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    De Leon Insurance Code of The Philippines

    Uploaded by

    Mary Nove Patangan

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    © All Rights Reserved
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    yo THE INSURANCE CODE OF THE PHILIPPINES ANNOTATED 1 HECTOR S. D) LLB, University ofthe Philippines —--—— and HECTOR M. DE LEON, JR. AB,LLB, University of the Philippines University of Michigan Partner, se ip Salazar Hernandez & Gatmait 2014 Edition Published &Distibuted hy REX Book Store 086 Ricans eye, 8. St. ‘Wier abet 61904 ‘or cae rolon ipsa gT-Tess-9¢ Hana, Pipes veo expullshing.com fe Philippine Copyright 2014 \96175 by. BOOKS BY: AF is ‘CTOR 8. DE LEON A. Git Law lope AND CCommens and Cases or Property Dy HECTOR M. DE LEON, JR. i014 1 2 Comntens and Cates on Sucresson 3. Comments ant Cases on Obigitions and Contacts 4 Comments and Cases oa Sales and Lease ISBN 978-971-23-6723-6 >. Comments and Cates on Partneship, Agency, and Trusts 6 Comments and Cases on Torts and Damages No portion of this book may be copied or repro Comments and Cases on Credit Transactions duced in books, pamphlets, outlines or notes, ft | i Silo ‘ HECTOR S. DE LEON and HECTOR M. DE LEON, JR. | yhether | 3 Commercial Law printed, mimeographed, typewritten, copied in dif | “The Phy pre Neel a ntruments nd lid Las Anno ferent electronie devices or in any other form, for 2. Thelnaurance Code the Philippines Anwolted distribution or sale, without the written permission a ‘The Coeporatin Cede ofthe Philippines Anavtated © Poliial Law 1. Philippine Constutional Law Peinclples and Cas (Vole. ant 2 2. Adjninstrative Yaw: Tent and Cases 3. TheLaw on Public Offer and Blacion Law ofeitherof the authors except brief passages in books, articles, reviews, legal papers, and judicial or other official proceedings with proper citation Any copy of this book without the corresponding D. Taxation and Agrarian Reform number and the signature of either of the authors or i 1. The Fundarsentale of Taxation, this page either proceeds from an illegitimrte source 2 The Lawon income Taxation or is in possession of one who has no authority to 4 The Law on Transfer and Business Taxation dispose of the same. 4. Comprehe sive Review of Taxation | The Natinallncrnal Revenue Code Annotated (Vols. Lon 2 ALL RIGHTS RESERVEO 1 {5 Tetbook on Agrarien Reform and Taxaton* BY THE AUTHORS, aT 1. The Law on Obligations and Contracts No, 0006 2 The Law on Partnerships an Private Co.perations —_—_—— 2. The Law on Negri ingruments (with Documents Ii) veensraraseraae 4 The Law cn Sale, Agency, and Credit Transactions TM 5. Compeohersve Review of Business Law if F Concitution (For College Student and Other Readers) i {Textbook un the Philippine Constitution At 2 Studer Manel onthe Coat S5-CALn0DSS olraatraiserass 2 Canetti Made Sime a {Aust araine Begg Eoetayent ex onlnring company, Inc, Serena Rex paiingcomAny 7 RSTERS Deo {4 Peventno St, Outten Cy Sane esr.7777 PREFACE ‘This work which is now on its eleventh ecition, is primarily intended to provide a basic text for the law course in INSUR- ANCE. To those connected with the industry, it may serve as a ready reference or: questions pertinent to the subject, Briefly, the book aims jo present a simplified, correlated irestment of our law of insurance, now embodied in Presidential Deciee No 632 (as amended by Republic Act No, 10607), other- wise known as “The Insurance Code,” in a way which is at the sam time authoritative and exhaustive. Opinions of recognized writers and Philippine and American judicial decisions including the latest rulings of our Supreme Court are cits! or quoted in the proper places by way of explanation of the fan. Nanerous illustrations are als given to further help the reacies understand the matter being explained. The authors are gratified to note that the previous editions have beer: used notonly by law students butalsoto acorsiderable extent by lawyers and judges and tnose interested to acquire an adequate g-asp of important doctrines of insurance law as they relate to the peinciples and practices of the insurance business, thus fulfilling the aim behind this work as a source material and seference in the study of nisurance. The authors woutd like io say a word of thanks to former Dean Jose R. Sundiang (San Beda College) and Atty. Norberto F. Castro, foriner Chief, Regulation Division, Insurance Commis- sion, for their suggestions and comments on the first edition of this book. Of course, for all shortcomings and mistaxes, they are solely responsible. HECTOR S, DE LEON HECTOR M. DE LEON, JR. April 2014 CONTENTS GENERAL PROVISiONS Section 7... 1. Historical origin of insurance. 2. Sources of insurance law in the 3. Laws governing insurance .. 4. Right of subrogation of insurer to right of insured against wrongdoer . 5. Applicability of the Civil Code... 6. Construction of the Insurance Code . Section2 1. Legal concept of insurance: 4. Definition of insurance from other viewpoints... 2, Determination of the existence of the contract, 4. Nature and characteristics of an insurance contract 5, Distinguishing elements cf the contract of mnsurance. insurance, arisk-distributing device ig with tisk se he valwe of transferring risk... Economic effects of the transfer and distribution of risk. 10. ‘The fields of insurance . 11. Claesifications of contracts of insurance. 12, Classifcation by interests protected 13, Classifications under the Code.. 14, Contacs writen by guaranty or surety companies. EBo 15. Construction of insurance contracts... ILLUSTRATIVE CASES; 1. Del Rosario vs. Equitable Insurance & Casualty Co., 8 SCRA 343 (1963).. 2. Taurus Taxi Co., Inc. vs. The Capital Insurance & Surety Co, Ine, 24 SCRA 454 (1968)... 3. CCC Insurance Corp. vs. Court Of Appeais, 31 SCRA 264 (1970)... 