MODULE 1: INSURANCE AND PRE-NEED
capital stock and the contributions of members are the only sources
INSURANCE CODE
(R.A. No. 10607 amending P.D. No. 612, as amended)
A. Concept of insurance
A Contract of Insurance
 An agreement whereby one undertakes for a consideration to
indemnify another against loss, damage, or liability arising from an
unknown or contingent event (Sec. 2, par. 2, Insurance Code of the
Philippines, hereinafter referred to as ICP).
A Contract of Suretyship
 An agreement whereby a party called the surety guarantees the
performance by another called the principal or obligor of an
obligation or undertaking in favor of a third party called the obligee.
It shall be deemed to be an insurance contract if made by a surety
who or which, as such, is doing an insurance business (Sec. 177
and Sec. 2, par. 3, JCP).
Doing an insurance or transacting an insurance business
 A person is doing or transacting an insurance business if he
performs any of the following:
a. making or proposing to make as insurer, any insurance
contract;
b. making or proposing to make, as surety any contract of
suretyship as a vocation, not as a mere incident to any
other legitimate business of a surety;
c. doing any insurance business like reinsurance and
similar "acts; and
d. doing or proposing to do any business equivalent to the
above
(Sec. 2, par. 4, JCP).
a) Mutual Insurance Companies
 An entity owned by the policyholders that caters only to the
insurance needs of the same policyholders/members is still
engagein insurance business.
 These entities are mutual insurance companies which have no
of funds to meet losses and expenses
b) Bancassurance
 The presentation and sale to bank customers by an insurance
company of its insurance products within the premises of the head
office of such bank duly licensed by the BSP or any of its branches
(Sec. 375, ICP).
 The bank itself will not engage in insurance business because it is
prohibited under the General Banking Law to engage in insurance
business.
B. Elements of an insurance contract
ELEMENTS OF INSURANCE
1. existence of an insurable interest
2. risk of loss
3. assumption of risks
4. scheme to distribute losses; and
5. payment of premiums
Principal Object and Purpose Test
 The contract is insurance if the Principal object and purpose is
assumption of risk and indemnification of loss.
Not Insurance
 Contracts of law firm with clients whereby in consideration of
periodical payments, the law firm promises to represent such clients
in all suits for or against them are not insurance contracts
Considered Insurance
I. A contract by which a corporation, in consideration of a stipulated
amount, agrees at its own expense to defend a physician against all
suits for damages for malpractice is one of insurance, and the
corporation will be deemed as engaged in the business of
insurance
II. Insurance may take the form of a provision in a Collective
Bargaining Agreement whereby the employer agreed to assume
 under a self-insurance basis, hospitalization fixed expenses for the
dependents of regular employees
C. Characteristics and nature of insurance
Contracts
CHARACTERISTICS
1. Insurance as a risk-distributing device
 The device of insurance serves 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
which payment will be made for an economic loss of a defined type,
each member contributes to a small degree toward compensation
for losses suffered by any member of the group.
 This broad sharing of economic risk is the principle of risk-
distribution.
2. Contract of Adhesion or Fine Print Rule
 Insurance is a contract of adhesion considering that most of the
tenns of the contract do not result from mutual negotiations
between the parties as they are prescribed by the insurer in printed
form to which the insured may "adhere" if he chooses but cannot
change.
 Hence, in case of doubt, the contract shall be interpreted strictly
against the insurer and liberally in favor of the insured.
 However, if the terms of the contract are clear, there is no room for
interpretation and the courts are bound to adhere to the insurance
contract although the contract may be rather onerous.
 Courts cannot make a new contract for the parties where they
themselves have employed clear and unambiguous words.
3. Aleatory
 The obligation of the insurer to pay the proceeds of the insurance
arises only upon the happening of an event which is uncertain, or
which is to occur at an indeterminate time (Art. 2010, NCO. In a
sense, however, the contract of insurance is commutative because
there is still exchange of equivalents — the amount paid by the
insured is deemed the equivalent of the protection given by the
insurer based on the insurance contract (2012 Bar).
4. Contract of Indemnity
 The contract of insurance is a contract of indemnity. It is the basis
of all property insurance.
