INSURANCE LAW

Guadalupe Lyn P. Vergel de Dios

(2019)

Course Objectives:

The course is designed for students to understand the key provisions of the Insurance Code and
insurance related laws, and to equip them with practical knowledge of the insurance business.

The course is divided into three main sections. Section I provides a solid grounding of the
definition, nature, and origin of insurance and focuses on the insurance contract: the parties
thereto, the policy, premium payment, and its rescission. Section II provides the kinds and class
of insurance contracts. Section III is an overview of the insurance business and the regulatory
environment wherein it operates.

Grading System:

Quizzes 15%
Recitation 30%
Midterm Exam 25%
Final Exam 30%
100%

House Rules:

• Reference: Essentials of Insurance Law, TIMOTEO B. AQUINO

Insurance Code of the Philippines, HECTOR DE LEON
• Attendance: If you are called to recite, and you are not around, you will be given a 3.50
(i.e. 74).
• Cases should be read in the original

Meeting 1

I. THE CONTRACT OF INSURANCE

A. Concept

1. Definition

a. Black Law’s Definition of Insurance

b. Elements of Contract, Civil Code

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 c. Contract of Insurance, Section 21

2. Origin

• Aboitiz Shipping vs. New India Assurance, 488 SCRA 563 (2006)

3. Laws Governing Insurance

a. Republic Act No. 10607 (2013) or the new “Insurance Code”

b. Civil Code provisions (life annuities, donations, damages, subrogation,

guarantees and sureties, insurance provisions repeal)

c. Special Laws (e.g. GSIS, SSS, PDIC, Pre-Need Code)

• Gercio vs. Sunlife Assurance, 48 Phil. 53 (1925)

• Republic vs. Del Monte Motors, Inc., 504 SCRA 53 (2006)
• Philamcare Health Systems, Inc. v. Court of Appeals, 356 SCRA 379 (2002)
• Blue Cross Health Care, Inc. vs. Olivares, 580 SCRA (2008)
• Philippine Health Care Products vs. Commissioner of Internal Revenue, 600
SCRA 413 (2009)

4. Nature of Insurance Contracts

a. Aleatory, Civil Code Article 2010

b. Consensual and voluntary2, Civil Code Articles 1305, 1306, 1308, 1319
c. Unilateral
d. Conditional
e. Contract of Adhesion
f. Contract of Indemnity
g. Personal

Meeting 2

5. Construction/Interpretation

1
All sections refer to Republic Act No. 10607 (2013), unless otherwise specified.
2
With exceptions.

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 a. Civil Code, Articles 1370 to 1379

• Gercio vs. Sunlife Assurance, supra

• Cebu Shipyard v. William Lines, 306 SCRA 762 (1999)
• New Life Enterprises v. CA, 207 SCRA 669 (1992)
• Gaisano Cagayan Inc. v. Insurance Co. of North America, G.R. No. 147839,
June 8, 2006
• Rizal Surety v. CA, 336 SCRA 12 (2000)
• Lalican v. Insular, 158 SCRA 597 (2009)
• Gulf Resorts, Inc. v. PCIC, 454 SCRA 550 (2005)

B. Insurance Contract

1. Parties

a. Insurer, Sections (“Secs”) 6, 190, 191

• White Gold Marine Services vs. Pioneer Insurance & the Steamship Mutual,
464 SCRA 48 (2005)
• Pandiman vs. Marine Manning Management Corp. & Singhid, 460 SCRA 418
(2005)

b. Insured, Secs 7 to 9, 53-57; Civil Code Articles 1327-1328, 1390;

• Filipinas Cia de Seguros vs. Christern Huenefeld & Co., 89 Phil. 54 (1951)
• Rights of the Insured, see Great Pacific Life v. CA 361 SCRA 677 (1999)

c. Beneficiaries, Secs 11, 12, Civil Code Articles 2011, 2012,739

• Heirs of Loreto Maramag vs. de Guzman, G.R. 181132, June 5, 2009

• Insular vs. Ebrado, 80 SCRA 181 (1977)
• Consuegra vs. GSIS, 37 SCRA 315 (1971)
• SSS vs. Davac, 17 SCRA 863 (1966)

d. Others (Assignee; Mortgagor, Insurance Agent and Broker), Secs 184, 8, 9

• Harding vs. Commercial Union Assurance, 38 Phil. 464 (1918)

