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    12 views34 pages

    Insurance Law Part 3

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    Gibbs Acedo delos Santos

    Copyright:

    © All Rights Reserved
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    of 34
    TITLE 6 THE POLICY 49. The written instrument in which a contract of ce icy of insurance. si insurance is set forth, is called a ‘SEC. 50. The policy shall be in printed form which may ‘contain blank spaces; and any word, phrase, clause, mark, sign, symbol, signature, number, or word ‘complete the contract of insurance shall be writ blank spaces provided therein. ‘Any rider, clause, warranty, or endorsement purporting to be part of the contract of insurance and which is pasted or attached to sald policy is not binding on the insured, ss the descriptive ame of the rider, clause, warranty or endorsement is also mentioned and written on the blank spaces provided in the policy. Unless applied for by the insured or owner, any warranty, or endorsement issued after the ‘original policy shall be countorsigned by the insured oF owner, which countersignature shall be taken as his ‘agreement to the contents of such rider, clause, warranty, ‘or endorsement. to the pertinent provisions of and panerise known asthe “Electronic such rules and regul by the Commissioner’ (a) Republic Act No, 879; Commerce Aa and 19 cn bbe prescribed "Deleted by Republic Act No, sar however may be ype and ne "Group i and group annuity pots ote in pi erin Ms rm (ast par) 180 Secs. 49-50 ‘THE CONTRACT OF INSURANCE i Tile ~The Policy Policy of insurance defined, ct rance. In other word the written document embodying the terms and stipulations of the contract of insurance between the insured and the insurer. Signature of the parties, “or “insurance policy” or more fully “policy of is Signed only by the insurer or his duly authorized It need not be signed by the insured except where express warranties are contained in a separate instrument forming part of the policy in which case the law requires that the instrument must be signed by the insured. (Sec. 70.) The standard practice is to have the prospective insured fill ‘out and sign an application prepared by the insurer, Policy controls terms of insurance contract. be a valid contract of insurance mus In the absence of fraud or mistake, a policy of insurance, upon ‘constitutes a valid and binding contract, superseding, ry agroementsand negotiations. (#4CJ$.1070-1071.) ions of policy. — In the statutory prohit nies: have rey oe rights as individuals to .d to impose whatever conditions they dé ras not inconsistent with public policy. sired with the terms of the policy is a the right of recovery. (Young vs. Midland ‘617 [1915]; Pacific Banking Corp. vs. 1 [1988]; Central Assurance Corp. Court of Appeals, 168 SCRA 1f2 THEINSURANCE CODEOF THEPHILIPINES ANNOTATED | Secs. 48 , Insurance & vvs. Court of Appeals, 200 SCRA 459 [1991]; Fortune Surety Co, Ine vs, Court of Appeals, 244 SCRA 308 [1995}.) Policy, a contract of “adhesion.” (1) Terms drafted and imposed by insurer, — A is formed: one party having ‘superior bargaining power imposes its choice of terms on the other party. Ordinarily, contracts are freely negotiated by parties with roughly equivalent bargaining power. However, this has had no voice inthe selection o " arrangement employed therein. (Geagonia 1521195}) ‘vs. Court of Appeals, 241SCRA (b) Althor avallable cose tt insured can choose from a variety of Secs. 49-50, THE CONTRACT OF INSURANCE. us “Tile6—The Policy isurer. — Since in this type of cts, the parties do not bargain on Participation is reduced to the ‘Thus, those contracts are view ips for the weaker party whom the courts of justice must protect. (Gulf Resort, Inc. pine Charter Insurance Corporation, 458 SCRA 550 (@) Consequently, where the language used in an insur- ance contract or application is such as to create ambiguity, the same should be resolved liberal it being, undoubtedly, to afford the greatest prot insured. is well-settled that “contractual limitations of ty found in insurance contracts should be regarded by with a jaundiced eye and extreme care and should another thing — is inman General Assurance Corp. vs. Court of [3 SCRA 493 [1992].) tet -THEINSURANCECODEOF THE PHILIPPINES ANNOTATED Sees. 49.59 also a cardinal principle of law that forfeitures are “and that any construction which would result in policy benefits for the person policy in a manner which would permit recovery, as for ‘example, by finding a waiver for such a forfeiture. (Geagonia vvs. Court of Appeals, supra.) (4) The rule that insurance contracts are to be construed liberally in favor ofthe insured and strictly against the insurer applies to suretyship agreements. (Chapter XI, Title 4.) (3) When terms of contract clear. — It goes without saying that if the terms of the contract are clear and unambiguous, there is no room for construction and such terms c diminished by judicial construction. Th intent isto limit earthquake shock coverage of the policy to two pools only in a resort, the coverage cannot be of the insured properties. ‘The courts will only rule out blind adherence to terms where facts and circumstances will show that they are basically one- sided. The “fine print” or “contracts of adhesion” rule does not apply