INSURANCE

A. CONCEPT OF INSURANCE

- agreement: contract one for a consideration indemnifies another against loss from an
unknown or contingent event

B. ELEMENTS OF AN INSURANCE CONTRACT (PAIRS)

a. payment of premiums

b. assumption of risk

c. insurable interest

d. risk of loss

e. scheme to distribute loss

*NOT INSURANCE

- contract: in consideration of periodical payments, a law firm promises to represent clients in

all suits

*DEEMED INSURANCE

a. contract: in consideration of a stipulated amount, a corporation defends a physician against

all suits, at its own expense

b. provision in a CBA: employer assumes hospitalization for dependents of regular employees

C. CHARACTERISTICS AND NATURE (UP FAIR)

a. Uberrimae Fidae Contracts one of perfect good faith (utmost good faith)

- require BOTH parties to disclose anything conditions affecting the risk they are:
aware, material thereto and those which they ought to know

b. Personal Contract

- insurer considered the personal qualifications of the insured in approving the appli

c. Fine Print Rule (Contract of Adhesion)

- terms of the contract do not result from mutual negotiations of the parties, but are
prescribed by the insurer

*INTERPRETATION

GR – the terms shall be interpreted strictly against the insurer and liberally in
favor of the insured

EX – if the terms are clear, there is no room for interpretation

*here the courts are bound to adhere to the insurance contract

although onerous

d. Aleatory

- obligation of the insurer to pay arises only upon happening of an event which is
uncertain or at an indeterminate time

e. Contract of Indemnity (basis of all property insurance)

 - insured is only entitled to recover amount of actual loss

GR – applicable only to property insurance

*life insurance is not a contract of indemnity; no over insurance in

life insurance

EX – (applicable also to life) creditor insuring the life of his debtor

f. Risk Distributing Device

- to distribute the risk of economic loss among those who are subject to the same kind
of risk; each member contributes to a small degree to compensate the loss
suffered by any member of the group

D. CLASSES

1. MARINE contract; one consideration indemnifies another; against loss from

- covers risks connected with navigation to which a:

i. ship

ii. cargo,

iii. freightage,

iv. profits

v. other insurable interest in movable property

vi. inland marine insurance

may be exposed during a voyage or a fixed period

*IMPLIED WARRANTIES (SIDIN)

a. ship is seaworthy at inception of contract

b. presence of insurable interest

c. ship will not deviate from agreed voyage UNLESS proper (O GSW)
d. ship not engaged in illegal venture

d. possessing documents of neutrality where such nationality or neutrality is expressly

warranted

*INSURABLE INTEREST

A. Shipowner

i. value of the vessel

a. Ship Chartered and Charterer agreed to Pay him Value of the

Vessel in case of Loss

- extent: shipowner can only recover amount not recoverable from

charterer

b. Ship Hypothecated by a Bottomry Loan

- extent of insurable interest: only excess of value of vessel over

loan
 ii. expected freightage

B. Cargo Owner/ Shipper

i. cargo

ii. expected profit

C. Charterer

i. vessel

- extent: amount he is liable to shipowner if ship is lost or damaged during

voyage

ii. expected profits or freightage; but only if he accept cargoes from others for a
fee

iii. own cargo or his client’s cargo

*PERILS OF THE SEA V. PERILS OF THE SHIP

PSEA

– loss due to unusual or extraordinary causes connected to navigation which

cannot be guarded by ordinary human skill or prudence

PSHIP

- loss due to:

i. ordinary, natural and inevitable action of the sea

ii. ordinary wear and tear of ship

iii. negligent failure of shipowner to provide vessel with proper equipment

to convey cargo

*PRESUMPTION OF LIABILITY

GR – in the absence of stipulation, risk insured against are only perils of the sea

