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III. Insurable Interest A. In General 1.

Pecuniary benefit in preservation or pecuniary damage in loss of the subject of insurance Pecuniary in nature In general, a person is deemed to have an insurable interest in the subject matter insured where he has a relation or connection with or concern in it that he will derive pecuniary or financial benefit or advantage from its preservation and will suffer pecuniary loss or damage from its destruction, termination, or injury by the happening of the event insured against. Interest not necessarily implies a right to the whole or part of a thing; to have an interest n the preservation of a things is to be circumstanced with respect to it as to have benefit from its existence and prejudice from its destruction The property of a thing and the interest devisable from it may be different: of the first, the price is generally the measure, but by interest in a thing, every benefit or advantage arising out of or depending on such thing may be considered as being comprehended; Exception the term has a somewhat broader meaning in connection with life insurance; the expectation of benefit from the continued life of that person need not necessarily be of a pecuniary nature Necessity of insurable interest to validity Its existence is a primary concern in determining the liability of an insurer under a policy of insurance; insurable interest may be in life and health or in property; its existence gives a person the legal right to insure the subject of the policy of insurance; in its absence, the person would be gambling which is prohibited; postulate: insurance must not be a mere bet upon a future event; rule: an insurable interest is necessary to the validity of an insurance contract whatever the subject matter of the policy, whether upon property or life; insurable interest requirement not applicable to industrial life insurance An insurable interest does not, of necessity, depend upon ownership of the property. It may be a special interest entirely disconnected from any title, lien, or possession. If the holder of an interest in property will suffer direct pecuniary loss, by its destruction, he may indemnify himself therefrom by a contract of insurance. The question is not what is his title to the property, but rather, would he be

damaged pecuniary by its loss. If he would, he has an insurable interest. That interest may be derived by possession, enjoyment, or profits of the property, security or lien resting upon it, or it may be other certain benefits growing out of or dependent upon it." Crossman v. American Insurance Co., supra at 308-309, 164 N.W. at 429. The usual rule is that an insurable interest exists when the policy holder derives pecuniary benefit or advantage by the preservation or continued existence of the property or will sustain pecuniary loss from its destruction. The policy holders pecuniary interest need not be specific or definite; it may even be strictly hypothetical, as long as the policy holder demonstrates some relationship to the property that would, in good faith, provide an interest in its preservation. Similarly, the loss to the policyholder from the destruction of property need not be specific or direct; it may be potential only. It may arise out of a statutory or contractual liability on the part of the policyholder, rather than from any ownership interest in the property. Arthur N. Brook. Business Insurance Law and Practice Guide 2. Necessary for validity of insurance contract; Absence amounts to gambling or wager policy Sec. 4 The preceding section does not authorize an insurance for or against the drawing of any lottery, or for or against any change or ticket in a lottery drawing a prize. Sec. 18 No Contract or policy of insurance on property shall be enforceable for the benefit of some person having an insurable interest in the property insured. Effects of absence of insurable interest in property insured Principle of indemnity applicable an insurance taken out by a person on property in which he has no insurable interest is void; It has been held that fire insurance taken on property belonging to another is void, although the insurer had full knowledge of the fact of ownership and even if the insured subsequently acquired insurable interest; Where the contract is invalidated on the ground that no insurable interest exists, the premium is ordinarily returned to the insured unless he is in pari delicto with the insurer; In life insurance taken by a person on his own life, it is not necessary for the beneficiary to have an insurable interest if the life insured

Doctrine of waiver or estoppel not applicable cannot be invoked since the public has interest in

the matter independent concurrence of the parties -

of

the

consent

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Where the intent of the insured was to insure his good for 15k but thru the error or mistake of the insurer, the policy of 15k was for the building in which the goods were stored which building the insured never owned or insurable interest, it was held in case of loss of the goods, the insured can recover; this is a case where the insureds lack of insurable interest is not sufficient to avoid an insurance;

by statute but also by public policy; regarded as detrimental to society; such policies have a tendency for the event, and furnish strong temptation to the party interest to bring about if possible the event insured against; Non-existence of los from occurrence of event wagers suffer no loss from the occurrence of the contingent event; on the contrary, they actually profit from it; the insurable interest requirement intends to deter the insured from the temptation to bring about any unnatural means the results of the contingent event.

