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Based on the lecture/syllabus of Atty. Ma.

Cristina Sagmit

hpsevilla_2008 1 (2) The term "doing an insurance business" or "transacting an insurance business", within the meaning of this Code, shall include: (a) making or proposing to make, as insurer, any insurance contract; (b) making or proposing to make, as surety, any contract of suretyship as a vocation and not as merely incidental to any other legitimate business or activity of the surety; (c) doing any kind of business, including a reinsurance business, specifically recognized as constituting the doing of an insurance business within the meaning of this Code; (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. In the application of the provisions of this Code the fact that no profit is derived from the making of insurance contracts, agreements or transactions or that no separate or direct consideration is received therefore, shall not be deemed conclusive to show that the making thereof does not constitute the doing or transacting of an insurance business. Elements of an Insurance Contract The insured possesses an interest of some kind susceptible of pecuniary estimation, known as insurable interest The insured is subject to a risk of loss through the destruction or impairment of that interest by the happening of the designated perils; The insurer assumes the risk of loss; Such assumption is part of a general scheme to distribute actual losses among a large group of persons bearing somewhat similar risks; As consideration for the insurers promise, the insured makes a ratable distribution called premium to a general insurance fund. Nature and Characteristics of an Insurance Contract Aleatory depends upon some contigent event Contract of indemnity for non-life and an investment for life insurance Personal Executory and conditional on the part of the insurer Uberrimae fides - utmost good faith; all parties to an insurance contract must deal in good faith, making a full declaration of all material facts in the insurance proposal. Adhesion most of the terms do not result from mutual negotiation as they are prescribed by the insurer insured may reject or adhere. PHILAMCARE VS. CA A applied for health care coverage with Philamcare. Under the agreement, A was entitled to avail of hospitalization benefits, whether ordinary or emergency. He was also entitled to avail of "out of patient benefits". Philamcare contentds that the health care agreement is not an insurance contract. Held: Section 2 (1) of the Insurance Code defines a contract of insurance as an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event. An insurance contract exists where the following elements concur: 1. The insured has an insurable interest; 2. The insured is subject to a risk of loss by the happening of the designated peril; 3. The insurer assumes the risk; 4. Such assumption of risk is part of a general scheme to distribute actual losses among a large group of persons bearing a similar risk; and 5. In consideration of the insurers promise, the insured pays a premium.

INSURANCE
Laws governing insurance 1. Insurance Code of 1978 primary application 2. Civil Code of the Philippines secondary application 3. Family Code 4. Special Laws a. Revised Government Service Insurance Act b. Social Security Act 5. Other laws a. Property Insurance law b. RA 4898 life, disability and accident insurance for barangay officials c. EO 250 rationalizes benefits under RA 4898 for members of various Sanggunian Subrogation in insurance Process of legal substitution The insurer, after paying the amount covered by the policy, steps into the shoes of the insured The insurer avails of the rights of the insured against the wrongdoer. Insured CANNOT recover from offender what was paid by insured but can recover any deficiency. NOTE: this is applicable only in non-life insurance (Philamgen v. CA) Rule of Construction In case of doubt, the provision shall be strictly construed against the insurance company. RIZAL SURETY V. CA Pursuant to Art. 1377 of the Civil Code, any obscure word or stipulation in the insurance policy shall be resolved against the insurance company which drafted the terms thereof. Regulation of the Insurance Business Insurance business is affected with public interest The public must be protected against insolvency or unfair treatment by insurers Section 414-416 As part of its administrative powers, the insurance Commission is tasked to regulate the conduct of insurance business through licensing, examination, investigation and revocation. Statute of Limitations Any suit based on an insurance policy should be brought within 10 years from the time the cause of action accrues (from the time the claim is denied; If there was no denial of the claim, right of action does not accrue) The 10 year period may be lengthened or shortened BUT Prescriptive period for industrial life: cannot be shorter than 6 years In all other kinds of insurance, cannot be shorter than one year. Contract of Insurance, concept Sec. 2. Whenever used in this Code, the following terms shall have the respective meanings hereinafter set forth or indicated, unless the context otherwise requires: (1) A "contract of insurance" is an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event. A contract of suretyship shall be deemed to be an insurance contract, within the meaning of this Code, only if made by a surety who or which, as such, is doing an insurance business as hereinafter provided. An agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event. Contract of suretyship is deemed an insurance contract only if made by a surety who or which is doing an insurance business. What is Doing an Insurance Business?

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit Section 3 of the Insurance Code states that any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest against him, may be insured against. In the case at bar, the insurable interest of respondents husband in obtaining the health care agreement was his own health. The health care agreement was in the nature of non-life insurance, which is primarily a contract of indemnity. The answer assailed by petitioner was in response to the question relating to the medical history of the applicant. This largely depends on opinion rather than fact, especially coming from respondents husband who was not a medical doctor. Where matters of opinion or judgment are called for, answers made in good faith and without intent to deceive will not avoid a policy even though they are untrue. Mayer vs. CA Facts: HK contracted Mayer Steel to manufacture and supply various steel pipes and fittings. Prior to the shipping, Mayer insured the pipes with South Sea Surety and Insurance Co. Upon reaching HK, the pipes were discovered damaged. Mayer then sued the insurance company for indemnity. The CA held that the action by Mayer is barred under Sec 3(6) of COGSA since it was filed more than 2 years from the time the goods were unloaded from the vessel. Held: The CA erred in applying the provision of COGSA in the instant case. Under Sec. 3(6), only the carriers liability is extinguished if no suit is brought within 1 year. BUT the liability of the insurer is not extinguished because the insurers liability is based not on the contract of carriage but on the contract of insurance. COGSA governs the relationship between the carrier on one hand and the shipper,, the consignee, and/or the insurer on the other hand. It defines the obligations of the carrier under the contract of carriage without affecting the relationship between the shipper and the insurer as the latter is governed by the Insurance Code. Phil HealthCare vs. CIR ISSUE: Is a healthcare agreement in the nature of a contract of insurance? FACTS: Individuals enrolled in its health care programs pay an annual membership fee. They are entitled to various preventive, diagnostic and curative medical services provided by its duly licensed physicians, specialists and other professional technical staff participating in the group practice health delivery system at a hospital or clinic owned, operated or accredited by it.The DST under Section 185 of the 1997 Tax Code is imposed on the privilege of making or renewing any policy of insurance (except life, marine, inland and fire insurance), bond or obligation in the nature of indemnity for loss, damage, or liability. RULING: The health care agreement is primarily a contract of indemnity. A health care agreement is in the nature of a non-life insurance policy. What may be insured against? Sec. 3. Any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest, or create a liability against him, may be insured against, subject to the provisions of this chapter. 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. Any minor of the age of eighteen years or more, may, notwithstanding such minority, contract for life, health and accident insurance, with any insurance company duly authorized to do business in the Philippines, provided the insurance is taken on his own life and the beneficiary appointed is the minor's estate or the minor's father, mother, husband, wife, child, brother or sister.

hpsevilla_2008 2 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. All rights, 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, unless otherwise provided for in the policy. Sec. 84. Unless otherwise provided by the policy, an insurer is liable for a loss of which a peril insured against was the proximate cause, although a peril not contemplated by the contract may have been a remote cause of the loss; but he is not liable for a loss which the peril insured against was only a remote cause. Art. 1174, Civil Code: Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which, though foreseen, were inevitable. Contingent event something which may or may not happen OR Unknown event something which is certain to happen but the time of occurrence is unknown Which may damnify a person having insurable interest or create a liability against him Damnify v. Create a liability Damnify direct loss Create a liability expose the person to liability such as in the case of third party liability(TPL) Insurance by a married woman May take out an insurance on her life or that of her children or that of her husband without the consent of her husband May take out insurance on paraphernal property Insurance by a minor A property insurance taken by a minor is voidable until annulled If contract is not disaffirmed, insurer cannot invoke minority to escape liability Guingon vs. Del Monte A owned and operated several jeepneys and insured the same with C against accidents and TPL. Issue: To whom is C liable to pay H: The right of the person injured to sue the insurer of the party at fault (insured), depends on whether the contract of insurance is intended to benefit third persons also or only the insured. And the test applied has been this: Where the contract provides for indemnity against liability to third persons, then third persons to whom the insured is liable, can sue the insurer. Where the contract is for indemnity against actual loss or payment, then third persons cannot proceed against the insurer, the contract being solely to reimburse the insured for liability actually discharged by him thru payment to third persons, said third persons' recourse being thus limited to the insured alone Bonifacio vs. Mora H: The appellants are not mentioned in the contract as parties thereto; nor is there any clause or provision thereof from which we can infer that there is an obligation on the part of the insurance company to pay the cost of repairs directly to them. It is fundamental that contracts take effect only between the parties thereto, except in some specific instances provided by law where the contract contains some stipulation in favor of a third person. a policy of insurance is a distinct and independent contract between the insured and insurer, and third persons have no right either in a court of equity, or in a court of law, to the proceeds of it, unless there be some contract of trust,

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit expressed or implied, by the insured and third person". In this case, no contract of trust, expressed or implied exists. We, therefore, agree with the trial court that no cause of action exists in favor of the appellants in so far as the proceeds of insurance are concerned. Insurance for or against drawing of lottery: Sec. 4. The preceding section does not authorize an insurance for or against the drawing of any lottery, or for or against any chance or ticket in a lottery drawing a prize. 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. Game of chance v. insurance Game of chance Parties contemplate gain by mere chance Gambler courts fortune Tends to increase inequality of fortune Whatever one wins is lost by another person Gambler creates a risk of loss to himself Insurance Parties seek to distribute possible loss by reason of mischance Insured seeks misfortune Tends to equalize fortune What one gains is not at the expense of another Insurance Contract does not create a new and non existing risk of loss

hpsevilla_2008 3 common form, group insurance provides life or health insurance coverage for the employees of one employer. The coverage terms for group insurance are usually stated in a master agreement or policy that is issued by the insurer to a representative of the group or to an administrator of the insurance program such as a, employer. The employer acts as a functionary in the collection and payment of premiums and in performing related duties. Likewise falling within the ambit of administration of a group policy is the disbursement of insurance payments by the employer to the employees. 3. Industrial premiums are payable either monthly or oftener if the face amount of insurance is not more than 500 times the current statutory minimum wage in Metro Manila Non-Life Insurance: a. Fire Insurance includes insurance against loss by fire, lightning, windstorm, tornado or earthquake and other allied risks, when such risks are covered by extension to fire insurance policies or under separate policies b. Casualty insurance covers loss or liability arising from accident or mishap, excluding certain types of loss which by law or custom are considered as falling exclusively within the scope of other types of insurance such as fire, marine Includes but is not limited to employers liability insurance, workmens compensation insurance, public liability insurance, motor vehicle liability insurance, plate glass insurance, burglary and theft insurance, personal accident and health insurance written by non-life companies. b. 1Casualty: Compulsory Motor Vehicle Liability Insurance against passenger and third party liability for death or bodily injuries arising from motor vehicle accidents Required before an owner or operator can use his vehicle Required in registration or renewal of registration c. Marine Insurance Vessels, craft, aircraft, vehicles, goods, freights, cargoes, merchandize, effects, bottomry, respondentia interests Persons or property in connection with or appertaining to marine, inland marine, transit or transportation insurance but excludes life insurance or surety bonds or insurance against loss by reason of bodily injury to any person who arising out of ownership, maintenance or use of automobiles Precious stones, jewels, jewelry, precious metals, whether in the course of transportation or otherwise Bridges, tunnels and other instrumentalities of transportation and communication (excluding buildings, furniture and furnishings fixed contents and supplies held in storage), piers, wharves, docks and slips other aids of navigation, dru docks, marine railways, dams d. Suretyship An agreement whereby a party called the surety guarantees the performance of another party called the principal or obligor of an obligation or undertaking in favor of a third party called the oblige. o Includes official recognizances, stipulations, bonds or undertakings issued by any company.

Uy vs. Palomar: H: The term lottery extends to all schemes for the distribution of prizes by chance, such as policy playing, gift exhibitions, prize concerts, raffles at fairs, etc and various forms of gambling. The three essential elements of lottery are: 1. Consideration; 2. Prize; 3. Chance. With respect to consideration, the law does not condemn the gratuitous distribution of property by chance, if no consideration is derived directly or indirectly from the party receiving the chance, but does condemn as criminal, schemes in which a valuable consideration of some kind is paid directly or indirectly for the chance to draw a price. TWO BASIC KINDS OF INSURANCE Life insurance sec. 179 insurance on human lives and insurance appertaining thereto or connected therewith Non-life insurance property insurance or insurance whose object is other than a persons life or where the covered peril is something other than death Life Insurance: Types 1. Individual protection is based on individual application. 2. Group unit of selection is the group rather than the individual; individual underwriting characteristics of each individual is not considered in the determination of insurable interest. Single policy covering number of persons such as employees in a given establishment, but each individual possessing certificate of insurance. Note: The employer and/or the agent of the employer is considered an agent of the insurance company such that payment of premium to the employer is equivalent to payment to the insurance company. Pineda vs. CA H: The practice is usual in the group insurance business and is consistent-with the jurisprudence thereon in the State of California-from whose law our Insurance Code has been mainly patterned-which holds that the employerpolicyholder is the agent of the insurer. Group insurance, is essentially a single insurance contract that provides coverage for many individuals. In its original and most

PART TWO: LIFE INSURANCE


Sec. 179. Life insurance is insurance on human lives and insurance appertaining thereto or connected therewith. Sec. 180. An insurance upon life may be made payable on the death of the person, or on his surviving a specified period, or otherwise contingently on the continuance or cessation of life. Every contract or pledge for the payment of endowments or annuities shall be considered a life insurance contract for purpose of this Code.

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit In the absence of a judicial guardian, the father, or in the latter's absence or incapacity, the mother, or any minor, who is an insured or a beneficiary under a contract of life, health or accident insurance, may exercise, in behalf of said minor, any right under the policy, without necessity of court authority or the giving of a bond, where the interest of the minor in the particular act involved does not exceed twenty thousand pesos. Such right may include, but shall not be limited to, obtaining a policy loan, surrendering the policy, receiving the proceeds of the policy, and giving the minor's consent to any transaction on the policy. Sec. 180-A. The insurer in a life insurance contract shall be liable in case of suicides only when it is committed after the policy has been in force for a period of two years from the date of its issue or of its last reinstatement, unless the policy provides a shorter period: Provided, however, That suicide committed in the state of insanity shall be compensable regardless of the date of commission. (As amended by Batasang Pambansa Blg. 874). 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. Sec. 182. Notice to an insurer of a transfer or bequest thereof is not necessary to preserve the validity of a policy of insurance upon life or health, unless thereby expressly required. Sec. 183. Unless the interest of a person insured is susceptible of exact pecuniary measurement, the measure of indemnity under a policy of insurance upon life or health is the sum fixed in the policy. Section 87. An insurer is not liable for a loss caused by the willful act or through the connivance of the insured; but he is not exonerated by the negligence of the insured, or of the insurance agents or others. Sec. 187, 9th par. No insurance company may be authorized to transact in the Philippines the business of life and non-life insurance concurrently unless specifically authorized to do so: Provided, That the terms "life" and "non-life" insurance shall be deemed to include health, accident and disability insurance. Contingencies insured against: 1. Death 2. Survival of a specific period 3. Contingently on the continuance or cessation of life Scope/what may be insured against Actual death Cessation of life o Best proof of death: Death certificate o Policy matures upon the death of the insured Living death When the insured suffers from disability due to disease or accident which prevents him from engaging in any lawful occupation; Partakes the nature of health and disability benefits. (May be life and/or non-life) Retirement death CF: Life annuity Annuitant gives money or property to the insurer Insurer now becomes the debtor, and has the obligation to give annual pension or income to either the annuitant or another person The obligation of insurer to give pension stops upon the death of the annuitant KINDS OF LILFE INSURANCE:

hpsevilla_2008 4 1. Ordinary Life insured is required to pay premiums annually or at more frequent intervals throughout life and the beneficiary is entitled to receive payment only after the death of the insured. 2. Limited Payment Life premiums are payable only during a limited period of years (10,15,20 years). After the period, the insurance is deemed fully paid. Proceeds are payable upon death of insured. 3. Term insurance provides coverage only if the insured dies during a limited period. If the insured dies within the period, the beneficiary gets the proceeds. If the insured survives the period, the contact is terminated. 4. Endowment Policy insured gets a sum of money if he survives a specified period. If insured dies within the period, the beneficiary gets the proceeds. 5. Life Annuity debtor binds himself to pay an annual premium or income during the life of one or more determinate persons in consideration of a capital consisting of money or other property, whose ownership is transferred to him at one with the burden of income. 6. Accident Insurance may be life or non-life insurance If death is one of the risks insured against, it is classified as life insurance. Accident an event which happens by chance without intention and which is unexpected, unusual and unforeseen. Nature of Accident and Health Insurance Sec. 187-A, 9th par Health, accident and disability insurance are deemed as both life and non-life insurance and such may be issued by either life or non-life insurance companies. Gallardo v. Morales Accident insurance may be regarded as life insurance when one of the risks insured is the death of the insured by accident

Rule on suicides: General Rule: Not compensable BASES: (1) Sec. 87 which provides that an insurer is not liable if loss is caused by willful act or connivance of the insured; and (2) The rules of Court which provides that a person is presumed to intend the consequences of his voluntary acts When is suicide compensable? Section 180-A If insured was not in his right mind/insane at the time of suicide compensable regardless of date of commission If insured committed suicide after the policy has been effective for at least 2 years from issuance or last reinstatement Note: 2 year period can be shortened but not lengthened because this is beneficial to the insured. SUN INSURANCE VS. CA During a party, A, believing that a gun was not loaded, pointed the same to his temple and shot himself dead. There was recovery. H: The words "accident" and "accidental" have never acquired any technical signification in law, and when used in an insurance contract are to be construed and considered according to the ordinary understanding and common usage and speech of people generally. In substance, the courts are practically agreed that the words "accident" and "accidental" mean that which happens by change or fortuitously, without intention or design, and which is unexpected, unusual, and unforeseen. The definition that has usually been adopted by the courts is that an accident is an event that takes place without one's foresight or expectation an event that proceeds from an unknown cause, or is an unusual effect of a known case, and therefore not expected. An accident is an event which happens without any human agency or, if happening through human agency, an event which, under the circumstances, is unusual to and not expected by the person to whom it happens. It has also been defined as an injury which happens by reason of some

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit violence or casualty to the insured without his design, consent, or voluntary co-operation. DELA CRUZ VS. CAPITAL INSURANCE During a boxing match, insured slipped causing his death. Insurance company argued that the death of the insured, caused by his participation in a boxing contest, was not accidental, and therefore, not covered by the insurance. H: The generally accepted rule is that, death or injury does not result from accident or accidental means within the terms of an accident-policy if it is the natural result of the insured's voluntary act, unaccompanied by anything unforeseen except the death or injury. There is no accident when a deliberate act is performed unless some additional, unexpected, independent, and unforeseen happening occurs which produces or brings about the result of injury or death. In other words, where the death or injury is not the natural or probable result of the insured's voluntary act which produces the injury, the resulting death is within the protection of policies insuring against the death or injury from accident. In the present case, while the participation of the insured in the boxing contest is voluntary, the injury was sustained when he slid, giving occasion to the infliction by his opponent of the blow that threw him to the ropes of the ring. Without this unfortunate incident, that is, the unintentional slipping of the deceased, perhaps he could not have received that blow in the head and would not have died. The fact that boxing is attended with some risks of external injuries does not make any injuries received in the course of the game not accidental. In boxing, as in other equally physically rigorous sports, such as basketball or baseball, death is not ordinarily anticipated to result. If, therefore, it ever does, the injury or death can only be accidental or produced by some unforeseen happening or event as what occurred in this case. FINMAN VS. CA Stabbed while waiting for a ride from fiesta; there was recovery H: In the case at bar, it cannot be pretended that Carlie Surposa died in the course of an assault or murder as a result of his voluntary act considering the very nature of these crimes. In the first place, the insured and his companion were on their way home from attending a festival. They were confronted by unidentified persons. The record is barren of any circumstance showing how the stab wound was inflicted. Nor can it be pretended that the malefactor aimed at the insured precisely because the killer wanted to take his life. In any event, while the act may not exempt the unknown perpetrator from criminal liability, the fact remains that the happening was a pure accident on the part of the victim. The insured died from an event that took place without his foresight or expectation, an event that proceeded from an unusual effect of a known cause and, therefore, not expected. Neither can it be said that there was a capricious desire on the part of the accused to expose his life to danger considering that he was just going home after attending a festival. GALLARDO VS. MORALES Issue: W/N a personal accident insurance which insures for injuries and/or death as a result of murder or assault is a life insurance thus exempting it from execution. H: Yes. It is not disputed that a life insurance is, generally speaking, distinct and different from an accident insurance. However, when one of the risks insured in the latter is the death of the insured by accident, then there are authorities to the effect that such accident insurance may, also, be regarded as a life insurance. The exemption there established applies to ordinary life insurance contracts, as well as to those which, although intended primarily to indemnify for risks arising from accident, likewise, insure against loss of life due, either to accidental causes, or to the willful and criminal act of another, which, as such, is not strictly accidental in nature. Indeed, it has been held that statutes of this nature seek to enable the bead of the family to secure his widow and

hpsevilla_2008 5 children from becoming a burden upon the community and, accordingly, should merit a liberal interpretation. Statutes exempting life insurance are regarded as exemption laws, and not as part of the insurance law of the state, nor as designed simply to protect insurer from harassing litigation. Such, statutes should be construed liberally and in the light of, and to give effect to, their purpose of enabling an individual to provide a fund a fter his death for his family which will be free front the claims of creditors. The exemption privilege is created not by contract but by legislative grant, and grounds for the exemption of the proceeds of insurance policies must be found in the statutes. Calanoc vs. CA Basilio was a watchman of the Manila Auto Supply. He secured a life insurance policy from the Philippine American Life Insurance Company in the amount of P2,000 to which was attached a supplementary contract covering death by accident. In 1951, he died of a gunshot wound on the occasion of a robbery. It is contended in behalf of the company that Basilio was killed which "making an arrest as an officer of the law" or as a result of an "assault or murder" committed in the place and therefore his death was caused by one of the risks excluded by the supplementary contract which exempts the company from liability. This contention was upheld by the CA. H: There is no proof that the death of Basilio is the result of either crime because there is no proof of how the fatal shot was fired. Nor can it be said that the killing was intentional for there is the possibility that the malefactor had fired the shot merely to scare away the people around for his own protection and not necessarily to kill or hit the victim. In any event, while the act may not exempt the triggerman from liability for the damage done, the fact remains that the happening was a pure accident on the part of the victim. While as a general rule "the parties may limit the coverage of the policy to certain particular accidents and risks or causes of loss, and may expressly except other risks or causes of loss therefrom" , however, it is to be desired that the terms and phraseology of the exception clause be clearly expressed so as to be within the easy grasp and understanding of the insured, for if the terms are doubtful or obscure the same must of necessity be interpreted or resolved against the one who has caused the obscurity. BIAGTAN VS. INSULAR A clause in the insurance policy expressly provided that it would not apply where death resulted from an injury "intentionally inflicted by another party."; robbers entered the house and stabbed the insured; no recovery H: Nine wounds were inflicted upon the deceased, all by means of thrusts with sharp-pointed instruments wielded by the robbers. This is a physical fact as to which there is no dispute. So is the fact that five of those wounds caused the death of the insured. Whether the robbers had the intent to kill or merely to scare the victim or to ward off any defense he might offer, it cannot be denied that the act itself of inflicting the injuries was intentional. Intentional" as used in an accident policy excepting intentional injuries inflicted by the insured or any other person, etc., implies the exercise of the reasoning faculties, consciousness and volition. Where a provision of the policy excludes intentional injury, it is the intention of the person inflicting the injury that is controlling. If the injuries suffered by the insured clearly resulted from the intentional act of a third person the insurer is relieved from liability as stipulated. INSURABLE INTEREST Relation between the insured and a particular event such that the happening of the event will damnify or cause loss to the person; link between one person and the insured risk PURPOSES FOR THE CONCEPT: To avoid wagering To avoid temptation of bringing about the event Sec. 10. Every person has an insurable interest in the life and health:

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit (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. Section 10(a) Every person has unlimited insurable interest in his own life One also has insurable interest in the life of his spouse and children on the basis of love and affection Section 10(b) Obligation to give support Article 195, Family Code Spouses, legitimate ascendants and descendants Parents and their legitimate children and legitimate or illegitimate children of the latter Parents and their illegitimate children and legitimate or illegitimate children of the latter. Legitimate brothers and sisters whether of the full or half blood Article 196, Family Code Brothers and sisters not legitimately related, whether of the 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. Blood relationship, affinity: enough? In cases not falling under 195 and 196, mere blood relationship or affinity does not create insurable interest Examples: uncle, aunt, nephew, niece, cousins, son-inlaw, brother-in-law, stepchildren Can a person get a policy on a person under 195 and 196 even if he can support himself? Yes. Factual expectation is enough basis to get a life insurance policy Even if policyholder can support himself, factual expectation that he will one day need to be supported and 195 and 196 are sufficient basis for a policy on the lives of people who are expected to support him. Section 10(c) Pecuniary interest concretizes face value of policy; exception to the general rule that no value can be placed on a persons life Debtor-creditor - only to the extent of the amount of the debt because the creditor stands to lose the chances of being paid of the debtor dies. Upon death of the debtor, the creditor can only recover extent of the debt unpaid, unless the debtor takes insurance on his own life for the benefit of the creditor. Employer-employee to the extent of the profit brought by the ER; once the relationship ceases, no recovery. El Oriente v. Posadas The Court does not believe that this fact signifies that when the plaintiff received P104,957.88 from the insurance on the life of its manager, it thereby realized a net profit in this amount. It is true that the Income Tax Law, in exempting individual beneficiaries, speaks of the proceeds of life insurance policies as income, but this is a very slight indication of legislative intention. In reality, what the plaintiff received was in the nature of an indemnity for the loss which it actually suffered because of the death of its manager. Life insurance in such a case is like that of fire and marine insurance,- a contract of indemnity. he benefit to be gained by death has no periodicity. It is a substitution of money value for something permanently lost, either in a house, a ship, or a life. Business partners to the extent of the profit the partner brings to the partnership.

hpsevilla_2008 6 Section 10(d) Person in whose estate an interest is dependent Person is given the right to use a house and lot Right ceases when the owner dies and another person becomes the owner When must insurable interest 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. GENERAL RULE: when the insurance takes effect, but need not exist thereafter or when the loss occurs. Thus, spouses may be annulled but if at the time of the issuance of the policy, they were still married, insurable interest still exists and the policy is not voided; there may be recovery. (Because the basis for the policy is love and affection, not a monetary obligation). Exception: when capable of pecuniary estimation, in which case, insurable interest must exist at the time the insurance takes effect AND when the loss occurs because insurable interest is based on a monetary consideration. 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. 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. (in relation to) Sec. 11. The insured shall have the right to change the beneficiary he designated in the policy, unless he has expressly waived this right in said policy. Measure of recovery Sec. 183. Unless the interest of a person insured is susceptible of exact pecuniary measurement, the measure of indemnity under a policy of insurance upon life or health is the sum fixed in the policy. GENERAL RULE: Face value of the policy Except: pecuniary estimation is possible

Special Rule in Insurable Interest for Industrial Life Usual rules re insurable interest are generally not made applicable in industrial life because: o Proceeds are small, little danger to induce a person to kill o Investigation of presence of insurable interest will nullify speedy payment of proceeds under the family of payment clause o The costs to prove insurable interest will destroy the purpose for this type of insurance Facility of Payment Clause (Art. 230(m)) Industrial Life if beneficiary does not surrender policy or Beneficiary is the estate of insured OR Legally incompetent Payment may be made to o The executor or administrator of the insured or o Any of insureds relative by blood as legal adoption or o By marriage or o Any person who incurred expenses for maintenance, medical attention or burial LIFE INSURANCE POLICY (See also 226-231) Sec. 49. The written instrument in which a contract of insurance is set forth, is called a policy of insurance.

