Contract of Insurance - an Agreement whereby one Undertakes for a consideration to member of the group.

Indemnify another against loss, damage, or liability Arising from an unknown or contingent
event.
Contract of Suretyship - an agreement whereby a party called the surety guarantees the
performance by another called the principal or obligor of an obligation or undertaking in
favor of a third party called the obligee.
 It shall be deemed to be an insurance contract if made by a surety who or which, as
such, is doing an insurance business.
A person is doing or transacting an INSURANCE BUSINESS if he performs any of
the following: MMDD
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, not as
a mere incident to any other legitimate business of a surety;
3. Doing any insurance business like reinsurance and similar acts; and
4. Doing or proposing to do any business equivalent to the above.
MUTUAL INSURANCE COMPANIES - an entity owned by policy holders that caters only to
the insurance needs of the same policyholders/members. These companies have no capital
stock and the contributions of members are the only sources of funds to meet
losses and expenses.
BANCASSURANCE - the presentation and sale to bank customers by an insurance company
of its insurance products within the premises of the head office of such bank, duly licensed
by the BSP or any of its branches.
 The bank itself will not engage in insurance business because it is prohibited under
the General Banking Law to engage insurance business.
CHARACTERISTICS OF INSURANCE: CAR-CUP
1. Contract of Adhesion - it is such considering that most of the terms of the contract
do not result from mutual negotiations between the parties as they are prescribed by
the insurer in printed form to which the insured may adhere if he chooses but which he
cannot change.
 In case of doubt, the contract shall be interpreted strictly against the insurer and
liberally in favor of the insured.
 However, if the terms of the contract are clear, there is no room for interpretation
and the courts are bound to adhere to the insurance contract although the
contract may be rather onerous.
2. Aleatory - the obligation of the insurer to pay the proceeds of the insurance arises only
upon the happening of an event which is uncertain, or which is to occur at an
indeterminate time.
3. Risk-Distributing Device - by paying a pre-determined amount into a general fund
out of which payment will be made for an economic loss of a defined type, each
member contributes to a small degree toward compensation for losses suffered by any
4. Contract of Indemnity - It means that the insured, who has insurable interest over a
property, is only entitled to recover the amount of actual loss sustained and the burden
is upon him to establish the amount of such loss.
 Applicable only to property insurance, except creditor insuring the life of his
debtor.
 Life insurance is not a contract of indemnity. There is over insurance only in
property insurance and, if this is present, the insurer is only liable up to the extent
of the loss.
 Insurance contracts are not wagering contracts.
5. Uberrimae Fidae Contracts - insurance policies are contracts of utmost good faith.
It requires the parties to the contract to disclose conditions affecting the risk of which
he is aware, or material fact, which the applicant knows, and those, which he ought to
know.
6. Personal Contract - The insurer considered the personal qualifications of the insured
in approving the insurance application.
ELEMENTS OF INSURANCE: PAIRS
1. Payment of premiums;
2. Assumption of risks;
3. Insurable interest’s existence;
4. Risk of loss; and
5. Scheme to distribute losses.
INSURANCE RISK - actuarial risk; the risk that the cost of insurance claims might be higher
than the premiums paid.
When is a CONTRACT OF INSURANCE PERFECTED?
 An insurance contract is a consensual contract and is therefore perfected the
moment there is a meeting of minds with respect to the object and the cause or
consideration (cognition theory).
 Mere submission of the application without the corresponding approval of the
policy does not result in the perfection of the contract of insurance.
 Since the contract of insurance is consensual, delivery of the policy is not necessary
for its perfection.
 Delay in acceptance of the insurance application will not result in a binding
contract.
 An acceptance of an offer by letter does not bind the offerer except from the time it
came to his knowledge.
COVER NOTES - Persons who wish to be insured may get protection before the perfection
of the insurance contract -- notice of approval of the application -- by securing a cover
note.
 The cover note issued by the insurer shall be deemed an insurance contract,
subject to the following RULES: IV-SCP-SW
1. It shall be Issued or renewed only upon prior approval of the Insurance
Commission;
2. It shall be Valid and binding not more than 60 days from the date of its issuance;
3. No Separate premium is required for the cover note;
4. It may be Cancelled by either party upon prior notice to the other of at least 7
days;
5. The Policy should be issued within 60 days after the issuance of the cover note;
6. The Sixty-day period may be extended upon written approval of the Insurance
Commission; and
7. The Written approval of the Insurance Commission is dispensed with upon the
certification of the president, VP or general manager of the insurer that the Risk
involved, the Values of such risks and Premiums therefor RVP, have not as yet
been determined, and the extension or renewal is not contrary to or is not for the
purpose of violating the ICP or any rule.
POLICY of INSURANCE - it is a written instrument where the terms and conditions of the
contract of insurance are set forth.
 The policy is not necessary for the perfection of the contract. However, the law
provides that no policy of insurance shall be issued or delivered unless in the form
previously approved by the Insurance Commission.
 The Code does not provide for prescribed forms but requires certain provisions to be
included in the policy.
Basic Contents of a Policy: PAR-PRIP
1. Parties;
2. Amount of insurance, except in open or running policies;
3. Rate of premium;
4. Property or life insured;
5. Risk insured against;
6. Interest of the insured in the property if he is not the absolute owner;
7. Period during which the insurance is to continue.
RIDER - an attachment to an insurance policy that modifies the conditions of the policy by
expanding or restricting its benefits or excluding certain conditions from the coverage.
 They are not binding on the insured unless the descriptive title or name thereof is
mentioned and written on the blank space provided in the policy.
 It shall be countersigned by the insured or owner unless he was the one who
applied for the rider, clause, warranty, etc.
 When the requirements of the rider are complied with, it is considered part of the
policy.
CANCELLATION by the INSURER of a NON-LIFE POLICY requires (1) PRIOR
NOTICE to the INSURED; and (2) any of the following GROUNDS: NCFW-PDD
1. Non-payment of premium;
2. Conviction of a crime out of acts increasing the hazard insured against;
3. Fraud or material misrepresentation;
4. Willful or reckless acts or omissions increasing the risk insured against;
5. Physical changes in the property inured making it uninsurable;
6. Discovery of other insurance coverage that makes the total insurance in excess of the
value of the property insured; and
7. Determination by the Insurance Commissioner that the policy would violate the
Insurance Code.
REQUISITES FOR CANCELLATION: NB-WS
1. Prior Notice of cancellation to the insured;
2. Notice must be Based on the occurrence after effective date of the policy of one or
more of the grounds mentioned;
3. Notice must be in Writing, mailed or delivered to the named insured at the address
shown in the policy, or to his broker, provided the broker is authorized in writing by the
policy owner to receive the notice of cancellation on his behalf; and
4. Notice must State the grounds relied upon, and upon request of the insured, to furnish
facts on which cancellation is based.