*here insured is bound to prove the cause of the loss is peril of the
sea

EX – in an all risk policy, all risks are covered

ex – EX – expressly excepted

*here insurer is bound to prove the cause of loss is an excluded risk

*BARRATRY

- wilful misconduct of master or crew to pursue an unlawful or fraudulent purpose

without consent and to the prejudice of the owner

GR – (liability) insured if expressly covered by policy

*here proof of wilful and intentional act is necessary

EX – honest error of judgment or negligence

ex – EX – criminally gross

*CONCELAMENT
 - belief and expectation of a third person relating to a material fact is material and must
be disclosed (contrary to GR that belief or opinion are not material EXCEPT if
made by expert)

GR – (to vitiate contract) matters concealed need not be cause of the loss

EX – although concealed will not vitiate contract:

i. national character of insured

ii. liability of insured to capture or detention

iii. liability of insured from breach of foreign laws

iv. want of necessary documents

v. use of false or simulated papers

*GENERAL AVERAGE LOSS V. PARTICULAR AVERAGE LOSS

GAL – damage deliberately caused by master or upon his authority to save vessel,
cargo or both from a real or known risk

*REQS TO CLAIM GAL

a. common danger to vessel or cargo

b. part of vessel or cargo sacrificed deliberately

c. for common safety or benefit of all

d. made by master or upon his authority

e. successful (resulted to saving vessel or cargo)

f. necessary

PAL – damage to vessel or cargo which did not inure to the common benefit of all
persons interested in vessel and cargo

*LIABLITY IN GAL/ PAL

i. GAL – insurer of vessel or cargo saved

ii. PAL – insurer of the damaged cargo or vessel

*CO- INSURANCE CLAUSE

- if a property is insured for less than its value, insurer is deemed a co- insurer for
difference

*REQS OF CI IN MARINE

a. loss is partial

b. amount of insurance is less than value of prop

*FORMULA

- damage or loss / value or prop X value of insurance

*SEAWORTHINESS

- warranty (ship) it is fit to perform service and to encounter ordinary perils of the
voyage; extends to:
 a. structure of the ship

b. it be properly laden

c. with a competent master

d. sufficient crew

e. requisite appurtenances and equipment

f. others necessary for voyage

*WHEN SHOULD SHIP BE SW

GR – at commencement of the risk

EX –

i. time policy

- insurance is for a specified length of time

GR – implied warranty is not complied

EX – vessel is SW at commencement of every voyage

ii. insurance is on cargo to be transhipped at intermediate port at

commencement of each particular voyage

iii. different portions of the voyage are contemplated at commencement of

each voyage

iv. ship SW at commencement of voyage but becomes USW during

voyage

*here an unreasonable delay in repairing exonerates insurer

from liability

*APPLICATION OF SW TO CARGO OWNER

- applicable; it is the obligation of cargo owner to look for a reliable common

carrier which keeps its vessel SW

*here cargo owner may not have control over the vessel BUT has full
control in choosing the vessel

*INSURER’S LIABILITY IF CARGO OWNER NOT AWARE THAT SHIP IS USW

- none; it is the obligation of cargo owner to look for a reliable common carrier
keeps its vessel SW

*here cargo owner may not have control over the vessel BUT has full
control in choosing the vessel

*EFFECT OF PAYMENT

GR – payment of insurer to insured for lost cargo is a waiver of insurer’s right to

enforce IW of SW against latter

EX – no waiver against carrier (if it was the common carrier paid)

*here insurer can still claim against carrier for breach based on right
of subrogation
*DEVIATION

- departure of vessel from course of voyage OR unreasonable delay in pursuing voyage

OR commencing an entirely different voyage

*PROPER WHEN (O GSW)

a. due to circum outside control of captain or shipowner

b. in good faith to avoid a peril

c. to save human life or another vessel in distress

d. to comply with a warranty

*LOSS AND ABANDONMENT

- act of insured after a constructive loss relinquishing to insurer his interest in thing
insured

