1) What constitutes doing or transacting insurance
business? (Sec. 2) The term doing an insurance
business or transacting an insurance business,
within the meaning of this Code, shall include:
1. Making or proposing to make, as insurer, any insurance
contract;
2. Making or proposing to make, as surety, any contract of
suretyship as a vocation and not as merely incidental to
any other legitimate business or activity of the surety;
3. Doing any kind of business, including a reinsurance
business, specifically recognized as constituting the doing
of an insurance business within the meaning of this Code;
4. Doing or proposing to do any business in substance
equivalent to any of the foregoing in a manner designed to
evade the provisions of this Code
The fact that no profit is derived from the making of the
insurance contract or that no separate or direct consideration
was derived from the making of an insurance contract
agreement or transaction shall not be deemed conclusive to
show that the making thereof does not constitute the doing or
transacting of an insurance business
2) Rule on succession on the proceeds if the
beneficiary is disqualified (Sec. 12):
Section 12. The interest of a beneficiary in a life insurance
policy shall be forfeited when the beneficiary is the
principal, accomplice, or accessory in willfully bringing
about the death of the insured. In such a case, the share
forfeited shall pass on to the other beneficiaries, unless
otherwise disqualified. In the absence of other
beneficiaries, the proceeds shall be paid in accordance
with the policy contract. If the policy contract is silent, the
proceeds shall be paid to the estate of the insured.
1. The share forfeited shall be pass on to the other
beneficiaries, unless if they are also disqualified
2. Absence of other beneficiaries, it is the according to the
policy contract; or
3. If the policy is silent, the proceeds shall be paid to the estate
of the insured
General Rule: A contract of insurance may be rescinded on
the following grounds:
1. Concealment (Sec. 26) -A neglect to communicate that which
a party knows and ought to communicate. Here the insured
withholds information of material facts from the insurer
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2. False representation (Sec. 44);
A representation is to be deemed false when the facts fail to DOUBLE INSURANCE OVER-INSURANCE
correspond with its assertions or stipulations.
In double insurance, There is over insurance when
3. Breach of warranty; and there may be no over the amount of the insurance is
4. Material alteration insurance as when the beyond the value of the
sum total of the amounts insured’s insurable interest.
3) What may be insured (Sec. 3) of the policies issued
Any contingent or unknown event, whether past or future, which does not exceed the
may damnify a person having an insurable interest, or create a insurable interest of the
insured
liability against him, may be insured against, subject to the
Always several insurers There may be only one insurer
provisions of the Insurance Code.
involved
4) Double insurance vs. Over-insurance
Double Insurance: It exists where same person is insured by NOTE: Double insurance and overinsurance may exist at the
several insurers separately in respect to same subject and same time or neither may exist at all. When the sums insured
interest. (Sec. 93) exceed the insurable interest, the term “Double insurance” is
used instead of "co-insurance". In such case, there is
Requisite: (1) Person insured is the same; "overinsurance" by "double insurance."
(2) Two or more insurers insuring separately;
5) What is the effect of an insurance contract taken
(3) Identity of Subject matter; by a minor?
(4) Identity of Interest insured; A contract of insurance entered into by a minor (below 18) is
(5) Identity of Risk or peril insured against is likewise the same. merely voidable, thus it is valid until annulled in a proper action

2
in court by the minor or his legal representative. (Art. 1399,
NCC)
If the contract is not disaffirmed by the minor, the insurer cannot
escape liability by pleading minority as a defense because
"persons who are capable cannot allege the incapacity of those
with whom they contracted." (Art. 1397, NCC).
But if the contract is fair and no fraud or undue influence was
practiced by the insurer the minor cannot recover the premiums
paid, if he cannot return the benefits received. The result is that
an insurance company contracting with a minor is bound; the
minor ordinarily is not.
6) What is insurance?/Definition of Insurance
A contract of insurance is an agreement whereby one
undertakes for a consideration to indemnify another
against loss, damage or liability arising from an unknown
or contingent event. (Sec. 2a)
Better definition: It is an agreement by which one party (insurer)
for a consideration (premium) paid by the other party (insured),
promises to pay money or its equivalent or to do some act
valuable to the latter (or his nominee or beneficiary), upon the
happening of a loss, damage, liability, or disability arising from
an unknown or contingent event.
7) Define Casualty Insurance (Sec 176)
Sec 176. Casualty insurance is insurance covering loss or
liability arising from accident or mishap, excluding certain types
of loss which by law or custom are considered as falling
exclusively within the scope of other types of insurance such as
fire or marine. It includes, but is not limited to, employer's
liability insurance, motor vehicle liability insurance, plate glass
insurance, burglary, and theft insurance, personal accident and
health insurance as written by non-life insurance companies,
and other substantially similar kinds of insurance.
8) What is the insurable interest of a mortgagee and
mortgagor?
(Sec. 8, page 81) The mortgagor and the mortgagee have each
an insurable interest in the property mortgaged (Sec. 13), and
this interest is separate and distinct from the other.
MORTGAGOR - mortgagor, as owner, has an insurable
interest therein to the extent of its value, even though the
mortgage debt equals such value. The reason is that the loss
or destruction of the property insured will not extinguish his
mortgage debt.
MORTGAGEE - mortgagee (or his assignee) as such has an
insurable interest in the mortgaged property to the extent of the
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debt secured, since the property is relied upon as security
thereof, and in insuring, he is not insuring the property itself but
his interest or lien thereon. His insurable interest (Sec. 10) is
prima facie the value mortgaged and extends only to the
amount of the sale, not exceeding the value of the mortgaged
property. Such interest continues until the mortgage debt is
extinguished. Thus, separate insurances (see Sec. 93.)
covering different insurable interests may be obtained by the
mortgagor and the mortgagee
9) Fire insurance (Sec. 169)
Fire insurance shall include insurance against loss by fire,
lightning, windstorm, tornado or earthquake and other allied
risks, when such risks are covered by extension to fire
insurance policies or under separate policies.
