I.
Insurance Parties to An Insurance Contract
a. Basic concepts
i. What may be insured
Q: What maybe insured?
A: Any contingent or unknown event whether past or future which
may damnify the person having insurable interest or create a
liability against him maybe insured against.
-What may NOT be insured?
A: An insurance for or against the lottery or for or against any
chance or ticket in a lottery drawing a price may not be insured,
because gambling results in profit and insurance seeks to
indemnify the insured against the loss.
Insurance Contract
An agreement whereby one undertakes for a consideration to
indemnify another ( Insured) against loss, damage or liability
arising from an unknown and contingent event.
Doing an insurance business or transacting an insurance
business :
1. The making or proposing to make as insurer any insurance
contract.
2. The making or proposing to make as surety any contract of
suretyship as a vocation and not as a mere incident to any
other legitimate business of a surety
3. Doing any insurance business like reinsurance and similar
acts
4. Doing or proposing to do any business equivalent above.
Ceniza ( Lecture)
1. Conditional : The contract of insurance is laden with
conditions hence faithful compliance is necessary
2. Aleatory: The parties must only be bound due to an existence
of a potential harm ( It is not a wager contract)
3. Personal In Nature: The agreement is one valid only between
the insurer and the insured hence one cannot assign without
written consent
4. Uberrimae Fidae: Parties must enter into contract with
utmost good faith
5. Indemnity: Not an investment contract what you get is only
the damage
Ex: Car is insured 80M can you get the whole 80 m if the
damage is only 50m?
Ans: No . Since a contract of insurance is a contract of
indemnity one cannot be indemnified more than what he lost
Elements ( PARIS)
1.Payment of Premium
2. Assumption of risk
3. Risk of loss
4. Existence of Insurable interest
5. Scheme to distribute losses
Principal Object test: The contract is one of insurance if the
principal object and purpose is assumption of risk and
indemnification of loss.
Q: Are healthcare provider engaged in the business of insurance?
A: No. Under the principal purpose test, the test applied is whether
the assumption of risk and indemnification of loss are the principal
object and purpose of the organization or whether it is merely
incidental to the business. If these are principal objectives, the
business is that of insurance. If these are merely incidental the
service is the principal purpose then the business is not an
insurance. In the case of healthcare providers, since Maxicare
provides healthcare services rather than insurance service it cannot
be considered as being engaged in an insurance business.
a. Insurers: Partnership, association, or corporation who
are duly authorized by the Insurance Commission to
engage in insurance Business.
*Note : This does not include individuals under RA 10607.
b.insured : The person to whose loss is the occasion of
payment of the insurance proceed by the insurer anyone
except the public enemy may be insured.
*A public enemy is a nation, including its citizen or subject
with whom the Philippines is at war.
Q: May a member of the MILF or its breakaway group
be considered as a public enemy?
A: No. A member of the MILF or the Abu Sayyaf may be
insured with a company licensed to do business since the
MILF is not a citizen or national of the country with which
the Philippines is at war.
c. Beneficiary : Beneficiary is the person designated to
receive the proceed of the policy when the risk attaches. The
designation of a third person as beneficiary may be required
by a separate agreement. The designation may also be made
through a valid will.
*Void designation:
a. Those made between the person who were guilty of adultery and
concubinage at the time of the donation ( Conviction is not
necessary)
b. Those made between persons guilty of the same criminal offense
in consideration thereto. If the beneficiary is the principal ,
accomplice or accessory in willfully bringing about the death of
the insured.
c. Those made to a public officer, or his wife, descendant or
ascendant by reason of his office.
Notes:
1.There is no legal prohibition in destinating an illegitimate child
as beneficiaries ( Heirs of Maramang vs Guzman).
2. Any person that is prohibited from receiving donation cannot be
considered a beneficiary among the grounds are those who are
guilty of adultery and concubinage ( Insular vs Ebrado)
3. The lawful spouse and legitimate children cannot complain in
the denial of the legitime because the proceeds of life insurance
policy to not form a part of the estate of the insured. Neither can
they claim insurance proceed because they are not privy to the
contact.
The Forfeited Share passes to the ff :
1. The other beneficiaries, unless otherwise disqualified
2. In the absence of other beneficiaries the proceed shall be
paid in accordance with the policy contract
3. It shall be paid to the estate of the insured.
ii. Insurable interest
Definition: This is an interest which a person is deemed to have in
the subject matter of the insurance where he has a relation or
connection to it such that the person will derive pecuniary benefit
or advantage from preservation of the subject matter or will suffer
from pecuniary loss or damage from its destruction by the
happening of the event insured against it
Kinds of insurable interest
*Note the difference between beneficiary and insurable interest
1. In life and health
2. In property
In Life and health: iii. Double insurance and over
1. Of himself , of his spouse and of his children insurance
Q: Does the person have insurable interest over the life of his iv. No fault, suicide and
parents? incontestability clause
A: Generally no unless he or she depends upon his or her parent for b. Perfection of Insurance contrct
education and support. c. Rights and obligation of parties
d. Rescission of insurance contracts
Q: A homosexual took an insurance policy on the life of his
boyfriend Y. Y died in an accident X filed his claim should the
insurer pay?
A: NO. The insurer is not obliged to pay. X has no insurable
interest in the life of his boyfriend. Friendship alone is not
insurable interest.

2. Of any person on whom he depends wholly or in

part for education and support or in whom he has a
pecuniary interest
3. Of any person under the legal obligation to him for
payment of money or respecting or service of which
death or illness prevent performance ( Creditor
insuring a debtor)
4. Of any person upon whose life any estate or interest
depends.

Cases:
1. Spouses Cha vs Court of appeals
Nilo and Stella entered into a contract of lease with CKS the lessor.
One of the stipulation in the lease contract is that the lessee shall
not insure the chattel or merchandise inside the premises without
the consent of the lessor. Notwistanding the said provision, Cha
still insured their merchandised within the leased premises with
United Insurance. A fire suddenly broke out, CKS ask that the
premium based on the insurance contract inure to their benefit
since the spouses insured the merchandise without their consent.
United Insurance refused to pay on the ground that CKS has NO
Insurable interest over the chattel. Who is entitled to receive?

A: The Spouses. The measure of the insurance interest is to the

extent that one has to be damnified by the loss or injury thereof.
Here. The lessor is not affected as to the loss of the chattel,
therefore he has no insurable interest over the same.