where, for example, the petitioner is an acute businessman of experience who is presumed to have assented to the assailed (2) swimmi Policy different from contract itself, __A policy of insurance is insurance. (1) Written different from the contract of (2) Form the — Insurance er Aspe 'usly approved by Insurance Commissioner Benerally are required in standard forms. secs. 49-50 ‘THE CONTRACT OF INSURANCE 185 Tile6 —The Policy Under Section 226, no policy of insurance shall be issued or delivered within the Philippines unless in the form previously approved by the Insurance Commissioner. It would seem from this provision that every contract of insurance in the Philippines must be evidenced by a policy and that policy must be in the form previously approved by the Insurance Commissioner. Form of contract of insurance. ‘Modern-day insurance contracts are evidenced or electronic form by writing, This writing may be informal, asa binding slip (infra.), ot a written application informally accepted; or it may be formal, being the carefully drawn written policy in customary use, (Vance, op. cit, p. 234.) Under the Code, the policy must be in printed form? Any word, phrase, clause, mark, sign, symbol word necessary to complete the contract of insurance shall be sn on the blank spaces provided in the , ase of conflict between the written of a policy, the written portion prevails. (argue vs. Union Fire Insurance Co,, 56 Phil. 758 [1932]) Perfection of insurance contract. ‘Acontract of insurance, like other contracts, must be assented to by the parties either in person or by their agents. Under the law, assent or consent is manifested by the meeting of the offer spe INSURANCE CODEOF THEPHILIPINES ANNOTATED Secs 4.59 186 ‘and the acceptance upon the thing and the cause which are to constitute the contract. (Art. 1319, Civil Code.) . of application. — tion for insurance on a i er cl rejected by the insurer, there is no contract yet as itis merely an offer or proposal. (De Lim vs. Sun Life Assurance Co., 41 Phil 263 [1920]; Development Bank of the Phils. vs. Court of Appeals, 231 SCRA 370 [1994]; see Steamship Mutual Underwriting Assoc, vs. Sulpicio Lines, 840 SCRA 203 [2017)). (a) The mere signing of an application for life insurance and the payment of the first premium do not bind the insurer to issue a policy where there is no evidence of any contract between the parties that such acts should constitute a contract ance. (Badger vs. New York Life Ins. Co., Inc,, 7 Phill. Similarly, the contract is not perfected where the applicant for life insurance dies before its approval or it does not appear that the acceptance of the application ever came to the knowledge of the applicant. (Enriquez vs. Sun Life Assurance Co, 41 Phil. 269 [1920].) (©) The acceptance of an insurance policy must be ‘unconditional, but it need not be by formal act. Reception and retention of the policy without objection beyond a reasonable time may be deemed to be an acceptance. (44 ‘was guilty of negligent delay in acting on the application. ols aplication may be so drafted that the insurance and tae tive on its signing by the prospective insured, ial te pi 7 = bound by the terms of the policy of Which the application is made, until the ed eon “AY the insurer should not make the offet. therfore neues agStdy ape thennue Tee atte of domane agen esa Te sal pct Secs 49-50 ‘THE CONTRACT OF INSURANCE. 17 Tile6 —ThePaicy insurance is terminated by rejection of the application. The insurer may expressly limit the duration of the temporary insurance. Retention by insurer of the premium paid with the application for an unreasonable time may constitute ‘an acceptance, especially where the insurer was guilty of negligent delay in acting on the application, ») The contract, to be binding from the date of the application, must have been a completed contract, one that leaves nothing to be done, nothing to be completed, nothing to be passed upon, or determined, before it shall take effect. ‘There can be no contract of insurance unless the minds of the parties have met in agreement. (De Lim vs. Sun Life Assurance Co,, supra; Great Pa ife Assurance Corp. vs. ‘Court of Appeals, 89 SCRA 543 [1979].) -ome binding until the policy is delivered and the first premium paid. These conditions are valid and enforceable, the conditions are fulfilled, the Sec. 77.) But where the premium has been previously paid, the contract is perfected upon approval of the application although the policy has not yet been issued, unless ther stipulation to the contrary. (see Ocampo vs. GSIS, 78 Phil. 216 1947}, b) The insurance applied for has never been in force show theapplicantdiesaterthedsappro theinsurance application notwithstanding thatthe initial premium has been paid and a binding deposit sued, where receipt contains the following condi tthe insurer 189 THEINSURANCECODEOF THE PHILIPPINES ANNOTATED Secs 49:0 hall be satisfied that the applicant was insurable; 2) that if i vsnot accept the application but offers another the insurer doesnot accept the 3 ke effect unless the insurance applied for s paid shall be returned to the apy ‘The above are in the nature of conditions precedent and show that the binding deposit receipt is intended to be merely a provisional or temporary insurance contract (see Sec. 52.) and to be binding only upon compliance