Insurance by Atty. Rodiel
Concept of insurance
1. Definition
1. Already in the codal.
2. Unknown or contingent event
1. Contingent - Event that is not certain to take place.
2. Unknown - Event which is certain to happen, but the time of its
happening is not known.
1. Hence, past events are included, as long as they are unknown to
the parties, i.e., prior loss of a ship at sea.
2. Doing or transacting insurance business
1. Already in the codal.
3. HMO v Insurance
1. In sum, the Court said that the main difference between an HMO arid an
insurance company is that HMOs undertake to provide or arrange for the
provision of medical services through participating physicians while
insurance companies simply undertake to indemnify the insured for
medical expenses incurred up to a pre-agreed limit. (Medicard v CIR,
2017)
Elements of an insurance contract (IRAPS)
1. Insurable interest on the part of the insured
2. Risk of loss of the insurable interest by the happening of the event
3. Assumption of risk of loss by the insurer
4. Premiums are paid by the insured
5. General Scheme to distribute actual losses among a group bearing a similar
risk. (Philmacare Health Systems v CA, 2002)
Characteristics and nature of insurance contracts
1. Contract of adhesion or Fine Print Rule
1. A contract of adhesion is defined as one in which one party prepares the
stipulation in the contract, while the other party merely affixes his
signature or his "adhesion" thereto. It must be borne in mind, however,
that contracts of adhesion are not invalid per se. (Norton Resources v All
Asia Bank, 2009)
2. When does it become void?
1. Such contract may be struck down as void and unenforceable, for
being subversive to public policy, only when the weaker party is
completely deprived of the opportunity to bargain on equal footing.
(PCIB v CA, 1996)
2.
3.
4.
5.
6.
7.
8.
3. How are ambiguities construed?
1. A contract of insurance, being a contract of adhesion, any ambiguity
therein should be resolved in favor of the insured. (Alpha Insurance v
Castor, 2013)
Contract of indemnity
1. The measure of insurable interest in property is the extent to which the
insured might be damnified by the loss or injury thereof. (Sec. 17, IC)
2. Hence, the insured cannot collect more than the loss/injury.
3. Exceptions: Life and accident insurance. These two insurances are not
contracts of indemnity, because life cannot be indemnified.
Subrogation
1. In subrogation, the subrogee substitutes/succeeds/steps into the shoes of
the insured.
2. The rights to which the subrogee succeeds are the same as, but not
greater than, those of the person for whom he is substituted.(Standard
Insurance v Cuaresma, 2014)
3. When does subrogation not apply? (WELER)
1. Insurer pays the insured Without notifying the carrier who has in good
faith settled the insured’s claim for loss
2. Payment of loss Excepted by the policy
3. Life insurance
4. Recovery of loss in Excess of the insurance coverage
5. Insured Releases the party at fault from liability.
Consensual
1. The contract is perfected by mere consent without need of delivery or any
other formality. (Perez v CA, 2000)
1. Upon consent, the insurance is perfected already.
2. The failure to pay the premium merely makes the contract ineffective.
Unilateral
1. It is a contract which imposes legal duty only to the insurer who promises
to indemnify in case of loss.
2. The payment of premium is not an obligation, but an event that gives the
contract an obligatory force. (De Leon)
Risk-distributing device
1. All members of a group exposed to a particular risk contribute premiums
to an insurer, and from these contributory funds are paid whatever losses
occur due to the exposure to the peril insured against. (Gaisano v
Development Insurance, 2017)
Personal
1. Each party in an insurance contract had in view, the character, credit, and
conduct of each other. (De Leon)
Uberrimae Fidae contract; Utmost good faith
1. Both parties must not only perform their obligations in good faith, but
1.
