Insurance Code of the Philippines PD No.

1460, as amended
July 26, 2012

• A contract of insurance is an agreement
whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event. (Section 2)

Doing an insurance or transacting an insurance business
• Making or proposing to make an insurer, any
• •
insurance contract; Making or proposing to make as surety any contract of suretyship as a vocation as a vocation,, not as a mere incident to any other legitimate business of a surety; Doing any insurance business like reinsurance and similar acts; and, Doing or proposing to do any business equivalent to the above. (Section 2, par.4)

• Insurance as a risk distributing device
– By paying a pre-determined amount into a general fund out of which payment will be made for an economic loss of a defined type, each member contributes to a small degree toward compensation for losses suffered by any member of the group

Characteristics… • Contract of adhesion or fine print rule • Aleatory – In case of doubt. the contract shall be interpreted strictly against the insurer and liberally in favor of the insured – The obligation of the insurer to pay the proceeds of the insurance arises only upon the happening of an event which is uncertain or which is to occur at an indeterminate time .

Characteristics… • Commutative – The amount paid by the insured is deemed the equivalent of the protection given by the insured based on the insurance contract • Contract of indemnity – The insured who has insurable interest over a property is only entitled to recover the amount of actual loss sustained and the burden is upon him to establish the amount of such loss .

the insurer is only liable up to the extent of the loss. (Section 4) • • . • Applicable only to property insurance.Characteristics…. There is no overinsurance in life insurance There is overinsurance only in property insurance and if this is present. Insurance contracts are not wagering contracts. Life insurance is not a contract of indemnity. except • creditor insuring the life of his debtor.

.Characteristics… • Uberrimae fides contract – The contract of insurance is one of perfect good faith not for the insured alone. • Personal contract – The law presumes that the insured considered the personal qualifications of the insured in approving the insurance application. in fact. but equally so for the insurer. it is more so for the latter since its dominant bargaining position carried with it stricter responsibility.

• Payment of premiums .Elements of insurance • Existence of an insurable interest • Risk of loss • Assumption of risks • Scheme to distribute losses. and.

The Policy… • It is a written instrument where the terms and conditions • of the contract of insurance are set forth. except in open of running policies Rate of premium Property or life insured Interest of the insured in the insured in the property if he is not the absolute owner – Risk insured against – The period during which the insurance is to continue . ( Section 49) Basic contents of policy ( Section 51) – – – – – Parties Amount of insurance.

The Policy… • Rider – An attachment to an insurance policy that modifies the conditions of the policy by expanding or restricting its benefits or excluding certain conditions from the coverage .

Cancellation of non-life policy • Grounds (Section 64) – Requires prior notice to the insured – Non-payment of premium – Conviction of a crime out of acts in creasing the hazard insured against – Fraud or material misrepresentation – Willful or reckless acts of omissions increasing the risk insured against – Physical changes in property making the property uninsurable – Determination by the insurance commissioner that the policy would violate the Insurance Policy .

Notice must state the grounds relied upon provided in Section 64 of ICP. and. mailed or delivered to the insured at the address shown in the policy. .Requisites for cancellation (Section 65) • Prior notice of cancellation to insured • Notice must be based on the occurrence after • • effective date of the policy or one or more of the grounds mentioned. Notice must be in writing.

(Section 62) Life insurance policies are always valued policies. but left to be ascertained at the time of loss (Section 60) Valued policy-definite valuation is agreed by both parties and written on the face of the policy Running policy.value of the thing insured is not • • • agreed upon.contemplates successive insurances and which provides that the subject of the policy may from time to time be defined.Kinds of Policies • Open policy. .

Its most common form is an insurance that provides life or health insurance coverage for the employees of a single employer.a blanket policy covering a number of individuals. – Industrial life .insurance on human live and insurance appertaining thereto or connected therewith ( Section 179) – Group life.Types of Insurance Contracts • Life insurance – Individual life.

Types… • Non-life insurance – Marine – Fire – Casualty • Contracts of suretyship .

associations or corporations – Insurance corporation .Parties to Insurance Contract • Insurer – The person who undertakes to indemnify another – May be individuals. partnership.

person designated to received proceeds of policy when the risk attaches .Parties… • Insured-the person with capacity to contract and having an insurable interest in the life or property of the insured • Beneficiary.

