INSURANCE Art.
2011: The contract of insurance is governed by
INSURANCE – it is an agreement whereby one
undertakes for a consideration to indemnify another
against LOSS, DETERIORATION, or LIABILITY
arising from an unknown or contingent event.
PARTIES:
1) Insurer
- The person who undertakes to indemnify
another by a contract of insurance.
2) Insured
- Generally, any person with capacity to
contract.
3) Beneficiary
- The person designated to receive the
proceeds of the policy when the risk
attaches.
NOTE:
There are 3 parties to a contract. However,
usually, the Insured and the Beneficiary are one and
the same person.
Anyone may be insured EXCEPT a public
enemy.
GOVERNING LAWS:
1) Insurance Code
2) Civil Code
3) Special Laws
REMEMBER:
If the provisions in the Insurance Code does
not provide for a particular matter in question, the
provisions of the Civil Code regarding contracts shall
govern.
CIVIL CODE PROVISIONS RELEVANT TO
INSURANCE CODE
Art. 739: The following donations shall be VOID:
1) Those made between persons who were guilty
of adultery or concubinage at the time of the
donation;
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, 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 donee may be proved by preponderance
of evidence in the same action.
special laws. Matters not expressly provided for in such
special laws shall be regulated by this Code.
Art. 2012: Any person who is forbidden from receiving
any donation under Art. 739 cannot be named
beneficiary of a life insurance policy by the person who
cannot make any donation to him, according to said
article.
Art. 1305: A contract is meeting of minds between
two persons whereby one binds himself, with respect
to the other, to give something or to render some
service.
Voluntary Characteristic of Insurance
Art. 1306: The contracting parties may establish such
stipulations, clauses, terms and conditions as they may
deem convenient, provided they are not contrary to
law, morals, good customs, public order or public
policy.
Art. 1308: The contracts must bind both contracting
parties; its validity or compliance cannot be left to the
will of one of them.
NOTE: Insurance is not compulsory and the parties
may incorporate such terms and conditions as they
may deem convenient which will be binding.
NOTE: However, even though insurance is generally
voluntary, there are instances wherein the law requires
it, such as for motor vehicles.
Consensual Characteristic of Insurance
Art. 1319: Consent is manifested by meeting of the
offer and the acceptance upon the thing and the cause
which are to constitute the contract. The offer must be
certain and the acceptance absolute. A qualified
acceptance constitutes a counter-offer.
Acceptance made by letter or telegram does
not bind the offerer except from the time it came to his
knowledge. The contract, in such a case, is presumed
to have been entered into in the place where the offer
was made.
NOTE: Insurance is perfected by the meeting of the
minds of the parties. If the application for insurance
has not been either accepted or rejected, there is no
contract as yet.
 Insurance company’s consent to the policy was
vitiated by error:
Art. 1330: A contract where consent is given through
mistake, fraud, violence, intimidation, undue influence,
or fraud is voidable.
Art. 1331: In order that mistake may invalidate
consent, it should refer to the substance of the thing
which is the object of the contract, or to those
conditions which have principally moved one or both
parties to enter into the contract.
Mistake as to the identity or qualifications of
one of the parties will vitiate consent only when such
identity or qualifications have been the principal cause
of the contract.
A simple mistake of account shall give rise to
its correction.
Insurance is null and void where the
consideration is false or fraudulent:
Art. 1353: The statement of a false cause in contracts
shall render them void, if it should not be proved that
they were founded upon another cause which is true
and lawful.
Insurance Code does not have any provision
regarding the amount of recovery in case of
rescission. Thus, the rule which imposes the
obligation of mutual restitution should apply.
Art. 1385: Rescission creates the obligation to return
the things which were the object of the contract,
together with their fruits, and the price with its
interest; consequently, it can be carried out only when
he who demands rescission can return whatever he
may be obliged to restore.
Neither shall rescission take place when the
things which are the object of the contract are legally
in the possession of third persons who did not act in
bad faith.
In this case, indemnity for damages may be
demanded from one person causing the loss.
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CHARACTERISTICS OF INSURANCE:
Consensual Characteristic of Insurance
Art. 1319: Consent is manifested by meeting of the
offer and the acceptance upon the thing and the cause
which are to constitute the contract. The offer must be
certain and the acceptance absolute. A qualified
acceptance constitutes a counter-offer.
Acceptance made by letter or telegram does
not bind the offerer except from the time it came to his
knowledge. The contract, in such a case, is presumed
to have been entered into in the place where the offer
was made.
NOTE: Insurance is perfected by the meeting of the
minds of the parties. If the application for insurance
has not been either accepted or rejected, there is no
contract as yet.
Voluntary Characteristic of Insurance
Art. 1306: The contracting parties may establish such
stipulations, clauses, terms and conditions as they may
deem convenient, provided they are not contrary to
law, morals, good customs, public order or public
policy.
Art. 1308: The contracts must bind both contracting
parties; its validity or compliance cannot be left to the
will of one of them.
NOTE: Insurance is not compulsory and the parties
may incorporate such terms and conditions as they
may deem convenient which will be binding.
NOTE: However, even though insurance is generally
voluntary, there are instances wherein the law requires
it, such as for motor vehicles.
Aleatory Characteristic of Insurance
Art. 2010: By an aleatory contact, one of the parties
or both reciprocally bind themselves to give or to do
something in consideration of what the other shall give
or do upon the happening of an event which is
uncertain, or which is to occur at an indeterminate
time.
NOTE: Insurance is not a contract of chance. However,
each party must take a risk.
Executory and Unilateral Characteristics of
Insurance
Conditional Characteristic of Insurance
Insurance is subject to conditions the principal one of
which is the happening of the event insured against.
The conditions therein must be complied with.
Contract of Indemnity
Personal Contract
Art. 1291: Obligations may be modified by:
1) Changing their object or principal conditions;
2) Substituting the person of the debtor;
3) Subrogating a third person in the rights of the
creditor.