*KINDS

a. Actual Total Loss

i. total destruction

ii. loss by sinking

iii. damage rendering thing valueless

iv. total deprivation of owner of thing insured

b. Constructive Total Loss

i. actual loss of more than 3/4 of value of object

ii. damage reducing value more than 3/4 of value of vessel and cargo

iii. expenses of shipment exceed 3/4 of value of cargo

*here insured may:

1. abandon vessel or cargo to insurer and claim whole

insured value OR

2. without abandoning vessel, claim partial actual loss

*REQS FOR VALID ABANDONMENT (WaR CANE)

a. actual relinquishment by insured of his interest in thing insured

b. constructive total loss

c. abandonment not partial or conditional

d. made within a reasonable time after receipt of reliable information of

loss

e. made by giving notice to insurer orally or in writing

f. notice is explicit and specific

2. FIRE contract; one consideration indemnifies another; against loss from

- insurer for a consideration indemnifies insured against loss of property by fire

 *it may include the following: (if covered by “extension to fire insurance”)

a. lightning

b. windstorm

c. tornado

d. earthquake

e. other allied risks

*LIABILITY OF INSURER (same rule provided in p. 81)

*ALTERATION

- use or condition of thing insured other than the purpose in the policy made without
consent of insurer

*here the insurer is entitled to rescind the contract

*REQS FOR RESCISSION IN FIRE

a. use or condition of thing insured is limited or stipulated in policy

b. alteration of such use or condition

c. made without consent of insurer

d. made by means within control of the insured

e. it increases the risk

f. there is a violation of a material policy provision

*eg: converting an insured residential house to a factory

*FRIENDLY FIRE V. HOSTILE FIRE

FF – fire burning where it is supposed to be

HF – fire burning where it is not supposed to be OR friendly fire that escaped or went
out of control

3. CASUALTY INSURANCE contract; one consideration indemnifies another; against

loss from

- insurance covering loss from accident or mishap excluding those under marine or fire

*INTENTIONAL V. ACCIDENTAL

I-

GR – exercise of reason and volition

EX – intentional injuries by insured or any other person

*WHEN A POLICY EXCLUDES I

- it is intention of the person inflicting the injury that is controlling

*IF INJURIES BY INSURED IS FROM INTENTIONAL ACT OF THIRD

- insurer is relieved from liability

A–
 - that which happens by chance or fortuitously

*TPL

a. Casualty insurance providing Stipulation Pour Atrui

- third party may directly sue insurer upon loss; upon payment, insurer is
entitled to right of subrogation

*here insurer is not solidarily liable with insured or tortfeasor

b. Casualty insurance against liability to third but NO Stipulation Pour Atrui

- any third person injured may not sue insurer; only insured may recover
from insurer

*here third person must recover from insured

c. Liability of Insurer if Insured was Committing a Felony

GR – insurable (may claim) if felony is accidental

EX – not insurable (no claim) if deliberate criminal acts

4. SURETYSHIP

- agreement: surety guarantees performance of an obligation by another in favor of third

(creditor) party

a. Fidelity Bond – insurance against loss from misconduct

b. Fidelity Guaranty Insurance

- insurance against loss from want of integrity, fidelity, honesty of

employees or other person holding positions of trusts

5. LIFE INSURANCE

- insurance on human life or those appertaining or connected (HAC) thereto

*DEATH OF INSURED VIA SUICIDE; LIABILITY OF INSURER

a. Suicide committed After Policy was in force for 2yrs From Issue or Last
Reinstatement EXCEPT policy provides shorter period

- insurer is liable

b. Suicide in a State of Insanity

- insurer is liable regardless of date of suicide

6. MICROINSURANCE*

7. CMVLI contract; one consideration indemnifies another; against loss from

- mandatory or compulsory insurance or guarantee to indemnify death or bodily injury of

a third person or passenger from use of a motor vehicle in public highways

*this is a condition precedent prior registration motor vehicle or

renewal thereof

*PURPOSE
 - to give immediate financial assistance to victims and/or their dependents regardless of
financial capability of owner or operators