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit Sec. 50. The policy shall be in printed form which may contain blank spaces; and any word, phrase, clause, mark, sign, symbol, signature, number, or word necessary to complete the contract of insurance shall be written on the blank spaces provided therein. Any rider, 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, unless the descriptive title or name of the rider, clause, warranty or endorsement is also mentioned and written on the blank spaces provided in the policy. Unless applied for by the insured or owner, any rider, clause, warranty or endorsement issued after the original policy shall be countersigned by the insured or owner, which countersignature shall be taken as his agreement to the contents of such rider, clause, warranty or endorsement. Group insurance and group annuity policies, however, may be typewritten and need not be in printed form. Sec. 51. A policy of insurance must specify: (a) The parties between whom the contract is made; (b) The amount to be insured except in the cases of open or running policies; (c) The premium, or if the insurance is of a character where the exact premium is only determinable upon the termination of the contract, a statement of the basis and rates upon which the final premium is to be determined; (d) The property or life insured; (e) The interest of the insured in property insured, if he is not the absolute owner thereof; (f) The risks insured against; and (g) The period during which the insurance is to continue. Sec. 52. Cover notes may be issued to bind insurance temporarily pending the issuance of the policy. Within sixty days after the issue of the cover note, a policy shall be issued in lieu thereof, including within its terms the identical insurance bound under the cover note and the premium therefor. 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. The Commissioner may 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. Sec. 56. When the description of the insured in a policy is so general that it may comprehend any person or any class of persons, only he who can show that it was intended to include him can claim the benefit of the policy. Form GENERAL RULE: printed form EXCEPTIONS: group life and annuity contracts which may be typewritten Contains blanks where word, phrase, clause, mark, sign necessary to complete the policy are placed FORTUNE VS. CA The bank was insured by theft and robbery insurance. The insurance policy contained limitation on the insurers liability in case robbery/theft were committed by the banks authorized agent. The bank was robbed with the connivance of the banks driver and security guard. Court held that there was no recovery. H: An insurance contract is a contract of indemnity upon the terms and conditions specified therein. It is settled that the terms of the policy constitute the measure of the

hpsevilla_2008 7 insurer's liability. In the absence of statutory prohibition to the contrary, insurance companies have the same rights as individuals to limit their liability and to impose whatever conditions they deem best upon their obligations not inconsistent with public policy. Contents of Insurance policy Parties Amount to be insured Premium Life insured Risks Period of effectivity

What are riders? Riders are printed or typed stipulations contained on a slip of paper attached to the policy and forming an integral part of the policy. Rule on inconsistency: The rider prevails as being a more deliberate expression of the agreement of the contracting parties. JARQUE VS. SMITH : It is a well settled rule that in case repugnance exists between written and printed portions of a policy, the written portion prevails, and there can be no question that as far as any inconsistency exists, the above-mentioned typed "rider" prevails over the printed clause it covers. Requisites for validity: Descriptive title or name of rider is also mentioned and written on the blank spaces provided for in the policy; The rider must be countersigned by the insured if the same is issued after the original policy, which countersign shall be taken as his agreement to the terms found therein; [unless: applied for by the insured, no need for countersignature] Must be in the prescribed form issued by the Commissioner. What are warranties? Warranties are inserted or attached to a policy to eliminate specific potential increases of hazards during the policy owing to (1) actions of the insured; or (2) condition of the property. Eliminates potential hazards by promising to do something or refraining from doing something. What are clauses? Agreements between the insurer and the insured on certain matters relating to the liability of the insurer in case of loss, example: the liability of the insurer shall not exceed of the damage. What are endorsements? Provisions added to an insurance contract altering its scope and application, example: extending the perils covered, increasing the amount of liability, inclusion or exclusion of suicide. What are Cover Notes? Temporary insurance policies intended to cover the insured while application is being evaluated Effective for not longer than 60 days unless with written approval of Commissioner Binding receipt not the same as cover note since this only serves as acknowledgement of receipt of premium and application subject to evaluation (Great Pacific v. CA) COVER NOTES VALID IF: Issued and renewed with prior approval of IC Valid and binding for not more than 60 days, unless the insurance commission has approved an extension based on valid grounds No separate premium is required for the cover note (Pacific Timber v. CA) 7-day notice to the other party is required to cancel the cover note Policy must be issued within 60 days from issuance of cover notes 60-day period may be extended upon written approval of IC Written approval is dispensed when president, VP or general manager that the renewal is not to circumvent the insurance code (Ins. Memo Circular 3-75)

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Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit When is the insurance contract perfected? 1. Delivery of the policy or information as to the approval of the application for insurance must be made known to the insured before there can be a perfected contract. In short, a contract of insurance is deemed perfected at the time the insured-applicant had knowledge of his application. 2. Since the insured is the one making the offer, the submission of the application WITHOUT the approval of the policy does not result in a perfected contract of insurance (Grepalife v. CA) 3. If the applicant pays the premium upon filing of application but he dies before the approval, there is no perfected contract of insurance. (De Lim vs. Sun Life) 4. If the insured died during the period of provisional policy which is conditioned upon approval of application, the beneficiary is not entitled to proceeds; 5. Acceptance of the application by letter shall not bind the insurer except from the time the approval came to his knowledge; Even if the insurer has approved the application via a letter, there is no perfected contract of insurance if there is no evidence that the applicant knew of the approval. (Enriquez vs. Sun Life) 6. The insured is presumed to have understood the application and the contract of insurance DE LIM VS. SUN LIFE FACTS: On July 6, 1917, Luis Lim made application to the Sun Life Assurance Company of Canada for a policy of insurance on his life in the sum of P5,000.The first premium of P433 was paid by Lim, and upon such payment the company issued what was called a "provisional policy." Luis Lim died on August 23, 1917, a fter the issuance of the provisional policy but before approval of the application by the home office of the insurance company. H: Otherwise stated, the policy for four months is expressly made subject to the affirmative condition that "the company shall confirm this agreement by issuing a policy on said application when the same shall be submitted to the head office in Montreal." To re-enforce the same there follows the negative condition "Should the company not issue such a policy, then this agreement shall be null and void ab initio, and the company shall be held not to have been on the risk." The so-called provisional policy it amounts to nothing but an acknowledgment on behalf of the company, that it has received from the person named therein the sum of money agreed upon as the first year's premium upon a policy to be issued upon the application, if the application is accepted by the company. It is of course a primary rule that a contract of insurance, like other contracts, must be assented to by both parties either in person or by their agents. So long as an application for insurance has not been either accepted or rejected, it is merely an offer or proposal to make a contract. The contract, to be binding from the date of the application, must have been a completed contract, one that leaves nothing to be done, nothing to be completed, nothing to be passed upon, or determined, before it shall take effect. There can be no contract of insurance unless the minds of the parties have met in agreement. Our view is, that a contract of insurance was not here consummated by the parties. Badger vs. New York H: The mere signing of an application for life insurance and payment of first premium do not bind the insurance company to issue a policy where there is no evidence of any contract between the insure and the insurance company that such acts would constitute the contract. Eniquez vs. Sun Life

hpsevilla_2008 8

Facts: Sept 24, Herrer made an application. Sept. 26, the head office in Canada office gave notice of acceptance by cable to Manila. On December 4, 1917, the policy was issued at Montreal. On December 18, 1917, attorney Aurelio A. Torres wrote to the Manila office of the company stating that Herrer desired to withdraw his application. The following day the local office replied to Mr. Torres, stating that the policy had been issued, and called attention to the notification of November 26, 1917. This letter was received by Mr. Torres on the morning of December 21, 1917. Mr. Herrer died on December 20, 1917. The heirs sought to recover from the insurance company H: We hold that the contract for a life annuity in the case at bar was not perfected because it has not been proved satisfactorily that the acceptance of the application ever came to the knowledge of the applicant. Lucero de Sindayen v. Insular Facts: A, while with his aunt, applied for insurance with Insular, through its agent. It was agreed that should the application be approved the insurance policy should be delivered to his aunt with whom he left the balance to cover the payment of the first annual premium. Application was approved and the agent delivered the policy to insureds aunt asking if the insured was in good health. The aunt answered yes, unaware that the insured got sick and died pending the approval of his application. The next day, the agent found out of the insureds death and asked the aunt to return the policy. The insurance contract argued that there was no perfected contract of insurance. H: The delivery of the policy to the insured by an agent of the company who is authorized to make delivery or withhold delivery is the final act which binds the company (and the insured as well) in the absence of fraud or other legal ground for rescission. The fact that the agent to whom it has entrusted this duty (and corporations can only act through agents) is derelict or negligent or even dishonest in the performance of the duty which has been entrusted to him would create a liability of the agent to the company but does not resolve the company's obligation based upon the authorized acts of the agent toward a third party who was not in collusion with the agent. GREPALIFE vs. CA Facts: A filed an application with insurance company for a 20 year endowment policy on the life of his 1 year old daughter without disclosing that she was mongoloid. After payment of first premium, a binding receipt was issued by the agent to A, at the bottom of which was written the agents strong advise for the approval of the application. Pending action on the application, the child died. The application was denied. H: The binding deposit receipt is intended to be merely provisional or temporary insurance contract subject to the compliance of conditions imposed by the insurance company. It is merely an acknowledgment, on behalf of the insurance company, that the latters branch office had received from the applicant the insurance premium and had accepted the application subject for processing by the insurance company. Since petitioner Pacific Life disapproved the insurance application of respondent Ngo Hing, the binding deposit receipt in question had never become in force at any time. Tang vs. CA Facts: A, illiterate Chinese who spoke only the same, applied for insurance stating that she was in good health and naming her son to be the beneficiary. The application was approved. Sometime after, A died of lung cancer. Her son sought to claim the proceeds of the insurance policy but the company refused on the ground of material misrepresentation in the application. The son alleged that the insured could not have been guilty of misrepresentation applying Art. 1332 of the Civil Code considering that the insurer had not fully explained the terms of the contract to the insured. H: The obligation to show that the terms of the contract had been fully explained to the party who is unable to read or understand the language of the contract, when fraud or mistake is alleged, devolves on the party seeking to enforce it. Here the insurance company is not seeking to enforce the

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit contracts; on the contrary, it is seeking to avoid their performance. It is petitioner who is seeking to enforce them even as fraud or mistake is not alleged. Accordingly, respondent company was under no obligation to prove that the terms of the insurance contracts were fully explained to the other party. Required Provisions Sec. 227. In the case of individual life or endowment insurance, the policy shall contain in substance the following conditions: (a) A provision that the policyholder is entitled to a grace period either of thirty days or of one month within which the payment of any premium after the first may be made, subject at the option of the insurer to an interest charge not in excess of six per centum per annum for the number of days of grace elapsing before the payment of the premium, during which period of grace the policy shall continue in full force, but in case the policy becomes a claim during the said period of grace before the overdue premium is paid, the amount of such premium with interest may de deducted from the amount payable under the policy in settlement; Grace period provision provision which gives the insured additional time to pay his premiums from the due date Clarifies the right to collect if death happens within the grace period if contingency happens during the grace period, there can be recovery. Individual life 30 days/1 month Group life 30 days/1 month Industrial life- 4 weeks or if payable monthly 30 days/1 month (c) A provision that the policy shall constitute the entire contract between the parties, but if the company desires to make the application a part of the contract it may do so provided a copy of such application shall be indorsed upon or attached to the policy when issued, and in such case the policy shall contain a provision that the policy and the application therefore shall constitute the entire contract between the parties; Entire contract provision the policy constitute the entire contract between the parties shall

hpsevilla_2008 9 Special Features Loan Privilege based on the cash surrender value, the insured may obtain a loan by pledging the policy Policy dividend options if the policy is participating, the policyholder is entitled to a share of the surplus. Exemption from claims of creditors protection against execution Income tax treatment proceeds of life insurance policies are generally tax exempt. However, endowment proceeds and cash surrender values are treated as income and are taxable. Surrender options if the policyholder cannot continue paying the premiums, he has some options which will not put to waste what he has paid. However, these options are available only upon payment of at least 3 annual premiums. Surrender Options/Special rights of insured in case of default/Non Forfeiture clauses 1. Cash Surrender Value 227(f); 230(f) and (g) It is the amount the insured, in case of default, after payment of at least three annual premiums, is entitled to receive if he surrenders the policy and releases his claim upon it; not available in group insurance. Requirements: Payment of at least 3 annual premiums Not less than the reserve on the policy Illustration: 10 years to pay annual premium of 20,000 Premium rate is uniform although for the first 5 years, 10,000 may be enough to cover the risk. The excess amount is called the reserve and this is the source of the cash surrender value Manufacturers Life vs. Meer (1951) F: ML is an insurance company licensed to engage in the insurance business in the Phil. Because of the war, it temporarily closed its business in the Philippines. The insurance policies it issued contained non-forfeiture clauses such as automatic premium loan which it applied to the payment of premiums of its insured during the closure of its business in the Philippines. The Phil. Govt taxed the application of these premiums as income tax. H: Suppose that 'A', 30 years of age, secures a 20-year endowment policy for P5,000 from plaintiff-appellant Company and pays an annual premium of P250. 'A' pays the first ten yearly premiums amounting to P2,500 and on this amount plaintiff-appellant pays the corresponding taxes under section 255 of the National Internal Revenue Code. Suppose also that the cash value of said policy after the payment of the 10th annual premium amounts to P1,000." When on the eleventh year the annual premium fell due and the insured remitted no money within the month's grace, the insurer treated the premium then over due as paid from the cash value, the amount being a loan to the policyholder ( 1 ) who could discharge it at any time with interest at 6 per cent. The insurance contract, therefore, continued in force for the eleventh year. Under the circumstances described, did the insurer collect the amount of P250 as the annual premium for the eleventh year on the said policy? The plaintiff says no; but the defendant and the lower court say yes. The latter have, in our opinion, the correct view. In effect the Manufacturers Life Insurance Co. loaned to "A" on the eleventh year, the sum of P250 and the latter in turn paid with that sum the annual premium on his policy. The Company therefore collected the premium for the eleventh year. "How could there be such a collection" plaintiff argues "when as a result thereof, insurer becomes a creditor, acquires a lien on the policy and is entitled to collect interest on the amount of the unpaid premiums?" Wittingly or unwittingly, the "premium" and the "loan" have been interchanged in the argument. The insurer "became a creditor" of the loan, but not of the premium that had already been paid. And it is entitled to collect interest on the loan, not on the premium. In other words, "A" paid the premium for the eleventh year; but in turn he became a debtor of the company for the sum of P250. This debt he could repay either by later remitting the

(d) A provision that if the age of the insured is considered in determining the premium and the benefits accruing under the policy, and the age of the insured has been misstated, the amount payable under the policy shall be such as the premium would have purchased at the correct age; Misstatement of age provision if the age of the insured is misstated, the amount payable shall be as such premium would have purchased at the correct age; an exception to the general rule that misrepresentations in contract of insurance is a ground to rescind. (j) A provision that the policyholder shall be entitled to have the policy reinstated at any time within three years from the date of default of premium payment unless the cash surrender value has been duly paid, or the extension period has expired, upon production of evidence of insurability satisfactory to the company and upon payment of all overdue premiums and any indebtedness to the company upon said policy, with interest rate not exceeding that which would have been applicable to said premiums and indebtedness in the policy years prior to reinstatement. Reinstatement provision clarifies the requirements for restoring a policy to premium-paying status after it has lapsed. Individual 3 years Group no reinstatement Industrial 2 years

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit money to the insurer or by letting the cash value compensate for it. The debt may also be deducted from the amount of the policy should "A" die thereafter during the continuance of the policy. Proceeding along the same line of argument counsel for plaintiff observes "that there is no change, much less an increase, in the amount of the assets of plaintiff-appellant after the application of the automatic premium loan clause. Its assets remain exactly the same after making the advances in question. It being so, there could have been no collection of premium . . .." We cannot assent to this view, because there was an increase. There was the new credit for the advances made. True, the plaintiff could not sue the insured to enforce that credit. But it has means of satisfaction out of the cash surrender value. Here again it may be urged that if the credit is paid out of the cash surrender value, there were no new funds added to the company's assets. Cash surrender value "as applied to a life insurance policy, is the amount of money the company agrees to pay to the holder of the policy if he surrenders it and releases his claims upon it. The more premiums the insured has paid the greater will be the surrender value; but the surrender value is always a lesser sum than the total amount of premiums paid." The cash value or cash surrender value is therefore an amount which the insurance company holds in trust 2 for the insured to be delivered to him upon demand. It is therefore a liability of the company to the insured. Now then, when the company's credit for advances is paid out of the cash value or cash surrender value, that value and the company's liability is thereby diminished pro tanto. Consequently, the net assets of the insurance company increased correspondingly; for it is plain mathematics that the decrease of a person's liabilities means a corresponding increase in his net assets. Nevertheless let us grant for the nonce that the operation of the automatic loan provision contributed no additional cash to the funds of the insurer. Yet it must be admitted that the insurer agreed to consider the premium paid on the strength of the automatic loan. The premium was therefore paid by means of a "note" or "credit" or "other substitute for money" and the tax is due because section 255 above quoted levies taxes according to the total premiums collected by the insurer "whether such premiums are paid in money, notes, credits or any substitute for money. 2. Extended insurance The insured is given the right, upon default, after the payment of at least three full annual premiums, to have the policy continued in force from the date of default for a time either stated or equal to the amount as the net value of the policy taken as a single premium, will purchase. In case of death within the extended term, he may recover the face value of the policy. In short, the insured will purchase a new policy using the cash surrender value. The amount of recovery is the same, but the period of coverage is shorter. Requirements: At least 3 annual premiums Limited time, same face value Illustration ORIGINAL POLICY covered until age 70, with face value of P1 million; Extended insurance covered until age 60 only but face value is still P1 million 3. Paid-Up Insurance At least 3 annual premiums Same period, lower proceeds Illustration ORIGINAL POLICY: P1 million covered until age 70 PAID-UP INSURANCE: P500,000 covered until age 70 4. Automatic Premium Loan Parties agree that in case of default insurer advances the premium not subject to repayment REMIUMS Agreed price for assuming the risk The right to premium arises the moment the property/object is exposed to risk; See also Sec. 227(a); 228(a); 230(a) with respect to grace period.

hpsevilla_2008 10 Cash and carry basis - based on section 77 which provides that the moment the thing insured is exposed to the peril, the insurer has the right to payment of premium. Sec. 77. An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the peril insured against. Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid, except in the case of a life or an industrial life policy whenever the grace period provision applies. ( Sec. 78. An acknowledgment in a policy or contract of insurance or the receipt of premium is conclusive evidence of its payment, so far as to make the policy binding, notwithstanding any stipulation therein that it shall not be binding until the premium is actually paid. Instances when non-payment of premium is excused [WIN] Insurer waives the right to payment Insolvent insured Insurers negligence or fault Aleja vs. GSIS F: The deceased Rosauro Aleja was appointed as temporary classroom teacher in the Bureau of Public Schools. A compulsory term insurance policy was issued in his name to take effect February 1, 1959. On January 29, 1959, Aleja died of a gunshot wound inflicted by his own gun. Plaintiffs, as beneficiaries, filed a claim with GSIS to collect the proceeds of the policy. The claim was denied allegedly because at the time of Alejas death, the policy was not yet effective and therefore, Aleja was not covered by the insurance. H: It appears that the policy issued and accepted by Aleja during his lifetime specifically provides that the effective date of the insurance contract is February 1, 1959. It is not denied that the first premium on said insurance contract was deducted from Alejas salary only on January 31, 1959 or after his death. At the time of said death, there was no existing contract between him and GSIS, there being no consideration for the risk sought to be enforced against the insurance system. Constantino vs. Asia Life War does not suspend the policy and does not excuse non-payment of premiums F: In consideration of the sum of P176.0 as annual premium duly paid to it, Asia Life Insurance Company issued on September 27, 1941 its Policy whereby it insured the life of Arcadio Constantino for a term of 20 years. After the first payment, no further premiums were paid. The insured died on Sept 22, 1944. It is admitted that Asia Life Insurance, being an American corporation, had to close its branch office in Manila by reason of the Japanese occupation from January 2, 1942 until the year 1945. H: US Rule: It declares that the contract is not merely suspended, but is abrogated by reason of non-payment of premiums, since the time of the payments is peculiarly of the essence of the contract. It additionally holds that it would be unjust to allow the insurer to retain the reserve value of the policy, which is the excess of the premiums paid over the actual risk carried during the years when the policy had been in force. Promptness of payment is essential in the business of life insurance; there must be power to cut off unprofitable members, or the success of the whole scheme is endangered Connecticut Rule- the payment of premiums is a condition precedent, the non-performance of which, even when performance would be illegal, necessarily defeats the right to renew the contract New York Rule- war between states in which the parties reside merely suspends the contracts of life insurance, and that, upon tender of all premiums due by the insured or his representative after the war has terminated, the contract revives and becomes fully operative After perusing the Insurance Act, we are firmly persuaded that the non-payment of premiums is such a vital defense of

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit insurance companies that since the very beginning, said Act No. 2427 expressly preserved it, by providing that after the policy shall have been in force for two years, it shall become incontestable (i. e. the insurer shall have no defense) except for fraud, non-payment of premiums, and military or naval service in time of war (sec. 184 [b], Insurance Act). And when Congress recently amended this section (Rep. Act No. 171), the defense of fraud was eliminated, while the defense of nonpayment of premiums was preserved. Thus the fundamental character of the undertaking to pay premiums and the high importance of the defense of non-payment thereof, was specifically recognized. In keeping with such legislative policy, we feel no hesitation to adopt the United States Rule, which is in effect a variation of the Connecticut rule for the sake of equity. In this connection, it appears that the first policy had no reserve value, and that the equitable values of the second had been practically returned to the insured in the form of loan and advance for premium. Ocampo vs. GSIS F: Andres Gomez had served the provincial government of Pampanga as appraiser for a continuous period of 25 years form August 8, 1914 until his death on February 28, 1938; his appointment was as a temporary employee. He filled up Information for Membership insurance form with his wife Adelaida as beneficiary. The Treasurer of the provincial government deducted from the salary of Gomez the amount of P2.70 as part of the first premium. The Provincial Treasurer submitted to GSIS a claim for the amount of the policy of insurance in the sum pf P1,052 in the name of Adelaida Ocampo. GSIS Board refused to pay on the ground that Gomez was a temporary employee and therefore was not insurable when he died. H: It was established that Andres Gomez had taken the Civil Service exam on October 16, 1937 and passed the same, although it was not announced before his death. The effect of his passing retroacts to the date of examination; hence his passing the exam made him eligible and qualified automatically for a regular and permanent appointment from the date of such examination. Besides, the GSIS Board accepted the first premium paid and issued the receipt therefore; so estopped. Insular Life vs. Suva F: The applicant Benito Patrocinio Suva was examined by Dr Ocampo, one of the physicians of the company and by Dr Llora, another physician of the company. In reply to the question in the printed application, Are you in good health? he replied Yes.. The insured died of pulmonary tuberculosis on September 23, 1933. The plaintiff asserts that the statements made by the insured in his applications were false and that the applicant was not in good health at the time he presented his applications or on the date when said policies were delivered H: If two qualified physicians, not selected by him, independently examine a man with critical attention and in the interest of their employer, the insurance company, and they pronounce him to be in good health, we should said he believed the same thing himself. The applicant was in good health when the policies were delivered and that it is not proved that he made any material false statements in his said applications for insurance. "Good health" is a relative term. A person with sound body may honestly believe himself to be in "good health" although at the moment he may have a terrific headache, or a running cold, or an attack of diarrhea, or indigestion, or any other of a host of minor common ailments which may possibly develop later into a serious illness. Rule as to failure to pay 1st premium: If insured fails to pay 1 st premium, insurer cannot ask for specific performance but can only rescind the contract since there is no creditor-debtor relationship. As compared with non-life insurance, failure to pay first premium may be demanded by specific performance ( cash and carry basis) Special Rule in Industrial Life if Premiums are Not Paid

hpsevilla_2008 11 Sec. 229. The term "industrial life insurance" as used in this Code shall mean that form of life insurance under which the premiums are payable either monthly or oftener, if the face amount of insurance provided in any policy is not more than five hundred times that of the current statutory minimum daily wage in the City of Manila, and if the words "industrial policy" are printed upon the policy as part of the descriptive matter. An industrial life policy shall not lapse for non-payment of premium if such non-payment was due to the failure of the company to send its representative or agent to the insured at the residence of the insured or at some other place indicated by him for the purpose of collecting such premium: Provided, That the provisions of this paragraph shall not apply when the premium on the policy remains unpaid for a period of three months or twelve weeks after the grace period has expired. Policy will not lapse if failure to pay is due to fact that agent did not collect in the address provided in the policy Except: if 12 weeks or 3 months have lapsed from end of grace period. (4 months all in all) PARTIES to INSURANCE: INSURER: the CONTRACT IN LIFE

Sec. 6. Every person, partnership, association, or corporation duly authorized to transact insurance business as elsewhere provided in this code, may be an insurer. Sec. 184. For purposes of this Code, the term "insurer" or "insurance company" shall include all individuals, partnerships, associations, or corporations, including government-owned or controlled corporations or entities, engaged as principals in the insurance business, excepting mutual benefit associations. Unless the context otherwise requires, the terms shall also include professional reinsurers defined in section two hundred eighty. "Domestic company" shall include companies formed, organized or existing under the laws of the Philippines. "Foreign company" when used without limitation shall include companies formed, organized, or existing under any laws other than those of the Philippines. Sec. 185. Corporations formed or organized to save any person or persons or other corporations harmless from loss, damage, or liability arising from any unknown or future or contingent event, or to indemnify or to compensate any person or persons or other corporations for any such loss, damage, or liability, or to guarantee the performance of or compliance with contractual obligations or the payment of debt of others shall be known as "insurance corporations". Sec. 186. No person, partnership, or association of persons shall transact any insurance business in the Philippines except as agent of a person or corporation authorized to do the business of insurance in the Philippines, unless possessed of the capital and assets required of an insurance corporation doing the same kind of business in the Philippines and invested in the same manner; nor unless the Commissioner shall have granted to him or them a certificate to the effect that he or they have complied with all the provisions of law which an insurance corporation doing business in the Philippines is required to observe. Every person, partnership, or association receiving any such certificate of authority shall be subject to the insurance laws of the Philippines and to the jurisdiction and supervision of the Commissioner in the same manner as if an insurance corporation authorized by the laws of the Philippines to engage in the business of insurance specified in the certificate. Sec. 187. No insurance company shall transact any insurance business in the Philippines until after it shall have obtained a certificate of authority for that purpose from the Commissioner upon application therefor and payment by the company concerned of the fees hereinafter prescribed.

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit The Commissioner may refuse to issue a certificate of authority to any insurance company if, in his judgment, such refusal will best promote the interest of the people of this country. No such certificate of authority shall be granted to any such company until the Commissioner shall have satisfied himself by such examination as he may make and such evidence as he may require that such company is qualified by the laws of the Philippines to transact business therein, that the grant of such authority appears to be justified in the light of economic requirements, and that the direction and administration, as well as the integrity and responsibility of the organizers and administrators, the financial organization and the amount of capital, notwithstanding the provisions of section one hundred eighty-eight, reasonably assure the safety of the interests of the policyholders and the public. In order to maintain the quality of the management of the insurance companies and afford better protection to policyholders and the public in general, any person of good moral character, unquestioned integrity and recognized competence may be elected or appointed director or officer of insurance companies. The Commissioner shall prescribe the qualifications of the executive officers and other key officials of insurance companies for purposes of this section. No person shall concurrently be a director and/or officer of an insurance company and an adjustment company. Incumbent directors and/or officers affected by the above provisions are hereby allowed to hold on to their positions until the end of their terms or two years from the effectivity of this decree, whichever is shorter. Before issuing such certificate of authority, the Commissioner must be satisfied that the name of the company is not that of any other known company transacting a similar business in the Philippines, or a name so similar as to be calculated to mislead the public. Such certificate of authority shall expire on the last day of June of each year and shall be renewed annually if the company is continuing to comply with the provisions of this Code or the circulars, instructions, rulings or decisions of the Commissioner. Every company receiving any such certificates of authority shall be subject to the provisions of this Code and other related laws and to the jurisdiction and supervision of the Commissioner. No insurance company may be authorized to transact in the Philippines the business of life and non-life insurance concurrently unless specifically authorized to do so: Provided, That the terms "life" and "non-life" insurance shall be deemed to include health, accident and disability insurance. No insurance company shall have equity in an adjustment company and neither shall an adjustment company have an equity in an insurance company. Insurance companies and adjustment companies presently affected by the above provision shall have two years from the effectivity of this Decree within which to divest of their stockholdings. INSURED

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Anyone except a public enemy may be insured. (Sec 7) Public enemy citizen or national of any country with which the Philippines is at war. Filipinas vs. Huenefeld The respondent corporation, Christern, Huenefeld & Co. Inc., after payment of corresponding premium, obtained from the petitioner, Filipinas Cia de Seguros, fire policy covering merchandise contained in a building. During the Japanese military occupation, the building and insured merchandise were burned. The respondent submitted to the petitioner its claim under the policy. The petitioner refused the claim on the ground that the policy in favor of the respondent had ceased to be in force on the date the United States declared war against Germany, the respondent corporation being controlled by German subjects and the petitioner being under the American jurisdiction. The petitioner however paid to the respondent the sum of P92,650. H: CHCI became a public enemy thus absolving insurer from liability. The nationality of a private corporation is determined by the character or citizenship of its controlling stockholders (control test). The Philippine Insurance Law as amended provides that anyone except a public enemy may be insured. It stands to reason that an insurance policy ceases to be allowable as soon as an insured becomes a public enemy. By the law of nations, all intercourse between citizens or belligerent powers which is inconsistent with a state of war is prohibited. The purpose of which is to cripple the power and exhaust the resources of the enemy. It is inconsistent that the subjects of one country should lend their assistance to protect by insurance, the commerce or property of belligerent alien subjects or to do anything detrimental to their countrys interests. It results that the petitioner is entitled to recover what was paid to the respondent under the circumstances of this case. Note: The insured must have an insurable interest in the life of the cestui que vie; he is the person who pays the premium and is commonly known as the policy holder; it is not necessarily his life which is used to constitute the insurance policy. May a member of the Moro Islamic Liberation Front or its breakaway group Abu Sayyaf be insured with a company licensed to do business under theInsurance Code of the Philippines? Explain (3%) Yes, a member of the MILF or the Abu Sayyaf may be insured. Only a public enemy cannot be insured. A public enemy is a citizen or national of a country with which the Philippines is at war. A is an elderly bachelor who took out an individual life insurance policy on his life. The designated beneficiary is B a companion-friend. A died in a fire which also destroyed his home. The insurer refused payment to B due to absence of insurable interest on the life of A. Is the insurer correct? The insurer is wrong. B as the beneficiary is entitled to collect the proceeds. As a beneficiary in a life insurance policy, B is not required to have insurable interest on the life of A. A had insurable interest on his own life and the policy was taken on his life

Insurance corporations section 185 corporations formed or organized to save any person or persons or other corporations harmless from any loss, damage or liability arising from any unknown or contingent event, or to indemnify or compensate for such loss, damage or liability or to guarantee performance with contractual obligations or payment of debts Shall include all individuals, partnerships, associations or corporations, including GOCCs or entities, engaged as principals in the insurance business Excludes mutual benefit associations REQUIREMENTS BEFORE DOING INSURANCE BUSINESS: 1. It must possess the capital and assets required; and 2. It must obtain a certificate of authority from the Insurance Commissioner.

RIGHTS OF THE INSURED 1. Right to borrow on the policy 227(g) 2. Right to dividends if participating policy 227(e); 230(e)

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit Requirements before declaration dividends1 : o Entire paid up capital stock o Margin of solvency o Legal reserve fund o Aggregate amount of its debts and liabilities of

hpsevilla_2008 13 H: The administratrix. The assignee shall have the right and power to recover and to take into his possession, all of the estate, assets, and claims belonging to the insolvent, except such as are exempt by law from execution. The assignee in insolvency acquired no beneficial interest in the policy of insurance in question; that its proceeds are not liable for any of the debts provable against the insolvent in the pending proceedings, and that said proceeds should therefore be delivered to his administratrix. Grepalife vs. CA Dr. Wilfredo Leuterio, a physician and a housing debtor of DBP applied for membership in the group life insurance plan. Grepalife issued an insurance coverage to Dr. Leuterio, to the extent of his DBP mortgage indebtedness amounting P86,200.00. Dr. Leuterio died due to massive cerebral hemorrhage. Issue: Who is the party-in-interest who may file a claim against Grepalife, DBP or the widow? Held: The widow. In a group insurance policy of mortgagors, otherwise known as the mortgage redemption insurance, where the mortgagor pays the insurance premium under the group insurance policy, making the loss payable to the mortgagee, the insurance is on the mortgagors interest, and the mortgagor continues to be a party to the contract. In this type of policy insurance, the mortgagee is simply an appointee of the insurance fund, such loss-payable clause does not make the mortgagee a party to the contract. Section 8 of the Insurance Code provides: Unless the policy provides, where a mortgagor of property effects insurance in his own name providing that the loss shall be payable to the mortgagee, or assigns a policy of insurance to a mortgagee, the insurance is deemed to be upon the interest of the mortgagor, who does not cease to be a party to the original contract, and any act of his, prior to the loss, which would otherwise avoid the insurance, will have the same effect, although the property is in the hands of the mortgagee, but any act which, under the contract of insurance, is to be performed by the mortgagor, may be performed by the mortgagee therein named, with the same effect as if it had been performed by the mortgagor. The insured private respondent did not cede to the mortgagee all his rights or interests in the insurance, the policy stating that: In the event of the debtors death before his indebtedness with the Creditor [DBP] shall have been fully paid, an amount to pay the outstanding indebtedness shall first be paid to the creditor and the balance of sum assured, if there is any, shall then be paid to the beneficiary/ies designated by the debtor. Insured may be regarded as the real party in interest, although he has assigned the policy for the purpose of collection, or has assigned as collateral security any judgment he may obtain. And since 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 it whatever the insured might have recovered, the widow of the decedent Dr. Leuterio may file the suit against the insurer, Grepalife. CESTUI QUE VIE Person on whose life the insurance contract is constituted Anyone of those mentioned under Sec. 10. BENEFICIARY One who receives benefits; The beneficiary may or may not have insurable interest on the life of the cestui que vie. What is vital is that the beneficiary is NOT disqualified under the law to be designated as such.

3. Right to reinstatement (NOT ABSOLUTE RIGHT, DISCRETIONARY) 227(j); 230(j) unless CSV paid or extension period expired Individual 3 years from date of default Industrial 2 years from date of default Group no reinstatement! Must pay overdue premiums Must show evidence of insurability not only good health but also insureds occupation, habits, finances Andres vs. Crown Life The policy cannot be considered reinstated at the time of Severa Andres death. There was no payment of all overdue premiums and other indebtedness at the time of her death. Prior to her death, only P100 of the overdue premium of P165.15 was paid but the balance of P65.15 was only paid two days after Severas death. Hence, when she died the policy was still lapsed. There was no waiver of the condition regarding payment of the overdue premium. The letter of Crown Life telling Rufino Andres to send to the former as big an amount as he is able and an adjustment most beneficial to him will be worked out does not show a clear and positive intent to waive the payment of the overdue premium. On the contrary, the subsequent letters of Crown Life patently indicated that the Company insisted on the full payment of the premium before the policy was reinstated. Clearly the Company did not consider the partial payment as sufficient consideration for the reinstatement. Appellant's failure to remit the balance before the death of his wife operated to deprive him of any right to waive the policy and recover the face value thereof. 4. Right to transfer/bequeath-pass by transfer, will or succession to any person whether he has insurable interest or not; notice to insurer not required A has an insurance policy on the life of a debtor If a dies, his heirs automatically get the right to the insurance policy OR A can assign or transfer his right to another person, his creditor maybe Sun Life vs. Ingersoll Sun Life issued a policy of insurance on the life of one Dy Poco, of Manila. Subsequently, Dy Poco was adjudged an involuntary insolvent, and the defendant Frank Ingersoll, was appointed assignee in insolvency. In 1919, the said Dy Poco died, and thereafter, defendant Tan Sit, was duly appointed as the administratrix of his intestate estate. Issue: Who is entitled to the proceeds under the policy?