Sec 25 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, or that the policy shall be received as proof of such interest, and every policy executed by way of gaming or wagering, is void.

Stipulations void in an insurance policy Stipulation for the payment of loss whether the person insured has or has not any interest in the subject matter of the insurance a policy issued to a person without interest in the subject matter of the contract is a mere wager policy or contract and is void; wager policy has been defined as a pretended insurance where the insured has no interest in the thing insured an can sustain no loss by the happening of the misfortunes insured against; the policy of law does not admit of such insurance however willing the parties may be to enter it; doctrine of waiver has obviously nothing to do with it; the company or its agents cannot, by waiver, invest the insured with interest he does not own; the law, however, makes an exception in the cases mentioned in Section 181 regarding life insurance Sec. 181. A policy of insurance upon life or health may pass by transfer, will or succession to any person, whether he has an insurable interest or not, and such person may recover upon it whatever the insured might have recovered. Stipulation that the policy shall be received as proof of insurable interest whether or not insurable interest exists does not depend upon the contract of insurance or the stipulations therein; the insurer can always show lack of insurable interest after the issuance of a policy insurance; the defence of absence of insurable interest is available only to the insurer being the only party to the insurance contract who has a legitimate interest in raising the defence; Wagering or gaming policies void A mere bet upon a future event it is fundamental postulate of all insurance that it must not be a mere bet upon a future event; not only condemned

Sec. 229-231 on Industrial life insurance Existence of insurable interest; rules regarding insurable interest have frequently been held not to apply to industrial life insurance for several reasons 1. since the proceeds of industrial life policies are typically small, they present little danger as an inducement to murder; 2. the investigation and processing of the potential defence in each case would be time-cosuming and nullify the advantage of speedy payment of proceeds for funeral and burial expenses under the facility of payment clause (see Sec. 230[k,m]); 3. In view of the diminutive size of the proceeds, the addition of pointless administrative costs for either the insurer or the beneficiary could destroy the current usefulness of this type of insurance; While there exists the possibility of wagering by buying up industrial policies of those unable to meet the premiums, the evil has not been considered sufficiently serious to impose the insurable interest requirement on such policies. 3. Reasons for Requirement of Insurable Interest Requirement, a matter of public policy As a deterrence to the insured Public policy which renders wager policies as invalid; it is against public interest; demoralizing in that: it allows the insured to have an interest in the destruction of the subject matter rather that in its preservation; and it affords a temptation or an inducement to the insured, having nothing to lose and everything to gain, to bring to pass the even upon the happening of which the insurance becomes payable; As a measure of limit of recovery or limit to liability of insurer If and to the extent that any particular insurance contract is a contract to pay indemnity, the insurable interest of the insured will be the measure of the upper limit of his provable loss under the contract; Insurance contract should not provide means of making profit;

4. Difference in life and non-life insurance Insurable Life Property Interest As to extent of Unlimited Limited to actual insurable (except in life value of interest interest insurance thereon effected by creditor on life of debtor) As to time when Enough that Insurable insurable insurable interest must interest must interest exists at exist when the exits the time of the insurance takes policy takes effect and when effect and need the loss occurs, not exist at the but need not time of loss exist in the (except: same meantime above) As to Expectation of Expectation of expectation of benefit to be benefit from benefit derived derived from the continued continued existence of existence of life property not need not have sufficient unless any legal basis; it has a basis of a reasonable legal right probability is sufficient

