CAGAYAN STATE UNIVERSITY

College of Law

INSURANCE LAW
Course Outline
Atty. Romeo G. Guillermo

I. INTRODUCTION

A. Governing Laws – The New Insurance Code (RA 10607 1), The New Civil Code, General
Principles

B. General Concept – Sec. 2(a), 2(b), PD 612 (The Insurance Code of 1978), as amended by RA
10607 (The New Insurance Code); White Gold Marine Insurance Services, Inc. vs. Pioneer
Insurance and Surety Corporation, G.R. No. 154514

C. Characteristics
1. Risk Distributing Device – Tibay vs. Court of Appeals, G.R. No. 119655
2. Contract of Adhesion – Gulf Resorts, Inc. vs. Philippine Charter Insurance Corporation, G.R. No.
165167; Eternal Gardens Memorial Park Corporation vs. Philippine American Life Insurance
Company, G.R. No. 166245
3. Aleatory Contract – UCPB General Insurance Co. Inc. vs. Masagana Telamart, Inc. G.R. No.
137172
4. Contract of Indemnity
5. Uberrimae Fidei contract – Fieldman’s Insurance Co. Inc. vs. Vda. de Songco, 25 SCRA 70; Yu
Pang Cheng vs. Court of Appeals, 105 Phil 930

D. Elements of Insurance - Philamcare Health Systems, Inc. vs Court of Appeals, G.R. No. 125678

E. Right of Subrogation – Asian Terminals, Inc. vs. First Lepanto – Taisho Insurance, Corp., G.R.
No. 185964; Pan Malayan Insurance vs. Court of Appeals, G.R. No. 77397

II. CONTRACT OF INSURANCE

A. Perfection – Enriquez vs. Sun Life Assurance Co. of Canada, G.R. No. 15895; Great Pacific Life
Assurance Co. vs. CA, G.R. Nos. 31845 & 31873

B. Parties – Sec. 6, NIC

1. Rule on Minors - Sec. 3, NIC
2. Rule on Married Women, Sec. 3, NIC

C. Subject Matter - Secs. 3 & 4, NIC

D. Insurance Not a Wagering Contract - Sec. 4, NIC

III. INSURABLE INTEREST

A. Concept of Insurable Interest
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Signed into law by Pres. Benigno S. Aquino III on August 15, 2013.

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B. Reason for the Requirement of Insurable Interest

C. Insurable Interest in Life Insurance - Sec. 10, NIC 

- Designation of Beneficiary; who are disqualified? Sec. 11, NIC. Insular Life v. Ebrado, GR L-
44059 (1977); Heirs of Loreto Maramag v. Maramag, GR 181132 (2009)
- Revocable v. Irrevocable beneficiary; effect?
- If beneficiary predeceased the insured; who will get the proceeds?
- “Sole beneficiary” vs. “Irrevocable beneficiary”

D. Forfeiture of Interest of the Beneficiary

E. Insurable Interest in Property Insurance - Sec. 13, 14, 17, & 19, NIC; Cha vs. Court of Appeals,
G.R. No. 124520; Gaisano Cagayan, Inc. vs. Insurance Company of North America, G.R. No.
147839
- Lessee have insurable interest in the leased property?
- Financial Lease agreement (RA 8556) Lim Sing Jr. v. FEB Leasing & Finance Corp, GR
168115 (2007)

1. Insurable Interest in Mortgaged Property - Sec. 8, NIC; Geagonia vs. Court of Appeals, G.R. No.
114427
a. Standard or Union Mortgage Clause
b. Open or Loss Payable Clause – Sec. 9, NIC
2. Change of Interest in the Thing Insured - Secs. 20 & 58; Secs. 21, 22, 23, 24, & 57 NIC

IV. DEVICES FOR ASCERTAINING AND CONTROLLING RISK AND LOSS

A. Concealment
1. Concept - Sec. 26, NIC
2. Duty to Communicate - Sec. 28, NIC 
3. Test of Materiality - Sec. 31, NIC; Sunlife Assurance Company of Canada vs. Court of Appeals,
G.R. 105135; Philamcare Health Systems, Inc. vs. Court of Appeals, G.R. No. 125678; Vda. de
Canilang vs. Court of Appeals, G.R. No. 92492
4. Effect of Concealment - Secs. 27 & 29, NIC; Florendo vs. Philam Plans, Inc., G.R. No. 186983
5. Matters Which Need Not be Communicated - Secs. 30, 32, 33, 34, & 35, NIC
6. Waiver of Information; Sunlife Assurance Company of Canada vs. Court of Appeals, G.R.
No.105135