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Meeting 3

2. Premium

a. Payment, Secs 77-84, 315, 233, 234,236

• Velasco vs. Aposto, 173 SCRA 228 (1985)
• Marquez and Maxilite v. Far East Bank and Trust Company, GR No. 171379,
January 10, 2011

b. Effect

• Non-Payment, see Philippine Phoenix Surety vs. Woodworks, Inc. G.R. L-

22684, August 31, 1967
• Partial Payment, see Tibay, et. al. vs. CA., G.R. 119655, May 24, 1966; UCPB
General Insurancev. Masagana Telemart Inc., G.R. 137172, April 4, 2001
• Payment through Agent, see Malayan Insurance v. Arnaldo, et al, G.R.
L067835, October 12, 1987 and South Sea Surety v. CA, G.R. No. 102253, June
2, 1995
Return of Premium, see Great Pacific Life vs. CA and Teodoro Cortez, G.R. L-
57308, April 23, 1990

c. No right to return of premium, Sec 80

3. Insurable Interest

a. Definition and purpose, Secs 3, 4, 21 to 24

b. Insurable interest in life/health, Sec 10

c. Insurable Interest in property

Meeting 4

d. Double Insurance and over insurance,

• Defined, Secs 95, 96, and 64 (f)

• Pioneer Insurance & Surety Corp. v. Yap 61 SCRA 426 (1974)

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 • Malayan Insurance Co., v. Phil. First Insurance Co., Inc. et al, G.R. No. 184300,
July 11, 2012

e. Reinsurance

• Defined Sec 97, see Artex Development Co. vs. Wellington Ins. Co., 51 SCRA
352 (1973)
• Duty to disclose Sec 96
• Distinguish from co-insurance
• PHILAM v. Auditor, 22 SCRA 135 (1968); Fieldmen’s vs. Asian Surety, 34 SCRA
36 (1970); Equitable Insurance vs. Rural Insurance, 4 SCRA 343 (1962)

f. Multiple or several interests on the same property; special provisions on

mortgagor and mortgagee, Secs 8 and 9

• Geogonia vs. CA, 241 SCRA 152 (1995)

• Tai Tong Chuache & Co. vs. Insurance Commission, 158 SCRA 366 (1988)

g. Other insurance clause

• New Life Enterprises, et al. vs. CA, et al., G.R. 94071, March 31,1992
• Geagonia vs. CA, 7995, supra

Meeting 5

4. Policy

a. Defined, Secs 49, 232, 233

b. Form, Secs 50, 51, 226
c. Riders and Endorsements, Sec 50, par. 2
d. Contents, Sec 51, 227
• Void Stipulations, see Secs 25, 63
• Sun Insurance vs. CA, 195 SCRA 193 (1991)

e. Cover Notes, Sec 52

f. Kinds of Policies
• Open, Sec 60, see Development Insurance vs. IAC, 143 SCRA 62 (1986)
• Valued, Sec 61, see Harding vs. Commercial Union Assurance, 38 Phil. 464
(1918)

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 • Running or Successive, Sec 62

g. Unilateral Cancellation of non-life policies

• By the Insurer, Secs 64-65
• By the Insured, Sec 79; see Paulino vs. Capital Insurance, 105 Phil 1315
(1921)
• Non-Renewal by the Insurer, Sec 66

Meeting 6

C. Rescission of Insurance Contract

1. Concealment

a. Defined, Secs 26, 28

b. Effect Secs 27, 29

• Argente vs. West Coast Life, 51 Phil. 725 (1928)

• Florendo v. Philam Plans, Inc. et.al., G.R. No 186983, Feb. 22, 2012

c. Elements

• Ng vs. Asian Crusader, 122 SCRA 461 (1983)

• Canilang vs. CA, 223 SCRA 443 (1993)
• Sunlife vs. CA, 245 SCRA 268 (1995)
• Great Pacific Life vs. CA, 89 SCRA 643 (1979)

d. Matters which need not be disclosed, Secs 30, 32-35

e. Test of Materiality, Sec 31

f. Consequences of concealment, Sec 27

g. Incontestability, Secs 48, 232 (d)

• Tan vs. CA, 174 SCRA 403 (1989)