KINDS OF POLICIES: OVR
1. Open Policy - value of the thing insured is not agreed upon, but left to be ascertained
at the time of loss. The amount of insurance merely represents the insurer’s maximum
liability.
2. Valued Policy - definite valuation is agreed by both parties, and written on the face of
the policy. (Life insurance policies are always valued policies.)
3. Running Policy - contemplates successive insurances and which provides that the
subject of the policy may from time to time be defined.
 The stipulation in a life insurance policy giving the insured the privilege to
reinstate it upon written application does not give the insured the absolute
right to such reinstatement by the mere filing of the application. The
insurer has the right to deny the reinstatement.
TYPES OF INSURANCE CONTRACTS UNDER THE ICP
1. LIFE INSURANCE
a. Individual Life - insurance on human lives and insurance appertaining thereto or
connected therewith.
b. Group Life - blanket policy covering a number of individuals.
 Its most common form is an insurance that provides life or health insurance
coverage for the employees of a single employer.
 The policy need not be in printed form and may be in electronic form, but the
law prescribes the contents of such policy.
 The group life insurance policy must contain a provision that if the group
policy terminates or is amended so as to terminate the insurance of any
class of insured persons, every person insured thereunder at the date
of such termination whose insurance terminates and who has been
so insured for 5 years prior to such termination shall be entitled to
 HAVE ISSUED TO HIM by the insurer an INDIVIDUAL POLICY OF LIFE
INSURANCE except that the group policy may provide that the amount of
such individual policy shall not exceed the amount of the person’s life
insurance protection ceasing.
c. Industrial Life - form of insurance under which the premiums are payable
either monthly or oftener, if the (1) face amount of insurance provided in
any policy is not more than 500 times that of the current statutory
minimum daily wage in the City of Manila and if (2) the words
“industrial” policy are printed upon the policy as part of the descriptive
matter.
2. NON-LIFE INSURANCE
a. Marine
b. Fire
c. Casualty
3. CONTRACT OF SURETYSHIP
4. MICRO-INSURANCE - financial product or service that meets the risk protection
needs of the poor where:
a. The amount of contributions, premiums, fees or charges, computed on a
daily basis, does not exceed 7.5% of the current daily minimum wage rate for
non-agricultural workers in Metro Manila; and
b. The maximum sum of guaranteed benefits is not more than 1,000 times of
the current daily minimum wage rate for non-agricultural workers in Metro Manila.
WHO ARE THE PARTIES TO AN INSURANCE CONTRACT?
I. INSURER - the person who undertakes to indemnify another.
 Insurers may be partnerships, associations or corporations who are duly
authorized by the Insurance Commission to engage in insurance business.
 An individual natural person is no longer allowed to be an insurer. However, it
includes the following:
1. Professional reinsurer - any person, partnership, association or
corporation that transacts solely and exclusively reinsurance business in the
Philippines.
2. Mutual Insurance Companies
3. Cooperatives - conditions: SC
a. It must have Sufficient capital and assets required under the Insurance
Code and the pertinent regulations issued by the Commission; and
b. It must have a Certificate of authority to operate issued by the
Insurance Commission which should be renewed every year.
 Foreign Insurance Corporations may be authorized by the Commission to
engage insurance business in the Philippines. The REQUIREMENTS, among
others, include: PAID
1. Possession of paid-up unimpaired assets or capital and reserve not less than
1 Billion Pesos;
2. Appointment of a resident of the Philippines as general agent (on whom any
notice or proof of loss may be served and on whom summons or other
processes may be served);
3. Its Investments should not exceed 20% of the net worth of the foreign
corporation or 20% of the capital of the registered enterprise; and
4. It must Deposit securities satisfactory to the commission, for the benefit and
security of policyholders.
 No insurance company shall transact any insurance business in the Philippines until
after it shall have obtained a certificate of authority for that purpose from
the Insurance Commissioner.
 The certificate of authority issued by the Commissioner shall expire on the last
day of December, 3 years following its date of issuance, and shall be
renewable every 3 years thereafter.
II. INSURED - the person with capacity to contract and having an insurable interest in the
life or property of the insured.
 A PUBLIC ENEMY may not be insured. A public enemy is a nation, including its
citizens or subjects, with whom the Philippines is at WAR.
 With respect to corporations, the nationality is determined by the controlling
stockholders irrespective of the place of incorporation.
 The property insurance entered into before war automatically loses its binding
effect the moment the insurer becomes a public enemy.
 MINORS cannot enter into an insurance contract. A contract entered into
between a minor and capacitated person is considered voidable (can be ratified).
 SPOUSES - consent of the spouse is not necessary for the validity of an insurance
policy taken out by a married person on the life of the spouses themselves or his
or her children.
 EFFECT OF DEATH OF OWNER OF POLICY - all rights, title and interest in the
policy of insurance taken out by an original owner on the life or health of the
person insured shall automatically vest in the latter upon the death of the
original owner, unless otherwise provided for in the policy.
III. BENEFICIARY - person designated to receive proceeds of policy when risk attaches.
 GENERAL RULE: When one insures his own life, he may designate any
person as the beneficiary, whether or not the beneficiary has an insurable interest
in the life of the insured.
EXCEPTION: Persons specified in Art. 739 of CC cannot be designated: AGP
1. Those made between persons who were guilty of Adultery or concubinage at
the time of (designation); - conviction not necessary
2. Those made between persons found Guilty of the same criminal offense, in
consideration thereof;
3. Those made to a Public officer or his wife, descendants or ascendants by
reason of his office.
 The designation is VOID, but the policy is BINDING. The ESTATE will
get the proceeds.
 The interest of a beneficiary is FORFEITED when the beneficiary is the principal,
accomplice, or accessory in willfully bringing about the death of the
insured. In such case, the forfeited share shall pass on to: OAE
1. The Other beneficiaries, unless otherwise disqualified;
2. In the absence of other beneficiaries, the proceeds shall be paid in
Accordance with the policy contract;
3. If the policy is silent, the proceeds shall be paid to the Estate of the insured.
 If a person will insure the life of another payable to himself, he must have
insurable interest on the life of the person whose life he is insuring.
 In PROPERTY INSURANCE, the beneficiary must have insurable interest on the
property.
 The DESIGNATION is REVOCABLE.
Exceptions: EI
1. unless the right to revoke is Expressly waived in the policy.
2. The Civil Code allows the Innocent spouse to revoke the designation of the
other spouse as irrevocable beneficiary after legal separation.
 The insured cannot assign the policy if the designation of the beneficiary is
irrevocable. The irrevocable beneficiary has a vested right.
 If there is no waiver of the right to revoke, assignment of the policy may be
deemed implied revocation.
 If the insured refuses to pay the premiums, the designated irrevocable
beneficiary may continue the policy by paying premiums that are due.