destruction and not in the continuance of his life; When the insurance regarded a wager policy Exception to the general rule is when it is found out that a wagering policy has been taken out by the insured on his life at the behest of a third person who is named as beneficiary; Evidence of a wagering policy is usually found in such facts as: o That the original proposal to take out insurance was that of the beneficiary; o That premiums are paid by the beneficiary; and o That the beneficiary has no interest, economic or emotional, in the continued life of the insured; In finding that a policy is a wager, courts will generally void the policy entirely; 2. Insurable Interest in Life of Another Insurance for benefit of insured a person cannot lawfully procure insurance for his own benefit on the life of another in whose life he has no insurable interest; Insurable interest of another must be a pecuniary one and it exists whenever the relation between the assured and the insured, whether by blood, marriage or commercial intercourse, is such that the assured has a reasonable expectation of deriving benefit from the continuation of the life insured or of suffering detriment or incurring liability thru its termination; The policy of the law requires that the assured shall have an interest to preserve the life insured in spite of the insurance, rather than destroy it because of the insurance; Insurance for benefit of a third party When the owner of the policy insures the life of another the cestui que vuie and designates a third party as beneficiary, both the owner and beneficiary must have an insurable interest in the life of the cestui que vuie; If the insurable interest is satisfied, a life policy is assignable regardless of whether the assignee has an insurable interest in the life of the cestui que vuie; Under our law, in order that one may have an insurable interest in the life of another, it must be one of those mentioned in a,b,c,d and e of Section 10, i.e. the interest is pecuniary or founded upon the close relationship between the parties; hence, the mere fact that two persons are engaged to be married does not give one an insurable interest in the life of the other;

B. Insurable interest in Life and Health

Sec 10 Every person has an insurable interest in the life and health: a) Of himself, of his spouse and of his children; b) Of any person on whom he depends wholly or in part for education or support, or in whom he has a pecuniary interest c) Of any person under a legal obligation to him for the payment of money, or respecting property or services, of which death or illness might delay or prevent the performance; and d) Of any person upon whose life any estate or interest vested in him depends. 1. Insurable in ones own life: Everyone has unlimited insurable interest in his own life whether the insurance is for the benefit of himself or another and it is not necessary that the beneficiary designated in the policy should have any interest in the life of the insured Insurance taken out by insured on his life for the benefit of another presence of insurable interest required only as evidence of good faith of the parties; It is contrary to human experience that one will insure own life for anothers benefit for the purpose of speculation, to be tempted to take his own life in order to secure the payment of money to another; or designate as the beneficiary, a person interested in the

a. b.

In spouse, children and other close relatives Upon whom one depends for education or support or in whom he has a pecuniary interest

When mere blood relationship sufficient In US, numerous decisions hold that pecuniary benefit is not the only test; thus, mere relationship of brother or sister, father or child is sufficiently close to give either an insurable interest in the life of another; Reasoning: natural affection in cases of this kind is considered sufficient, if not more powerful, to protect the life of the insured than any other consideration; Essential: must be in good faith and not for the purpose of speculating upon the hazard of a life in which the insured has no interest; The following have insurable interest in each others life since under Article 195 FC, they are obliged to support each other: o The spouses; o Legitimate ascendants and descendants; o Parents and their legitimate children and the legitimate or illegitimate children of the latter; o Parent and their illegitimate children and the legitimate or illegitimate children of the latter; o Legitimate brothers and sisters, whether of the full or half-blood; Brothers and sisters not legitimately related, whether full or half-blood, are likewise bound to support each other except only when the need for support of the brother or sister, being of age is due to a cause imputable to the claimants fault or negligence; When pecuniary benefit essential Ordinarily, mere affinity does not constitute an insurable interest There must be an expectation of pecuniary benefit in the life of the insured to sustain the insurance, that is, a risk of actual monetary loss from his death; Hence, love and affection, gratitude, or friendship by itself is not sufficient; The expectation, however, need not have legal basis whatever; it being sufficient that it be actual; c. Under a legal obligation to him

illness of the other may lawfully procure insurance on the others life; Risk that performance of obligation might be delayed or prevented it must appear that the death or illness of the insured person who is under a legal obligation, might delay or prevent its performance; d. Upon whose life any estate or interest vested in him depends

Section 10(d) provides that every person has an insurable interest in the life and health of any person upon whose life any estate or interest vested in him depends; this means that one may insure the life of a person where the continuation of the estate or interest vested in him who takes the insurance depends upon the life insured. 3. Beneficiaries: Designation Forfeiture of Interest and Change;