must avoid material concealment or misrepresentations as contracts of
insurance are one of utmost good faith. (Verendia v CA, 1993)
9. Aleatory contract
1. By an aleatory contract, one of the parties or both reciprocally bind
themselves to give or to do upon the happening of an uncertain event, or
which is to occur at an indeterminate time. (Vitug v CA, 1990)
10. Conditional
1. The right of the insured to claim the proceeds is dependent upon the
happening of an event which constitutes the obligation of the insurer to
pay. (Art. 1181, Civil Code)
11. Executory
1. Executed as to the insured, after the payment of the premium, and
2. Executory on the part of the insurer, until the payment of the loss. (De
Leon)
Classes
1. Marine
1. What may be insured
1. Vessels/Aircraft/Vehicles
2. Goods/Cargoes/Merchandise
3. Freights/Profits
4. Bridges/tunnels/piers/wharves/docks/other instrumentalities of
transportation and communication
5. Marine protection and indemnity insurance 1. It is an insurance against legal liability of the insured for loss/
damage/expense incident to the maintenance/use of a vessel or
instrumentalities used for waterways,
2. This includes liability of the insured for personal injury/illness/
death/damage to property of another person. (Sec. 101)
2. Insurable interest
Owner of the ship
In all cases, he has
insurable interest on the
ship, even when 1)
chartered by a person
who covenants to pay
him its value in case of
loss, or 2) hypothecated
by bottomry. (Sec.
102-103)
However, in the former
case, the insurer shall be
liable only for that part of
the loss which the
insured cannot recover
from the charterer;
Further, in the latter
case, the insurer is only
liable for the excess of
the ship’s value over the
amount secured by the
bottomry. (Sec. 102-103)
He has insurable interest
over the expected
freightage, which
according he would have
Freightage means all the
benefits derived by the
owner 1) from chartering
the ship, or 2) from the
Charterer
102-103)
liable for the excess of
the ship’s value over the
amount secured by the
bottomry. (Sec. 102-103)
He has insurable interest
over the expected
freightage, which
according he would have
earned if not for the peril
insured against. (Sec.
105)
Freightage means all the
benefits derived by the
owner 1) from chartering
the ship, or 2) from the
carriage of goods. (Sec.
104)
He has insurable interest
over the ship, to the
extent that he is liable to
be damnified by its loss.
(Sec. 108)
He has insurable interest
over the expected
freightage, when the
ship has broken ground
on the chartered voyage.
(Sec. 106)
Owner of the cargo
What does “broken
ground on the chartered
voyage” mean? If a price
is to be paid for the
carriage of goods,
insurable interest over
the freightage exists
when the goods are
actually on board, OR
there is some contract
for putting them on
board, AND both ship
and goods are ready for
the specified voyage.
(Sec. 106)
He has insurable interest
over the cargo.
(Common sense)
One who has interest in
the thing from which
profits are expected
has insurable interest in
the profits. (Sec. 107)
3. Concealment
1. In marine insurance, each party is bound to communicate ALL the
information which he possesses material to the risk, except those in
Sec. 30 (KKWEE). (Sec. 109)
1. The person insured is presumed to have knowledge of a prior
loss, if the information might possibly have reached him in the
usual mode of communication. (Sec. 111)
2. In marine insurance, information of the BELIEF or expectation of a
THIRD PERSON, in reference to a material fact, is material. (Sec. 110)
3. In marine insurance, the concealment of the following matters doe
NOT VITIATE THE ENTIRE CONTRACT, but only EXONERATES the
insurer if LOSS RESULTS from the RISK CONCEALED: (NCD)
1. Nationality of the insured
2. Capture - Liability to capture/detention; Liability to seizure from
breach of foreign laws
3. Documents - Want of necessary documents/Use of false/
simulated papers. (Sec. 112)
4. Representation
5. Implied warranties
1. Seaworthiness
1. In every marine insurance upon a ship/freight/any thing subject
thereof, a warranty is implied that the ship is seaworthy. (Sec.