*NO FAULT CLAUSE

- injured party or passenger has option to claim for injury or death without need of
proving fault or negligence provided:

a. total indemnity not exceed 15K

b. proofs of loss submitted under oath

c. claim made against one motor vehicle only

*TO WHOM CLAIM IS MADE

a. Injured is an Occupant of Vehicle

- against insurer of vehicle the occupant was riding, mounting or dismounting

b. Injured Not an Occupant

- against insurer of directly offending vehicle

*here (a, b) party paying shall maintain his right to subrogation against owner of
erring vehicle

*TIME TO FILE NOTICE

– within 6mos from date of accident OTHERWISE waived

*TIME TO FILE ACTION (claim was denied by insurer)

- filed in court or commission within 1yr from denial of claim by insurer/

*TIME TO PAY (for insurer)

a. There is Agreement

- within 5wd after reaching agreement

b. No Agreement

- insurer pay only no fault indemnity

*this is without prejudice to right of claimant from pursuing his claim

further

*CAN THIRD SUE INSURER DIRECLTY – same rule in TPL

*IS INSURER SOLIDARILY LIABLE WITH INSURED – same rule in TPL

*COVERAGE AND EXTENT OF LIABILITY

a. Coverage – 100K + 100k if public utility per person as of Jan 23, 2014

b. Death – 70K + 30K funeral expenses per person as of Jan 23, 2014

*OTHER RULES CMVLI

a. Authorized Driver Clause

- agreement: insurer is liable only when the driver is insured himself OR another
on his order duly licensed to drive
 i. Insured Himself Driver

- need not prove he has driver’s license at accident

ii. Another is Driver on Insured’s Order

- still needs to prove he has driver’s license at accident

*here a driver driving on an expired license is a driver

without authority

iii. Claimant who presents Driver’s License

- presumed genuine

b. Theft Clause

- where motor vehicle is taken with intent to gain without consent of owner;
authorized driver clause does not apply BUT the Theft Clause even if:

i. vehicle was returned

ii. stolen by driver of insured

iii. taken to repair shop for repair or accessories

*a comprehensive policy includes a theft clause UNLESS expressly

excepted

c. Malicious Damage Clause

- insurance for damage resulting from deliberate or wilfull acts of insured, his
family, person in the service of insured to cause damage to insured
vehicle to defraud insurer

8. COMPULSORY INSURANCE FOR AGENCY- HIRED WORKERS

E. VARAIBLE CONTRACTS

- policy or contract on group or individual by insurer; to provide benefits to vary so as to reflect

investment results

F. INSURABLE INTERST (II)

1. LIFE AND HEALTH (HELD)

- person has insurable interest in the life and health of:

a. himself, his spouse, his children

b. any person upon whose life, estate or interest vested in him depends (LIE)

c. any person under legal obligation to him for payment of money, property or
services death or illness might prevent

d. any person upon whom he depends for education and support or in whom he
has pecuniary interest

*a – mere relationship is sufficient

*b, c, d – requires pecuniary interest

GR – person has II in life and health of another if he has pecuniary interest in the
life and health of such person
 EX – (pecuniary interest not required) person insured is his spouse or child

2. PROPERTY (EIE)

a. existing interest

b. inchoate founded on an existing interest

c. expectancy coupled with existing interest

*pecuniary interest in property is always required

*II is a matter of public policy, thus estoppel cannot be invoked against it

*GENERAL

- a person has II in property if he derives pecuniary benefit from its preservation or will
suffer pecuniary loss by its destruction WON he has title, lien or possession of
the property

*II OF AN HEIR

- no II in the properties he will inherit even if there be execution of a last will and
testament

*II OF AN OWNER WHOSE PROP LEVIED UPON J AND LOST IN EXECUTION SALE

- retains II during the redemption period

*however, the buyer of the property also has II from the time of purchase subject
to condition that the prop will not be redeemed