Sec. 11 The insured shall have the right to change the beneficiary he designated in the policy, unless he has expressly waived said right in his policy. Definition Beneficiary ordinarily used in referring to the person who is named or designated in a contract of life, health, or accident insurance as the one who is to receive the benefits which become payable, according to the terms of the contract, upon the death of the insured; Also used to indicate only those persons, whether natural or juridical, who, though not parties to the contract, are mentioned in it as the intended recipients of the proceeds or benefits of the insurance if the insured risk occurs; Broader term includes those who, upon a proper basis of insurable interest, secure insurance for their own benefit upon the lives of others Kinds 1. Insured himself 2. Third person who paid a consideration 3. Third person thru mere bounty of insured Right of insured to change beneficiary in life insurance GENERAL RULE: Section 11 abandons former rule that unless the policy reserves to the insured the right to change the beneficiary, no such right exists and the named beneficiary has vested in the policy of which he cannot divested without his consent; NOW, whether or not the policy reserves to the insured the right to change the beneficiary, he has the power to so change the beneficiary without the

Insurable interest of a person in life of another under a legal obligation to former Related by contract or commercial relation any person so related to another, either by contract or commercial relation, that a right possessed by him will be extinguished or impaired by the death or

consent of the latter who acquires no vested right but only an expectancy of receiving the proceeds under the insurance; it follows that the insured retains the right to receive the cash value, to assign the policy, or to surrender it without the consent of the beneficiary; Effect of death of the insured the right must be exercised specifically in the manner provided in the policy or contract; but the insureds power to extinguish the beneficiarys interest ceases at his death, and cannot be exercise by his personal representatives or assignees; the beneficiarys right then becomes completely fixed; Where right to change is waived the insured has no power to make such changed without the consent of the beneficiary; The beneficiary acquires an absolute and vested interest to al benefits accruing to the policy from the date of its issuance and delivery, including that of obtaining a policy loan to the extend stated in the schedules of values attached to the policy; Neither can a new beneficiary be added to the irrevocably designated beneficiary; The insured does not even retain the power to destroy the contract by refusing to pay premiums for the beneficiary can protect his interest by paying premiums for the reason that the fulfilment of an obligation may be made by a third person even against the will of the debtor and if he has an interest in the fulfilment of the obligation, even against the will of the creditor Designation of Beneficiary words used in a life policy will be construed broadly in order that the benefit of the insurance shall be received by those intended by the insured as the object of his bounty; the beneficiary designated may be the insured or his estate, a specifically designated person or persons, or a class or classes of persons; 1. Children broad enough to include an adopted child, an adult child not forming a part of the household of the insured, after-born children even of a marriage subsequently contracted; Ordinarily means a descendant of the first degree and is never intended to include grandchildren Where other children are named individually, other children cannot share in the proceeds unless the insured subsequently amend this designation to include them; 2. Husband; wife or widow wife generally regarded as description personae, and the fact that one who otherwise answers the description does not have the legal status of the wife of the insured does not prevent her from taking as beneficiary, as when she is designated by

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name, although the words his wife are added; however, if the beneficiary is not named but is designated merely by a status, such as the husband, wife or widow of the insured, the legal husband or wife as ascertained at the death of the insured is entitled to the benefits; Note, under a law, a common law spouse cannot be named beneficiary of a life insurance by the person who cannot make any donation to him; Husband and children; wife and children - a policy payable to the wife of the insured and their children includes children by another wife, although the prevailing view state that the beneficiaries are limited to children common to both; but if the designation is made to the insureds wife and children or my wife and children. The insurance is deemed for the benefit of all children of the insured, whether by the named wife or those of another; Under a policy payable to the insureds husband and children, he and they do not take the insurance by inheritance but upon her death, the insurance money must be divided per capita among the husband and children; the same rule applies to a policy payable to wife and children; Family used to indicate the recipient of the proceeds of an insurance policy; in deciding whether a particular person claiming a share of the fund is of the family of the insured, the court will ascertain whether that person was so regarded by the insured; Heirs or legal heirs these terms will not ordinarily be construed as indicating merely the heirs at law but rather that class of person who would take the property of the insured in case he died intestate; generally held that the widow of the insured is entitled to take under a policy payable to his heirs or legal heirs as well as the children of the deceased; Estate or legal representatives of deceased are to be construed in their strict technical sense and the courts will ordinarily assume that they are used to mean executors or administrator, unless it appear that the insured intended to use these expression in the sense of heirs or next of kin;