Sec. 195. No domestic insurance corporation shall declare or distribute any dividend on its outstanding stocks except from profits attested in a sworn statement to the Commissioner by the president or treasurer of the corporation to be remaining on hand after retaining unimpaired: (a) The entire paid-up capital stock; (b) The margin of solvency required by section one hundred ninety-four; (c) In the case of life insurance corporation, the legal reserve fund required by section two hundred eleven; (d) In the case of corporations other than life, the legal reserve fund required by section two hundred thirteen; (e) A sum sufficient to pay all net losses reported, or in the course of settlement, and all liabilities for expenses and taxes. Any dividend declared or distributed under the preceding paragraph shall be reported to the Commissioner within thirty days after such declaration or distribution. If the Commissioner finds that any such corporation has declared or distributed any such dividend in violation of this section, he may order such corporation to cease and desist from doing business until the amount of such dividend or the portion thereof in excess of the amount allowed under this section has been restored to said corporation.

2 instances where beneficiary is required to have insurable interest on the life of the cestui que vie: 1. when he is also the insured 2. when stipulated in the policy(230(m)) GENERAL RULE: designation of beneficiary may be changed by insured EXCEPTIONS: (1) insured has expressly waived his right to changed and (2) if the beneficiary has a vested right in the policy.

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit Sec. 11. The insured shall have the right to change the beneficiary he designated in the policy, unless he has expressly waived this right in said policy What are the effects of an irrevocable designation of a beneficiary under the Insurance Code? Explain (2%) Answer: The irrevocable beneficiary has a vested interest in the policy, including its incidents such as the policy loan and cash surrender value Jacob obtained a life insurance policy for P1 M designating irrevocably Diwata, a friend, as his beneficiary. Jacob changed his mind and wants to include two other friends as beneficiaries. Can Jacob still add the two friends? (2%) Answer: Jacob cannot include the two friends as additional beneficiaries as this would diminish the interest of Diwata who is irrevocably designated as beneficiary. Diwata has to consent first to the inclusion. RULES ON BENEFICIARIES If beneficiary WILLFULLY causes the death of the insured/cestui, the nearest relatives of the insured will get the proceeds . On January 1, 2000, Antonio Rivera secured a life insurance from SOS Insurance Corp. for P1 Million with Gemma Rivera, his adopted daughter, as the beneficiary. Antonio Rivera died on March 4, 2005 and in the police investigation, it was ascertained that Gemma Rivera participated as an accessory in the killing of Antonio Rivera. Can SOS Insurance Corp. avoid liability by setting up as a defense the participation of Gemma Rivera in the killing of Antonio Rivera? Discuss with reasons. (4%) SOS cannot avoid liability merely because Gemma was an accessory to the death of Antonio. Under the law, when the beneficiary willfully causes the death of the cestui, the nearest relatives of the insured will be entitled to the proceeds. If beneficiary dies ahead of the insured/cestui, the estate of the insured will get the proceeds If beneficiary is not designated, insureds estate will get the proceeds In re: Chanliongco This matter refers to the claims for retirement benefits filed by the heirs of the late ATTY. MARIO V. CHANLIONGCO, an attorney working in the office of the Supreme Court. Atty. Chanliongco died intestate, the other retirement benifits already being paid out to the heirs what remains to be disposed of are the retirement benefits and the money value of the terminal leave benefits.He left his widow, Dra. Fidela B. Chanliongco and an only legitimate son, Mario II, it appears that there are other claimants to the benefits due the deceased, namely, Mrs. Angelina C. Buenaventura and Mario Chanliongco, Jr., both born out of wedlock to Angelina B. Crespo, and duly recognized by the deceased. H: Dying ab intestado and failing to name beneficiaries in his application for membership in the GSIS the retirement benefits shall accrue to his estate and will be distributed among his legal heirs in accordance with the law on intestate succession, as in the case of a life insurance if no beneficiary is named in the insurance policy DISQUALIFIED BENEFICIARIES Article 2012 in relation to Article 739 of the Civil Code 1. Those made between persons who were guilty of concubinage at the time of donation 2. Those made between persons found guilty of the same criminal offense in consideration thereof 3. Those made to a public office or his spouse, descendants and ascendants by reason of his office SSS vs. DAVAC

hpsevilla_2008 14 Facts: The late Petronilo Davac became a member of the SSS. In the SSS form he designated respondent Candelaria Davac as his beneficiary and indicated his relationship to her as that of "wife". It appears that the deceased contracted two marriages, the first, with claimant Lourdes Tuplano and the second, with Candelaria Davac When Petronilo died each of the respondents (Candelaria Davac and Lourdes Tuplano) filed their claims for death benefit with the SSS.. SSS declared Candelaria as the one entitled to the benefits as she was the one indicated as beneficiary. Held: Candelaria Davac is entitled to the benefits, thus, SSS did not err in awarding the same to her. The disqualification under the Civil Code is not applicable to Candelaria Davac because she was not guilty of concubinage, there being no proof that she had knowledge of the previous marriage of her husband Petronilo. The SSS Act provides that if there is a named beneficiary and the designation is not invalid (as it is not so in this case), it is not the heirs of the employee who are entitled to receive the benefits (unless they are the designated beneficiaries themselves). It is only when there is no designated beneficiaries or when the designation is void, that the laws of succession are applicable. As already held, the Social Security Act is not a law of succession. INSULAR LIFE VS. EBRADO Facts: Buenaventura Ebrado was a whole-life for P5,882.00 by ILACT designating Carponia Ebrado as the revocable beneficiary in his policy. He referred to her as his wife. Buenaventura Ebrado died as a result of an accident when he was hit by a failing branch of a tree. Carponia Ebrado filed with the insurer a claim for the proceeds of the Policy as the designated beneficiary therein, although she admits that she and the insured were merely living as husband and wife without the benefit of marriage. Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased insured. She asserts that she is the one entitled to the insurance proceeds, not the common-law wife, Carponia Ebrado. H: Common -law spouses are disqualified by reason of Article 2012 in relation to Article 739 of the CC, which prohibits persons guilty of concubinage or adultery from becoming beneficiaries in a life insurance policy. No criminal conviction for the offense is a condition precedent. In fact, it cannot even be gleaned from the aforequoted provision that a prosecution is needed. On the contrary, the law plainly states that the guilt of the party may be proved "in the same acting for declaration of nullity of donation. And, it would be sufficient if evidence preponderates upon the guilt of the consort for the offense indicated. The quantum of proof in criminal cases is not demanded. The designation of a common law wife when insured has a legal wife is void. Concubinage only needs to shown by preponderance of evidence, no previous conviction is required. A was issued a policy on whole life plan for P20,000. A is married to B with whom he has 3 legitimate children. However, A designated his common-law wife C as the beneficiary in his policy and referred to C as his legal wife. When A died, both B and C claimed the proceeds of the insurance. Who is entitled to the proceeds? (5%) The estate of A is entitled to the proceeds. C is a disqualified beneficiary because of the illicit relation she had with A. Nature of Beneficiarys interest: a mere expectancy -Generally, the designation of a beneficiary is revocable. The insured has the power to change the beneficiary without the 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 of the policy, to take out loans against the cash value, to assign the policy, or to surrender it without the consent of the beneficiary

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit What is an immediate cause? How change of the beneficiary may be effected -the right must be exercised specifically in the manner provided in the policy or contract. -o0oSummary: Only the insured must have insurable interest on the life if the cestui Suicide is generally not compensable unless: mentally ill or committed after the policy has existed for more than two years from issuance If the beneficiary is disqualified because he participated in the death of the cestui, the nearest relatives of the insured will recover. In all other cases, it is the estate of the insured which can recover If the cestui dies during the grace period, there can be recovery If the cestui dies during the duration of the cover notes, there can be recovery The measure of recovery in life insurance is the face value of the policy. Except when insurable interest is capable of pecuniary estimation

hpsevilla_2008 15

It is the cause or peril which appears closest in time to the loss. What is loss? mIt is the injury, damage, liability, loss of

income or profits sustained by the insured in consequence of the happening of one or more perils insured against (Bonifacio Bros. v. Mora)
Heirs of Coscolluela vs. Rico F: A pick up truck was insured with Rico Insurance Co. Within the period of coverage, the truck was damaged because it was fired upon by an unidentified group of men. The insurance company refused to pay indemnity as the firing came within the excepted peril . H: The private respondent's invocation of the exceptions clause in the insurance policy as the basis for its non-liability and the consequent dismissal of the complaint is without merit. We also reiterate the established rule that when the terms of an insurance contract contain limitations on liability, the court "should construe them in such a way as to preclude the insurer from non-compliance with his obligations." (Taurus Taxi Co. Inc. v. Capital Insurance and Surety Company, Inc., 24 SCRA 454 [l968]) A policy of insurance with a narration of exceptions tending to work a forfeiture of the policy shall be interpreted liberally in favor of the insured and strictly against the insurance company or the party for whose benefit they are inserted. Where the insurer denies liability for a loss alleged to be due to a risk not insured against, but fails to establish the truth of such fact by concrete proofs, the Court rules that the insurer is liable under the terms and conditions of the policy by which it has bound itself. In this case, the dismissal order without hearing and reception of evidence to prove that the firing incident was indeed a result of a civil commotion, rebellion or insurrection constitutes reversible error on the part of the trial court. The case was remanded to the trial court for trial on the merits. East vs. Globe H: Regardless of any difference of opinion as to the value of the insured furniture and the extent of the damage caused thereto by the fire in question, the fact that the insured only had approximately 202 pieces of furniture in the building at the time of the fire and sought to compel the insurance companies to pay for 506 pieces conclusively shows that its claim was not honestly conceived. The trial court's conclusion that said claim is notoriously fraudulent, is correct. Thus, there was no recovery. Paris vs. Phoenix The real cause of the fire is more or less a matter of conjecture, upon which there is little, if any, evidence. In appellant's brief, it is said: The cause of the explosion was and is unknown and wholly a matter of conjecture. Neither peter Johnson nor Francisco Banta (the only persons in the building at the time) claimed that either of them saw anything explode. There is no evidence as to whether the fire was started before or after the explosion. Neither is there any competent testimony as to the cause of the explosion. The defendant having issued its policy which was in legal force and effect at the time of the fire, it is bound by its terms and conditions, and the property having been destroyed, the burden of proof was upon the defendant to show that it was exempt from liability under the terms and conditions of the policy, and upon that point, there is a failure of proof. Alfredo took out a policy to insure his commercial building against fire. A fire broke out and destroyed the building. It was found that the proximate cause of the fire was explosion but fire was the immediate cause of the loss. There is no excepted peril in the policy. Can there be recovery under the policy? Alfredo cannot recover from the policy. Section 84 of the Insurance Code provides that before there can be recovery under property insurance, the proximate cause of the loss must be the covered peril. In the instant case, the proximate

PART III NON-LIFE INSURANCE


I. WHAT MAY BE INSURED AGAINST Sec. 3. Any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest, or create a liability against him, may be insured against, subject to the provisions of this chapter. Sec. 84. Unless otherwise provided by the policy, an insurer is liable for a loss of which a peril insured against was the proximate cause, although a peril not contemplated by the contract may have been a remote cause of the loss; but he is not liable for a loss which the peril insured against was only a remote cause. Sec. 86. Where a peril is especially excepted in a contract of insurance, a loss, which would not have occurred but for such peril, is thereby excepted although the immediate cause of the loss was a peril which was not excepted. Rule on recovery: 1. The peril insured against must be the proximate cause, even if the remote cause is an excepted peril. 2. When the insured risk is only a remote cause, OR if the proximate cause is an excepted peril, the insurer is not liable. What is proximate cause? Proximate cause is that which in the natural and continuous sequence, unbroken by any NEW INDEPENDENT cause, produces an event without which the event (loss, in this case) would not have occurred. It is also called the EFFICIENT CAUSE, or the one which sets the other causes in motion.

Examples Fire causes an explosion which results in loss, fire is the proximate cause of the loss and if fire is a covered peril, the insurer is liable If the house is insured against fire and the house is destroyed dud to the falling of a wall which is on life, the insurer is liable

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit cause of the loss was not the peril insured against. Hence, there can be no recovery under the policy. What is the rule as regards loss in the course of rescue? Sec. 85. An insurer is liable where the thing insured is rescued from a peril insured against that would otherwise have caused a loss, if, in the course of such rescue, the thing is exposed to a peril not insured against, which permanently deprives the insured of its possession, in whole or in part; or where a loss is caused by efforts to rescue the thing insured from a peril insured against. First, the insurer is liable if the thing is rescued from a peril insured against if the thing in the course of rescue is exposed to a peril not insured against. It must be shown that the property would have been lost by the peril insured against had there been no attempt to rescue it. Second, If loss is caused by efforts to rescue thing insured from a peril insured against. An owner gets theft insurance for his car. In the course of rescuing the car from thieves, the car suffers damages. The insurer is liable to the owner although the damage is not due to theft since it was in the course of rescuing the car from theft that it suffered some damage.

hpsevilla_2008 16 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. Act No. 3893, Bonded Warehouse Act - SECTION 6.Every person licensed under this Act to engage in the business of receiving rice for storage shall insure the rice so received and stored against fire. 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.2 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. Sec. 18. 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. 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; Factual expectation Mere factual expectation of loss not arising from any legal right or duty in connection with the SM does not constitute an insurable interest NOTE: although factual expectation is enough basis in life insurance Note: Beneficiary is required to have insurable interest in property insurance. A is an elderly bachelor who insured his house against fire. He named his companion-friend as beneficiary. A died in a fire which also destroyed his home. The insurer refused payment to B due to absence of insurable interest on the life of A. Is the insurer correct? The insurer is correct. The beneficiary in property insurance must have insurable interest on the property. The companion-friend of A does not have insurable interest on the house of A. Hence, he cannot recover from the fire insurance policy. JQ, the owner of a condominium insured the same against fire with XYZ Company and made the loss payable to his brother MLQ. In case of loss by fire, who can recover from the policy. State the reason for your answer (5%) JQ can recover since he has insurable interest over his own condominium unit. MLQ cannot recover since it is required that a beneficiary must have insurable interest over the property.

Rule if loss is due to the willful act or with the connivance of the insured Sec. 87. An insurer is not liable for a loss caused by the willful act or through the connivance of the insured; but he is not exonerated by the negligence of the insured, or of the insurance agents or others. If loss is through SIMPLE negligence of insured or his agents, insurer is STILL LIABLE. Why? Because this is one of the purposes of an insurance. The doctrine of contributory negligence does not apply to rights under a contract of insurance. Insurer is NOT liable if loss is caused by GROSS negligence of insured Because gross negligence tantamount to bad faith and is as if the act was wilful. If the fire was found to have been caused by Alfredos own negligence, can he still recover from the policy? I qualify. If the negligence was simple in nature then Alfredo can still recover under the policy. However, if there was gross negligence on the part of Alfredo then he is barred from recovering under the policy. ii. INSURABLE INTEREST IN NON-LIFE INSURANCE

Note: Loss of insurable interest in life insurance AT THE TIME 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. Every interest in property, whether real or personal (owner) Any relation thereto (lessee, agent) Liability in respect of property (carrier, depositary) Sec. 14. An insurable interest in property may consist in: (a) An existing interest (owner); (b) An inchoate interest founded on an existing interest; (shareholder) or (c) An expectancy, coupled with an existing interest in that out of which the expectancy arises. (usufructuary)

the loss occurs does not affect the policy and there can be recovery.
INSURABLE INTEREST IN A MORTGAGED PROPERTY: Sec. 8. Unless the policy otherwise provides, where a mortgagor of property effects insurance in his own name providing that the loss shall be payable to the mortgagee, or
2

father cannot insure his sons property mere expectancy of inheriting. General or unsecured creditor cannot insure property of debtor but an unsecured creditor may insure the property of a deceased debtor since all personal liability ceases with the death of the debtor. Also, an unsecured creditor who obtains a judgment in his favor becomes a judgment creditor and has been held to have insurable interest in the debtors property. However, to recover under the insurance, he must show the debtor has no other property out of which the judgment may be satisfied. Of course, an unsecured creditor has an insurable interest in the life of his debtor to the extend of the amount of his debt. But a beneficiary has no insurable interest in the testators death

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit assigns a policy of insurance to a mortgagee, the insurance is deemed to be upon the interest of the mortgagor, who does not cease to be a party to the original contract, and any act of his, prior to the loss, which would otherwise avoid the insurance, will have the same effect, although the property is in the hands of the mortgagee, but any act which, under the contract of insurance, is to be performed by the mortgagor, may be performed by the mortgagee therein named, with the same effect as if it had been performed by the mortgagor. Sec. 9. If an insurer assents to the transfer of insurance from a mortgagor to a mortgagee, and, at time of his assent, imposes further obligation on assignee, making a new contract with him, the act of mortgagor cannot affect the rights of said assignee. an the the the Lampano vs. Jose

hpsevilla_2008 17

Facts: The defendant, Mariano R. Barretto, constructed a house for the other defendant, Placida A. Jose. Placida A. Jose sold the house to the plaintiff, Antonina Lampano. Subsequently, the house was destroyed by fire. At the time of the fire Antonina Lampano still owed Placida A. Jose the sum of P2,000. Placida A. Jose still owed Mariano R. Barretto on the cost of the construction the sum of P2,000. After the completion of the house and sometime before it was destroyed, Mariano R. Barretto took out an insurance policy upon it in his own name, with the consent of Placida A. Jose, for the sum of P4,000. After its destruction, he collected P3,600 from the insurance company. H: Barretto had an insurable interest in the house, he could insure this interest for his sole protection. The policy was in the name of Barretto alone. It was, therefore, a personal contract between him and the company and not a contract which ran with the property. According to this personal contract the insurance policy was payable to the insured without regard to the nature and extent of his interest in the property, provided that he had, as we have said, an insurable interest at the time of the making of the contract, and also at the time of the fire. Where different persons have different interests in the same property, the insurance taken by one in his own right and in his own interest does not in any way insure to the benefit of another. This is the general rule prevailing in the United States and we find nothing different in this jurisdiction. "A contract of insurance made for the insurer's (insured) indemnity only, as where there is no agreement , express or implied, that it shall be for the benefit of a third person , does not attach to or run with the title to the insured property on a transfer thereof personal as between the insurer and the insured. In such case strangers to the contract cannot require in their own right any interest in the insurance money, except through an assignment or some contract with which they are connected." In the case at bar Barretto assumed the responsibility for the insurance. The premiums, as we have indicated, were paid by him without any agreement or right to recoup the amount paid therefor should no loss result to the property. It would not, therefore, be in accordance with t he law and his contractual obligations to compel him to account for the insurance money, or any par thereof, to the plaintiff, who assumed no risk whatever. Traders vs. Golangco (Spanish text) By virtue of the contract between Tomas B. Lianco and the Archbishop, Lianco erected the building of which the premises in question form part and became owner thereof. He transferred the ownership of the premises in question to kaw Eng Si, who in turn transferred it to plaintiff Juan Golangco Lianco and the actual occupant of the premises acknowledged plaintiff's right to collect rentals thereon in a compromise agreement which was incorporated in a judicial judgment . Both at the time of the issuance of the policy and at the time of the fire, plaintiff Golangco was in legal possession of the premises, collecting rentals from its occupant. It seems plain that if the premises were destroyed as they were by fire, Golangco would be, as he was, directly damnified thereby; and hence he had an insurable interest therein. Thus, There is no doubt in our mind that both at the time of the execution of the fire policy (Exhibit A) on April 7, 1949, and on June 5, 1949, when the destruction by fire of the property for which the said policy was issued took place, plaintiff Juan Golangco had an insurable interest on the property insured which included the rents of premises Filipino vs. CA Anent the issue of insurable interest, we uphold the ruling of the respondent court that private respondent, as consignee of the goods in transit under an invoice containing the terms under "C & F Manila," has insurable interest in said goods. Section 13 of the Insurance Code defines insurable interest in property. In principle, anyone has an insurable interest in property who derives a benefit from its existence or would

Both the mortgagor and the mortgagee have insurable interest on the mortgaged property The insurable interest of the mortgagor is to the full value of the SM The insurable interest of the mortgagee is only up to the extent of the indebtedness A businessman obtained a fire insurance policy on his stocks for P5 M. Three months later, a fire broke out and destroyed the grocery and stocks. The insurer denied the claim since the stocks were mortgaged to another person who also insured the same stocks for P5 M. May the businessman and the creditor obtain different insurance policies on the same stocks? Yes. The businessman, as the owner and the creditor, as the mortgagee have insurable interest over the stocks. Hence, they may obtain separate policies on the same stocks. Measure Measure of insurable interest is the extent the insured might be damnified by loss or injury (sec.17) Section 25: void stipulations payment of loss whether insured has insurable interest or not or that policy shall be proof of interest Distinguish insurable interest in property insurance from insurable interest in life insurance

(5%)

In property insurance, the expectation of benefit must have a legal basis. In life insurance, insurable interest can be based on mere factual expectation . In property insurance, the actual value of the interest is the limit of the insurance. There is no such limit in life insurance except if insurable interest is capable of pecuniary estimation. In property insurance, insurable interest must exist when the insurance takes effect and at the time of the loss but not in the meantime. In life insurance, insurable interest must exist only at the time the insurance takes effect. Also: INSURABLE INTEREST IN LIFE 1. insurable interest is unlimited except one taken by the creditor on the life of the debtor 2. it is sufficient that insurable interest exists at the time the insurance takes effect but not when the loss occurs. 3. the expectancy of benefit may be sufficient even without legal basis

INSURABLE INTEREST IN PROPERTY Insurable interest is limited to the actual value of the interest in the property The insurable interest must exist both at the time the insurance takes effect and at the time of the loss. The expectancy must be coupled with an existing legal basis to be a sufficient insurable interest.

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit suffer loss from its destruction whether he has or has not any title in, or lien upon or possession of the property. Insurable interest in property may consist in (a) an existing interest; (b) an inchoate interest founded on an existing interest; or (c) an expectancy, coupled with an existing interest in that out of which the expectancy arises. Herein private respondent, as vendee/consignee of the goods in transit has such existing interest therein as may be the subject of a valid contract of insurance. His interest over the goods is based on the perfected contract of sale. The perfected contract of sale between him and the shipper of the goods operates to vest in him an equitable title even before delivery or before be performed the conditions of the sale. The contract of shipment, whether under F.O.B., C.I.F., or C. & F. as in this case, is immaterial in the determination of whether the vendee has an insurable interest or not in the goods in transit. The perfected contract of sale even without delivery vests in the vendee an equitable title, an existing interest over the goods sufficient to be the subject of insurance. Cha vs. CA F: Respondents Cha insured the leased premises despite the contrary agreement with the lessor that the lessee cannot insure the same without the formers consent; and should the lessee do so in contravention with the agreement, the lessor will be ipso facto considered as the assignee of the insurance proceeds. When the leased premises was destroyed by fire, the lessor sought to recover the insurance proceeds. H: Sec. 18 in reference to Sec. 25 of the Insurance Code. A non-life insurance policy such as the fire insurance policy taken by petitioner-spouses over their merchandise is primarily a contract of indemnity. Insurable interest in the property insured must exist at the time the insurance takes effect and at the time the loss occurs. The basis of such requirement of insurable interest in property insured is based on sound public policy: to prevent a person from taking out an insurance policy on property upon which he has no insurable interest and collecting the proceeds of said policy in case of loss of the property. In such a case, the contract of insurance is a mere wager which is void under Section 25. In the present case, it cannot be denied that CKS has no insurable interest in the goods and merchandise inside the leased premises under the provisions of Section 17. Therefore, respondent CKS cannot, under the Insurance Code a special law be validly a beneficiary of the fire insurance policy taken by the petitioner-spouses over their merchandise. This insurable interest over said merchandise remains with the insured, the Cha spouses. The automatic assignment of the policy to CKS under the provision of the lease contract previously quoted is void for being contrary to law and/or public policy. The proceeds of the fire insurance policy thus rightfully belong to the spouses Nilo Cha and Stella Uy-Cha (herein copetitioners). The insurer (United) cannot be compelled to pay the proceeds of the fire insurance policy to a person (CKS) who has no insurable interest in the property insured. Lim Cuan Sy vs. Northern The appellant calls attention to the fact that the true owner of the insured goods was the mercantile entity Lim Cuan Sy & Co., whereas the policies were written in the name of Lim Cuan Sy only, without any revelation having been made to the insurer of the fact that Lim Cuan Sy was only one of several partners in the business and that he was not the sole owner. The proof, however, shows that the agent who wrote the policy made no inquiry as to the interest of Lim Cuan Sy in the insured goods, and he merely asked in what name the insurance should be written . The proof further shows that, in accordance with the Chinese genius for mixing names, the name Lim Cuan Sy was commonly used to indicate the business pertaining to the mercantile entity Lim Cuan Sy & Co.

hpsevilla_2008 18 There is no question but that when this policy of insurance was written, the agent of the company knew that he was insuring a stock of goods the identity of which was not in doubt, and which pertained to a business commonly known as the business of Lim Cuan Sy; and inasmuch as the defendant was content to take the premium corresponding to the insurance on goods of the value of those then contained in the bodega, the company should not now be permitted to escaped responsibility merely upon the lack of conformity between the name used in the policy and the true name of the legal entity existing under our law. RCBC VS. CA As earlier mentioned, accordant with the credit facilities extended by RCBC to GOYU, the latter executed several mortgage contracts in favor of RCBC. It was expressly stipulated in these mortgage contracts that GOYU shall insure the mortgaged property with any of the insurance companies acceptable to RCBC . GOYU indeed insured the mortgaged property with MICO, an insurance company acceptable to RCBC. Based on their stipulations in the mortgage contracts, GOYU was supposed to endorse these insurance policies in favor of, and deliver them, to RCBC. Alchester Insurance Agency, Inc., from whom GOYU obtained the subject insurance policies, prepared the nine endorsements however, because these endorsements do not bear the signature of any officer of GOYU, the trial court, as well as the CA, concluded that the endorsements are defective. We do not quite agree. A mortgagor and a mortgagee have separate and distinct insurable interests in the same mortgaged property, such that each one of them may insure the same property for his own sole benefit. There is no question that GOYU could insure the mortgaged property for its own exclusive benefit. In the present case, although it appears that GOYU obtained the subject insurance policies naming itself as the sole payee, the intentions of the parties as shown by their contemporaneous acts, must be given due consideration in order to better serve the interest of justice and equity. It is also significant that GOYU voluntarily and purposely took the insurance policies from MICO, a sister company of RCBC, and not just from any other insurance company. On equitable principles, particularly on the ground of estoppel, the Court is constrained to rule in favor of mortgagor RCBC. RCBC, in good faith, relied upon the endorsement documents sent to it as this was only pursuant to the stipulation in the mortgage contracts. We find such reliance to be justified under the circumstances of the case. GOYU failed to seasonably repudiate the authority of the person or persons who prepared such endorsements. Over and above this, GOYU continued, in the meantime, to enjoy the benefits of the credit facilities extended to it by RCBC. GOYU cannot seek relief under Section 53 of the Insurance Code which provides that the proceeds of insurance shall exclusively apply to the interest of the person in whose name or for whose benefit it is made. The peculiarity of the circumstances obtaining in the instant case presents a justification to take exception to the strict application of said provision, it having been sufficiently established that it was the intention of the parties to designate RCBC as the party for whose benefit the insurance policies were taken out. (Garcia v. Hongkong) Where the real intention of insured was to insure his goods for 15,000 but insurer mistakenly insured the building where the goods were contained and not owned by insured, in case of loss of goods insured was allowed to recover Rule in case of change of ownership over the subject matter: General Rule (Section 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. Also: Section 58. The mere transfer of a thing insured does not transfer the policy, but suspends it until the same person

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit becomes the owner of both the policy and the thing insured. Illustration: A owns a car which is insured against theft. A sells the car to B. The policy was not included in the sale. If the car is carnapped, neither A nor B can recover under the policy. A cannot recover because he does not own the car at the time of the theft. B cannot recover because he does not own the policy Exceptions: 1. Life, accident and health 2. Change of interest after the occurrence of any injury which results in a loss(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. 3. Change of interest in one or more of several things, separately issued by one policy(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. 4. Change of interest by will or succession on the death of the insured(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. Illustration: A owns a car which has theft insurance. A bequeath the car to B under his will. A dies. B now owns the car, together with the insurance policy 5. Transfer of interest by one of several partners, joint owners, or owners in common, who are jointly insured, to the others(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. 6. When a policy is so framed that it will inure to the benefit of whomsoever, during the continuance of the risk, may become the owner of the interest insured(sec.57) 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. III. INSURANCE POLICY In general: See Sec. 49-51

hpsevilla_2008 19 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, the named insured shall be entitled to renew the policy upon payment of the premium due on the effective date of the renewal. Any policy written for a term of less than one year shall be considered as if written for a term of one year. 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. Kinds of Insurance Policy: (See Sec. 59-62) 1. Open Sec. 60. An open policy is one in which the value of the thing insured is not agreed upon, but is left to be ascertained in case of loss. 2. Valued Sec. 61. A valued policy is one which expresses on its face an agreement that the thing insured shall be valued at a specific sum. Kinds of Value: Face value maximum amount which may be recovered under the policy Valuation- value of the subject matter agreed on by the parties Open vs. Valued policy: Open - has a face value but has NO valuation of the thing. Valuation is done after the loss Valued - has both face value and valuation of the thing

Illustration: Open Policy Value of the house: to be determined at time of loss Face Value: P2 Million If the valuation is more than the face value, recovery is limited to the face value Illustration: Valued Policy Valuation of the car : P1.5 Million Face Value : P 1 Million GENERAL RULE: Recovery will

be based on valuation EXCEPTION: If valuation is obtained through fraud or misrepresentation. Recovery is limited to the face value or insurer may deny the claim 3. Running Sec. 62. A running policy is one which contemplates successive insurances, and which provides that the object of the policy may be from time to time defined, especially as to the subjects of insurance, by additional statements or indorsements. Illustration: Running policy on grocery store As of May 1, 2007 value of goods P1 Million As of June 1, 2007 - value of goods P500,000 Harding vs. Commercial H: The defendant, upon the information given by plaintiff, and after an inspection of the automobile by its examiner, having agreed that it was worth P3,000, is bound by this valuation in the absence of fraud on the part of the insured. Plaintiff was the owner of the automobile in question and had an insurable interest therein; that there was no fraud on her part in procuring the insurance; that the valuation of the automobile, for the purposes of the insurance, is binding upon the defendant corporation. Development vs. IAC There is no evidence on record that the building was worth P5,800,000.00 at the time of the loss; only the petitioner says so and it does not back up its self-serving estimate with any independent corroboration. On the contrary, the building was insured at P2,500,000.00, and this must be considered, by agreement of the insurer and the insured, the actual value of the property insured on the day the fire occurred.