with the said conditions. In life insurance, a “binding slip” or “binding receipt” does not insure by itself. (Great Pacific Life Assurance Corp. vs. Court of Appeals, supra; see Sec. 52.) (3) Cover notes. — They may be issued to bind the Insurance ‘temporarily pending the issuance of the policy. (Sec. 52.) Coverage then can begin depending upon their terms. (4) Ambigui in policy. — When there is ambiguity inthe policy, the provision is to be interpreted against the insurance company. (supra.) When it ig unclear whether, the insurance contract actuall determined ag; is that the policy show otherwise insurance company. The presumpt fect unless the insurance company can insurance contract, are usually obtained through an agent ‘orks for the insurance company, ‘ora broken an independent contract. (see Secs, 807-310.) secs 4950 ‘THE CONTRACT OF INSURANCE 19 ‘ile6 —The Policy it, or makes a counter-offer. The offer is usually accepted by an insurance agent on behalf ofthe insurer, (2) In life and health insurance. — The situation depends upon whether the insured pays the premium at the time he applies for insurance. (a) If he doe: is considered an invi which he must then a pay the premium, his application an offer, a binding rece the date of (b) Where the application for insurance constitutes an offer by the insured, a policy issued strictly in accordance with the offer is an acceptance of the offer that perfects the icy issued doesnot conform to the insured’s 's an offer to the insured which he may accept son, op. cit, p. 107.) Importance of delivery of policy. ry is the act of putting the insurance policy — the 1 document — into the possession of the insured. (RH. op. cit, p. 156.) (1) Process of forming a contract. — The delivery of the policy portant in atleast two (2) way (a) as evidence of the making of a contract and of its terms; and (b) as communication of the insurer’s acceptance of the insureds offer. (E.W. Patterson, op. cit, p. 92.) 190 _THEINSURANCECODE OF THE PHILIPPINES ANNOTATED — Secs 48.59 Q) Determination of policy period. — The fact of delivery is also important for another reason. Delivery may affect the term of the coverage. Where a policy, for example, provides that the coverage terminates one (1) year after delivery, it, therefore, for determining when the policy the parties. The policy may contain a pi the insurance is not effective until the ‘The widespread use of binding receipts has made delivery less important than it used to be in the process of forming a contract between the insurer and the insured, but delivery still has significance asthe “decisive act that ordinarily marks the end mmstructive delivery. — As has been can be no contract of insurance unless the minds have met in agreement. Hower the policy is not a prerequisite t have so agreed in clear language. sufficient. (a) Delivery may be made to the to his duly constituted agent (Lucero Insular Life Assur. Co. Ltd., 62 Phi for the benefit of the insured, (b) Where no further conditions are to be fulfilled, a policy "urance may be constructively delivered when it is ted in the ‘uly directed to the insured or his sured in person or fa. de Sindayen vs. 835},) or some person mar of intention. — In the final : policy was delivered after its suance, depends, not upon its manual Possession by the insured but rather upon the intention of the Parties which may 50 secs 49 THE CONTRACTOP a . Tile6— The Petey be shown by their acts or words, It may d in of the application for insurance“ “ePend on the wording }) Presumption of detivery. — But possession by the insured ses the presumption that the policy was delivered to the ip. The application take effect unless and until provided that “no insurance the policy had been manual [Pa the st premium ps health (except as provided in mrumber as this application the fll fist premium has been paid and acknowledged and such receipt issued).” No medical pplication examination was required. P died suddenly of a coronary occasion before the policy issued by the home office had been delivered to im. Was the policy enforceable although it was not ly delivered to and accepted by P”? . int of delivery was subject to the Held: Yes. The requiremet ny wag subject 0 the les and practices of the ee tement in the ay jon that the policy must cathy before the eure on a yr ih maid by the fren 9 9 ane te py bythe home office, subject to the condition that the insured was in 182 THEINSURANCECODEOFTHEPHILIPPINESANNOTATED Secs. 49.59 health when the policy was issued.” erty National itnoranc Cov Paterson 173 S024 77 [Sup. Ct Ala policy has by the Head Office but view on the question. (1) Beneficiary cannot re One view holds th beneficiary cannot recover for the simple reason th: i wt his agent, (see Bradley v. New York Life the Beneficiary can recover. — The other vi beneficiary can recover on the theory that the deemed complete when the policy has been di insurance agent. (a) The insured having complied with every con required of him, actual delivery to him is not essent give the policy binding effect. (see New York Life Ins. Co. v. Babcock, 30 SE. 273 [1898]) (©) Moreover, a contrary rule would be financially un- fair to the beneficiary where the amount of the premium is computed from the date of the appl insured paid a premium for a period not actually receive any