280 THEINSURANCE CODE OFTHE PHILIPPINES ANNOTATED See. 86 Jaim under of a right of action on the policy. Gr corp. v. Southyrestern Bell Teleph. Co, 122 ransfer involves no question of moral hazard. — Such assignment of the right to collect from the insurer involves no risk of loss being deliberately or carelessly caused by the insured) because it cannot increase the insurer's risk for a loss that has already occurred. Once a loss has occurred, the duty of the insurer to pay the insurance proceeds is fixed and the transfer does no harm to its duty. Section 175, however, prohibits the transfer of a policy of fire insurance to any person or company who acts as an agent for or otherwise represents the issuing company and declares such transfer void insofar as it may affect other creditors of the insured. SEC. ise provided by the policy, an but he is not lable for a loss of which the peril insured against was only a remote cause. Loss in insurance defined. Loss may be defined as the injury, dama y, damage, or sustained by the insured in consequence of the happening, or more of the perils against which the insurer, in consideration of the premium, has undertaken to indemnify the insured. Scope of loss. 0c. 85 ‘THE CONTRACTOR; TRACTOEmsuRANce Ea Liability of insurer for loss, ‘The principle of indemnity applicable to property insurance (eee Sec 18.) proscrbes the insured from recovering greater than his loss. To profit from his loss will constitute unjust enrichment. (2) Cause of loss. — The insurer assumes liability only for a loss proximately caused by the perils insured against although peril insured against. (see Sec. 8.) (3) Burden of proof where loss has f proof to show that hei —The insurer has . Where the insurer to a risk not insured to establish the truth of such fact by concrete sureris liable under the terms and conditions of the policy by it has bound itself. (Heirs of Rico General Insurance Corp, 179 SCRA 511 [19272 THEINSURANCECODE OF THEPHILIPPINES ANNOTATED Sec. Stated elsewise,ifa proof is made of a loss apparently within & contract of insurance the burden is upon the insure € prove a preponderance of evidence, arose from a cause wih ‘which itis not liable, or from a cause which rrance Corporation vs, ve, Inc, 374 SCRA 653 Lianga Bay and [2002]; DBP Pool of Accredited Insurance Companies vs. Radio Mindanao Network, Inc, 480 SCRA 314 [2006].) Meaning of proximate cause. Proximate cause is that which, in a natural and continuous sequence, unbroken by any new independer an event and without which the event would (Milwaukee v. Kellog, 94 US. 469.) proximate cause is the efficient cause — the one that sets others in motion — to which the loss is to be attributed, although other and incidental causes may be nearer to the result and. ‘operate more immediately in producing the loss. (Lanasa Fruit, SS. & Importing Co. v. Universal Ins. Co,, 302 US. 556.) Proximate cause is not, therefore, equivalent to “immediate ‘The doctrine of proximate cause has been defined as follows: “Was there an unbroken connection between the wrongful act and the injury, a continuous ope a continuous succession of events, so linked togeth is NO, then the event is the proximate caus Corp. vs. Lim Sio Wan, 549 SCRA 504 [2008] EXAMPLES: fire causes an explosion which results mate cause ofthe loss (Scripture v. Lowe se 86 "THE CONTRACT OF SuRANCE = Tie9 tare fut. Fire Ins, Co,, 57 Am. Dec. 1) while explosion is the immediate ‘cause. The insurer is liable where ether peril is covered by the policy. (see Sec. 88.) by a house is insured against fire ofa wal ofan contemplated by the conrad which one fice he ‘peal not (5) An accidental injury resulting in hernia which forced the insured, as a last resort, to submit which tums out to be unsuccessful, the death and not the surgical 0 31 operation proximate cause of {travelers Ins. Co. there is an unbroken chain of 296.) He a natural whole, or was there some new and independent cause Shusstion between the accident and the death without the intervening between the wrong and the injury intervention of any new end independent cus fe Kellog, supra.) The question that needs to be asi death is the direct and natural consequence o did not happen, could the injury have resulted? Hostile and friendly fires In determining the tis neceany to make a rahe ul “hose ana those that re re iders indemnification prot ins cuted providers inde anager les duetoa endl Se against damage by distinction between “For dcfton of ire, ee anotation under Sesion 168ae sot THBINGURANCECODEOFTHEPEDLPPINES ANNOTATED Se. in detail under the ws. ‘The dividing line is somewhat the traditional definition i : = sa fire burns in (1) When fire a friendly fre. — So long as @ a place where ea rended to bur, and ought to be, its to be regarded as merely an agency for the accomplishment of some purpose and not as a hostile peril Itis a friendly fire. (a) Thus, a fire burning in a furnace, or astove, or a lamp, is considered a friendly fire; and damage that may be caused by such fires, due to their negligent management, is not considered to be within the terms of the policy. (Vance, ap, cit, p. 862.) () So it has been held that damage caused by smoke issuing from a lamp that is turned up too high (Fitzgerald v. Ferman Ins. Co,, 2 N.YS. 824.) or ftom a stove pipe that is defective (Cannon v. Phoenix Ins. Co, 35 SE cor smoke issuing from a defective fur ‘Country Mut. Fire Ins. Co., 136 A.572.)is not to be considered as directly caused by fire. ‘The principle underlying these cases is simply that the policy shall not be construed to protect the insured from injury upon his negligent use or management of fire, 50 confined to the place where it ought to be. (American >. v. German Fie Ins, Co, 21 A. 353,) (2) When frea hostile fre. —Itis hostile when it occurs outsi y ishostile when it occurs outside ate none sso begins aa friendly fire and becomes place where tought not tobe tet OUBhE tO Be to some (a) Therefore, where a fire in a chimns ignition of soot there, caused soot and smoke fo on mn the stove ae very properly held the gen BroPerty insured, the court Insurance Co, 4SNE 1022) The eo te, AY © these and notin ese asintended to burnin (©) Likewise, where fam : er flames escaped through a crack in a sing a spri "8 @ sprinkle head above, the insurer was held liable for the issuin, Ins. Co, 242,641 f° aPPAdakis ¥. Netherlands Fire se 87 ‘THE CONTRACT OF INSURANG We tog i (c) Ithas also been held, and wi a fire may remain entire ly in its proper place, it oe Ee baped ie accident, comes so excessive as e beyond control (O'Connor v. Queer Co, 1 NW. Le and when oil leaked a = properly held that