Also: Sec. 56. When the description of the insured in a policy is so general that it may comprehend any person or any class of persons, only he who can show that it was intended to include him can claim the benefit of the policy. Sec. 57. A policy may be so framed that it will inure to the benefit of whomsoever, during the continuance of the risk, may become the owner of the interest insured. 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. Sec. 66. In case of insurance other than life, 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

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit As defined in Section 60 of the Insurance Code, " an open policy is one in which the value of the thing insured is not agreed upon but is left to be ascertained in case of loss. " This means that the actual loss, as determined, will represent the total indemnity due the insured from the insurer except only that the total indemnity shall not exceed the face value of the policy. The actual loss has been ascertained in this case and this Court will respect such factual determination in the absence of proof that it was arrived at arbitrarily. There is no such showing. Hence, applying the open policy clause as expressly agreed upon by the parties in their contract, we hold that the private respondent is entitled to the payment of indemnity under the said contract in the total amount of P508,867.00. IV. PREMIUMS General Rule: CASH AND CARRY BASIS once exposed to the peril insured against you have to pay the premium, otherwise, the insurance company can opt for rescission of the contract or specific performance. Sec. 77. An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the peril insured against. Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid, except in the case of a life or an industrial life policy whenever the grace period provision applies. Sec. 78. An acknowledgment in a policy or contract of insurance or the receipt of premium is conclusive evidence of its payment, so far as to make the policy binding, notwithstanding any stipulation therein that it shall not be binding until the premium is actually paid. Cash and carry basis nonpayment of the first premium prevents the contract from becoming binding Premium must be paid in cash as a condition precedent for non-life insurance policy to be valid and binding In Suretyship: Sec. 177. The surety is entitled to payment of the premium as soon as the contract of suretyship or bond is perfected and delivered to the obligor. No contract of suretyship or bonding shall be valid and binding unless and until the premium therefor has been paid, except where the obligee has accepted the bond, in which case the bond becomes valid and enforceable irrespective of whether or not the premium has been paid by the obligor to the surety: Provided, That if the contract of suretyship or bond is not accepted by, or filed with the obligee, the surety shall collect only reasonable amount, not exceeding fifty per centum of the premium due thereon as service fee plus 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 fault or negligence of the surety, no such service fee, stamps or taxes shall be collected. In the case of a continuing bond, the obligor shall pay the subsequent annual premium as it falls due until the contract of suretyship is cancelled by the obligee or by the Commissioner or by a court of competent jurisdiction, as the case may be. Exceptions when policy nonpayment of premium: valid notwithstanding

hpsevilla_2008 20 This simply means that 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, recovery on the policy should be allowed even though the premium is paid after the loss but within the credit term. UCPB v. Masagana April 4, 2001 Facts: Facts: Petitioner issued insurance policies covering respondent's various property against fire, for the period from May 22, 1991 to May 22, 1992. On June 13, 1992, fire razed respondent's property covered by three of the insurance policies petitioner issued. On July 13, 1992, respondent presented to petitioner's cashier at its head office manager's checks representing premium for the renewal of the policies from May 22, 1992 to May 22, 1993. No notice of loss was filed by respondent under the policies prior to July 14, 1992. On July 14, 1992, respondent filed with petitioner its formal claim for indemnification of the insured property razed by fire. On the same day, July 14, 1992, petitioner returned to respondent the manager's checks and at the same time rejected respondent's claim for the reasons (a) that the policies had expired and were not renewed, and (b) that the fire occurred on June 13, 1992, before respondent's tender of premium payment. H: insured is entitled to proceeds even if he has not fully paid premiums when: for years, insurer has been issuing fire insurance policies to insured and the policies were renewed; insurer has been granting 6090 day credit extension; no valid notice of nonrenewal; premium was paid by insured within credit extension period Alfredo took out a policy to insure his commercial building. The broker agreed to give a 15-day credit to Alfredo within which to pay the premium. Upon delivery of the policy on May 15, 2006, Alfredo issued a postdated check dated May 30, 2006. On May 28, 2006, fire destroyed the building. May Alfredo recover from the policy? Alfredo can recover from the policy. In a decided case by the Supreme Court, it was held that parties may agree on a credit extension in paying the premium. The happening of the peril during the credit extension will entitle the insured to proceeds, less the unpaid premiums.

4. When there is an agreement allowing the insured to pay the premium in installments and partial payment has been made at the time of loss. (MAKATI TUSCANY VS. CA) Makati and American Assurance agreed that premiums will be paid via three instalments. Makati paid premiums for 3 consecutive years in three instalments. On the 4th year, Makati paid only the 1st 2 instalments. American collected the 3rd instalment. H: Section 77 merely precludes the parties from stipulating that the policy is valid even if premiums are not paid, but does not expressly prohibit an agreement granting credit extension, and such an agreement is not contrary to morals, good customs, public order or public policy ( De Leon, the Insurance Code, at p. 175). So is an understanding to allow insured to pay premiums in installments not so proscribed. At the very least, both parties should be deemed in estoppel to question the arrangement they have voluntarily accepted. We hold that the subject policies are valid even if the premiums were paid on installments. The records clearly show that the petitioners and private respondent intended subject insurance policies to be binding and effective notwithstanding the staggered payment of the premiums. The initial insurance contract entered into in 1982 was renewed in 1983, then in 1984. In those three years, the insurer accepted all the installment payments. Such acceptance of payments speaks loudly of the insurer's intention to honor the policies it issued to petitioner. Certainly, basic principles of equity and fairness would not allow the insurer to continue collecting and accepting the premiums, although paid on installments, and later deny liability on the lame excuse that the premiums were not prepaid in full. 5. Estoppel

1. Whenever the grace period applies (sec.77) 2. When there is an acknowledgement in the policy of receipt of premium even if there is a stipulation therein that it shall not be binding until the premium is actually paid.(sec.78) 3. When there is an agreement to grant the insured credit extension for the payment of the premium (UCPB vs. Masagana)

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit Finally in the instant case, it would be unjust and inequitable if recovery on the policy would not be permitted against Petitioner, which had consistently granted a 60- to 90-day credit term for the payment of premiums despite its full awareness of Section 77. Estoppel bars it from taking refuge under said Section, since Respondent relied in good faith on such practice. Estoppel then is the fifth exception to Section 77. (UCPB vs. Masagana) A Insurance Company issued an policy on the new car of B. The premium of P60,000 was to be paid in 6 months. B paid only the 1st two months installments. Despite demands, B failed to pay the rest of the installments. Five months after the issuance of the policy, the vehicle was carnapped. A denied the claim of B since B did not pay the premium resulting to cancellation of the policy. Can B recover from A? B can recover from A the proceeds of the policy less the unpaid premiums. In a decided case by the Supreme Court, it was held that when the parties agreed on payment of premiums by installment, the policy becomes effective upon payment of first installment. Absent any provision that non-payment of subsequent installments will cause cancellation, the policy between A and B continue to exist. 6. In Suretyship where the obligee accepts the bond even if premium has not been paid. General Rule: Sec. 80. If a peril insured against has existed, and the insurer has been liable for any period, however short, the insured is not entitled to return of premiums, so far as that particular risk is concerned. When is the premium? insured entitled to a return of

hpsevilla_2008 21 Name at least three instances when an insured is entitled to a return of the premium paid. How to compute Sec. 82: Ratable return of premium in case of over insurance by several insurers STEP 1: Determine amount overinsured Amount over insured = (Amount of insurance value of property) STEP 2: Get the ratio of overinsurance with the total amount of insurance STEP 3: Multiply the ratio to the amount of premium paid to every insurer

Insurer A company B company TOTAL

Amount of insurance

Premiums Paid

P1,200,000.00 P24,000.00

P600,000.00
P1,800,000.00

P12,000.00 P36,000.00

1. Amount over-insured = P300,000 P1.8 P1.5M = P300,000 2. Ratio = 1/6 P300,000/P1,800,000.00

Sec. 79. A person insured is entitled to a return of premium, 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 against3; (b) Where the insurance is made for a definite period of time and the insured surrenders his policy, to such portion of the premium as corresponds with the unexpired time, at a pro rata rate, unless a short period rate has been agreed upon and appears on the face of the policy, after deducting from the whole premium any claim for loss or damage under the policy which has previously accrued; Provided, 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. 4 Sec. 81. A person insured is entitled to return of the premium when the contract is voidable, on account of fraud or misrepresentation of the insurer, or of his agent, or on account of facts, the existence of which the insured was ignorant without his fault; or when by any default of the insured other than actual fraud, the insurer never incurred any liability under the policy.5 Sec. 82. In case of an over-insurance by several insurers, the insured is entitled to a ratable return of the premium, proportioned to the amount by which the aggregate sum insured in all the policies exceeds the insurable value of the thing at risk.

3. A= 1/6 of P24,000 = P4,000 from A Company B= 1/6 of P12,000 = P2,000 from B Company V. PARTIES TO THE CONTRACT IN NON-LIFE INSURANCE Insurer and insured same as life insurance; Beneficiary: Sec. 18: no contract or policy on property shall be enforceable except for the benefit of some person having an insurable interest in the property insured Vs. Beneficiary in Life Insurance - Where the beneficiary is not required to have insurable interest over the cestui que vie. It is only the insured who must have insurable interest over the cestui que vie VI. DOUBLE INSURANCE VS. REINSURANCE What is double insurance? When does double insurance exist? Sec. 93. A double insurance exists where the same person is insured by several insurers separately in respect to the same subject and interest. Is double insurance allowed? Yes, there is no prohibition against double insurance, as a general rule. The exception is when it is provided in the policy/contract, which is the usual case. Pioneer vs. Yap By the plain terms of the policy, other insurance without the consent of petitioner would ipso facto avoid the contract. It required no affirmative act of election on the part of the company to make operative the clause avoiding the contract, wherever the specified conditions should occur. Its obligations ceased, unless, being informed of the fact, it consented to the additional insurance. The validity of a clause in a fire insurance policy to the effect that the procurement of additional insurance without the consent of the insurer

E.g. insured pays in advance the annual premium, loss occurs before date of effectivity. Insured is entitled to reimbursement of whole premium. 4 Pro-rated return of premium: E.g. A insures his house for 1 year but returns the policy after 3 months. A is entitled to of the premiums. 5 If the contract is voidable on account of fraud / misrepresentation of insure/agent, facts insured was ignorant of, default of insured other than fraud. E.g. Agent represents that A can be insured even if his age disqualifies him. Insured is entitled to return of premium.

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit renders ipso facto the policy void is well-settled. The obvious purpose of the aforesaid requirement in the policy is to prevent over-insurance and thus avert the perpetration of fraud. The public, as well as the insurer, is interested in preventing the situation in which a fire would be profitable to the insured. What are the elements of double insurance? 1. 2. 3. 4. 5. insured is the same two or more insurers insuring separately same subject matter interest insured is the same risk or peril insured against is the same

hpsevilla_2008 22 agreement by which the mortgagor is to pay the premiums upon such insurance. It has been noted, however, that although the mortgagee is himself the insured, as where he applies for a policy, fully informs the authorized agent of his interest, pays the premiums, and obtains on the assurance that it insures him, the policy is in fact in the form used to insure a mortgagor with loss payable clause. A businessman obtained a fire insurance policy on his stocks for P5 M. Three months later, a fire broke out and destroyed the grocery and stocks. The insurer refused to pay claiming that double insurance is contrary to law. Is this contention tenable? The contention of the insurer is untenable. First, there is no law prohibiting double insurance. Second, there was no double insurance here because the insured in the two policies are different. The two insured also have different interests on the property. What is over insurance? It is the amount of insurance is beyond the value of insureds insurable interest. How do you collect in case of over insurance? Sec. 94. Where the insured is overinsured by double insurance: (a) The insured, unless the policy otherwise provides, may claim payment from the insurers in such order as he may select, up to the amount for which the insurers are severally liable under their respective contracts; Illustration: John owns a house worth P1.8M and got the following insurance policies: A- P600,000 ; b- 1.8M; C- 2.4M. If the house is totally burned, John can claim from them in whatever order he may select. Example, get from A the 600T, from B 600T, from C 600T OR he may just get the entire amount from B. (b) Where the policy under which the insured claims is a valued policy, 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; Example: Johns house was destroyed by fire and the value of restoring the same was pegged at P1.8M. He had the following insurance policies: A 600,000 (Valued) B 1.8M (Open) C 2.4M (Open) If John gets 600T from A, a valued policy, he must give credit as against the 1.8M valuation for the 600T he got from A. he can only get the balance of 1.2M either from B or C or both. (c) Where the policy under which the insured claims is an unvalued policy he must give credit, as against the full insurable value, for any sum received by him under any policy; John insures the house but there is no valuation. The 3 policies have the following face values: A 600,000 B 1.8M C 2.4M If the valuation at the time of the loss is 1.5M, he can collect only up to 1.5M and collect in such order he may select. E.g. 600T from A and 900T from B. (d) Where the insured receives any sum in excess of the valuation in the case of valued policies, or of the insurable value in the case of unvalued policies, he must hold such sum in trust for the insurers, according to their right of contribution among themselves; John owns a house and valuation at the time of loss is 1.5M. he can only recover up to 1.5M. The policies are as follows: A 600,000, B 1.8M and C 2.4M. John is able to collect 600T from A and P1M from C = 1.6M. He must hold the excess of P100T in trust for insurers A and B

Geagonia vs. CA A double insurance exists where the same person is insured by several insurers separately in respect of the same subject and interest. As earlier stated, the insurable interests of a mortgagor and a mortgagee on the mortgaged property are distinct and separate. Since the two policies of the PFIC do not cover the same interest as that covered by the policy of the private respondent, no double insurance exists. The non-disclosure then of the former policies was not fatal to the petitioner's right to recover on the private respondent's policy. Section 75 of the Insurance Code which provides that "[a] policy may declare that a violation of specified provisions thereof shall avoid it, otherwise the breach of an immaterial provision does not avoid the policy." Such a condition is a provision which invariably appears in fire insurance policies and is intended to prevent an increase in the moral hazard. It is commonly known as the additional or "other insurance" clause and has been upheld as valid and as a warranty that no other insurance exists. Its violation would thus avoid the policy. However, in order to constitute a violation, the other insurance must be upon same subject matter, the same interest therein, and the same risk As to a mortgaged property, the mortgagor and the mortgagee have each an independent insurable interest therein and both interests may be one policy, or each may take out a separate policy covering his interest, either at the same or at separate times. The mortgagor's insurable interest covers the full value of the mortgaged property, even though the mortgage debt is equivalent to the full value of the property. The mortgagee's insurable interest is to the extent of the debt, since the property is relied upon as security thereof, and in insuring he is not insuring the property but his interest or lien thereon. His insurable interest is prima facie the value mortgaged and extends only to the amount of the debt, not exceeding the value of the mortgaged property. Thus, separate insurances covering different insurable interests may be obtained by the mortgagor and the mortgagee. A mortgagor may, however, take out insurance for the benefit of the mortgagee, which is the usual practice. The mortgagee may be made the beneficial payee in several ways. He may become the assignee of the policy with the consent of the insurer; or the mere pledgee without such consent; or the original policy may contain a mortgage clause; or a rider making the policy payable to the mortgagee "as his interest may appear" may be attached; or a "standard mortgage clause," containing a collateral independent contract between the mortgagee and insurer, may be attached; or the policy, though by its terms payable absolutely to the mortgagor, may have been procured by a mortgagor under a contract duty to insure for the mortgagee's benefit, in which case the mortgagee acquires an equitable lien upon the proceeds. In the policy obtained by the mortgagor with loss payable clause in favor of the mortgagee as his interest may appear, the mortgagee is only a beneficiary under the contract, and recognized as such by the insurer but not made a party to the contract himself. Hence, any act of the mortgagor which defeats his right will also defeat the right of the mortgagee. This kind of policy covers only such interest as the mortgagee has at the issuing of the policy. On the other hand, a mortgagee may also procure a policy as a contracting party in accordance with the terms of an

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit REINSURANCE VS. DOUBLE INSURANCE (e) Each insurer is bound, as between himself and the other insurers, to contribute ratably to the loss in proportion to the amount for which he is liable under his contract. Johns house was valued at P1.8M at the time of loss. He got the following fire insurance policies: A 600,000 B 1.8M C 2.4M TOTAL 4.8M thus: Amount of policy contribution Total insurance taken A = 600,000 X 1.8M 4.8M = 1/8 x 1.8 = 225,000 X Loss = ratable REINSURANCE Insurer becomes the insured Subject of insurance is the original insurers risk Insurance of a different interest Original insured is not a party Consent of original insured is not necessary

hpsevilla_2008 23

DOUBLE INSURANCE Insurer remains the insurer Subject of insurance is property Insurance of the same interest Insured is the party in interest in all contracts Insured has to give his consent

MARINE INSURANCE
See Sec. 99 for definition INSURABLE INTEREST Sec. 100. The owner of a ship has in all cases an insurable interest in it, even when it has been chartered by one who covenants to pay him its value in case of loss: Provided, That in this case the insurer shall be liable for only that part of the loss which the insured cannot recover from the charterer. Sec. 101. The insurable interest of the owner of the ship hypothecated by bottomry is only the excess of its value over the amount secured by bottomry. Sec. 102. Freightage, in the sense of a policy of marine insurance, signifies all the benefits derived by the owner, either from the chartering of the ship or its employment for the carriage of his own goods or those of others. Sec. 103. The owner of a ship has an insurable interest in expected freightage which according to the ordinary and probable course of things he would have earned but for the intervention of a peril insured against or other peril incident to the voyage. Sec. 104. The interest mentioned in the last 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 actually 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 insurable interest in the profits. Sec. 106. The charterer of a ship has an insurable interest in it, to the extent that he is liable to be damnified by its loss. What are the perils covered by marine insurance? Only perils of the sea or perils of navigation or those casualties due to unusual violence or extraordinary action of wind and wave or other extraordinary causes connected with navigation. The perils of the sea/navigation must be the PROXIMATE CAUSE of the loss for there to be recovery. Perils of the ship are not covered or those losses resulting from ordinary wear and tear incidental to the voyage. Perils of the ship vs. Perils of the sea; Jurisprudence Roque v. IAC sinking of barge without extra-ordinary circumstances (SHIP) Go Tiaco v. Union loss results from natural and inevitable action of the sea, from the ordinary wear and tear of the ship or from negligence of owner to provide with proper equipment (SHIP) Cathay v. CA rusting of steel pipes in the course of the voyage in view of the toll on cargo of wind, water and salt conditions (SEA)

B= 1.8 x 1.8 4.8M

C=2.4 x 1.8 4.8M

What is the nature of liability of several insurers in double insurance (2%) In double insurance, the insurers are considered as coinsurers. Each one is bound to contribute ratably to the loss in proportion to the amount for which he is liable under his contract (sec. 94e) Terrazas de Patio Verde, a condominium building, has a value of P50 Million. The owner insured the building against fire with three (3) insurance companies for the following amounts: Northern Insurance Corp. - P20 Million Southern Insurance Corp. - P30 Million Eastern Insurance Corp. P50 Million Is the owner's taking of insurance for the building with three (3) insurers valid? Discuss. (3%) The building was totally razed by fire. If the owner decides to claim from Eastern Insurance Corp. only P50 Million, will the claim prosper? Explain. (2%) What is reinsurance? Reinsurance is a way for primary insurance companies to transfer risk to another insurance entity. Sec. 95. 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. Sec. 96. Where an insurer obtains reinsurance, except under automatic reinsurance treaties, he must communicate all the representations of the original insured, and also all the knowledge and information he possesses, whether previously or subsequently acquired, which are material to the risk. Sec. 97. A reinsurance is presumed to be a contract of indemnity against liability, and not merely against damage. Sec. 98. The original insured has no interest in a contract of reinsurance. Illustration: A gets B to insure his building against fire for P10 Million. B (insurer) can get C (reinsurer) to reinsure him for P5 Million out of the P10 Million insurance in favor of A. Thus, Bs liability shall be limited to P5 Million. While C, the reinsurer has to give the insurer the other P5 M.

There is no question that the rusting of steel pipes in the course of a voyage is a "peril of the sea" in view of the toll on the cargo of wind, water, and salt conditions. At any rate if the insurer cannot be held accountable therefor, We would fail to observe a cardinal rule in the interpretation of contracts, namely,

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit

hpsevilla_2008 24 3. A contract of affreightment may be either time charter, wherein the leased vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. In both cases, the charter-party provides for the hire of the vessel only, either for a determinate period of time or for a single or consecutive voyage, the ship owner to supply the ship's store, pay for the wages of the master of the crew, and defray the expenses for the maintenance of the ship. 4. Under a demise or bareboat charter on the other hand, the charterer mans the vessel with his own people and becomes, in effect, the owner for the voyage or service stipulated, subject to liability for damages caused by negligence. If the charter is a contract of affreightment, which leaves the general owner in possession of the ship as owner for the voyage, the rights and the responsibilities of ownership rest on the owner. The charterer is free from liability to third persons in respect of the ship. 5. In this case, the charter party agreement did not convert the common carrier into a private carrier. The parties entered into a voyage charter, which retains the character of the vessel as a common carrier. Indubitably, a ship-owner (Vector Shipping Corp) in a time or voyage charter retains possession and control of the ship, although her holds may, for the moment, be the property of the charterer. 6. MT Vector fits the description of a common carrier. It is deemed to warrant impliedly the seaworthiness of the ship. The failure of a common carrier to maintain in seaworthy condition the ship involved in its contract of carriage is a clear breach of duty prescribed in Art. 1755. 7. Caltex has no obligation to ensure that MT Vector complied with all the legal requirements. The duty rests upon the common carrier simply for being engaged in "public service". Because of the implied seaworthiness, shipper of goods, when transacting with common carriers, are not expected to inquire into the vessel's seaworthiness, genuineness of its licenses and compliance with all maritime laws. To demand more from shippers and hold them liable in case of failure exhibits nothing but the futility of our maritime laws insofar as the protection of the public in general is concerned. By the same token, we cannot expect passengers to inquire every time they board a common carrier, whether the carrier possesses the necessary papers or that all the carrier's employees are qualified. Such a practice would be an absurdity in a business where time is always of the essence. Considering the nature of transportation business, passengers and shippers alike customarily presume that common carriers possess all the legal requisites in its operation. May a ship owner get insurance for: Yes. Expected freightage (Sec. 103) Expected freightage which in the ordinary and probably course of things he would have earned but for the intervention of the peril insured against. Note: Important that insured must have an inchoate right to freightage which cannot be defeated Expected profits (Sec. 105) YES, to the extent that he is liable to be damnified by its loss.

that any ambiguity therein should be construed against the maker/issuer/drafter thereof, namely, the insurer.
Filipino vs. CA On December 1976, Chao Tiek Seng, consignee, insured a shipment of fishmeal loaded on board the vessel SS Bougainville and unloaded at the Port of Manila on or about December 11, 1967. H: An "all risks policy" should be read literally as meaning all risks whatsoever and covering all losses by an accidental cause of any kind. Generally, the burden of proof is upon the insured to show that a loss arose from a covered peril, but under an "all risks" policy the burden is not on the insured to prove the precise cause of loss or damage for which it seeks compensation. The insured under an "all risks insurance policy" has the initial burden of proving that the cargo was in good condition when the policy attached and that the cargo was damaged when unloaded from the vessel; thereafter, the burden then shifts to the insurer to show the exception to the coverage. Herein private respondent, as vendee/consignee of the goods in transit has such existing interest therein as may be the subject of a valid contract of insurance. His interest over the goods is based on the perfected contract of sale. The perfected contract of sale between him and the shipper of the goods operates to vest in him an equitable title even before delivery or before be performed the conditions of the sale. The contract of shipment, whether under F.O.B., C.I.F., or C. & F. as in this case, is immaterial in the determination of whether the vendee has an insurable interest or not in the goods in transit. The perfected contract of sale even without delivery vests in the vendee an equitable title, an existing interest over the goods sufficient to be the subject of insurance. Rule if vessel is chartered: Sec. 101. The insurable interest of the owner of the ship hypothecated by bottomry is only the excess of its value over the amount secured by bottomry.

Is the ships insurer liable if the vessel is chartered? YES. liable only for part of the loss which insured cannot recover from charterer Insurance of owner full value of property but recovery shall be limited to amount not paid by charterer Insurance of charterer extent of his liability in case of loss Illustration: A and B enter into a charter agreement. A's vessel is valued at P1 Million. Per agreement, Bs insurer shall be liable up to P500,000 in case of loss. A has an insurance of P1 M. In case of loss: As insurer = P500,000 Bs insurer = P500,000

Caltex vs. Sulpicio 1. The respective rights and duties of a shipper and the carrier depends not on whether the carrier is public or private, but on whether the contract of carriage is a bill of lading or equivalent shipping documents on the one hand, or a charter party or similar contract on the other. 2. A charter party is a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a specified time or use; a contract of affreightment is one by which the owner of a ship or other vessel lets the whole or part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight.

RE INSURANCE

FRIENDLY FIRE: fire that burns in a place where it is intended to burn. This is not covered by insurance. The policy is not construed to protect the insured from injury consequent upon his negligent use or management of the fire. HOSTILE FIRE: fire that occurs outside the confines or begins as a friendly fire and becomes hostile by escaping from the place where it ought to be. This is the one covered by insurance. Sec. 167. As used in this Code, the term "fire insurance" shall include insurance against loss by fire, lightning, windstorm, tornado or earthquake and other allied risks, when such risks

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit are covered by extension to fire insurance policies or under separate policies. Sec. 168. An alteration in the use or condition of a thing insured from that to which it is limited by the policy made without the consent of the insurer, by means within the control of the insured, and increasing the risks, entitles an insurer to rescind a contract of fire insurance. Sec. 169. An alteration in the use or condition of a thing insured from that to which it is limited by the policy, which does not increase the risk, does not affect a contract of fire insurance. Sec. 170. A contract of fire insurance is not affected by any act of the insured subsequent to the execution of the policy, which does not violate its provisions, even though it increases the risk and is the cause of the loss. Sec. 171. If there is no valuation in the policy, the measure of indemnity in an insurance against fire is the expense it would be to the insured at the time of the commencement of the fire to replace the thing lost or injured in the condition in which at the time of the injury; but if there is a valuation in a policy of fire insurance, the effect shall be the same as in a policy of marine insurance. Sec. 172. Whenever the insured desires to have a valuation named in his policy, insuring any building or structure against fire, he may require such building or structure to be examined by an independent appraiser and the value of the insured's interest therein may then be fixed as between the insurer and the insured. The cost of such examination shall be paid for by the insured. A clause shall be inserted in such policy stating substantially that the value of the insured's interest in such building 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 total loss under such policy, the whole amount so insured upon the insured's interest in such building or structure, as stated in the policy upon which the insurers have received a premium, shall be paid, and in case of a partial loss the full amount of the partial loss shall be so paid, and in case there are two or more policies covering the insured's interest therein, each policy shall contribute pro rata to the payment of such whole or partial loss. But in no case shall the insurer be required to pay more than the amount thus stated in such policy. This section shall not prevent the parties from stipulating in such policies concerning the repairing, rebuilding or replacing of buildings or structures wholly or partially damaged or destroyed. Sec. 173. No policy of fire insurance shall be pledged, hypothecated, or transferred to any person, firm or company who acts as agent for or otherwise represents the issuing company, and any such pledge, hypothecation, or transfer hereafter made shall be void and of no effect insofar as it may affect other creditors of the insured. General Rule: Fire insurance covers only fire; allied risks are covered only when expressly provided or when covered by other policies. What is the measure of indemnity? (Sec. 171) If there is a valuation shall be conclusive as between parties in adjusting partial or total loss in the absence of FRAUD If there is NO valuation - the expense it would be to the insured to REPLACE the thing lost or injured in the condition in which it was at the time of injury How is valuation made? GENERAL RULE: Valuation shall be indemnity in case of total loss (Art. 172) the basis for

hpsevilla_2008 25 In case of Partial loss full amount of the partial loss (172) BUT Parties may agree that instead of payment, insurer may repair, rebuild or replace property Illustration: Subject matter is a house; Independent appraiser values it at P5 Million; The valuation is attached to the policy. I. If house is totally destroyed by fire, the valuation of P5 M will be given II. If the house is half-destroyed, the indemnity will be half of P5 Million or P2.5 M. III. If the valuation is based on some fraud on the part of the insured, e.g. adding fixtures which are not part of the house OR there is an alteration increasing the hazard such as converting in to an ammunition factory, the valuation is not used. Del Castillo vs. Metropolitan Fire came from a grocery that was being looted an abnormal condition caused by war, therefore, the insurer is not liable. From December 8, 1942 to January 4, 1942 there had been at least 50 fires in Maila and on January 2, 1942 there had been at least 8 fires in the city. Looting and robbery were rampant in the city because only a handful of policemen were let and they were generally ignored by the mob of looters. Fires breaking out in houses being looted were beyond control because a great portion of Manila's firemen had also evacuated to the provinces or failed to report for duty in fear of imminent danger and calls for assistance received no response from the fire department. The fire which destroyed partially the bakery in question, came from a grocery that was being looted. Such fire was the effect of abnormal conditions caused by war. Filipinas vs. Tan Fire was purely ordinary and accidental, unrelated to war, invasion therefore policy is binding and conclusive. The findings of the lower court in finding that the fire, which destroyed the building "was purely an ordinary and accidental one, unrelated to war, invasion, civil commotion, or to the abnormal conditions arising therefrom," are binding and conclusive upon this court. As regards the supposed increase in the risk, there were only three possible sources of danger to which the building insured could have been exposed before it was burned on January 5, 1942, namely, by action of USAFFE, guerrilla, or civilian saboteurs. The fire which caused the loss of the building had no direct or indirect relation, either proximately or remotely, with the abnormal conditions alleged by the defendant, and held that it was, therefore, the result of causes independent of said abnormal conditions. That clause of the policy providing that it shall not cover "loss or damage by fire happening during the existence of any invasion, foreign enemy, rebellion, insurrection, riot, civil commotion, military or usurped power, or martial law does not apply. As the words of the policy are those of the company, they should be taken most strongly against it, and the interpretation should be adopted which is most favorable to the insured, if such interpretation be not inconsistent with the words used.

CASUALTY INSURANCE
Sec. 174. Casualty insurance is insurance covering loss or liability arising from accident or mishap, excluding certain types of loss which by law or custom are considered as falling exclusively within the scope of other types of insurance such as fire or marine. It includes, but is not limited to, employer's

EXCEPT: If there is a change increasing the risk without the consent of insurer or if there's fraud on the part of insured.

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit liability insurance, motor vehicle liability insurance, plate glass insurance6, burglary and theft insurance, personal accident and health insurance as written by non-life insurance companies, and other substantially similar kinds of insurance.

hpsevilla_2008 26 H: It appears affirmatively that the contract is the guarantors separate undertaking in which the principal does not join, that it rests on a separate consideration moving from the principal and that although it is written in continuation of the contract for the construction of the building, it is a collateral undertaking separate and distinct from the latter While a surety undertakes to pay if the principal does not pay, the guarantor only binds himself if the principal cannot pay; the one is the insurer of the debt, the other an insurer of the solvency of the debtor. This latter liability is what the Fidelity and Surety Company assumed in the present case. The Fidelity and Surety Company having bound itself to pay it follows that it cannot be compelled to pay until it is shown that Machetti is unable to pay PHIL. PRYCE ASSURANCE CO. VS CA, GEGROCO, INC.