protection. On insured has not died, the in contract perfected upon actu agent. mn. In effect, the which he did ther hand, if the wsurer can simply consider the ial delivery of the policy to the Effect of delivery of policy, ) Wier delivery conditional. — Where there is conditional in precedent mance Policy, non-performance of the Precedent prevents the contract from taking effect loes not mean perfect health. (2) Where delivery unconditional. — The unconditional delivery of an insurance policy corresponding to the terms of the application ordinarily consummates the contract, and the policy as delivered becomes the final contract between the parties. Where the parties so intend, the insurance becomes effective at the same time of the delivery ofthe policy. (44 C.S. 1069.) (3) Where premium still unpaid after unconditional delivery. — But the insurer cannot be presumed to have extended credit from the mere fact of unconditional delivery of the insurance policy without the prepayment of premium; and even if such presumption may be inferred, there must be a clear and express acceptance by the insured of the insurer’s offer to extend credi In the absence of any clear agreement grant the policy will lapse ifthe premium is not paid, in the manner specified in the policy: (Phi Co,, Inc. vs. Woodworks, Inc, 92 SCRA 419 See. 77.) Rider in a contract of insurance. i - ider is a small printed or typed stipulation contained on a ‘of paper attached to the policy and forming an integral part ling between the parties. — ittached to because they, constiite sna Sn pe not a r eed dh wit Hk feta factual embod (Ang Giok Chip vs. Springfield, 56 Phil. 275 La (2) Necessity for riders, ee. — The necessity for riders, etc, is found in the fact that in the conduct of praca i often becomes necessary 1 add a new provision fo 2 POLY, oF to modify or waive an existing Provision, 194 THEINSURANCE CODE OF THE PHILIPPINES ANNOTATED — Secs. 49-59, desired change in the policy. This saves the trouble and expense of making an entirely new contract. (3) Rule in case of conflict between a rider, stipulations of a policy. — When there is an incons a rider and the printed stipulations prevails, as being a more deliberate expression of the contracting parties. (C. Alvendia, The Law of Insurance in the Philippines [1968 98, This principle applies to the insured against loss by earthquake. ‘The rider becomes a part ofthe policy and supersedes any part ofthe policy im cont with ts provisions e There is here sufficient notification to the company that other insurances existed. (se so age rem Gee Gonzales La Os, Yek Tong Lin Attached papers on insurance policy. (1) Binding effect. — As a general Paper is considered and becomes a part o Stechaee inding onthe injured if properly and sutfientiy to therein in a manner as to leave no doubt as to the intention of th 345-346.) he parties in such respect. (43 Am. Jur. 24 0 He ‘Secs. Sue ig NeeRance 195, poses a restriction on the use of riders, i states that no rider, etc, shall be altached to prated orstorrped upon a policy of insurance unless the form of such rider, etc, has been approved by the Insurance Commissions . (2) Effect of lack of description, — Any vider clause, warranty or endorsement purporting to be part ofthe contract of insurance and which is pasted or attached to cy is not binding on the insured unless the descriptive ame of the rider, etc. is also mentioned and written on the blank spaces provided in the poli 50, par, ‘of description will not affect the Trades Warranty” which stipulates that none of the ‘enumerated trades considered as hazardous will be carried on the building insured. (b) A clause is an agreement between the insurer and the insured on certain matter relating tothe li “Three-fourths t exceed 3/4 of ‘damage to the insured. The “Loss Payable Claus ‘any, is payable to a named party or parti ay appear. (see Sec. 53.) the “Change of Ownership Clause” providing lure to the benefit of whomsoever, during the conti ¥ the risk, may become the owner ofthe interest insured (see Sec. 57.) the insurer gives its written consent to the assignment of the thing insured. (©) An endorsement is any provision added to an insurance contract altering its scope or application. Examples Tae paig mieten ste Be sie a ape uh poly tbe binding on the nse ine THEINSURANCECODEOF THEPHILIPINES ANNOTATED Sec. 9.9 “of endorsements are those extending the perils covered, An Chdowsement may be in the nature of a permit such as one guthorizing theremovalof the insured property and providing. for coverage in another location. Many endorsements are merely typewritten additions to the contract, changing its ‘amount, rate, or term. Errors may be corrected in the same ‘manner. (D.L. Bickelhaupt, op. cit., p. 52.) Anendorsement varies the terms of an original insurance contract. I the endorsement is already attached to the policy at the time of its issue, it is not an endorsement, strictly speaking. (3) Effect of lack of signature. — As a general the rider, ete. is physically attached to a poli contemporaneously with its execution and the signature of the insurer or of jot prevent its inclusion and construction as a part ofthe insurance contract. (43 Am, Jur. 2d 346-347.) (4) Effect where riders, etc, applied/uot applied for

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