4. Association of Baptists for World Evangelism, Inc. vs. Fieldmen's Insurance Co,, Ine, 124 SCRA 618 (1983) 5. Landicho vs. Government Service Instirance System, 469CRA7 (1972) nan 6. Gonzales vs. The Phil. American Lite Insurance Co, 1.C. Case No. 56, June 21, 1976)... : : American Home Assurance Company Tantuco Enterprise, Inc, 366 SCRA 740 (2001), Misamis Lumber Corporation vs. Capital Dev. & Surety Co, 17 SCRA 228 (1966) oor 2. Union Manufacturing Co, Inc. vs. Phil Guaranty Co., 47 SCRA 271 (1972)... 3. Ty vs. First National Sutety & Assurance Co, Inc, TSCRA 1324 (1961)... 4. Ang vs. Fulton, 2SCRA 945 (1961) 5. Dumoy Sawmill, Inc. vs. Times Surety and Insurance Co, Ine, 1.C. Case No. 132 (1976) 6. Perla Compania de Seguros, Inc. vs. CA, 185 SCRA 741 (1990)... 45 47 43 49 51 52. 7 37 7 58 58 16 What constitutes doing o1 transacting an insurance business... 17, Functions of insurance Chapter 1, ~ THE CONTRACT OF INSURANCE Title What May Be Insured SCION 3 enn 1, Requisites of a contract of insucarce Subjec: matter of contract of insurance Event or peril insured ageinst.. Insurance by a married woman. Insurance by a minor. 6. Ownership of life insurance policy Section 4 1. Concept of lottery 2 Contac of insurers not wagering Contract sen 3. Similarity between insurance and gambling. Section 5 1. Applicability of provisions of of Chapter 1 Title 2 Parties to the Contrast Section 6 1. Parties to a contract of insurance... 2. Terms used : 3. \ho may bean insurer. 4, Business of insurance affected with public interest Section? 1. Capacity vf party insured 2. Meaning of public enemy... SSEGRR 74 74 73 75 7 7 78 78 3. Effect of war on existing insurance CONEACES re Section 8 .., 1. _Insurable interest of mortgagee and mortgagor: eer Insurance by mortgagor of his own interest Insurance by mortgagor for benefit of mortgagee, ot policy assigned to mortgagee... . 5. Bifect of standard and open clauses in fire insurance policy.... 7. Rifect of insurance by mortgagee on behalf of mortgagor... Section 9 1. Assignment or transfer of insurance policy 2. Right of mortgagor to assign insurance policy to mortgagee... 3. _ Effect of new contract between insurer and mortgagee-assignee.. Title 3 Insurable Interest Section 10 ee A. Insurable interest in general. 2. Necessity of insurable interes 3. Requirement, a matter of public policy 4, Two general classes of life policies. 5, Insurable interest in one’s own life .. 6. Similarity between a life insurance policy and a civil donation... Insurable interest in life of another Insurable interest in life of person upon whom one depends for education ot support or in whom he has a pecuniary interest... Insurance by mortgagee of his own interest. 89 89 a 91 92 95 9. Insurable interest of a person in life of anocher under a legal obligation to former 10. Insurable interest of cxesiior in life of his debtor... ' LL. Insurable interest in life of person upor which an estate or interest depends LZ. Consert of person whose life is insured Section 1 1. Beneficiary defined 2. Kinds of beneficiary nmin 3. Limitations in the appointment of beneficiary. 4, Right of insured to change beneficiary in life insurance 5. Measurement of vested interest of beneficiary in policy ze 6. Where beneficiary dies before insure 7. Designation of beneficiary... Section 12 1. Forfeiture of the interest of the beneficiary ina life insurance policy. 2. Liability of insure. bn death of insured ILLUSTRATIVE CASE: A. Telentino vs. Filipinas Life Assurance Co, Ine, LC, Case No. 162, July 19, 1976 Section 13 er es 1. Insurable interest in property . Section 14 .. 1. Insurable interest in property in particular ca8€5....0- Section 15 sense 1. _Insurable interest of carrier or depository Section 16 ” 98 99 100 tot 101 101 102 104 105 106 107 109 110 1m 13 4 14 116 16 ns 118 ug 1, Mere contingent or expectant interest NOP MNSUTADTE ssa Section 17 1. Measure of incurable interest in property. Section 18 .. 1 Effet of absence of insurabie interest in property insured . 2, Measure of indemnity in insurance contracts. Section 19 1. Time when insurable interest must exist. 2. Existence of insurable interest when risk attaches... 3. Insurable interest in life and Proper distinguished .. Section 20 1. Effect, in general, of change of interest 2. Object of rule against alienation 3. Change of interest covered by law 4. Exceptions to general rule . Section 21 1. Change of interest in a ohn insured after loss, se Section 22 1. Change of interest where several things separately insured by one policy. Section 23 .. 1. Change of interest by death of insured. Section 24 1, Transfer of interest by one of the several partners, etc. jointly insured. Section 25. 121 123 128 125 127 128 129 129 129 130 130 131 131 131 131 132 132 133 133 134 1. Stipulations prohibited in an insurance POLICY nn 2. Wagering of gaining policies void Ties Concealment Section 26 a 1 Four primary conrerns of the parties to an insurance contract... 2. Devices for ascertairing and controllin», 18K aNd JOS. 3. Concealment defined... 4. Requisites of concealment Section 27 uo 1. Bifect of conceaiment... 2. Proof of fraud in concealment. 3. Rules as to marine insurance.. Section 28 . 1. Matters that must be coramurucated even in the absence of inquiry. 2. Effect of failure of insurer to verify Section 29 1. Whee fraudulent intent necessary. Section 30 . 1. Matters made the subject of special inguiries material... 2. When there is no duty to make EisCOSUFE Section 31 A. Determination of E materiality 2. Time wher information acquired Section 32 1 Matters each party bound to know 134 135 136 136 136 138 139 139 139, 140 a2 3 3. 144 145 Ase 7 147 156 151 151 Section 33, 1. Right to information may be waived. ILLUSTRATIVE CASES: 1, AG. Factor vs. The Phil. American Life Insurance Co,, 1,C, Case No. 310, Aug. 29, 1997... 2, Ng Zee ws. Asian Crusader Life Assur. ance Corp., 122 SCRA 461 (1983) Section 34 .... 1. Disclosure of nature and extent of interest of insured... Section 35 1. Disclosure of deen upon the matters in question... Titles Representation Section 36 .. 