Professional Documents
Culture Documents
☞ An insurance contract requires utmost good faith (uberrimae fidei) between the
parties. The applicant is enjoined to disclose any material fact, which he knows or
ought to know.
3. Contract of Indemnity
☞ It is the basis of all property insurance. The insured who has insurable interest over a
property is only entitled to recover the amount of actual loss sustained and the burden is
upon him to establish the amount of such loss (Reviewer on Commercial Law,
Professors Sundiang and Aquino)
☞Rules:
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Group 1: Insurance (Delgado/Nebres Report)
a. Applies only to property insurance except when the creditor insures the life of his
debtor.
b. Life insurance is not a contract of indemnity.
c. Insurance contracts are not wagering contracts. (Sec. 4)
4. Contract of Adhesion (Fine Print Rule)
☞ Most of the terms of the contract do not result from mutual negotiations between the
parties as they are prescribed by the insurer in final printed form to which the insured
may “adhere” if he chooses but which he cannot change. (Rizal Surety and Insurance
Co., vs. CA, 336 SCRA 12)
5. Principle of Subrogation
☞ It is a process of legal substitution where the insurer steps into the shoes of the
insured and he avails of the latter’s rights against the wrongdoer at the time of loss.
Binding Receipt
☞ A mere acknowledgment on behalf of the company that its branch office had
received from the applicant the insurance premium and had accepted the application
subject to processing by the head office.
Insurance contract was considered binding upon proof that the insurance
application was duly received by the insurer
Cover Note (Ad Interim)
☞ A concise and temporary written contract issued to the insurer through its duly
authorized agent embodying the principal terms of an expected policy of insurance.
Purpose: It is intended to give temporary insurance protection coverage to the applicant
pending the acceptance or rejection of his application.
Duration: Not exceeding 60 days unless a longer period is approved by Insurance
Commissioner (Sec. 52).
Clauses
☞ An agreement between the insurer and the insured on certain matter relating to the
liability of the insurer in case of loss.
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Group 1: Insurance (Delgado/Nebres Report)
Endorsements
POLICY OF INSURANCE
POLICY OF INSURANCE
Contents: (Sec. 51) PARPIRD
1. Parties
2. Amount of insurance, except in open or running policies;
3. Rate of premium;
4. Property or life insured;
5. Interest of the insured in the property if he is not the absolute owner;
6. Risk insured against; and
7. Duration of the insurance.
Persons entitled to recover on the policy (sec. 53): The insurance proceeds
shall be applied exclusively to the proper interest of the person in whose name or to
whose benefit it is made, unless otherwise specified in the policy.
Kinds of Policy:
1. OPEN POLICY – value of thing insured is not agreed upon, but left to be ascertained
in case of loss. (Sec. 60)
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. (Development Insurance Corp. vs. IAC, 143 SCRA 62)
2. VALUED POLICY – definite valuation of the property insured is agreed by both
parties, and written on the face of policy. (Sec. 61)
In the absence of fraud or mistake, the agreed valuation will be paid in case of total
loss of the property, unless the insurance is for a lower amount.
3. RUNNING POLICY – contemplates successive insurances and which provides that
the object of the policy may from time to time be defined (Sec. 62)
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Group 1: Insurance (Delgado/Nebres Report)
Kinds of Insurance
A. Compulsory Insurance- coverage is secured from private insurers and not from a
particular government agency
Compulsory Third Party Liability Insurance for motor vehicles
Compulsory coverage of passengers and cargoes of vessels
Compulsory coverage Migrant worker deployed by a recruitment/manning
agency at cost to the said worker
B. General Classification
Different kinds of assurance may be grouped into three great heads namely:
1. Insurance against loss or impairment of property, interests, which may be either
be in existence or merely expected; that is present rights or profits yet to accrue
2. Insurance against loss of earning, power by accidental injury, sickness, old age,
or disability, by death, or even by unemployment,
3. Insurance against contingent liability to make payment to another for any cause.
C. Classification According to Object
- Private insurance can either be:
a. Life or Health Insurance
b. Property Insurance, or
c. Liability insurance
D. Special Types
- With specific provisions in the Insurance Code
a. Marine Insurance
b. Casualty insurance
c. Fire insurance
d. Life insurance
e. Compulsory Third Party Liability Insurance, and
f. Microinsurance (RA. No. 10607)
E. As to the persons Covered
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Group 1: Insurance (Delgado/Nebres Report)
Principle of Indemnity
The principle is meant to prevent the insured from profiting from insurance and to
reduce moral hazard. The real purpose of the contract is, in case of loss, to place the
insured in the same situation in which he was before the loss, subject to the terms and
conditions of the policy.
