the meaning of this Code. 4.The Insurance Code Sec. or for or against any chance or ticket in a lottery drawing a prize. health and accident insurance. as insurer. Any minor of the age of eighteen years or more. 3. may be insured against. specifically recognized as constituting the doing of an insurance business within the meaning of this Code. In the application of the provisions of this Code the fact that no profit is derived from the making of insurance contracts. (c) doing any kind of business. brother or sister. child. husband. Sec. 5. All rights. (2) The term "doing an insurance business" or "transacting an insurance business". may. unless the context otherwise requires: (1) A "contract of insurance" is an agreement whereby one undertakes for a consideration to indemnify another against loss. only if made by a surety who or which. subject to the provisions of this chapter. within the meaning of this Code. Chapter 1 THE CONTRACT OF INSURANCE Title 1 WHAT MAY BE INSURED Sec. (b) making or proposing to make. or create a liability against him. unless otherwise provided for in the policy. Title 2 PARTIES TO THE CONTRACT . (3) As used in this code. provided the insurance is taken on his own life and the beneficiary appointed is the minor's estate or the minor's father. 2. shall include: (a) making or proposing to make. contract for life. shall not be deemed conclusive to show that the making thereof does not constitute the doing or transacting of an insurance business.

Sec. Every person. of his spouse and of his children. Sec. 10. who does not cease to be a party to the original contract. is an insurable interest. accomplice. nor upon any valid contract for it. making a new contract with him. may be performed by the mortgagee therein named. Sec. Sec. An interest in property insured must exist when the insurance takes effect. 19. with the same effect as if it had been performed by the mortgagor. to the extent of his liability but not to exceed the value thereof. Title 3 INSURABLE INTEREST Sec. or in whom he has a pecuniary interest. 13. 6. . may be an insurer. partnership. is not insurable. No contract or policy of insurance on property shall be enforceable except for the benefit of some person having an insurable interest in the property insured. where a mortgagor of property effects insurance in his own name providing that the loss shall be payable to the mortgagee. but not exist in the meantime. Unless the policy otherwise provides. Sec.Sec. the insurance is deemed to be upon the interest of the mortgagor. Sec. A mere contingent or expectant interest in anything. or respecting property or services. of which death or illness might delay or prevent the performance. (b) Of any person on whom he depends wholly or in part for education or support. and any act of his. unless he has expressly waived this right in said policy. Sec. imposes further obligation on the assignee. (b) An inchoate interest founded on an existing interest. and (d) Of any person upon whose life any estate or interest vested in him depends. or assigns a policy of insurance to a mortgagee. not founded on an actual right to the thing. or liability in respect thereof. is to be performed by the mortgagor. and when the loss occurs. 17. and. (c) Of any person under a legal obligation to him for the payment of money. although the property is in the hands of the mortgagee. The insured shall have the right to change the beneficiary he designated in the policy. whether real or personal. The measure of an insurable interest in property is the extent to which the insured might be damnified by loss or injury thereof. at the time of his assent. An insurable interest in property may consist in: (a) An existing interest. and interest in the life or health of a person insured must exist when the insurance takes effect. the act of the mortgagor cannot affect the rights of said assignee. 9. 15. Anyone except a public enemy may be insured. the nearest relative of the insured shall receive the proceeds of said insurance if not otherwise disqualified. 11. prior to the loss. under the contract of insurance. A carrier or depository of any kind has an insurable interest in a thing held by him as such. association. or any relation thereto. Sec. 18. Sec. or corporation duly authorized to transact insurance business as elsewhere provided in this code. will have the same effect. 14. but need not exist thereafter or when the loss occurs. 16. The interest of a beneficiary in a life insurance policy shall be forfeited when the beneficiary is the principal. 7. but any act which. If an insurer assents to the transfer of an insurance from a mortgagor to a mortgagee. in which event. or accessory in willfully bringing about the death of the insured. Every person has an insurable interest in the life and health: (a) Of himself. which would otherwise avoid the insurance. 12. Sec. Sec. 8. Every interest in property. or (c) An expectancy. coupled with an existing interest in that out of which the expectancy arises. Sec. of such nature that a contemplated peril might directly damnify the insured.