115)
1. Since cargo can be the subject of marine insurance, the
implied warranty of seaworthiness immediately attaches to
whoever is insuring the cargo, whether he be the shipowner or
not. Although the shipper has no control over the vessel, he
has control in the choice of the vessel. (Roque v IAC)
2. When is a ship seaworthy?
1. It is seaworthy when REASONABLY FIT:
1. To perform the service, and
2. To encounter the ordinary perils the voyage
contemplated. (Sec. 116)
1. Ordinary “perils of the sea” extends only to losses
caused by sea damage, or by violence of the
elements, and does not embrace all losses happening
at sea. (Roque v IAC)
2. How can it be reasonably fit?
1. The warranty of seaworthiness extends:
1. Not only to the condition of the structure of the ship
2. But also requires that it is properly laden/
appurtenances/equipment/stores/implements for
the voyage
3. Competent master/officers/seamen. (Sec. 118)
2. Carry documents to show nationality/neutrality; Not carry those
which cast reasonable suspicion
1. Where the nationality/neutrality of a ship or cargo is expressly
warranted, it is implied that:
1. The ship will carry the requisite documents
2. It will not carry documents which cast reasonable suspicion
2.
thereon. (Sec. 122)
6. Voyage and deviation
1. Deviation is the: (DDD - Departure; Delay; Different voyage)
1. Departure from the course of the voyage insured, or
2. Unreasonable delay in pursuing the voyage, or
3. Commencement of an entirely different voyage
2. What is the course of the voyage insured?
1. When the voyage contemplated is described by the places of
beginning and ending,
1. The voyage insured is one which conforms to the course of
sailing fixed by mercantile usage between those places;
2. If not fixed by mercantile usage, it is the way, which to a
master of ordinary skills and discretion, is the most natural,
direct, and advantageous.
3. Effects of deviation
1. As a rule, every deviation not specified below is improper. Hence,
an insurer is not liable for any loss happening SUBSEQUENT to
the improper deviation.
2. As exception, deviation is proper when: (CPPL - Control; Peril;
Peril; Lives)
1. Control - Caused by circumstances neither the master/
shipowner has control
2. Comply warrant; Avoid peril - Necessary to comply with
warranty/avoid peril, whether or not the peril is insured
3. Good faith avoid peril - Made in good faith and reasonable
grounds to believe its necessity to avoid peril
4. Good faith save lives - Mad in good faith, to save human life or
another vessel in distress.
7. Loss
1. Total or partial. (Sec. 129)
2. A loss that is not total is partial. (Sec. 130)
3. A total loss can be actual total or constructive total loss. (Sec. 131)
4. When is there actual total loss? (TIVE)
1. Total destruction
2. Irretrievable loss
3. Valueless - Damage that renders the thing valueless
4. Effectively deprives - Other event that effectively deprives the
owner of the possession of the thing insured. (Sec. 132)
5. Upon an actual total loss, a person insured is entitled to payment
without notice of abandonment. (Sec. 137)
6. When is there constructive total loss?
1. A constructive loss is one which gives to a person insured a right
to abandon, under Sec. 141. (Sec. 133)
8. Abandonment
1. It is the act of the insured by which, after a constructive total loss, he
declares the relinquishment to the insurer of his interest in the
thing insured. (Sec. 140)
2. Grounds for abandonment:
1. However, freightage cannot be abandoned unless the ship is also
abandoned. (Sec. 141)
Grounds
More than 3/4 of the value of the
thing insured
Is actually lost
Would have to be expended to recover
it from peril
Was the reduction in value of the same
due to the injury
If the thing insured is the ship/cargo/
freightage, and the contemplated
voyage cannot be lawfully performed
without expending such amount.
Incurring a risk which a prudent man
would not take under the
circumstances
3.
4.
5.
6.
If the thing insured is the ship/cargo/
freightage, and the contemplated
voyage cannot be lawfully performed
without incurring such risk. (Sec. 141)
How is an abandonment made?
1. It must be made by giving NOTICE to the insurer, orally or in
writing. (Sec. 145)
1. It must neither be partial nor conditional. (Sec. 142)
2. It must be explicit, and must specify the particular cause for
abandonment. (Sec. 146)
1. It can be sustained only for the cause specified in the
notice thereof. (Sec. 147)
3. It must be made within a reasonable time after receipt of
reliable information of the loss. (Sec. 143)
Transfer of interest to the insurer
1. An abandonment is equivalent to a TRANSFER by the insured of
his INTEREST to the insurer, with all the CHANCES of recovery
and indemnity. (Sec. 148)
Irrevocability
1. An abandonment once made and accepted is IRREVOCABLE,
unless the ground for abandonment was proven to be unfounded.