 If premiums are paid out of the conjugal funds, the proceeds are considered
conjugal. If the beneficiary is other than the insured estate, the source of
premiums would not be relevant.
 Minor as Beneficiary. In the absence of a judicial guardian, the father, or in the
latter’s absence or incapacity, the mother of any minor, who is an insured or a
beneficiary under a contract of life, health or accident insurance, may exercise,
in behalf of said minor, any right under the policy, without necessity of a court
authority or the giving of a bond, where the interest of the minor in the
particular act involved does not exceed P500,000 or in such reasonable as
may be determined by the Insurance Commissioner.
The rights that may be exercised include: GORS
1. Giving the minors consent to any transaction on the policy;
2. Obtaining a policy loan;
3. Receiving proceeds of the policy;
4. Surrendering the policy.
 In the absence or incapacity of the father or mother, the Grandparent, the
Eldest brother or sister at least 18 years of age, or any Relative who has
actual custody of the minor insured or beneficiary, shall act as a guardian
without need of a court order or judicial appointment as such guardian, as
ling as such person is not otherwise disqualified or incapacitated.
Payment made by the insurer pursuant shall relieve such insurer of any
liability under the contract.
 The designation of illegitimate children as beneficiaries in the deceased
father’s insurance policy is VALID because no law prohibits such designation.
INSURABLE INTEREST
 In LIFE INSURANCE, every person has an insurable interest in the life and health of:
H-DWU
1. Himself, his spouse, and his children;
2. Any person on whom he Depends wholly or in part for education or support, or in
whom he has a pecuniary interest;
3. Any person upon Whose life any estate or interest vested in him depends; and
4. Any person Under 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.
 The test is whether the person is interested in the preservation of the insured’s life
despite the insurance.
 Consent of the person whose life is insured is not necessary of one insures the life
of another under Sec. 10.
 One has an insurable interest over the life of his children. The law does not
distinguish between a married child or a minor child.
 A decree of legal separation does not remove the insurable interest of a spouse
over the other. Sec. 10 of the Insurance Code does not distinguish.
 In PROPERTY, insurable interest is any interest therein, or liability in respect thereof,
and it may consist in: EIE
1. An Existing interest;
2. An Inchoate interest founded on an existing interest; or
3. Any Expectancy coupled with an existing interest.
 In general, a person has an insurable interest in property if he: DS
a. Derives pecuniary advantage from its preservation; or
b. Would Suffer pecuniary loss, damage or prejudice by its destruction;
- whether he has no title in, or lien upon, or possession of the property.
 Existence of insurable interest is a matter of public policy. Hence, the principle of
estoppel cannot be invoked.
 An HEIR has no insurable interest over property that he will inherit. The execution
of a last will and testament does not vest to an heir, even a compulsory heir,
insurable interest over the property that he will inherit as stipulated in the will.
 The owner whose property was levied upon by a judgment creditor, and who
lost the same in an execution sale retains insurable interest thereon during
the redemption period. However, the buyer during the auction sale also has an
interest over the subject property subject to the condition that the property will
not be redeemed.
 The CARRIER has insurable interest over the goods that are being shipped.
  The LESSEE in a financial lease has insurable interest over the property that is the Both the mortgagor and mortgagee have an insurable interest on the property mortgaged.
object of the lease although title is retained by the financial lessor. This interest is separate and distinct from the other. They may take out separate
 A PURCHASER OF GOODS UNDER A PERFECTED CONTRACT OF SALE policies at the same time or at separate times.
already acquires interest on the property pending delivery. The perfected contract
of sale, even without delivery, vests in the vendee an equitable title, an existing  MORTGAGOR - as owner, he has an insurable interest to the extent of its value,
interest over the goods to be the subject of insurance. even though the mortgage debt equals such value.
 In order for hope or expectancy to be insurable, it must be coupled with an  When the mortgagor secures the insurance, the mortgagee may be made the
existing interest out of which expectancy arises. beneficial payee in the following ways: A-SPORE
 A DEPOSITARY is responsible for the property deposited to him and he will be 1. He may become the Assignee of the policy with the consent of the insurer;
liable in case of damage or destruction to the thing. Hence, he has insurable 2. A Standard mortgage clause containing a collateral independent contract
interest over the thing deposited because he will be damnified by its loss. between the mortgagor and the insurer may be attached;
3. He may be the Pledgee without the consent of the insurer;
ETEB Insurable Interest in Insurable Interest in 4. The Original policy may contain a mortgage clause;
LIFE PROPERTY 5. A Rider making the policy payable to the mortgagee may be attached (loss
As to EXTENT Unlimited, except in life Limited to the actual value of payable clause);
insurance effected by a the interest thereon. 6. The mortgagee acquires an Equitable lien upon the proceeds of the policy.
creditor on the life of his
debtor.  MORTGAGEE - as such, he has an insurable interest in the mortgaged property to the
As to TIME WHEN It is enough that insurable It is necessary that insurable extent of the debt secured; such interest continues until the mortgage debt is
INSURABLE INTEREST interest exists at the time the interest exists when extinguished.
MUST EXIST policy takes effect, and need insurance takes effect and
not exist at the time of the when loss occurs, but need STANDARD/UNION OPEN/LOSS PAYABLE
loss. not exist in the meantime. MORTGAGE CLAUSE MORTGAGE CLAUSE
As to EXPECTATION OF Expectation of the benefit to Expectation of benefit to be Subsequent acts of the mortgagor cannot Mortgagor does not cease to be a party to
BENEFIT TO BE DERIVED be derived need not have derived must have legal affect the rights of the mortgagee. the contract.
any legal basis. basis.
As to BENEFICIARY’S Beneficiary need not have Beneficiary must have The mortgagee is only the beneficiary under
INTEREST insurable interest over the insurable interest over the the contract, and recognized as such by the
life of the insured if the thing insured. insurer but not made a party to the contract
insured himself secured the itself.
policy. However, if the life
insurance was obtained by  An insurance procured by either the mortgagor or mortgagee will not inure to the
the beneficiary, the latter benefit of the other. Insurance is a personal contract and, just like any other
must have insurable interest contract, it takes effect only between the contracting parties, their heirs, successors and
over the life of the insured. assignees, unless it contains a stipulation in favor of a third person . However, while an
insurance procured by a mortgagor does not inure to the benefit of the mortgagee, the
 The TRANSFER OF PROPERTY does not include the transfer of the insurance latter has a lien on the proceed of the policy under Art. 2127, NCC.
policy.
 In life insurance, it is only necessary that the person who took out the insurance  When the mortgagor takes out an insurance over mortgaged property and
on the life of another has insurable interest on such life at the time the policy ENDORSED the same to the mortgagee, the INSURANCE PROCEEDS of the
takes effect. endorsed policy shall be applied exclusively to the proper interest of the person
for whose benefit it was made -- the MORTGAGEE. Hence, creditors of the
mortgagor cannot garnish or levy upon the proceeds up to the extent of the debt of the
mortgagee.