 It simply" means that 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.
a) Applicable only to property insurance, except creditor insuring
the life of his debtor.
b) Life insurance is not a contract of indemnity. There is no over
insurance in life insurance. There is" over insurance only in
property insurance and if Ais is present, the insurer is only
liable up to the extent of the loss.
c) Insurance contracts are not wagering contracts
5. Uberrimae Fidae Contracts
 The contract of insurance is one of perfect goodfaith not for the
insured alone, but equally so for the insurer; in fact, it is more so for
the latter since ^ dominant bargaining position carries with it stricter
responsibility.
 Insurance policies are traditionally contracts uberrimae fidae, that
is, contracts of utmost good faith.
 It requires the parties to the contract of insurance to disclose
conditions affecting the risk of which he is aware, or material fact,
which the applicant knows, and those, which he ought to know.
 This doctrine is essential on account of the fact that the full
circumstances of the subject matter of insurance are, as a rule,
known to the insured only and the insurer, m deciding whether or
not to accept a risk, must rely primarily upon the information
supplied to him by the applicant.
6. Personal contract
 The law presumes that the insurer considered the personal
qualifications of the insured in approving the insurance application.
C. Classes 1. Marine
2. Fire
A) LIFE INSURANCE 3. Casualty
4. Suretyship
1) Individual life — insurance on human lives and insurance appertaining 5. Life
thereto or connected therewith (Sec. 181, JCP); 6. Microinsurance
7. Compulsory motor vehicle liability
insurance
8. Compulsory insurance coverage for agency-hired workers
2) Group life - a blanket policy covering a number of individuals.
Its most common form is an insurance that provides life or health insurance
coverage employees for a single employer
E. Variable contracts
The policy need not be in printed form and may be in electronic form (Sec.
50, ICP), but the law prescribes the contents of such policy (Sec. 234, JCP);
and
F. Insurable interest
1. In life/health
Note: Under R.A. No. 10607, the Group Life Insurance Policy must contain
a) Life Insurance
a provision that if the group policy terminates or is amended so as to
Every person has an insurable interest in the life and health:
terminate the insurance of any class of insured persons, every person
1) of himself, of his spouse, and of his children;
insured thereunder at the date of such termination whose insurance
2) of any person on whom he depends wholly or in part for education or
terminates and who has been so insured for five years prior to such
support, or in whom he has a pecuniary interest (2015 Bar);
termination date shall be entitled to have issued to him by the insurer an
3) of any person under a legal obligation to him for the payment of
individual policy of life except that the group policy may provide that the
money, or respecting property or services, of which death or illness
amount of such individual policy shall not exceed the amount of the person’s
might delay or prevent the performance; and
life insurance protection ceasing.
4) of any person upon whose life any estate or interest vested in him
depends (Sec. 10, ICP).
3) Industrial life — a form of life insurance under which the premiums are
Additional rules:
payable either monthly or oftener, if the face amount of insurance provided in
In general, the test is whether the person is interested in the preservation of
any policy is not more than 500 times that of the current statutory minimum
the insured life despite the insurance.
daily wage in the City of Manila and if the words "industrial" policy are printed
upon the policy as part of the descriptive matter (Sec. 235, JCP).
In paragraph (a), mere relationship is sufficient while the rest (pars. b,c d)
requires pecuniary interest.
B) NON-LIFE INSURANCE
Thus, the interest of the creditor over the life of the debtor ceases upon full
payment.
1) Marine (Sees. 101-168, JCP);
2) Fire (Sees. 169-175, ICP); and
3) Casualty (See. 2 76, ZCP).
3) There are two views regarding the need for the consent of the person
whose life is insured. It is submitted that consent of the person whose life is
insured is not necessary if one insures the life of another under Section 10.
4) Support need not be based on a legal obligation to support (2015 Bar). period. However, the buyer during the auction sale also has an interest over
With respect to the spouses, the insurable interest remains even if they are the subject property subject to the condition that the property will not be
separated (2013 Bar). redeemed. Hence, the purchaser acquires insurable interest at the time of
the purchase

2. In property 7) The carrier has insurable interest over thee goods that are being shipped
INSURABLE INTEREST IN PROPERTY. The consignee-buyer also has insurable interest
1.Insurable interest in property
 is any interest therein, or liability in respect thereof, and it may 8) The lessee in a financial lease has insurable interest over the property
consist in (like a vehicle) of the lease although title is retained by the financial lessor
o (i) an existing interest,
o (ii) an inchoate interest founded on an existing interest, or
o (iii) any expectancy coupled with an existing interest ( insurable interest in life Insurable interest in
property
2) Test. In general, a person has an insurable interest in the property, if he As to extent unlimited actual value of the
interest thereon
derives pecuniary benefit or advantage from its preservation or would suffer
As to time when it is enough that it is necessary the
pecuniary loss, damage or prejudice by its destruction whether he has or has
insurable insurable interest exist at insurable interest exists
no title in, or lien upon, or possession of the property
interest must the time the policy takes when the insurance
(i) Hence, PECUNIARY INTEREST over the property is always necessary exist effect and need not exist takes effect and when
although the interest is not limited to interest of an owner. at the time of the lost the loss occurs, but
need not exist in the
3) Existence of insurable interest is a matter of public policy. Hence, the meantime
principle of estoppel cannot be invoked. As to expectation of the benefit there must be a legal
expectation of to be derived need not basis.