SURETYSHIP
Sec. 175. A contract of suretyship is an agreement whereby a party called the surety guarantees the performance by another party called the principal or obligor of an obligation or undertaking in favor of a third party called the obligee. It includes official recognizances, stipulations, bonds or undertakings issued by any company by virtue of and under the provisions of Act No. 536, as amended by Act No. 2206. Sec. 176. The liability of the surety or sureties shall be joint and several with the obligor and shall be limited to the amount of the bond. It is determined strictly by the terms of the contract of suretyship in relation to the principal contract between the obligor and the obligee. (As amended by Presidential Decree No. 1455). Sec. 177. The surety is entitled to payment of the premium as soon as the contract of suretyship or bond is perfected and delivered to the obligor. No contract of suretyship or bonding shall be valid and binding unless and until the premium therefor has been paid, except where the obligee has accepted the bond, in which case the bond becomes valid and enforceable irrespective of whether or not the premium has been paid by the obligor to the surety: Provided, That if the contract of suretyship or bond is not accepted by, or filed with the obligee, the surety shall collect only reasonable amount, not exceeding fifty per centum of the premium due thereon as service fee plus 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 fault or negligence of the surety, no such service fee, stamps or taxes shall be collected. In the case of a continuing bond, the obligor shall pay the subsequent annual premium as it falls due until the contract of suretyship is cancelled by the obligee or by the Commissioner or by a court of competent jurisdiction, as the case may be. Sec. 178. Pertinent provisions of the Civil Code of the Philippines shall be applied in a suppletory character whenever necessary in interpreting the provisions of a contract of suretyship. Machette vs. Hospicio Romulo Machetti, by a written agreement, undertook to construct a building on Calle Rosario, Manila for the Hospicio de San Jose, the contract price being P64,000. One of the conditions of the agreement was that the contractor should obtain the guarantee of the Fidelity and Surety Company of the Philippine Islands to the amount of P12,800 Payments were made to Machetti as he constructed the building until the entire contract price, with the exception of P4,978.08 was paid. Subsequently it was found that the work had not been carried our in accordance with the specifications which formed part of the contract and that the workmanship was not of the standard required. Therefore Hospicio de San Jose refused to pay the balance. Machetti thus filed the action. After issue was joined, Machetti, on petition of his creditors, was declared insolvent and an order was entered suspending the proceeding in accordance with the Insolvency Law. The Hospicio de San Jose filed a motion asking that the Fidelity and Surety Company be made cross-defendant to the exclusion of Machetti and that the proceedings be continued as to said company, but still remain suspended as to Machetti

1. Petitoner was sued for collection of som of money filed by Gegroco Inc. The complaint alleged that petitioner issued 2 surety bonds in behalf of its principal Sagum General Merchandis for P500,000 and P1M respectively. 2 Petitioner hinges its defense on two arguments, namely: a) that the checks issued by its principal which were supposed to pay for the premiums, bounced, hence there is no contract of surety to speak of; and 2) that as early as 1986 and covering the time of the Surety Bond, Interworld Assurance Company (now Phil. Pryce) was not yet authorized by the insurance Commission to issue such bonds H: Petitioner is liable. 1. The Insurance Code states that: The surety is entitled to payment of the premium as soon as the contract of suretyship or bond is perfected and delivered to the obligor. No contract of suretyship or bonding shall be valid and binding unless and until the premium therefor has been paid, except where the obligee has accepted the bond, in which case the bond becomes valid and enforceable irrespective of whether or not the premium has been paid by the obligor to the surety. . . . The above provision outrightly negates petitioner's first defense. In a desperate attempt to escape liability, petitioner further asserts that the above provision is not applicable because the respondent allegedly had not accepted the surety bond, hence could not have delivered the goods to Sagum Enterprises. This statement clearly intends to muddle the facts as found by the trial court and which are on record. In the first place, petitioner, in its answer, admitted to have issued the bonds subject matter of the original action. On the other hand, petitioner's defense that it did not have authority to issue a Surety Bond when it did is an admission of fraud committed against respondent. No person can claim benefit from the wrong he himself committed. A representation made is rendered conclusive upon the person making it and cannot be denied or disproved as against the person relying thereon .

COMPULSORY MOTOR VEHICLE LIABILITY INSURANCE


Sec.373. For purposes of this chapter: (a) "Motor Vehicle" is any vehicle as defined in section three, paragraph (a) of Republic Act Numbered Four Thousand One Hundred Thirty-Six, Otherwise known as the "Land Transportation and Traffic Code." Note: "Motor Vehicle " shall mean any vehicle propelled by any power other than muscular power using the public highways, but excepting road rollers, trolley cars, streetsweepers, sprinklers, lawn mowers, bulldozers, graders, forklifts, amphibian trucks, and cranes if not used on public highways, vehicles which run only on rails or tracks, and tractors, trailers and traction engines of all kinds used exclusively for agricultural purposes. Trailers having any number of wheels, when propelled or intended to be propelled by attachment to a motor vehicle, shall be classified as separate motor vehicle with no power rating.

Coverage on an all risks basis for glass breakage, subject to exclusions of war and fire. Thus, if a vandal throws a brick through a window of an insured's establishment, the coverage would apply.
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Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit (b) "Passenger" is any fare paying person being transported and conveyed in and by a motor vehicle for transportation of passengers for compensation, including persons expressly authorized by law or by the vehicle's operator or his agents to ride without fare. (c) "Third-Party" is any person other than a passenger as defined in this section and shall also exclude a member of the household, or a member of the family within the second degree of consanguinity or affinity, of a motor vehicle owner or land transportation operator, as likewise defined herein, or his employee in respect of death, bodily injury, or damage to property arising out of and in the course of employment. (As amended by Presidential Decree No. 1814 and 1981). (d) "Owner" or "motor vehicle owner" means the actual legal owner of a motor vehicle, in whose name such vehicle is duly registered with the Land Transportation Commission; (e) "Land transportation operator" means the owner or owners of motor vehicles for transportation of passengers for compensation, including school buses; (f) "Insurance policy" or "Policy" refers to a contract of insurance against passenger and thirty-party liability for death or bodily injuries and damaged to property arising from motor vehicle accidents. (As amended by Presidential Decree No. 1455 and 1814). Sec. 374. It shall be unlawful for any land transportation operator or owner of a motor vehicle to operate the same in the public highways unless there is in force in relation thereto a policy of insurance or guaranty in cash or surety bond issued in accordance with the provisions of this chapter to indemnify the death, bodily injury, and/or damage to property of a third-party or passenger, as the case may be, arising from the use thereof. (As amended by Presidential Decree No. 1455 and 1814). Sec. 375. The Commissioner shall furnish the Land Transportation Commissioner with a list of insurance companies authorized to issue the policy of insurance or surety bond required by this chapter. (As amended by Presidential Decree No. 1814). Sec. 376. The Land Transportation Commission shall not allow the registration or renewal of registration of any motor vehicle without first requiring from the land transportation operator or motor vehicle owner concerned the presentation and filing of a substantiating documentation in a form approved by the Commissioner evidencing that the policy of insurance or guaranty in cash or surety bond required by this chapter is in effect. (As amended by Presidential Decree No. 1455). Sec. 377. Every land transportation operator and every owner of a motor vehicle shall, before applying for the registration or renewal of registration of any motor vehicle, at his option, either secure an insurance policy or surety bond issued by any insurance company authorized by the Commissioner or make a cash deposit in such amount as herein required as limit of liability for purposes specified in section three hundred seventy-four. X x x Sec. 378. Any claim for death or injury to any passenger or third party pursuant to the provisions of this chapter shall be paid without the necessity of proving fault or negligence of any kind; Provided, That for purposes of this section: (i) The total indemnity in respect of any person shall not exceed five thousand pesos; (ii) The following proofs of loss, when submitted under oath, shall be sufficient evidence to substantiate the claim: (a) Police report of accident; and (b) Death certificate and evidence sufficient to establish the proper payee; or (c) Medical report and evidence of medical or hospital disbursement in respect of which refund is claimed;

hpsevilla_2008 27 (iii) Claim may be made against one motor vehicle only. In the case of an occupant of a vehicle, claim shall lie against the insurer of the vehicle in which the occupant is riding, mounting or dismounting from. In any other case, claim shall lie against the insurer of the directly offending vehicle. In all cases, the right of the party paying the claim to recover against the owner of the vehicle responsible for the accident shall be maintained. Tanco vs. Phil. Guarantee The policy defined the term Authorized Driver to be: The insured himself or Any person driving on the Insureds order or with his permission, PROVIDED that the person driving is permitted in accordance with the licensing or other laws or regulations to drive the Motor Vehicle or has been permitted and is not disqualified by order of a court of law or by reason of any enactment or regulation in that behalf from driving such Motor Vehicle. At the time of the collision plaintiffs brother did not have a valid licensehe hadnt renewed the one he obtained for the year 1958 and is thus considered delinquent and invalid by the Motor Vehicle Law; further Section 21 thereof states that except as otherwise specifically provided in this Act no person shall operate any motor vehicle on the public highways without having procured a license for the current year, nor while such license is delinquent, invalid, suspended or revoked. One week after the accident Manuel Tanco renewed his license. The CFI gave judgment for plaintiff and ruled that the term authorized driver was ambiguous. RULING The Motor Vehicle Law expressly prohibits any person from operating a motor vehicle on the highways without a license for the current year or while such license is delinquent or invalid That Manuel Tanco renewed his license one week after the accident did not cure the delinquency or revalidate the license which had already expired Appellants defense does not rest on the general proposition that if a law is violated at the time of the accident which causes damage or injury there can be no recovery, but rather on a specific provision on the policy that appellant shall not be liable if the accident occurs while the vehicle is being driven by any person other than an authorized driver and that an authorized driver is one acting on his permission provided he is permitted to drive under licensing laws. The exclusion clause in the contract invoked by appellant is clear.

-o0oSummary: Insurable interest is property insurance must exist at the time of the issuance and at the time of the loss although it need not exist in between these times A beneficiary in property insurance must have insurable interest over the property It is possible that two or more persons may have insurable interest over the same object. As in the case of owner and lessee, mortgagor and mortgagee. In such cases, two or more separate insurance policies may be obtained . This is not double insurance since they dont have the same insured and they have different interests. The covered peril must be the proximate cause before there can be recovery under the policy. Instances when there can be return of premiums. Payment of premiums must be on cash and carry basis. Important exceptions to cash and carry: extension and installment payment. credit

Marine insurance covers only perils of the sea and NOT perils of the ship.

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit In marine, the ff persons can get insurance policies: owner, charterer, for freightage, for expected profits. Fire insurance covers hostile fire Failure to give notice of loss in fire without unreasonable delay will exonerate the insurer. Indemnity in fire may either be based on valuation OR payment of cost to restore the object at the time of loss

hpsevilla_2008 28 date. The sixty-day period fixed by law within which to pay the proceeds after presentation of proof of death is merely procedural in nature, evidently to determine the exact amount to be paid and the interest thereon to which the beneficiaries may be entitled to collect on case of unwarranted refusal of the company to pay, and also to enable the insurer to verify or check on the fact of death which it may even validly waive. It is the happening of the suspensive condition of death that renders a life policy mature and not the filing of proof of death which, as above stated, is merely procedural, for even if such proof were presented but it turns out later that the insured is alive, such filing does not give maturity to the policy . PROOF OF DEATH VS. NOTICE OF DEATH Notice of death is not enough, there must be proof of death. The best proof of death is the death certificate. Londres vs. National (94 Phil 627) The SC said in this case that the proof of death was clearly established by the certificate of death. And it is not enough that one gives notice of death of the cestui que vie, but what matters is the presentation of proof of death. And what better proof of death than death certificate. With regard to the sufficiency of the proof presented by appellee as to the death of the insured, we find that the same has been sufficiently established in view of the death certificate issued by the Civil Register of Manila on April 15, 1952, which was attached to the motion for summary judgment. This certificate strengthens the proof submitted by appellee on May 16, 1949 and as such it can serve as basis for the determination of the interest that the company should pay under the policy as required by law. General Rule: The designated beneficiaries are the ones paid upon maturity of the life insurance policy. Exception: FACILITY OF PAYMENT CLAUSE This is a bar question. What is the facility of payment clause? Or what are the instances when a non-beneficiary can collect from a life insurance policy? Ito ang sagot nyo, facility of payment clause. So if any of the situations is present, or is satisfied in industrial life, then even persons who are not designated can collect. Facility of payment clause: Industrial life policy: Sec. 231. No policy of industrial life insurance shall be issued or delivered in the Philippines if it contains any of the following provisions: (c) A provision that allows the company to pay the proceeds of the policy at the death of the insured to any person other than the named beneficiary, except in accordance with a standard provision as specified under the provisions of paragraph (m) of the preceding section Sec. 230(m) "X x x Such policy may also contain a provision that (1) if the beneficiary designated in the policy does not surrender the policy with due proof of death within the period stated in the policy, which shall not be less than thirty days after the death of the insured, or (2) if the beneficiary is the estate of the insured, or (3) is a minor, or (4) dies before the insured, or (5) is not legally competent to give valid release, Then the insurer may make any payment thereunder to: (a) the executor or administrator of the insured, or (b) to any of the insured's relatives by blood or legal adoption or connections by marriage or (c) to any person appearing to the insurer to be equitably entitled thereto by reason of having

PART IV: PAYMENT OF PROCEEDS AND FILING OF CLAIMS


Q: How does one insurance policy? collect from an

LIFE INSURANCE:
When are proceeds from life insurance payable ? General Rule: Proceeds of a life insurance policy shall be paid immediately upon maturity of the policy, policy (happening of the contingencies insured against. Exception: unless such proceeds are made payable in installments or as an annuity, in which case the installments, or annuities shall be paid as they become due, If maturity is due to death: In the case of a policy maturing by the death of the insured, the proceeds thereof shall be paid within sixty days after presentation of the claim and filing of the proof of the death of the insured. 7(Sec. 242) What if there is delay in payment? Sec. 242: Refusal or failure to pay the claim within the time prescribed herein will entitle the beneficiary to collect interest on the proceeds of the policy for the duration of the delay at the rate of twice the ceiling prescribed by the Monetary Board, unless such failure or refusal to pay is based on the ground that the claim is fraudulent. What are the contingencies again in life insurance? Sec. 180. An insurance upon life may be made payable on the death of the person, or on his surviving a specified period, or otherwise contingently on the continuance or cessation of life. Fernandez vs. National Issue: When would the policy mature, is it at the time of death or at the time of giving of notice? The SC said that it is the time of the happening of the suspensive condition, which is death, that the policy becomes mature. There can always be filing of documents to establish death, but it is really the fact of death which will make the policy mature; which will now give rise to the claim, and to the entitlement of the proceeds. In life insurance, the policy matures either upon the expiration of the term set forth therein in which case its proceeds are immediately payable to the insured himself, or upon his death occurring at any time prior to the expiration of such stipulated term, in which case, the proceeds are payable to his beneficiaries within sixty days after their filing of proof of death (Sec. 91-A Insurance Law). In the case at bar, the policy matured upon the death of the insured on November 2, 1944, and the obligation of the insurer to pay arose as of that
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Notice PLUS proof

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit incurred expense for the maintenance, medical attention or burial of the insured Is the facility of payment clause present in group life? Yes, but the difference is there is a P500.00 limit. Sec. 228 (f) A provision that any sum becoming due by reason of death of the person insured shall be payable to the beneficiary designated by the insured, subject to the provisions of the policy in the event that there is no designated beneficiary, as to all or any part of such sum, living at the death of the insured, and subject to any right reserved by the insurer in the policy and set forth in the certificate to pay at its option a part of such sum not exceeding five hundred pesos to any person appearing to the insurer to be equitably entitled thereto by reason of having incurred funeral or other expenses incident to the last illness or death of the person insured Is it also present in individual life insurance? No, there is no such provision in individual life insurance. Why? Because of the nature of a life insurance which is a contract of investment, not indemnity. When we talk about industrial life, this refers to the members of the low income group. Nakarinig na kayo ng drama na ang gusmastos sa libing ni A ay ang kamaganak nya na hindi kasama sa insurance. So industrial life is supposed to address that concern. What if someone who is not designated in the policy, actually spent for the last hospitalization or funeral expenses, he is able to recover through the facility of payment clause. As long as ANY of the conditions are present. Any, not necessarily ALL. Examples of 60-90 rule:

hpsevilla_2008 29

1) So A filed on March 5, 2008. On April 4, 2008, there was still no ascertainment of the damage caused by the fire, the proceeds must be paid within 90 days after the receipt of such notice. So there must be no ascertainment when? There must be no ascertainment on May 4, 2008 -- so 60 days. So when must payment be made? So 90 days from proof of loss -- March 5, 2008, so payment dapat on June 5, 2008. 2) A presents proof of theft on January 1, 2000 but parties cannot agree on amount of loss by March 1, 2000 (within 60 days from Jan.1). Proceeds must be paid within 90 days from January 1, 2000. Otherwise, interest will accrue. Kung pasok na pareho, within 30 days. Kung after 60 days wala pa ring ascertainment of loss, magdagdag na lang kayo ng additional 30 days kailangan na bayaran. Ibig sabihin nagtagal sila sa ascertainment, the insured should not suffer the consequence. In case of litigation of claim, what is the responsibility of the court or the insurance commission? Sec. 244. In case of any litigation for the enforcement of any policy or contract of insurance, it shall be the duty of the Commissioner or the Court, as the case may be, to make a finding as to whether the payment of the claim of the insured has been unreasonably denied or withheld; and in the affirmative case, the insurance company shall be adjudged to pay damages which shall consist of attorney's fees and other expenses incurred by the insured person by reason of such unreasonable denial or withholding of payment plus interest x x x, from the date following the time prescribed in section two hundred forty-two or in section two hundred forty-three, as the case may be, until the claim is fully satisfied; When shall there be prima facie delay in the payment of proceeds? The failure to pay any such claim within the time prescribed in said sections shall be considered prima facie evidence of unreasonable delay in payment. Instances wherein delay in payment is justified: 1) Insurance company is still ascertaining whether the insured has insurable interest or not, then the delay is justified. 2) If there are two or more parties fighting over the same right to the insurance proceeds, and the company incurs delay because they are still investigating, then the delay is justified.

NON LIFE INSURANCE


When are proceeds payable, as a general rule for all nonlife policies? Sec. 243. The amount of any loss or damage for which an insurer may be liable, under any policy other than life insurance policy, shall be paid within thirty days after proof loss is received by the insurer and ascertainment of the loss or damage is made either by agreement between the insured and the insurer or by arbitration; 30 days from when? Proof of loss and ascertainment of loss. Ascertainment of loss is actually the amount of loss. Magkano ba ang nawala sa kanya? If they do not agree, they can submit themselves to arbitration. So dapat 30 days pasok na pareho: Proof of loss plus ascertainment. What if there is no ascertainment within 30 days from proof of loss? But if such ascertainment is not had or made within sixty days after such receipt by the insurer of the proof of loss, then the loss or damage shall be paid within ninety days after such receipt. So if there is no ascertainment within 60 days from proof of loss, then the insurance company must give the proceeds within 90 days. This is the 30-60-90 rule. Examples of 30: 1) A insured his house for fire. On March 4, 2008 a fire gutted the entire house. Proof of loss was given on March 5, 2008 and there was ascertainment as to the amount of loss. So proceeds must be paid within 30 days from March 5, 2008 or on April 4, 2008. 2) A presents proof of loss of car by theft and insurer ascertains amount of loss on January 1, 2000. Proceeds must be paid 30 days after January 1, 2000. Otherwise, interest must be paid.

LOSS:
Sec. 83. An agreement not to transfer the claim of the insured against the insurer after the loss has happened, is void if made before the loss except as otherwise provided in the case of life insurance. A lost his car and he files a claim with the insurance policy (for theft), can A assign his claim to B collect? YES. But can B get an insurance on the car of A? NO. What am I pointing out? The right to assign, the right to collect, from a policy is again a circumvention of the requirement as to insurable interest. You have a situation wherein a person who has no insurable interest being able to enjoy the benefits of a property insurance, although ito naman you do not wait for the event if you assign it after the loss occurs. Halimbawa, nawala ang kotse nya, kinokolektahan na nya ngayon si insurance company, inassign nya ngayon sa creditor nya, walang problema. Wala tayong makikitang problema na si creditor ang nagcarnap. Pero what if before the loss happened, inassign na ni insured ang kanyang right to collect kay creditor? Again, nacircumvent na naman ang requirement that only those who

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit have insurable interest can benefit from a property insurance. Again, what are the requirement in insurance before there can be recovery? property

hpsevilla_2008 30 What if the delay in presentation of proof of loss is due to the insurance company? Sec. 91. Delay in the presentation to an insurer of notice or proof of loss is waived if caused by any act of him, or if he omits to take objection promptly and specifically upon that ground. The insurance company causing the delay cannot use that against the insured. It cannot assert the fact of delay. What if fire happened and the insured has to get the statement of a third person, what is the rule? Sec. 92. If the policy requires, by way of preliminary proof of loss, the certificate or testimony of a person other than the insured, it is sufficient for the insured to use reasonable diligence to procure it, and in case of the refusal of such person to give it, then to furnish reasonable evidence to the insurer that such refusal was not induced by any just grounds of disbelief in the facts necessary to be certified or testified. The only requirement is the exertion of diligence to get that statement, and to show that the refusal to give the statement is not be induced by any just grounds of disbelief in the facts necessary to be certified or testified. So the minimum requirement is diligence to get the statement and to show that the refusal to give the statement was not based on disbelief. In the case of Manila Mahogany vs. CA , what was the holding? So here, you have a situation where the insured was able to claim both from SMC and the insurance company. So ang sinasabi ng insurance company, bat ka pa nag-claim jan eh nakatanggap ka na sakin? Ako na dapat ang nagcclaim jan sa party na yan. Right of subrogation. So since nakakolekta ka na sa 3rd person, ibalik mo sakin yung binayad ko. So isa-isa lang yan. Hindi pwedeng dinemanda mo na yung person at fault, kokolekta ka pa from the insurance company. 2. Since petitioner by its own acts released San Miguel Corporation, thereby defeating private respondent's right of subrogation, the right of action of petitioner against the insurer was also nullified. 3. The right of subrogation can only exist after the insurer has paid the insured, otherwise the insured will be deprived of his right to full indemnity. If the insurance proceeds are not sufficient to cover the damages suffered by the insured, then he may sue the party responsible for the damage for the remainder. To the extent of the amount he has already received from the insurer, the insurer enjoys the right of subrogation. 4. Since the insurer can be subrogated to only such rights as the insured may have, should the insured, after receiving payment from the insurer, release the wrongdoer who caused the loss, the insurer loses his rights against the latter. But in such a case, the insurer will be entitled to recover from the insured whatever it has paid to the latter, unless the release was made with the consent of the insurer. Holding in YU vs. Fieldsmen Yu cannot recover from the insurance policy because he committed fraud under a fire insurance policy. What was the purpose of the invoices? To prove the properties razed by fire, So because of the fraud, there was denial of the claim. Shielding himself under Section 82 of the Insurance Act, the plaintiff asserts that in submitting his proof of loss he was "not bound to give such proof as would be necessary in a court of justice". The assertion is correct, but that does not give him any justification for submitting false proofs. Their falsity is the best evidence of the fraudulent character and the unmeritoriousness of plaintiff's claim. In the case of LEE BOG vs. Hanover There was payment of the claim because the discrepancy was not that gross.

Sec. 84. Unless otherwise provided by the policy, an insurer is liable for a loss of which a peril insured against was the proximate cause, although a peril not contemplated by the contract may have been a remote cause of the loss; but he is not liable for a loss which the peril insured against was only a remote cause. Sec. 85. An insurer is liable where the thing insured is rescued from a peril insured against that would otherwise have caused a loss, if, in the course of such rescue, the thing is exposed to a peril not insured against, which permanently deprives the insured of its possession, in whole or in part; or where a loss is caused by efforts to rescue the thing insured from a peril insured against. Sec. 86. Where a peril is especially excepted in a contract of insurance, a loss, which would not have occurred but for such peril, is thereby excepted although the immediate cause of the loss was a peril which was not excepted. Sec. 87. An insurer is not liable for a loss caused by the willful act or through the connivance of the insured; but he is not exonerated by the negligence of the insured, or of the insurance agents or others. SPECIAL RULES ON COLLECTION FIRE INSURANCE In fire insurance, there must be a notification or a notice of loss given by the insured, otherwise there can be no recovery. Sec. 88: In case of loss upon an insurance against fire, an insurer is exonerated, if notice thereof be not given to him by an insured, or some person entitled to the benefit of the insurance, without unnecessary delay. Why is this rule here? Take note and be able to differentiate that the only minimum requirement is that notice of loss be given to the fire insurance company. NOT proof. You only have to inform that the property was burned. Why? Because when we talk of fire insurance, the possibility of removing evidence of arson is great. So the minimum requirement is that notice of fire or destruction by fire be given without unreasonable delay otherwise there can be no recovery. What kind of proof of loss are we discussing here? Sec. 89. When a preliminary proof of loss is required by a policy, the insured is not bound to give such proof as would be necessary in a court of justice; but it is sufficient for him to give the best evidence which he has in his power at the time. Preliminary proof of loss. Only evidence within his power, or in his possession at the time that he is asked or ordered to give proof. Not evidence required in court. So when we talk about proof of loss, what happened? Around what time? What is destroyed? What portion of the property was destroyed? Not proof that X burned the property, or even cause of the fire, only the best evidence that the insured has at that time. What is the rule when there is a defect in the notice of loss? Sec. 90. All defects in a notice of loss, or in preliminary proof thereof, which the insured might remedy, and which the insurer omits to specify to him, without unnecessary delay, as grounds of objection, are waived. So there has to be action on the part of the insurance company to ask the insured to remedy the defect.

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit Naturally, numerical precision may not be expected, because those estimates were based merely on a physical observation of the big pile existing before the fire. It is sufficient that they show little discrepancy with the figures recorded in the books of the appellee. The mathematical computations of witnesses Filomeno and Magpili are "rough estimates" and therefore some allowance for such technical factors as "staggering," "shrinkage" and "angle of repose" should be duly taken into account; and where said estimates do not show too wide a difference, there would be no justification in discrediting appellee's claims. Holding in CHUY vs. PHILAM The delay in investigating whether the insured has insurable interest was justified and does not give rise to payment of interest. Holding in RCBC vs. CA For an insurance company to be held liable for unreasonably delaying and withholding payment of insurance proceeds, the delay must be wanton, oppressive, or malevolent. It is generally agreed, however, that an insurer may in good faith and honesty entertain a difference of opinion as to its liability. Accordingly, the statutory penalty for vexatious refusal of an insurer to pay a claim should not be inflicted unless the evidence and circumstances show that such refusal was willful and without reasonable cause as the facts appear to a reasonable and prudent man The case at bar does not show that MICO wantonly and in bad faith delayed the release of the proceeds. The problem in the determination of who is the actual beneficiary of the insurance policies, aggravated by the claim of various creditors who wanted to partake of the insurance proceeds, not to mention the importance of the endorsement to RCBC, to our mind, and as now home out by the outcome herein, justified MICO in withholding payment to GOYU. Holding in Zenith vs. CA The award/grant of damages for unreasonable delay in recovery of proceeds must be equitable and may thus be reduced. However, the act of petitioner of delaying payment for two months cannot be considered as so wanton or malevolent to justify an award of P20,000.00 as moral damages, taking into consideration also the fact that the actual damage on the car was only P3,460. In the pre-trial of the case, it was shown that there was no total disclaimer by respondent. The reason for petitioner's failure to indemnify private respondent within the two-month period was that the parties could not come to an agreement as regards the amount of the actual damage on the car. The amount of P10,000.00 prayed for by private respondent as moral damages is equitable. Therefore, the award of moral damages is reduced to P10,000.00 and the award of exemplary damages is hereby deleted. The awards due to private respondent Fernandez are modified What is the right of subrogation? In the right of subrogation, the insurer steps into the shoes of the insured. But of course, subrogation is limited to the amount given to the insured by the insurer because the essence of engaging in an insurance business is the assumption of risk. So if one assumes the risk, he is ready to pay his way to collect from the erring party. Art. 2207 of the Civil Code: If the plaintiff's property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party

hpsevilla_2008 31 shall be entitled to recover the deficiency from the person causing the loss or injury. Malayan vs. CA While it is true that where the insurance contract provides for indemnity against liability to third persons, such third persons can directly sue the insurer, however, the direct liability of the insurer under indemnity contracts against third party liability does not mean that the insurer can be held solidarily liable with the insured and/or the other parties found at fault. The liability of the insurer is based on contract; that of the insured is based on tort. In the case at bar, petitioner as insurer of Sio Choy, is liable to respondent Vallejos, but it cannot, be made "solidarily" liable with the two principal tortfeasors, namely respondents Sio Choy and San Leon Rice Mill, Inc. For if petitioner-insurer were solidarily liable with said two (2) respondents by reason of the indemnity contract against third party liability ---- under which an insurer can be directly sued by a third party ---- this will result in a violation of the principles underlying solidary obligation and insurance contracts. Subrogation is a normal incident of indemnity insurance. Upon payment of the loss, the insurer is entitled to be subrogated pro tanto to any right of action which the insured may have against the third person whose negligence or wrongful act caused the loss. The right of subrogation is of the highest equity. The loss in the first instance is that of the insured but after reimbursement or compensation, it becomes the loss of the insurer . When the insurance company pays for the loss, such payment operates as an equitable assignment to the insurer of the property and all remedies which the insured may have for the recovery thereof. That right is not dependent upon, nor does it grow out of, any privity of contract or upon written assignment of claim, and payment to the insured makes the insurer an assignee in equity It follows, therefore, that petitioner, upon paying respondent Vallejos the amount of not exceeding P20,000.00, shall become the subrogee of the insured, the respondent Sio Choy; as such, it is subrogated to whatever rights the latter has against respondent San Leon Rice Mill, Inc. Article 1217 of the Civil Code gives to a solidary debtor who has paid the entire obligation the right to be reimbursed by his co-debtors for the share which corresponds to each. "Art. 1217. Payment made by one of the solidary debtors extinguishes the obligation. If two or more solidary debtors offer to pay, the creditor may choose which offer to accept. "He who made the payment may claim from his co-debtors only the share which corresponds to each, with the interest for the payment already made. If the payment is made before the debt is due, no interest for the intervening period may be demanded. In accordance with Article 1217, petitioner, upon payment to respondent Vallejos and thereby becoming the subrogee of solidary debtor Sio Choy, is entitled to reimbursement from respondent San Leon Rice Mill, Inc. ST. PAUL vs. MACONDRAY The plaintiff-appellant, as insurer, after paying the claim of the insured for damages under the insurance, is subrogated merely to the rights of the assured. As subrogee, it can recover only the amount that is recoverable by the latter. ""Upon payment for a total loss of goods insured, the insurance is only subrogated to such rights of action as the assured has against 3rd persons who caused or are responsible for the loss. The right of action against another person, the equitable interest in which passes to the insurer, being only that which the assured has, it follows that if the assured has no such right of action, none passes to the insurer, and if the assured's right of action is limited or restricted by lawful contract between him and the person sought to be made responsible for the loss, a suit by the insurer, in the right of the assured, is subject to like limitations or restrictions." Federal Express vs. American Home Assurance (2004)

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit Basic is the requirement that before suing to recover loss of or damage to transported goods, the plaintiff must give the carrier notice of the loss or damage, within the period prescribed by the Warsaw Convention and/or the airway bill. Subrogation Upon receipt of the insurance proceeds, the consignee (Smithkline) executed a subrogation Receipt in favor of respondents. The latter were thus authorized to file claims and begin suit against any such carrier, vessel, person, corporation or government. Undeniably, the consignee had a legal right to receive the goods in the same condition it was delivered for transport to petitioner. If that right was violated, the consignee would have a cause of action against the person responsible therefor. Upon payment to the consignee of an indemnity for the loss of or damage to the insured goods, the insurers entitlement to subrogation pro tanto -- being of the highest equity -- equips it with a cause of action in case of a contractual breach or negligence. Further, the insurers subrogatory right to sue for recovery under the bill of lading in case of loss of or damage to the cargo is jurisprudentially upheld. In the exercise of its subrogatory right, an insurer may proceed against an erring carrier. To all intents and purposes, it stands in the place and in substitution of the consignee. A fortiori, both the insurer and the consignee are bound by the contractual stipulations under the bill of lading. Prescription of Claim From the initial proceedings in the trial court up to the present, petitioner has tirelessly pointed out that respondents claim and right of action are already barred. The latter, and even the consignee, never filed with the carrier any written notice or complaint regarding its claim for damage of or loss to the subject cargo within the period required by the Warsaw Convention and/or in the airway bill. Indeed, this fact has never been denied by respondents and is plainly evident from the records. Article 26 of the Warsaw Convention, provides: ART. 26. (1) Receipt by the person entitled to the delivery of baggage or goods without complaint shall be prima facie evidence that the same have been delivered in good condition and in accordance with the document of transportation. (2) In case of damage, the person entitled to delivery must complain to the carrier forthwith after the discovery of the damage, and, at the latest, within 3 days from the date of receipt in the case of baggage and 7 days from the date of receipt in the case of goods. In case of delay the complaint must be made at the latest within 14 days from the date on which the baggage or goods have been placed at his disposal. (3) Every complaint must be made in writing upon the document of transportation or by separate notice in writing dispatched within the times aforesaid. (4) Failing complaint within the times aforesaid, no action shall lie against the carrier, save in the case of fraud on his part. In this jurisdiction, the filing of a claim with the carrier within the time limitation therefor actually constitutes a condition precedent to the accrual of a right of action against a carrier for loss of or damage to the goods. The shipper or consignee must allege and prove the fulfillment of the condition. If it fails to do so, no right of action against the carrier can accrue in favor of the former. The aforementioned requirement is a reasonable condition precedent; it does not constitute a limitation of action. The requirement of giving notice of loss of or injury to the goods is not an empty formalism. The fundamental reasons for such a stipulation are (1) to inform the carrier that the cargo has been damaged, and that it is being charged with liability therefor; and (2) to give it an opportunity to examine the nature and extent of the injury. This protects the carrier by affording it an opportunity to make an investigation of a claim while the matter is fresh and easily investigated so as to safeguard itself from false and fraudulent claims.

hpsevilla_2008 32 When an airway bill -- or any contract of carriage for that matter -- has a stipulation that requires a notice of claim for loss of or damage to goods shipped and the stipulation is not complied with, its enforcement can be prevented and the liability cannot be imposed on the carrier. To stress, notice is a condition precedent, and the carrier is not liable if notice is not given in accordance with the stipulation. Failure to comply with such a stipulation bars recovery for the loss or damage suffered. Being a condition precedent, the notice must precede a suit for enforcement. In the present case, there is neither an allegation nor a showing of respondents compliance with this requirement within the prescribed period. While respondents may have had a cause of action then, they cannot now enforce it for their failure to comply with the aforesaid condition precedent.