Section 12 The interest of a beneficiary in a life insurance policy shall be forfeited when the beneficiary is the principal, accomplice, or accessory in wilfully bringing about the death of the insured; in which event, the nearest relative of the insured shall receive the proceeds of said insurance if not otherwise disqualified Forfeiture of the interest of the beneficiary in a life insurance policy

Interest in Section 12 means the right of the beneficiary to receive the proceeds of the life insurance policy; does not mean insurable interest since the beneficiary need not have an insurable interest in the life of the insured; The nearest relatives of the insured in the order of enumeration are the following: 1. Legitimate children; 2. The father and mother, if living; 3. The grandfather and grandmother, or ascendants nearest in degree, if living; 4. The illegitimate children; 5. The surviving spouse; and 6. The collateral relatives, to wit: a. Brothers and sisters of full blood; b. Brothers and sisters of the half-blood; and c. Nephews and nieces 7. In default of the above, the State shall be entitled to receive the insurance proceeds.

necessarily entail a pecuniary loss in case of its injury or destruction. As a general a general rule however, the expectation of the benefit to be derived from the continued existence of the property must have a basis of legal right, although the person insured has no title, either legal or equitable, to the property insured. The rule is different in life insurance. (4) Mere factual expectation of loss. Such expectation arising from any legal right or duty in connection with the property doesnt constitute an insurable interest. Ex: owner of a gasoline station near a hotel has no sufficient insurable interest in the hotel simply because its burning or destruction though it leaves the filling station physically unharmed wil lessen his income fromg guests of the hotel. (???) This type of interest is called factual expectation though usually insufficient in strict indemnity insurance, will SUFFICE in LIFE INSURANCE. 2. WHAT IT MAY OR MAY NOT CONSIST IN Sec. 14. An insurable interest in property may consist in: (a) An existing interest; (b) An inchoate (embryonic, undeveloped) interest founded on an existing interest; or (c) An expectancy, coupled with an existing interest in that out of which the expectancy arises. Insurable interest in property in particular cases. Insurable interest need not be an existing. (1) An existing interest. The existing interest in a property may be a legal title or equitable title. Absolute owner has a insurable interest thereon.

C. INSURABLE INTEREST IN PROPERTY 1. DEFINITION Sec. 13. Every interest in property, whether real or personal, or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril might directly damnify the insured, is an insurable interest. -The interest may be in the property itself (ownership) or any relation thereto (interest of a trustee or commission agent, or liability in respect thereof (interest of a carrier or depository of goods) -generally, anyone has an insurable interest in property who derives a benefit from its existence or would suffer loss from its destruction. (1) Occurrence of loss may be uncertain. Under the law it is not necessary that the interest is such that the event insured against would necessarily subject the insured to loss. It is sufficient that it might do so, and the pecuniary injury would be the natural consequence. (2) title or right to possession not essential. Although a person has no title, legal or equitable, in the property , and neither possession nor right to possession yet he has an insurable interest if he is so situated with respect to the property that he will suffer loss as the proximate result of its damage or destruction. Unlike in the civil law concept of jus perit domino, where ownership is the basis for consideration of who bears the risk of loss, in property of insurance, ones interest IS NOT DETERMINED BY concept of title, but whether the insured has substantial economic interest in the property. (3) legal expectation of loss or benefit. Insurable interest in property is not necessarily an interest in property in the sense of title, but a concern in the preservation of the property and such relation to or connection with it as will

The following have insurable interest arising from LEGAL TITLE: trustee (seller of property not yet delivered); mortgagor, lessor of property leased, lessee and sublessee may also insure the property leased or subleased, and assignee of property for the benefit of creditors. If title is held in a representative capacity, (executor, administrator, trustee, receiver) the representative has insufficient insurable interest for the purpose of taking out insurance on the property under his control, but the proceeds from such insurance are FOR THE BENEFIT THE REPRESENTATIVE IS ACTING. (benefit ng lupa or owner??) The following have insurable interest arising from EQUITABLE TITLE: purchaser of property before delivery or before he has performed the conditions of the sale; mortgagee of property mortgaged; mortgagor after the foreclosure but BEFORE EXPIRATION PERIOD REDEMPTION IS ALLOWED; the beneficiary under a deed of trust, the creditors under a deed of assignment; judgement debtor whose property has been seized under execution until the right to redeem or the right to have the sale set aside has been lost, etc.