1. Representation defined.. 2, Misrepresentation defined 3. Form and nature of representation. Section 37 1. Time when representation may be made... Section 38 1. Construction of representations, ILLUSTRATIVE CASES: 1. Penn, Mutual Life Ins, Co. vs. Nunnery 176 Miss. 197.... 2. Fitch vs, Am. Popular Life Ins. Co. 59 N.Y. 557, 17 Am. Rep. 372. 151 151 153 153 153, 154 154 155 155 155 156 157 197 187 157 158 158 2, B. Agos ws. The Phil. Aunerican Lite Ins., Co., IC. Case No. 10, March 11, 197€..... sevasten SectiON 39 es ee 1. Kinds of representation... 2. Nature of prumissory representaticns 3. Effect on policy ofexpresions of opinion or expectation, 4. When representation deemed a mere expression of opinion. Section 40 1. Effect of representation or express ‘provisions of pulicy... Section $1 1. When representation may be aered or withdrawn jon Section 42 1 Time to which epresentation refers. Section 43 . 1. Bifert where information obtained from third persons: 2. Effect where inforiaation obtained trom agent of insured insurer... Section 44 1 Wher representation deemed false 2 Construction of representation as affirmative Section 45 1 _ Effect of falsity of representation... ILLUSTRATIVE CASE: ‘All State insurance Co. +. Melani, 236 A2d 402 Guper. Ct. NJ. 1997)... 2. fect of collusion of fraud of agent of insurer... a 158 159 159 159 160 161 161 161 162 162 162 162 163 164 164 165 165 166 167 167 169 169 Section 46 ... 1 Materialityof representation so 2. Concealment and misrepresentation compared. : Section 47 .. a 1. Applicability of Sections 26 to 4 Section 48 ... 1. When an insurer must exercise his right torescind of life polices ct of the incontestable Requisites for incontestability... Effect when policy becomes incontestable... ILLUSTRATIVE CASE: Enriquez vs. The Phil. American Life Insurance Co, LC. Case No. 13, uly 21, 1976 6. Defenses not barred by incontestable clause...... os Title 6 The Policy Sections 49-50 ...... Policy of insurance defined Signature of the parties Policy controls terms of insurance contract Policy, a contract of “adhesion’.... Policy different from contract itself... Form of contract of insurance Perfection of insurance contract Offer and acceptance in insurance contract. Importance of delivery of policy... ‘Modes of delivery of policy... Delivery to insurer’s agent as delivery to insured... a EB eeuggeene 19 189 170 170 aw wm 171 172 17% 173 173 175 75 177 178 178 178 179 381 182 182 185, 186 187 188 12. Efect of delivery of pelicy 13. Rider in a contract of insurance 14. attached payers on insurarce policy 15. _Bitect of failure of insured tu read policy 16, Insurer’s duty to explain the policy... netion 51 ne Contents of the policy Kinds of insurable ri8k3 sen Risk, peril, and hazards distinguished Requirements foc risks to be insurable Requirements not absolute... Scetion 52 peers 1, Preliminary contracts of insurance. 2. issuance and rerewa! of cover notes 3. Raics on cover notes. Section 53 1. Person: entitled to recover on policy ILLUSTRANIVE CASES: 1. Rizal Commercial Banking Corp. vs. \, 289 SCRA 292 (1998) 2. Coguia vs. Fieldimen’s Insuraace Co Inc, 26 SCRA 178 (1968) 3. A.Cazlos vs, Summit Guaranty and Insurance Co, Inc, iC. Case No. 181, Jant!23, 1976.. Sectina 54 1. Where insurance made by an agent cor trustee. Section 55 1. Where insurance effected by partner of pait owner : Sections 55-57 . 1. Where description of incured general 189 190 191 193 195 196 197 200 201 202 203 24 204 206 207 208 209 210 210 2 a 2 2 n2 212 Section 58 .. 1. Bec of transfer of thing roused Sections 59-62 .. 1. Kinds of poticies. 2, Advantages of a sunning Policy Section 63. 1. Validity of agreement limiting time for commencing, actio® ws..nmn 2 Nature of condition limiting pesioa for filing Caist.ewo 3. Where action brought against insure 4. When cause of action accrues Sections 64-65 ss . 1. Cancellation of nonslie nourancs paliey 2. Form and sufficiency of notice of cancellation by the insurer .. 3. Prior notice of cancellation to insured. Section 66 .. agent 1. Renewal of non-life insurance policy... Title7 Warranties Section 67 1. Warranty defined: 2. Kinds of warranties... 3. Warranty presumed affirmative Section 68 ...... 1. Time to which warranty refers.. Section 69 1. Intention of parties governs... 2. Warranties distinguished from representations. ALLUSTRATIVE CASE: American Home Assusance Company vs. Tantoce Enterprises, Inc., 366 SCRA 740 (2001)... il m2 23 213 213 216 27 ay 2 28 28 221 222 222 23 224 224 26 226 226 aw 228 208 228 228 231 Section 70 1. Express warranty, whete contained... Section 72 1. Express warrenty regarding person, thing, or risk Section 72... 1. Warcanty of fac's or omissions which miaterialiy affect the risk. Section 73 . 3. Wher Beeach of warranty does not avoid policy 2 Where insurer barred by waiver or estoppel ILLUSTRATIVE CASE: Far Bastern Surety & Insurance Co. vs. Vda. de Misa, 25 SCRA 662 (1968) Section 74... a 1. Rightto rescind for violation ofa materia warranty... Section 75 1. When violation of immaterial provisions shall avoid policy .. Section 76 oes 1. Effect of breach of warranty by insureci 2 Conditions in insurance policy .. 3, Warranties and coniitions distinguished 4. Exceptions in insurdnce policy... 5. Exceptions distinguished from warranties nd SORIRIONS nn 6, Bifects of breach on legal relations of parties Title 8 Premium Sections 77-78 .. 1. Premium defined .. 31 231 232 23 234 234 235 236 238 238 28 239 239 239 240) 241 241 242 242 243, 244 244 2. Assessment defined a 3. Premium distinguished from assessment 4. Payment of premium ordinarily not a debt or obligation... ILLUSTRATIVE CASES: 1. Phil. Phoenix Surety & Insurance Co., Inc, vs. Woodworks, Inc, 20 SCRA 1270 (1967 denen se 2. Phil. Phoenix Surety é& Ins, Co. vs Woodworks, Inc,, 92 SCRA 419 (1979) esnnnne . 3. Tibay vs. CA, 257 SCRA 126 (1996). . 4, American Home Assurance Company, Inc vs. Tarttoco Enterprises, Inc, 366 SCRA 740 (2001) 5. Effect of nonpayment of premium 6. Excuses for nonpayment of premiums... 