4) A person having a mere right of possession of the property may insure its benefit to be have any legal basis
full value in his own name, even when he is not responsible for its derived
safekeeping and even if he is not paying rentals. He stands to benefit from As to the the beneficiary need not beneficiary must have
continued existence or to be prejudiced by its destruction. The insurance on beneficiary's have insurable interest insurable interest over
such interest would not be a wager, whether the interest was an ownership, interest over the life of the the thing insured in
in or a right to possession of, the property or simply an advantage of insured if the insured property insurance
himself secured the
pecuniary character having legal basis but depended upon the continued
policy. However, if the life
existence of the subject
insurance was obtained
by the beneficiary, the
5) An heir has no insurable interest over properties that he will inherit. The latter must have
execution of a last will and testament does not vest to an heir, even a insurable interest over
compulsory heir, insurable interest over the property that he will inherit as the life of the insured.
stipulated in the will.

6) An owner whose property was levied upon by a judgment creditor, and

who lost the same in an execution sale retains insurable interest thereon 3. Double insurance and over insurance
during the redemption period. He is still the owner of the property during that 4. Multiple or several interests on same Property
 G. Perfection of the contract of insurance
1. Offer and acceptance/consensuality
PERFECTION
a) An insurance contract is a consensual contract and is therefore perfected
from the moment there is a meeting of minds with respect to the object
and the cause or consideration
What is being followed in insurance contracts is what is known as the
"cognition theory."
b) Generally, 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. Thus, mere submission of the application without the
corresponding approval of the policy does not result m the perfection of
the contract of insurance
i. Delay in acceptance
d. Delay in Approval of Policy
Mere delay in acceptance of the instance application will not result in a
binding contract. Courts cannot impose upon the parties a contract if they did
not consent. However, in proper cases, the insurer may be liable for tort
Note: See exceptional case of Eternal Garden Memorial Park Corp. v. Phil.
American Life Ins. Corp., GR, No. 166245, April 9, 2008, where there is a
prior agreement fixing the date of effectivity, that is, one year starting from
the party's purchase of a memorial lot on installment from the memorial park.
ii. Delivery of policy
Since the contract of insurance is consensual (and not a formal or real
contract), delivery of the policy is not necessary for its perfection. However,
the insured has the right to demand delivery of the policy.
Note: Prof. Agbayani opined that delivery of the policy is necessary to make
the policy binding. However, he also said that this requirement of delivery is
satisfied if the parties intention i's to be bound by the insurance.
In effect, even under this view, mere consent is enough to bin d the parties
2. Premium payment
PREMIUM (Secs. 77 and 78, ICP)
 Premium is the consideration paid to an insurer undertaking to
indemnify the insured against a specified peril.
General Rule:
No insurance policy issued or renewed is valid and binding until actual
payment of the premium. Any agreement to the contrary is void (Sec. 77,
ICP)
a) The Supreme Court observed in UCPB General Insurance Co., Inc. v.
Masagana Telamart, Inc. (308 SCRA 259) that "the parties may not agree
expressly or impliedly on the extension of credit or time to pay the premium
and consider the policy binding before actual payment”. However, the
petitioner filed a Motion for Reconsideration and the same was granted by
the Supreme Court.
On April 4, 2001, the Court reversed its earlier Decision. The April 4,2001
Resolution of the High Court enumerates five exceptions to the general
rule stated in Section 77 — that the Insurance Policy is not valid and
binding until actual payment of premium:
Exceptions:
1. In case of life and industrial life whenever the grace period provision
applies (Sec. 77).
