Insurance Code

RA 10607

- PD 612 is the original

- Became effective 1974
- Originally amended 1978
- The latest amendment is RA 10607, happened in 2014
- PD 612 is not the first insurance law. We already have one during the 1915.
- The 1915 act is patterned after American Insurance Laws. Even the latest one is also patterned
after US Laws especially California insurance code.

What is the concept of Insurance?

- Insurance is a contract
- When you apply for an insurance, you do not feel any benefit from it unlike other contracts.
- The only thing that you feel is that money gets out of your pocket whether you pay the premium
on monthly or yearly basis.
- The only time you enjoy or feel any relevance is when the risk that you get the insurance for
happens. If ever it happens then you will be thanking the heavens that you got the insurance.
- By that time you are shielded from serious financial crisis.
- Buti nalang na insure ung bahay. Etc
- In short it is a contract of indemnity. ( a contract of insurance )
- It is a contract where in a person whether a personal or juridical enters into a contract of
indemnity.
- The purpose of which is so that in case there is loss or damage or liability that arises because of
a contingent event (an even that may or may not happen) or an uncertain even (like death, you
know but you don’t know when).
- When these events happen then you are shielded from a financial loss or damage or liability in
case the damage is to a third person.
- In short, from this concept, a contract of insurance is not an investment contract in a sense that
you are expecting a rate of return in a future. It is not to enrich the person that has got the
contract.
- Or maybe to reimburse him later on.
- It only makes you whole again.
- Its objective is not to enrich

Parties to an insurance

1. Insured - The one who wants to shield himself from an unknown peril.
2. Insurer - The party who accepted the premium and undertakes to pay the insurance
proceed to whomever it is designated to be paid. May be a corporation that engages in an
insurance business. Duly licensed by SEC for its primary, and the Insurance Commission for
its secondary franchise. NO LICENSE BY BOTH, ILLEGAL.
 Insurance Commission – primary agency that supervises insurance entities.

3. Beneficiary – Sometimes he is also the insured. Because the beneficiary is the person that is
legally entitled to receive the proceeds of the insurance the moment the risk insured against
happened.

Elements of a contract of insurance – know WON you have just entered into a valid contract of
insurance

- One missing element, insurer may have a valid ground to refuse payment
- Sadly there are some insurance company who’s modus is to deny claims for insurance. And let
the insured sue them in court. And they have already prepared defenses.
- If you are not well versed with the insurance code, they can easily escape payment.
- The way you counter it is that you defend.
- One of the ways to defend is to know the elements

1. Insurance contract is WRITTEN contract – there must be a written contract existing to evidence
the contract.
- When we say written contract, we are talking about the written insurance policy itself.
- This is a formal document drafted by the insurer and previously approved by the insurance
commission.
- In short an insurance contract is not a mere consensual contract. Some may say that it is that it
is perfected by the meeting of the minds of the parties. But that concept is incomplete because
not only is it consensual it is also a real formal contract because all elements must be present.
- What you need to have is that you need to have a signed copy
- In fact, in the insurance policy itself, there are mandatory provisions that should be found.
- Even if it is a formal written contract, an insurance contract may be in electronic form so long as
it complies with the requirements of your E-commerce act.
2. There must be a valid consideration.
- In an insurance contract, consideration involved is the payment of premium paid the insured so
that insured may be insured.
- Rule is that no premium, no insurance.
- Because there has to be a valid consideration
- There are exceptions to be discussed
3. The insured must have an insurable interest over the thing or the life insured.
- You cannot just insure the life of your boyfriend, assuming youre still living with your parents,
who is your inspiration so that when he dies you get paid one million pesos. BECAUSE YOU DO
NOT HAVE AN INSURABLE INTEREST. Inspiration is not yet an insurable interest.
- What is insurable interest? How do you know if you have an insurable interest?
- You have insurable interest when (1) if you gain financial advantage over the preservation of
that thing or preservation of the life you are trying to insure. In reverse, you will suffer pecuniary
loss in the event the thing is damage or dies.
- Example: your husband can be insured because the continuation of his life gives you financial
benefit. He supports the family.
 - Example: If you have a valuable employee in your business can be insured because you are
gaining financial advantage over the continuation of the life of the employee.
- Example: House can be insured. Especially if you own it. Because it provides shelter. There is a
financial advantage when that house continues to stand. You will suffer pecuniary loss when the
house is destroyed.
4. You are subject to a risk of loss in the event the contingent event or the liability you are insuring
happens.
5. The insurer must have assumed the risk.
- Insurer must agree in paying you
- How do you know if the insurer has assumed the rist?
1. He has accepted the premium
2. He has accepted the application. How do you know? He communicated his acceptance to
you.
- If what is issued is only the acknowledgement receipt, it is not binding.