*II OF BUYER OVER GOODS PURCHASED

- purchaser has II upon perfection even before delivery of the goods

*II IN LIFE V. II IN PROPERTY (BELT)

a. BENEFICIARY’S INTEREST

L – (over the life of the insured)

GR – not required if it was insured himself who secured the policy

EX – required if it was the beneficiary who secured

P – required

b. TIME WHEN II MUST EXIST

L – at time of effectivity; need not at loss

P – at time of effectivity and loss; need not in meantime

c. EXPECTATION OF BENEFIT

L – need not have legal basis

P – required legal basis

d. EXTENT

L–

GR – unlimited
 EX – policy by creditor on the life of his debtor

P – limited to the actual value of the interest

*CHANGE OF INTEREST IN THING WITHOUT CHANGE OF INTEREST IN INSURANCE

GR – suspends insurance until interest in thing and interest in insurance are vested in
the same person

EX – (I LISTS)
a. policy inures to the benefit of whomsoever, during continuance of risk, become
owner of the interest insured

b. life, health and accident insurance

c. change of interest in thing after injury resulting in loss

d. change of interest in one or more of several distinct things separately insured

by one policy

e. transfer of interest by one of several partners, jointly insured

f. change of interest by will or succession on death of insured

*when an express prohibition against alienation in the policy is violated, it is not

merely suspended but avoided

3. DOUBLE INSURANCE V. OVER INSURANCE (II SIR)

- same person is insured by several insurers separately respecting the same subject
and interest:

*this is not prohibited by law but may be prohibited by “other insurance clause”

a. insured is same

b. 2 or more insurers insuring separately

c. subject matter is same

d. interest is same

e. risk insured is same

*EFFECT

GR – insured may claim from insurers in order he may select the amount insurers are
severally liable under respective contracts

EX – policy otherwise provide

a. Policy is Valued

- sum received by insured under any other policy is deducted from value of the
policy without regard to actual value of subject matter

b. Policy is Unvalued

- sum received by insured under any other policy is deducted from full insurable
value

c. Insured receives a Sum in Excess to Valuation in a or Insurable Value in b

 - he must hold such sum in trust for the insurers

d. Insurer’s Liability among Other Insurers

- to contribute ratably to loss in proportion to amount he is liable in his contract

4. MULTIPLE OR SEVERAL INTERESTS ON SAME PROPERTY

a. trust – trustor and trustee; prop in trust

b. corporation – corp and SH; assets of corp

c. partnership – firm and partners; assets of firm

d. assignment – assignor and assignee; prop assigned

e. lease – lessor, lessee or sub- lessee; prop leased

f. mortgage – mortgagor and mortgagee; prop mortgaged

*II OF MORTGAGOR AND MORTGAGEE IN MORTGAGED PROPERTY

- both have; separate and distinct ; they may take out separate policies at the same time
or separate times

a. Mortgagor

- as owner, extent: value of property

b. Mortgagee

- as such, extent: debt secured until mortgage debt is extinguished

*insurance procured by the mortgagor or the mortgagee will not inure to the
benefit of the other

- insurance is by nature personal; like any other contract it is effective only between

GR - parties, heirs, successors and assignee

EX – contains stipulation pour atrui

*STANDARD OR UNION MORTGAGE CLAUSE V. OPEN OR LOSS PAYABLE MC

SU – subsequent acts of mortgagor cannot affect rights of mortgagee

OL – mortgagor does not cease to be a party to the contract

*if made by mortgagor in favour of mortgagee

- mortgagee is only a beneficiary but not a party to the contract itself

*INTEREST RETAINED BY MORTGAGOR

- a mortgagor who effects insurance providing loss be payable to mortgagee or assigns

a policy to him

GR – insurance is deemed upon the interest of the mortgagor who does not
cease to be a party to the original contract

*any act of the mortgagor prior to loss which would avoid the
insurance has same effect though the prop is with the
mortgagee
 *any act to be performed by the mortgagor may be performed by the
mortgagee and has the same effect as if it had been performed
by the mortgagor