10) Contract of Suretyship (Sec. 177)
A contract of suretyship is an agreement whereby a party called
the surety guarantees the performance by another party called
the principal or obligor of an obligation or undertaking in favor
of a third party called the obligee. It includes official
recognizances, stipulations, bonds or undertakings issued by
any company.
by virtue of and under the provisions of Act No. 536, as
amended by Act No. 2206
11) Life insurance (Sec. 181)
Life insurance is insurance on human lives and insurance
appertaining thereto or connected therewith.
Every contract or undertaking for the payment of annuities
including contracts for the payment of lump sums under a
retirement program where a life insurance company manages
or acts as a trustee for such retirement program shall be
considered a life insurance contract for purposes of this Code
12) Representation defined (Sec. 36 to 48)
Representation is a statement made by the insured at the time
of, or prior to, the issuance of a policy relative to the risk to be
insured as an existing or past fact or state of facts or concerning
a future happening to give information to the insurer and
otherwise induce him to enter into the contract of insurance
Form: Oral or written
When made: Made at the time of, or before, issuance of the
policy
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Rules: A representation as to the future is to be deemed a
promise, unless it appears that it was merely a statement of
belief or expectation.
- A representation cannot qualify an express provision in a
contract of insurance, but it may qualify an implied warranty.
- A representation may be altered or withdrawn before the
insurance is effected, but not afterwards.
- A representation must be presumed to refer to the date on
which the contract goes into effect.
- A representation is to be deemed false when the facts fail to
correspond with its assertions or stipulations.
13) Nature and characteristics of an insurance
contract
1. Consensual- perfected by a meeting of the minds of the
parties
2. Voluntary- parties may incorporate such terms and
conditions as they please.
EXCEPTIONS: 1. May be required by law such as in
motor vehicles or as a condition to granting a license to
conduct a business affecting public safety or welfare
2. May arise by operation of law e.g. War Damage
Corporation Act
3. Social insurance for members of the government
service or for employees of the private sector
3. Aleatory- it depends on some contingent event thus it is not
a contract of chance and in an insurance contract each party
must take a risk.
Insurer: Risk of having to pay the indemnity if the contingent
event happens
Insured: Risk of paying the premium without receiving anything
therefor if the contingent event does not happen except
protection, which in itself is a valuable consideration
4. Unilateral – imposing legal duties only on the insurer who
promises to indemnify in case of loss
-It is executed as to the insured after payment of the premium
and executory on the part of the insurer in the sense that it is
not executed until payment for a loss.
-Insured usually assumes no duty to pay subsequent premiums
unless the insurer has continued the insurance after maturity of
the premium, in consideration of the insured’s express or
implied promise to pay. BUT he has the right to pay the
stipulated premium and the insurer has
5
5. Conditional– Subject to conditions the principal one of which
is the happening of the contingent event insured against
6. Contract of indemnity - except for life and accident
insurance where the result is death because the promise of the
insurer is only to make good the loss of the insured.
1. If you have no insurable interest then you cannot be
insured and the contract will be void and unenforceable
7. Personal- between the insurer and insured
1. Insured generally cannot assign before the happening
of the loss, his rights under a property policy without the
consent of the insurer. The obligation to pay does not
attach to the object insured. If a transfer is allowed in the
policy then such contracts by which insurance is made to
pass from one owner to another are in the nature of
successive novations.
2. Life insurance policies, however, are generally
assignable or transferable as they are in the nature of
property
8. Risk Distributing Device- a mechanism by which all
members of a group exposed to a particular risk contribute
premiums to an insurer. From these contributory funds are paid
whatever losses occur due to exposure to peril insured against
9. Uberrimae Fidae- Utmost good faith
14) Insurable interest in life and health?
Sec. 10. Every person has an insurable interest in the life and
health:
(a) Of himself, of his spouse and of his children;
(b) Of any person on whom he depends wholly or in part for
education or support, or in whom he has a pecuniary interest;
(c) Of any person under a legal obligation to him for the
payment of money, or respecting property or services, of which
death or illness might delay or prevent the performance; and
(d) Of any person upon whose life any estate or interest vested
in him depends.
15) Why is concealment in Marine Insurance stricter
compared to Fire Insurance?
SEC. 110. A party to a contract of insurance need not
communicate information of his own judgment to the insurer
much less what he learns from a third person. In marine
insurance, however, the rule is quite strict because the insured
is bound to communicate to the insurer not only facts but also
(1) beliefs or opinions of third persons or (2) expectations of
third persons. The only requirement is that the information be
6
in reference to a material fact. Thus, there is concealment The insured has to The consent of the
where the insured at the time of application for insurance did give his consent original insured is not
not disclose the opinion of marine experts who inspected the necessary
vessel insured that it was unseaworthy.
16) Reinsurance v Double Insurance 17) Hostile and friendly fires (page 293)
Double Reinsurance
Insurance
The insurer The insurer becomes
remains as the the insured of the
insurer of the reinsurer
original insured
The subject of the The subject of the
insurance is reinsurance is the
property original insurer’s risk
It is an insurance It is an insurance of a
of the same different interest
interest
The insured is the The original insured has
party in interest in no interest in the
all contracts contract of reinsurance.
Such contract is
independent of the
original contract of
insurance

7
18) PROXIMATE CAUSE, defined
The cause that which in a natural and continuous sequence,
unbroken by any new independent cause, produces an event
and without which the event would not have occurred. It is the
efficient cause that sets others in motion although other and
incidental causes may be nearer in time to the result and
operate more immediately in producing the loss.
The question that needs to be asked is: If the event did not
happen, could the injury have resulted? If NO, the event IS the
proximate cause.
19) What is a rider?
A rider is a small printed or typed stipulation contained on a slip
of paper attached to the policy and forming an integral part of
policy. They constitute additional stipulations between parties
as it saves the trouble and expense of making an entirely new
contract.
In case of conflict between a rider and a printed stipulation in
the policy, the rider prevails because it is a deliberate
expression of the agreement of the contracting parties.
