1. Definition of friendly fire and hostile fire. Distinctions between friendly fire and 3.

3. When there is an agreement allowing the insured to pay the premium in installments and
hostile fire. partial payment has been made at the time of loss. (Makati Tuscany Condominium Corp. v.
CA, G.R. No. 95546, Nov. 6, 1992)
Hostile Fire – fire that is uncontrolled (fire contemplated in a fire insurance policy) Once a
fire has passed outside the limits assigned to it, it becomes a hostile fire. Fire that escapes 4. When there is an agreement to grant the insured credit extension for the payment of the
and burns in a place where it is not supposed to be. It may also refer to fire that started out premium. (Art. 1306, NCC), and loss occurs before the expiration of the credit term. (UCPB
as a friendly fire but escapes from its original place or it becomes too strong as it becomes General Insurance v. Masagana Telemart, G.R. No. 137172, Apr. 4, 20012006, 2007 Bar)
out of control.(Sundiang Sr. & Aquino, 2014)
Friendly Fire – is one contained in its proper receptacle. Fire that burns in a place where it is 5. When estoppel bars the insurer to invoke non-recovery on the policy.
supposed to burn. E.g. Gas stove, fire place
6. When the public interest so requires, as determined by the Insurance Commissioner
So long, as the fire remains friendly, it is generally held that no right of recovery arises under
the policy. Example: In compulsory motor vehicle insurance, if the policy was issued without payment
of premium by the vehicle owner, the insurer will still be held liable. To rule otherwise
2. What is the cash and carry rule in non-life insurance. What are the exceptions to would prejudice the 3rd party victim.
the cash and carry rule in non-life insurance.
3. Double Insurance. Over-Insurance. Reinsurance. Distinctions between the three.
GR: No policy or contract of insurance issued by an insurance company is valid and binding
unless and until the premium thereof has been paid. Any agreement to the contrary is void. "SECTION 95. A double insurance exists where the same person is insured by several
insurers separately in respect to the same subject and interest.
XPN: A policy is valid and binding even when there is non-payment of premium: There is over insurance whenever the insured obtains a policy in an amount exceeding the
value of his insurable interest. (Perez, 2006)
1. In case of life or industrial life policy whenever the grace period provision applies, or SECTION 97. A contract of reinsurance is one by which an insurer procures a third person to
whenever under the broker and agency agreements with duly licensed intermediaries, a insure him against loss or liability by reason of such original insurance.
ninety (90)-day credit extension is given. No credit extension to a duly licensed intermediary
should exceed ninety (90) days from date of issuance of the policy. (IC, Sec. 77) Double Insurance Reinsurance
The insurer remains in such The insurance become an
capacity only insured (reinsured) in the
2. When there is acknowledgment in a policy of a receipt of premium, which the law reinsurance policy
declares to be conclusive evidence of payment, even if there is stipulation therein that it There is only one insured Two separate insured
shall not be binding until the premium is actually paid. This is without prejudice however to Subject matter is the Subject matter is the liability
right of insurer to collect corresponding premium. (Sec. 77, ibid) property insured. of the insured
Same interest is insured Involves separate interests
Same peril is insured against Different perils are insured
in separate policies against in separate policies.
 Double Insurance Over insurance Rule regarding voyage in marine insurance
There may be no over When the amount of the
insurance as when the sum insurance is beyond the value When the voyage contemplated by a marine insurance policy is described by the places of
total of the amounts of the of the insured’s insurable beginning and ending, the voyage insured is one which conforms to the course of sailing
policies issued does not interest.
fixed by mercantile usage between those places. (IC, Sec. 123)
exceed the insurable
interest of the insured.
There are two or more There may be only one NOTE: If the course of sailing is not fixed by mercantile usage, the voyage insured is that way
insurers insuring the same insurer, with whom the between the places specified, which to a master of ordinary skill and discretion, would mean
subject matter. insured takes insurance the most natural, direct and advantageous. (IC, Sec. 124)
beyond the value of his
insurable interest. DEVIATION
It is a departure from the course of the voyage insured, mentioned in Sec. 123 and Sec. 124,
4. Definition of notice of loss. Definition of proof of loss. Distinctions between or an unreasonable delay in pursuing the voyage or the commencement of an entirely
notice of loss and proof of loss. different voyage. (IC, Sec. 125)

Loss in insurance, defined. — The injury or damage sustained by the insured in consequence
of the happening of one or more of the accidents or misfortune against which the insurer, in
consideration of the premium, has undertaken to indemnify the insured. (1 Bouv. Ins. No.