EX – otherwise provided by the policy

*II OF BENEFICIARY OR ASSIGNEE

a. Life

i. Insured secures insurance on His Own Life

- he can designate anybody who does not have II

ii. Insured secures insurance for Third

- beneficiary must have II in the life of insured

iii. Assignment

- assignee need not have II

b. Property

- both beneficiary and assignee must have II

*Assignment

- consent of the insurer is necessary before assignment

G. PERFECTION

1. OFFER AND ACCEPTANCE

- insurance contract being consensual by nature, is perfected the moment there is

meeting of the minds of object and cause or consideration

i. Insured – makes offer by application

ii. Insurer – accepts offer by approving

A. DELAY IN ACCEPTANCE

GR – not result in a binding contract

EX – prior agreement fixing the date of effectivity

*ACCEPTANCE OF AN OFFER BY LETTER

- binds the offerer only from time it came to his knowledge

B. DELIVERY OF POLICY

- since the contract is perfected by mere consent; not necessary for perfection

*if an insurer authorizes his agent to deliver a policy to the insure

- it is deemed to have authority to receive premium payment in its behalf; insurer

is bound by agent’s acknowledgement of receipt of premium

2. PREMIUM PAYMENT

GR – required for validity in issuance or renewal of policy (actual payment)

EX – (ALICE)
 a. parties agreed to payment of premium in installments and partial payment was
made at time of loss

b. life or industrial life; when a grace period applies

c. acknowledgment in policy that premium already paid

d. credit term was agreed:

i. provided in broker and agency agreement

ii. not exceed 90d from issuance of policy

e. parties barred by estoppel

*SALARY DEDUCTION FOR GOVT. EMP

- mode of paying insurance premium or loan oblig

a. must be an employees of the Republic of Phil or GOCC

b. entity employing the employee must be authorized to make salary deductions

c. authority is based on an agreement between insurer and employee

*FUTURE PREMIUMS/ ADVANCE PAYMENT

- insurer may accept for the purpose of:

a. paying future premiums

b. increase benefits

*PAYMENT OF PREMIUM BY POST DATED CHECK

GR – if made subsequent to loss; it is insufficient to constitute as payment

EX – if accepted prior to loss assuming an availability of funds; sufficient, even if

unencashed

*here subsequent enchashment shall retroact to date of acceptance by

insurer

3. NON DEFAULT OPTIONS IN LIFE (GADS)

- to prevent lapse of life insurance, insured may avail:

a. grace period

b. automatic policy loan

c. dividend application

d. restatement clause

4. REINSTATEMENT OF LAPSE POLICY OF LIFE

GR – at any time within 3yrs from default of premium payment

EX – cash surrender value paid to insurer or extension period has expired

*here there must be proof of insurability and payment of overdue premium

+ interest

5. RETURN OF PREMIUMS TO INSURED (D FAVORED)

 a. default of insured other than actual fraud, insurer never incurred liability

b. contract is voidable due to fraud or misrep of insurer or agent

c. contract is annulled due to fraud or misrep of insurer or agent OR due to facts

existence of which the insured was ignorant

d. contract is voidable and subsequently annulled via Civil Code

e. over insurance

f. rescission granted due to insurer’s breach

g. thing insured never exposed to risk insured against

h. insurance for a definite period and insured surrenders policy before termination

*NO RETURN OF PREMIUM TO INSURED

- policy is annulled, rescinded or claim denied due to fraud of insured

H. RESCISSION OF INSURANCE CONTRACT

A. CONCEALMENT

- neglect to communicate a party knows or ought to know

*TEST OF MATERIALITY

GR – determined by probable or reasonable influence of facts upon party to whom

communication is made in forming his estimate of disadvantages of contract,
making his inquiries or fixing the premium (FMF)