INSURABLE INTEREST OF MORTGAGOR AND MORTGAGEE over mortgaged  In property insurance, the BENEFICIARY and the ASSIGNEE must have
property insurable interest. Consent of the INSURER must be secured before the
 assignment.
 In life insurance, if the insured takes the insurance on his own life, he can designate
anybody who does not have insurable interest. If a third person takes the policy, the
beneficiary must have insurable interest. In case of assignment, the assignee need not
have insurable interest.
 A CHANGE OF INTEREST in any part of a thing insured, unaccompanied by a
corresponding change of interest in the insurance, suspends the insurance to
an equivalent extent, until the interest in the thing and the interest in the
insurance are vested in the same person.
Exceptions:
1. Life, health and accident insurance;
2. Change of interest in the thing insured after the occurrence of an injury which
results in loss;
3. Change of interest in one or more of several distinct things, separately insured by
one policy;
4. Change of interest by will or succession on death of the insured;
5. Transfer of interest by one of several partners, joint owners, or owners in
common, who are jointly insured, to others;
6. When a Policy is so framed that it will inure to the benefit of whomsoever, during
the continuance of the risk, may become the owner of the interest insured.
 When there is an express prohibition against ALIENATION in the policy, in case of
alienation, the contract of insurance is not merely suspended but AVOIDED.
RISK INSURED AGAINST
 It may be a contingency or unknown event the happening of which will damnify a
person having insurable interest or will create liability against him. Even fortuitous
events may be insured.
 GENERAL RULE: A FUTURE EVENT is the only event that can be covered by an
insurance contract.
EXCEPTION: A past event may be covered by a marine insurance -- if the loss of the
vessel in the past could not have been known by ordinary means of communication.
PREMIUM - consideration paid to an insurer for undertaking to indemnify the insured
against a specified peril.
 GENERAL RULE: No insurance policy issued or renewed is valid and binding until
actual payment of the premium. Any agreement to the contrary is void.
EXCEPTIONS: ALICE
1. Where there is an Acknowledgment in the contract or policy of insurance that the
premium has already been paid;
2. In case of Life and industrial life whenever the grace period provision applies;
3. 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;
4. Where a Credit term was agreed upon for the payment of premiums despite full
awareness of Sec. 77; and
5. Where parties are barred by Estoppel.
 Credit extension - a 90-day credit extension may be given whenever credit extension
is given under the broker and agency agreements with duly licensed intermediaries.
 Requisites for Credit Extension: PN
1. It must be Provided for under the broker and agency agreements; and
2. It should Not exceed 90 days from date of issuance of the policy.
 Where an insurer authorizes an insurance agent or broker to deliver a policy to
the insured, it is deemed to have authorized said agent to receive the premium in its
behalf. The insurer is also bound by its agent’s acknowledgment of receipt of payment
of premium.
 Future Premiums/Advance Payment - An insurer may contract and accept
payments, in addition to regular premium, for the purpose of paying future premiums
on the policy or to increase the benefits thereof.
 In the following instances, the insured is entitled to a RETURN OF THE
PREMIUMS: TVDV-ROAD
1. Thing insured was never exposed to the risks insured against;
2. The contract is Voidable and subsequently annulled under the provisions of the
Civil Code;
3. When insurance is for a Definite period and the insured surrenders his policy
before the termination thereof;
4. The insurance contract is Voidable due to the fraud or misrepresentation of insurer
or his agent;
5. Rescission is granted due to insurer’s breach of contract
6. Over-insurance;
7. The contract is Annulled on account of the fraud or misrepresentation of the
insurer or of his agent or on account of facts, or the existence of which the insured
was ignorant without his fault;
8. When by any Default of the insured other than actual fraud, the insurer never
incurred any liability.
 Effect of FRAUD - a person insured is not entitled to a return of premium if the
policy is annulled, rescinded, or if a claim is denied by reason of fraud.
 GENERAL RULE: Premium is also necessary in order for the contract of suretyship
to be binding.
EXCEPTION: Where the obligee has accepted the bond, it is binding even if the premium
has not been paid, subject to the right of the insurer to recover the premium from its
principal.
 To PREVENT THE LAPSE OF LIFE INSURANCE POLICY, the insured may avail of:
GARA
1. Grace period;
 2. Automatic policy loan from the policies’ cash surrender value;
3. Restatement clause; and
4. Application of dividend.
 Reinstatement of a Lapsed Policy of Life Insurance - Policy holders in life
insurance shall have the policy reinstated at any time within 3 years from the date
of default of premium payment, unless: CE
a. The Cash surrender value has been duly paid to the insurer; or
b. The Extension period has expired.
However, there must be (1) proof of insurability and (2) payment of overdue
premiums and any indebtedness plus interest.
TRANSFER OF POLICY
 May the policy be transferred without the consent of the insurer?
 YES in life insurance, but NOT in property insurance.
 Property insurance cannot be transferred without the consent of the insurer
because the insurer approved the policy based on the personal qualification and
the insurable interest of the insured.
 The effect of the transfer of property insurance policy without the consent of the
insurer - the insurance policy is suspended and will not be avoided until the interest
in the thing insured and the interest in the insurance are vested in the same person.
DEVISES USED FOR ASCERTAINING AND CONTROLLING RISK AND LOSS: CRWCE
1. Concealment;
2. Representation;
3. Warranty;
4. Condition;
5. Exception.
CONCEALMENT - a neglect to communicate that which a party knows and ought to
communicate.
REPRESENTATIONS - oral or written statements of a facts or conditions affecting the risk,
made by the insured to the insurer, tending to induce him to assume risk.
WARRANTIES - (1) Statements or promises by the insured (2) Set forth in the policy itself
or incorporated in it by proper reference, (3) the Untruth or nonfulfillment of which in any
respect, and without reference as to whether the insurer was in fact prejudiced by such
untruth or nonfulfillment, (4) Render the policy voidable by the insurer SSUR. The same
may be expressed, implied, affirmative, or promissory.
CONDITIONS - the insurer must also protect himself against fraudulent claims of loss and
attempts to do by inserting in the policy various conditions which take the form of either
conditions precedent or subsequent.
EXCEPTIONS - exclusion of certain specified risks that otherwise would be included under
the general language describing the risks assumed.
 The burden of proving that the loss was caused by an excepted peril rests with the
INSURER.
CONCEALMENT
 Test of Materiality - Materiality is determined not by the event, but solely by the
probable and reasonable influence of the facts upon the party to whom the
communication is due, in (1) Forming his estimate of the disadvantages of the
proposed contract, or (2) in Making his inquiries or (3) in Fixing the premium rate
FMF.