the fire was hostile. (Gi . Phoenix Ins. Co., 36 N.YS. 2d 598.) — = (d) A fire caused by a lighted ci f Cigarette on a rug is, of course, a hostile fire. (Swerling v. Connecticut Fire ite Co, 180 A. 343.) But recovery would not be allowed for damage toa rug accidentally dropped on a burning stove. In this case, the damage is caused by a friendly fire. good reason, that even ‘the thing Insured is, ‘SEC. 87. An in rescued from a per is caused by offorts to insured against. Extension of principle of proximate cause. Under Section 87, the insurer is liable in two (2) cases: ) Where the loss took place while being rescued from the peril ‘— The insurer is liable where the insured is is shown that said property would have been | insured against had there been no attempt to rescue it. Thus, the Toss of goods by theft during the removal of the goods to save them from loss by fire is covered by @ ‘. v. Paterson Drug Co., 74 So. 807.) un! contains a stipulation exempting sents, (Caceres v. New India Assur Co, [C.A.]36 .) Where the loss is caused by efforts to rescue the thing insured {from a peril insured against. — Hire, iti the efforts to rescue the thing that caused the loss.te6THEINSURANCECODEOFTHEPHILIPINES ANNOTATED Sex. us, damages to goods by being trampled on or Tht a to pot ot the i recovered by the policy offre insurance. (Cohn v. National Ins. Co,, 70 S.W, 259.) ‘The insurer is also liable for loss caused by preparing the a for removal from the premises although they are not actually carried out if atthe time the work of removal is begun the property isin such danger of fire that a reasonably prident man would attempt to protect it. (Ins. Co. of North ‘America v. Leader, 48 SE. 972.) (© $0 also, damage to the insured property caused by ‘water during attempt to save it from fire is generally regarded and as making the determined not by the result alone but by the circumstances as they appear to the interested persons at the time of the fire. (White v. Republic Fire Ins. Co,, 57 Me. 91. EXAMPLE: X was ised fie insurance policy covering his house ands contents. At about 10 lock inthe evening, the house ugh fee and was pata deste, Mach the fre ‘was carried out of rouse and left in the yard. During the night, some of the furniture was stolen. : . [Is X entitled to recover for this later oss? No. The loss is Te cereedy Secon 8” since the oss dd not tke place “in furniture] from a peri insured against” ‘SEC. 88. Where a por contract of insurance, ‘occurred but for such peri the immediate cause of the excepted, especially excepted in a which would not have reby excepted although 4 peril which was not Prd THE CONTRACTOF RSURANCE ™ Tie Loe Where proximate cause is an excepted peril. ‘The insurer is not liable ifthe proximate cause of the loss is a peril excepted from the excludes loss through explosion, if an explosion occurs first and ‘causes a fire which results in a loss, the ol this case, the proximate cause of the loss is “explosi the immediate cause but not the hostile fire occurs and causes ion, then, “fre” is the proximate cause and the insurer r the loss caused by the “explosion” notwithstanding thas been held that the insurance company has the burden of proving that the loss is caused by the risks excepted and for want of such proof, the compan (Paris-Manila Perfumery Co. vs. Phoenix Assur. Co, 11926},) or of the insured's agents or others. Loss by willful act or through connivance of insured. roof Phoenix Ins. Co,, 52 Phil & Rutgers Fire Ins, Co., 57 Furniture Co. vs. Globe 1) “Preidenay Deeee No, 1613 enumerates the circumstances any of hich shall -constite rina fie evidence of ron (oe not See 174)288 THEINSURANCE CODE OF THE?! Sec. 89 500. 88 THE CONTRACT OF INSURANCE Ey Tos EXAMPLE: consequences of his own negligence i The inured conspired or designed to destny the property eee eee insure the peoperty was burned before such conspiracy or gents constitute no defense on the pa design could be carried out. Is the insurer liable? Yes, because the loss was not “caused by the willfl act or through the connivance of the insured.” ' ' 5 ILLUSTRATIVE CASE: Wife stared a fre that damaged the house and some of its i (a) Mere negligence or carelessness on the part of the ae insured or of his servants, although directly causing or contributing to the loss, usually is one of the risks covered t by the insurance and does not relieve the company from rapidly spread and destroyed the property, it was held that the insured could reaver fr lom by Bre of his barn by fire of his barn and its ‘insured, collect the polic pole: contents. (Johnson v. Bershire Mut. Ins. Co, 4 Allen 328.) ted the fre, ing. When an rrance policy would be of be construed to set up a defense in every case wh 7 the property Id be shown. (Pool v. Ins. Co,, 65 N.W. 54.) by one of the co sured shoud not be interpreted to deny “An overwhelming percentage ofall insurable loss sustained ns sured because of fire can be directly traced to some act or acts of negligence. Were it not for the errant human eleme hazards insured against would be greatly diminished. full appreciation of these conditions. seeks insurance and it is after painstaking analysi insurer fixes his premiums and issues the policies. recognition of this practice that the law requires the insurer to assume the risk of negligence of the insured and recovery by an insured whose negligence proximately the loss.” (Federal Ins. Co. v. Terminal Trail Tours, former majority arnong sates we vas barred from recovery bene other co-insured, ie Allow the wrong gross negligence, — But gross negligence or recklessness on the part of the insured, the consequence of which, must have been palpably obvious to him at the time, will relieve Loss caused by negligence of insured, the insurer from labiliy This would be true for example: (1) Where there is ordi (a) where the insured, in his own house, sees the burning for taking out insurance is to prete the Ot ene Purposes coals in the fireplace roll down on his wooden floor and does Protect the insured against the not brush them up; or (CINE — OoooOF THEPHILIPPINES ANNOTATED See ‘am THEINSURANCECODEO 2 sured sees a small fire start and makes it (Gove v. Farmer’s Mut. F. Ins. Co,, 97 (b) where no attempt to Am. Dec. 5 (©) where a building is voluntarily set on fire to save other buildings from the effect of a conflagration and no tfforts are taken to save personal property in the building Slthough there i ample time. (First Nat. Bank v. German Am, Ins. Co, 134 N.W. 873.) To what ex! insured’s negligence must go in order to constitute gross carelessness or recklessness and thereby exonerate the insurer from lability