MARINE INSURANCE
What may be insured against? Only covers loss due to perils of the sea and not perils of the ship In case there is a bottomry, insurable interest of the ship owner is limited to excess of its value over the amount secured by bottomry. (101) Who can insure? Freightage all benefits derived by the owner either from chartering the ship or its employment for the carriage of his own goods or those of others (102) Charterer of the ship has insurable interest on the ship to the extent that he is damnified by the loss (106) What is average Average is any extraordinary or accidental expense incurred during the voyage for the preservation of the vessel, cargo, or both and all damages to the vessel and cargo from the time it is loaded and the voyage commenced until it ends and the cargo unloaded. What are the two kinds of average? General Average and particular average. General insurer is liable for proportion of the loss assessed (136) Particular insurer is liable unless there is a stipulation exempting the insurer (136) Sec. 136. Where it has been agreed that an insurance upon a particular thing, or class of things, shall be free from particular average, a marine insurer is not liable for any particular average loss not depriving the insured of the possession, at the port of destination, of the whole of such thing, or class of things, even though it becomes entirely worthless; but such insurer is liable for his proportion of all general average loss assessed upon the thing insured. What is the difference between the two kinds? General average - include damages and expenses which are deliberatedly caused by the master of the vessel or upon his authority, in order to save the vessel, her cargo, or both at the same time from a real and known risk Goods of A valued at 1 M are disposed Disposition saves the goods of B (1 M) and C (1 M) The 1 M loss of A will be shared by B and C in proportion to the value of the goods belonging to them which are saved. The 1 M loss will be divided by three

Simple or particular average- include all damages and expenses caused to the vessel or to her cargo which have not inured to the common benefit and profit of all the persons interested in the vessel and her cargo. If the goods of A are disposed

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit But disposition did not inure to the common benefit of other owners of goods Only A and his insurer will suffer the loss Other owners and their insurers will not contribute in As loss Whoever sacrificed, he bears the loss. What are the causes of actual total loss? Sec. 130. An actual total loss is cause by: (a) A total destruction of the thing insured;

hpsevilla_2008 33

What is the rule with regard to general average when we are talking about marine insurance? Is the marine insurance company liable for loss in general average? YES. If the company says it is not liable for general average, is that possible? So in the example above, can insurance company of the cargo who was saved, refuse to pay the owner of the cargo that was jettisoned? No, there can be no stipulation to that effect. That is an invalid stipulation. Jarque vs. Smith Issue: Can the insurer be held liable despite the thing insured did not result to an absolute total loss? Held: YES. The liability for contribution in general average is not based on the express terms of the policy, but rest upon the theory that from the relation of the parties and for their benefit, a quasi contract is implied by law. Article 859 of the Code of Commerce is still in force and reads as follows: ART. 859. The underwriters of the vessel, of the freight, and of the cargo shall be obliged to pay for the indemnity of the gross average in so far as is required of each one of these objects respectively. The article is mandatory in its terms, and the insurers, whether for the vessel or for the freight or for the cargo, are bound to contribute to the indemnity of the general average. And there is nothing unfair in that provisions; it simply places the insurer on the same footing as other persons who have an interest in the vessel, or the cargo therein at the time of the occurrence of the general average and who are compelled to contribute. Liability in case of reshipment Insured peril prevents a ship from completing voyage at an intermediate port, liability of the marine insurer continues after reshipment without prejudice to insurer's right to collect more premiums (133) In case of reshipment, the insurer of goods is liable for damages, expenses of discharging, storage, reshipment and other expenses (134)

(b) The irretrievable loss of the thing by sinking, or by being broken up; (c) Any damage to the thing which renders it valueless to the owner for the purpose for which he held it; or (d) Any other event which effectively deprives the owner of the possession, at the port of destination, of the thing insured. So when we talk about actual total loss, it is possible that the whole thing is actually not really lost, or destroyed, but still it is rendered useless for the purpose for which it was created. In that case, we still consider that actual total loss. Phil. Manufacturing case: Section 122 specifically says that "a total loss may be either actual or constructive," and that "the loss of the thing by sinking, or being broken up," is an actual loss or that "any damage to the thing which renders it valueless to the owner for the purposes for which he held it" is an actual loss. As we construe the record, at the time the lighter was sunk and in the bottom of the bay under the conditions then there existing, it was of no value to the owner, and, if it was of no value to the owner, it would be a actual total loss. To render it valueless to the owner, it is not necessary that there should be an actual or total loss or destruction of all the different parts of the entire vessel. The question here is whether, under the conditions then and there existing, and as the lighter laid in the bottom of the bay, was it of any value to the owner. If it was not of any value to the owner, then there was an actual loss or a "total destruction of the thing insured" within the meaning of the above sections of Act No. 2427 of the insurance code. When those questions are considered the testimony is conclusive that the cost of salvage, repair, and reconstruction was more than the original cost of the vessel of its value at the time the policy was issued. As found by the trial court "it is difficult to see how there could have been a more complete loss of the vessel than that which actually occurred." Pan Malayan case The subject matter here is rice. It will be recalled that said rice seeds were treated and would germinate upon mere contact with water. The rule is that where the cargo by the process of decomposition or other chemical agency no longer remains the same kind of thing as before, an actual total loss has been suffered. ". . . However, the complete physical destruction of the subject matter is not essential to constitute an actual total loss. Such a loss may exist where the form and specie of the thing is destroyed, although the materials of which it consisted still exist (Great Western Ins. Co. vs. Fogarty, N.Y., 19 Wall 640, 22 L. Ed. 216), as where the cargo by the process of decomposition or other chemical agency no longer remains the same kind of thing as before (Williams vs. Cole, 16 Me. 207)." 23 Moreover, it is undisputed that no replacement whatsoever or any payment, for that matter, of the value of said lost cargo was made to FAO by petitioner or LUZTEVECO. It is thus clear that FAO suffered actual total loss under Section 130 of the Insurance Code, specifically under paragraphs (c) and (d) thereof, recompense for which it has been denied up to the present. In view of our aforestated holding that there was actual total loss of the goods insured in this case, it is no longer necessary to pass upon the issue of the validity of the abandonment made by FAO. Section 135 of the Insurance Code explicitly provides that "(u)pon an actual total loss, a person insured is entitled to payment without notice of abandonment." This is a statutory adoption of a long standing doctrine in maritime insurance law that in case of actual total loss, the right of the

What are the two kinds of loss in marine insurance? Sec. 127. A loss may be either total or partial. What is partial loss? Sec. 128. Every loss which is not total is partial. What is total loss? What may constitute total loss? Sec. 129. A constructive. total loss may be either actual or

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit insured to claim the whole insurance is absolute, without need of a notice of abandonment. When can one presume actual loss? Sec. 132. An actual loss may be presumed from the continued absence of a ship without being heard of. The length of time which is sufficient to raise this presumption depends on the circumstances of the case. So if a ship is supposed to have travelled this time, and supposed to have arrived at this time and then there's no news about it, then there can be a presumption that it is actual loss. What is constructive total loss? Technical total loss. Also known as

hpsevilla_2008 34 Sec. 139 is what I call more than 3/4 rule. Bakit? Dahil madami nang studyante ang nagkakamali dito. Ang loss lang ay 75% inaabandon na nila. Nakalagay jan, MORE THAN. So dapat 76% and up ang damage. So pag ganitong situtation, pwede ka nang mag-abandon and you can claim the entire proceeds. It is as if there was actual total loss. Can the owner of the cargo say I abandon the vessel, but not the cargo? No, because abandonment must be total, not partial. So total relinquishment. Sec. 140. An abandonment must be neither partial nor conditional. Can the owner of the cargo say, I will abandon the goods provided that the goods in the upper deck can be saved? No. Again, sec. 140 So when must abandonment be done? At what point in time? Sec. 141. An abandonment must be made within a reasonable time after receipt of reliable information of the loss, but where the information is of a doubtful character, the insured is entitled to a reasonable time to make inquiry. What happens if there was already abandonment, but later on it was found out that the information was incorrect? 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 total loss, the abandonment becomes ineffectual. So it is as if there was no abandonment which happened. What is the form of abandonment? It may be oral or written, provided that if the notice be done orally, a written notice of such abandonment shall be submitted within 7 days from such oral notice. Who is supposed to give notice of abandonment and to whom? So the insured or his agent must give notice of abandonment to the insurer or to the insurer's agent. What is the requirement with respect to the notice? Sec. 144. A notice of abandonment must be explicit, and must specify the particular cause of the abandonment, but need state only enough to show that there is probable cause therefor, and need not be accompanied with proof of interest or of loss. So dapat ilagay nyo dun: I am hereby abandoning my vessel, Edin Ann, due to destruction of more than 3/4. So ilalagay nyo ang 139. What if the cause of the loss is a storm, can the insured present evidence as to other causes? Sec. 145. An abandonment can be sustained only upon the cause specified in the notice thereof. What is the effect again of abandonment? Sec. 146. An abandonment is equivalent to a transfer by the insured of his interest to the insurer, with all the chances of recovery and indemnity. What if the insured does not abandon, and yet there was payment by the insurer as if there was actual loss? Example more than 3/4 of the value of the property was damage, pero hindi sya nag-abandon, and yet, binigay ni insurance company ang full proceeds, ano ang effect nun?

Sec. 131. A constructive total loss is one which gives to a person insured a right to abandon, under Section one hundred thirty-nine. When we talk about constructive total loss, the goods are still there, the ship is still there, but the extent of damage will give rise to the right to abandon. What is the right to abandon? What happens if the goods/ship is abandoned? Sec. 138. Abandonment, in marine insurance, is the act of the insured by which, after a constructive total loss, he declares the relinquishment to the insurer of his interest in the thing insured. Why do we have to differentiate if total loss is actual or constructive? If there is actual total loss, the insured is entitle to claim from the policy the full amount. However, if there is only constructive loss under Sec. 139, the policy holder must exercise his right to abandon before he can claim the full amount. If he does not abandon, then he can only claim upto the extent of damage/loss, not the full amount. Hindi pwedeng basahin ni insurance company ang utak ni insured.. ay more than 3/4 na ang damage, inaabandon na nya. Hindi! Dapat the policy holder must declare abandonment before he can claim the entire proceeds of the policy. When can there be abandonment? This is a bar question: This is the more than rule. Sec. 139. A person insured by a contract of marine insurance may abandon the thing insured, or any particular portion thereof separately valued by the policy, or otherwise separately insured, and recover for a total loss thereof, when the cause of the loss is a peril insured against: (a) If more than three-fourths thereof in value is actually lost, or would have to be expended to recover it from the peril; (b) If it is injured to such an extent as to reduce its value more than three-fourths; (c) If the thing insured is a ship, and the contemplated voyage cannot be lawfully performed without incurring either an expense to the insured of more than threefourths the value of the thing abandoned or a risk which a prudent man would 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 reasonable time and with reasonable diligence, to forward the cargo, without incurring the like expense or risk mentioned in the preceding sub-paragraph. But freightage cannot in any case be abandoned unless the ship is also abandoned. Okay, the ship is valued at 2 Million pesos, when can there be constructive total loss?

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit Sec. 147. If a marine insurer pays for a loss as if it were an actual total loss, he is entitled to whatever may remain of the thing insured, or its proceeds or salvage, as if there had been a formal abandonment. It is as if there was abandonment constructive constructive abandonment. also, parang

hpsevilla_2008 35 B still gives A P1 Million B will now have the right over the vessel, what remains of it and proceeds of salvage

What if the shipowner abandons the ship and the captain of the ship does something in good faith with respect to the subject matter? 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 loss, are at the risk of the insurer and for his benefit. So the captain now is acting in good faith, no longer as an agent of the insured but of the insurer already. Nagabandonment na eh. So kung ano ang gagawin ni captain, act of the insurer na. What if the insured followed all the requirements of abandonment and yet the insurance company refuses to accept the abandonment? Sec. 149. Where notice of abandonment is properly given, the rights of the insured are not prejudiced by the fact that the insurer refuses to accept the abandonment. So in such case, the insured has the right to collect the total amount. Sec. 154. If an insurer refuses to accept a valid abandonment, he is liable as upon actual total loss, deducting from the amount any proceeds of the thing insured which may have come to the hands of the insured. Sec. 150. The acceptance of an abandonment may be either express or implied from the conduct of the insurer. The mere silence of the insurer for an unreasonable length of time after notice shall be construed as an acceptance. Note: Sec. 155. If a person insured omits to abandon, he may nevertheless recover his actual loss. So yung more than 3/4 rule gives the insured the chance to get the full proceeds even if the property itself is not totally damaged. Ang condition lang ay ang more than 3/4 rule. So again, the main difference between abandoning and not abandoning is the extent of recovery of the policy holder. We said that if there's a situation creating the right to abandon and he does not abandon, then the policy holder can only recover to the extent of the loss. Compare to someone who abandons and relinquishes all his rights to the cargo and the vessel who is able to recover to the full extent of the value of the policy. Of course, we also discussed that if all the requisites for a valid abandonment are present but the insurance company did not accept the abandonment, it (insurance company) is still liable to the full extent of the policy. Illustration: A insures a vessel with B for P1 Million The vessel's value is reduced to P200,000 due to a peril of the SEA TWO CHOICES OF A: Abandon or claim actual loss IF A abandons: A must immediately give a written notice of abandonment to B If B accepts the abandonment, it must give A P1 Million B now has all the right with respect to the vessel HOWEVER, freightage earned before loss will belong to the insurer of the goods Freightage earned after the loss will belong to the insurer of the vessel If A does not abandon but:

If A does not abandon at all: A can recover ACTUAL loss or P800,000 since the vessel is reduced to 20% of its former value of P1 Million Basically, just to recap:

Requisites for a valid abandonment: 1. actual relinquishment of rights to the cargo and/or vessel; 2. there must be constructive total loss -- so pag 3/4 lang, hindi yan pwede; 3. abandonment is neither partial nor conditional; 4. abandonment must be made within the reasonable period of time from the time the person receives the information; 5. abandonment may be done orally or in writing, but there is a 7 day requirement if there is an oral abandonment; 6. the notice of the abandonment must be explicity and it must state the cause for the abandonment, and 7. all evidence (presented) should center on the cause of abandonment. The policy holder is not supposed to present evidence of other causes. Oriental vs. CA So sabi ng SC dito, indivisible. Because we are talking only of 1 policy covering the goods, kahit hinati pa yan, hindi mo pwedeng sabihin na partially covered ng policy. Hindi pwede sabihin na magkahiwalay. So indivisible yan, kahit na nilagay sa magkahiwalay na vessel. The terms of the contract constitute the measure of the insurer liability and compliance therewith is a condition precedent to the insured's right to recovery from the insurer. The fact that the logs were loaded on two different barges did not make the contract several and divisible as to the items insured. The logs on the two barges were not separately valued or separately insured. Only one premium was paid for the entire shipment, making for only one cause or consideration. The insurance contract must, therefore, be considered indivisible. Also, the insurers liability was for total loss only. A constructive total loss is one which gives to a person insured a right to abandon (Sec. 139 Insurance Code), and during these instances: (a) If more than three-fourths thereof in value is actually lost, or would have to be expended to recover it from the peril; (b) If it is injured to such an extent as to reduce its value more than three-fourths. Since only 498 of the 1,208 logs were lost, or only 41%, then there was no constructive total loss. What is the rule with regard to freightage? What is freightage? It is the amount paid by the shipper for the transport of the goods. (But see: Sec. 102. Freightage, in the sense of a policy of marine insurance, signifies all the benefits derived by the owner, either from the chartering of the ship or its employment for the carriage of his own goods or those of others. ) The rule is upon acceptance of the abandonment of the ship, the freightage which was earned previous to the loss will belong to the insurer of the freightage.

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit If the freightage was subsequently earned (after the loss) the freightage would belong to the insurer of the ship. Sabi natin, can the one who is supposed to get the freightage insure the same? Yes, meron syang insurable interest-- an expectancy coupled with an existing interest. So expected nya na pagkatapos ng biyahe babayaran sya ng may-ari ng goods dahil trinansport nya ang goods. Sinabi rin natin na yung charter diba, kapag chinarter mo yung ship, 2 persons can insure the ship: the owner of the vessel and the charter. The owner of the vessel can insure it upto the portion that is not covered by the insurer of the charterer. So kapag nirentahan yung vessel mo, sasabihin ng charterer, okay, so 1 million ang vessel mo, kapag nawala, i will cover upto 500,000. So ikaw, the owner, you can insure the vessel also upto 500,000. So for freightage naman, dalawang tao rin ang pwede mag-insure: (1) yung may-ari ng goods -- to the full extent of the value of the goods because yun ang mawawala sa kanya, and (2) yung entitled sa bayad for shipping, pwede rin nyang i-insure upto what extent? Upto the extent that he expects to suffer some loss. Ano yung loss? Pwedeng liable sya sa loss or pwedeng yung ineexpect nyang kita, hindi na mapupunta sa kanya. So 2 classes: (1) actual loss of profits -- kung magkano usapan nila na cost of shipment; and (2) kung may liability sya arising from the loss. Pwede nyang sabihin kay owner, na kapag nawala yung goods mo, liable ako upto this amount. Pero ang pinag-uusapan natin ngayon, FREIGHTAGE. Yung amount that he is supposed to get for transporting the goods. So two points in time: 1. BEFORE ABANDONMENT OR BEFORE THE LOSS So kung may kinita syang freightage, dapat before the loss, at hindi nya kinita, ang sasagot dun ang insurer ng freightage. 2. AFTER ABANDONMENT kapag may ineexpect pang earnings, hindi na si insurer ng freightage ang meh right, ang may right na (dahil inabandon mo na) ang insurer ng ship or cargo. So kung before abandonment, kung kanino mo ininsure ang freightage, sya ang makakakuha or sya ang liable. After abandoning, wala na sya sa picture, ang papasok na sa eksena yung insurer ng cargo or ng vessel. Bakit? Kasi nag-abandon ka na sa lahat ng rights mo dun eh. So kung may kikitain kang freightage, it (freightage) will pertain to the insurer of the cargo or the vessel which was abandoned. In sum: Freightage earned before the loss belongs to the insurer of the freightage Freightage earned after the loss belngs to the insurer of the ship

hpsevilla_2008 36 Sec. 158. Where profits are separately insured in a contract of marine insurance, the insured is entitled to recover, in case of loss, a proportion of such profits equivalent to the proportion which the value of the property lost bears to the value of the whole. Sec. 159. In case of a valued policy of marine insurance on freightage or cargo, if a part only of the subject is exposed to the risk, the evaluation applies only in proportion to such part. Sec. 160. When profits are valued and insured by a contract of marine insurance, a loss of them is conclusively presumed from a loss of the property out of which they are expected to arise, and the valuation fixes their amount. Sec. 161. In estimating a loss under an open policy of marine insurance the following rules are to be observed: (a) The value of a ship is its value at the beginning of the risk, including all articles or charges which add to its permanent value or which are necessary to prepare it for the voyage insured; (b) The value of the cargo is its actual cost to the insured, when laden on board, or where the cost cannot be ascertained, its market value at the time and place of lading, adding the charges incurred in purchasing and placing it on board, but without reference to any loss incurred in raising money for its purchase, or to any drawback on its exportation, or to the fluctuation of the market at the port of destination, or to expenses incurred on the way or on arrival; (c) The value of freightage is the gross freightage, exclusive 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 value thus estimated. Sec. 162. If cargo insured against partial loss arrives at the port of destination in a damaged condition, the loss of the insured is deemed to be the same proportion of the value which the market price at that port, of the thing so damaged, bears to the market price it would have brought if sound. Sec. 163. A marine insurer is liable for all the expenses attendant upon a loss which forces the ship into port to be repaired; and where it is stipulated in the policy that the insured shall labor for the recovery of the property, the insurer is liable for the expense incurred thereby, such expense, in either case, being in addition to a total loss, if that afterwards occurs. Sec. 164. A marine insurer is liable for a loss falling upon the insured, through a contribution in respect to the thing insured, required to be made by him towards a general average loss called for by a peril insured against; provided, that the liability of the insurer shall be limited to the proportion of contribution attaching to his policy value where this is less than the contributing value 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 claim the whole loss from the insurer, subrogating him to his own right to contribution. But no such claim can be made upon the insurer after the separation of the interests liable to the contribution, nor when the insured, having the right and opportunity to enforce the contribution from others, has neglected or waived the exercise of that right. Sec. 166. In the case of a partial loss of ship or its equipment, the old materials are to be applied towards payment for the new. Unless otherwise stipulated in the policy, a marine insurer is liable for only two-thirds of the remaining cost of repairs after such deduction, except that anchors must be paid in full.

MEASURE OF INDEMNITY
Valuation is conclusive between parties in determining total or partial loss EXCEPT if there is fraud (156) Marine insurer is liable for partial loss only for such proportion of the amount insured by him as the loss bears to the value of the whole interest. Sec. 157. A marine insurer is liable upon a partial loss, only for such proportion of the amount insured by him as the loss bears to the value of the whole interest of the insured in the property insured.

COMPULSORY MOTOR VEHICLE LIABILITY INSURANCE

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit Again, I want to emphasize: Ito, third party lang. Hindi ito yung comprehensive na pati ang may-ari ng kotse ay nakakarecover. Iba yun. Yung TPL mura lang yan mga 800. Yung comprehensive depende sa kotse ninyo.. it can cost upto 300,000 kung brand new. So TPL to. Before you can ply the national roads, you have to have TPL. So what situations will give rise to a claim under TPL? A motor vehicle liability insurance is a protection coverage that will answer for legal liability for losses and damages for bodily injuries that my be sustained by another arising from the use and operation of a motor vehicle by its owner. Kasama ba dito ang damage to property? No. When we talk about loss we talk about loss of life. Kasi diba idudugtong nyo yung "resulting from injury". So ito ay purely loss of life or injury arising from a motor vehicle accident. If the accident happened on April 1, 2000, within what time must the claim be file and in what manner must the claim be filed? A written claim must be filed within 6 months from the date of the accident, otherwise, the claim shall be deemed waived. (Sec. 384) So it must be in writing. Hindi pwedeng tawag lang. Be able to diffentiate this from the prescriptive period of one year. Action or suit for recovery of damage due to loss or injury must be brought, in proper cases, with the Commissioner or the Courts within one year from denial of the claim, otherwise, the claimant's right of action shall prescribe. So ganito yan, accident on April 1, 2000, dapat ma-file mo na sa insurance company ang written notice within 6 months. Kapag na-deny yan, you have one year from the denial to question the decision of the insurance company. So magkaiba yan ha. What's the no-fault indemnity clause? This is a bar question. This connotes that the victim of a tort can recover for his loss from his insurer without regard to his own contributory fault or the fault of the tortfeasor. Ganito na lang, pagkafile ng claim, anong action dapat ang gawin ng insurance company? Ordinary claim muna, wag muna no fault. So upon written notice, insurance company. ano ang responsibility ng

hpsevilla_2008 37 ii) The following proofs of loss, when submitted under oath, shall be sufficient evidence to substantiate the claim: (a) Police report of accident; and (b) Death certificate and evidence sufficient to establish the proper payee; or (c) Medical report and evidence of medical or hospital disbursement in respect of which refund is claimed; Si A nag-aabang ng masasakyan. Nasandwich sya sa dalawang sasakyan. Kanino sya pwedeng magfile ng claim? Against the directly offending vehicle. Hindi pwedeng magfile si A ng no fault indemnity clause sa dalawa. So only against the one directly causing the death or injury. Ang sistema dito, in theory, kapag dineny ang claim nya, pero napresent nya tong mga documents na to, the insurance company is supposed to give him P5,000.00 pesos. Pero in practice hindi yan nangyayari. Kapag nabayaran ka ba ng P5,000.00 tapos na? No, because Sec. 385 provides that without prejudice to the claimant from pursuing his claim further, in which case, he shall not be required or compelled by the insurance company to execute any quit claim or document releasing it from liability under the policy of insurance or surety bond issued. So the payment of the P5,000.00 upon presentation of documents should work as a "pantawid gutom". So bibigyan ko sya ng P5,000.00 peso pero that does not mean that the owner of the policy is really the one at fault. That's not an admission. Hindi na kailangan maglitigate para sa P5,000, pero kung mas malaki pa sa P5K ang kini-claim nya, that's the time that he can proceed to the proper court or commission to collect the balance within of course the one year period reckoned from the denial of the claim. What if the person is a passenger of a certain vehicle? (iii) Claim may be made against one motor vehicle only. In the case of an occupant of a vehicle, claim shall lie against the insurer of the vehicle in which the occupant is riding, mounting or dismounting from. In any other case, claim shall lie against the insurer of the directly offending vehicle. In all cases, the right of the party paying the claim to recover against the owner of the vehicle responsible for the accident shall be maintained. So kung pasahero sya ng jeep, dun ka sa jeep maghahabol. Pero kung ang situation ay hindi ka nakasakay pero nagkaron ka ng accident, ang pipiliin mo ay yung directly offending vehicle under the no fault indemnity clause. Insurance Memorandum 4-20068 Any claim for death or bodily injuries sustained by a passenger or third party shall be paid without the necessity of proving fault or negligence of any kind provided the total indemnity in respect of any person shall be fifteen thousand pesos (Php 15,000.00) for all motor vehicles. GSIS vs CA Issue: Can GSIS be held solidarily liable with NFA? Held: NO. Under the Compulsory Motor Vehicle Liability Insurance, a third party may sue directly the insurer for indemnity. But such indemnity would be limited only to the extent of the insurance policy and those required by law. Yet, the direct liability of the insurer under indemnity contracts against third party liability does not mean that the insurer can be held liable solidarily with the insured and/or the other parties found at fault. The liability of GSIS based on the insurance contract is direct, but not solidary with that of the NFA. Ganito yan, ang nag-iissue ng TPL ay ang GSIS. So ang sabi ng lower court dito, o ang NHA liable under TPL so solidary liable ang GSIS. Sabi ng SC, hindi. What if the TPL is only to a
8

Sec. 385. The insurance company concerned shall forthwith ascertain the truth and extent of the claim and make payment within five working days after reaching an agreement. If no agreement is reached, the insurance company shall pay only the "no-fault" indemnity may be availed of. So ganito ang nangyari.. nagfile ng claim si A, nagkasundo. Walang problem, babayaran sya. Pero pag hindi sila nagkasundo, sasabihin ni A ang nagastos nya is P50,000.00 pero sasabihin ng insurance company na pagkacheck nya, P10,000 lang. So hindi sila nagkaron ng ascertainment of loss. The next step would be to pay the no fault indemnity of P5,000.00. So kapag walang ascertainment, automatically dapat, upon presentation of certain documents, bibigyan si 3rd party ng P5,000.00 under the no-fault indemnity clause. What are the documents that must be presented by the 3rd party? Sec. 378: x x x

See Annex for full text

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit certain amount, then hanggang dun lang din ang pwede kolektahin from GSIS. Yung remaining amount, mag-sue ka na sa court. So the purpose of insurance is not supposed to prevent a person from suing. Its supposed to give what is due the person on the policy with a right to collect or sue for the balance within the prescriptive period. Ilao vs. CA Again, the principle of subrogation. Kapag nagbayad na ang insurance company, at merong offending vehicle, pwede na nyang habulin since bayad na nya yung policy holder or in the case of TPL, yung 3rd person. Perla (first case) There was recovery in this case. So in this case, sabi ng insurance company, hindi kami magbabayad kasi viniolate niyo yung "authorized driver" clause. Pero sabi ng SC, iba yun. Ang tanong lang dito, ninakaw ba yung kotse, nawala o hindi? Hindi mo na itatanong sino ba ang nagddrive nung nawala, diba? Yung authorized driver clause important lang naman yun when we talk about TPL kasi gusto nating malaman sino nagddrive nung accident. Dun lang naging material yun. Perla (2nd case) Sec. 378 of the Insurance Code, or the no fault clause, is very clear - the claim shall lie against the insurer of the vehicle in which the occupant is riding, and no other. Irrespective of whether or not fault lies with the driver of the Superlines Bus, as private respondents were not

hpsevilla_2008 38 occupants of the bus, they cannot claim. The claim shall be made against the insurer of the vehicle they were riding. So kung passenger si A, dapat dun sya sa insurance company ng bus or jeep or vehicle where he is riding. Kung hindi sya passenger, dun sya sa directly offending vehicle. Kaya nga sya no fault indemnity clause kasi hindi mo na kailangang iestablish sino ang may kasalanan. Tiu vs. Arriesgado Sept. 1, 2004 As can be gleaned from the Certificate of Cover, such insurance contract was issued pursuant to the Compulsory Motor Vehicle Liability Insurance Law. It was expressly provided therein that the limit of the insurers liability for each person was P12,000, while the limit per accident was pegged at P50,000. An insurer in an indemnity contract for third party liability is directly liable to the injured party up to the extent specified in the agreement but it cannot be held solidarily liable beyond that amount. The respondent PPSII could not then just deny petitioner Tius claim; it should have paid P12,000 for the death of Felisa Arriesgado, and respondent Arriesgados hospitalization expenses of P1,113.80, which the trial court found to have been duly supported by receipts. The total amount of the claims, even when added to that of the other injured passengers which the respondent PPSII claimed to have settled, would not exceed the P50,000 limit under the insurance agreement. Indeed, the nature of Compulsory Motor Vehicle Liability Insurance is such that it is primarily intended to provide compensation for the death or bodily injuries suffered by innocent third parties or passengers as a result of the negligent operation and use of motor vehicles. The victims and/or their dependents are assured of immediate financial assistance, regardless of the financial capacity of motor vehicle owners. claimed or sued upon any kind of insurance, bond, reinsurance contract, or membership certificate does not exceed in any single claim one hundred thousand pesos. Xxx The authority to adjudicate granted to the Commissioner under this section shall be concurrent with that of the civil courts, but the filing of a complaint with the Commissioner shall preclude the civil courts from taking cognizance of a suit involving the same subject matter. xxx So P100,000 and below, san sya pwede pumunta? Basahin nyo yang provision na yan ha. That is concurrent: the insurance commission and the appropriate court, which is, the Municipal Trial Court. If more than P100,000? The appropriate court, either RTC or MTC depending on the amount. (Again, again, again) P100,000 and below - the IC or the MTC, whichever the claimant prefers; kapag more than P100,000 - appropriate court. The amount to determine jurisdiction, the P100,000.. what does it include? So hindi kasama ang attorney's fees and interests just the single claim. What's the general rule in prescriptive period? Sec. 63. A condition, stipulation, or agreement in any policy of insurance, 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, is void. 10 years if there is no stipulation; Exceptions: Can be shortened to one year from the time of action accrues.. always? No, exception to the exception: industrial life -- cannot be shorter than 6 years. What are the two powers of the commission? Administrative and adjudicatory powers. What are the adjudicatory powers?