1215; Black's Law Dictionary; Cyclopedic Law Dictionary, cited in Martin's Phil. Commercial
Laws, Vol. 1, 1961 ed. p. 608).( Bonifacio Bros vs Mora)
NOTICE OF LOSS
It is the more or less formal notice given the insurer by the insured or claimant under a
policy of the occurrence of the loss insured against.
PROOF OF LOSS
It is the more or less formal evidence given the company by the insured or claimant under a
policy of the occurrence of the loss, the particulars thereof and the data necessary to enable
the company to determine its liability and the amount thereof.
5. What is a voyage in marine insurance. What is the meaning of deviation in
marine insurance. When is a deviation proper in marine insurance.
Instances when deviation is proper (2000, 2005 Bar)
1. When caused by circumstances over which neither the master nor the owner of the ship
has any control;
2. When necessary to comply with a warranty, or to avoid a peril, whether or not peril is
insured against;
3. When made in good faith, and upon reasonable grounds of belief in its necessity to avoid
a peril; or
4. When made in good faith, for the purpose of saving human life or relieving another vessel
in distress. (IC, Sec. 126)
Improper deviation
Every deviation not specified under Sec. 126. (IC, Sec. 127)
In improper deviation, an insurer is not liable for any loss happening to the thing insured
subsequent to an improper deviation. (IC, Sec. 128, 2005 Bar)
6. What is actual total loss in marine insurance. What is constructive total loss in
marine insurance. What are the grounds for abandonment in marine insurance.
Actual total loss (1996 Bar)
The following constitutes actual total loss:
1. A total destruction of the thing insured;
2. The irretrievable loss of the thing by sinking, or by being broken up;
3. Any damage to the thing which renders it valueless to the owner for the purpose for
which he held it; or
4. Any other event which effectively deprives the owner of the possession, at the port of
destination, of the thing insured. (IC, Sec. 132)
NOTE: Complete physical destruction is not essential to constitute actual total loss.
An insurance confined in terms to an actual loss does not cover a constructive total loss,
but covers any loss, which necessarily results in depriving the insured of the possession, at
the port of destination, of the entire thing insured. (IC, Sec. 139)
Constructive total loss
There is constructive total loss when:
1. More than ¾ thereof in value is actually lost, or would have to be expended to
recover it from the peril;
2. The thing insured is injured to such extent as to reduce its value more than ¾;
3. The thing insured is a ship, and the contemplated voyage cannot be lawfully
performed without incurring either an expense to the insured of more than ¾ the
value of the thing abandoned or a risk which a prudent man would not take under the
circumstances; or
4. The thing insured, being cargo or freightage, and the voyage cannot be performed,
nor another ship procured by the master, within a reasonable time and with
reasonable diligence, to forward the cargo, without incurring the like expense or risk
mentioned in no. (3). But freightage cannot in any case be abandoned (and thus
declared constructively lost) unless the ship is also abandoned. (IC, Sec. 141)
Abandonment- It is the act of the insured by which, after a constructive total loss he
declared the relinquishment to the insurer of his interest in the thing insured. (Sec. 140,
ibid)
Effect of a valid abandonment
It is equivalent to a transfer by the insured of his interest, to the insurer, with all the chances
of recovery and indemnity (Sec. 148, ibid).
Requisites of valid abandonment
1. There must be an actual relinquishment by the person insured of his interest in the thing
insured. (Sec. 140, ibid)
2. There must be a constructive total loss. (Sec. 141, ibid)
3. The abandonment must neither be partial nor conditional. (Sec. 142, ibid)
4. It must be made within a reasonable time after receipt of reliable information of the loss.
(Sec. 143, ibid)
5. It must be factual. (Sec. 144, ibid)
6. It must be made by giving notice thereof to the insurer which may be done orally or in
writing; Provided, that if the notice be done orally, a written notice of such abandonment
shall be submitted within 7 days from such oral notice. (Sec. 145, ibid)
7. The notice of abandonment must be explicit and must specify the particular cause of
abandonment. (Sec. 146, ibid)
7. What are perils of the ship. What are perils of the sea. Distinctions between
perils of the ship and perils of the sea.
“Perils of the sea or perils of navigation” (1998 Bar)
It includes only those casualties due to the:
1. Unusual violence or extraordinary action of WInd and wave, or
2. Other extraordinary causes connected with Navigation. (De Leon, 2010)
“Perils of the ship”
It is a loss which, in the ordinary course of events, results from the:
1. Natural and inevitable action of the sea;
2. Ordinary wear and tear of the ship;
3. Negligent failure of the ship’s owner to provide the vessel with proper equipment to
convey the cargo under ordinary conditions.
