1.
Insurance defined: agreement to indemnify another
against LOSS, DAMAGE OR LIABILITY arising from
unknown or contingent event.
2. Characteristics:
a. Risk-distribution device – serve to distribute the
risk of economic loss among as many as
possible to those who are subject to the same
kind of risk. By paying a pre-determined amount
into a general fund out of wc payment will be
made for an eco loss.
b. Aleatory – obli of the insurer to pay the
proceeds of the insurance arises only upon the
happening of the event wc is uncertain or wc is
to occur at a certain time.
c. Contract of Adhesion or Fine Print Rule – most
of the terms of the contract doesn’t result from
mutual nego between the parties as they’re
prescribed by the insurer in printed form to wc
the insured adhere if he chooses but wc he cant
change. [GR= IN CASE OF DOUBT THE K
SHALL BE INTERPRETED AGAINST THE
INSURER AND LIBERALLY IN FAVOR OF
THE INSURED1]
d. Uberrimae Fides Contract – utmost good faith.
It req the parties to the K of Insurance to
disclose conditions affecting the risk of wc he’s
aware or the material facts.
e. Contract of Indemnity – the insured who has
insurable interest over a prp is only entitled to
recover the amount of actual loss sustained and
1 6 Sec. 51 (f), ICP.
Rizal Surety and Insurance Co. v. CA.
the burden is upon him to establish the amnt of
such loss. [*APPLICABLE TO PROP
INSURANCE EX CREDITOR INSURING THE
LIFE OF HIS DEBTOR]
f. Consensual (relate with Cognition Theory)- IC
is consensual and is therefore perfected the
moment there is a meeting of the minds with
respect to the object and the
cause/consideration. GR= the insured is the
one making the offer by submitting an
application to the insurer and the latter accepts
the offer by approving the application. The mere
submission of the app w/o the corresponding
approval doesn’t result in the perfection of the
IC.2
 Thus, acceptance made by letter shall not
bind the person making the offer ex from the
time it came to his knowledge.3
g. *Personal – each party having in view the
character, credit and conduct of the other.4
3. Elements: in add to consent, object and
cause/consideration: [PARIS]
a. Insurable Interest 5 - the insured has an
insurable interest in the life/thing insured.
b. Risk of Loss 6 - the happening of designated
events, either unknown or contingent, past or
future, will subject such interest to some kind of
2 Great Pacific Life Assurance Co. v CA.
3
Enriquez v. Sun Life Assurance Co. of Canada.
4 p. 22, De Leon & De Leon, Jr., Insurance Code (2014); p. 80, Reviewer on
Commercial Law, Sundianag & Aquino.
5 Sec. 12-14, ICP.
1
 loss, whether in the form of injury, damage or
liability.
c. Assumption of Risks7 - insurer assumes such.
d. Scheme to Distribute losses - is part of a
general scheme to distribute the loss among a
large number of persons exposed to similar
risks.
e. Payment of Premiums 8- consideration for the
insurer’s promise to undertake the RoL.
4. Insurance Policy – the written instrument where
terms/condition of IC is set forth9.
 Need not be signed by the insured EX when express
warranties are contained in separate docs, part of the
policy.
 Such isn’t necessary for the perfection of the K.
however, the law provides that no policy of insurance
shall be issued or delivered unless in the form
previously approved by the Insurance Commission.10
 The Code doesn’t provide for prescribed forms but
requires certain provisions to be included in the
policy.11
5. Kinds of Policy
a. Open – value of the thing not agreed upon but
left to be ascertained at time of lost. The
amount of the insurance merely represents the
insurer’s max liability.12
b. Valued – definite valuation is agreed upon by
both parties and written on the face of the
policy.13
c. Running – successive insurances and wc
provides that the subject of the policy may from
time to time be defined.14
NB: LIFE INSURANCE POLICIES ARE ALWAYS VALUED
POLICIES.
6. Types of Insurance Contracts
a. LIFE
i. Group – a blanket policy covering a
number of individuals. Its most common
form is an insurance that provides
life/health insurance coverage for the
Ees of a single Er.15
ii. Industrial – a form of life insurance
under wc the premiums are payable
either monthly or oftener, if the face
amount of insurance provided in any
policy isn’t more than 500x that of the
current statutory min. wage in the city of
manila and if the words “industrial”
policy are printed upon the policy as part
of the descriptive matter.16

7 Sec. 2, ICP.
8 12
Sec. 77, ICP; Philamcare Health Systems, Inc. v. CA; Gulf Resorts, Inc. v. Sec. 60, ICP.