must be evaluated in light of the circumstances surrounding each case. (FGU Insurance Corporation vs. Court of Appeals, supra.) aoe TITLE 10 NOTICE OF Loss ‘SEC. 90. In case of loss upon an insurance against fire, an insurer is exonerated, if written notice thereof be not given to him by an insured, or some person entitled to the benefit of the insurance, without unnecessary delay. For other non-lfe insurance, the Commissioner may specify i ibmission of the notice of loss. (a) to give the best evidence which he has in his power at the time. Conditions before loss. condition precedent to the right of recovery, there must jance on the part of the insured with the terms of the = If he has violated or failed to contract, and such a violation or rer, then the the conditions ‘measure of the insurer’ by the ins Textile Insurance Co. Insurance, Co, In where a fire insurance policy required, as one of fe insured to give notice of other insurance, sme property, in the absence of such notice, ing that there are other insurance policies on the he policy is null and void, and the insured cannot covery. (Young vs. Midland tokes vs. Malayan =m“HE nSURANCECODEOFTHEPHILIPINES ANNOTATED) Secs. on where the policy provides that it shall be sod shall procure any other insurance on the irer, the violation icy voi f the condition renders ipso facto the policy Taamance & Surety Co. vs. Yap, 6 SCRA 246 [1974 (2) Contract, law between parties, — As has been ee ay be rather onerous but that in does not justify the abrogation of its express terms, which the insured accepted or adh ind which is the law bet the contracting parties.” (Misamis Lumber Corp. vs. Capi Insurance & Surety Co, Inc, 17 SCRA 228 [1966].) Conditions after loss. (1) Notice and proof of loss. — Sections 90 and 91 establish conditions concerning matters after the loss that must be fulfilled before the insured becomes entitled to the benefit of a fire insurance policy, namely: written notice of loss must be given to the insurer (Sec. 90.) and when required by the policy, a loss must likewise be gi an insured, in submitting his proof of loss such proof as would be necessary in a court Section90, the same section does not give him any j false proofs. (Yu Ban Chuan vs. Fieldmen’s Insurance Tn some life and accident requiring that a certificate of nding physician of the insured be furnished as.a part of the proof of death. (see Sec. 94.) (2) Nature. — While in the form of conditions: are in prececient, they Feu hEI naar subsequent the breach of which affects 4 ri as already accrue sth covered by the policy, the ina Joss occurs, through a peril altogeth« ing of the capital fact arises and becomes ay fied. Allthose requirements of the insured after S208. 9091 THE CONTRACT OF INSURANCE 3 Tile 10— Nico Loce for evidential purposes and do not property form a conditions of lability. Such being the ratuce of ee eae it is manifested that the general rules of construction require that they shall be construed with much les strictness than those conditions that operate prior to the loss. (Vance, op. cit, p. 894.) Indeed, with regard the submission of documents to prove Joss, substantial, not strict compliance with the requirements will always be deemed sufficient. (Finman General Assurance Corporation vs. Court of Appeals, 361 SCRA 214 [2001].) Meaning and purpose of notice of loss. (1) Notice of loss 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 agains (2) The purpose of a notice of loss is to apprise the insurance company with the occurrence of the loss, so that it may gather information and make proper investigation while the evidence is sh, and take such action as may be necessary to protect its interest (see 45 CJS. 1182.) from fraud or imy inthe case of property insurance, to prevent further loss to the property. Necessity of notice of loss. It is obvious that the insurer cannot be held liable to pay a claim unless he receives notice of that claim. Under the law, if notice of loss is not given to the insurer by the person insured or by the person entitled to the benefit of the insurance without unnecessary delay, or in a timely manner, the insurer is exonerated (Sec. 90.) or discharged from liability even though the loss is one the policy was designed to protect against. It is immaterial that if the notice is not given, the company ‘would not be prejudiced; and if given, the company would not be benefited. thas been held that formal notice of loss is not necessary if the insurer already has actual notice (Fidelity-Phoenix F. Ins. Co. v. Friedman, 174 .W. 215.), but there is authority to the contrary. (Col. Sav. Bank v. American Surety Co, 87 P. 118.)nin NGuRANCECODEOF THEPHILIFPINES ANNOTATED Sec 9 sou THED ‘Time for giving notice of loss: ‘The notice of loss upon ven “without unnecessary requirement of the policy or forthwith requires the ‘What constitutes a reasonable time for giving notice depen. ‘on the circumstances of the particular case althou construe the requirement of immediate notice liber: theinsured. Thus, notice will be considered as given forthwith, as soon as possible or “without unnecessary delay,” thas been given “as soon as circumstances permitted the insured, in the exercise of reasonable diligence, to communicate.” (Vance, p.895.) thin period specified by Commissioner. —For non-life (Sec. 90.) lure to gi within such ime shal precude recovery. Such pro provided the time so fixed is not unreasonably short. ILLUSTRATIVE CASE: A2-year student, troughs guardian, as judgment ok ned ki inom cident brought action a insure whos defense wa delay in notifying them of Facts: RL, a 12-year old stu an accident Which resulted RL who was walking nearby. RL recovered a Nochemn snd Tr jigment for $82,500 against WN but "sles, WN's insurers, both refused to defend secs 9091 ‘THE CONTRACT OF INSURANCE “ide 10— Notice of Lose the suit or to pay the judgment, Their defense was lack of notice. Travelers was not notified ofthe accident for 17 months and Norther for two (2) years after the accident. Issue: The issue for determination was whether the insured’s two-year delay in notifying Norther of the accident and his of 17 months in notifying Travelers, his automobile insurer, relieved both insurers of their contractual when notice is made an express condition precedent Held: (1) Duty of insure to show it has been prejudiced because of delay in giving notice. — “We have held in the past that an insurance company is because ofthe insured’ failure to give notice unless it can be shown that it has been prejudiced thereby. However, in that case the policy did not include a specific forfeiture clause. ‘California cour, on the