Refusal of notice of abandonment
1. Where notice of abandonment is properly given, the rights of the
insured are not prejudiced by the fact that the insurer refuses to
1.
accept the abandonment. (Sec. 151)
1. In case of refusal, the insurer is liable as upon an actual total
loss, deducting from such amount any proceeds of the thing
insured which would come into the hands of the insured. (Sec.
156)
7. What if the insured with a right to abandon omits to do so?
1. If a person insured omits to abandon, he may nevertheless
recover his ACTUAL (PARTIAL) LOSS. (Sec. 157)
8. Who has the right over the freightage once the ship is abandoned?
Freightage earned before the loss
Belongs to the insurer of the
freightage
Freightage earned after the loss
Belongs to the insurer of the ship.
(Sec. 155)
2. Fire
1. Fire insurance is an insurance against loss by fire, lightning, windstorm,
tornado or earthquake and other allied risks, when such risks are covered
by extension to fire insurance policies or under separate policies. (Sec.
169, IC) The peril here is fire and allied risks such as lighting et. al.
2. An alteration in the use or condition of a thing insured: (LCR)
1. From that to which it is Limited by the policy
2. Made without the Consent of the insurer, by means within the control
of the insured, and
3. Increasing the Risks, entitles an insurer to rescind a contract of fire
insurance. (Sec. 170, IC)
3. In the absence of any change increasing the risk without the consent of
the insurer or of fraud on the part of the insured then:
1. in case of a total loss under such policy, the whole amount so insured
upon the insured’s interest in such building or structure, as stated in
the policy upon which the insurers have received a premium, shall be
paid, and
2. in case of a partial loss the full amount of the partial loss shall be so
paid. (Sec. 174, IC)
3. Casualty
4. Suretyship
1. Premiums
1. The surety is entitled to the payment of the premium as soon as the
contract for suretyship or bond is perfected and delivered to the
obligor.
2. No contract of suretyship or bonding shall be valid and binding unless
and until the premium has been paid, except where the obligee has
accepted the bond, in which case the bond becomes valid and
enforceable irrespective of whether or not the premium has been paid
by the obligor to the surety
3. Provided, that if the contract of suretyship or bond is not accepted by,
or filed with the obligee, the surety shall collect only a reasonable
amount, not exceeding 50% of the premium due thereon as service
fee plus the cost of stamps/taxes imposed on the contract or bond;
4. Provided, however, that if the non-acceptance of the bond be due to
the fault to negligence of the surety, no such service fee/stamps/taxes
shall be collected.
5. In the case of a continuing bond, the obligee shall pay the subsequent
annual premium as it falls due until the contract of suretyship is
cancelled by the obligee, or by the Commissioner, or by a court of
competent jurisdiction. (Sec. 179)
2. Nature of liability
1. The liability of surety is joint and several with the obligor AND is
limited to the amount of the bond. (Sec. 178)
5. Life (correlate to forms)
1. Meaning
1. Life Insurance is insurance on human lives and insurance appertaining
thereto or connected therewith
2. It includes every contract or undertaking for the payment of annuities
3. It includes every contract or pledge for the payment of endowments
or annuities
4. It includes contracts for the payment of lump sums under a retirement
program where a life insurance company manages. (Sec. 181-182)
2. Kinds of life insurance
1. Ordinary Life or General Life Policy — the insured pays a fixed
premium every year until he dies. There is a cash surrender value after
three (3) years.
2. Group Life — is essentially a single insurance contract that provides
coverage for many individuals.
3. Limited Payment Policy — the insured pays premium for a limited
period. If he dies within the period, his beneficiary is paid; if he
outlives the period, he does not get anything.