20) Forms of Warranties/KINDS
1. Express warranty – an agreement contained in the policy
or clearly incorporate therein as part thereof
2. Implied warranty – a warranty which from the very nature of
the contract or from the general tenor of the words is
necessarily embodied in the policy as part thereof
3. Affirmative warranty – one which asserts the existence of
a fact or condition at the time it is made
4. Promissory warranty – one where the insured stipulates
that certain facts or conditions pertaining to the risk shall exist
or that certain things with reference thereto shall be done or
omitted
21) When is deviation in marine insurance proper
Sec. 126- Deviation is proper:
(a) When caused by circumstances over which neither the
master nor the owner of the ship has any control;
(b) When necessary to comply with a warranty, or to avoid a
peril, whether or not the peril is insured against;
(c) When made in good faith, and upon reasonable grounds of
belief in its necessity to avoid a peril; or
(d) When made in good faith, for the purpose of saving human
life or relieving another vessel in distress
8
Sec. 127. Every deviation not specified in the last section is
improper.
*Deviation to save cargo or property is improper
Section 128. An insurer is not liable for any loss happening to
the thing insured subsequent to an improper deviation
*Even if the risk has not increased or even if it has been
apparently diminished.
22) How many kinds of loses in Marine Insurance?
There are 3.
Actual total loss, Constructive total loss , Partial loss
23) Implied warranties in marine insurance.
In every insurance upon any marine venture whether of vessel,
cargo, or freight, there are conditions upon the underwriter's
liability for the risks assumed, usually termed as implied
warranties. That is, the insurer will not be liable for any loss
under his policy in case the vessel:
(1) is unseaworthy at the inception of the insurance (Sec. 115.);
(2) deviates from the agreed voyage (see Secs. 125,126,127.);
(3) engages in an illegal venture. (Vance, op. cit., p. 920.)
(4) the ship will carry the requisite documents of nationality or
neutrality of the ship or cargo where such nationality or
neutrality is expressly warranted. (Sec. 122.)
Of course, it is also impliedly warranted that the insured has an
insurable interest in the subject matter insured
24) When is the ship considered seaworthy?
Sec 116. A ship is seaworthy, when reasonably fit to perform
the service and to encounter the ordinary perils of the voyage
contemplated by the parties of the policy.
GENERAL RULE: The warranty of seaworthiness is complied
with if the ship be seaworthy at the time of the commencement
of the risk.
EXCEPTIONS:
a. In the case of time policy, the ship must be seaworthy at the
commencement of every voyage she may undertake
b. In the case of cargo policy, each vessel upon which the cargo
shipped or transhipped, must be seaworthy at the
commencement of each particular voyage.
c. In the case of a voyage policy contemplating a voyage in
different stages, the ship must be seaworthy at the
commencement of each portion.
9
25) What are the Perils of the Sea?
Perils of the sea embraces all kinds of marine casualties and
damages done to ships or goods at sea by violent action of the
winds and waves. It is one that could not be foreseen and not
attributable to the fault of anybody.
It embraces all kinds of marine casualty such as shipwreck,
foundering, stranding, collision, and every specie of damage
done to the ship or goods at sea by the violent action of the
wind and waves or losses occasioned by the jettisoning of
cargo if it is made for the purpose of saving a vessel rendered
unworthy during the voyage, not through the fault of the captain.
26) Distinguish perils of the sea and perils of the
ship
Perils of the sea include only such losses that are extraordinary
nature or arise from some overwhelming power which cannot
be guarded against by the ordinary exertion of human skill or
prudence.
Perils of the ship which in the ordinary course of events, results
from the natural and inevitable action of the sea, from the
ordinary wear and tear of the ship, or from the negligent failure
of the ship’s owner to provide the vessel with proper equipment
to convey the cargo under ordinary conditions.
27) What is an incontestability doctrine?
An incontestability clause is a clause in most life insurance
policies that prevent the provider from voiding coverage due to
a misstatement by the insured after a specific amount of time
has passed
28) Incontestability period (sec 48)
"Section 48. Whenever a right to rescind a contract of insurance
is given to the insurer by any provision of this chapter, such
right must be exercised previous to the commencement of an
action on the contract.
"After a policy of life insurance made payable on the death of
the insured shall have been in force during the lifetime of the
insured for a period of two (2) years from the date of its issue
or of its last reinstatement, the insurer cannot prove that the
policy is void ab initio or is rescindable by reason of the
fraudulent concealment or misrepresentation of the insured or
his agent.
29) Requisites for incontestability
1. The policy is a life insurance policy.
2. Payable on the death of the insured.
10
3. It has been in force during the lifetime of the insured for at
least 2 years from its date of issue or of its last reinstatement.
Incontestability means that after the requisites are shown to
exist, the insurer is estopped from contesting the policy or
setting up the defense, except as is allowed, on the ground of
public policy.
30) The effect when the policy becomes
incontestable
The insurer may not refuse to pay the policy by claiming that:
1. The policy is void ab initio;
2. It is rescissible by reason of fraudulent concealment of the
insured or its agent, no matter how patent or well-founded; and
3. It is rescissible by reason of fraudulent misrepresentations of
the insured or his agent
31) Insurable interests in property:
Section 14. An insurable interest in property may consist in:
(a) An existing interest
(b) An inchoate interest founded on an existing interest; or
(c) An expectancy, coupled with an existing interest in that out
of which the expectancy arises.
32) What is actual loss?
An actual total loss exists when the subject matter of the
insurance is wholly destroyed or lost or when it is so damaged
as no longer to exist in its original character.
33) What is constructive total loss?
A constructive total loss, is one in which the loss, although not
actually total, is of such a character that the insured is entitled,
if he thinks fit, to treat it as total by abandonment.
*It is sometimes called, a "technical total loss"
34) Concealment v Misrepresentation
Misrepresentation is a statement as a fact of something which
is untrue, which the insured stated with knowledge that is
untrue and with an intent to deceive, or which he states
positively as true without knowing it to be true and which has a
tendency to mislead, and where such fact in either case is
material to the risk.
Concealment is neglect to communicate that which a party
knows and ought to communicate.
In concealment, the insured withholds information of material
facts from the insurer, whereas in misrepresentation, the
11
insured makes erroneous statements of facts with the intent of
inducing the insurer to enter into the insurance contract;
35) What are the types of beneficiaries?