2. Validity of policy where credit extension Branted (0 INSUrEd ssn 8. When policy valid and binding notwithstanding non-payment of premium : ILLUSTRATIVE CASES: 1. Makati Tuscany Condominium Corp. vs CA, 215 SCRA 462 (1992).... 2. UCPB General Insurance Co,, Ine. vs. Masagana Telemart Inc, 356 SCRA 307 (2001) Section 79 .. 1. Effect of acknowledgment of receipt of premium in policy .. ILLUSTRATIVE CASE: Capital Insurance & Surety Co, Inc. vs. Plastic Era Co,, Inc, 65 SCRA 134 (1975).... 245 245, 245; 262 266 n 273 27a 2. Effect of acceptance of premium... Sections 80-83 se 1. When insured entitled to recover premiums. 2. Where risk has never attached... 3. Where insuzed surrendeis policy before termination... 4, Where short period rate has been stipulated. ae Right to recover premiums a* to life insurance. 6. Where risk has attached soon 7. Where the contact is voidable 8. Where there is over-incurance 9. ‘Where insuxance is illegal... 0. Basis of right to recover premiums Section 84 4 Payments in addition to regular premiums Title9 Loss Section 85 ses 1. Claim insurance defined. ve 2. Effect of ageeement not to transfer claire of insured after a loss... Section 86 ... sstttenreanee 1. Loss in insurance defined 2, SeOpE OF 1088. rervsmannnrne 3. Liability of insurer for loss. 4. Meaning of proximate cause... 5. Hostile and friendly fires explained. Section 97 i, Extension of principle of proximate cause Section 88 . 1, Where proximate sause is an excepted peri 274 28 278 276 2 279 279 280 282 282 283 283 283 284 284 284 285 286 287 288 290 290 ma 292 Section 89 .. 1. Loss by willful act or through connivance of insured. vs ILLUSTRATIVE CASE: Ryan vs. MEA Mutual Insurance Company, 610 SW 2d 428 (Tean. App.) (1980) 2. Loss caused by negligence of insured... Title 10 Notice of Loss Sections 90.91 1. Conditions before loss. 2. Conditions after loss... 3. Meaning and purpose of notice of loss... 4. Necessity of notice of 1088..uruson 5. Time for giving notice of loss. ILLUSTRATIVE CASE: Lindu v. Northern Insurance Co. of New York, 438 P. 24.311 (Sup. Ct. Ariz 1368) ‘Meaning and nature of proof of loss... Form of notice or proof of loss... Purpose of proof of loss : Burden of proof of loss in court action . 10. Excuses for non-compliance with conditicns Section 92 1. When defects in notice or proof deemed waived .. Section 93... a 1. When delay in presentation of notice ‘or proof deemed waived. ILLUSTRATIVE CASE: Pacific Timber Export Corp. vs. Court of Appeals, 112 SCRA 199 (1982) at 292 292 298 293, 296 296 297 295, 298 299 208 304 304 SS . 1. Effect of failure to secure certificate or testimony of third person Title 11 Donble Insurance Section 85 ee 1. Double insurance defined 2. Requisites vf double insurance. 3. Double insurance distinguished from over-insurance ee 4, Binding effect of stipulation against double insurance.. 5. Purpose of prohibition against doubl> insurance. Section 96 1. Rules for payment of c'aims where ther i over-insurance by double insurance Title 12 Reinsurance Section 97 as 1. Reinsurance defined ss 2. Reinsurance distinguished from double insurance... : 3. Value of reinsurance... Section 98 1. Duty of reinsured to disclose facts.. 2. Automatic and facultative methods of ceding reinsurance. smn 4. Reinsurance treaty distinguisied frora teinsuraisce policy... SeCtON 99 arsonsnnnsnse 1. Nature of contract Section 100 1, Righis of original insured in contract of reinsurance... of reinsurance. 306 306 307 307 307 308 309 309 310 310 315 315 316 316 318 318 319 320 321 321 322 322 2. Liability of reinsurer to reinsured .. 3. Liability of reinsurer to original insured... Chapter II. — CLASSES OF INSURANCE Title 1 Marine Insurance SubTitle 1-A Definition Section 101 .. 1. Transportation insurance defined 2. Major divisions of transportation insurance. 3. Scope of ocean marine insurance .. ‘ 4. Risks or losses covered in ocean marine AMSLUEANCE re seen 5. “Perils of the sea,” as used in. ovean marine insurance, explained. ae 6. Perils of the sea distinguished from perils OF the Ship cnn seo 7. Perils of the sea must be the proximate cause of loss, 8 “All risks” marine insurance policy... Development of inland marine insurasce in the United States.. : 10. Classes (scope) of inland marine insurance... a SubTitle 1-8 Insurable interest Section 102 1. _Insurable interest of insured in marine insurance, — 2. Insurable interest of owner of a ship. 3. Insurable interest and sale contracts 323 323 326 37 207 328 329 331 232 333 335 338 339 239 340 341 I Section 103 so ers 1. Shipowner’s and lender's insurable interest where vessel hypothecated by bottomry Section 104... = 1. Meaning of freightage 2. Sources of freightage Section 105 1. Insurable interest in expected or anticipated fieighitage. 2, Insurable interest in passage money. Sectio 106 enn 1. Insurable interest in expected Sreightage in a charter party .. Section 107 1. _Insurabie interest in expected profits Section 108 ~ mesnsette - 1. _Insurable interest of the charterer 2. Types of charter partes SubTitle 1-C Concealment Section 109 1. Meaning of concealment in marine insurance. a 2. Rulesas to misvopreceutations and concealments stricter in marine insurance. Section 110 .... es 1. Opinions or expectations of third persons Section M1 ce 1. Presumptive knowledge by insured OF POF LOSS 342 342, 343 343 343 243 343 344 344, 345 345, 346 346 347 349 9 350 351 Section 112 1, When concealment does not vitiate entire contract. SubTitle LD Representation Section 113 . : ee 1. Applicability of rules on representation to marine insurance. — 2, Bitect of false representation by insured Section 114 1. _Bifect of falsity of representation a5 to expectation SubTitle 1-£ Implied Warranties Section 15 . = a 1. Warranty in marine insurance defined..... 2. Implied warranties in marine insurance. 