2. Where there is an acknowledgment in the contract or policy of
insurance that the premium had already been paid (Sec. 78, ICP).
3. The rule laid down in Makati Tuscany Condominium v. Court of
Appeals to the effect that Section 77 may not apply if the parties have
agreed to the payment of the premium in installments and partial
payment has been made at the time of the loss.
4. Where a credit term was agreed upon like the agreement in UCPB
General Insurance, Inc. v. M-asagana Telamart where the insurer
granted a 60-90-day credit term for the payment of the premiums
despite full awareness of Section 77.
5. Where the parties are barred by estoppel.
b) Credit Extension.
Under Section 77 as amended R.A- Na 10607, a 90-day credit extension may
be given whenever credit extension is given under the broker and agency
agreements with duly licensed intermediaries
The requisites are as follows:
(1) The credit extension must be provided for under the broker and agency
agreements; and
(2) The credit extension to a duly licensed intermediary should NOT EXCEED
90 days from date of issuance of the policy
(1) Payment on installment basis staggered payment of premium is allowed
under present rules; the policy is valid and binding (GSIS v. Prudential
Guarantee and Assurance, Inc., November 20,2013) (2006 Bar).
c) Salary Deductions for Government Employees.
Another innovation under R.A. No. 10607 is Section 78 that provides that
"employees of the Republic of the Philippines, including its political
subdivisions and instrumentalities, and government-owned or controlled
corporations, may pay their insurance premiums and loan obligations through
salary deduction.
The treasurer, cashier, paymaster or official of the entity employing the
government employee is authorized (notwithstanding the provisions of any
existing law, rules and regulations to the contrary) to make deductions from
the salary, wage or income of the latter pursuant to the agreement between
the insurer and the government employee and to remit such deductions to
the insurer concerned, and collect such reasonable fee for its services.
d) Note, however, the rule that where an insured authorizes an insurance
agent or broker to deliver a policy to the insured," it is deemed to have
authorized said agent to receive the premium in its behalf.
The insurer is also bound by its agent's acknowledgment of receipt of
payment of premium.
e) Future Premiums/Advance Payment.
An insurer may contract and accept payments, in addition to regular
premium, for the purpose of paying future premiums on the policy or to
increase the benefits thereof (Sec. 84, ICP).
Effect of the payment of the premium by a post-dated check.
 The payment of a premium by a post-dated check at a stated
maturity subsequent to the loss is insufficient to put the insurance
into effect if there is no credit agreement (Gaisano v. Development
Insurance and Surety Corp., February 27, 2017).
 However, even if there is no credit agreement, payment by means
of a check or a note, accepted by the insurer, bearing a date prior
to the loss, assuming an availability of the funds thereof, would be
sufficient even if it remains unencashed at the time of the loss.
 The subsequent effects of encashment would retroact to the date of
the instrument and its acceptance by the creditor (Vitug, Pandect of
Commercial Law and Juriprudence, 1st Ed., p. 68)(2004, 2007,
2010, and 2014 Bar).
When the insured is entitled to return of premiums paid (2000 Bar).
1. If the thing insured was never exposed to the risks insured against
(Sec. 80, ICP);
2. When the insurance is for a definite period and the insured
surrenders his policy before the termination thereof (Sec. 80, ICP)',
3. The contract is voidable and subsequently annulled under the
provisions of the Civil Code (See. 82, ICP);
4. The insurance contract is voidable due to the fraud or
misrepresentation of insurer or of his r, agent (Sec. 52, ICP);
5. When the contract is annulled on account of the fraud or
misrepresentation of the insurer or of his agent or on account of
facts, or the existence of which the insured was ignorant of without
his fault (Sec. 82 ICP);
6. When by any default of the insured other than actual fraud, the
insurer never incurred any liability (Sec. 82, ICP);
7. When there is over-insurance (Sec. 83, ICP); and
8. When rescission is granted due to the insurer's breach of contract.
Note: Effect of fraud — A person insured is NOT entitled to a return of
premium if the policy is annulled, rescinded, or if a claim is denied by reason
of fraud (Sec. 82, ICP).
3. Non-default options in life insurance
(1) To prevent the lapse of life insurance policy, the insured may avail of:
1. Grace Period
2. automatic policy loan from the policies' cash surrender value
3. application of dividend, and
4. reinstatement clause
4. Reinstatement of a lapsed policy of life insurance
Reinstatement of a Lapsed Policy of Life Insurance
 Policy holders in life insurance shall have the policy reinstated at
any time within 3 years from the date of default of the premium
 payment unless the cash surrender value has been duly paid to the
insurer or the extension period has expired.