Revocable – beneficiary can be changed at any time
Irrevocable – needs consent of IR Beneficiary to change
beneficiary.
36)What may be insured?
Any contingent or unknown event, whether past or future,
which may damnify a person having an insurable interest or
create a liability against him, may be insured against.
37) What are those that cannot be insured?
1. public enemy (Sec 7)- A public enemy designates a nation
with whom the Philippines is at war and it includes every citizen
or subject of such nation
2. Pure expectancy (Sec. 16)- A mere contingent or expectant
interest in anything, not founded on an actual right to the thing,
nor upon any valid contract for it, is not insurable.
3. For or against drawing any lottery, or for or against any
chance or ticket in a lottery drawing a prize (Sec. 4)
4. No insurable interest
38) Subrogation and to what extent applicable and
exceptions to the doctrine of subrogation (to the extent of
the amount paid by the insurer to the mortgagee-insured;
applicable only to property insurance
1. Basis of right- Subrogation; the substitution of one person
in place of another with reference to a lawful claim or right, so
that he who is substituted succeeds to the rights of the other in
relation to a debt or claim, including its remedies and securities.
2. Purpose of subrogation condition in policy to make the
person who caused the loss, legally responsible for it and at the
same time prevent the insured from receiving a double recovery
from the wrongdoer and the insurer.
3. Right of subrogation applicable only to property insurance
and NOT LIFE INSURANCE because the value of human life
regarded as unlimited
4. Privity of contract or assignment by insured of claim not
essential
5. Loss or injury for risk must be covered by the policy to entitle
the insurer to subrogation.
6. The right of subrogation given to the insurer prevents the
insured from obtaining more than the amount of his loss. It is a
12
method of implementing the principle of indemnity that is at the
heart of all insurance.
7. The exercise of the right of subrogation is discretionary upon
the insurer.
EXTENT: The right of subrogation under Article 2207 applies
only to property and not to life insurance. The value of human
life is regarded as unlimited and therefore, no recovery from a
third party can be deemed adequate to compensate the
insured's beneficiary.
39) When does the alteration of the things insured
invalidate the insurance (sec 170)
Section 170. An alteration in the use or condition of a thing
insured from that to which it is limited by the policy made
without the consent of the insurer, by means within the control
of the insured, and increasing the risks, entitles an insurer to
rescind a contract of fire insurance.
The following requisites must be present:
1) The use or condition of the thing is specifically limited or
stipulated in the policy;
2) Such use or condition as limited by the policy is altered;
3) The alteration is made without the consent of the insurer;
4) The alteration is made by means within the control of the
insured; and
5) The alteration increases the risk.
--------------------------------------END--------------------------------------
1)What is/are the oldest insurance?
A: Ocean marine and fire insurance.
2) The ___ insured has no interest in a contract of
reinsurance
A: Original
3) When breach of warranty does not avoid the
policy
A: The general rule is that a violation of a warranty avoids a
contract of insurance.
Exception: Section 73, which refers to those warranties relating
to the future, however provides 3 exceptions:
1. When the loss occurs before time for performance
2. when performance becomes unlawful
3. when performance becomes impossible
13
4. Waiver - an express or implied intentional relinquishment of
a known right, the failure of the insurer to assert the breach of
warranty
5. Estoppel - the insurer is precluded because of some action
or inaction on its part when those actions or inaction were relied
on by the insured.
4) What are the 3 main classifications of insurance?
- Under the Insurance Code, the insurance contracts are
classified according to the nature of the risk involved as follows:
a) Life Insurance Contracts
Individual Life, Group Life, Industrial
b) Non-Life Insurance
Marine, Fire, Casualty
c) Contracts of Suretyship or binding
5) When are the facts material to the insurance (Sec.
31)
Materiality is to be determined not by the event, but solely by
the probable and reasonable influence of the party to whom the
communication is due, in forming his estimate of the
disadvantages in the proposed contract, or in making his
inquiries.
Test of materiality: The effect of the knowledge of the fact in
question would have on the making of the contract. It is
sufficient if the knowledge of such fact would influence the
parties in making the contract.
6) Elements of Contract of Insurance
The CONTRACT OF INSURANCE made between the parties
usually called the insured and the insurer, is distinguished by
the presence of five elements
1. The insured possesses an interest of some kind susceptible
of pecuniary estimation, known as insurable interest
2. The insured is subject to a risk of loss through the
destruction or impairment of that interest by the happening of
designated perils
7) Legal Concept of insurance
A contract of insurance is an agreement by which one party
(insurer) for a consideration (premium) paid by the other party
(insured), promises to pay money or its equivalent or to do
some act valuable to the later (or his nominee), upon the
14
happening of a loss, damage, liability or disability arising from
an unknown or contingent event.
(1) Insurance against loss of or damage to:
3. The insurer assumes that risk of loss
4. Such assumption of risk is part of a general scheme to
distribute actual losses among a large group or substantial
number of persons bearing similar risk
5. As consideration for the insurer’s promise, the insured makes
a ratable contribution called “premium” to a general insurance
fund.
8) Distinguish Insurable Interest in Life Insurance
from Property Insurance
9) Define marine insurance (section 101)
Sec. 101 Marine insurance includes:
(a) Vessels, craft, aircraft, vehicles, goods, freights,
cargoes, merchandise, effects, disbursements,
profits, moneys, securities, choses in action,
evidences of debt, valuable papers, bottomry, and
respondentia interests and all other kinds of property
and interests therein, in respect to, appertaining to or in
connection with any and all risks or perils of navigation,
transit or transportation, or while being assembled,
packed, crated, baled, compressed or similarly prepared
for shipment or while awaiting shipment, or during any
delays, storage transshipment, or reshipment incident
thereto, including war risks, marine builder’s risks, and all
personal property floater risks.
(b) Person or property in connection with or
appertaining to a marine, inland marine, transit
or transportation insurance, including liability for
loss of or damage arising out of or in connection with
the construction, repair, operation, maintenance or
use of the subject matter of such insurance (but not
including life insurance or surety bonds nor
insurance against loss by reason of bodily injury to
15
 any person arising out of the ownership,
maintenance, or use of automobiles).