4. Endowment Policy — the insured pays premium for a specified
period. If he outlives the period, the face value of the policy is paid to
him; if not, his beneficiaries receive the benefit.
5. Term Insurance — the insured pays only once, and he is insured for a
specified period. If he dies within the period, his beneficiaries benefits
get the benefits. If he outlives the period, no person benefits from the
insurance.
6. Industrial Life — entitles the insured to pay premiums weekly, or
where premiums are payable monthly or oftener.
3. Transferability
1. A policy of insurance upon life/health may pass by transfer/succession
1.
to ANY person, whether or not he has insurable interest, and SUCH
person may recover whatever the insurer might have recovered. (Sec.
184)
4. Notice of transfer is not needed
1. Notice to an insurer of a transfer/bequest is NOT necessary to
preserve the validity of a policy of insurance upon the life/health.
5. Four (4) important risks in life insurance: (DSBA)
1. Death or survival
2. Suicide
3. Killing by Beneficiary
4. Accidental death
1. Death or Survival
1. An insurance upon life may be made payable:
1. On the death of the person, or
2. On his surviving a specified period, or
3. On the continuance or cessation of life. (Sec. 182)
2. Suicide
1. When can the insurer be liable for the suicide of insured?
1. When suicide is committed AFTER the policy has been in
force for 2 years from the date of its issuance or last
reinstatement, unless the policy provides a shorter period;
and
2. When suicide is committed in a STATE OF INSANITY,
regardless of the date of commission. (Sec. 183)
1. Hence, the insurer is not liable if suicide was
committed by a sane person within the 2-year period.
2. QUESTION:
1. On June 21, 2018, Kate took out a life insurance policy on
her life in the amount of Php 10 million and named her
husband and her daughter as joint irrevocable
beneficiaries. Before the policy was issued and the
premiums were paid, Kate underwent a medical checkup
with a physician accredited by the insurer, and the only
notable observation was that she was suffering from high
blood pressure. Kate was previously diagnosed by a
private physician of having breast cancer which she did
not disclose to the insurer in her application, nor to the
insurer's accredited physician because by then, she was
told that she was already cancer-free after undergoing
surgery which removed both her breasts. She was later
diagnosed with psychotic tendency that graduated into
extreme despondency. She was found dead hanging in
her closet on October 20, 2019. The police authorities
declared it to be a case of suicide as they found a suicide
note written by Kate stating that she needed to stop the
voices in her head who kept telling her she was ugly. The
policy did not include suicide as an excepted risk.
1. Can the insurer raise the issue of failure to disclose
that Kate previously had cancer as a cause for
denying the claim of her husband and daughter?
2. Are the beneficiaries entitled to receive the proceeds
of the life insurance notwithstanding the fact that the
cause of death was suicide within the 2-year
contestability period?
1. No. In life insurance, the insurer cannot raise the
issue of Kate’s failure to disclose that she had
cancer as a cause for denying the claim because
the insurer is already estopped from contesting
the validity of the policy. The incontestability
clause under Section 48 of the Insurance Code
provides that the insurer will lose its right to
rescind the policy on the ground of concealment
or material misrepresentation (a) if the insured
dies within two years and the policy is in force; or
(b) if the policy is continuously in force for at least
2 years from its issuance. The insurer is given two
years from the effectivity of the life insurance,
and while the insurer is alive, to discover or prove
that the policy is void due to concealment or
misrepresentation. There is a view to the effect
that when the insured dies within said period, the
insurer must make good of the policy even if it
was obtained by fraud, concealment, or
misrepresentation (Manila Bankers Life Insurance
Corporation v. Aban, G.R. No. 175666, July 29,
2013). Thus, under this view, upon the death of
Kate, the insurer lost its right to rescind the policy
(Sun Life of Canada v. Ma. Daisy Sibya, G.R. No.
211212, June 8, 2016). However, the opposite
view that is also supported by jurisprudence is
that the insurer can still deny the claim if the
insured dies within the 2-year period (Emilio Tan,
et al. v. The Court of Appeals, G.R. No. 48049,
June 29, 1989).