(2) An inchoate interest must be founded on an existing interest. Stock holder has an inchoate interest in the property of the corporation , which is founded on an existing interest arising from his ownership of shares in the corporation. His insurable interest is limited to the extent of the value of his interests or to his share in the distribution of the corporate assets upon dissolution. Note that the stockholder neither has legal nor equitable title to assets of the corp. A partner likewise has an insurable interest in the firm property which will support a separate policy for his benefit. (3) An expectancy the expectancy must be coupled with an existing interest in that our of which such expectancy arises. A farmer may insure future crops if they are to be grown on land owned by him at the time of the issuance of the policy or although the crops are to be raised by him on the land of another, provided the crops belong to him when produced. A business owner can insure against a contingency which may cause loss of profits Any binding contact giving rights which will be affected by destruction of property will afford insurable interest even though insured has neither interest or lien on the property (workman to a building he contracted to repair) Sec. 16. A mere contingent or expectant interest in anything, not founded on an actual right to the thing, nor upon any valid contract for it, is not insurable. A mere hope or expectation which may be frustrated by the happening of some event uncoupled with any present legal right will not support contract of insurance. 1. Property of father/son/spouse a father cannot insure sons property nor can a son insure property he expects to inherit as his interest is an expectancy OF INHERITING. Spouse has no interest in the property of the other. 2. Life of parents/children/spouses by statutory provisions, parents and children and spouses can insure the life of each other. (A195 Family Code in relation to Sec10 (b). Since in the law they are under mutual obligation to support each other, a life policy is held to be ameans of fulfilling this obligation or a means of saving the party entitle to support from being the subject of public charity. 3. Property of Debtor nor can a general or unsecured creditor insure specific property of his debtor who is alive, even though destruction of such property would render worthless any judgment he might obtain. But an unsecured creditor may insure the property of A DECEASED DEBTOR since all personal liability ceases with the death of the debtor. The proceedings to subject the estate to the payment of debt of the deceased debtor are in rem. An unsecured debtor who OBTAINS JUDGMENT IN HIS FAVOR becomes a

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judgement creditor and has insurable interest in the debtors property as he has A RIGHT TO LEVY on such property. However, to recover under the insurance, he must show that the debtor HAS NO OTHER POPERTY OUT OF WHICH THE JUDGEMENT MAY BE SATISIFIED. An unsecured creditor has an insurable interest in the life of his debtor to the extent of the amount of the debt sec10c. Property of testator still alive one named as beneficiary in a will has no insurable interest in a property designated before the testators death, however reasonable his expectation or benefit to be derived from the continued existence of the property. His expectation has no legal basis since the will has no legal effect BEFORE THE DEATH of the testator. (like the creditor) The will can be revoked at anytime before the death of the testator unless he expressly waived this right in the policy sec11 in which case the beneficiary will have insurable interest.

4. MEASURE OF INSURABLE INTEREST IN PROPERTY Sec. 17. The measure of an insurable interest in property is the extent to which the insured might be damnified by loss or injury thereof. Contract of insurance is a contracy if indemnity. Any contract of property insurance that gives the insured MORE THAN INDEMNIY AGAINST HIS ACTUAL LOSS is in the nature of a WAGERING POLICY CONTRARY TO PUBLCI POLICY AND VOID. Ex: mortgagor has an insurable interest EQUAL to the value of the mortgaged property, and the mortgagee ONLY TO THE EXTENT of the credit secured by the mortgage Sec. 15. A carrier or depository of any kind has an insurable interest in a thing held by him as such, to the extent of his liability but not to exceed the value thereof. Ex: a bailee ma insure merely his interest in the chattels to protect himself from the loss of benefits to which he is entitled; he may insure himself against the liability which he may incur upon destruction of chattels. 5. CHANGE EXCEPTIONS OF INTEREST SUSPENDS INSURANCE;

Sec. 20. Except in the cases specified in the next four sections, and in the cases of life, accident, and health insurance, a change of interest in any part of a thing insured unaccompanied by a corresponding change in interest in the insurance, suspends the insurance to an equivalent extent, until the interest in the thing and the interest in the insurance are vested in the same person. there mere transfer of a thing insured does not transfer the policy, but suspends it until the same person becomes the owner of both policy and the thing insured. In accord with sec19: an insured must have an insurable interest in the property insured at the time of loss.