13
Phil Charter Insurance Corp.) Sec. 61, ICP.
9 Sec. 49, ICP. 14 Sec. 62, ICP.
10 Sec. 232, ICP. 15 Pineda v. CA.
11 Sec. 233-237, ICP. 16 Sec. 235, ICP.

2
 iii. Endowment - is a life insurance
contract designed to pay a lump sum
amount after a specific term (on its
‘maturity’) or on death.
NB: if insured outlives the period, the
face value of the policy is paid to him; if
not, his beneficiaries the receive benefit.
b. NON-LIFE
i. Marine
ii. Fire
iii. Accident
iv. Medical/Health
c. SURETYSHIP
 Surety/Bond – a contract w/ indemnity agreement.
o Fidelity Bond – contract of insurance against
loss from misconduct.
o Fidelity Guaranty Insurance – a contract
whereby one for a consideration, agrees to
indemnify the assured against loss arising from
the want of integrity, fidelity or honesty of Ees
or other persons holding positions of trust.
7. TRANSFER OF POLICY
a. Life insurance can be transferred even w/o
consent of insured.
i. EX: when notice to an insurer is
required in the policy.17
b. On the other hand, in property insurance
consent of insurer is required.18
c. If the property insurance is transferred w/o
consent of the insurer, the policy is suspended
17
Sec.185, ICP.
18
Sec. 184, ICP.
and will not be avoided until the interest in the
thing and the interest in the insurance are
vested in the same person.19
i. GR: the mere transfer of the thing
insured doesn’t transfer the policy but
suspends it until the same person
becomes the owner of both policy and
the thing insured.20 The term “change in
interest” in this section means absolute
transfer of the property insured such as
conveyance of the property insured by
means of absolute deed of sale.
 RATIO: Insurance contract is a personal (remember).
 NB: A lessor can’t demand payment of the insurance
proceeds from the insurer. Lessor cant be validly a
beneficiary of the fire insurance policy cause he didn’t
have insurable interest over the goods. The automatic
assignment of the policy to the lessor (where failure to
obtain to consent of the Lor by the Lee to insure the
leased property) under the provision of the lease
contract is void for being contrary to law and/or public
policy.21
ii. EX:
1. Life, health and accident
insurance.22
2. Change of interest in the thing
insured occurs after the injury wc
results in a loss.23
19
Sec.20, ICP.
20 Sec.20, ICP.
21 Cha v. CA, 1997.
22 Sec. 20, ICP
23 Sec. 21, ICP
3
  RATIO: after the loss of the thing happens, the liability
of the insurer becomes fixed. Hence, the insured can
assign his claim against the insurer as any other
money claim.
3. Change of interest in one or
more of several things
separately insured by one
policy.24
 RATIO: the contract is divisible.
4. Change of interest by will or
succession on the death of the
insured.25
 RATIO: no new party was introduced into the co-
ownership and what the law dictates is the transfer of
the interest/ownership to a stranger or non-original
party to the contract of insurance.
5. Change of interest by 1 or
several partners, joint owners or
owners in common who are
jointly insured to the other.26
6. When a policy is so framed that
it will inure to the benefit of
whomever, during the
continuance of the risk, may
become the owner of the interest
insured.27
8. PARTIES
24 Sec. 22, ICP
25 28
Sec. 23, ICP
26 Sec. 24, ICP 29 RA 10607.
27 Sec.57, ICP. 30 Sec.193, ICP.
a. Insurers who are duly authorized by the
Insurance Commish may be28 –
i. Partnership
ii. Association
iii. Corporation
iv. Cooperatives
v. Foreign Insurance Corp.
1. Appointment of resident agent in
the Phil
2. Posses paid-up unimpaired
assets/capital and reserve not
less than P1Bil
3. Dep to the Commish for the
benefit and security of
policyholders
4. Investment shouldn’t exceed
20% of the net worth of the
foreign corp or 20% of the capital
of the registered enterprise.
 NB: An individual can’t be an insurer anymore.29
 NB: Must obtain a Certificate of Authority before it can
transact any insurance business in the Phil.30
b. Insured are persons w/ the capacity to contract
and having an insurable interest in the life or
prop of the insured
i. A public enemy can’t be insured. With
respect to corp., the nationality is
Sec.6, 190-193, ICP.