 Philamcare Health Systems v. CA - The answers of the applicant, who is not a
doctor, regarding the medical history of his wife largely depends on opinion rather
than fact. Where matters of opinion or judgment are called for, answers made in
good faith and without intent to deceive will not avoid the policy even though they
are untrue.
 Effects of Concealment - It vitiates the contract and entitles the insurer to rescind,
even if death or loss is due to a cause not related to the concealed matter. The matter
concealed need not be the cause of the loss.
 The fact that the matter concealed had no bearing to the cause of death of the
insured is not important because it is well-settled that the insured need not die of
the disease he had failed to disclose to the insurer. It is sufficient that his non-
disclosure misled the insurer in forming his estimates of the risks of the proposed
insurance policy or in making inquiries.
 Good faith is not a defense in concealment. The Insurance Code provides that the
concealment, whether intentional or unintentional entitles the injured party to rescind a
contract of insurance.
 Having no medical knowledge is not a reason to exculpate the insured from
concealment, if she does not disclose her illness.
 An insurer may be deemed estopped from raising concealment as a defense if it
accepts the premium payments and issued the policy even if the insured already
supplied the insurer such facts or information that requires further inquiries from the
insurer but the latter failed to do so.
However, the insurer is not estopped from raising concealment as a defense if there was
connivance between the insured and the soliciting insurance agent and the medical examiner.
In this situation, the insured made them his own agents and he becomes responsible for their
acts in that connection.
REPRESENTATION
 An oral or written statements of a facts or conditions affecting the risk, made by the
insured to the insurer, tending to induce him to assume risk.
 KINDS:
1. Affirmative - an affirmation of a fact when the contract begins.
2. Promissory - promise to be performed after the policy is issued.
 Test of Materiality - It is determined by the probable and reasonable influence of the implied from the conduct mainly, said conduct must be clearly indicative of a clear
facts on the party on whom communication is due, in forming his estimate of the intent to waive such right. There must be a clear showing that the insurer knew about
contract, risk, and premium. the violation of the clause.

 Effect of Misrepresentation - The injured party is entitled to rescind from the  The ICP provides that the non-fulfillment of the warranty renders the contract voidable
time when the representation becomes false. whether or not the insurer was in fact prejudiced.
 RA 10607 - acceptance of the premium will not estop the insurer from rescinding
the policy on the ground of misrepresentation.  The fact that the agents of the insurer were aware of the other insurance is not a
valid defense.
WARRANTY
 KINDS: EI-AP INCONTESTABILITY CLAUSE
1. Express;  After a life insurance policy made payable on the death of the insured shall have
2. Implied - warranties that are deemed included on the contract, although not been in force during the lifetime of the insured for a period of 2 YEARS from
expressly mentioned. They are found only in MARINE INSURANCE. the date (1) of issue or (2) of last reinstatement, the insurer cannot prove that
3. Affirmative - asserts the existence of a fact or condition at the time it is made; and the policy is void ab initio or is rescindible by reason of the fraudulent concealment or
4. Promissory - the insured stipulates that certain facts or condition shall exist or misrepresentation.
thing shall be done or omitted.  Requisites:
1. The insurance is a Life insurance policy;
 Effect of Breach of Warranty - It gives the insurer the right to rescind. 2. It is Payable on the death of the insured;
Exceptions: LUI 3. It has been in Force during the lifetime of the insured for at least 2 years from its
1. Loss occurs before the time of performance of the warranty; date of issue or of last reinstatement.
2. The performance becomes Unlawful;  The period of 2 years may be shortened, but it cannot be extended.
3. The performance becomes Impossible.  The phrase “during the lifetime” means that the policy is no longer considered in force
after the insured has died.
 Not all breach of the provisions of the policy may give the right to rescind the policy.
Immaterial provisions do not avoid the policy. Defenses NOT BARRED by INCONTESTABILITY CLAUSE: LCPC-FAB
Exception: When the parties stipulate that violation of a particular provision, though 1. Insured Lacked insurable interest as required by law;
normally immaterial, shall avoid the policy. In effect, the parties converted the immaterial 2. Cause of the death of the insured is an excepted risk;
provision into a material one. 3. Premiums have not been paid;
4. Conditions of the policy relating to military or naval service have been violated;
PWPS 5. Fraud is of a vicious type;
WARRANTY REPRESENTATION 6. Action was not brought within the time specified;
Part of the contract. Collateral inducement. 7. Beneficiary failed to furnish proof of death or to comply with any condition imposed by
Written on the policy or in a valid rider or Need not be written. the policy after the loss has happened.
attachment.
Generally conclusively Presumed to be Should be established to be material. DOUBLE INSURANCE
material.  It exists where the same person is insured by several insurers SEPARATELY in
Fact warranted must be Strictly complied Requires only to be substantially true. respect to the same subject and interest.
with.  It is not prohibited by law, but it may be prohibited by “other insurance clause.”
 Requisites: PT-SIR
1. Person insured is the same;
OTHER INSURANCE CLAUSE 2. Two or more insurers insuring separately;
 It is a clause in the policy that provides that the policy shall be void if the insured 3. Subject matter is the same;
procures additional insurance without the consent of the insurer. 4. Interest insured is the same;
 Purpose: To prevent over-insurance. 5. Risk or peril insured against is the same.
 It is a warranty that entitles the insurer to rescind in case of breach.
 It may be subject to WAIVER, but the waiver must either be express or if it is to be Effects of DOUBLE INSURANCE and OVER-INSURANCE
a. The insured, unless the policy otherwise provides, may claim payment from the insurers interest in the second contract. reinsurance contract.
in such order he may select, up to the amount for which the insurers are Insured has to give his consent. Consent of original insured, not necessary.
severally liable under their respective contracts.
PROXIMATE AND IMMEDIATE CAUSE
b. Where the policy is a VALUED POLICY, any sum received by him under any other  The insurer is LIABLE if: PINE
policy shall be deducted from the value of the policy without regard to the actual value 1. Loss, the Proximate cause of which is the peril insured against.
of the subject matter insured. 2. Loss, the Immediate cause of which is the peril insured against except where the
proximate cause is an excepted peril.
c. Where the policy is an UNVALUED POLICY, any sum received by him under any policy 3. Loss thru Negligence of insured except where there was gross negligence
shall be deducted against the full insurable value, for any sum received by him under amounting to willful act.
any policy. 4. Loss caused by Efforts to rescue the thing from peril insured against -- if during
the course of rescue, the thing is exposed to a peril not insured against, which
d. Where the insured receives any sum in excess of the valuation in the case of permanently deprives the insured of its possession, in whole or in part.
valued policies, or of the insurable value in case of unvalued policies, he must hold
such sum in trust for the insurers, according to their right of contribution among  The insurer is NOT LIABLE if: WEC
themselves; and 1. Loss is by Willful act or gross negligence of the insured;
2. Loss where the Excepted peril is is the proximate cause;
e. Each insurer is bound, as between himself and the other insurers, to contribute ratably 3. Loss due to Connivance of the insured.
to the loss in proportion to the amount for which he is liable under his contract.