So a purchaser of insured property who DOES NOT TAKE PRECAUTION to obtain a transfer of the policy of insurance cannot in case of loss recover!!! He has no contract with insurer!!! Object of the rule against alienation / change of interest or title: to provide against changes which might supply a motive to destroy the property orr might lessen eh interest of the insured in protecting or guarding it. Change of interest covered by law: change of interest referred to in sec 20, 2 1, 22, 23, 24 means ABSOLUTE TRANSFER OF THE PROPERTY Consequently the interest in the property insured doesnt pass by mere execution of the pledge or mortgage. (ex: NO alienation until the mortgagee acquires right to take possession by default)

policy with respect to one or more of the things DOESNT AFFECT OTHERS. If the things are insured under one policy for a gross sum and for an entire premium the contract is indivisible so that the change of interest in one or more of the things will also avoid the insurance as to the others. (2) DIVISIBILITY OF CONTRACT, A QUESTION OF INTENTION whether a contract is entire or severable is a question of intention to be determined by the language employed by the parties. Where only one premium was paid for the entire shipment of goods, the insurance contract is indivisible and he fact that the goods are loaded on two different vessels DOESNT make the contract several and divisible. Sec. 23. A change on interest, by will or succession, on the death of the insured, does not avoid an insurance; and his interest in the insurance passes to the person taking his interest in the thing insured. Under sec 23 the insurance on property passes automatically on the death of the insured, to the heir, legatee or devisee who acquired interest in the thing insured. The rights to the succession are transmitted from the moment of the death of the decedent. Sec. 24. A transfer of interest by one of several partners, joint owners, or owners in common, who are jointly insured, to the others, does not avoid an insurance even though it has been agreed that the insurance shall cease upon an alienation of the thing insured. Transfer of interest by one or several parties etc. jointly insured. (1) effect where transfer is to the others. a transfer of interest in the insured property by a partner, joint owner, or owner in common, to the others who are jointly insured WILL NOT AVOID the insurance. The rule is the same even if there is a stipulation that the insurance shall cease upon an alienation of the thing insured. (2) Reason for the rule the underlying principle is that each partner (or owner or owner in common) is interested in the whole property and the hazard is not increased because the purchasing partner has acquired a greater interest in the property by a transfer of his co-partners share. (the transfer doesnt affect the risk because no new party is brought into contractual relationship with the insurer.) nalipat lang (3) exception to the rule but a policy will be avoided by a sale of an interest in partnership property to one of his co partners WITHOUT CONSENT OF THE INSURER AND BEFORE THE LOSS OCCURS, where the policy CONTAINS THE CONDITIONS that in case of any sale, transfer or change of title of any property insured, of any undivided interest therein such insurance will be void. -- - by stipulation (4) effect where transfer is to strangers it is ALIENATION. A sale by a parent of his interest to a stranger ens the contract as to him but doesn affect the others. Sec. 57. A policy may be so framed that it will inure to the benefit of whomsoever, during the