Principle of Indemnity
a. Exceptions:
1. Life Insurance
2. Valued policies under which the insurer will pay the value fixed in the policy
regardless of the actual cash value in case of total loss
b. Manifestations:
1. Insurable interest is indispensable,
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Group 1: Insurance (Delgado/Nebres Report)
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Group 1: Insurance (Delgado/Nebres Report)
The Parties
1. Insurer
2. Insured
3. Beneficiary
Capacity
Under the New Civil Code, a contract is voidable if one of the parties is incapacitated.
Accordingly, an insurance contract is voidable if the insured is a minor, an insane person or is
otherwise incapacitated to enter into an insurance contract. However, a capacitated person can
validly enter into an insurance contract insuring the life of an incapacitated person like a minor.
Equality in Capacity to Act. – Women of legal age, regardless of civil status, shall have the
capacity to act and enter into contracts which shall in every respect be equal to that of men
under similar circumstances.
General Rule
Women’s capacity to act is not impaired by marriage;
Provision on insurance is not limited to common children of the spouses;
Exceptions
If the beneficiary is a debtor of the spouses, taking of insurance can be considered as an act of
administration where it should be jointly undertaken under absolute community of property
regime. In case of disagreement, it is the husband that will prevail.
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Group 1: Insurance (Delgado/Nebres Report)
If the beneficiary is a stranger to any of the spouses, taking of insurance can be in the nature
of donation that should be approved by both of them under absolute community of property
regime.
Rule on Minors
Minors cannot enter into insurance contracts. The rule under the New Civil Code is that a
contract entered into between a minor and capacitated person is considered voidable. Hence,
an insurance contract entered into between the minor and an insurance company is voidable.
“All rights, title and interest in the policy of insurance taken out by an original owner on the life
or health of the person insured shall automatically vest in the latter upon the death if the
original owner, unless otherwise provided for in the policy.”
For example, the life of a minor can be insured. The parents can insure the life of their minor
child. If the parents, who are the original owners of the policy, will die, all the rights, title and
interest in the policy shall be automatically vested in the minor.
Public Enemy
Section 7 of the Insurance Code provides that “Anyone except a public enemy may be insured.”
Public enemy - a State (and citizens thereof) which is at war with the Philippines.
Effect of war
If there is no war yet at the time of the taking of policy but war ensues between the Philippines
and the country of the insured, the insurance policy is deemed abrogated.
Policy Holder – named owner of the insurance policy who may be the insured or assured in life
or non-life insurance policy or a beneficiary may be applicable.
As part of its effort to protect the public, the Insurance Commission promulgated the Bill of
Rights of Policyholders under which the following are recognized:
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Group 1: Insurance (Delgado/Nebres Report)
Beneficiary
a. LIFE
i. A person who insures his own life can designate any person as his beneficiary,
whether or not the beneficiary has an insurable interest in the life of the insured
subject to the limitations under Art. 739 and Art. 2012 of the NCC.
b. PROPERTY
The beneficiary of property insurance must have an insurable interest in such
property, which must exist not only at the time the policy takes effect but also when the
loss occurs. (Sec. 13 and 18).
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Group 1: Insurance (Delgado/Nebres Report)
Insured cannot:
1. Assign the policy
2. Take the cash surrender value of the policy
3. Allow his creditors to attach or execute on the policy;
4. Add new beneficiary; or
5. Change the irrevocable designation to revocable, even though the change is just and
reasonable.
Exception:
The Family Code provides for revocation of an irrevocable designation of beneficiary. Article 64
of the Family Code provides that after the finality of the decree of legal separation, the innocent
spouse may revoke the designation as beneficiary in any insurance policy even such designation
is stipulated to be revocable.
The law does not authorize insurance for or against the drawing of any lottery, or for or against
any chance or ticket in a lottery drawing a prize.
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