2. Yes. In cases of suicide, the insurer is liable if
committed in a state of insanity regardless of the
2.
date of the commission unless suicide is an
excepted peril (INSURANCE CODE, Sec. 183).
Here, Kate committed suicide in a state of insanity
and suicide is not an excepted peril. Thus, the
claim must be paid.
3. Killing by beneficiary
1. General rule:
1. The interest of a beneficiary in a life insurance policy shall
be forfeited when the beneficiary is the principal,
accomplice or accessory in willfully bringing about the
death of the insured. (Sec. 12)
2. In such event, the other beneficiaries so named shall
receive their share and divide among them the forfeited
share of the “guilty” beneficiary;
3. In the absence of other beneficiaries, proceeds shall be
paid according to the policy contract; and
4. If silent, it shall be paid to the estate of the insured.
5. NOTE: Conviction of the beneficiary is necessary before
there can be forfeiture.
6. NOTE: To correlate, a life insurance policy is transferable/
assignable to any person. Hence, the transferee’s interest
over the life insurance policy shall be forfeited if he is the
principal/accomplice/accessory in willfully brining about
the death of the insured.
2. Exceptions:
1. Accidental killing
2. Self-defense
3. Insanity of the beneficiary at the time he killed the insured
3. Negligence
4. Accidental death
1. The term accident means that they happen by chance or
fortuitously, without intention and design from any person.
2. Hence, when the insured is intentionally killed by another
person, it cannot be considered as accidental. Hence, the
incident is not covered by the supplemental insurance on
“death by accident.” (Biagtan v Insular, 1972)
3. NOTE: However, most life insurance policies cover all kinds of
death.
6. Measure of indemnity
1. Unless the interest of a person insured is susceptible of exact
pecuniary measurement, the measure of indemnity under a policy of
insurance upon life or health is the sum fixed in the policy (Sec. 186,
IC).
2. Hence, when the creditor insures the life of his debtor, the amount of
insurance is limited by the value of the obligation due.
7. Grace period
1. The policyholder is entitled to a grace period of 30 days within which
payment of any premium AFTER THE FIRST may be made. (Sec.
233)
8. Cash surrender value
1. In case of default in a premium payment BUT after the payment of
three (3) full annual premiums , the policyholder is entitled to a cash
surrender value. It is payable upon surrender of the policy and shall
not be less than the reserve on the policy. (Sec. 233)
9. Reinstatement
1. The policyholder shall be entitled to have the policy reinstated at any
time within three (3) years from the date of default of premium
payment, unless:
1. the cash surrender has been paid, or
2. the extension period has expired,
2. Reinstatement occurs upon production of evidence of insurability
satisfactory to the company and upon payment of all overdue
premiums and any indebtedness to the company upon said policy,
with interest. (Sec. 233)
6. Microinsurance
7. Compulsory motor vehicle liability insurance
1. Defined
1. It refers to a contract of insurance against passenger and thirdparty liability for death or bodily injuries and damage to property
arising from motor vehicle accidents. (Sec. 386(f), IC)
1. “Third party” means any person OTHER than a passenger. It shall
also EXCLUDE: (HFE)
1. Members of the household
2. Member of the family within the 2nd degree of
consanguinity/affinity of the motor vehicle owner; and
3. His employee. (Sec. 386(c))
2. Hence, liabilities against the passenger and third party are
covered by CMVLI.
3. However, liabilities against household/family/employee are NOT
covered by CMVLI.
2. Requirement
1. It shall be unlawful for any land transportation operator or motor
vehicle owner to operate the same in public highways, unless there is
in force a policy of insurance or guaranty in cash or surety bond to
indemnity the death/bodily injury/damage to property of a third party
or passenger. (Sec. 387)
3. No-fault indemnity clause
1. Any claim for death or injury to any passenger or third-party pursuant
to the provisions of this chapter shall be paid without the necessity
of proving fault or negligence of any kind.