 Liabilities arising out of acts of negligence, which are also criminal, are also
REINSURANCE INSURABLE on the ground that such acts are accidental.
 It is a contract thru which the insurer procures a third person to insure him
against loss or liability by reason of such original insurance. Notice and Proof of FIRE INSURANCE
 Here, the original contract of insurance and the contract of reinsurance are separate  NOTICE - In case of loss upon an insurance against fire, NOTICE OF LOSS should be
and distinct from each other and covered by separate policies. given without unnecessary delay, otherwise, the insurer is exonerated.
 The original insured has no interest in a contract of reinsurance. Thus, the
original insured cannot file an action to recover from the reinsurer even if he has  PROOF - If proof of loss is required under the policy, it is sufficient that the
difficulty in recovering from the original insurer. insured give the best evidence he has in his power to present and need not
Exception: The original insured may be allowed to directly sue the reinsurer if the submit proof that is necessary in court.
reinsurance policy contains a stipulation POUR ATRUI in favor of the original insured.  Substantial compliance will always be deemed sufficient.

POLICY OF INSURANCE
Written document embodying the terms and
stipulations of the contract of insurance
between the insured and insurer.
Formal written instrument evidencing the
contract of insurance.
IC-SIC
DOUBLE INSURANCE
Involves the same interest.
Insurer remains in such capacity.
Subject of insurance is property.
Insured in the first contract is a party in
REINSURANCE
Contract by which an insurer procures a third
person to insure him against loss or liability
arising of an original insurance.
The original contract of insurance and the
contract of reinsurance are covered by
separate policies.
REINSURANCE
Insurance of different interests.
Insurer becomes an insured in relation to
reinsurer.
Subject of insurance is the original insurer’s
risk.
Original insured has no interest in
 NOTICE OF SETTLEMENT - A stipulation in a policy of insurance requiring that the
consent of the insurer must first be obtained before any payment by the
person responsible for the loss in the settlement of the claim against the
insured can be made is valid, the purpose of which is to avoid collusion between the
insured and the claimant.
CLAIMS SETTLEMENT
 LIFE INSURANCE:
1. The proceeds shall be paid immediately upon MATURITY of the policy if
there is such a maturity date.
2. If the policy matures by the death of the insured, within 60 days after (1)
Presentation of the claim and (2) Filing of the proof of death of the insured PF.
 PROPERTY INSURANCE:
 1. Proceeds shall be paid within 30 days after (1) Proof of loss is received by the 2. Insured, by his own act, releases the wrongdoer or third person liable for the loss;
insurer and (2) Ascertainment of the loss or damage is made either by agreement 3. Life insurance;
or arbitration PA. 4. Insurer pays the insured for a loss or risk not covered by the policy.
2. If no ascertainment is made within 60 days after receipt of proof of loss,
the loss shall be paid within 90 days after such receipt. MARINE INSURANCE
 Traditionally, marine insurance includes policies that cover risks connected with
 Effects of DELAY OF INSURER - If the period prescribed above are not complied navigation, to which a ship, cargo, freightage, profits, or other insurable interest in
with, the beneficiary is entitled to payment of: IAD movable property, may be exposed during a certain voyage or a fixed period of time.
1. Interest for the duration of the delay of twice the legal interest;  Under present laws, it also covers inland marine insurance.
2. Attorney’s fees and other litigation expenses;  Cargo can be the subject of marine insurance, and once it is entered into, the implied
3. Damages. warranty of seaworthiness immediately attaches to whoever is insuring the
cargo, whether he be the shipowner or not.
 Sec. 249 and 250 shall apply only when the Court or Commissioner finds that there
was UNREASONABLE DELAY or REFUSAL by the insurer in the payment of the  Implied Warranties in MARINE INSURANCE: SPIED
claim. 1. That the ship is Seaworthy at the inception of the insurance;
2. Warranty of Possession of documents of neutrality;
 Collateral Source Rule: If an injured person receives compensation for his injuries 3. Presence of Insurable interest;
from a source wholly independent of the tortfeasor, the payment should not be 4. That the ship will not Engage in an illegal venture;
deducted from the damages which he would otherwise collect from the tortfeasor. 5. That the ship will not Deviate from the agreed voyage, unless deviation is proper.
This Rule is not applicable to NO FAULT INSURANCES. A no-fault insurer cannot be
obliged to pay the hospitalization expenses of the insured which had already been paid by SHIPOWNER CARGO CHARTERER
separate health insurance providers of the insured. OWER/SHIPPER
Insurable Interest Over the value of the Over the cargo and 1. Over the Vessel
PERIOD OF PRESCRPTION in Marine vessel. However, if expected profits. up to the extent of
 In the absence of an express stipulation in the policy, it being based on a written Insurance/Extent the ship is the amount he is
contract, the action prescribes in 10 years. hypothecated by a liable to the
 However, the parties may validly agree on a shorter period provided it is not less bottomry loan, the shipowner, if the
than 1 year from the time the cause of action accrues. insurable interest is ship is lost or
 The cause of action accrues from the final rejection of the claim of the insured and only up to the excess damaged during the
not from the time of loss. of the value of the voyage.
 For compulsory motor vehicle liability insurance, notice of claim must be vessel over the loan. 2. Over his Expected
filed within 6 months from the date of the accident, otherwise, the claim shall be profits or freightage
deemed waived. if he accepts cargoes
from other persons
RIGHT OF SUBROGATION for a fee.
 There is subrogation without a need of formal assignment or an express stipulation in 3. Over his Own
the policy. It is a legal effect of payment. cargo or his client’s
 The insurer can only recover from the third person what the insured could cargo.
have recovered. Thus, there can be no recovery if the insurer voluntarily paid even if VEO
the loss is not covered by the policy.
 The INSURED can no longer recover from the offending party what was paid to him by  PERILS OF THE SEA - perils of navigation; include only those casualties due to the
the insurer, but he can recover any deficiency, that is, if his damages is more than unusual violence or extraordinary causes connected with navigation
what was paid. The deficiency is not covered by the right of subrogation.  It has been said to include only such losses as are of extraordinary nature or
 The INSURER must present the policy as evidence to determine the extent of its arise from some overwhelming power which cannot be guarded against
coverage. by the ordinary exertion of human skill or prudence.
