IV. INSURANCE CODE (Republic Act No.

10607, as amended)

A. Concept of Insurance

- Sec. 2, Insurance Code (IC)

- Principle of Indemnity – insured should not collect more than actual
value of loss. Exceptions: 1) Life insurance; 2) Valued policies
- Contract of Adhesion
- Philippine Health Care Provider, Inc. v. CIR, GR No. 167330,
September 18, 2009

B. Elements of an Insurance Contract

1. Insurable interest
2. Risk of loss on part of insured - “Actuarial loss”, see Phil. Health
Care Provider, Inc. v. CIR, ibid.
3. Assumption of risk by insurer
4. Assumption of risk is part of general scheme to distribute losses
5. Premium payment

C. Characteristics/Nature of Insurance Contracts

1. Aleatory - See Art. 2010, Civil Code

2. Unilateral
3. Personal
4. Consensual
5. Uberrimae fidae

D. Classes

1. Marine

- Sec. 101, IC
- Perils of the Sea versus Perils of the Ship
- Seaworthiness – See Sections 11, 117, 118 and 121, IC

2. Fire
- Sec. 169, IC
- “Option to Rebuild Clause” - Sec. 174, IC

3. Casualty

- Sec. 176, IC

4. Suretyship

- Sec. 177, IC
- 3 Cs of Suretyship:
i. Character
ii. Capacity
iii. Capital

5. Life

- Sec. 181, IC
- Human Life Value – Sec. 186, IC

6. Compulsory Motor Vehicle Liability Insurance

- Sections 386 to 402, IC

E. Parties

1. Insured/assured

a. Spouse - Sec. 3, IC
b. Minors - Sec. 3, IC
c. Public enemy – Sec. 7, IC

2. Insurer - Sec. 6, IC

3. Beneficiary - Sec. 53, IC

- Del Val v. Del Val, 29 Phil. 534

a. Effect of use of conjugal funds in premium payment

- BPI v. Posadas, Sr., No. L-34583, October 22, 1931

b. Generally revocable - Sec. 11, IC

 Exceptions: Under the Family Code, Art. 43 (4); Articles 40 and
45, in relation to Art. 43 (4) and 50; and Art. 64.

c. Disqualifications
i. Willful acts under Sec. 12, IC
ii. Art. 2012, in relation to Art. 739, Civil Code

F. Insurable Interest

1. In Life/Health

- Sec. 10, IC

2. In Property

a. Test - Sec. 13, IC

b. Kinds - Sec. 14, IC:

i. Existing interest
ii. Inchoate Interest founded on existing interest
iii. Expectancy, coupled with an existing interest from which
expectancy arises

3. Double Insurance and Over Insurance

4. Multiple or Several Interests on Same Property

- Mortgagor versus Mortgagee

- Sec. 8, IC
- Sec. 9, IC - “Union Mortgage Clause” versus “Loss Payable Clause or
Open Mortgage Clause”

G. Perfection of the Contract of Insurance

1. Offer and Acceptance/Consensual - Cognition Theory; Art. 1319,

Civil Code

a. Delay in Acceptance
b. Delay of policy

2. Premium Payment
 a. Sec. 77, IC
b. Binding policy notwithstanding non-payment of premium

- See UCPB v. General Insurance, Inc. v. Masagana Telemart, Inc.,

GR No. 137172, April 4, 2001

i. Grace period – Sections 233, 234 and 236, IC

ii. Acknowledgment – Sec. 79, IC
iii. Credit extension – Sec. 77, IC
iv. Salary deductions of government employees – Sec. 78, IC

c. Advance payment – Sec. 84, IC

3. Non-Default Options in Life Insurance

- Sec. 233 (f) and (g), IC

4. Reinstatement of Lapsed Policy of Life Insurance

- Sec. 233 (j), IC

5. Refund of Premiums

- Sections 80, 82 and 83, IC

H. Insurance Policy

- Sec. 49, IC
- Under Sec. 50, may be in Electronic Form, consistent with E-
Commerce Act
- Riders - Sec. 50, IC
- Cover notes - Sec. 52, IC
- Basic provisions – See Sec. 51, IC

I. Rescission of Insurance Contracts

1. Concealment - “suppressio veri”

- Sections 26, 27 and 28, IC

- Materiality - Sec. 31, IC
- Is good faith a defense?
- Non-material matters – Sections 30, 32, 34 and 35, IC
- Should judgment/opinion be disclosed? See Philamcare Health
Systems, Inc. v. Julita Trinos, GR No. 124678, March 18, 2002
- Incontestability Clause - Sec. 48, IC

2. Misrepresentation/Omissions

- Sec. 44, IC
- Sec. 45, IC - remedy of rescission
- Incontestability Clause - Sec. 48, IC

3. Breach of Warranties

- Sec. 68, IC

J. Claims Settlement and Subrogation

1. Notice and Proof of Loss

- Sec. 90, IC
- Sec. 92, IC
- Sec. 93, IC

2. Guidelines on Claims Settlement

a. Unfair Claims Settlement; Sanctions

- Sec. 247, IC
- Sec. 248, IC
- Sec. 249, IC
- Sec. 250, IC

b. Prescription of Action

- Art. 1144, Civil Code - Ten (10) years

- Sec. 63, IC; If stipulated, should not be less than one (1) year from
accrual
- Sec. 397, IC; One (1) year prescriptive period for Compulsory Third
Party Liability (CTPL)

c. Subrogation

- Art. 2207, Civil Code