LITIGATION TO SATISFY CLAIMS; PROCEDURE


Halimbawa, nadeny ang claim sa insurance company, where does the person go? So the party can go the insurance commission. Always to the insurance commission? No. Sec. 244. In case of any litigation for the enforcement of any policy or contract of insurance, it shall be the duty of the Commissioner or the Court, as the case may be, to make a finding as to whether the payment of the claim of the insured has been unreasonably denied or withheld; and in the affirmative case, the insurance company shall be adjudged to pay damages which shall consist of attorney's fees and other expenses incurred by the insured person by reason of such unreasonable denial or withholding of payment plus interest of twice the ceiling prescribed by the Monetary Board of the amount of the claim due the insured, from the date following the time prescribed in section two hundred forty-two or in section two hundred forty-three, as the case may be, until the claim is fully satisfied; Provided, That the failure to pay any such claim within the time prescribed in said sections shall be considered prima facie evidence of unreasonable delay in payment. So how do we know if the person should go to the Insurance Commissioner (IC) or to the appropriate court? Or should it be that the person MAY go to the IC? Note that the amount is the determining factor. Sec. 416. The Commissioner shall have the power to adjudicate claims and complaints involving any loss, damage or liability for which in insurer may be answerable under any kind of policy or contract of insurance, or for which such insurer may be liable under a contract of suretyship, or for which a reinsurer may be sued under any contract of reinsurance it may have entered into; or for which a mutual benefit association may be held liable under the membership certificates it has issued to its members, where the amount of any such loss, damage or liability, excluding interest, cost and attorney's fees, being

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit To decide claims by the insured against the insurer. So mga claims. Ito yung sinasabi natin na kapag dineny ni insurance company pwede nyong i-file sa commission. Single claims of P100,000 or below (excluding cost, attorneys fees and interest) This jurisdiction is concurrent with the regular courts What are the administrative powers? Grant certificates of authority to engage in insurance business Require any insurance company to keep its records in a manner that will allow IC's authorized representatives to verify the solvency of the insurer and has complied with IC and circulars (Sec. 245) At least once a year to examine the affairs, financial condition and method of business of insurers (Sec. 246) To issue licenses/registration/authority to: (a) Domestic or foreign insurer (247) (b) Reinsurance Broker (license) (Sec. 310) (c) Insurance Agent and Broker (license) (Sec. 299) (d) Resident agent of a foreign insurer (certificate of registration) (Sec. 315) (e) Non-life company underwriter (certificate of registration) (Sec. 318) (f) Adjusters (Sec. 323) (g) Actuary (Sec. 335) Suspension or Revocation of certificate of authority on the ff grounds: (a) Insurer is in an unsound condition

hpsevilla_2008 39 without justifiable reason substantially less than the amounts ultimately recovered in suits brought by them. (2) Evidence as to numbers and types of valid and justifiable complaints to the Commissioner against an insurance company, and the Commissioner's complaint experience with other insurance companies writing similar lines of insurance shall be admissible in evidence in an administrative or judicial proceeding brought under this section. (3) If it is found, after notice and an opportunity to be heard, that an insurance company has violated. In the exercise of adjudicatory powers if the person is not satisfied with the decision of the IC, where does he go? Appeal to the Court of Appeals. If appeal on administrative powers, where do you go? You go to the Secretary of Finance. (Is there a need for motion for reconsideration before appeal? I think so) So when does the cause of action accrue in insurance? The right of the insured to the payment accrues from the time the loss occurs, however, the cause of action under the insurance contract does not accrue until the claim is finally rejected by the insurance company/insurer. So the elements of cause of action: Right; concomitant obligation on the part of the defendant; failure or denial of the right or violation of plaintiff's right, and damage. So you don't count the 10 year period, or the 1 year period in TPL, or the 6 year period in industrial life, UNTIL THE DENIAL OF THE CLAIM BY THE INSURANCE COMPANY. Eagle Star vs. Chia ISSUE: Whether plaintiff's action has prescribed. HELD: It has prescribed with respect to the carrier but not with the Insurance company. As stated in the bill of lading: In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after the delivery of the goods or the date when the goods should have been delivered. This discharged the carrier from all liability. The case for the insurer stands on a different footing. Under our law the time limit for bringing a civil action upon a written contract is ten years after the right of action accrues. Even if this stipulation is in the policy: No suit action on this Policy, for the recovery of any claim, shall be sustainable in any Court of law or equity unless the insured shall have fully complied with all the terms and conditions of this Policy nor unless commenced with twelve (12) months next after the happening of the loss . . According to Act 4101: SEC. 61-A. Any condition, stipulation or agreement in any policy of insurance, 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, is void. But the question then would be: When did the cause of action accrue? On that question we agree with the court below that plaintiff's cause of action did not accrue until his claim was finally rejected by the insurance company. This is because, before such final rejection, there was no real necessity for bringing suit. As the policy provides that the insured should file his claim, first, with the carrier and then with the insurer, he had a right to wait for his claim to be finally decided before going to court. The stipulation is invalid since it reduces the period to less than one year. Moreover, even if it expires in one year, the cause of action only accrued on April 22, 1948 when the claim

(b)

Insurer failed to comply with the provisions of law or regulations obligatory upon it Insurer's condition or method of business is hazardous to the public or its policyholders (c) Insurer's paid up capital or available assets or security deposits is impaired or is deficient (d) Margin of solvency is deficient (e) Commission of any of unfair settlement practices (Sec. 241) UNFAIR SETTLEMENT PRACTICES Basically, these are acts which will give rise to interest. The policyholder will be given interest because of the commission of the acts. These acts may also give rise to cancel or suspend the license or certificate of authority to engage in insurance business. Should you memorize these acts? YES. Sec. 241. (1) No insurance company doing business in the Philippines shall refuse, without just cause, to pay or settle claims arising under coverages provided by its policies, nor shall any such company engage in unfair claim settlement practices. Any of the following acts by an insurance company, if committed without just cause and performed with such frequency as to indicate a general business practice, shall constitute unfair claim settlement practices: (a) knowingly misrepresenting to claimants pertinent facts or policy provisions relating to coverage at issue; (b) failing to acknowledge with reasonable promptness pertinent communications with respect to claims arising under its policies; (c) failing to adopt and implement reasonable standards for the prompt investigation of claims arising under its policies; (d) not attempting in good faith to effectuate prompt, fair and equitable settlement of claims submitted in which liability has become reasonably clear; or (e) compelling policyholders to institute suits to recover amounts due under its policies by offering

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit was rejected by the London office. Therefore, it has not yet prescribed. Holding in Travellers vs. CA ISSUE: W/N Mendozas cause of action has presccribed by failing to file a written notice of claim as required by sec. 384, PD 612 HELD:Yes, it has prescribed. Mendoza failed to file a written notice of claim. He did not attach a copy of the insurance contract to the amended complaint. Since MENDOZA failed to attach a copy of the insurance contract to his complaint, the trial court could not have been able to apprise itself of the real nature and pecuniary limits of petitioner's liability. Morever, assuming arguendo that it had issued the insurance contract over the Lady Love taxicab, Mendozas cause of action against petitioner did not successfully accrue because he failed to file with petitioner a written notice of claim within six (6) months from the date of the accident as required by Section 384 of the Insurance Code. Any person having any claim upon the policy issued pursuant to this chapter shall, without any unnecessary delay, present to the insurance company concerned a written notice of claim setting forth the amount of his loss, and/or the nature, extent and duration of the injuries sustained as certified by a duly licensed physician. Notice of claim must be filed within six months from date of the accident, otherwise, the claim shall be deemed waived . Action or suit for recovery of damage due to loss or injury must be brought in proper cases, with the Commission or the Courts within one year from date of accident, otherwise the claimant's right of action shall prescribe. Petitioners liability under an insurance contract the existence of which had not at all been proven in court. Even if there were such a contract, private respondent's cause of action can not prevail because he failed to file the written claim mandated by Section 384 of the Insurance Code. He is deemed, under this legal provision, to have waived his rights as against petitioner-insurer. So in TPL, there is a 6 month period requirement. If a person fails to meet the 6 month period to file a written notice, it is deemed waived. FILIPINO MERCHANTS Dito, parang inattempt to circumvent the prescriptive period. Sabi ng SC hidi pwede. ISSUE: Whether or not the one-year period within which to file a suit against the carrier and the ship, in case of damage or loss as provided for in the Carriage of Goods by Sea Act applies to the insurer of the goods. HELD: Yes it also applies to the insurer of the goods. Therefore, the action has already prescribed. Section 3(b) of the Carriage of Goods by Sea Act provides: In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered: Provided, that if a notice of loss or damage, either apparent or concealed, is not given as provided for in this section, that fact shall not affect or prejudice the right of the shipper to bring the suit within one year after the delivery of the goods or the date when the goods should have been delivered. Clearly, the coverage of the Act includes the insurer of the goods. Otherwise, what the Act intends to prohibit after the lapse of the one-year prescriptive period can be done indirectly by the shipper or owner of the goods by simply filing a claim against the insurer even after the lapse of one year. This would be the result if we follow the petitioner's argument that the insurer can, at any time,

hpsevilla_2008 40 proceed against the carrier and the ship since it is not bound by the time-bar provision. In this situation, the one-year limitation will be practically useless. This could not have been the intention of the law which has also for its purpose the protection of the carrier and the ship from fraudulent claims by having "matters affecting transportation of goods by sea be decided in as short a time as possible" and by avoiding incidents which would "unnecessarily extend the period and permit delays in the settlement of questions affecting the transportation." The notice of loss or damage is required to be filed not necessarily by the shipper but also by the consignee or any legal holder of the bill of lading. ACCFA vs. Alpha Insurance Provision in the policy reads: No action, suit or proceeding shall be had or maintained upon this Bond unless the same be commenced within one year from the time of making claim for the loss upon which such action, suit or proceeding, is based, in accordance with the fourth section hereof. " The provision is void. A fidelity bond is, in effect, in the nature of a contract of insurance against loss from misconduct, and is governed by the same principles of interpretation: Consequently, the condition of the bond in question, limiting the period for bringing action thereon, is subject to the provisions of Section 61-A of the Insurance Act (No. 2427), SEC. 61-A - A condition, stipulation or agreement in any policy of insurance, 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 is void. The year for instituting action in court must be reckoned, therefore, from the time of appellee's refusal to comply with its bond; it can not be counted from the creditor's filing of the claim of loss, for that does not import that the surety company will refuse to pay. In so far, therefore, as condition eight of the bond requires action to be filed within one year from the filing of the claim for loss, such stipulation contradicts the public policy expressed in Section 61-A of the Philippine Insurance Act. Condition eight of the bond, therefore, is null and void, and the appellant is not bound to comply with its provisions. Vda de Gabriel vs. Fortune Insurance The notice of death was given to private respondent, concededly, more than a year after the death of petitioner's husband. Private respondent, in invoking prescription, was not referring to the one-year period from the denial of the claim within which to file an action against an insurer but obviously to the written notice of claim that had to be submitted within six months from the time of the accident. Barred. COUNTRY BANKERS INSURANCE VS. TRAVELLERS The one year prescriptive period runs from the date of rejection of the claim by the insurer. The one-year period under Section 384 should be counted not from the date of the accident but from the date of the rejection of the claim by the insurer. The Court further held that it is only from the rejection of the claim by the insurer that the insured's cause of action accrued since a cause of action does not accrue until the party obligated refuse, expressly or impliedly, to comply with its duty. Basically, Country bankers tells us that diba, 6 month period file written claim. And after that, kung na-deny dun lang tatakbo ang 1 year period.

PART V. GROUNDS FOR RESCISSION


Q: How can one party get out in a contract of insurance? Usually, the one who wants to get out is the insurance company. How can it deny liability from the contract? So there are three major grounds which you can find in life and non-life: concealment, misrepresentation, breach of warranty.

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit

hpsevilla_2008 41 The right and the duty to communicate emmanates from the nature of the contract of insurance na of utmost good faith.. or uberimmae fides. 4. Determining whether loss occurred an if so, the amount of such loss. What is the effect of the concealment of the insured. Sec. 27. A concealment whether intentional or unintentional entitles the injured party to rescind a contract of insurance . The contract is not void, it is only voidable; it is valid until annulled. Or you remember our discussion on value policies? Kung niloko sya sa valuation, he can either rescind or he can say that he will collect the face value. Basta ang sabi lang sa batas is that the injured party is entitled to rescind. It does not say that the policy is automatically rescinded. What if there is concealment by the insurer? So still an option to rescind. Before a party can be guilty of concealment, is it necessary that there must be fraud? No, fraud is not necessary. Whatever motivation or intention you have, basta itinago mo lang, that is already a ground to rescind. What is the exception to this rule, which requires fraud? Sec. 29. An intentional and fraudulent omission, on the part of one insured, to communicate information of matters proving or tending to prove the falsity of a warranty, entitles the insurer to rescind. So aside from concealment, there has to be fraud if the fact concealed tends to give information as to the falsity of a warranty. Example: I hereby warrant that I will not place flammable products inside my building. Tapos hindi mo dinisclose na naglagay ka pala ng kung anu-anong gamit dun na flammable. So ang requirement ng batas before there can be right to rescission based on concealment is dapat may fraud. Dapat ang kanyang intention is really fraudulent, hindi lang basta nakalimutan nya icommunicate. What must be communicated? Sec. 28. Each party to a contract of insurance must communicated to the other, in good faith, all facts within his knowledge which are material to the contract and as to which he makes no warranty, and which the other has not the means of ascertaining. All facts within his knowledge Material to the contract Other party has no means of ascertaining He makes no warranty Information which prove or tend to prove falsity of warranty

CONCEALMENT
Sec. 26. A neglect to communicate that which a party knows and ought to communicate, is called a concealment. A neglect to communicate what he knows which he has a concomitant obligation to communicate because the other party does not know it. What are the elements? Requisites of Concealment: 1. a party knows the fact which he neglects to communicate or disclose 2. such party concealing is duty bound to disclose such fact to the other 3. such party concealing makes no warranty as to concealed fact 4. the other party has no means of ascertaining the fact concealed The most important element of concealment is warranty. Why is it that when a person makes a warranty as to a certain information, he does not have the obligation to communicate anymore? What's a warranty? Warranty is a statement or promise by the insured set forth in the policy itself or incorporated in it by proper reference, the untruth or nonfulfillment of which in any respect and without reference to whether the insurer was in fact prejudiced by the untruth or nonfulfillment, renders the policy voidable. What is the time frame when we are discussing warranty? Does it pertain to present, past or future? It may pertain to the present, past or future. So for example, a person says, I hereby warrant that this property was built using strong materials of this material -- past yun. So hindi na nya kailangan icommunicate pa yung information na yun, why? Because he has made a warranty with respect to that information. So hindi na pwde sabihin ng insurance company na kinonceal mo sakin na ito ang materials na ginamit. Hindi na kailangan icommunicate yun kasi may warranty na. That will not be concealment. What is supposed to be addressed by the duty to communicate? What are the four primary concerns of parties? 1. The correct estimation of the risk which enables the insurer to decide whether he is willing to assume it and if so, at what rate of premium; So you have to communicate all the material things because gusto mo malaman as an insurance company, eto ba insurable? Gusto ko bang i-take ang risk na to sa taong to na 4x na inatake sa puso? If so, magkanong premium ang sisingilin ko? 2. The precise delimitation of the risk which determines the extent of the contingent duty to pay undertaken by the insurer; So alam natin noh.. so itong taong to may suicidal tendencies ito, so ilalagay ko dun sa policy na the company will not be liable for death due to suicide. 3. Such control of the risk after it is assumed as will enable the insurer to guard against the increase of the risk because of change in conditions; and So control of the risk so that the insurer can also safeguard against the happening of the risk. So kung hindi dineclare ni insurance holder na yung building na ininsure nya eh restaurant pala, hindi alam ni insurance company na delikado pala ang fire insurance policy na kinuha ni policy holder.

What is the test of materiality? Sec. 31. Materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due, in forming his estimate of the disadvantages of the proposed contract, or in making his inquiries. [Test of materiality - the test is in the effect which the knowledge of the fact in question would have on the making of the contract. To be material, a fact need not increase the risk or contribute to any loss or damage suffered. It is sufficient if the knowledge of it would influence the parties in making the contract.]

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit Assessment of risk, in making/omitting further inquiries, cause him to reject the risk or accept it at higher premium rate/different terms Kung ako ang bar examiner, tatanungin ko to. Thelma Vda. De Canilang v. CA (Test of Materiality) Had INSURED disclosed his visits to the doctor, the diagnosis made and the prescribed medicines in the insurance application, it may be reasonably assumed that INSURER would have made further inquiries and would have probably refused to issue the policy, or, at the very least, required a higher premium for the same coverage. Case of Sun Life Where the applicant concealed prior medical history and he died in a plane crash, there was still concealment notwithstanding the apparent lack of relation between the fact concealed and the cause of death. So was the concealed information material in this case? According the SC, yes. The matter concealed could have definitely affected the insurer's decision on his application. And because, again, the test of materiality is determined not by the event by the probable effect such information would have had in making an estimate of the disadvantages of taking the policy or of granting the policy or in making further inquiries. In other words, kung sinabi sana nya na sya ay na-ospital for renal failure, number 1 possibility eh baka hindi na sya bigyan ng insurance policy. Number 2, baka binigyan sya pero higher premiums. Or Number 3, the insurance company could have made further inquiries as to why renal failure. So it did not matter that the cause of the death was totally different from the concealed information. Wala tayong pakialam dun. We are not trying to establish a causal connection between the fact concealed and the cause of death. Ang important lang is the concealed information would have made the insurance company think twice about granting the policy with this premium, or in accepting the policy. This is a favorite bar question so this is very important. A applied for non-medical life insurance. He did not inform the insurer that he was examined and confined at St. Lukes Hospital where he was diagnosed with lung cancer. A died in a plane crash. Is the insurer liable considering that the fact concealed had no bearing with the cause of death of A? The insurer is not liable. The concealed fact is material to the approval and issuance of the policy. According to a decided case, the insured need not die of the disease he failed to disclose to the insurer. It is sufficient that his non-disclosure misled the insurer in forming his estimate of the risks of the proposed insurance policy or in making further inquiries. Great Pacific case (mongoloid child) Ang nangyari dito, may policy syang inapplyan tapos hindi umubra so naging conditional. Pero hindi sila nagkasundo so no perfected contract of insurance. Number 2 ruling: Concealment of the fact that the one being insured is a mongoloid. Material yun. MUSNGI VS. WEST COAST LIFE INSURANCE CO Yes the said answers are false. The insured knew that he had suffered from a number of ailments, including incipient pulmonary tuberculosis, before subscribing the applications, yet he concealed them and omitted the hospital where he was confined as well as the name of the lady physician who treated him. That this concealment and the false statements constituted fraud, is likewise clear, because the defendant by reason thereof accepted the risk which it would otherwise have flatly refused.

hpsevilla_2008 42 One ground for the rescission of a contract of insurance under the Insurance Act is a "concealment", which in section 25 is defined as "A neglect to communicate that which a party knows and ought to communicate". The beneficiary argues that the alleged concealment was immaterial and insufficient to avoid the policy. We cannot agree. In an action on a life insurance policy where the evidence conclusively shows that the answers to questions concerning diseases were untrue, the truth or falsity of the answers become the determining factor. If the policy was procured by fraudulent representations, the contract of insurance apparently set forth therein was never legally existent. It can fairly be assumed that had the true facts been disclosed by the assured, the insurance would never have been granted. PHILAMCARE CASE The answer assailed by Philamcare was in response to the question relating to the medical history of the applicant. This largely depends on opinion rather than fact, especially coming from Julitas husband who was not a medical doctor. Where matters of opinion or judgment are called for, answers made in good faith and without intent to deceive will not avoid a policy even though they are untrue. Thus, (A)lthough false, a representation of the expectation, intention, belief, opinion, or judgment of the insured will not avoid the policy if there is no actual fraud in inducing the acceptance of the risk, or its acceptance at a lower rate of premium, and this is likewise the rule although the statement is material to the risk, if the statement is obviously of the foregoing character, since in such case the insurer is not justified in relying upon such statement, but is obligated to make further inquiry . There is a clear distinction between such a case and one in which the insured is fraudulently and intentionally states to be true, as a matter of expectation or belief, that which he then knows, to be actually untrue, or the impossibility of which is shown by the facts within his knowledge, since in such case the intent to deceive the insurer is obvious and amounts to actual fraud. Basically, Philamcare tells us tingnan natin. Was he in a position to answer? Kung doctor sya, tapos yun ang sagot, aba something's wrong, nanloloko talaga sya. Pero kung layman sya, ni hindi nya alam kung na-diagnose na sya for that, the fact that he answered negative does not mean that he concealed such fact. So look at the circumstances. Kung biglaang namatay because of these diseases, wala syang history na nalaman nya, there was no concealment. Pero kung alam nyang ganun, nagpapacheck up sya buwan buwan, nagmemedication sya, hindi pwedeng sabihin na hindi nya alam. What information need not be communicated? Sec. 30. Neither party to a contract of insurance is bound to communicate information of the matters following, except in answer to the inquiries of the other: (a) Those which the other knows; (b) Those which, in the exercise of ordinary care, the other ought to know, and of which the former has no reason to suppose him ignorant; (c) Those of which the other waives communication; (d) Those which prove or tend to prove the existence of a risk excluded by a warranty, and which are not otherwise material; and (e) Those which relate to a risk excepted from the policy and which are not otherwise material. Sec. 32. Each party know all the general equally with that of political or material usages of trade. to a contract of insurance is bound to causes which are open to his inquiry, the other, and which may affect the perils contemplated; and all general

Sec. 34. Information of the nature or amount of the interest of one insured need not be communicated unless in answer to an inquiry, except as prescribed by section fifty-one. Sec. 35. Neither party to a contract of insurance is bound to communicate, even upon inquiry, information of his own judgment upon the matters in question. Ngayon, possible rin naman na meron kang hindi diniclare pero dapat alam nila because of some medical examinations that were conducted. Example, nakalimutan i-declare ni A na bulag sya. Minedical examination tapos hindi pa nalaman. Di na pwedeng sabihin ng insurance company na A concealed.

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit So you have to know what should be communicated, and what need not be communicated to draw the line because that will determine if there was concealment or not. What if there was some information communicated by the insured but hindi nagmake ng further inquiry si insurance company? So there was communication given tapos dapat nag-inquire pa si insurance company, pero hindi sya naginquire. Sec. 33. The right to information of material facts may be waived, either by the terms of the insurance or by neglect to make inquiry as to such facts, where they are distinctly implied in other facts of which information is communicated. So there is waiver of material fact, the insurance company cannot say that there was concealment. Ng Gan Zee vs. Asian Crusader There was no material concealment because (1) INSUREDs statement was done in good faith and (2) there is a waiver of right to information of material facts by INSURER. 1. INSURED was shown to have insufficient medical knowledge as to enable him to distinguish between peptic ulcer and a tumor. Therefore, such statement must be interpreted as an expression done in good faith of his belief as to the nature of his ailment and operation. INSURER or its medical examiner did not make any further inquiries on such matters from the hospital or require copies of the hospital records of INSURED before acting on the application for insurance. CONCEALMENT IN MARINE INSURANCE So mas strict tayo sa marine insurance. Why do I say that? What information should be disclosed in marine insurance? Section 107. In marine insurance each party is bound to communicate, in addition to what is required by section twenty-eight, all the information which he possesses, material to the risk, except such as is mentioned in Section thirty, and to state the exact and whole truth in relation to all matters that he represents, or upon inquiry discloses or assumes to disclose. Section 108. In marine insurance, information of the belief or expectation of a third person, in reference to a material fact, is material. Sec. 109. A person insured by a contract of marine insurance is presumed to have knowledge, at the time of insuring, of a prior loss, if the information might possibly have reached him in the usual mode of transmission and at the usual rate of communication. Sa marine, mas extensive dapat ang revelation ng information. So in Marine Insurance, the information that must be communicated are: a. In addition to section 28 b. All information he possesses material to the risk except those in section 30 c. State exact and whole truth in relation to all matters that he represents d. Information of belief or expectation of a third person as to a material fact is MATERIAL e. Insured is presumed to know prior loss at the time of insuring A simple concealment of a material information in marine insurance will entitle the injured party to rescind the contract. Are all forms of concealment in marine constitute a ground to rescind? Important to ha. No. Section 110. A concealment in a marine insurance, in respect to any of the following matters, does not vitiate the entire contract, but merely exonerates the insurer from a loss resulting from the risk concealed:

hpsevilla_2008 43 (a) The national character of the insured; (b) The liability of the thing insured to capture and detention; (c) The liability to seizure from breach of foreign laws of trade; (d) The want of necessary documents; (e) The use of false and simulated papers. Illustration a. A, a vessel owner, conceals that the vessel contains contraband b. As a result of the concealment, the vessel was seized c. Here, the insurer is exonerated since the fact concealed was the reason for the loss d. What if the vessel was seized not because of the concealed fact but because of improper deviation? e. The insurer can still rescind the contract since the cause of loss is not the fact concealed. General rule, pag nagconceal ang party, it will entitle the insurance company to the right to rescind. It can now claim that it will not pay liability on the policy. So kahit anong kinonceal mo, basta kinonceal mo, hindi ako magbabayad. BUT in marine, under Sec. 110, if the cause of the loss is not the information concealed under Sec. 110, pwede pa rin pagbayarin si insurance company. Example: Tinago nya na Philippine Nationality ang kanyang vessel. So nationality ang concealment. Eh kaya nawala yung vessel dahil may dalang opium. May connection ba yung fact concealed sa cause of the loss? Wala, in which case, liable pa rin si insurer. Ngayon kung ang fact concealed is may dala syang thing which will be held in the country of destination, example opium. Tapos kaya hindi natuloy ang biyahe dahil nabuking. May connection. Information concealed = loss, therefore the insurance company can now say I will not pay. Example of want of necessary documents. So para makatravel ang vessel, dapat dala nya ang mga documents na to. Kinonceal nya yung fact na nagtravel sya na walang dalang documents, pero nawala ang vessel kasi lumubog. So liable parin si marine insurer kasi walang connection. Pero kung di natuloy yung travel kasi nadiscover wala syang documents, na-hold, marine insurer can say I will not pay you. So conclusion: THERE HAS TO BE CAUSAL RELATION BETWEEN INFORMATION CONCEALED AND THE CAUSE OF THE LOSS. Otherwise, the insurance company will still be liable. So this is an exception to the rule that concealment will entitle the insurance company to rescind the contract of insurance. Dito, kahit material yung kinonceal mo, pero hindi sya ang cause of loss, magbabayad parin si insurance company. What is the incontestability clause? Bar question. (Sec. 48 par. 2) Sec. 48. Whenever a right to rescind a contract of insurance is given to the insurer by any provision of this chapter, such right must be exercised previous to the commencement of an action on the contract. After a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of two years from the date of its issue or of its last reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindable by reason of the fraudulent concealment or misrepresentation of the insured or his agent. All along we have been saying basta may concealment of a material fact, no payment. Marine insurance, Sec. 110, dapat may causal relation. Now, here comes a provision IN LIFE ONLY, kahit na may concealment or fraudulent misrepresentation, basta ganito yung conditions na-satisfy, pwede paring sumingil ang beneficiaries. Illustration Date of Issuance: April 3, 2008

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit Fact Concealed: Heart ailments Date of Contingency: April 10, 2010 So after the lapse of two years, the life insurance policy has become incontestible, meaning the life insurance company cannot deny liabililty anymore because from the time of issuance (or last reinstatement), nagdalawang taon nang nag-eexist ang policy. Bakit may 2 year period nanaman? Kasi yung 2 year period na yun, that should have been enough time for the insurance company to discover the fraudulent concealment or misrepresentation. What are the exceptions to the incontestability clause? Person has no insurable interest Cause of death is an excepted peril Premiums have not paid Violation of Conditions of the policy relating to military or naval service have been violated Fraud of a vicious type is present when policy was taken out Beneficiary failed to furnish proof of death or to comply with any condition imposed by the policy after the loss has happened That the action was not brought within the time specified. In SUM: Gen. Rule: Pag may concealment, walang bayad. Except: 1. In marine, dapat may causal relation; and 2. pag incontestability clause ang applicable, PERO kung present ang isa sa mga defenses, pwede paring hindi magbayad si insurance company. Ruling in TAN vs. CA Held: The phrase during the lifetime means that the policy is no longer considered in force after the insured has died. Since the policy has thus in force for only one year and five months, INSURER is not barred from proving that the policy is void ab initio due to the insureds fraudulent concealment or misrepresentation. Key phrase: 'must have been existing two years during the lifetime of the insured'.

hpsevilla_2008 44 It appears from the record that the insured had knowledge of the false replies contained in the two applications for insurance and knowingly permitted fraud to be practised upon the insurance company, for in his acknowledgment and consent his mother-in-law was designated as the beneficiary of the insurance, despite the fact that he had children and his mother was still living. In the present case the fraud consisted in the fact that a healthy and robust person was substituted in place of the insured invalid when Dr. Vidal made the physical examination of the one who was seeking to be insured, for the real person who desired to be insured and who ought to have been examined was in bad health on and before the date of executing the insurance contract, of which facts the insured Dominador Albay and the insurance agent Ponciano Remigio had full knowledge. It is immaterial that Albay may have died of intestinal occlusion, as Dr. Kamatoy affirms in the death certificate (p. 154), because said ailment does not demonstrate that Albay was not suffering from some other chronic disease; or that in the month of October, 1912, when he (allegedly) applied for insurance on his life, he was not affected by a malady that would have been sufficient cause for his rejection by the physicians of the insurance company. Article 1269 of the Civil Code states: "There is deceit when by words or insidious machinations on the part of one of the contracting parties the other is induced to execute a contract which without them he would not have made." It is essential to the nature of the deceit, to which the foregoing article refers, that said deceit be prior to or contemporaneous with the consent that is a necessary requisite for perfecting the contract, but not that it may have occurred or happened thereafter. A contract is therefore deceitful, for the execution whereof the consent of one of the parties has been secured by means of fraud, because he was persuaded by words or insidious machinations, statements or false promises, and a defective consent wrung from him, even though such do not constitute estafa or any other criminal act subject to the penal law. The judgment of acquittal rendered in the criminal case for estafa against the said Francisca Eguaras does not produce the effect of res adjudicata in the present suit to the extent that because she was acquitted of the crime of estafa she has necessarily acquired as a plaintiff the right to collect the value of the insurance, or that the insurance company cannot contend that the insurance contract is null and void because it was executed by means of deceit, which upon being proven, as it has been in this case, invalidates the contract that gave rise to the obligation to pay the value of said policy. In the said criminal case the question raised was whether the acts performed by Eguaras and her so-accused partook of the nature of the crime of estafa, and when it was decided in the negative, the said Eguaras was not therefore unquestionably entitled to collect the value of the insurance, for after deceit had once been proven in the contract, no obligation rested upon the insurance company to pay the sum stipulated. In the present civil suit it is not a question whether the acts performed by Eguaras and others interested in the proceeds of the insurance were criminal, but whether in taking out the insurance on the life of Dominador Albay there occurred in the operation deceit and fraud of a civil nature, in the form and under the conditions defined by the Civil Code. In a contract executed with the requisites fixed in article 1261, one of the contracting parties may have given his consent through error, violence, intimidation, or deceit, and in any of such cases the contract is void, even though, despite this nullity, no crime was committed. (Article 1265, Civil Code.) There may not have been estafa in the case at bar, but it was conclusively demonstrated by the trial that deceit entered into the insurance contract, fulfillment whereof is claimed, and therefore the conclusions reached by the court in the judgment it rendered in the criminal proceedings for estafa do not affect this suit, nor do they influence the decision proper herein, nor can they produce in the present suit, over the exception of the defendant, the force of res adjudicata. Argente vs. West Coast Facts: On Feb. 9, 1925, Bernardo Argente (INSURED) applied for a joint application for a life insurance policy with his wife.