(c) Precious stones, jewels, jewelry, precious
metals, whether in course of transportation or
otherwise.
(d) Bridges, tunnels and other instrumentalities
of transportation and communication (excluding
buildings, their furniture and furnishings, fixed
contents and supplies held in storage); piers,
wharves, docks and slips, and other aids to
navigation and transportation, including dry docks
and marine railways, dams and appurtenant
facilities for the control of waterways. 11) Prevailing rule on changing beneficiary in life
(2) “Marine protection and indemnity insurance,” insurance
meaning insurance against, or against legal liability of the General Rule: Whether or not the policy reserves to the insured
insured for, loss, damage, or expense incident to owner- the right to change the beneficiary, the insured has the power
ship, operation, chartering, maintenance, use, repair, or to change the beneficiary without the consent of the latter who
construction of any vessel, craft or instrumentality in use acquires no vested right but only an expectancy of receiving the
in ocean or inland waterways including liability of the proceeds under the insurance.
insured for personal injury, illness or death or for loss of,
or damage to, the property of another person. It follows that the insured retains the right:

10) Distinguish warranties from representation - to receive the cash value of the policy,
- to take out loans against the cash value,

16
- to assign the policy, or
- to surrender it without the consent of the beneficiary.
Effect of death of insured: The insured's power to extinguish
the beneficiary's interest ceases at his death, and cannot be
exercised by his personal representatives or assignees.
Where right to change is waived: The insured has no power to
make such change without the consent of the beneficiary.
2. (a) The beneficiary acquires an absolute and vested interest
to all benefits accruing to the policy from the date of its issuance
and delivery, including that of obtaining a policy loan to the
extent stated in the schedules of values attached to the policy.
(b) Neither can a new beneficiary be added to the irrevocably
designated beneficiary for this would in effect reduce the latter's
vested rights.
(c) The insured does not even retain the power to destroy the
contract by refusing to pay premiums for the beneficiary can
protect his interest by paying the premiums for the reason that
the fulfillment of an obligation may be made by a third person
even against the will of the debtor and if he has an interest in
the fulfillment of the obligation, even against the will of the
creditor
12) Definition of warranty
Warranty is a statement or promise by the insured contained in
the policy or incorporated in or attached to it by proper
reference, the falsity or nonfulfillment of which and regardless
of whether or not the insurer has suffered loss or prejudice as
a result of the falsity or nonfulfillment, renders the policy
voidable at the election of the insurer.
13) What are the contents of a policy (sec 51)
1. Names of the parties
2. Amount of insurance – easily and exactly determine the
amount of indemnity to be paid especially if it is only partial and
not total.
- Amount of the insurance is the maximum limit on the
insurer’s liability which is not necessarily the value of the
property insured nor extent of liability of insurer in the
event of loss, unless otherwise stipulated.
- Life and health insurance and accidental death and
injury, a fixed sum is payable.
- The amount insured is the amount fixed in the policy.
(e.g. automatic increase clause)
- deductible – stated amount to be deducted from any loss,
which is shouldered by the Insured making the insurer liable
only for the excess of said amount.
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3. Premium – represents the consideration of the contract;
what the insured pays the insurer to assume the risk of or the
value loss.
- developed in the basis of the nature and character of the
risk assumed and also on the value of the property or
other interest insured.
a. life insurance – average life span
b. fire insurance – structure or construction, occupancy or
use, location, and loss-prevention or protection facilities
4. Property or life insured – subject matter if the contract;
“thing insured”
5. Interest of insured in property – determine actual damage
suffered by the insured in case of loss if he is not the absolute
owner of the property
6. Risks insured against – insurer’s undertaking is to
indemnify the insured for loss, damage or liability caused or
created only by the risks insured against
7. Term or duration of insurance – period during which the
insurance is to continue.
Life of the policy – period of time during which the insurer
assumes the risk of loss
Annual policies – term of 12 months
Short period policies – less period
14) Rule on succession if life insurance if
beneficiary dies
Section 23. A change of interest, by will or succession, on the
death of the insured, does not avoid an insurance; and his
interest in the insurance passes to the person taking his interest
in the thing insured.
15) When does the alteration of the things insured
invalidate the insurance (sec 170)
Section 170. An alteration in the use or condition of a thing
insured from that to which it is limited by the policy made
without the consent of the insurer, by means within the control
of the insured, and increasing the risks, entitles an insurer to
rescind a contract of fire insurance.
16) When is the period to file a case begins when
there is already a rejection of claim?
Where the policy provided that if a claim be made rejected,
an “action or suit” should be commenced within 12
months after such rejection otherwise the claim would
prescribe.
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The action or suit in a policy as referring to a claim or demand
must be filed in the courts of justice.
Note however that the new insurance code now empowers the
Insurance Commissioner to adjudicate disputes relating to an
insurance company’s liability, hence the filling unto the
commissioner would have the effect of tolling or suspending the
running of the prescriptive period.
Note: Section 63: A condition, stipulation or agreement, in any
policy insurance, limiting the time for commencing an action
thereunder to a period of less than 1 year from the time when
the cause of action accrues, is void.
Exception: A policy of industrial life insurance, the period
cannot be less than 6 years after the cause of action accrues.
(Sec 231(d))
17) Who is the owner of the insurance policy, the
insurer or the beneficiary?
BOTH. Insured holds the policy as evidence of his right. When
death occurs, beneficiary has the right to claim for the proceeds
of the policy
18) Insurable interest of property insurance? How
to measure the insurable interest of a property
insurance?
Section 13. Every interest in property, whether real or personal,
or any relation thereto, or liability in respect thereof, of such
nature that a contemplated peril might directly damnify the
insured, is an insurable interest.
19) Despite non-payment of premiums what are
those that are still valid and binding?
- In case of life or industrial life insurance, when the grace
periods applies; (Sec. 77)
- Under a broker and agency agreements with duly licensed
intermediaries, a 90- day extension is given
- When the insurer makes a written acknowledgment of the
receipt premium; (Sec. 78)
- If the parties have agreed to the payment of the premium in
installments and partial payment has been made at the time of
the loss.