other hand, in dealing with a ‘case has held that an insurance company cannot prevail defense of lack of notice unless it can show prejudice even where notice is made an express condition in the policy.” (2) Burden of proving actual prejudice is on the insurer. — “Moreover, the burden of proving prejudice is on the insurance ‘company. In the case at bar the trial court found that both Norther and Travelers had been prejudiced but the only fact relied on to reach that conclusion, as shown in the record, was the insured’s delay in giving notice ofthe accident. The record indicates, however, that all of the investigative reports would have been made available to both insurers, and that RL was perfectly willing to aid them in any investigation they wished to pursue. We conclude therefore, that in the instant case, ‘Northern and Travelers failed to show actual prejudice.” (@). Duty of insurer to show that an additional insured knew of the policy and its conditions. — "Moreover, we cannot assume that an 18-year old boy would know tional family motor vehick ed, although not the by this policy; and that he might be liable for neg he threw the gasoline can which injured RL. Under our holding in Carpenter v. Superior Court, the burden ison the insurer to either show that an additional insured knew of the policy and its conditions, or that they made a reasonable effort to apprise the insured of the extent and conditions of the poliy. In thesop THEINSURANCE CODE OFTHE PHILIPINES ANNOTATED Sec 0.95 to prove this fact.” 438 P.2d 311 [Sup, instant case the insurance companies f (Lindus , Northern Insurance Co. of New (C, Arie 1968.) Meaning and nature of proof of loss. (1) Proof of loss 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. is not what is known in the law of evidence as “proof” lence” for the consideration of the trial court, and it does not stand for proof in court. (45 CJ.S. 1182.) Loss and its amount may be determined on the basis of such proof as may be offered by the insured which need not be of such persuasiveness as is required in judicial proceedings. (Malayan Insurance Co., Inc. vs. Cruz-Amaldo, 154SCRA 672 [1987].) Form of notice or proof of loss. In case of loss upon an insurance against fre, the law requires a written notice thereof. The law does not make any requirement as to the form in which notice or proof of lo case of other non-life insurance. According] any stipulation in the policy, notice or proof may be given orally to give the notice or proof ared or his beneficiary. The notice of loss may be in the form of an informal ot Provisional claim containing a minimum of i evidence, together with a demand or request for payment. Purpose of proof of loss. The notice of loss is distin, requirement of notice eet ftom the proof of los. The nded merely to give the insurer "Inthe ase of the “no fale surance, see Secon 0) My In Compulsory Motor Vehicle Liability In- 5008. 9091 ‘THE CONTRACT OF INSURANCE oa Tie 10— Notice of Loe information upon which he may act promptly in protecting the property from further loss fr which he may be lakie os fo evable him to take any other immediate steps that his interests may require. (Vance, 895.) ‘The statement is, however, a very much more formal requirement, and intended not only: (1) to give the insurer information by which he may determine the extent of his liability but also; (2) to afford him a means of detecting any fraud that may have been practiced upon him; and (3) to operate as a check upon extravagant claims. (bid.) The insurer or the insured may avail of the services of adjusters in effecting the settlement of an insurance claim. (see Sec. 324.) Burden of proof of loss in court action. (1) Insured, — The insured has the burden of proving that he has suffered a loss and in life insurance, death of the insured must be proven. (a) In an action on a fire insurance policy to recover the value of goods alleged to have been destroyed by fire, it devolves upon the plaintiff to prove the amount of his loss by a preponderance of evidence. (Go Ly vs. Yorkshire Ins. Co,, 43 Phil. 633 [1922].) In this connection, the cost price is competent evidence to show the value of articles destroyed by fire. (Lao vs. Yek Tong Lin Fire & Marine Ins. Co., 55 Phil. 386 [1930].) (b) But an inventory of goods destroyed by fire is a mere claim for loss and, where the insurer denies liability, does not certainly constitute evidence of loss. Testimony or evidence must be given to sustain the correctness of the claim. This is particularly true where the insurer's inventory was prepared with the intervention of the insured. Its falsity is evidence the fraudulent character and the sess of the en's Insurance Co., n of false invoices establishes a clear case of fraud and misrepresentation which It has long been settled that aSS sos THEINSURANCECODEOF THE PHILIPPINESANNOTATED See. 93 and material statement made with an intent to deceive tg an mat ate ne Meron Corporation vs. Country Bankers Insurance Corporation, 675 SCRA 382 [2012],) (2) Insurer, — Once the insured makes out a prima facie casein Ie favor the burden of evidence shifts to the insurer to wurer who seeks to ion in the policy comes within the has the burden of est purview of the exception Excuses for non-compliance with ‘conditions. Timely compliance with the conditions is required as a condition precedent to the right to recover under the policy. However, failure on the part of the insured to comply strictly with their terms will be excused when the circumstances were such as to make strict compliance impossible. Thus, failure to give notice and proof of loss will be excused when itis due to the death or incapacity of the insured or the fact that the beneficiary had no knowledge of the existence of the policy ofthe insured who died before the fire. (Vance, op. cit, ere, for example, the heirs did not know about the policy, their delay in giving notice of loss to the insurer and furnishing proof of loss should not defeat their right to recover ‘on the policy. SEC. 92 Aldfects ina notice of root thereat, wich te insured might rome on aa 'surer omits to specify to him, without unnecessary 88 ounds af objection are tins When defects in notice or doomed waived. "°F Proofs of loss satista given. Bu $00.98 ‘THE CONTRACT OF INSURANCE 29 Tie 10— Notice of Lose the proofs of loss as given, so that the deficiencies may His retention of the defective proofs constitutes a ‘objections. (Ibid, pp. 893-894.) Thus, there is waiver where the insurer: tes to the insured that he considers the policy null and fumishing of the notice or proof of loss would be vain and useless (Bachrach vs. British