2. Claim may be made against one motor vehicle only.
3. In the case of an occupant of a vehicle, claim shall lie against the
insurer of the vehicle in which the occupant is riding, mounting or
dismounting from.
4. In any other case, claim shall lie against the insurer of the directly
offending vehicle.
5. In all cases, the right of the party paying the claim to recover against
the owner of the vehicle responsible for the accident shall be
maintained. (Sec. 391, IC)
1. Although the victim may proceed directly against the insurer for
indemnity, the third party liability is only up to the extent of the
insurance policy and those required by law.
2. While it is true that where the insurance contract provides for
indemnity against liability to third persons, and such persons can
directly sue the insurer, the direct liability of the insurer under
indemnity contracts against third party liability does not mean that
the insurer can be held liable in solidum with the insured and/or
the other parties found at fault.
3. For the liability of the insurer is based on contract; that of the
insured carrier or vehicle owner is based on tort. (Tiu v
Arriesgado, 2004)
4. Enforcement of rights under CMVLI; Different from general provisions
on insurance
1. Any person having any claim upon the policy issued pursuant to this
chapter shall, without any unnecessary delay, present to the insurance
company concerned a written notice of claim setting forth the nature,
extent and duration of the injuries sustained as certified by a duly
licensed physician.
2. Notice of claim must be filed within six (6) months from the date of
accident, otherwise, the claim shall be deemed waived.
3. Action or suit for recovery of damage due to loss or injury must be
brought, in proper cases, with the Commissioner or the courts within
one (1) year from denial of the claim, otherwise, the claimant’s right
of action shall prescribe. (Sec. 397, IC)
8. Compulsory insurance coverage for agency-hired workers
1. Requirement
1. In addition to the performance bond to be filed by the recruitment/
manning agency under Section 10 of the Act, each migrant worker
deployed by a recruitment/manning agency shall be covered by a
1.
compulsory insurance policy which shall be secured at no cost to
the said worker. (Sec. 1, Rule XVI, RA 10022)
2. No-fault indemnity clause
1. Any claim arising from accidental death, natural death or permanent
total disablement under Section 2 (a), (b) and (c) shall be paid by the
insurance company without any contest and without the
necessity of proving fault or negligence of any kind on the part of
the insured migrant worker. (Sec. 7, Rule XVI, RA 10022)
2. Any question or dispute in the enforcement of any insurance policy
issued under this Rule shall be brought before the IC for mediation or
adjudication. (Sec. 11, Rule XVI, RA 10022)
3. Notwithstanding the preceding paragraph, the NLRC shall have the
exclusive jurisdiction to enforce against the recruitment/manning
agency its decision, resolution or order that has become final and
executory or a settlement/compromise agreement reached between
the parties. (Sec. 11, Rule XVI, RA 10022)
1. IC is for the insurance company; NLRC is for the recruitment/
manning agency.
Variable contracts
1. Already in the codal.
2. Do not forget to read this.
What may be insured; Requisites
1. Any contingent or unknown event, whether past or future, which may
damnify a person having an insurable interest, or create a liability against
him may be insured (Sec. 3, IC).
1. In short, risk must be a contingent or unknown event:
1. Which may damnify the person with insurable interest; or
2. Create liability against him.
2. As a rule, only future events may be covered by an insurance contract
because of the requirement that it be “contingent or unknown.”
3. As exception, a past event that may be insured against is peculiar to
Marine Insurance in case the loss of the vessel in the past could not have
been known by ordinary means of communication.
Insurable interest
1. Life/health
1. Every person has an insurable interest in the life AND health of: (HSC-SPOE)
1. Himself
2. Spouse
3. Children
4. Any person whom he depends for education or Support
5. Any person in whom he has a Pecuniary interest
6. Any person under legal Obligation to him for the payment of money/
property/services, of which death or illness might delay or prevent the
performance; and
7. Any person upon whose life any Estate/interest vested in him
depends. (Sec. 10)
2. As to the life of the mortgagor, the mortgagee’s insurable interest is the
amount of debt owed by the mortgagor. The same is true for a creditordebtor relationship.