 However, there must be
o (1) proof of insurability, and
o (2) payment of overdue premiums and any indebtedness
plus interest
5. Refund of premiums
H. Rescission of insurance contracts
1. Concealment
a neglect to communicate that which a party knows and ought to
communicate
a) Test of Materiality
 Materiality is determined not by the event, but solely by the
probable and reasonable influence of the facts upon the party to
whom the communication is due, in forming his estimate of the
disadvantages of the proposed contract, or in making his inquiries
or in fixing the premium rate
 The matters concealed (or misrepresented) refers to those facts
occurring at or before the time the policy becomes effective not
thereafter (2011 Bar).
1. For instance, matters relating to the health of the insured are material
and relevant. Hence, the waiver of a medical examination in a non-
medical insurance contract renders even more material the information
required of the applicant concerning previous conditions of health and
diseases suffered (Sunlife Assurance Company of Canada v. CA and
Rolando and Bernarda Bacani, 246 SCRA 268; See also Sec. 31, JCP).
Matters relating to health would affect the insurer either by approving it
with the corresponding adjustment for a higher premium or rejecting the
same
2. The Supreme Court ruled in Philamcare Health Systems, Inc. v. Court of
Appeals and Julita Trinos, G.R. No. 125678, March 18, 2002 that
answers of the applicant, who is not a doctor, regarding the medical
history of his wife largely depends on opinion rather than fact. Where
matters of opinion or judgment are called for, answers made in good
faith and without intent to deceive will not avoid the policy even though
they are untrue. In this case, the insured answered //NO// to the following
question, but no concealment was ascribed: "Have you or any of your
family members ever consulted or been treated for high blood pressure,
heart trouble, diabetes, peptic ulcer, cancer, liver disease, or asthma?"
Effects of Concealment
 It vitiates the contract and entitles the insurer to rescind, even if the
death or loss is due to a cause not related to the concealed matter
Cause of Loss
 The matter concealed need not be the cause of the loss
In Sunlife Assurance Company of Canada u. Court of Appeals, G.R. No.
105235, June 22, 1995, 245 SCRA 268, the insured who applied for a life
insurance policy was asked the following questions: "Within the past five (5)
years have you: a) Consulted any doctor or other health practitioner? b)
Submitted to ECG? X-rays? Blood tests? Other tests? c) Attended or been
admitted to any hospital or other medical facility? Have you ever had or
sought advice for urine, kidney or bladder disorder?" The insured disclosed
the fact that he consulted a doctor, but only for cough and flu complications,
and answered in the negative on all other questions, although two weeks
prior to his application he was confined at a hospital for renal failure. The
insured died in a plane crash after the issuance of the policy. The Supreme
Court sustained the denial of the policy on the ground of material
concealment. The fact that the matter concealed had no bearing to the cause
of death of the insured is not important because it is well-settled that the
insured need not die of the disease he had failed to disclose to the insurer.
It is sufficient that his non-disclosure misled the insurer in forming his
estimates of the risks of the proposed insurance policy or in making inquiries
(Citing Henson v. The Phil. American Life Ins. Co., 56 O.G. No. 48 [1960];
see also Florendo v. Philam Plans, Inc., supra.)
Is good faith a defense in concealment?
 No. Good faith is not a defense m concealment. Section 27 of the
Insurance Code of the Philippines dearly provides that, "the
concealment whether intentional or unintentional entitles the injured
party to rescind a contract of insurance/' Indeed, the materiality of
the facts concealed does not depend on the state of mind of the
insured, but rather to the probable and reasonable influence of the
 facts upon the party to whom communication should have been
made
Waiver and Estoppel
 An insurer may be deemed estopped from raising concealment (as
well as exclusionary conditions or warranties) as a defense if it. the
premium payments and issued the policy even if the insured
already supplied the insurer such facts or information which could
hardly be overlooked in the application form considering its
prominence and it materiality to the coverage applied for. This may
also be true if the insured already supplied such information that
requires further inquiries from the insurer but it failed to do so.