Am. Ins. Phil. 555 1209.); the proceedings for determining the amount of rbitration, making no objections on account of notice inary proof (Carol v. Gerard Fire Ins. Co, 13 Pac. 863.); (5) Makes objection on any ground other than a formal defect the preliminary proof. (McMasters & Bruce v. Westchester inty Mut. Ins. Co, 25 Wend. 397.) It has been held that a general statement that proofs are defective is not sufficient to impose on the insured the duty to supply defects not pointed out. (Ins. Co. of N. Am. v. Hope, 58 Il 75.) SEC. 93. Delay in the presentation to an insurer of notice or proof of loss is waived if caused by any act of his, ‘or if he omits to take objection promptly and specifically upon that ground. ‘When delay in presentation of notice or proof deemed waived. By the provisions of Section 91, waiver of delay in the presentation of notice or proof of loss may be made: (I) by an act ‘and (2) by failure to take objection promptly and ly upon that ground. ‘An insurance company, by accepting payment of premium with fal heeldge that the premises had been injured or10 THEINSURANCE CODEOF THE PHILIPPINES ANNOTATED Sx. 55, re, isestopped from claiming that notice of the fire beeciearta se nner toe nuse attogeed by the tems ofthe policy. (Emery v. Svea Fire Ins. Co, 20 Pac. 88, Ifthe insured has attempted to comply with the stipulations of the policy and the company makes objections which necessitate amended or supplemental proofs, the insured will be allowed a reasonable time after he is appraised thereof within which to remedy the defects regardless of the time prescribed by the policy for furnishing proofs. (McCarvel v. Phoenix Ins. Co., 66 N.W.367,) ILLUSTRATIVE CASE: 1963. Tt requested investigate and assess the loss on Se 94 ‘THE CONTRACT OF INSURANCE Tile 10— Notice of Less ility when it should have done ‘80, indicating that it any delay But even on the assumption that there was delay, waiver can be successfully raised against the insurer. (Pace Timber Export Corps, CoutofAppens, 12 SCRA 19919891 SEC. 94. If the policy requires, by way of pi Proof of loss, the certificate or testimony of a person other than the insured, it is sufficient for the insured to use reasonable evidence to the insurer by any just grounds of be certified or testified. Effect of failure to secure certificate or testimony of third person. on Ifthe policy requires, by way of preliminary proof of loss, the 1963 and his certificate or testimony of a person (like a notary public) other 963. than the insured, such requirement must be complied with by Issue: Was there delay in the giving of notice of loss? On the insured as part of the contract. However, the insured is only this assumption, was there waiver of the delay on the part of req exercise due diligence to procure it. In the event of the insurer? the refusal of such person to give the certifica Held: The deten Co ee insured must furnish reasonable evidence insurer's reaction upon receipt of the notice of loss was to set i ination what would be necessary to determine hecoose ok extent of the loss, with a view to payment thercot insurance agreement. ee person in the truth of the facts necessary to be certified or but, because of other grounds. It has been held that such requirement in the policy must be liberally construed in favor of the insured. (bid.) invoking the ground of del is particular ground fo ts mind. The natu —000— cating the sso a Place in sioner, the insurer did not,TITLE 14 DOUBLE INSURANCE ‘SEC. 95. A double insurance exists where the same person is insured by several insurers separately in respect to the same subject and interest. Double insurance defined. Section 95 defines double insurance. In insurance contracts, the In double insurance, there is co-insurance (see Sec. 157.) by ‘two or more insurers; hence, itis also known as “co-insurance.” Requisites of double insurance. exit @™ m0 double insurance unles the following requisites (1) The person insured is the same; (2) Two or more insurers insuring separately; (G) There is identity of subject matter; (4) Theres identity of interest insured; and tity of risk or peril insured ay \gainst. (Malayan vs. Philippine First Insurance Co., Tne. 678 "Ching De La, H. and Anwotsted (2010, De Len, Its The Insurance Code of the Philippines on 5095 ‘THE CONTRACT OF INSURANCE a3 Tile 11— Double Insure ures his house against ire with Y company and Z ble insurance exits in this case because ll the subject matter insured isthe house. interest inthe house. X mortgages his house to B. Insurance taken by X and another taken by B on the same house is not double insurance because its not on the same insurable interest. (see Sec. 8.) (@) X insures his automobile against fre with Y company and against theft with Z company. There sno double insurance because the automobile is not insured against the same risk or peril. Double insurance distinguished from over-insurance. Double insurance is different from over-insurance. (1) There is over-insurance when the amount ofthe insurance is beyond the value of the insured’s insurable interest. In double insurance, there may be no over-insurance as when the sum ithe amounts of the policies issued does not exceed the terest of the insured. (2) While in double insurance there are always several ce there may be only one insurer insurers, in overinsuran involved. From the above explanation, double insurance and over- insurance may exist at the same time or neither may exist at all, Double insurance is the term used instead of “co-insurance” when the sums insured exceed the insurable interest. In such case, there is “over-insurance” by “double insurance.” EXAMPLE: 1 X's insurable interest in a house is 71,000,000 and he insured it with Y company for PI,100,000, there 15 over insurance but there is no double insurance. ‘other hand, if he insures the same house with Y con nto an 2 company for P4000, hei Gouble insurance but there is no over insurance314 THEINGURANCE CODE OFTHEPHILIPPINES ANNOTATED See. 95 If the amount of insurance with Y company is P450,000, there isnot only double insurance but also over-insurance. Now if X procures only one policy for the amount of 1,000,000 or a lesser amount, there is neither double insurance nor over insurance Binding effect of stipulation against double insurance. A policy which contains no stipulation against additional insurance is not invalidated by the procuring of such insurance, Invariably, policies of fire insurance contain a stipulation or a breach thereof will prevent a recovery on the pol 9-360; Santa Ana vs. Commercial Union Assur. Phil |; Union Manu- facturing Co,, Inc. vs. Phil. Guaranty