• Manila Bankers Life Insurance Corp. v. Aban, G.R. No. 175666, July 29, 2013

Meeting 7

2. Misrepresentations

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 a. form and when made, Sec 36, 37,47,42
b. as to future, Sec 39
c. as to information Sec 43
d. effects, Sec 44-45
e. as to age, Sec 233 (d); see Edillon vs. Manila Bankers Life, 717 SCRA 187
(1982),
f. test of materiality, Sec 46; see Pacific Banking vs. CA 168 SCRA 1 (1988)
g. defenses not barred by incontestability; see Eguaras vs. Great Eastern 33
Phil. 263 (1916)

c. Warranties, Secs 67-76

a. Defined
b. Kinds Secs 67, 68,71,72
• Qua Chee Gan vs. Law Union, 98 PhiI. 85 (1955)
• Young vs. Midland Textile Insurance, 30 Phil. 51 (1915)

c. Form Sec 69
d. When omission does not avoid, Sec73
e. Effect of breach Secs 74-76
f. Pioneer Insurance and Surety vs. Yap, 61 SCRA 426 (1974)
g. New Life Enterprises vs. CA, 207 SCRA 609, (1992)

h. Meaning of warranty condition

• Prudential Guarantee and Assurance Inc. vs. Trans-Asia Shipping Lines
Inc., G.R.1,51890, lune 20, 2006

i. Warranties in fire insurance policies; standard clauses Secs 168-170

--- MIDTERM EXAM (Meeting 8) ---

Meeting 9

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 D. Loss

1. Terms defined

a. Loss - Bonifacio Bros. vs. Mora, 20 SCRA 261 (1969)

b. Proximate cause - Vda. De Bataclan vs. Medina, 102 Phil l8l (1957)

2. Loss for which insurer liable

a. Loss the proximate cause of which is the peril insured against Sec 84
• Allied Banking Corp vs. Lim Sio Wan, 549 SCR-A (2008)

b. Loss the immediate cause of which is the peril insured against except
where the proximate cause is an excepted peril, Sec 86

c. Loss through the negligence of the insured Sec 87

• FGU vs. CA, 454 SCRA 337 (2005)

d. Loss caused by efforts to rescue the thing from the peril insured
against, Sec. 85

3. Loss for Which insurer not liable

a. Loss by the insured's willful act, Sec 87

b. Loss due to connivance of the insured
c. Loss where the excepted peril is the proximate cause, Sec 86
• Paris-Manila Perfumery vs. Phoenix Assurance Co., 49 Phil 753
(1926)
Meeting 10

E. Claims Settlement and Subrogation

1. Prerequisite to recovery for loss in insurance against fire

a. Notice of loss, Sec 88
b. Proof of loss, Sec 89
c. Waiver of defects in notice or proof of loss, Sec 90
d. Waiver of delay in presentation of notice or proof, Sec 91
e. Effect of failure to secure certificate or testimony of third persons,
Sec 92

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 • New World V. NYK Fil-Japan Shipping, GR Nos. 171468 & 174241, 24
August 2011

2. Prescription of action, Secs 63, 231 (a), 384, 416

• Ang v. Fulton, 2 SCRA 945 (1961)
• Travellers Insurance v. CA, 272 SCRA 536 (1997)

2. Guidelines on claim settlement, Secs 247 to 251

• United Merchants Corporation v. Country Bankers, G.R. No.

198588, July 11, 2012
• Danzas Corp. v. Abrogar, 478 SCRA 80 (2005)

Meeting 11

II. CLASSES OF INSURANCE

A. Life Insurance

1. Defined, when payable Secs 181, 182

a. Transfer of policy; notice Secs 184, 185

b. Measure of indemnity Sec 186
c. Effect of death of insured, Sec 183
d. Killing of insured by beneficiary Sec 12
e. Suicide, Sec 183
f. Accidental death
• Finman vs. CA, 213 SCRA 493 (1992)
• Calanoc vs. CA, 98 Phil.79 (7955)
• Biagtan vs. Insular, 44 SCRA 58 (with dissenting opinion) (1972)
Sun Insurance vs. CA, 211 SCRA 554 (1992)

2. Group life insurance Sec 234

• Pineda vs. CA, 1993, 226 SCRA 754 (1993)

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 3. Industrial life, Sec 235

4. Variable Contracts, Secs 238, 241, 242

5. Mutual Life Insurance Companies, Sec 268

• Republic v. Sunlife, 473 SCRA 129 (2005)

6. Life Annuities (CC Arts 2021-2027)

Meeting 12

B. Fire insurance

1. Defined Sec

• Hostile "Fire” and "friendly" fire

• Eastern Shipping Lines, Inc. v. IAC, 150 SCRA 463 (1987)

2. Alteration resulting in use or condition

• Alteration resulting in rescission, Sec 170

• Alteration not resulting in rescission, Secs 171,172
• Malayan Insurance v. PAP Co., Ltd., GR No. 200784, August 7, 2013

3. Measure of indemnity Sec 173

4. Valuation of building for fire insurance Sec 174

5. Pledge or transfer of fire insurance to insurer Sec 175

C. Casualty & Liability Insurance

1. Defined Sec 176

• Fortune Insurance vs. CA,244 SCRA 309 (2005)