3. Implied warranty of seaworthiness..... Section 116 1. What constitutes seaworthiness .. ILLUSTRATIVE CASE: Madrigal, Tiangco & Co. vs. Hanson, Orth & Stevenson, Inc., 103 Phil. 345 (1958). 2. Criterion of seaworthiness.. Section 117 . 1. When seaworthiness is complied with 2. Time and voyage polices... Section 118 . 1. Scope of seaworthiness of vessel Section 119 1. Seaworthiness during voyage in stages 352, 352 35, 353 353 354 54 358 358 359 361 361 361 362 362 Section 12¢ ... 1. Where ship hacomes unseaworthy dating voyage unm Section 121 ... 1. Seaworthiness as to cargo. Section 122 ... 1, Express warranty as to nationality or neutrality 2. umplied warranty to curry requisite documents. san SubTitle 1-F ‘The Voyage and Deviation Sections 123-125 1. Mecning of deviation ..sncnnese Cases of deviation in marine insurance. Sections 126-127 1. Kinds of deviation... 2, When deviation is proper... Section 128 . i, Effect of improper deviation SubTitle 1-G Loss Sections *29-131 1. Kinds of losses. Section 132 ... 1. Meaning of actual total loss.. 2. Complete physical destruction not ess-ntial to constitute actual total hiss 3. Limited Liability rule Section 133 1. Meaning of constructive tota} loss, 363 363 364 364 365 365 366 366 366 367 367 368 368 368 368 368 369 369 370 371 371 2. Importance of distinction between actual and constructive total loss... Section 134 1. Presumption of actual total loss.. Section 135 1. Liability of Section 136 —— 1. Additional liability of insures of goods. Section 137 1. Right of insured to payment upon an actual total loss. . Section 138 .. = 1. Meaning of average 2. Kinds of average a = 3. Principle of general average contribution.. 4. CORLBULOR ercnsrnsnsncnsns Liability of insurer for general average Liability of insurer for particilar average... Section 139 Right of a party to claim general average ae 1. Scope of insurance against actual total loss. SubTitle 1-H Abandonment Section 140., 1. Meaning of abandonment... 2. Requisites for valid abandonment 3. Necessity for abandonment... Section 141 1. When constructive total loss exists 2. Abandonment where insurance divisible and where indivisible 372 372 32 372 373 373 373 374 374 374 374 375, 376 376 378 378 378 379 379) 379 380 380 381 381 3. Criterion as to extent of loss. Section 142, 1. Abandonment must be absolute. Section 143 1. Abandonment taust be made within a reasonable tinte Section 144 : a 1. Abandonment must be factual. 2. Information need not be direct or positive SCCHON 145 -oonrnsnn 1. Form of notice of abandoament 2, Hy vrham and to whom notice made. Section 146 oe a 1. Notice of abandonment must be expiicit 2. Notice of abandonment must specify articular cause thereot... Section 147 .. : . J. Proof or other cause not admissible Section 148... om 1. Effect of valid abaridonment.. Section 149 nn 1. Rights of insurer who pays pattial loos ag actual total loss. Section 150 .. 1. Transfer of agency to iNsURef enn 2. Liability of insurer for expenses and wage Sectinr. 151 1. Effect on insurer's refusal to accept abandonment on insured's rights Section 152 1. Form of acceptance.of abandonment 383 383 383 383 385 385 385 385 385 286 386 386 386 386 387 387 387 387 388 388 388 388 Sections 153-154 ... 1, Effect of acceptance of abandonment Section 155 — 1. Right of insurer to ohne Section 156 wn. 1. Eifectof refusal to accept avai abandonment on insurer's liability Section 157 . 1, Effect of insureds failure to make abandonment... SubTitle 1-1 Measure of Indemnity Section 158 .. 1. Valuation in a marine policy Section 159 1. When insured a co-insurer in marine insurance. Section 160 .. 1. Loss of profits separately insured.. Section 161 1. Where only part of a cargo or «igh ‘insured exposed to risk Section 162 .. 1. Presumption of loss of profits Section 163 ... 1. Rules for estimating loss under an open Policy of marine insurance. Section 164, 1 Where cargo insured gine partial oss is damaged “ 389 389 390 290 300 390 391 ou 301 an 392 392 383 393 394 394 394 394 395 395 387 Section 165 ... 1. Liability of insurer for expenses incurred for repair and recovely.. Sections 166-167 1. Rights of insured in case of general average 2. Limut as to lebility of insurer. Section 168 ... 1. Liability of insures in case of partial loss of chip or its equipment Title2 Fire Instrance Section 169 .. 1. Fie insurance defined. 2, Fireand-extended coverage.. 3. Nature of fire insurance. 4, Concept of fire 5. Ricks or losses covered. 6. Indirect loss coverage. 7. Kinds of indirect tosses. 8. Ocean marine and fire pol distinguished .... 9. importance of the distinction . Sections 170-171 : a 1. When alteration in thing insured entitle insurer to rescind.. 2. Increase of rs or hazard in general 3. Alterations avoiding policy... 4, Alterations not avoiding policy... 5. Where insured has no control or knowledge of alteration wu.n 6. Application of Sections 77 and 171. Section 172 1. Where act of insured not in violatio.. Of Policy ann 398 398 398 399 399 492 402 402 403 404 404, 404 405 405 406 406 406 407 408 408 409 409 409 Sections 173-174 rnteneeneesae vs 1. Measure of indemnity under an open policy. : 2, Measure of indemnity under a valued policy 3. Insured not a co-insurer under fire policies in the absence of stipulation 4, Reason for co-insurance clause in fire policies..... = 5. Option to rebuild clause ... Section 175 .... rnssonsenessenenssse ‘1. Pledge, etc. of fire insurance policy after a loss. Titles Casualty Insurance Section 176... 1. Casualty insurance defined... 2. Risks or losses covered run 3. Two general divisions of casualty insurance...... 4. Liability insurance defined. 5. Liability insurable . . 6. Insurable interest in liability insurance... 7. When liability insurance in policy payable. 8. Right of injured person to sur insurer of party at fault . 9. Basis and extent of insurer's liability ILLUSTRATIVE CASE: Malayan Insurance Co. vs. Court cf Appeals 165 SCRA 136 (1988). 