Co,, 47 SCRA 271 Pioneer Insurance and Surety Corp. vs. Yap, 61 SCRA 426 [1974.) However, in order to constitute a the other insurance must be upon the same subject matter, the same interest therein, and the same risk. (Geagonia vs, Court of Appeals, 241 SCRA 152 Purpose of prohibitio eee of n against double prea Pupon othe Prokton agsinst double insurance ito pre a thus avert the perpet ff. public os well he inners tee a so 96 THE CONTRACT oF msUR Tie! Dobe surance oe ‘There is a great temptation upon dishonest persons, whose property is insured up to its full value or above it, to its destruction; and the same considerations undoubtedly tend to lessen the care that may be exercised by the honest in preventing loss. In view of these facts, as amply demonstrated by experience as they are apparent to reason, the underwriters take every precaution to avoid over-insurance. (Vance, op. cit, p. 841.) ‘SEC. 96. Where the insured ina policy other than life is may select, up to the amount for which the insurers are severally liable under their respective contracts; {b) Where the policy under which the insured claims. hi right of contribution among themselves; Each insurer is bound, as between himself and the other insurers, to contribute ratably to the loss in proportion to the amount for which he is liable under his contract. Rules for payment of claims where there is ‘over-insurance by double insurance. i Gee. ‘As the contract of insurance is a contract of indemnity (Sec 18), the insured can recover no more than the amount of hisINESANNOTATED ——See.95 316 THEINSURANCE CODE OF THE PHILIT the same subject matter ai where there is over. in several policies insurable interest of the insured. of the insurers among ceeds the loss. If policies issued, Paragraph (e) governs the liabi themselves where the the loss is greater than the sum total of each insurer is lable for the amount of his policy. EXAMPLE: 1 solidary ibility of insurers under A owns a house valued at P th three insurance companies If the house is totally bumed, A, unless otherwise provide, may claim payment such order as he may select, up to the amount liable under its contract, Thus, A from X company but the later 60,000, the am« 100 only *m X company and Z company. iable to pay ble proportion of the loss or * Citing. De Tan ae HDs Lear Note 560.96 THE CONTRACT OF INSURANCE “Tile T1— Double nsurance 2) Where insured claims under a valued policy (par. b). — In the same example, in ease A recovers P6000 from X company, this amount received by him shal be deducted from P180,000, the value of the policy, without regard to his actual loss. In cother words, A may recover only the difference of P120,000 from either Y company of Z company or from both of them so Tong as the amount recovered does not exceed P120,000. If Ahhas been fully indemnified for his loss by one insurer, he cannot file subsequent claims against the others (@) Where insured claims under an uncalued policy (par. 0 — In ease the polices are unvalued or open, the value of the hhe may select up to the amount for which they are liable under their respective contracts. (par. [a]) If ypany P30,000 and from Y company P90,000, lect from Z company the difference of P30,000 to Amount of policy “Total insurance taken X Loss = Liability of insurer ‘Thus, inthe frst example, the pro rata contribution of each ofthe insurers i as follows: X Company — 26,000 97 1/8 of P180,000 oF P22,500 480,000 Y Company — 180,000. 6, 3/8 ofP180,000 or P67, 500 480,000 ZCompany — P240,000_ or 4/8 of P180,000 or P90,000 480,000 or 4/8 of P180,000 or P90.000 “otal amount recoverable = 180,000 avSPINES ANNOTATED Se, EOF THE PHILIP 56 . —— INSURANCE COD! 318 THE: score So, if Ais able to receive the amount of P180,000 from oe ‘under paragraph (a) of Section 94, X company and Z cre a ee pee PO) — aap shares indicated above. However, where there is a pro rata =22.000 = — amount to be returned byA clause in the policy, whereby each one ofthe Hosa is made 4 se a tt ie A ' Sanam cay aes re cmtbuwnconey “ c= £20,000 — pro ata contribution ‘each insurer only such amount corresponding to his ratable proportion ofthe loss. (5) er sum eid by ined ects (par.d). — Let us now suppose that A, after re ffom X company, suceeds in collecting the su of P120,000 and P144,000 from Y company and Z company, respectively. Under paragraph (d), Amust hold the amount of P144,000, said ‘amount being in excess of his insurable interest in the house, in trust for the insurers X, ¥; and Z. He cannot recover more than the full indemnity. Thus, 1/8 of P144,000 or P18,000 must bbe retuned to X; 3/8 of P144,000 or P54,000 to Y; and 4/8 of P144,000 or P72,000 to Z. Pursuant to paragraph (e), X Company can recover from Y ‘Company, P1,500 and from Z Company, P18,000. Thus: —000— X Company — 60,000 — amount paid to A 18000 — amount tobe returned by A 42,000 =1500 — amount due from ¥ Company 40,500 =18d0 — — amount due from Z Company 222500 — promta contribution ¥ Company — P120000 — amount paid to A 3S — amount to be P 66,000 returned by A +1 ‘amount due to X company Pers ~ Provata contributionTITLE 12 REINSURANCE SEC. 97. A contract of reinsurance is one by which an ir procures a third person to ir im against loss ray by reason of such original insurance. Reinsurance defined. Section 95 defines a contract of reinsurance. It is a contract whereby one party, the reinsurer, agrees to indemnify another, the reinsured (original insurer), either in whole or in part, against loss or Fability which the latter may sustain or incur under a rd party, the original insured. Ithas been referred to simply as “an insurance of an insurance” (44 Am. Jur. 2d, 283; see Secs, 222-228, 288-289, 319- 321.), ie, insurance business is transferred from one insurance ‘company to another, Reinsurance is thus essentially a form of insurance for insurance companies. Such contracts are sometimes referred to as “tre Reinsurance is required by law in certain cases. (see Sec. 221, pat. 1.) The reinsurance of a reinsurance is called retrocession. EXAMPLE: X insures his house against fire for P1,000,000 with Y company. Here the contracts only between X and Y company. Pd ‘THE CONTRACT OF INSURANCE 3a Tie 12— Reinsurance It is obvious that in order that there may be a contract of is necessary that there isan original contract of Since a contract of reinsurance like any other surance must be supported by an insurable ikewise clear that reinsurance may not be for a {greater amount than the original insurance, although it may be easily for a less amount. In case the house is destroyed by fire, Z company is not bound to pay Y company more than the amount