2. Compulsory Motor Vehicle Liability

a. Method of Coverage, Secs 386, 387, 389

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 b. No-fault clause Sec 391

• Perla v. Ancheta, 164 SCRA 144 (1988)

c. Period of filing and action to recover damages Sec 397

• Travellers Insurance v. CA, G.R. No. 82036, May 22, 1997

• Perla Compania de Seguros vs. CA & Lim, 208 SCRA 487 (1992)
• Shafer vs. Judge, 167 SCRA 386 (1988)
• Vda. de Maglana vs. Consolacion, 212 SCRA 268 (1992)
• Far Eastern Surety vs. Misa, 25 SCRA 663 (1968)
• Peza vs. Alikpala, 160 SCRA 31 (1988)
• Western Guarantee vs. CA, 187 SCRA 652 (1990)
Meeting 13

3. Third-party suit against insurer

• First Integrated Bonding v. Hernando, G.R.5122L, July 37, 1991

D. Suretyship

1. Defined Secs 2, 177

2. Extent of liability Sec 178

3. Premium Payment Sec 179
• Philippine Pryce Assurance vs. CA, 230 SCRA 764 (1994)

4. Applicability of Civil Code Sec 180

5. Cases:
• Zaragoza vs. Fidelino, 163 SCRA 443 (1988)
• Eastern Assurance vs. IAC, 179 SCRA 561 (1989)
• Stronghold Insurance vs. CA, 208 SCRA 336 (1992)
• Prudential vs. Equinox, 533 SCRA 257 (2007)
• Intra-Strata vs. Republic, 557 SCRA 363 (2008)
• Reparations Commission vs. Universal Deep Sea Fishing Corp., 83 SCRA
764 (1979)

E. Marine Insurance

1. Definition and risk covered, Sec 100

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 • Republic Act No. 9295 (Domestic Shipping Development Act of 2004)

Meeting 14

2. Perils of the sea vs. perils of the ship

• Cathay Insurance v. CA, 151 SCRA 710 (1987)

• Roque vs. IAC, 139 SCRA 596 (1985)
• Malayan Insurance v. CA, 270 SCRA 242 (1997)
• Mayer Steel v. CA & Southsea Surety, 274 SCRA 432
• Vector Shipping Cor. V. Adelfo Macasa, G.R. No. 160219, July 21, 2008
• Aboitiz Shipping Corp. v. New India, GR No. 156978. May 2, 2006

3. Insurable Interest in marine insurance, Secs 100-108

4. Concealment and misrepresentation, Secs 109-114

5. Implied Warranties, Secs 115 to 122

6. Deviation, Sec. 126 to 128

7. Kinds of losses covered: total, partial, actual, Secs 129 to 139

• Keppel Cebu v. Pioneer, GR. No. 180880-81 September 25, 2009

8. Abandonment, Secs 140-157

9. Measure of Indemnity, Sec 158-168

Meeting 15

III. INSURANCE BUSINESS

A. Insurance Corporations, Secs 190, 254

1. Doing an Insurance Business, Sec 2 (b)

• White Gold Marine Services vs. Pioneer Insurance & the Steamship Mutual,
464 SCRA 48 (2005)

2. Capitalization requirement, Sec 194

3. Mutualization and demutualization, Sec 268

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 4. Security Fund, Sec -378

B. Other Players in the Insurance Industry

1. Microinsurers, Secs 187-188

2. Banks, Secs 375-377
3. Mutual Benefit Association, Secs 392-393, 403,405
4. Trust Business, Sec 429
5. SROs, Secs 430-432
6. Adjuster, Sec 333
• Malayan Insurance v. Arnaldo, G.R. No. L-67835, Oct. 12, 1987
7. Agent, Sec 307-309
8. Broker, 310
• Tongko v. The Manufacturers Life Insurance Co., (Phils.), 622 SCRA 58 (2010)
9. Common Provisions, Secs 373 to 374

C. The Insurance Commissioner

1. Administrative functions, Sec 437

2. Adjudicative function, Sec 439
• Philippine American Life, et al vs. Ansaldo, et al., 234 SCRA 509 (1994)
• Almendras Mining Corproration vs. Office of the Insurance Commissioner, 160
SCRA 656 (1988)

3. Binding effect of decision, order or ruling, Sec 439; Rules of the Court, Rule 43

D. Current state and the future of the insurance industry

--- FINAL EXAM (Meeting 16)---

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