- Where a credit term has been agreed upon.
- Where the parties are barred by estoppel.
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20) What are the alterations in fire insurance which
do not avoid the policy in the event of loss?
Alterations not avoiding policy:
a) Where risk of loss is not increased
b) Where questioned articles required by insured's business
c) Where insured property would be useless if questioned acts
were prohibited
21) Representation and misrepresentation
Representation is a statement made by the insured at the time
of, or prior to, the issuance of the policy (Sec.37.), relative to
the risk to be insured, as to an existing or past fact or state of
facts, or concerning a future happening, to give information to
the insurer and otherwise induce him to enter into the insurance
contract.
Misrepresentation in insurance is a statement (1) as a fact of
something which is untrue, (2)which the insured stated with
knowledge that is untrue and with an intent to deceive, or which
he states positively as true without knowing it to be true and
which has a tendency to mislead, and (3) where such fact in
either case is material to the risk. *Misrepresentation is an
affirmative defense. It renders the insurance contract voidable
at the option of the insurer, even though innocently made and
without wrongful intent. The insurer, to avoid liability, has the
duty to establish such defense by satisfactory and convincing
evidence.
22) When does a person have an insurable interest
in the property? (Sec 19)
Sec 19. An interest in property insured must exist when the
insurance takes effect, and when the loss occurs, but need not
exist in the meantime; and interest in the life or health of a
person insured must exist when the insurance takes effect, but
need not exist thereafter or when the loss occurs.
23) Who may be an insurer? (Sec. 6)
Every corporation, partnership, or association duly
authorized to transact insurance business as elsewhere
provided in this Code, may be an insurer. (Sec. 6)
The terms “insurer” and “insurance company” include all
partnerships, associations, cooperatives, or corporations,
including government-owned or controlled corporations or
entities, engaged as principals in the insurance business,
excepting mutual benefit associations. Unless the context
otherwise requires, the terms shall also include professional
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reinsurers defined in Section 288. (Sec. 190) An individual is
no longer allowed to be an insurer.
24) What constitutes an insurance corporation?
An “insurance corporation” is defined as “formed or organized
to save any person or persons or other corporations harmless
from loss, damage, or liability arising from any unknown or
future or contingent event, or to indemnify or to compensate
any person or persons or other corporations for any such loss,
damage, or liability, or to guarantee the performance of or
compliance with contractual obligations or the payment of debts
of others. (Sec. 191)
25) When can the insured change his beneficiary?
(Sec. 11)
Sec 11. The insured shall have the right to change the
beneficiary he designated in the policy, unless he has expressly
waived this right in said policy. Notwithstanding the foregoing,
in the event the insured does not change the beneficiary during
his lifetime, the designation shall be deemed irrevocable.
General Rule: Unless the policy reserves to the insured the
right to change the beneficiary, no such right exists and the
named beneficiary has vested right in the policy of which he
cannot be divested without his consent.
Exception: In life insurance, the insured has the power to
change the beneficiary without the consent of the latter who
acquires no vested right but only an expectancy of receiving the
proceeds under the insurance. It follows that the insured retains
the right to receive the cash value, to assign the policy, or to
surrender it without the consent of the beneficiary.
26) Requisites of insurance contract
● A subject matter in which the insured has an insurable
interest. (see Secs 12-14);
● Event or peril insured against which may be any (future)
contingent or unknown event, past or future (Sec. 3), and a
duration for the risk thereof (see Sec. 51g);
● A promise to pay or indemnify in a fixed or ascertainable
amount (see Sec. 2);
● A consideration for the promise, known as the premium (see
Sec. 77); and
● A meeting of the minds of the parties upon all the foregoing
essentials. (see Arts. 1318, 1319 of NCC)
● The parties must be competent to enter into the contract ( see
Arts. 1327-1329 (NCC);
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● No policy of insurance shall be issued or delivered within the
Philippines unless in the form previously approved by the
Insurance Commissioner. (Sec. 232)
27) When does the right of subrogation commence
between the insurer and insured?
When the insurer after paying the amount covered by the
insurance policy, steps into the shoes of the insured, as it were,
and avails himself of the latter`s rights that exist against the
wrongdoer at the time of the loss.
28) Limitations in the appointment of beneficiaries.
(Sec. 11)
● Article 2012(NCC) “Any person who is forbidden from
receiving any donation under Article 739 cannot be named
beneficiary of a life insurance policy by the person who cannot
make any donation to him, according to said article.”
● Article 739 (NCC) “The following donations shall be void:
> Those made between persons who were guilty of adultery or
concubinage at the time of the donation;
> Those made between persons found guilty of the same
criminal offense, in consideration thereof;
> Those made to a public officer or his wife, descendants and
ascendants, by reason of his office
In the case referred to in No. 1, the action for declaration of
nullity may be brought by the spouse of the donor or donee;
and the guilt of the donor and the donee may be proved by
preponderance of evidence in the same action.”
● Since life insurance policy, in essence, is no different from a
civil donation insofar as the beneficiary is concerned. As a
consequence, the proscription in Article 739 should equally
operate in life insurance contracts
29) Sources of insurance law
Spanish Period: Title 7 Book 2 and section 3 of title 3 of Code
of Commerce and chapters 2 and 4 of title 12 of Book 4 of Civil
Code 1889
American Regime: Act 2427 or the Insurance Act of 1915
repealed provisions in Code of Commerce; RA 386 Civil Code
of the PH repealed Code of Commerce provisions on
insurance and old provision of insurance in the old Civil Code
Martial Law: PD 612 Insurance Code of 1974; Repealed 2427;
PD amendments of 612 were 63, 123, and 317.