3 10. Accident and health insurance = 11, Meaning of “accident” and “accidental” as used in accident policy a 12, Ruleas to death or injury resulting from “accidental” or “accidental means’... aii #10 a1 412 13, 4a 415 45 415 a7 a7 az 418 418 419 420 420 421 a1 423 124 125 426 JULUSTRATIVE CASE: NED International Manning Agents, Inc Ilescas, 631 SCRA 629 [2010]. 13. Suicide and willful exposure to needless PFI aaa es 14, Meaning of “intentional” as used in accident policy ILLUSTRATIVE CASES: 1. Biagtan vs. The tngular Life Assur. Co., utd, 44 SCRA.58 (1972) 2. Hutcherafis's Ex’r. vs. Travelers’ Ins, Co,, 87 Ky. 300, 8 S.W. 570. 3. Calanoe vs. CA, $8 Phil. 79 (1955). 4, Finman Gen, Assur. Corp. vs. CA, 213 SCRa 493 (3592) 15, Efiect of “no action” clause in policy of liability insurance Titles Suretyship Section 177 1. Suretyship defined... 2. Undertakings within the scope of surctysitip. 3. Corporate suretyship. Section 178 a 1 Nature of liability of surety ILLUSTRATIVE CASE: Edward Keller, Ltd. vs. Workmen's hust'rance Co, Ine, LC, Case No. 378, Aug, 9. 197 2. Distinctions between suretyship and property instirance eso 430 430 431 431 432 432 433, 433 435 435 435 136 437 437 439 439 3. Distinctions between suretyship and Section 184 ——— 462 eas 440 1. Right ot insured to assign life insurance SeCHON 179 rn . 400 POLICY enrrnnnntene 462 2. Necescity of consent of beneficiary 1. Payment of premiums .crnniscnnnenanmmn, 441 a - ILLUSTRATIVE CASES: Section 185 a . 464 1. Arranz vs, Manila Fidelity and Surety Co, 1. Notice to insurer ef transfor... 464 a caghl Phil.272 1957 442 Section 186 ee 465 . Capital Ins. & Surety Co, Ine. ” ae Trading, 123SCRA 526 (1983)... mG 1. Measure of indemnity under life policy 465 2. Types of surety bonds 233 Title 6 Section 180 : a Microinsurance 1. Pertinent Civil Code provisions applicable Sections 187-186 .. : = 466 ina suppletory character......meemnnnen 445 1. Microinsurance defined... 66 . 2, Features of microinsuranee .n. -- 467 Titles 2. Requirements for the product 467 Life Insurance 4. Performance standards so. 468 Scctions 181-1 a. er ; aay Chapterit-A 1 Lie insurance defined 448, FINANCIAL REPORTING FRAMEWORK 3 8 SeCHON 189 csr snte 468 4. Life insurance distinguished from fire 1. Statutory Financial Statements and Reports 469 and marine insurance... 452 2. Differences vetwveen insurance accounting 5. Exemption of life insurance policies and generally accepted accounting, frOM EXECUBION eromsonsnne nnn 7 452 procedures cece 470 6. Application of exemption to accident . insurance sem a 454 Chapter I1], — THE BUSINESS OF INSURANCE 7. Kinds of life insurance policies 455 8. Scope of life insurance. 483 Title ; 9. Contract of life annuity defined... 450 Insurance Companics, Crganization, 10. The annuity concept. ve 459 Capitalization, and Authorizatio> 11, Annuity contracts distinguished e from ordinary life policies. se... sw 460 Saeed ~ “ ila Section 183. 4. Power of state to regulate insurance isi 8. 480 : ee eee 461 2. Business of insurance conducted almst 1. Liability of insurer in case of suivide 461 exclusively by corporations .o...n 483 General requirements before an insurance company may transact insurance Minimum capitalization requirements for new insurance and reinsurance companies and those to be rehabilitated Deposits and withdrawal of securities by foreign insurance companies Title 2 Solvency Requirements Section 200 1. Maintenance of solvency requirements at all tiMeS ren Section 201 .. 1. Distribution of dividends to stockholders of domestic corporations. Title 3 Assets Sections 202-203 vente seanssoneansns 1, Classification of assets of an insurance company 2. Treatment of premium receivables as admitted assets. Title 4 Investments Sections 204-215 1, Investments by insurance companies Investment of the amount of paid-up capital. 2 3. Investment of legal reserve. 4. Foreign curreny denominated investments and insurance policies... Necessity of approval of investments by the Insurance Commission... 6, Dual nature of the business of insurance 484 485 487 498 488 490 491 493 495 497 49 510 sil S12 513 516 518 Titles Reserves Sections 215-220 1, Reserves in geneyal cerves in iife insurance. Reserves in property insurance Valuation of resetves and cash surrender values in life policies..... 5, Cash surrender value, an asset of pelicy owner... 6. Non-forfeiture values on termination of life policies 7. Company reserves as a measure of solvency Title 6 Limit of Single Risk Section 224 .. i 1. Retention limit. Title7 Reinsurance Transactions Sections 222-228 .. = 4. Power to engage in reinsurance business Coding of excess risks . 3. Rules and regulations on life reinsurance transactions 10. 4. Rules and regulations on nor-life reinsurance transactions. 5. Glossary of important reinsurance terms. Titles Annval Statements Sections 2/9-231 7 1. Reports and statements. 520 5a 523 524 525 526 526 527 529 529 531 533 533 534 536 541 542 Sections 235-237 Title9 Policy Forms Section 232 1. Standardization of insurance contracts 2. Power to prescribe insurance contracts and standard policies.... 3. Submission of policies for approval.. Section 233 1, General form of life insurance 1 policy 2. Major classes of life insurance. 3. Special characteristics of life insurance. CONTAC race 4. Life insurance as property ..-. 5. Protection functions of life insurance 6. Savings functions of life insurance...1..n 7. Apportionment and distribution of policy owner dividend: 9. Rights of insured under a lapsed life policy. 10. Options available to insured in ife insurance. TL. Cash surrender value defined... 12. Nature of cash surrender value 13. Other required policy provisions . 14. Optional policy provisions. Section 234 1. Growth of group insurance business. 2. Social insurance and private insurance distinguished... 3. Group insurance and individual insurance contrasted. Group insurance contract ‘Types of group insurance Group fife insurance. 1. Industrial life insurance.. 