MISREPRESENTATION:
In General Sec. 36. A representation may be oral or written. Sec. 37. A representation may be made at the time of, or before, issuance of the policy. Sec. 38. The language of a representation is to be interpreted by the same rules as the language of contracts in general. Sec. 39. A representation as to the future is to be deemed a promise, unless it appears that it was merely a statement of belief or expectation. Sec. 40. A representation cannot qualify an express provision in a contract of insurance, but it may qualify an implied warranty. Sec. 41. A representation may be altered or withdrawn before the insurance is effected, but not afterwards. Sec. 42. A representation must be presumed to refer to the date on which the contract goes into effect. Sec. 43. When a person insured has no personal knowledge of a fact, he may nevertheless repeat information which he has upon the subject, and which he believes to be true, with the explanation that he does so on the information of others; or he may submit the information, in its whole extent, to the insurer; and in neither case is he responsible for its truth, unless it proceeds from an agent of the insured, whose duty it is to give the information. Eguaras vs. Great Eastern

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit During the medical examination for the application of the policy, INSURED and his wife withheld information relating to their health, like being hospitalized for several times due to cerebral congestion and Bells Palsy on the part of the husband, and diagnosed for manic-depressive psychosis and psycho-neurosis and being alcoholic on the part of the wife. The wife died. West Coast Life Insurance Co. (INSURER) wrote INSURED informing him that the policy was void due to concealment and offered him the refund of the paid premium. One month later, INSURED sued for compensation. INSURER denied the claim. INSURED alleged that the concealment was immaterial and insufficient to avoid the policy, and that the right to rescind of the INSURER cannot be enforced now. Issues: 1. Was the insurance valid? 2. Can the INSURER still exercise his right to rescind? Holding: 1. NO. Sec. 25. Concealment is a neglect to communicate that which a party knows and ought to communicate. In an action on a life insurance policy where the evidence conclusively shows that the answers to questions concerning diseases were untrue, the truth of falsity of the answers become the determining factor. Had the true facts been disclosed by the INSURED, the insurance would never have been granted. 2. YES. Sec. 47. Whenever a right to rescind a contract of insurance is given to their insurer by provision of this chapter, such right must be exercised previous to the commencement of an action on the contract. The INSURER, more than one month previous to the claim made by INSURED, wrote the latter informing him that the insurance contract was void because it had been procured through fraudulent representations, and offered to refund to the INSURED the premium which the latter had paid. It is well-settled that, where any of the material representations are false, the insurers tender of the premium and notice that the policy is canceled, before the commencement of suit thereon, operate to rescind the insurance contract. Saturnino vs. Philam If anything, the waiver of medical examination renders even more material the information required of the applicant concerning previous condition of health and diseases suffered, for such information necessarily constitutes an important factor which the insurer takes into consideration in deciding whether to issue the policy or not. It is logical to assume that if appellee had been properly apprised of the insured's medical history she would at least have been made to undergo medical examination in order to determine her insurability. The concealment of the fact of the operation itself was fraudulent, as there could not have been any mistake about it, no matter what the ailment. Secondly, in order to avoid a policy it is not necessary to show actual fraud on the part of the insured. In this jurisdiction, concealment, whether intentional or unintentional, entitles the insurer to rescind the contact of insurance, concealment being defined as negligence to communicate that which a party knows and ought to communicate. What is misrepresentation? Misrepresentation - is a statement (a) as a fact of something which is untrue (b) which the insured stated with knowledge that it is untrue and with an intent to deceive, or which he states positively as true without knowing it to be true and which has a tendency to mislead (c) where such fact in either case is material to the risk Concealment, passive. Misrepresentation, active. Misrepresentation as a ground to rescind: entitled to rescind from the time representation becomes false the

hpsevilla_2008 45 right to rescind by insurer is waived by acceptance of premiums despite knowledge of ground to rescind

Sec. 45. If a representation is false in a material point, whether affirmative or promissory, the injured party is entitled to rescind the contract from the time when the representation becomes false. The right to rescind granted by this Code to the insurer is waived by the acceptance of premium payments despite knowledge of the ground for rescission. Sec. 46. The materiality of a representation is determined by the same rules as the materiality of a concealment. Sec. 47. The provisions of this chapter apply as well to a modification of a contract of insurance as to its original formation. The test of materiality is just the same as in the case of concealment. But how do we know if a statement is false? Test of falsity : Section 44. A representation is to be deemed false when the facts fail to correspond with its assertions or stipulations. What if the person is 65 misrepresents that he is 40? years old and he

Misstatement of Age provision (Sec. 230) (d) A provision that if the age of the person insured, or the age of any person, considered in determining the premium, or the benefits accruing under the policy, has been misstated, any amount payable or benefit accruing under the policy shall be such as the premium paid would have purchased at the correct age; So at 40 years old, P10,000 premium can purchase a policy with face value of P500,000. So hindi mo i-aadjust ang premium. Ang ia-adjust mo yung ma-rerecover. So kung 65 sya, baka P100,000 na lang yung pwede nyang ma-recover. So P10,000 parin ang babayaran nyang premium. This is assuming that the correct age does not disqualify him. Kung dq sya, eh di walang policy na pinag-uusapan. In marine insurance, what is the effect of a misrepresentation of a material aspect, whether it is intentional or not. entitles the insurer to rescind eventual falsity of a representation as to expectation without fraud, does NOT avoid a marine insurance contract

Sec. 111. If a representation by a person insured by a contract of marine insurance, is intentionally false in any material respect, or in respect of any fact on which the character and nature of the risk depends, the insurer may rescind the entire contract. What if at the start, the representation was correct but then it subsequently becomes false? Sec. 112. The eventual falsity of a representation as to expectation does not, in the absence of fraud, avoid a contract of marine insurance. So umpisa tama, pero naging false, so pwede na syang magrescind from that time. PERO kung walang fraud, it will not avoid the contract.

BREACH OF WARRANTY
What are the kinds of warranties marine insurance? So this is the 3rd ground: Breach of warranty. Sec. 74. The violation of a material warranty, or other material provision of a policy, on the part of either party thereto, entitles the other to rescind. Sec. 75. A policy may declare that a violation of specified provisions thereof shall avoid it, otherwise the breach of an immaterial provision does not avoid the policy.

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit Sec. 76. A breach of warranty without fraud merely exonerates an insurer from the time that it occurs, or where it is broken in its inception, prevents the policy from attaching to the risk. Holding in PRUDENTIAL VS. TRANS-ASIA (2006) The Insurance company refused to pay the insured on the ground that the insured violated the Classed and class maintain warranty. Held: When we say a class warranty, it must be entered in the classification society. We sustain the findings of the Court of Appeals that PRUDENTIAL was not successful in discharging the burden of evidence that TRANS-ASIA breached the subject policy condition on CLASSED AND CLASS MAINTAINED. Foremost, PRUDENTIAL, through the Senior Manager of its Marine and Aviation Division, Lucio Fernandez, made a categorical admission that at the time of the procurement of the insurance contract in July 1993, TRANS-ASIAs vessel, M/V Asia Korea was properly classed by Bureau Veritas. As found by the Court of Appeals and as supported by the records, Bureau Veritas is a classification society recognized in the marine industry. As it is undisputed that TRANS-ASIA was properly classed at the time the contract of insurance was entered into, thus, it becomes incumbent upon PRUDENTIAL to show evidence that the status of TRANS-ASIA as being properly CLASSED by Bureau Veritas had shifted in violation of the warranty. Unfortunately, PRUDENTIAL failed to support the allegation. We are not unmindful of the clear language of Sec. 74 of the Insurance Code which provides that, the violation of a material warranty, or other material provision of a policy on the part of either party thereto, entitles the other to rescind. It is generally accepted that [a] warranty is a statement or promise set forth in the policy, or by reference incorporated therein, the untruth or nonfulfillment of which in any respect, and without reference to whether the insurer was in fact prejudiced by such untruth or non-fulfillment, renders the policy voidable by the insurer. However, it is similarly indubitable that for the breach of a warranty to avoid a policy, the same must be duly shown by the party alleging the same. We cannot sustain an allegation that is unfounded. Consequently, PRUDENTIAL, not having shown that TRANS-ASIA breached the warranty condition, CLASSED AND CLASS MAINTAINED, it remains that TRANS-ASIA must be allowed to recover its rightful claims on the policy.

hpsevilla_2008 46 or to maintain their class on that classification society. And it is not sufficient that the member of this classification society at the time of a loss, their membership must be continuous for the whole length of the policy such that during the effectivity of the policy, their classification is suspended, and then thereafter, they get reinstated, that again still a breach of the warranty that they maintained their class (sic). Our maintaining team membership in the classification society thereby maintaining the standards of the vessel. Types of warranty: Express or Implied covering a past, present or future event. (Sec. 67 and 68) Sec. 67. A warranty is either expressed or implied. Sec. 68. A warranty may relate to the past, the present, the future, or to any or all of these. What is the form? Sec. 69. No particular form of words is necessary to create a warranty EXPRESS WARRANTY: Sec. 70. Without prejudice to section fifty-one, every express warranty, made at or before the execution of a policy, must be contained in the policy itself, or in another instrument signed by the insured and referred to in the policy as making a part of it. Sec. 71. A statement in a policy of matter relating to the person or thing insured, or to the risk, as a fact, is an express warranty thereof. Sec. 72. A statement in a policy which imparts that it is intended to do or not to do a thing which materially affects the risk, is a warranty that such act or omission shall take place. What if a person warrants to do something at a particular time, but before he is able to do that, loss occurred. Sec. 73. When, before the time arrives for the performance of a warranty relating to the future, a loss insured against happens, or performance becomes unlawful at the place of the contract, or impossible, the omission to fulfill the warranty does not avoid the policy. For example, A warrants that he will place a burglar system on his house two weeks from the time of issuance of policy. After 1 week, ninakawan na sya. So there can be recovery because at that time, wala pa syang obligation to place the burglar system. If after 2 weeks di parin sya naglagay, there is breach of warranty and he cannot recover.

A classification society is an organization which sets certain standards for a vessel to maintain in order to maintain their membership in the classification society. So, if they failed to meet that standard, they are considered not members of that class, and thus breaching the warranty, that requires them to maintain membership What if there is breach without fraud?

EFFECT OF BREACH OF WARRANTY BY INSURED 1. without fraud - policy is avoided only from the time of breach and the insured is entitled: a. to the return of premium paid at a pro rata rate from the time of breach if it occurs after the inception of the contract b. to all premiums if it is broken during the inception of the contract (void ab initio) 2. with fraud - policy is void ab initio and insured is not entitled to return of premium Young vs. Midland ISSUE: whether or not the placing of said fireworks in the building insured, under the conditions above enumerated, they being "hazardous goods," is a violation of the terms of the contract of insurance and especially of "warranty B." HELD; Yes, the said placing of fireworks violated the contract of insurance. In the present case no claim is made that the "hazardous goods" were placed in the bodega for present or daily use. Contracts of insurance are contracts of indemnity upon the terms and conditions specified in the policy. The parties have a right to impose such reasonable conditions at the time of the making of the contract as they may deem wise and necessary. The rate of premium is measured by the character of the risk assumed. The plaintiff paid a premium based upon the risk at the time the policy was issued. Certainly it cannot be denied that the placing of the firecrackers in the building insured increased the risk. The plaintiff had not paid a premium based upon the increased risk, neither had the defendant issued a policy upon the theory of a different risk. The plaintiff was enjoying, if his contention may be allowed may be allowed, the benefits of an insurance policy upon one risk, whereas, as a matter of fact, it was issued upon an entirely different risk. The defendant had neither been paid nor had issues a policy to cover the increased risk. An increase of risk

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit

hpsevilla_2008 47

which is substantial and which is continued for a considerable period of time, is a direct and certain injury to the insurer, and changes the basis upon which the contract of insurance rests. Union vs. Philippines Guaranty The act of Union of procuring other insurance without notifying Philippine Guaranty violated the policy. Without deciding whether notice of other insurance upon the same property must be given in writing, or whether a verbal notice is sufficient to render an insurance valid which requires such notice, whether oral or written, we hold that in the absolute absence of such notice when it is one of the conditions specified in the fire insurance policy, the policy is null and void. The annotation then, must be deemed to be a warranty that the property was not insured by any other policy. Violation thereof entitles the insurer to rescind. (Sec. 69, Insurance Act) Such misrepresentation is fatal in the light of our views in Santa Ana v. Commercial Union Assurance Company, Ltd. e materiality of non-disclosure of other insurance policies is not open to doubt." What are the implied warranties in marine insurance? Implied warranties in marine insurance: (See Sec. 113-126) 1. SEA WORTHINESS 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 implied that the ship is seaworthy. Section 114 - a ship is seaworthy if reasonable fit to perform the service, and to encounter the ordinary perils of the voyage contemplated by the parties to the policy Section 116 - extends not only to the seaworthiness of the ship itself but requires that it be properly laden, provided with competent master, sufficient number of competent officers and seamen, requisite appurtenances and equipment and other implements for the voyage 2. NATIONALITY Sec. 120. Where the nationality or neutrality of a ship or cargo is expressly warranted, it is implied that the ship will carry the requisite documents to show such nationality or neutrality and that it will not carry any documents which cast reasonable suspicion thereon. 3. WARRANTY AGAINST IMPROPER DEVIATION Sec. 121. When the voyage contemplated by a marine insurance policy is described by the places of beginning and ending, the voyage insured in one which conforms to the course of sailing fixed by mercantile usage between those places. Sec. 122. If the course of sailing is not fixed by mercantile usage, the voyage insured by a marine insurance policy is that way between the places specified, which to a master of ordinary skill and discretion, would mean the most natural, direct and advantageous. Sec. 123. Deviation is a departure from the course of the voyage insured, mentioned in the last two sections, or an unreasonable delay in pursuing the voyage or the commencement of an entirely 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 control; (b) When necessary to comply with a warranty, or to avoid a peril, whether or not the peril is insured against; (c) When made in good faith, and upon reasonable grounds of belief in its necessity to avoid a peril; or (d) When made in good faith, for the purpose of saving human life or relieving another vessel in distress. Sec. 125. Every deviation not specified in the last section is improper . Sec. 126. An insurer is not liable for any loss happening to the thing insured subsequent to an improper deviation. 4. WARRANTY AGAINST ILLEGAL VENTURE 5. WARRANTY OF INSURABLE INTEREST. How different is implied warranty of nationality from the express warranty of nationality? In express warranty, "this vessel is an American nationality", so you express the nationality. Pag sinabi nating implied warranty of nationality, 'this vessel carries with it documents to prove that it is an American nationality". So express, sasabihin mo kaninong nationality ka. Yung implied, kung kaninong nationality ka, you carry documents to prove that nationality. So the moment na hindi mo dala yung documents to prove the ship's nationality, then that is a breach of implied warranty. Ngayon, kung American nationality kuno, yung pala Philippine, that is a breach of express warranty of nationality. Please determine what seaworthiness means ha. That does not pertain to the vessel only but also to the manning and crew, and what you bring abroad the vessel. Sec. 116. A warranty of seaworthiness extends not only to the condition of the structure of the ship itself, but requires that it be properly laden, and provided with a competent master, a sufficient number of competent officers and seamen, and the requisite appurtenances and equipment, such as ballasts, cables and anchors, cordage and sails, food, water, fuel and lights, and other necessary or proper stores and implements for the voyage. So please know also what is a proper deviation, what is an illegal venture. Dapat alam nyo yan.

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit

hpsevilla_2008 48 four is relied upon and (b) that, upon written request of the named insured, the insurer will furnish the facts on which the cancellation is based. So written notice stating what is the ground, and if there is a query as to the factual circumstances, then that is the only instance when the insurance company must state the facts of cancellation. Saura vs. Phil. International HELD: NO valid cancellation. REASON: Actual notice of cancellation in a clear and unequivocal manner preferable in writing, in view of the importance of an insurance contract should be given by the INSURER to the INSURED so that the latter might be given opportunity to obtain other insurance for his own protection. Notice should be personal to the insured and not to and/or through any unauthorized person by the policy. Defendant insurance company must have realized the paramount importance of sending notice of cancellation when it sent the notice of cancellation of the policy to the defendant bank as mortagagee but not to the insured with which it had DIRECT DEALING. Malayan vs. Arnaldo A valid CANCELLATION must therefore require concurrence of the following: 1. Prior notice of cancellation to the insured 2. Notice must be based on the occurrence after the effective date of the policy or one or more of the grounds mentioned 3. Notice must be in writing, mailed or delivered to the named insured 4. At the address shown in the policy 5. It must state which of the grounds mentioned in Sec. 64 is relied upon and that upon written request of the insured, the insurer will furnish the facts on which the cancellation is based. MICO claimed it cancelled policy on October 15, 1981 for nonpayment of premium, it presented its employee who testified that alleged cancellation were sent the assured by mail through their mailing section. THERE is NO PROOF that NOTICE was actually mailed to and received by Pinca. There is flat denial of Pinca who says she never received claimed cancellation, she did not have to prove the same. It stands to reason that if Pinca had really received said notice, she would not have made payment on the original policy on December 24, 1981, she would have asked for a new insurance effective on that date and until one year later and so taken advantage of the extended period. She paid on such date because she honestly believes that policy issued on July 7, 1981 was still in effect and she was willing to make her payment retroact to July 22, 1981, its stipulated commencement date. Agent Adora was also accommodating, had earlier told Pinca to a call him up anytime when she ready with her payment, Pinca was obviously reciprocating in kind when she paid her premium for the period beginning July 22, 1981 and not December 24, 1981.5. Pinca meant to renew policy if it had really been already cancelled but not if it was still effective. It was all conditional. As it has not been shown that there was a valid cancellation of the policy, there was no need to renew it but to pay premium thereon. Payment was thus legally made on the original transaction and it could be and was validly received on behalf of the insurer by its agent Adora, Adora, incidentally had not been informed of the cancellation either and saw no reason not to accept the said payment. Paulino vs. Capital If you look at Sec. 65, written notice na kinacancel mo na. Hindi na kailangan mag-agree yung kabila. How about TPL, what is the requirement before there can be a cancellation of the TPL? Section 380. No cancellation of the policy shall be valid unless written notice thereof is given to the land transportation operator or owner of the vehicle and to the Land Transportation Commission at least fifteen days prior to the intended effective date thereof. Upon receipt of such notice, the Land Transportation Commission, unless it receives evidence of a new valid insurance or guaranty in cash or surety bond as prescribed in this chapter, or an endorsement of revival of the cancelled

Fire insurance
What if there is an alteration in the use of the thing without the consent of the fire insurance company? Sec. 168. An alteration in the use or condition of a thing insured from that to which it is limited by the policy made without the consent of the insurer, by means within the control of the insured, and increasing the risks, entitles an insurer to rescind a contract of fire insurance. Alteration of thing insured + without consent by insurer + increasing risk = rescission Alteration + without consent + does not increase the risk = does not affect contract of insurance Sec. 169. An alteration in the use or condition of a thing insured from that to which it is limited by the policy, which does not increase the risk, does not affect a contract of fire insurance After the issuance of the policy, if there is a change, but the change does not violate the provisions of the policy, even if it increases the risk, there can be recovery kasi walang naviolate sa policy. Sec. 170. A contract of fire insurance is not affected by any act of the insured subsequent to the execution of the policy, which does not violate its provisions, even though it increases the risk and is the cause of the loss. Bachrach v. British 17 phil 555 Insurance company denied liability because plaintiff went against the provision in the policy that no flammable item should be stored in the store where the furniture were kept. The cause of the loss was fire caused by flammable item (benzine, also used for cleaning furniture). SC said that RTC was correct that although there was a provision in the policy that no flammable items should be kept in the store, but if it is incidental to the keeping of the business of the plaintiff, such storing would not avoid the policy. Lower Court correctly ruled that it is well settled that the keeping of inflammable oils on the premises, though prohibited by the policy, does not void it if such keeping is incidental to the business. It may be added that there was no provision in the policy prohibiting the keeping of paints and varnishes upon the premises where the insured property was stored. If the company intended to rely upon a condition of that character, it ought to have been plainly expressed in the policy.

OTHER GROUNDS FOR RESCISSION IN NON LIFE


What are the other grounds for rescission in non life insurance? Section 64. No policy of insurance other than life shall be cancelled by the insurer except upon prior notice thereof to the insured, and no notice of cancellation shall be effective unless it is based on the occurrence, after the effective date of the policy, of one or more of the following: (a) non-payment of premium; (b) conviction of a crime arising out of acts increasing the hazard insured against; (c) discovery of fraud or material misrepresentation; (d) discovery of willful or reckless acts or omissions increasing the hazard insured against; (e) physical changes in the property insured which result in the property becoming uninsurable; 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. Paano natin malalaman na kinacancel na ang policy? Sec. 65. All notices of cancellation mentioned in the preceding section shall be in writing, mailed or delivered to the named insured at the address shown in the policy, and shall state (a) which of the grounds set forth in section sixty-

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit one, shall order the immediate confiscation of the plates of the motor vehicle covered by such cancelled policy. The same may be re-issued only upon presentation of a new insurance policy or that a guaranty in cash or surety band has been made or posted with the Commissioner and which meets the requirements of this chapter, or an endorsement or revival of the cancelled one. (As amended by Presidential Decree No. 1455) When must the innocent party rescind? At what point in time? Section 48. Whenever a right to rescind a contract of insurance is given to the insurer by any provision of this chapter, such right must be exercised previous to the commencement of an action on the contract. After a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of two years from the date of its issue or of its last reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindible by reason of the fraudulent concealment or misrepresentation of the insured or his agent. So before kumulekta yung other party, dapat nirerescind mo na. Before any action is commenced using the policy, the innocent party must already exercise its right to rescind. Kung kumukulekta na, di ka na pwede magrescind, gawin mo na lang defenses yung grounds for rescission. Holding in Tan Chang vs. West Coast A contract of insurance may be rescinded on the ground of concealment or false representation or breach of warranty. An action to rescind a contract as contemplated by section 48 is founded upon and presupposes the existence of contract which is rescinded. To rescind means to abrogate, annul, avoid or cancel contract. It is the unmaking of a contract requiring same concurrence of wills as that which made it and nothing short of this will suffice. There is a wild difference between rescission and mere cancellation or termination. After a contract has been broken either by the inability to perform it or by rescinding against right or otherwise, the party not in fault may sue the other for damages suffered or if the parties can be placed in status quo, he may, should he prefer, return what he has received and recover in a suit the value of what he has paid or done. The latter is rescission. In the instant case, defendant does not seek to have alleged insurance contract rescinded, it denies it ever made any contract on the life of Tan Caeng or that such contract existed and that is the question which it seeks to have litigated by its special defense. Defendant never made or entered into a contract in question, NO CONTRACT to rescind and hence Section 48 upon which the lower court based its decision does not apply. Action to rescind contract is founded upon and presupposes existence of contract which is sought to be rescinded. If all material matters set forth and alleged in defendants special plea is true, there was no valid contract of insurance fro the simple reason that the minds of the parties never met and never agreed upon the terms and conditions of the contract. If such matters are known to exist by preponderance of evidence, they would constitute a valid defense to plaintiffs cause of action. Argente vs. West Coast As provided by Section 48, whenever a right to rescind a contract of insurance if given to the insurer, such right must be exercised previous to the commencement of an action to the contract. ISSUE: Whether or not there was valid ground for rescinding contract of insurance HELD: Insurance Company may rescind the contract of Insurance REASON: As provided by Section 48, whenever a right to rescind a contract of insurance if given to the insurer, such right must be exercised previous to the commencement of an action to the contract. This section was derived from Section 2583 of the California Civil Code but in contrast thereto, makes use of the imperative must instead of permissive

hpsevilla_2008 49 may. Nevertheless there are two answers to the question propounded: First is that the California law as construed by code examiners at whose recommendation it was adopted, conceded that a failure to exercise right of rescission cannot prejudice any defense to the action which concealment may furnish. Second answer is that insurance company more than one month previous to the commencement of the present action wrote the plaintiff and informed him that insurance contract was void because it has been procured through fraud and offered refund of premium which latter had paid upon return of policy for cancellation. Thus, as held in California as to fire insurance policy, where any material representations are false, insurers tender of premium and notice that policy is canceled before commencement of suit thereon, operate to rescind contract of insurance.

PART VI - PDIC LAW


What's the maximum insurable amount/ Insurance deposit, concept of: Sec. 4 (g) - the amount due to any depositor for deposits in an insured bank net of any obligation of the depositor to the insured bank as of the date of closure, but not to exceed Two hundred fifty thousand pesos (P250,000.00).

Types of Insured bank deposits: Single depositor account In trust for and by account Joint account Institutional account Single and joint account SINGLE DEPOSITOR ACCOUNT : Accounts are owned by one person, Pedro. Thus, all accounts will be consolidated or added together as they are maintained in the same right and capacity, regardless of account type. Total amount insured cannot exceed P250,000. Account Number #1 #2 #3 Total Type Checking Savings Time Amount P180,000 P50,000 P70,000 P300,000 P250,000 insured; P50,000 uninsured

In trust for and by account: Account Number #1 #2 #3 Pedro Account Holder Pedro Pedro ITF Jo Pedro By Juan 1 and 3 Amount 280,000 260, 000 290,000 280, 000 +290,000 570,000 less 250,000 (insurance) 320,000 (uninsured) P260,000 P250,000 insurance = P10,000 (uninsured) Nothing

Jo Juan

2 3

Pedro is the principal owner of Accounts #1 and #3. Thus, these 2 accounts will be consolidated as they are maintained in the same right and capacity; and insurance is up to P250,000 only. On the other hand, account #2 is owned by Jo with Pedro acting as agent. Jo is thus entitled to a separate maximum limit of P250,000. Juan is not entitled to anything since he merely opened an account for Pedro

JOINT ACCOUNT: ACCOUNT # ACCOUNT BALANCE

Based on the lecture/syllabus of Atty. Ma. Cristina Sagmit 1 2 Insured amounts: Account Number Pedro - #1 Pedro - #2 Total deposits Insured deposits Maria - #2 Juan - #2 Insured Share P125,000 P125,000 P250,000 P250,000 P125,000 P125,000 Uninsured P75,000 P200,000 Total: 275,000 P75,000 P200,000 HOLDER Pedro and Maria Juan and/or Pedro P 400,000 P650,000

hpsevilla_2008 50 thus, Account #1 owned by Benjamin is insured for P200,000. For joint ownership, each joint account is considered equally shared among co-depositors unless otherwise indicated in the deposit document. Insurance coverage of P250,000 will apply to the sum of shares of a depositor in the insured portion of each joint account. Bar Question: A has the following accounts: P10,000 savings account, P20,000 checking account, P30,000 money market placement and P40,000 trust fund in a medium-sized commercial bank. State which of the four accounts are insured by the PDIC. The P10,000 savings account and the P20,000 checking account are deemed insured under by the PDIC. BD has a bank deposit of half a million pesos. Since the PDIC limit is P250,000, BD would like some protection for the excess by taking out an insurance against all risks arising from unsound bank practices. Does BD have insurable interest under the Insurance Code? Yes, BD has insurable interest in his bank deposit. In case of loss to the extent of the amount not covered by PDIC, BD will be damnified. He will suffer pecuniary loss of P250,000 since PDIC Law only covers accounts up to P250,000. Phil Deposit Insurance vs. CA 2003 PDIC refused to pay the 17 out of 28 remaining golden time deposits of the respondents on the ground that they deposited it with the bank which they knew were soon closing in order to get insurance money. Held: Under its charter, PDIC is liable only for deposits received by a bank in the usual course of business. Being of the firm conviction that, as the reported May 25, 1987 bank transactions were so massive, hence, irregular, petitioner essentially seeks a judicial declaration that such transactions were not made in the usual course of business and, therefore, it cannot be made liable for deposits subject thereof. However, PDIC was unable to prove bad faith while respondents were able to prove that the transactions prior to the closure of the bank was made in the usual course of business, thus PDIC is liable. -oOo-

For account #1 amounting to P400,000, Pedro and Maria share at P200,000 each. They will also divide equally the P250,000 MDIC or computed at P125,000 each. For account #2 amounting to P650,000, Juan and Pedro share at P325,000 each. They will also divide the P250,000 MDIC at P125,000 each. INSTITUTIONAL ACCOUNT ACCOUNT NUMBER 1 2 ABC CO ABC CO. PEDRO CRUZ TOTAL FOR ABC CO. ACCOUNT HOLDER ABC CO. ABC CO and/or PEDRO CRUZ #1 #2 NONE BALANCE P600,000 P800,000 P600,000 P 800,000 NONE P 1.4 million 250,000 (insurance) = P1,150,000 uninsured

Joint accounts held by a juridical person with natural person will be presumed to belong to the juridical person. Thus, Accounts #1 and #2 will be consolidated in the name of ABC Co. Total amount of insured deposits will be P250,000.

SINGLE AND JOINT ACCOUNTS Account #1 Account #2 Account #3 Account #4 Benjamin Benjamin and Jose Benjamin and/or Jonas Benjamin or Jose or Jonas P200,000 P500,000 P300,000 P400,000

For Benjamin Single account Joint accounts

Acct #1 Acct. #2

Joint account Joint

Acct. #3 Acct. #4

P200,000 insured Share: P 250,000 Insured: P125,000 Uninsured: P125,000 Share: P150,000 Insured: P125,000 Uninsured: P25,000 Share: P133,333 Insured: P83,3333 Uninsured: P50,000

For Jose Jose Jose

Acct #2 Acct. #4

Share: P250,000 Insured: P125,000 Uninsured: P125,000 Share: P133,333 Insured: P83,333 Uninsured: P50,000

For Jonas Jonas Jonas (joint)

Acct. #3 Acct. #4

Share: P150,000 Insured: P125,000 Uninsured: P25,000 Share: P133,333 Insured: P83,333 Uninsured: P50,000

Under the new rules, single account is insured separately to a maximum coverage of P250,000,