by will or succession. does not avoid an insurance even though it has been agreed that the insurance shall cease upon an alienation of the thing insured. 20. 23. a policy shall be issued in lieu thereof. A policy of insurance must specify: (a) The parties between whom the contract is made. Unless applied for by the insured or owner. if he is not the absolute owner thereof. (d) The property or life insured. Within sixty days after the issue of the cover note. until the interest in the thing and the interest in the insurance are vested in the same person. The policy shall be in printed form which may contain blank spaces. clause. number. 51.Sec. and health insurance. The written instrument in which a contract of insurance is set forth. sign. signature. symbol. suspends the insurance to an equivalent extent. does not avoid an insurance. or owners in common. separately insured by one policy. 25. Any rider. or if the insurance is of a character where the exact premium is only determinable upon the termination of the contract. (b) The amount to be insured except in the cases of open or running policies. Cover notes may be extended or renewed beyond such sixty days with the written approval of the Commissioner if he determines that such extension is not contrary to and is not for the purpose of violating any provisions of this Code. A change on interest. and (g) The period during which the insurance is to continue. clause. warranty or endorsement purporting to be part of the contract of insurance and which is pasted or attached to said policy is not binding on the insured. (e) The interest of the insured in property insured. clause. Sec. Sec. any rider. A change in interest in a thing insured. to the others. who are jointly insured. and in the cases of life. and every policy executed by way of gaming or wagering. is void. a change of interest in any part of a thing insured unaccompanied by a corresponding change in interest in the insurance. or that the policy shall be received as proof of such interest. Title 6 THE POLICY Sec. Sec. accident. 22. may be typewritten and need not be in printed form. or word necessary to complete the contract of insurance shall be written on the blank spaces provided therein. 52. and any word. Sec. Cover notes may be issued to bind insurance temporarily pending the issuance of the policy. (c) The premium. 24. joint owners. Except in the cases specified in the next four sections. and his interest in the insurance passes to the person taking his interest in the thing insured. (f) The risks insured against. warranty or endorsement is also mentioned and written on the blank spaces provided in the policy. is called a policy of insurance. however. a statement of the basis and rates upon which the final premium is to be determined. Sec. A transfer of interest by one of several partners. The Commissioner may . phrase. on the death of the insured. including within its terms the identical insurance bound under the cover note and the premium therefore. 49. Sec. unless the descriptive title or name of the rider. clause. A change of interest in one or more several distinct things. 50. mark. after the occurrence of an injury which results in a loss. does not avoid the insurance as to the others. Sec. Every stipulation in a policy of insurance for the payment of loss whether the person insured has or has not any interest in the property insured. 21. warranty or endorsement issued after the original policy shall be countersigned by the insured or owner. clause. which countersignature shall be taken as his agreement to the contents of such rider. warranty or endorsement. Group insurance and group annuity policies. Sec. does not affect the right of the insured to indemnity for the loss.

Sec. the insurer will furnish the facts on which the cancellation is based. unless the insurer at least forty-five days in advance of the end of the policy period mails or delivers to the named insured at the address shown in the policy notice of its intention not to renew the policy or to condition its renewal upon reduction of limits or elimination of coverages. may become the owner of the interest insured. of one or more of the following: (a) non-payment of premium. The insurance proceeds shall be applied exclusively to the proper interest of the person in whose name or for whose benefit it is made unless otherwise specified in the policy. 55. the named insured shall be entitled to renew the policy . and which provides that the object of the policy may be from time to time defined. Sec. Sec. after the effective date of the policy. 59. Sec. 60. the fact that his principal or beneficiary is the real party in interest may be indicated by describing the insured as agent or trustee. To render an insurance effected by one partner or part-owner. limiting the time for commencing an action thereunder to a period of less than one year from the time when the cause of action accrues. When the description of the insured in a policy is so general that it may comprehend any person or any class of persons. and shall state (a) which of the grounds set forth in section sixty-four is relied upon and (b) that. stipulation. or by other general words in the policy. and no notice of cancellation shall be effective unless it is based on the occurrence. A policy may be so framed that it will inure to the benefit of whomsoever. 64. 53. is void. 57. Sec. A running policy is one which contemplates successive insurances. 58. only he who can show that it was intended to include him can claim the benefit of the policy. In case of insurance other than life. Sec. applicable to the interest of his copartners or other part-owners. Sec. by additional statements or indorsements. 63. Sec. The mere transfer of a thing insured does not transfer the policy. All notices of cancellation mentioned in the preceding section shall be in writing. 61. Sec. but suspends it until the same person becomes the owner of both the policy and the thing insured. 62. Sec. 66. upon written request of the named insured. A valued policy is one which expresses on its face an agreement that the thing insured shall be valued at a specific sum. No policy of insurance other than life shall be cancelled by the insurer except upon prior notice thereof to the insured. Sec. during the continuance of the risk. (d) discovery of willful or reckless acts or omissions increasing the hazard insured against. especially as to the subjects of insurance. An open policy is one in which the value of the thing insured is not agreed upon. A policy is either open. A condition. or agreement in any policy of insurance. mailed or delivered to the named insured at the address shown in the policy. (c) discovery of fraud or material misrepresentation. 56. When an insurance contract is executed with an agent or trustee as the insured. Sec. (e) physical changes in the property insured which result in the property becoming uninsurable. 54. Sec. 65. (b) conviction of a crime arising out of acts increasing the hazard insured against. Sec.promulgate rules and regulations governing such extensions for the purpose of preventing such violations and may by such rules and regulations dispense with the requirement of written approval by him in the case of extension in compliance with such rules and regulations. it is necessary that the terms of the policy should be such as are applicable to the joint or common interest. or (f) a determination by the Commissioner that the continuation of the policy would violate or would place the insurer in violation of this Code. valued or running. but is left to be ascertained in case of loss.