actually paid by the latter to X. Reinsurance distinguished from double insurance. The following are the distinctions: (1) In double insurance, the insurer remains as the insurer of the original insured, while in reinsurance, the insurer becomes the insured, insofar as the reinsurer is concerned; (2) In double insurance, the subject of the insurance is property, while in reinsurance, it is the original insurer’s risk Double insurance is an insurance of the same interest while reinsurance is an insurance of a different interest; In double insurance, the insured is the party in interest inall the contracts, while in reinsurance, the original insured has ro interest in the contract of reinsurance which is independent of the original contract of insurance (Sec. 100.); and double insurance, the insured has to give his consent, while in reinsurance, the consent of the original insured (who is hardly even aware of the reinsurance transaction) is not necessary. Value of reinsurance. From the standpoint of the insurer. — Reinsuring companies 1m contracts of reinsurance. Every insurance company, in accordance with its financial strength, establishes a limit on the maximum claimea THBINSURANCECODEOFTHEPHILIFPINES ANNOTATED Sec. 97 st wishes to pay outof its own resources. This limit is called a itwishes to pay ce ime a company want it salesmen Ito take an application for any amount the applicant {s nilling to seek. When such applications are for a sum over the company’s retention, it handles the excess by means of reinsurance. 1) Through the use of reinsurance, then, an insurer is able to issue policies for amounts in excess of its retention limit or beyond the capacity of its financial resources in case of a loss, rather than inconvenience referring him to other insurance companies. This best interest of the insuring public, the insurer, reinsurer. 2) Also, aside from spreading risks among insurance companies, insurance protection distributed to a greater proportion of those protection if the underwriters of many compa in position to supply insurance protection to applicants requiring large amounts and to applicants who are not eligible for insurance at standard rates. 3) Underwriters benefit through the placing of additional insurance in an expanded market. ‘The insurance industry benefits by reducing the waste arising ‘out of policies which are applied for but not issued. (6) Further, the knowledge of the industry regarding classification of impaired risks is increased in the most economical manner, Reinsuring companies serve as focal point for the collection of such risks where statistically significant volumes of consistently underw1 business are accumulated and subjected to. by an experienced staff. Improved underwi are promulgated as a result of such analyses. This process is more t than if each insuring company found it necessary to attempt to perform its own underwriting we reinsurer benefits through th ion of business which is expected to prove rofitable te B - (Reinsurance” by Walter W. Steffen, a LHF 9 350) a see 98 ‘THE CONTRACT OF INSURANCE : Tie 12— Reinsurance on (2) From the standpoint of the insured. — The practice of reinsurance is also beneficial to the insured for the following, reasons: (a) It gives insurance companies that practice in greater financial stability and thus makes the insured’s individual policy more reliable; (b) If large amount of insurance is needed, the insured ‘may obtain it without negotiating with numerous companies; (€) It enables the insured to obtain protection promptly, without the delay that would be required to divide and distribute the amount among many companies; (@) All the insurance can be written under identical contract provisions, whereas otherwise these might vary with the different companies among whom the insurance is divided; and (e) Small companies are encouraged to divide large exposures for safety and enabled to accept a wide variety of applicants. (Riegel, Miller & Williams, J op. cit. p- 125.) (3) From the standpoint of # 1g public. — Contracts or “treaties” of reinsurance are plainly beneficial to the public inasmuch as they promote both efficiency and conduct of the reinsurance business. (Vance, ep. Sees, 216-222.) . har aninsurer btn reinsurance, ee Sco he must communicate to the risk. De insured to disclose facts. uty of reinsure oo ere lerwriter is seeking to insure Hine ae satel ess than the similar duty24 THEINSURANCE CODE OF THE PHILIPPINES ANNOTATED Sec. 9g contract of reinsurance is the probability original insurer may be compelled to indemnify for the poli issued by him. (New York Brewery Ins. Co. v. New York Co,, 1us, a policy may be avoided where the reinsured that aloss has taken place or that the property is oversinsured where he has knowledge thereof. EXAMPLE: X insurance company issued a fire policy covering a building owned by Y. reinsurance coverage under H, an ex-conviet for arson Of directors of X were invited as guests at the wedding and knew who H was. Subsequently, the building was completely destroyed by fire. insurance company accepted icy. Thereafter, Y married the members of the board from Z notwithstanding that X did not conviction for arson? possessed by the insurer “whether previously acquired, which are material to the risk.” ‘Automatic and facultative methods of ceding reinsurance. Ss cme may be placed in effect either automatically ot "For glory of inportant sins zg, TOT SS of important reinsurance terms, see ennottions under Sections 222- see 98 ‘THE CONTRACT OF INSURA Tile 2—Rensranee NT = (1) Share or participation in risk insured. —The rule in Section 98 does not apply in case of automatic einsurance treaties under which the ceding company (reinsured) is bound to cede (give off by way of reinsurance) and the reinsurer is obligated to accept a fixed share of the risk which has to be reinsured under the contract. in the risk insured, each party having a fee choie, the share is accepted, the obligation is absolute and the liability assumed thereunder can be discharged by one and only way share ofthe losses, There is no alternative or On. ( Advantage to automatic me ing The advantage to the insurer of the facultative method receives the reinsurer’s underwriting opinion before previous applications or may receive concurrent a reinsurance on the same risk fom different compar it may have more complete underwriting i insurer. (“Reinsurance,” by Walter W. Steffen, in to reinsurer. — By agreeing to accept business autom. the reinsurer is relying on the underwriting judgment of the insurer and isbound to acceptacase even though it may not agree with the underwriting decision. The reinsurer is protected by the requirement that the original insurer retains its, retention limit, which assures a measure of self-interest. In actual practice, when any question of proper underwriting classification exists, the insurer usually does not use its automatic but instead secures the reinsurer’s underwriting opinion ting the case facultatively. (Ibid.) A prio ensure transaets exclusively reinsurance busines in the pone eee 38) 1 wile is ransatons being ited Philippines (se Sec 288) Tt doesnot write et insrance = toinsurers,126 THEINSURANCE CODEOF THEPHILIPFINES ANNOTATED Se, 99 from reinsuraneé already assumed x x x. In contr is merely an agreement between two (2 ‘whereby one agrees to cede and the other to accept reinsurance business pursuant to provisions specified in the treaty. ‘The practice of issuing policies by insurance companies includes, among other things, the issuance of world as ‘treaties.’ Such a insurance companies to cover Reinsurance treaties and reinsurance policies are not ‘SEC. 99. A reinsurance is prosumed to be a contract of indemnity against liability, and not merely against damage. Nature of contract of reinsurance. The subject of the contract of reinsurance is the primary urer’s risk and not the property insured under the original sec 100 ‘THE CONTRACT OF INSURANCE oF i Tie Regence NE accruing, a8 a con: of the reinsurer, In precludes him from in full the the insured under the orignal policy, doesnot oy nase aft the insurer to demand payment in full under the insurance (Vance, op. cit, pp. 1068-1068.), and this is original insured should decide not to enforce his, precedent to his demanding payment the insolvency sures, which the insurer even before the latter has indemnified the original insured, (3) Contract based on original policy. — The policy of reinsurance, however, is necessarily based upon the original -y, and the rights ofthe parties while, of course, fixed by the ‘and conditions of the policy of reinsurance are yet greatly affected by the terms and conditions of the original ‘which the reinsurance contract is based. (Vance, op. it, p. 1068.) ‘The reinsured risk must be the same as that covered by the original insurance policy. insurance cot to contract for reinsurance exceeding the lis ‘ceded to the reinsurer. Similarly, the reinsurer cannot provide coverage for risks beyond the scope of the coverage provided by the primary insurer. (RH. Jerry, IL op. ct, p- 686.) (6) Rule on subrogation applicable. — In. general, a reinsures, oon payment of a loss, acquires the same rights by subrogation dn similar cases where the original insurer pays mance & Surety Corp. ¥S. Court of Appeals, 2207, Civil Code, discussed under SEC, 100. Tho original insured has no interest in & contract of reinsurance.sag THEINSURANCECODEOPTHEPHIUPPINES ANNOTATED Sec. 19) Rights of original insured in contract ‘of reinsurance. oe Reinsurance is a contract between the reinsu reinsurer by which the later agrees to protect the former from risks already assumed. (1) The insured, unless the contract so provides, has no concern with the contract of reinsurance, and the reinsurer is not liable to the insured either as surety or otherwise. (Baltica Ins, Co. v. Cars, 162N. (2) There is no privity of contract between the original reinsured and the reinsurer. A contract of reinsurance rarely explicitly permits direct action by the original insured against the reinsurer. Liability of reinsurer to reinsured. In an action on a contract of reinsurance, as a general rule, the reinsurer is entitled to avail itself of every defense which the reinsured might urge in an action by the person originally insured, (Gibson vs. Revilla, 92 SCRA 219 [1979].) ‘Thus, the reinsurer i under an original policy u i \le to the original insured or for an amount more than the sum actually paid to the insured. It has been held that the clause “to ; ay as may be paid thereon” does not preciude the reinsurer from insisting ta proper proof that a loss within the terms of the original policy Bis taken place; it does not enable the reinsured to recover from reinsurer to an extent beyond the i under the contrac of ensurance (hig) NO” oF the later Liability of reinsurer to original insured, The original insured towards the reinsurer in ave articular contract of reinsurs stand in any of three relations iccordance with the terms of the ance, (1) Contract of reinsurance solely between solely insurer a Tanase te contact is solely between the Insurer andthe t "mplating only an indemnity to the insurer see 100 THE CONTRACT RETRACT ornsutaNce x against losses suffered by reason of the policies carried by him, the original insured has absolutely no interest in the contract and Unless the reinsurance contract contains i may coniain a prov whereby the reinsurer binds himself to pay to any loss for which the insurer may become also Art. 1311, par. 2, Civil Code) Therefore, has promised to pay the losses accruing under the original policy will be liable to a suit by the original insured under the contract of reinsurance. The remedy of the insured is both against the insurer and the reinsurer. (See Coquia vs. Fieldmen’s Insurance Co,, Inc., 26 SCRA 178 [1968]; Guingon vs. Del Monte, 20 SCRA 1043 [1967].) Contract of reinsurance amounting to novation of original con- ‘The original insured may also maintain an action direct- ly against the reinsurer in those cases in which the circumstances attending the making of the contract of reinsurance amount to a novation of the original contract (see Art. 1291[2], Civil Code?) and hence, operate to discharge that contract and the original insurer from all obligations thereunder. The original insurer, however, will be released only when the insured agrees with the insurer and reinsurer to the novation. (see Art. 1293, Ibid.) contact should contain some stipulation i favor of a third {i tulllment provided he communicated his aceptance to sar cabon. A mere incerta benefit or interest of a person is not an pris must have early and deliberately contre favor may be made tt not wou he consent ‘ahs enone nar 236 and 7 (20)‘390. THEINSURANCE CODE OFTHE PHILIPPINES ANNOTATED See. 199 Such an agreement is ordinarily carried into effect by a surrender of the original policy an ce Of a new one same terms and con eee socal CHAPTER Il reinsurance, for hee, the socalled “reinsurer” i but for the original insurer and hence, becomes CLASSES insurer of the subject of the original policy. (Vance, F INSURANCE 1070-1073.) ae —000— MARINE INSURANCE SUBTITLE1-A DEFINITION SEC. 101, Marine insurance includes: Person or propa Crewe ‘to a marine, inland 1m Insurance, including t of or i am