 Cases when there is NO RIGHT OF SUBROGATION: RILI
1. Recovery of loss in excess of insurance coverage;
 5. It must be Necessary.
 PERILS OF THE SHIP - loss which in the ordinary course of events, results from:  CO-INSURANCE CLAUSE
1. Ordinary, natural, and inevitable action of the sea;  Where the property is insured for less than its value, the insured is considered
2. Ordinary wear and tear of the ship; and a co-insurer for the difference between the amount of insurance and the value of
3. Negligent failure of the ship’s owner to provide the vessel with the proper the property.
equipment to convey the cargo under ordinary conditions.  In MARINE INSURANCE, there is co-insurance by virtue of Sec. 150, ICP, as
long as the requisites are present, namely: PA
 In the absence of stipulation, the risks insured are only perils of the sea. 1. There is Partial loss;
Thus, the insured is bound to prove that the cause of the loss is a peril of the sea. 2. The Amount of the insurance is less than the value of the property insured.
Exception: However, in an ALL RISK POLICY, all risks are covered, unless
expressly excepted. The burden rests on the insurer to prove that the loss is  FORMULA:
caused by a risk that is excluded. Amount of Damage x Amount of Insurance = Extent of insurer’s liability
Value of the Property
 CONCEALMENT
 Belief and expectation of a third person in reference to a material fact is  There is NO CO-INSURANCE in FIRE INSURANCE unless it is expressly stipulated in
material and must be disclosed in marine insurance. the policy.
 The rule is different from the general rule where matters of belief, judgment or
opinion of third persons are not material.  SEAWORTHINESS
 Ordinarily, the matters concealed need not be the cause of the loss. In MARINE  A ship is seaworthy, when reasonably fit to perform the service, and to
INSURANCE, there are instances when matters, although concealed, will not encounter the ordinary perils of the voyage, contemplated by the parties to
vitiate the contract, except when they caused the loss: W-NULL the policy.
1. Want of necessary documents;  There should be due consideration to the: NVS
2. National character of the insured; 1. Nature of the ship;
3. Use of false or simulated papers; 2. Voyage; and
4. Liability of insured thing to capture or detention; and 3. Service to be performed.
5. Liability to seizure from breach of foreign laws.  A warranty of seaworthiness extends not only to the condition of the structure of
the ship itself, bit requires that it be properly laden, and provided with a
GENERAL AVERAGE LOSS PARTICULAR AVERAGE LOSS competent master, a sufficient number of competent officers and seamen, and the
The insurer of the vessel or cargo that are Only the insurer of the damaged cargo or requisite appurtenances and equipment.
saved is liable for general average vessel is liable for particular average if
contribution and not for particular average. covered by the policy.  An IMPLIED WARRANTY OF SEAWORTHINESS is complied with if the ship be
Includes damages and expenses which are Includes all damages and expenses caused seaworthy at the time of the commencement of the risk, except in the
deliberately caused by the master of the to the vessel or to her cargo which have not following cases:
vessel or upon his authority, in order to save inured to the common benefit and profit of 1. Time policy - When the insurance is made for a specified length of
the vessel, her cargo, or both at the same all persons interested in the vessel and her time, the implied warranty is not complied with unless the vessel is
time from a real or known risk. It must be cargo. seaworthy at the commencement of every voyage it undertakes during that
born equally by all of the interests time.
concerned in the venture. It refers to those losses which occur under
Requisites to the right to claim general such circumstances as do not entitle the 2. When the insurance is upon the cargo, which, by the terms of the
average contribution: CP-SMS-N unfortunate owners to receive contribution policy, description of the voyage, or established custom of the
1. There must be a Common danger to the from other owners concerned in the venture trade, is to be transhipped at an intermediate port, at the
vessel or cargo; as where a vessel accidentally runs aground commencement of each particular voyage.
2. Part of the vessel or cargo was sacrificed and goes to pieces after the cargo is saved.
deliberately; 3. Where different portions of the voyage are contemplated, at the
3. The Sacrifice must be for the common commencement of each portion.
safety or for the benefit of all;
4. It must be Successful; and 4. When the ship was seaworthy at the commencement of the voyage
 but becomes unseaworthy during the voyage to which an insurance
relates, an unreasonable delay in repairing the defect exonerates the insurer
on ship or shippwner’s nterest from liability arising from any loss therefrom.
 It is the obligation of the CARGO OWNER to look for a common carrier which
keeps its vessel in seaworthy conditions. The shipper of the cargo may have no
control over the vessel, but it has full control in the choice of the common carrier
that will transport its goods.
 DEVIATION - may refer to: DUC
1. Departure of a vessel from the course of voyage; or
2. Unreasonable delay in pursuing the voyage; or
3. Commencement of an entirely different voyage.
 When is DEVIATION PROPER? DuCoGoSa
1. If Due to the circumstances outside the control of the ship captain or ship
owner;
2. If done to Comply with a warranty;
3. If made in Good faith to avoid a peril;
4. If made to Save human life or another distressed vessel.
 LOSS AND ABANDONMENT
 ACTUAL LOSS happens when there is: TT-SD
1. Total destruction;
2. Total deprivation of owner of possession of thing insured;
3. Loss by Sinking;
4. Damage rendering the thing valueless.
 CONTSTRUCTIVE TOTAL LOSS happens when there is: ADE
1. Actual loss of more than 3/4 of the value of the object;
2. Damage reducing the value by more than 3/4 of the value of the vessel and
of cargo; and
3. Expenses of shipment exceed 3/4 of value of cargo.
 In case of constructive total loss, insured may ABANDON the goods or
vessel to the insurer and claim for whole insured value, or he may, without
abandoning the vessel, claim for partial actual loss.
 ABANDONMENT - the act of the insured by which, after a constructive total loss,
he declares the relinquishment to the insurer of his interest in the thing insured.
 Requisites for Valid Abandonment: CNM-FANG
1. There mist be a Constrictive total loss;
2. Abandonment be Neither partial nor conditional;
3. It must be Made within a reasonable time after receipt of reliable information
of the loss;
4. It must be Factual;
5. Actual relinquishment by the person insured of his interest in the thing
insured;
6. Notice of abandonment must specify the particular cause of the
abandonment.
7. It must be made by Giving notice thereof to the insurer which may be done
orally or in writing;
FIRE INSURANCE
 It is a contract of indemnity by which the insurer, for a consideration, agrees to
indemnify the insured against loss of, or damage to, property by fire, but may include
loss by Lightning, Windstorm, Tornado, or Earthquake and other allied risks, when such
risks are covered by extension to fire insurance policies under separate policies.
 In an OPEN POLICY, the actual loss, as determined, will represent the total
indemnity due the insured except only that the total indemnity shall not exceed the
total value of the policy.
 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 the insurer to rescind a
contract of fire insurance.