4
 determined by the controlling SHs
irrespective of the place of corp.31
ii. Minors can’t enter into insurance
contract and under the NCC, a contract
entered into bet a minor and capacitated
person is considered voidable.
iii. Spouse’s consent isn’t necessary for the
validity of an insurance policy taken out
by a married person on the life of other
persons other than life of the spouses
themselves or his/her children.
iv. All rights, titles and interest in the policy
of insurance taken out by an orig owner
on the life/health of the person insured
shall automatically vest in the latter
upon death of the orig owner unless
others provided for in the policy.32
9. BENEFICIARY
a. Not a party but entitled to insurance proceeds.
i. GR: the designation is revocable
1. If there’s no waiver under
sec.181, assignment of the
policy may be deemed as
implied revocation.33
ii. EX: right to revoke is expressly waived
in the policy34
1. The insured can’t assign the
policy if the designation of the B
31
Filipinas Compañia de Seguros v. Christern Huenfeld and Co., 1951.
32 Sec.3, ICP.
33 p.97, Reviewer on Commercial Law by Jose R. Sundiang, Sr. and Timoteo
B. Aquino, Seventh Ed. 2014.
34 Sec.11, ICP.
is irrevocable. The irrevocable B
has a vested right.35
2. If the insured refuses to pay the
premiums, the designated
irrevocable B may continue the
policy by paying premiums that
are due.36
iii. EX to the EX: innocent sps may revoke
the designation of the guilty sps as
irrevocable B after Annulment, Nullity, or
LegSep.37
b. GR: Insured may designate anyone as B under
a Life Insurance. EX:
i. Concubine/paramour
1. Conviction condition precedent
isn’t req.
2. The designation of the illegit
children as B in the deceased
father’s insurance policy is valid.
Under the existing law, there’s
no legal proscription in
designating the children of illicit
relationships by the insured.38
ii. Those specified under art.739 and 2012
iii. Bet. Persons found guilty of the same
crim offense
35
p.97, Reviewer on Commercial Law by Jose R. Sundiang, Sr. and Timoteo
B. Aquino, Seventh Ed. 2014.
36 Ibid.
37 Art.43(4); Art.50; Art.64, NCC.
38 Heirs of Loreto Maramag v. Maramag, June 5, 2009.
5
 iv. Made to a public officer or his
wife/descendant/ascendant by reason of
his office.
 Ratio: a life insurance policy is no different from a
donation insofar as the B is concerned. A B is like a
done cause from the premiums of the policy wc the
insured pays out of liberality, the B will receive the
proceeds of the insurance.39
 NB: the designation of persons mentioned in Art.739 is
void but the policy is binding. The estate will get the
proceeds.40
c. A person may take out life insurance and make
it payable to whomsoever he pleases
regardless of the B’s lack of insurable interest.
i. On the other hand, if a person will insure
the life of another payable to himself he
must have insurable interest on the life
of the person whose life he is insuring.
d. GR: In Property Insurance, the B must have
insurable interest on the prop.
e. GR: If the B caused the willful killing of the
insured whether as a P/Accom/Access, the
interest of the B in the policy shall be forfeited.
The share forfeited shall pass on to the other
Bs, unless otherwise DQ. In the absence of
other Bs, the proceeds shall be pain in
39
The Insular Life Assurance Co. v. Ebrado, 1977.
40 p.96, Reviewer on Commercial Law by Jose R. Sundiang, Sr. and Timoteo
B. Aquino, Seventh Ed. 2014.
accordance w/ the policy contract. If the policy
contract is silent, the proceeds shall be paid to
the estate of the insured.41 EX:
i. Accidental killing
ii. Self-defense
iii. B was insane at the time he killed
insured.
 NB: the insurer isn’t liable for a loss caused by the
willful act/thru connivance of the insured.42
f. Effects of annulment/legsep (or nullity) – no
effect as to designation of B in the policy.
i. EX: if the guilty sps is the designated
irrevocable B, the innocent sps may still
revoke such by operation of law.43
10. INSURABLE INTEREST
a. The relation, connection or concern in a
person/prop that the insured will derive
pecuniary benefit/advantage for its preservation
and suffers pecuniary loss/dmg from its
destruction, injury/death by the happening of
event insured against.44
b. GR: in the absence of insurable interest, the
person w/o interest on the subject matter
insured would be gambling or would be entering
into a wagering contract wc is void for illegality.
c. EX: Life Insurance.
i. GR: Insurable interest must exist only at
the of perfection of the Contract.45
41 Sec.12, ICP; see also Heirs of Maramag v. Maramag, supra.
42
Sec.89, ICP.