• .Designation of the beneficiary • When one insures his own life. If the person who will insure the life of another payable to himself. he must have insurable interest on the life of the person he is insuring. he may • • designate any person as beneficiary. In property insurance. the beneficiary must have insurable interest in the property The designation is revocable unless provided otherwise.

of which death might delay or prevent the performance – Of any person upon whose life any estate or interest vested in him depends . – Of any person on whom he depends wholly or in part for education or support or in whom he has pecuniary interest – Of any person under a legal obligation to him for the payment of money or respecting property or services.Insurable Interest • Life Insurance • Every person has an insurable interest in the life and health: – Of himself. of his spouse and of his children.

Insurable interest… • Insurable interest in property is any interest therein. or liability in respect thereof and it may consist in an existing interest. an inchoate interest founded on an existing interest or any expectancy coupled with an existing interest .

damage or prejudice by its destruction whether he has or has no title in or lien upon or possession of the property.Insurable interest… • A person has an insurable interest in the property if he derives pecuniary benefit or advantage from its preservation or would suffer pecuniary loss. .

Insurable interest in property vs insurable interest in life Limited to the actual value of Unlimited save in life the interest thereon insurance effected by a creditor on the life of his debtor Exists at the time the policy Exists at the time the policy takes effect and at the time takes effect but need not be of loss present at the time of loss No need for legal basis There must be legal basis Need for insurable interest of Not necessary if the insurer the beneficiary insured himself .

General Rule: A future event is the only event that can be covered by an insurance contact. • • .if the loss of the vessel in the past could not have been known by ordinary means of communication.Risks insured against • May be any contingency or unknown event the happening of which will damnify a person having insurable interest or will create liability against him. Exception: A event may be covered by a marine insurance. Even fortuitous events may be insured against.

Premium ( Sections 77 and 78) • Premium is the consideration paid to an insurer for undertaking to indemnify the insured against a specified peril. • When the insured is entitled to return of premiums paid: – If thing insured was never exposed to the risks insured against. . – Contract is voidable due to the fraud or misrepresentation of insurer.

When there is over-insurance. • When the insurance is for a definite period and • • • the insured surrenders his policy before the termination thereof. Contract is voidable because of the existence of facts of which the insured was ignorant without his fault. .Return of premiums… • Insurer never incurred liability. When rescission is granted due t the insurer’s breach of contract.

a neglect to communicate that • which a party knows and ought to communicate ( Section 26) Representation.Devices for ascertaining and controlling risk and loss • Concealment.factual statements made by the insured at the time of or prior to the issuance of the policy to give information to the insurer and otherwise induce him to enter into the insurance policy .

statements or promise by the insured set forth in the policy itself or incorporated in it by proper reference. affirmative or promissory Condition. • .the insurer must also protect himself against fraudulent claims of loss and this he attempts to do by inserting in the policy various conditions which take the form of conditions precedent. implied. The same may be expressed.Devices… • Warranties.

the insurer cannot prove that the policy is void ab initio or is rescindable by reason of the fraudulent concealment or misrepresentation of the insured or his agent. (Section 48) .Incontestability Clause • After a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of two years from the date of its issuance or of its last reinstatement.

That the cause of the death of the insured is an excepted peril. That the action was not brought within the time specified. • • • .Defenses that are not barred by the incontestability clause • That the person taking the insurance lacked • insurable interest. That the premiums have not been paid That the beneficiary failed to furnish proof of death or to comply with any condition imposed by the policy after the loss has happened.

• The interest insured is also the same. • There are two or more insurers insuring separately. • The subject matter is the same. • The risk or peril insured against is likewise the same .Double insurance • The person insured is the same.

Double insurance vs. reinsurance Involves the same interest Insurer remains in such capacity Insured in the 1st contract is a party in the second contract Subject of insurance is property Insured has to give his consent Insurance of different interest Insurer becomes an insured in relation to the reinsurer Original insured has no interest in reinsurance contract Subject of insurance is the original insurer’s risk Consent of original insured is not necessary .