 Requisites for Rescission by reason of Alteration: UAW-MIV
1. The Use or condition of the thing insured is specially limited or stipulated in
the policy;
2. Use or condition is Altered;
3. It is made Without the consent of the insurer;
4. By Means within the control of the insured;
5. It Increases the risk; and
6. There must be a Violation of a material policy provision.
 Friendly Fire - fire that burns in a place where it is supposed to burn.
 Hostile Fire - fire that escapes and burns in a place where it is not supposed to be. It
may also refer to fire that started out as a friendly fire, but escapes from its original
place, or it becomes too strong as it becomes out of control.
CASUALTY INSURANCE
 It is an insurance covering loss or liability arising from accident or mishap, excluding
those falling under other types of insurance such as fire or marine.
 Intentional, as used in an accident policy excepting intentional injuries inflicted by the
insured or any other person, implies the exercise of the reasoning faculties,
consciousness and volition. Where a provision of the policy excludes intentional
injury, it is the intention of the person inflicting the injury that is controlling. If the
injuries suffered by the insured clearly resulted from the intentional act of a third
person, the insurer is relieved from liability as stipulated.
 THIRD-PARTY LIABILITY - casualty insurance may provide for third-party liability in
 the nature of stipulation pour atrui for personal injury and even damage to property,
in which case, the third party may directly sue the insurer upon the occurrence of the
loss.
 However, the insurer is not solidarily liable with the insured or the tortfeasor for
the latter’s obligation. If the insurer pays the third person, the right of
subrogation operates.
 If there is no stipulation in favor of third person but the insurance is an
insurance against liability to third persons, any third person who might be injured
may not sue the insurer. Only the insured can recover from the insurer.
 Liabilities arising out of acts of negligence which are also criminal, are also
insurable on the ground that such acts are accidental. But liability consequence of
deliberate criminal acts are not insurable.
COMPULSORY MOTOR VEHICLE LIABILITY INSURANCE
 The Insurance Code makes it unlawful for any land transportation operator or owner of
a motor vehicle to operate the same in public highways, unless there is an insurance or
guaranty to indemnify the death or bodily injury of a third party or passenger arising
from the use thereof.
 Registration of any vehicle will not be made or renewed without complying with
the requirement.
 THIRD PARTY - any person other than the passenger, and shall include:
a. a member of the household of a motor vehicle owner or land transportation
operator; or
b. a member of the family within the 2 nd degree of consanguinity or affinity, of a
motor vehicle owner or land transportation operator; or
c. his employee in respect of death, bodily injury, or damage arising out of and in the
course of employment.
 PURPOSE of CMVLI - to give immediate financial assistance to victims of motor
vehicle accidents and/or their dependents.
 NO FAULT CLAUSE - the injured party or passenger is given the option to file a claim
for death or injury without necessity of proving fault or negligence of any kind
under the following CONDITIONS: TPO
1. Total indemnity in respect of any person shall not exceed P15,000;
2. The following Proofs of loss, when submitted under oath, shall be sufficient
evidence to substantiate the claim: pdm
a. Police report of accident;
b. Death certificate and evidence sufficient to establish the proper payee; or
c. Medical report and evidence of medical or hospital disbursement in respect of
which refund is claimed.
3. Claim may be made against One motor vehicle only.
 From whom should the injured recover?
1. In the case of an OCCUPANT of a vehicle - claim shall lie against the insurer
of the vehicle in which the occupant is riding, mounting or dismounting from.
2. If not an occupant - claim shall lie against the insurer of the directly offending
vehicle.
3. In all cases - the right of the party paying the claim to recover against the owner
of the vehicle responsible for the accident shall be maintained.
 Period to file NOTCE - the written notice of claim must be presented within 6
months from the date of the accident, otherwise the claim is deemed waived.
 Prescriptive Period - the action must be filed in court or the Insurance Commission
within 1 year from denial of the claim.
 The insurer is not solidarily liable with the insured. While the insurer’s liability may be
direct, it does not mean that the insurer can be held solidarily liable with the insured.
The insurer’s liability is based on contract; that of the insured is based on torts.
Furthermore, the insurer’s liability is limited to the amount of the insurance coverage.
 COVERAGE - P100,000 (plus P100,000 if what is involved is used as public utility).
 DEATH INDEMNITY - P70,000 plus P30,000 for funeral expenses.
 This limit is not per person/injury under the LTFRB mandated insurance.
 AUTHORIZED DRIVER CLAUSE - the clause means that the insurer indemnifies the
insured owner against loss or damage to the car, but limits the use of the insured
vehicle to the insured himself or any person who drives on his order or with his
permission.
 The insured need not prove that he has a driver’s license at the time of the
accident if he was the driver.
 If the claimant was able to present a driver’s license, the same is presumed to be
genuine.
 A driver, not the insured himself, who holds an expired driver’s license is not an
authorized driver.
 THEFT CLAUSE - where the motor vehicle is unlawfully and wrongfully taken without
the owner’s consent or knowledge, such taking constitutes theft, and therefore, it is the
theft clause and not the authorized driver’s clause that should apply.
 There is theft if the vehicle is taken with intent to gain without the consent of
the insured-owner. Thus, there is theft even:
1. Vehicle was returned;
2. Vehicle was stolen by the driver of the insured;
3. Vehicle was taken to the owner of a repair ship for the purpose of repair and
in order to attach accessories.
LIFE INSURANCE
 The insurer in a life insurance contract shall be liable in case of SUICIDE by the
insured if:
1. It was committed after the policy has been in force for a period of 2 years
 from the date of its issue or last reinstatement, unless the policy provides
for a shorter period; or
2. Suicide committed on a state of insanity, regardless of the date of the
commission of the suicide.

POWERS OF THE INSURANCE COMMISSIONER - CPAS-CT

1. Concurrent jurisdiction with regular civil courts - cases where any single claim
does not exceed P5,000,000 involving liability arising from the following: sir-m
a. Suretyship contract;
b. Insurance contract;
c. Reinsurance contract;
d. Membership certificate issued by members of mutual benefit associations.

2. Primary and exclusive jurisdiction - claim for benefits involving pre-need plans
where the amount of benefits does not exceed P100,000.
3. Administer oaths and affirmation;
4. Subpoena witnesses;
5. Compel their attendance;
6. Take evidence and require the production of other records which are relevant or
material to the inquiry.

 The Certificate of Authority issued to the domestic or foreign company by the

Commission may be revoked or suspended by the Insurance Commissioner for any of
the following GROUNDS: UFC-PM
1. Unsound condition of the company;
2. Failure to comply with the provisions of law or regulations obligatory upon it;
3. Its Condition or method of business is such as to render its proceedings hazardous
to the public or to its policyholders;
4. Its Paid-up capital stock, in the case of a domestic stock company, or its available
cash assets, in the case of a domestic mutual company, or its security deposits, in
the case of a foreign company, is impaired or deficient;
5. The Margin of solvency required of such company is deficient.