EX – (not avoid policy even if untrue)

i. opinion

ii. made in good faith

iii. without intent to deceive insurer

*EFFECTS

a. vitiates the contract

b. entitles the insurer to rescind even if loss is due to matter not concealed

*CAUSE OF LOSS

- need not be matter concealed; reason: TEST OF MATERIALITY

*IS GOOD FAITH A DEFENSE TO CLAIM

- no; concealment intentional or unintentional entitles insurer to rescind; TEST OF

MATERIALITY

*WAIVER AND ESTOPPEL

- insurer may be estopped from raising concealment

GR –
 a. if it accepts premium and issued the policy even if insured supplied
facts which could hardly be overlooked considering its materiality to
coverage

b. if insured already supplied info that requires further inquiries but insurer
failed to do so

EX – insurer is not estopped if there was connivance between insured and agent
and medical examiner

*even if agent was aware that insured has a heart peacemaker, insured can
still be considered to have concealed as the duty not to conceal
belongs to insured – Florendo v. Philam Plans Inc.

B. REPRESENTATION

- statements made by insured; at or prior issuance of policy; to insurer inducing latter to

enter contract

*KINDS

a. Affirmative – affirmation when contract begins

b. Promissory – promise performed after policy was issued

*TEST OF MATERIALITY

- determined by probable or reasonable influence of facts upon party to whom

communication is made in forming his estimate of disadvantages of contract,
making his inquiries or fixing the premium (FMF)

*EFFECT

- entitles injured party to rescind from time representation becomes false despite there
be acceptance of premium by insurer

C. WARRANTY

- statement by insured set in the policy, the untruth or nonfulfillment WON insurer was
prejudiced, render the policy voidable

*KINDS

a. Express

b. Implied – deemed included in policy though not expressly mentioned (only in marine
insurance)

c. Affirmative – asserts existence of fact at time it is made

d. Promissory – stipulates facts shall exist or thing be done or omitted

*EFFECT OF BREACH

GR – entitles insurer right to rescind

EX – (BUI)

i. loss occurs before performance

ii. performance becomes unlawful

 iii. performance becomes impossible

*IMMATERIAL PROVISIONS

GR – do not avoid the policy

EX – parties stipulate that violation of a particular provision though immaterial shall

avoid the policy

*here via the stipulation, parties convert the immaterial provision to a

material one

4. OTHER INSURANCE CLAUSE

GR – violation of clause in the policy providing that it shall be void if insured procures
additional insurance without consent of insurer

EX – subject to waiver; express or implied (EKI)

*no violation of this clause if the face of the policy contain notation “Co-
insurance declared” which deems insurer on notice of existence of other
insurance contract on property – General Insurance and Surety Corp v.
Ng

*GROUND TO RESCIND

- only in property insurance; upon discovery of other insurance making total insurance in
excess of value of prop insured

* no over insurance in life insurance

*INCONTESTABILITY CLAUSE

- a policy of life in force during the lifetime of insured for a period of 2yrs from issue or
last reinstatement; insurer cannot prove policy is void ab initio or is rescindable
due to fraudulent concealment or misrepresentation

a. life insurance payable on death of insured

b. in force during lifetime of the insured for a period of 2yrs from issue or last
reinstatement

*period may be shortened but NOT extended by stipulation

GR – failure of insurer to contest validity of policy on grounds of fraudulent concealment

or misrep within the 2yr prescriptive period bars him from doing so

EX – defenses not barred even after lapse of 2yr period: (IRP MFB)
i. person taking insurance lack insurable interest

ii. cause of death is an excepted risk

iii. premiums not paid

iv. conditions relating to military or naval service violated

v. fraud is the vicious type

vi. beneficiary failed to furnish proof of death or comply with condition imposed by
policy after loss

vii. action not brought within time specified

I. LOSS AND CLAIM SETTLEMENT

*INSURER IS LIABLE (PINE)

i. proximate cause is peril insured against

ii. immediate cause is peril insured against EXCEPT proximate cause is

excepted peril

iii. loss is due to negligence of insured EXCEPT when negligence is gross being
wilful

iv. loss due to efforts to rescue the thing from peril insured against, during
rescue, thing is exposed to peril not insured
against permanently depriving insured of its possession,
whole or part