In case of an over-insurance by several insurers. If a peril insured against has existed. except in the case of a life or an industrial life policy whenever the grace period provision applies. for any sum received by him under any policy. 78. or of his agent. on account of fraud or misrepresentation of the insurer. up to the amount for which the insurers are severally liable under their respective contracts. Any policy written for a term of less than one year shall be considered as if written for a term of one year. An acknowledgment in a policy or contract of insurance or the receipt of premium is conclusive evidence of its payment. or of the . the insurer never incurred any liability under the policy. or on account of facts. proportioned to the amount by which the aggregate sum insured in all the policies exceeds the insurable value of the thing at risk. Sec. no policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid. the insured is not entitled to return of premiums. notwithstanding any stipulation therein that it shall not be binding until the premium is actually paid. unless the policy otherwise provides. Sec. may claim payment from the insurers in such order as he may select. the existence of which the insured was ignorant without his fault. A person insured is entitled to return of the premium when the contract is voidable. 93. (d) Where the insured receives any sum in excess of the valuation in the case of valued policies. to such portion of the premium as corresponds with the unexpired time. as follows: (a) To the whole premium if no part of his interest in the thing insured be exposed to any of the perils insured against. so far as that particular risk is concerned. at a pro rata rate. Any policy written for a term longer than one year or any policy with no fixed expiration date shall be considered as if written for successive policy periods or terms of one year. so far as to make the policy binding. That no holder of a life insurance policy may avail himself of the privileges of this paragraph without sufficient cause as otherwise provided by law. as against the full insurable value. the insured must give credit as against the valuation for any sum received by him under any other policy without regard to the actual value of the subject matter insured. 94. A double insurance exists where the same person is insured by several insurers separately in respect to the same subject and interest. (b) Where the insurance is made for a definite period of time and the insured surrenders his policy. Notwithstanding any agreement to the contrary. 79. (b) Where the policy under which the insured claims is a valued policy. however short. 82. 81. Where the insured is overinsured by double insurance: (a) The insured. unless a short period rate has been agreed upon and appears on the face of the policy. 80. Title 11 DOUBLE INSURANCE Sec. 77. or when by any default of the insured other than actual fraud.upon payment of the premium due on the effective date of the renewal. A person insured is entitled to a return of premium. Sec. the insured is entitled to a ratable return of the premium. Sec. (c) Where the policy under which the insured claims is an unvalued policy he must give credit. Sec. An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the peril insured against. Sec. Title 8 PREMIUM Sec. and the insurer has been liable for any period. after deducting from the whole premium any claim for loss or damage under the policy which has previously accrued. Provided.

he must communicate all the representations of the original insured. which are material to the risk. The original insured has no interest in a contract of reinsurance. A reinsurance is presumed to be a contract of indemnity against liability. he must hold such sum in trust for the insurers. except under automatic reinsurance treaties. Sec. to contribute ratably to the loss in proportion to the amount for which he is liable under his contract. Sec. and not merely against damage. and also all the knowledge and information he possesses. Where an insurer obtains reinsurance. 98. 96. whether previously or subsequently acquired.insurable value in the case of unvalued policies. A contract of reinsurance is one by which an insurer procures a third person to insure him against loss or liability by reason of such original insurance. Title 12 REINSURANCE Sec. according to their right of contribution among themselves. 95. (e) Each insurer is bound. . Sec. 97. as between himself and the other insurers.

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