8. What are the implied warranties in marine insurance.
Implied warranties in marine insurance (2000 Bar)
1. Seaworthiness (IC, Sec. 115 to 121);
2. Non-engagement from Illegal venture;
3. Warranty of Neutrality – The ship will carry the requisite documents to show the
nationality or neutrality of the ship or its cargo and will not carry any documents that cast
reasonable suspicion on it if the nationality or neutrality of the ship or its cargo is expressly
warranted (IC, Sec. 122);
4. Non-deviation from the Agreed voyage (IC, Secs. 125, 126, 127);
5. Presence of Insurable interest.
9. What is the jurisdiction of the Insurance Commission when it comes to claims in
insurance.
SECTION 439. The Commissioner shall have the power to adjudicate claims and complaints
involving any loss, damage or liability for which an insurer may be answerable under any
kind of policy or contract of insurance, or for which such insurer may be liable under a
contract of suretyship, or for which a reinsurer may be sued under any contract of
reinsurance it may have entered into; or for which a mutual benefit association may be held
liable under the membership certificates it has issued to its members, where the amount of
any such loss, damage or liability, excluding interest, cost and attorney's fees, being claimed
or sued upon any kind of insurance, bond, reinsurance contract, or membership certificate
does not exceed in any single claim Five million pesos (P5,000,000.00).
The power of the Commissioner does not cover the relationship between the insurance
company and its agents/brokers but is limited to adjudicating claims and complaints filed by
the insured against the insurance company.
10. What are the grounds for rescission of the contract of insurance by the insurer.
Instances wherein a contract of insurance may be canceled by the insurer
1. Nonpayment of premium;
2. Conviction of a crime arising out of acts increasing the hazard insured against;
3. Discovery of fraud or material misrepresentation;
4. Discovery of willful or reckless acts or omissions increasing the hazard insured against;
5. Physical changes in the property insured which result in the property becoming
uninsurable;
6. Discovery of other insurance coverage that makes the total insurance in excess of the
value of the property insured; or
7. A determination by the Commissioner that the continuation of the policy would violate
or would place the insurer in violation of the Insurance Code. (IC, Sec. 64)
No policy of insurance other than life shall be canceled by the insurer except upon prior
notice thereof to the insured, and no notice of cancellation shall be effective unless it is
based on the occurrence, after the effective date of the policy, of one or more of the
abovementioned instances. (Sec. 64, ibid)
11. What are unfair claim settlement practices. What is insurance fraud on the part
of the insured/beneficiary.
Unfair settlement practices
The following constitutes unfair settlement practices:
1. Knowingly misrepresenting to claimant’s pertinent facts or policy provisions relating to
coverage at issue;
2. Failing to acknowledge with reasonable promptness pertinent communications with
respect to claims arising under its policies;
3. Failing to adopt and implement reasonable standards for the prompt investigation of
claims arising under its policies;
4. Not attempting in good faith to effectuate prompt, fair and equitable settlement of claims
submitted in which liability has become reasonably clear; or
5. Compelling policyholders to institute suits to recover amounts due under its policies by
offering without justifiable reason substantially less than the amounts ultimately recovered
in suits brought by them.
Effects of breach of warranty
1. Material
GR: Violation of material warranty or of material provision of a policy will entitle the
other party to rescind the contract.
XPN: (with regard to “promissory” warranties)
a. Loss occurs before the time of performance of the warranty;
b. The performance becomes unlawful at the place of the contract; and
c. Performance becomes impossible (IC, Sec. 73).
2. Immaterial
GR: It will not avoid the policy.
XPN: When the policy expressly provides, or declares that a violation thereof will
avoid it. For instance, an “Other Insurance Clause” which is a condition in the policy
requiring the insured to inform the insurer of any other insurance coverage of the
property. A violation of the clause by the insured will not constitute a breach unless
there is an additional provision stating that the violation thereof will avoid the
policy. (IC, Sec. 75)
12. What deposits are covered by the PDIC Law. What deposits are not covered by
the PDIC Law.