544 544 545 545, 3a7 550 552 554 555 556 587 558, 559 866 561 561 562 56: 566 568 5” 572 373 576 577 578 583 2. Non-payment of premiums by buyers of industrial life policies... Existence of insurable interest. Title 10 Variable Contracts Sections 238-246 -eenennien 1. Variable ite insurance defined 2. Fundamental idea behind variable life contracts. : 3. Underwriting and administrative spec's Title 11 Claims Settlement Section 247... 1. Unfair claims settlement practices... ILLUSTRATIVE CASES: 1. Phil. Episcopal Church vs. The New Zealand Ins. Co,, Lid, VC. Case No. 40, Maich 24, 1977... 2. 1. Guanco vs. Summit Guaranty & Insurance Co, Ine, LC. Case No. 115, May 31, 1977... 2. Insurer's obligation to respect insured’s decision to compromise tnitd party claim.. ILLUSTRATIVE CASE. Yap vs, Perla Compafia de Seguros, Inc, LC. Case No. 103, Nov. 26, 1976 Section 288 ... 1. Life insurance losses 2. ime for payment of claims in life policies . 584 585 590 590 591 593 594 595 597 597 597 598 >. pitty-day period procedural in nature Section 249 .... 1. Fire insurance 10838... 2. Liability insurance losses... = 3. Time for payment of claims in non-life policies... : 4. Effect where claim is fraudulent 5. _Biect of false statements innocently made... : Reference to arbitration........ Right of insurer to subrogation. ne ILLUSTRATIVE CASE; Cebu Shipyard and Engineering Works, Inc. vs. William Lines, Inc, 306 SCRA 762 (1999)... 8. Loan repayable from collection not deemed Payment of insurance. Sections 250-251 1. Liability of insurer to pay damages and IML2RWSt8 saci Titie 12 Examination of Companies Sections 252-253, 1. Examination of insurers. 2. Examination of insurance and reinewrares brokers... Title 13 Suspension or Revocation of Autl.crity Section 254 .. 1. Suspension and revocation of license... 598 599 599 600 602 602 603 603 605 608 608 609 609 as 616 615 619 619 Title 14 Appointment of Conservator Section 255 1, Appointment of conservator. 2. Nature of conservation proceedings. 3. Actiun against conservator.. Title 13 Proceedings Upon Insolvency Sections 256-287 —— 1. Power te dissolve and liquidate insurance companies. 2. Action against receiver or liquidaior Title 16 Consolidation and Merger of Insurance Companii Sections 258-267 ..... 1. Definition of terms... Title17 Matualization of Stock Life insurance Companies Sections 268-280 1. Types of insurance organization... 2. Status of members of mutual insurance companies. Title 18 Withdrawal of Foreign Insmance Companies Sections 281-287 1. Regulation of foreign insurance com paris 2. Withdrawal of foreign. insurance companies ae 3. Reinsurance by withdrawing, foreign instner... 621 622 623 623 624 626 629 630 633 634 645 646 649 650 651 652 Title 19 Professional Reinsurers Sections 258-289 . 1. Types of reinsurers... Title 20 Holding Companies Sections 290-306 ... 1. Regulation of holding companies. 2. Need for regulation... Chapter IV, — SALES AGENCIES AND TECHNICAL SERVICES Title Insurance Agents and Insurance Brokers Section 307-310 ... — 1. Insurance agents and brokers 2. Regulation of insurance agents and brokers... 3. Licensing requirements and limitations... 4. Application for license Section 311 1 2. Errors and omissions insurance policy required of insurance brokeES 2... Sections 312-313 ..... L 2 Qualifications for insurance or reinsurance. broker’s license... v Qualifications for authorization of life insurance agents to sell or offer for sale variable contracts... sersennsanse 4. Qualifications for authorization of life insurance companies to issue, deliver, sell or use variable contracts... 3, ait Surety bond required of insurance brokers Qualifications for insurance agent's license... 657 064 665 5. Examination required of applicant... 6. Sssuance of limited license .n.. Sections 314-318 1. Denial, suspension, or revocation of license... — 2. “Actively engaged” requirement. ” Title2 Reinsurance Brokers Sections 319-321 1. Reinsurance brokers... Titles Resident Agents Sections 322-326 ann a 1. Principal duty of resident agent Title 4 : Non-Life Company Underwriter tions 327-331 1, Employment of non-life company underwriters 2, insurance underwriting. Titles Adjusters Sections 334-343.. 1. Adjustment of claims defined 2. Kinds of adjusters 3. Liability of a settling, or an insurance policy 4. Services of Adjusters .. 5. Report of claim/loss acjustment to insurersce company aim agent under 685 685 686 689 689 690 691 693 694 695 696 697 699 701 702 6. Report of claim/loss adjustment to Insurance Commission, Licensing of adjusters., 8 Etablshmentof branch or regional offices 2. Actuarial work in insurance... 3. The mortality table.... Title7 Rate Organization and Rate Making Sections 348-372 . = 1, Underwriters’ associations and rating bureaus, 2. Regulation of rates..... 3. Combinations among insurance companies... ‘Title 8 Provision Common to Agents, Brokers and Adjusters Sections 373-378 1. Types of insurer representatives Title9 Bancassurance Sections 375-377 ... 1. Bancassurance defined 2, Requirements for bancassurance. 3, Revised cross-selling framework. xiv 706 797 709 709 aut 713 7a vu 715 723 m3 7 77 ne 729 730 730 Secticns 378-385 .. 1 3 2. 3 6 WV. 18, tions 236-402 . Chapter V. SECURITY FUND Seenrity Fund Chapter VI. — COMPULSORY MOTOR VEHICLE LIABILITY INSURANCE Meaning of motor vehicle Meaning of motor vehicle liability insurance. How protection is obtained... Prerequisite regarding che operation and registration of motor vehicles. Spirit behind or need for compulsory third party tiability insurance tect of insured’s violation of policy condition on insurer’s liability to third- party claimant. Persons subject to the CMVLI requirement Substitutes for a CMVLI poli Scope of coverage required Duty cf MVO or LTO contemplating cancellation of ‘is cover. Effect of cancellation of cover No-fault indemnity ciaim... Cetificate of cover Limitations with respect «o CMVLI cove solicitation Limitations ws to use of insured vehicle une the master private venicle policy. Limitations as to use of insured vehicle under the master commercial vehicle policy . Limitations as io use of insured vehicle under tne inaster land trarspurtation aperators policy. Limitations as to use ofthe insured vehicle under the master motorcycle policy 73, 736 737 744 745 747 748 78 748 749 748 750 751 753 753 19, The malus system under CMVLL.... 