 However, the insurer is not estopped from raising concealment as a
defense if there was connivance between the insured and the
soliciting insurance agent as well as the medical examiner. Thus,
there was concealment in one case where the insured was
suffering from an advanced state of pulmonary tuberculosis, but he
still answered in the negative when asked in the policy whether he
suffered any ailment of the lungs. The insured signed the
application in blank and the false answer was supplied by the
insurance agent in collusion with the medical examiner.
When the insured signed the application in blank and authorized the soliciting
agent and/or the medical examiner to write for him, he made them his own
agents for that purpose and he was responsible for their acts in that
connection (The Insular Life Ltd. v. Serafin D. Feliciano, 74 Phil. 468 [1943],
but note the dissenting opinion therein and the original Decision in 73 Phil.
201) (2000 Bar).
In Florendo v. Philam Plans, Inc. (supra), the Supreme Court ruled that even
if the agent was aware that the insured has a heart “pacemaker,” the insured
can still be considered to have concealed his heart condition. The duty not to
conceal is imposed on the insured.
3. Misrepresentation/omissions
REPRESENTATION
a) Representation
 It is an oral or written statement of a fact or condition affecting the
risk, made by insured to insurer, tending to induce insurer to
assume risk
b) Kinds
1) affirmative — affirmation of afact when the contract begins; and
2) promissory — promise to be performed after the policy was issued.
c) Test of Materiality
 It is determined by the probable and reasonable influence of the
facts on the party on whom communication is due, in forming his
estimate of the contract, risks and premium
 Example: A statement that the vessel usually leaves every August
is not representation; it is a mere representation of intention (2011
Bar).
d) Effects of Misrepresentation
 The injured party is entitled to rescind from the time when the
representation becomes false.
E)Before R A. No. 10607, the insurer can no longer rescind the policy "when
there is estoppel as in the case where the insurer accepted premium
payments despite knowledge of the ground for rescission. However, R.A. No.
10607 deleted this provision thereby indicating that acceptance of Ae
premium will not estop the insurer from rescinding the policy on ground of
misrepresentation (See Sec. 45, JCP).
1. This should be distinguished from a case where an insurer may be
estopped from claiming that there was a violation of a condition if the
insured correctly represented a matter that is contrary to a condition. For
example, the policy requires that the insured is between 50 to 75 years
old but the insurer approved the application although the insured
expressly represented that he was already 80. The principle of estoppel
applies in this case (2009 Bar)'.
2. Breach of warranties
WARRANTY
a) Warranty
  It is a statement or promise set forth in die policy or by reference DISTINCTIONS
Incorporated therein, the untruth or nonfulfillment of which in any
respect, and without reference to whether the insurer was in fact Warranty Representation
prejudiced by such untruth or nonfulfillment, renders the policy part of the contract collateral inducement.
voidable. written on the policy or in a valid need not be written.
rider or attachment
Kinds generally conclusively presumed to should be established to be
1. Express be material material.
2. Implied — warranties that are deemed included in the contract, although The fact warranted must be strictly Requires only to be substantially
not expressly mentioned. They are found only in marine insurance; complied true
3. Affirmative —asserts the existence of a fact or condition at the time it is
made;
Example: Warranty of the location of the machineries at the time of the
effectivity of the policy I. Claims settlement and subrogation
4. Promissory — the insured stipulates that certain facts or conditions shall 1. Notice and proof of loss
exist or thing shall be done or omitted. 2. Guidelines on claims settlement
Examples: i. Unfair claims settlement;
a) Warranty that the owner shall not store flammable materials in sanctions
the insured building ii. Prescription of action
b) A statement that there is a plan to assign guards on every floor iii. Subrogation
is not promissory warranty J. Business of insurance; requirements
K. Insurance Commissioner and its powers

Effect of Breach of Warranty

 It gives the insurer the right to rescind (Sees.
I. PRE-NEED
A. Definition
Exceptions:
1. Pre-need plans
1. loss occurs before the time of performance of the warranty;
2. Pre-need company
2. the performance becomes unlawful; and
B. Registration of pre-need plans
3. performance becomes impossible
C. Licensing of sales counselor and general agent
D. Default and termination
E. Claims settlement
d) Immaterial Provisions
 Not all breach of the provisions in the policy may give the right to
rescind the policy .
 immaterial provisions do not avoid the policy

Exception: The parties stipulate that violation of particular provision, though

normally immaterial, shall avoid the policy. In effect, the parties converted the
immaterial provision into a material one.