B. Representation
1. Concept - Sec. 36, NIC
2. Kinds of Representation - Secs. 36, 37, 39, 42, NIC
3. Test of Materiality - Sec. 46, NIC
4. Alteration or withdrawal - Sec. 41, NIC
5. Time to which Representation Refers - Sec. 42, NIC
6. Representation Obtained from Third Persons - Sec. 43, NIC
7. When presumed False; Effect of Falsity - Secs. 44 & 45, NIC

C. Remedies Available in Case of Concealment or False Representation

1. Right of Rescission: Conditions – Section 27, NIC; Philamcare Health Systems, Inc. vs. Court of
Appeals, G.R. No. 125678

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2. Rescission by the Insurer - Sec. 48, NIC
3. Life Insurance Policy Becomes Incontestable - Sec. 48, NIC; Tan vs. Court of Appeals, G.R. No.
48049; Manila Bankers Life Insurance Corporation vs. Aban, G.R. No. 175666; Sun Life of Canada
(Philippines) vs. Sibya, G.R. No. 211212
i. Requisites
ii. Defenses Not Barred by Incontestability
D. Warranties
1. Concept – Sec. 68, NIC; Prudential Guarantee and Assurance, Inc. vs. Tans-Asia Shipping Lines
Inc., G.R. No. 151890, G.R. No. 151991
2. Warranty vs. Representation
2. Kinds of Warranties (express, implied, affirmative, promissory)
3. Time to Which Warranty Refers - Sec. 68, NIC
4. Effect of Breach - Secs. 74, 75, & 76, NIC

E. Condition

F. Exception – Country Bankers Insurance Corp. vs. Lianga Bay and Community Multi-Purpose
Cooperative, Inc., G.R. No. 136914

V. THE POLICY OF INSURANCE

A. Definition and Form - Secs. 49 & 50, NIC

B. Fine Print Rule

C. Contents of the Policy - Sec. 51, NIC 

D. Attachment and Binding Effect of Rider, Warranties, Clause, and Endorsement

E. Kinds of Policy
1. Open - Sec. 60, NIC
2. Valued - Sec. 61, NIC
3. Running - Sec. 62, NIC

F. Cover Notes - Sec. 52, NIC; Pacific Timber Export Corp. vs. Court of Appeals, G.R. No. L-38613

G. Cancellation of Policy - Secs. 64, 65, & 66, NIC

H. Prescriptive Period of Legal Action - Sec. 63, NIC; Arts. 1144 and 1145, NCC

VI. PREMIUM
A. Concept: Cash and Carry Rule – American Home Assurance Company vs. Chua, G.R. No.
130421; UCPB General Insurance Co. vs. Masagana Telemart, Inc., G.R. No. 137172; Tibay vs.
Court of Appeals, G.R. No. 119655; Pacheco v. CA, GR 126670

B. Effect of Non-Payment of Premium; Exceptions - Secs. 77 & 78, NIC; Art. 1306, NCC; UCPB
General Insurance Co. Inc. vs. Masagana Telamart, Inc., 356 SCRA 309; Makati Tuscany
Condominium Corp. vs. Court of Appeals, G.R. No. 95546; Gaisano v. Dev’t Insurance, GR 190702

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C. Return of Premium - Secs. 79, 80, 81, 82, & 83, NIC

VII. PERSONS ENTITLED TO RECOVER ON THE POLICY AND CONDITIONS FOR RECOVERY
A. Beneficiary - Secs. 11, 12, 53, 56, & 57 NIC; Bonifacio Bros., Inc. vs. Mora, G.R. No. L-20853;
The Insular Life Assurance Company, Ltd. vs. Ebrado, G.R. No. L-44059; Vda. Consuegra vs. GSIS,
G.R. No. L-28093

B. Limitations on the Appointment of Beneficiary – Arts. 2012 & 739, NCC; The Insular Life
Assurance Company, Ltd. vs. Ebrado, G.R. No. L-44059

C. Revocation of Beneficiary

B. Rule Where Insurance is Made by an Agent or Trustee - Sec. 54, NIC

C. Rule Where Insurance if Made by Partner or Part Owner - Sec. 55, NIC

D. Notice and Proof of Loss – Secs. 85 to 94, NIC

VIII. DOUBLE INSURANCE

A. Definition and Requisites - Sec. 95, NIC; Malayan Insurance Co. Inc. vs. Philippines First
Insurance Co. Inc., G.R. No. 184300

B. Double Insurance vs. Over-Insurance 

C. Rules for Payment Where there is Over-Insurance by Double Insurance - Sec. 94, NIC

D. Other Insurance Clause – American Home Assurance Co vs. Chua, G.R. No. 130421

IX. REINSURANCE
A. Concept - Sec. 97 & 98 NIC
B. Insured’s Right to Recover from Reinsurer – Sec. 100, NIC
C. Reinsurance vs. Double Insurance
D. Duty of Reinsured to Disclose Facts - Sec. 96, NIC