Exceptions to the general rule of suspending insurance: 1. in life health and accident insurance sec20 2. a change of interest in the thing insured after the occurrence of an injury which results in a loss sec 21 3. A change of interest in one or more of several things, separately insured by one policy sec22 4. A change of interest by wil or succession on the death of the insured sec 23 5. A transfer of interest by one of several partners , joint owners, or owners in common, who are jointly insured to the others sec24 6. When a policy is so framed that it will inure to the benefit of whoever, during the continuance of the risk, may become the owner of the interest insured sec57 7. When there is an express prohibition against alienation in the policy in case of alienation, the contract of insurance is not merely suspended but is aVOIDed. Sec. 21. A change in interest in a thing insured, after the occurrence of an injury which results in a loss, does not affect the right of the insured to indemnity for the loss. - after a loss has happened the liability of the insurer becomes fixed. The insured has a right to assign his claim against the insurer as freely as any other money claim. This right is absolute and cannot be delimited by agreement. -the insured has also the absolute right to transfer the thing insured after occurrence of the loss. Such change of interest doesnt affect his right to indemnity for the loss sec21. Section 20 refers to change of interest BEFORE LOSS HAS OCCURRED. Sec. 22. A change of interest in one or more several distinct things, separately insured by one policy, does not avoid the insurance as to the others. Distinguish a divisible contract from an indivisible contract A 1420 CC: Art. 1420. In case of a divisible contract, if the illegal terms can be separated from the legal ones, the latter may be enforced. (1) EFFECT DEPENDENT ON DIVISIBILITY OF CONTRACT IN THE FORMER the cause or consideration is made up of several parts while in the latter, it is entire and single. If the things are separately insured in one policy the contract is divisible and the violation of a condition which avoids the

continuance of the risk, may become the owner of the interest insured. -a policy must specify the parties between whom the contract is made, name is not essential as the insured may be described in other ways. The person must show that he is the person named or described or he belongs to that class described. Sec. 58. The mere transfer of a thing insured does not transfer the policy, but suspends it until the same person becomes the owner of both the policy and the thing insured. - effect of transfer: since a contract of insurance is a personal contract it doesnt attach to or run with the property insured. D. DISTINCTIONS BETWEEN INSURABLE INTEREST IN LIFE AND PROPERTY INSURANCE 1. AS TO TIME WHEN IT MUST EXIST Sec. 19. An interest in property insured must exist when the insurance takes effect, and when the loss occurs, but not exist in the meantime; and interest in the life or health of a person insured must exist when the insurance takes effect, but need not exist thereafter or when the loss occurs Time when insurable interest must exist: The general rule stated in this section is applicable only to insurance on property and not to life insurance except that on the life of the debtor. (1) When insurance takes effect and loss occurs insurable interest in property must exist at two distinct times: on the date of execution of the contract of insurance AND on the date of the occurrence of the risk against, otherwise the policy is void. (ex: if fire occurs after the sale or alienation of the property, the former owner cannot recover on the policy wala syang interest , di sya part ng contract.) (2) When insurance takes effect in life insurance , the insurable interest requirement is satisfied if the interest exists at the time the policy is procured, even if it has ceased to exist at the time of the insureds death. Under the law, health, accident and disability insurance is deemed included in the terms life and non life insurance. (3) When liability attaches in liability insurance, questions of insurable interest are not particularly importan. It necessarily exists when the liability of the insured to a 3rd party attaches. (4) Need not exist during intervening period the obvious purpose of this is to PREVENT THE ISSUE OF WAGERING POLICIES sec14 b,c . But the interest insured need not exist in the meantime sec19. In the absence of stipulation to the contrary, the alienation of insured property will not defeat recovery if the insured HAS SUBSEQUENTLY REACQUIRED THE PROPRY AND POSSESSES an insurable interest at time of loss.

measure of indemnity under a policy of insurance upon life or health is the sum fixed in the policy. 2. AS TO EXTENT -The extent or amount of indemnity payable on the death of the insured under a policy of insurance upon life or health is the amount fixed the policy. In effect, life policies are valued ones sec61. -In property insurance which is fundamentally a contract of indemnity, the measure of indemnity DEPENS ON WHETHER THE POLICY IS AN OPEN OR A VALUED POLICY. Stricty speaking, there could be no exact pecuniary measurement of a persons interest in is life or the life of another. Hence, a person can purchase life insurance FOR ANY AMOUNT AS LONG AS HE CAN PAY THE PREMIUM. Exception: when a person insures the life of another as where a creditor insures the life of his debtor (extent is susceptible of exact pecuniary estimation value lang ng utang) 3. AS TO AS TO EXPECTATION OF BENEFIT TO BE DERIVED. E. INSURABLE INTEREST OF MORTGAGEE AND MORTGAGOR

Sec. 183. Unless the interest of a person insured is susceptible of exact pecuniary measurement, the