PD 1460 or Insurance Code of 1978 amended provision of PD
612
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RA 10607 “An Act Strengthening the Insurance Industry, ● That the premiums have not been paid (Secs. 77, 235b, 234b,
Further amending PD 612” aka Insurance Code (recent) 236b);
30) Matters which need to be communicated in the ● That the conditions of the policy relating to military or naval
absence of inquiry. (Sec. 28) service have been violated (Secs 233b, 234b);

It is the duty of each party to a contract of insurance to
communicate in good faith all facts within his knowledge only
when:
● They are material to the contract (Secs. 31, 34, 35)
● The other has not the means of ascertaining the said facts
(see Secs. 30, 32, 33); and
● As to which the party with the duty to communicate makes no
warranty. (see Secs. 67-76)
31) Exceptions to incontestability clause. (Sec. 48)
● That the fraud is of a particularly vicious type, as where the
policy was taken out in furtherance of a scheme to murder the
insured, pr where the insured substitutes another person for the
medical examination, or where the beneficiary feloniously kills
the insured;
● That the beneficiary failed to furnish proof of death or to
comply with any condition imposed by the policy after the loss
has happened (see Sec. 248)’
● That the action was not brought within the time specified. (see
Sec. 63).

The insurer may still contest the policy by way of defense to a 32) Rights of mortgagee and distinctions (before
suit brought upon the policy or by action to rescind the same, and after loss)
on any of the following grounds:
Before loss - mortgagee is a conditional appointee of the
● That the person taking the insurance lacked insurable interest mortgagor entitled to receive so much of any sum that may
as required by law; become due under the policy as does not exceed his interest
as mortgagee. Such right becomes absolute upon the
● That the cause of death of the insured is an excepted risk’
occurrence of the loss.

23
After loss: If the loss happens after the credit has matured, the
mortgagee is entitled to receive the money to apply to the
extinguishment of the debt as fast as it becomes due.
If the loss happens after the credit has matured, the mortgagee
may apply the proceeds to the extent of his credit.
33) distinctions of fire and marine insurance
34) Modern classifications of insurance
Ans: marine, property, personal, liability
35) What is Loan on bottomry? Plus extent of
insurable interest in it. (Sec 103)
A loan on bottomry is one which is payable only if the vessel,
given as a security for the loan, completes in safety the
contemplated voyage.
Sec 103. The insurable interest of the owner of the ship
hypothecated by bottomry is only the excess of its value over
the amount secured by bottomry.
36) Powers of the insurance commissioner. Explain
each.
The general duty and function of the Insurance Commissioner
is to regulate and supervise the transaction of insurance
business so as to protect the interest of the public, to execute
the insurance laws, and to see that violations of the insurance
laws are properly dealt with or punished.
I. Adjudicatory/Quasi-judicial
a. Exclusive jurisdiction
Any dispute in the enforcement of any policy
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b. Concurrent original jurisdiction (with the RTC)
Where the maximum amount involved in any single
claim is P5,000,000.00 Five Million Pesos except in case
of maritime insurance which is within the jurisdiction of
the MTC or the RTC depending on the value involved
Where the amount exceeds P5,000,000.00 the RTC has
jurisdiction
II. Administrative/Regulatory
a. Enforcement of insurance laws
b. Issuance, suspension or revocation of certificate of
authority
c. Power to examine books and records, etc.
d. Rule-making authority; and
e. Punitive
Conferred by law - Statutes which provide that an insurance
board or official shall have powers have generally been upheld
or recognized as a proper delegation of administrative or
ministerial duties, rather than of legislative powers.
Exercise generally not subject to judicial review - Where
provision has been made for an appeal to the court from any
regulation, order, or rate adapted by an insurance board or
official, such a provision gives a speedy and adequate remedy,
and an injunction will not lie to restrain such board or official
from proceeding in a matter within its or his jurisdiction. As an
application of the nature of exhaustion of remedies, a court will
refuse to take jurisdiction of a matter while it is still pending
before the board or official, since the administrative remedy has
not been fully exhausted at that point.
37) When must insurable interest in property
exists? In life insurance? What are the exceptions?
(Sec 19)
Sec 19. An interest in property insured must exist when the
insurance takes effect, and when the loss occurs, but need not
exist in the meantime; and interest in the life or health of a
person insured must exist when the insurance takes effect, but
need not exist thereafter or when the loss occurs.
The general rule stated in Sec 19 is applicable only to insurance
on property and not to life insurance EXCEPT that on the life of
the debtor.
38) What is reinsurance (Sec. 97)
25
A contract of reinsurance is one by which an insurer (reinsured; 5. A transfer of interest by one of several partners, joint owners,
the original insurer) procures a third person (reinsurer) to insure or owners in common, who are jointly insured, to the others
him against loss or liability by reason of such original insurance. (Sec. 24)
- “Insurance of an insurance” 6. When a policy is so framed that it will inure to the benefit of
whomsoever, during the continuance of the risk, may become
- Insurance of a reinsurance = “retrocession”
the owner of the interest insured (Sec. 57); and
39) What is the general rule on change of interest
7. When there is an express prohibition against alienation in the
and the exceptions policy, in case of alienation, the contract of insurance is not
GEN RULE (Sec 20): A change of interest in any part of a thing merely suspended but is avoided. (Art. 1306, Civil Code; Sec.
insured unaccompanied by a corresponding change of interest 24)
in the insurance, suspends the insurance to an equivalent 40) Difference between Condition and Warranty
extent, until the interests in the thing and the interest in the
insurance are vested in the same person.
EXCEPTIONS:
1. In life, health, and accident insurance (Sec. 20)
2. A change of interest in the thing insured after the occurrence
of an injury which results in a loss (Sec. 21)
3. A change of interest in one or more several things, separately
insured by one policy (Sec. 22)
4. A change of interest by will or succession on the death of the
insured

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41) Kinds of policies (Secs. 59, 60, 61, 62)
OPEN POLICY- is one in which the value of the thing insured
is not agreed upon and the amount of insurance merely
represents the insurer's maximum liability. The value of such
thing insured shall be ascertained at the time of the loss.
VALUED POLICY- is one which expresses on its face an
agreement that the thing insured shall be valued at a specified
sum.
RUNNING POLICY- is one which contemplates successive
insurances, and which provides that the object of the policy may
be from time to time defined, especially as to the subjects of
insurance, by additional statements or indorsements.