X. MARINE INSURANCE
A. Definition

B. Scope of Marine Insurance - Sec. 101, NIC

C. Risks or Losses Covered
1. Perils of the Sea vs. Perils of the Ship – Roque vs. IAC, G.R. No. L-66935
2. “All Risks” Marine Insurance Policy

C. Insurable Interest in Marine Insurance

1. Ship Owner’s Insurable Interest - Sec. 102, NIC
a. Where Vessel is Chartered - Sec. 102, NIC

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b. Where Vessel Hypothecated by Bottomry - Sec. 103, NIC
c. Insurable Interest in Freightage - Secs. 104-106, NIC 
2. Charterer’s Insurable Interest - Sec. 108, NIC

D. Concealment
1. Meaning of Concealment in Marine Insurance – Sec. 109, NIC
2. Duty to Communicate - Sec. 109, NIC
3. Opinions or Expectations of Third Persons - Sec. 110, NIC
4. Concealment Does Not Vitiate the Contract - Sec. 112, NIC

F. Representations
1. Effect of False Representation by the Insured - Sec. 113, NIC
2. Effect of False Representation as to Expectation - Sec. 114, NIC

G. Implied Warranties in Marine Insurance

1. Seaworthiness - Sec. 115, NIC; Delsan Transport Lines, Inc. vs. American Home Assurance
Corporation, G.R. No. 149019; Roque vs. IAC, G.R. No. L-66935
a. What constitutes seaworthiness - Secs. 116, 117 NIC
b. When complied with; Exceptions - Sec. 117, NIC
c. Ship Becomes Unseaworthy in the Course of the Voyage - Sec. 120, NIC
2. Warranty that Necessary Documents are Carried
3. Warranty Against Improper Deviation
a. Concept - Sec. 125, NIC
b. When Proper - Sec. 126, NIC
c. Effect of Improper Deviation - Sec. 128, NIC

H. Loss 
1. Kinds of Losses – Secs. 129-133, NIC
i. Actual
ii. Constructive
2. Right to Payment Upon an Actual Total Loss
3. Scope of Insurance Against Actual Total Loss
4. When Constructive Total Loss Exists
5. Concept of Abandonment – Secs. 140,146, & 155, NIC
6. Requisites of Abandonment – Secs. 140-145, NIC

7. Average -
a. Kinds of Average
i. Particular – Sec 138; Articles 809 and 810, Code of Commerce
ii. General – Article 811, Code of Commerce
b. Requisites of General Average – A. Magsaysay, Inc. vs. Agan, 96 Phil. 504
c. Insurer’s Liability for General average – Secs. 166-167, NIC; Article 859, Code of Commerce
8. Co-Insurance – Sec. 159, NIC

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XI. FIRE INSURANCE
A. Definition and Scope - Sec. 169, NIC; Philippine Home Assurance Assurance Corp. vs. Court of
Appeals, 257 SCRA 468
B. Risks or Losses Covered: Friendly vs. Hostile Fire
C. Effect of Alteration in the Thing Insured - Sec. 170, 171, & 172, NIC; Malayan Ins. V. PAP Ltd.,
GR 200784 (2013)
E. Measure of Indemnity – Sec. 173, NIC
F. Option to Rebuild – Sec. 174, NIC

XII. CASUALTY INSURANCE

A. Concept - Sec. 176, NIC
B. Third Party Liability Insurance
C. Insurable interest
D. Meaning of “accident” and “accidental” in casualty insurance – Biagtan v. The Insular Life, 44
SCRA 158 (1972); Pan Malayan Ins. Corp v. CA, 184 SCRA 54
E. Basis and extent of insurer’s liability

XIII. Life Insurance

A. Definition (Sec. 181 & 182, NIC)
B. Kinds of life insurance
C. Liability of insurer in case of suicide (Sec. 183)
D. Right to assign life insurance policy (Sec. 184 & 185, NIC)
E. Measure of indemnity (Sec. 186, NIC)
XIV. Compulsory Motor Vehicle Liability Insurance – Secs. 386-387, NIC
A. Reason for the requirement
B. Scope of coverage required
C. Persons subject to the requirement
D. No-fault indemnity claim (Sec. 391, NIC)
E. Notice of claim (Art. 397, NIC)
Cases: Vda. de Gabriel vs. CA (November 14, 1996)
XV. Claims Settlement
A. Unfair claim settlement practices (Sec. 247, NIC)
B. Claims for life insurance policies (Sec. 248, NIC)
C. Claims for non-life insurance policies (Sec. 249, NIC)
D. Delay in payment of claims (Sec. 250, NIC)