*INSURER IS NOT LIABLE

i. loss due to wilful act or gross negligence of insured

ii. loss due to connivance of insured

iii. loss due to proximate cause which is an excepted peril

*LIABILITY OF INSURER IF INSURED COMMITTING FELONY

GR – insurable if accidental

EX – not if deliberate criminal acts

1. NOTICE OF LOSS

- should be given without unnecessary delay OTHERWISE insurer exonerated

*PROOF OF LOSS

- sufficient if insured give the best evidence he has in his power; even if policy require a
specific kind of proof: substantial compliance is sufficient

*needed only if required by policy

2. CLAIMS SETTLEMENT

A. UNFAIR SETTLEMENT; SANCTIONS*

i. Life

a. Maturity Date Provided

- paid immediately upon maturity

b. Maturity upon Death of Insured

- paid within 60d after presentation of claim and filing proof of death

ii. Property

1. paid within 30d after proof of loss received and ascertainment of loss
made by agreement or arbitration

2. no ascertainment made within 60d after receipt of proof of loss: paid

within 90d after such receipt
 *EFFECTS OF DELAY OF INSURER

- beneficiary is entitled to payment of: (IDALEC)

a. interest for duration of delay at a rate twice the legal interest (6%X2)

*legal rate is uniform at 6% WON claim is for loan or forbearance of

money

b. attorney’s fees, litigation expenses

c. damages

*COLLATERAL SOURCE RULE

GR – injured receives compensation from source wholly independent of the tortfeasor,

payment cannot be deducted from damages he would otherwise collect from
totrfeasor

EX – not applicable to no- fault insurance: insured is indemnified by insurer regardless

of who was at fault

*here a no- fault insurer cannot be obliged to pay hospitalization expenses

of the insured already paid by a separate health insurance provider

B. PRESCRIPTION OF ACTION

a. Absence of an Express Stipulation in Policy

- being a written contract; it prescribes in 10yrs

b. With an Express Stipulation in Policy

- provided not less than 1yr from accrual of coa

*coa accrues from final rejection of claim of insured NOT from loss
OR from denial of a MR filed by insured

c. CMVLI

i. Notice of Claim

- must be filed within 6mos from date of accident OTHERWISE claim is

waived

ii. Action

- must be brought with courts or commission within 1yr from denial

OTHERWISE action shall prescribe

C. RIGHT OF SUBROGATION (LRD)

i. legal effect of payment; inures to insurer without need of assignment or stipulation

ii. insurer can recover from third only what insured could have recovered BUT no
recovery can be made if insurer voluntarily paid even if loss is not covered

iii. insured can no longer recover from offending party what was paid to him by insurer
BUT he can recover deficiency if his damages is more than what was paid

*deficiency is not covered by subrogation

*NO RIGHT OF SUBROGATION (RILE)

 a. insured by his own act releases wrong doer/ third laible

b. insurer pays insured for a loss not covered by policy

c. life insurance

d. recovery of loss in excess of insurance

J. BUSINESS OF INSURANCE; REQS

K. INSURANCE COMMISSIONER

- appointed by the president for a term of 6yrs without reappointment; shall serve until
successor is appointed and qualified

*POWERS

a. regulate insurance companies

b. quasi- judicial powers

i. concurrent with civil courts

- single claim not exceed 5M

ii. primary and exclusive

- claim for benefits of pre- need plans not exceed 100K

iii. administer oaths

iv. subpoena

v. take evidence

c. revocation or suspension of Certificate of Authority granted to domestic or foreign

company

d. order liquidation if it determines a company insolvent

e. order appointment of conservator if it determines that a company is in a state of

continuing inability or unwillingness to maintain solvency or liquidity