1) Differences Between Life Insurance and Accident Insurance

a. As to Amount - In life insurance, there is no limit as to the amount, except the insured’s health and
his capacity to pay premiums (exception is when the life of debtor is insured). In property insurance,
limit is the value of the property to be insured.

b. As to Legal Basis - In life insurance, there need not be any legal basis and this is especially true where
an insured insures the life of a person upon whom he depends for support but the latter is not legally
bound to so support him. In property insurance, there must be a legal basis as when mortgagee creditor
insures the property mortgaged by the debtor; thus, there must be an existing right.

c. As to Time of Insurable Interest - In life insurance, the insurable interest is required to exist only at
the time of perfection of the contract. In property insurance, it must exist at the time of perfection and
the time of loss.

2. Concealment and Representation

Concealment - There is concealment where the insured has knowledge of facts, material to the risk, and
good faith and fair dealing require him to reveal them, and he fails to do so.

Representation - A statement incidental to the contract of insurance relative to some fact having
reference thereto and upon the faith of which the contract is entered into. Concealment and
misrepresentation are discussed together (Secs. 26 to 48) because their legal effects are the same, and
apply equally to life and non-life insurance. (Secs. 109-114

Common Rules on Concealment and Misrepresentations

GeneralRule

If concealment or misrepresentation is discovered before loss or death, then the insurer can cancel the
policy. If it is discovered after death or loss, the insurer can refuse to pay. (Sec. 48)

E x c e p t io n :

Incontestability Clause in life insurance, if after two (2) years from the issuance of the policy, and the
insurer fails to discover concealment or misrepresentation, any discovery after the two-year period
cannot be a ground for canceling or refusing to pay. (Sec. 48)

E x c e p tio n s to E x c e p t io n :

(a) Non-payment of premiums (Sec. 64);

(b) Violation of condition re military/naval service in times of war;

(c) No insurable interest;

(d) Cause of death was excepted/not covered;

(e) Fraud of the vicious type; or

(f) Proof of death was not given.

OtherCommonRules:

(1) The rules on concealment and misrepresentation apply as well to a modification of a contract of
insurance as to its original formation. (Sec. 47)

(2) Whenever the right to rescind a contract of insurance is given to the insurer, such right must be
exercised previous to the commencement of an action on the contract. (Sec. 48)
Incontestability Clause - Applies only to life insurance,

thus:

Two (2) years from perfection;

or Two (2) years from reinstatement. (Sec. 48)

Under Section 233, from the time the policy lapses due to non-payment of premium, the insured has
three (3) years within which to reinstate the policy. But reinstatement requires from the insured:

(a) To submit himself/herself to medical examination; and

(b) To pay all back premiums (back premium method) or advance the date of issue (re-dating method).

At reinstatement, there is no new policy issued, but the old policy continues, and when the end of the
policy is reached, then the insured will still receive the proceeds. When two (2) years have elapsed from
reinstatement, the insurer has no right anymore to rescind the policy on the ground of concealment or
misrepresentation; the only defense left to the company is the non-payment of premiums.

Case problem:

Case Problems:

1. CIF, FOB sa transpo

2. Incontestability Clause

3. Hypothecary Nature Page 78

4. Deviation/Concealment

5. Insurance

6. Another insurance

Distinctions:

1. Certificate of public convenience (page136) vs Certificate of public necessity

2. Deviation and Concealment

3. Remote vs Proximate vs Immediate Cause

4. Culpa aquiliana vs Culpa contractual vs Culpa criminal

a) Culpa contractual - negligence based on contract; the contract of carriage of passengers, it is the
obligation of carrier to convey the passengers safely to the point of destination.

(b) Culpa aquiliana - negligence based on tort; Damage caused to another due to negligence

(c) Culpa criminal - negligence based on a crime. The driver’s act may amount to a crime
Transpo Law Page130

Computations

1. Computation of value of life

2. Computation of loss earning capacity

Net Earning Capacity = Life Expectancy x Gross Annual Income, less Living Expenses

“Life Expectancy” - accepted formula for determining life expectancy is 2/3 multiplied by [80 minus age
of the deceased]

“Gross Annual Income” - deceased’s annual income before deduction of living expense [50% of gross
annual income]

“Living Expenses” - computed at 50% of gross annual income

In determining the indemnity for loss of earning capacity, the Supreme Court uses the following formula:

Loss of earning capacity = Life expectancy x (gross annual income - living expense)

Life expectancy = 2/3 (80 - age at time of death)

Living expenses = 50% of gross annual income