Why would an insurance company assume a risk?

- It is a lucrative business.
- Very lucrative
- Almost like a banking business
- An insurance business is a general scheme to distribute the risk of loss.
- Lets say you have insured clients wherein you collect premium of 50k a year. And you only get to
pay whenever one of them dies. Di mo naman babayaran kase lahat yon.
- They found out that it is profitable.
- That is why they are willing to assume the risk.
- That is also the reason why the insurance commission is strict

Insurance Contracts are contracts of adhesion.

- This means that whenever you pay for an insurance contract you are given a pre-approved
insurance policy form approved by insurance commission
- Wala kang participation sa pag draft ng policy form.
- Whenever you express interest, you are presented with a pre-approved draft.
- Take it or leave it basis.
- If you like it, you sign the insurance policy
- If you sign, you adhere to the contract.
- A contract of adhesion is perfectly valid.
- It does not suffer from any legal infirmity.
- The thing is that if there is doubt that arises, because of an interpretation of the contract
because of a doubt in the provisions of the contract. If it is a contract of adhesion, if there is
ambiguity, interpret it strictly against the party that drafted the contract. And liberally in favor of
the insured.
- Kapag walang doubt, no problem. Apply provisions of the contract.
There are three types of insurance documents.

1. The insurance policy itself.

- The written document
- That is the first document that they will require from you.
- It is the actionable document that you need to present in court.
- As a rule, no insurance policy, no insurance coverage.
- It can be in electronic form nowadays.
2. A binding receipt
- Not as binding as it sounds.
- Should be named as an acknowledgement receipt.
- It does not bind the insurer to pay you the proceeds
- It only acknowledges the payment subject to examination of the insurer.
3. Cover note.
- A cover note is sometimes issued by the insurance company to the insured upon acceptance of
the premium to temporarily establish an insurance contract by the insurer and insured pending
final decision or examination by the insurance company.
- This is much better than a binding receipt.
- The moment this is issued you are temporarily cover
- BUT ONLY FOR A PERIOD OF 60 DDAYS
- When the risk happened during the 60 days, you will be insured automatically.
- Extendible subject to approval by Insurance Commission
- The insurer may however just submit a certification saying that the extension is for a valid
purpose.
- Kapag bad faith yan, insurer will be liable to the Insurance Comission.

What are the 2 kinds of Insurance Contracts?

1. Life – The thing that is insured is a living thing.

- But not all living things are insurable.
- You cannot insure your plant
- How about your dog? They allow it in the US. But it has not yet been done in the PH
- HUMAN LIFE LANG
2. Non-life
- The thing being insured is a non-living thing.
- It involves the happening of the accident over that thing

Prescriptive period of actions

- If you house got burned and insurer does not want to pay you, the prescriptive period in
insurance is 10 years.
- Because this is a written contract.
- 10 years counting from the date when the cause of action accrues.
 - When does a cause of action accrue?
Answer: From the date of the rejection of claim by the insurance company of failure to pay the
insurance proceeds to the insurer.
- Pwede less than basta nasa stipulation.
- They can provide for a less period but not less than one year.
- General rule: They can provide for a less period
- XPN: Bawal less than one year

Is there another period that we need to know?

- Industrial life insurance, for this type of insurance, you cannot go beyond 6 years as the lowest
prescription period. (Eto ung XPN to the XPN na binanggit ko)
- If it is silent, 10 years ulit.