20. Where insured himself or his driver without license or with expired license .... 21. Pertinent provisions of the Civil Code. Chapter VII. — MUTUAL BENEFIT ASSOCIATIONS AND TRUSTS FOR CHARITABLE USES Title 1 ‘Mutual Benefit Associations Sections 403-423, so 1. Distinguished from mutual insurance companies Title2 ‘Trusts for Charitable Uses Sections 424-428 1. The trust relationship. 2. Types of trust........ Chapter VIII — TRUST BUSINESS IN GENERAL Section 429 . 1. Concept on trust 2, Authority of an insurance company to engage in trust business. 3. Funding of retirement and pre-need plans... ‘Chapter IX, -- REGISTRATION, RESPONSIBILITIES AND OVERSIGHT OF SELF-REGULATORY ORGANIZATIONS Sections 430-436 .. = 1. Self-egulatory organization a 757 786 767 768 769 769 769 ™ 7” 27 ‘Chapter X.— THE INSURANCE COMMISSIONER Title1 Administrative and Adjudicatory Powers Sections 437-439 ...... 1, Governmeni regulation of insurance 2 Powers and duties, generally, of an Insw ance Commissioner.... 3. Neture of powers of the Incurance Commission so 4. Coniissioner’s decisions, regulations, and rulings .... 5. Creation and organizational his.ory of the Insurance Conimission 6. Objectives of insurance regulatioa. Duties and functions of the Insurance Commission Title? Fees ara Other Sources of Funds Sections 440-441 .. 1. Insurance Fund MISCELLANEOUS PROVISIONS Sections 412-448 . APPENDICES A. — Rules of Procedure Governing Administraiive Ceses Before the Insurence Commissivv 8 — Synopsis of Annual Statements... © = Uniform Chart of Accounts for Gerexal Insurance Companies and Professional Reinsurers, avi 779 784 786 787 789 790 792 795 798 800 802 807 812 D a Uniform Chart of Accounts for Life Insurance Companies and Mutual Benefits Associations. Standard Life Insurance Policy Provisions. Compulsory Motor Vehicle Labi Insurance Coverage .. : Issuance of Bonds Minimum Requiement for. Approal of insurance Plans / Forms... —000— avi 843 877 836 890 895 Sr THE INSURANCE CODE OF THE PHILIPPINES (PRES. DECREE NO. 612, AS AMENDED BY R.A. NO. 10607.) GENERAL PROVISIONS SECTION 1, This Decree shai! be known as “The Insur- ance Soda." Historica! origin of insurance. (1) Mutual insnraace as old as society itself, — insures is based upon the principle of aiding another from a loss caused by an unfortunate event. Some writers have maintained that inutual Insurance 1s as old as society itself. ft seems that benevolent societies organized for the purpose of extending aid to their uniortunate merabers from a fund contributed by all, have been in existence from the earliest times. They existed among the Egyptians, the Chinese, the Hindus, and the Romans and are known to have been established among the Greeks as early as the third century before Christ» “he lnsarance Code of 678" in Presidential Dectee No.1 The ern ofthe modern mercante insurance comeact apps hve‘ Se transaction evicened by the bottomry a= respurdenty Bond, ngewe he peacice eneral average” cotubution. (se Secs. 101,138) The las De. Pomeey, author of a learned work on the ear istry of insane, ins primitive fort botomy leans fn he Baylonian Code oF Harmarae (B.C. 22305, un amore highly Jevsoges frm the Hind Laws of Manu, called, He conjectures th this in sine price 2 THE INSURANCE CODE OF THE PHILIPPINES See (2) Origin of present day insurance attributed to merchants of Italian cities. — The practice of insurance as we know: it today, asan important agency in promoting commercial and industrial transactions, is relatively of modem inwention. Its origin is to be found in the mutual agreements among merchants of the Malian cities in the early middle ages engaged in common shipping ventures for distributing among the mutual contractors, the loss falling upon any one by reason of the perils of navigation, Itis thus apparent that in its early forms, the law of insurance ‘was derived from the maritime law and, as such, was part of the general law merchant, and international in its chavacter= 3) Development of insurance in Englard. — From Italy, the practice of insuring commercial ventures against disaster rapidly extended to other maritime States of Europe. (a) The Italian merchants coming from the flourishing commercial centers in Northern Italy, and generally known as Lombards, founded trading houses in London in the 12th 1s fen over By the Phoenicians who greatly improved it a eat it 10 the who may have known ad used i eaty a fe jan War ‘Among tbe Romars, veer dileret fone of such sone known a Cle were develope, and became of sufcenImperiaace ude the Spite Wo ator st tmgulatory legislation They performed many of ine funcoore of the Medea ‘benefit society, proving primary funeral nites forthe dead buts id fr sek sd ‘ged member All etant copy ofthe y Jan of oe of these Reman sass conta sich fami provisions ett the meer forts all ight tenets by tte to py dues orb commiting suid, snd an exes! injunction to fe meee ose {he by-laws and ths avo lawsuit: rom the Roman Cle prbsbly deve he medieval gills which flourshed thoughout Europe ant unsoubtely assumed {3 thsiemembers many obligations which we shou now ca sie, accident of Moth insurance contacts Some of them even wen 0 fat as to provide incemty for onan by i and shipwreck fom the death of nile an om thet ance op ct. op 610) "From the ith tthe 1th cents, the falian republic of Vice Foreve, an Genon flourished greatly by reason oftheir extensive maa: commerce, and was meng these lian merchant tha he const of insurance recive that serion which the manifest Benefits tobe derived from its use would jy. rsuranes were

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