Liabilities… • The insurer is liable if: – Loss the proximate cause of which is the peril insured against. – Loss the immediate cause of which is the peril insured against except where the proximate cause is an excepted peril. – Loss caused by efforts to rescue the thing from peril insured against . – Loss through negligence of the insured.

– Loss due to connivance of the insured. – Loss where the expected peril is the proximate cause. and. .Liabilities… • The insurer is not liable: – Loss by insured’s willful act or gross negligence.

property by fire. . when such risks are covered by extension to fire insurance policies or under separate policies. tornado or earthquake and other allied risks. but may include loss by lighting.Fire insurance… • A contract of indemnity by which the insurer for the consideration agrees to indemnify the insured against loss of or damage to. windstorm.

• Third Party Liability- .Casualty insurance • An insurance covering loss or liability arising from accident of mishap. excluding those falling under other types of insurance as fire or marine.

• Registration of any vehicle will not be made or renewed without complying with this requirement.Compulsory Motor Vehicle Liability Insurance (CTPL) • An insurance or guaranty to indemnify the death or bodily harm of a third party or passenger arising from the use of a vehicle. .

• No fault clause: – The injured party or passenger is given the option to file a claim of death or injury without the necessity of proving fault or negligence of any kind.Purpose of CTPL… • To give immediate financial assistance to victims of motor vehicle accidents. .

– Death certificate and evidence sufficient to establish the proper payee.No fault clause…conditions • The total indemnity in respect of any person • shall not exceed five thousand pesos. The following proof of loss. . shall be sufficient evidence to substantiate the claim: – Police report of accident. when submitted under oath. – Medical report and evidence of medical or hospital disbursement in respect of which refund is claimed.

must be duly licensed to drive the motor vehicle otherwise the insurer is excused from liability. • . other than the insured owner. the insurer is liable under the theft clause.if there is such a provision and the vehicle was unlawfully taken.a stipulation in a motor vehicle insurance which provides that the driver.Other rules concerning motor vehicles… • Authorized driver clause. Theft clause.

– To discharge the debtor from his liabilities so that he can start afresh with the property set apart to him as exempt. .The Insolvency Law (Act No. 1956) • Purposes: – To effect equitable distribution of the insolvent’s property among his creditors.

The amount of indebtedness is not affected The purpose is to discharge the debtor from paying certain debts Some of the creditors may receive less than their credits The number of creditors is immaterial In case of involuntary insolvency. Insolvency The debtor has sufficient property The debtor does not have but he foresees the impossibility sufficient property to pay his debts of meeting his debts as they fall due The purpose is to suspend or delay the payment of debts.Suspension of Payment vs. three or more creditors are required .

Voluntary insolvency vs. involuntary insolvency One creditor is sufficient Filed by the debtor No need for commissions of acts of insolvency Three or more creditors are required Filed by three or more qualified creditors Debtors must have committed one or more acts of insolvency Amount of indebtedness must exceed one thousand pesos Bond is not required Indebtedness must not be less than one thousand Petition must be accompanied by bond .

. Upon request to court. all pending executions against the debtor shall be suspended except execution against property especially mortgaged. and. No payments may be made by the petitioner except in the ordinary course of his business or industry.Effects of filing petition for suspension of payments • No disposition in any manner of his property • • may be made by the Petitioner except insofar as concerns the ordinary operations of commerce or if industry in which he engaged.

Effects of adjudication of insolvency • Forbid the payment to the debtor of any debt due to him and the delivery to him of any property belonging to him. • Forbid the transfer of any property to him. • Stay of all pending civil proceedings against the insolvent. .

. – All debts. and.Discharge… • The insolvent debtor is released from: – All his debts and liabilities set forth in the schedule. liabilities or claims which were or might have been proved against the estate in insolvency.

• Corporations cannot ask for discharge .Discharge… • Only natural persons may ask for discharge.

The following are not discharged: • Taxes or assessment due to the National or local government. • Claims of secured creditors. • Debt created by fraud or embezzlement. . • Debts created by defalcation by public officer or while acting in fiduciary capacity.

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