SEC. 2. Section 4(f) of Republic Act No. 3591, as amended, is hereby amended by adding an
additional paragraph, to read as follows:
  “(f) The term ‘deposit’ means the unpaid balance of money or its equivalent received
by a bank in the usual course of business and for which it has given or is obliged to
give credit to a commercial, checking, savings, time or thrift account, or issued in
accordance with Bangko Sentral rules and regulations and other applicable laws,
together with such other obligations of a bank, which, consistent with banking usage
and practices, the Board of Directors shall determine and prescribe by regulations to
be deposit liabilities of the bank: Provided, That any obligation of a bank which is
payable at the office of the bank located outside of the Philippines shall not be a
deposit for any of the purposes of this Act or included as part of the total deposits or
of insured deposit: Provided, further, That, subject to the approval of the Board of
Directors, any insured bank which is incorporated under the laws of the Philippines
which maintains a branch outside the Philippines may elect to include for insurance its
deposit obligations payable only at such branch.
“The Corporation shall not pay deposit insurance for the following accounts or
transactions, whether denominated, documented, recorded or booked as deposit by
the bank:
“(1) Investment products such as bonds and securities, trust accounts, and other
similar instruments;
“(2) Deposit accounts or transactions which are unfunded, or that are fictitious or
fraudulent;
“(3) Deposit accounts or transactions constituting, and/or emanating from, unsafe and
unsound banking practice/s, as determined by the Corporation, in consultation with
the BSP, after due notice and hearing, and publication of a cease and desist order
issued by the Corporation against such deposit accounts or transactions; and
“(4) Deposits that are determined to be the proceeds of an unlawful activity as defined
under Republic Act No. 9160, as amended.
“The actions of the Corporation taken under this section shall be final and executory,
and may not be restrained or set aside by the court, except on appropriate petition
for certiorari on the ground that the action was taken in excess of jurisdiction or with
such grave abuse of discretion as to amount to a lack or excess of jurisdiction. The
petition for certiorari may only be filed within thirty (30) days from notice of denial of
claim for deposit insurance.”
SEC. 3. Section 4 (g) of the same Act is hereby amended to read as follows:
“(g) The term “insured deposit” means the amount due to any bona
fide depositor for legitimate deposits in an insured bank net of any obligation of
the depositor to the insured bank as of date of closure, but not to exceed Five
hundred thousand pesos (P500,000.00). Such net amount shall be determined
 according to such regulations as the Board of Directors may prescribe. In
determining such amount due to any depositor, there shall be added together all
deposits in the bank maintained in the same right and capacity for his benefit
either in his own name or in the name of others. A joint account regardless of
whether the conjunction ‘and,’ ‘or,’ ‘and/or’ is used, shall be insured separately
from any individually-owned deposit account: Provided, That (1) If the account is
held jointly by two or more natural persons, or by two or more juridical persons
or entities, the maximum insured deposit shall be divided into as many equal
shares as there are individuals, juridical persons or entities, unless a different
sharing is stipulated in the document of deposit, and (2) If the account is held by a
juridical person or entity jointly with one or more natural persons, the maximum
insured deposit shall be presumed to belong entirely to such juridical person or
entity: Provided, further, That the aggregate of the interests of each co-owner
over several joint accounts, whether owned by the same or different
combinations of individuals, juridical persons or entities, shall likewise be subject
to the maximum insured deposit of Five hundred thousand pesos
(P500,000.00): Provided, furthermore, That the provisions of any law to the
contrary notwithstanding, no owner/holder of any negotiable certificate of
deposit shall be recognized as a depositor entitled to the rights provided in this
Act unless his name is registered as owner/holder thereof in the books of the
issuing bank: Provided, finally, That, in case of a condition that threatens the
monetary and financial stability of the banking system that may have systemic
consequences, as defined in Section 17 hereof, as determined by the Monetary
Board, the maximum deposit insurance cover may be adjusted in such amount,
for such a period, and/or for such deposit products, as may be determined by a
unanimous vote of the Board of Directors in a meeting called for the purpose and
chaired by the Secretary of Finance, subject to the approval of the President of
the Philippines.”

SEC. 4. The maximum deposit insurance coverage of Five hundred thousand pesos
(P500,000.00) provided in Section 4(g) of Republic Act 3591, as amended herein, shall be
paid by the Corporation: Provided, That, for the first three (3) years from the effectivity of
this Act, the first Two hundred fifty thousand pesos (P250,000.00) of the deposit insurance
coverage shall be for the account of the Corporation, and those in excess of Two hundred
fifty thousand pesos (P250,000.00) but not more than Five hundred thousand pesos
(P500,000.00) shall be for the account of the National Government. The Congress shall
annually appropriate the necessary funding to reimburse the Corporation for any payment
to insured depositors paid in excess of Two hundred fifty thousand pesos (P250,000.00).