42) GROUNDS FOR RESCISSION (BF-BAC)
a. Breach of material warranty;
b. False representation;
c. Breach of a condition subsequent;
d. Alteration of the thing insured;
e. Concealment
43) Effect of Breach of Warranty
Sec. 71. A statement in a policy, of a matter relating to the
person or thing insured, or to the risk, as a fact, is an express
warranty thereof.
Sec. 74. The violation of a material warranty, or other material
provision of a policy, on the part of either party thereto, entitles
the other to rescind.
Sec. 75. A policy may declare that a violation of specified
provisions thereof shall avoid it, otherwise the breach of an
immaterial provision does not avoid the policy (unless
expressly stipulated).
Sec. 76. A breach of warranty without fraud merely exonerates
an insurer from the time that it occurs, or where it is broken in
its inception; prevents the policy from attaching to the risk.
Effect of Breach of Warranty
1) Fraud is not essential for breach; falsity not fraud is the basis
of liability on a warranty.
2) Effect without fraud:
- policy is avoided only from the time of breach
-and the insured is entitled to the return of premium paid
at pro rata rate from the time of breach if it occurs after
the inception of the contract; or to all premiums if it is
27
 broken during the inception of the contract. In the latter
case, the contract is void ab initio and never becomes
binding.
3) Effect with fraud
-policy is avoided ab initio, and the insurer is not entitled
to the return of premium paid.
44) When an insurer is entitled to the payment of a
premium, note exceptions
Sec. 77. An insurer is entitled to payment of the premium as
soon as the thing insured is exposed to the peril insured
against.
GEN RULE: Notwithstanding any agreement to the contrary, no
policy or contract of insurance issued by an insurance company
is valid and binding unless and until premium thereof has been
paid
EXCEPTIONS:
a. In case of a life or an industrial life policy whenever the grace
period provision applies (sec. 77)
b. Whenever under the broker and agency agreements with
duly licensed intermediaries, a ninety-day credit extension is
given (sec. 77)
c. When there is acknowledgment in a policy or contract of
insurance of receipt of premium even if there is a stipulation
therein that it shall not be binding until the premium is actually
paid (Sec. 79)
d. No contract of suretyship or bonding shall be valid and
binding unless and until the premium therefore has been paid,
EXCEPT where the obligee has accepted the bond, in which
case the bond becomes valid and enforceable irrespective of
whether or not the premium has been paid by the obligor to the
surety.
e. When there is an agreement allowing the insured to pay the
premium in installments and partial payment has been made at
the time of loss (case)
f. When there is an agreement to grant the insured credit
extension for the payment of the premium, and loss occurs
before the expiration of the credit term;
g. When estoppel bars the insurer from invoking Section 77 to
avoid recovery on a policy providing a credit term for the
payment of the premiums, as against the insured who relied in
good faith on such extension.
45) What is an all risk marine insurance policy?
28
An ALL RISKS marine insurance policy insures against all
causes of conceivable loss or damage, except as otherwise
excluded in the policy or due to fraud or intentional misconduct
on the part of the insured
46) What is barratry/barratry clause?
A clause which provides that there can be no recovery on the
policy in case of any willful misconduct on the part of the master
or crew in pursuance of some unlawful or fraudulent purpose
without consent of owners, and to the prejudice of the owner's
interest
- Barratry is not a peril of the sea and is not covered in an
insurance policy which does not specify barratry as a risk
47) Differentiate concealment in marine insurance
48) Sec. 111. Presumptive knowledge by insured of
prior loss
Sec. 111. A person insured by a contract of marine is presumed
to have knowledge, at the time of insuring, of a prior loss, if the
information might possibly have reached him in the usual mode
of transmission and at the usual rate of communication
49) Sec. 112 When concealment in marine insurance
does not vitiate the contract
Sec. 112. A concealment in a marine insurance, in respect to
any of the following matters, does not vitiate the entire contract,
but merely exonerates the insurer from a loss resulting from the
risk concealed:
a. The national character of the insured;
b. The liability of the thing insured to capture and detention;
c. The liability to seizure from breach of foreign laws of trade;
d. The want of necessary documents; and
e. The use of false and simulated papers.
50) Requisites for valid abandonment
29
The requisites for a valid abandonment in marine insurance
are:
(1) There must be an actual relinquishment by the person
insured of his interest in the thing insured;
(2) There must be a constructive total loss;
(3) The abandonment be neither partial nor conditional;
(4) It must be made within a reasonable time after receipt of
reliable information of the loss
(5) It must be factual
(6) It must be made by giving notice thereof to the insurer which
may be done orally or in writing; and
(7) The notice of abandonment must be explicit and must
specify the particular cause of the abandonment
51) What is contract of life annuity and distinguish
it from life insurance
Contract of life annuity: the debtor binds himself to pay an
annual pension or income during the life of one or more
determinate persons in consideration of a capital consisting of
money or other property, whose ownership is transferred to him
at once with the burden of the income.
a. An annuity contract, unlike the life insurance contract,
insures against economic problems resulting from a long life,
rather than an early death.
b. From the insurer's viewpoint, insurance looks to longevity,
while annuity, to transiency
c. Under the ordinary life insurance policy, the insured pays to
the insurer an annuity and his beneficiary receives at the
insured's death the lump sum payment. Under the usual form
of annuity, the lump sum is paid to the insurer immediately and
the annuitant receives the annuity payments as long as he
lives.
d. An annuity appears more like an investment instead of an
insurance, which may or may not turn out to be profitable, while
life insurance has a characteristic akin to indemnity, i.e., the
insurer will reimburse the insured's beneficiaries a large sum
upon the insured's death.
52) What is compulsory motor vehicle liability
insurance
Insurance covering loss or liability arising from accident or
mishap, excluding those falling under other types of insurance
such as fire or marine.
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NO FAULT CLAUSE: Clause that gives the victim (injured
person or heirs of the deceased) an option to file a claim for
death or injury without the necessity of proving fault or
negligence of any kind.
53) FORMULA OF RATABLE CONTRIBUTION

54) What is a cover note?

A concise and temporary written contract issued to the insurer
through its duly authorized agent embodying the principal terms
of an expected policy of insurance.

31