43 Supra, Note 33.
44 Lalican v. Insular Life Insurance Co., Ltd., August 25, 2009.
45 Sec.19, ICP.
6
 ii. EX:
1. Taken by the creditor on the life
of the debtor, the C is req to
have an insurable interest not
only at the time of the perfection
but also at the time of the D’s
death;
2. Insurance taken by the Er on the
life of the Ee.46
d. 2 general classes of Life Policies (Insurance)
i. Insurance upon one’s life (cestui que
vie)
1. Unlimited insurable interest
ii. Insurance upon life of another – the B
must have an insurable interest in the
life of the insured.
1. Relations by blood or marriage –
any person who provides
education and/or support may be
insured by the person benefitting
therefrom. Mere relationship is
sufficient.
a. w/ insurable %:
i. Husband/wife/chil
dren
ii. Grandparents/chil
dren
iii. Bro/sis
b. w/o insurable %
i. other relatives by
affinity
46 El Oriente Fabrica de Tabacos, Inc. v. Posadas, September 21, 1931.
ii. nieces/nephew
iii. uncles/aunts
iv. Stepchildren/pare
nts
v. Engaged couples
vi. Cohabitees.
 NB: insurable interest in life/health must exist and
prove the relationship DURING THE PERFECTION OF
THE CONTRACT or WHEN THE INSURANCE TAKES
EFFECT. Subsequent events, such as legal separation
of the sps, after such perfection doesn’t change the
fact that the insured may claim from the insurer.
 NB: on the above statement, if the claimant is the B, he
doesn’t need to have an insurable interest and as long
as he isn’t a person who is forbidden to receive
donations under the law.
2. Business relationships –
 Any person so related to another, either by
contract/commercial relation, that a right possessed by
him will be extinguished or impaired by the
death/illness of the other may lawfully procure
insurance on the other’s life.
 A person may take a policy on the life of his business
partner cause the latter’s death may result in an
interruption of business operations wc can cause
financial loss.
3. Creditors –
 a C may name himself as B in a policy he takes on the
life of his D. the death of the D may either prevent
7
 payment if his estate isn’t sufficient to pay his
debts/delay such payment if an admin has to be
appointed to settle his estate.
 if the D is the insured and the C is named B, the C will
be entitled to the whole proceeds of the policy upon the
D’s death, tho his credit may be much less.
4. Insurable interest in the life of a
person upon wc an estate or
interest depends on –
e. Property Insurance – consist of47:
i. Existing interest – legal or equitable.
E.G.:
1. Trustee (legal)
2. Mortgagor (legal)
3. Lessor (legal)
4. Purchaser before delivery of the
thing (equitable)
5. Mortgagee (equitable)
6. Mortgagor after foreclosure but
before expiration of
RedemPeriod (equitable)
ii. Inchoate interest founded on an existing
interest
iii. Expectancy coupled w/ an existing
interest in that out of wc the expectancy
arises.
47
Sec.14, ICP.
f. GR: a person has an insurable interest in the
property if he derives benefit/advantage from its
preservation or would suffer pecuniary loss,
dmg or prejudice by its destruction whether he
has or has no title, lien or possession of the
prop.48
i. Absence of such will make the property
insurance void.
g. The ins-int must exist when the insurance takes
effect AND when the loss occurs.
h. Ins-Int of Mgor-Mgee:
i. Mgor – (owner) extent of the value of
the prop. The L/D of the prop insured
shall not extinguish the mortgage debt.
EX:
1. Loan on Bottomry
2. Respondentia loan
ii. Mgee – extent of the debt.
i. Standard/union mortgage clause
i. Subsequent acts of the Mgor cant affect
the rights of the Mgee
ii. Reason: it’s as if the insurer made a
new and independent contract w/ the
Mgee
j. Open/Loss Payable mortgage clause
i. Acts of the Mgor affect the Mgee
ii. Reason: Mgor doesn’t cease to be a
party to the contract.49
48 Filipino Merchants Insurance, Inc. v. CA; see also Gaisano Cagayan, Inc.
v. Insurance Company of North America, June 8, 2006.
49 Sec.8-9, ICP.
8
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