3. QUESTION:
1. Carlo and Bianca met in Phuket, Thailand. Immediately, they fell in love
with each other and got married soon after. They have been
cohabiting blissfully as husband and wife, but they did not have any
offspring. As the years passed by, Carlo decided to take out an
insurance on Bianca’s life for P1M with him (Carlo) as sole beneficiary,
given that he did not have a steady source of income and he always
depended on Bianca both emotionally and financially. During the term
of the insurance, Bianca died of what appeared to be a mysterious
cause so that Carlo immediately requested for an autopsy to be
conducted. It was established that Bianca died of testicular cancer. It
seems that Bianca was a transsexual all along—a fact unknown to
Carlo. Can Carlo claim the insurance benefit?
1. Yes, Carlo can claim the insurance benefit. Although Carlo’s
insurable interest as the “husband” in a void marriage is
questionable, the law expressly provides that every person has an
insurable interest in the life and health of any person on whom he
depends wholly or in part for support (INSURANCE CODE, Sec.
10). Moreover, insurable interest in the life of the person only
needs to exist at the time the policy takes effect and need not
exist at the time of the loss (INSURANCE CODE, Sec. 19). Thus,
the subsequent knowledge of Carlo, upon the death of Bianca,
that the latter is a transsexual, and thus was not his wife, did not
destroy the insurable interest he had on the life of Bianca when he
took out the policy.
2. Property
1. A person has insurable interest over a property if he will derive benefit
from the preservation of the same, and will suffer pecuniary loss from
the destruction/injury/damage of the same. (Lalican v Insular Life, 2009)
2. As to a mortgaged property, the mortgagor’s insurable interest is the full
value of the mortgaged property. The mortgagee’s insurable interest is the
amount of debt owed by the mortgagor.
3. An insurable interest in property does not necessarily imply a property
interest in, or a lien upon, or possession of, the subject matter of the
3.
insurance, and neither the title nor a beneficial interest is requisite to the
existence of such an interest.
4. It is sufficient that the insured is so situated with reference to the
property that he would be liable to loss should it be injured or destroyed
by the peril against which it is insured. Anyone has an insurable interest in
property who derives a benefit from its existence or would suffer loss from
its destruction. (UCPB General Insurance Co., Inc. v. Asgard Corrugated
Box Manufacturing Corp., G.R. No. 244407, January 26, 2021 )
1. As illustration, a husband would thus have an insurable interest in the
paraphernal property of his wife since the fruits thereof belong the
conjugal partnership and may be used for the support of the family.
2. Moreover, a vendor or seller retains an insurable interest in the
property sold so long as he has any interest therein, in other words, so
long as he would suffer by its destruction, as where he has a vendor’s
lien. (Gaisano Cagayan v Insurance Company of North America, 2006)
3. Insurable interest of the beneficiary
1. General Rule:
1. For life insurance, the insured in a life insurance may designate any
person as beneficiary unless disqualified by Art. 739 of the Civil
Code.
2. Exception:
1. However, one cannot procure an insurance on the life of another
(insured) in whose life he has no insurable interest. COMMENT: The
reason is he has nothing to lose, but everything to gain.
3. For property insurance, no insurance on property shall be enforceable
except for the benefit of some person having an insurable interest in the
property insured. (Sec. 18, IC) COMMENT: In short, for property
insurance, the beneficiary must have insurable interest over the property
insured.
4. Limitations on the designation of beneficiary
1. Any person who is forbidden from receiving any donation under
article 739 cannot be named beneficiary of a life insurance policy by
the person who cannot make any donation to him, according to said
article. (Art. 2012, NCC)
2. The following donations shall be void:
1. Those made between persons who were guilty of adultery or
concubinage at the time of the donation;
2. Those made between persons found guilty of the same criminal
offense, in consideration thereof; and
3. Those made to a public officer or his wife, descendants and
ascendants, by reason of his office. (Art. 739, NCC)
5. Irrevocability of designation
1. The termination of the subsequent marriage referred to in the
1.
preceding Article shall produce the following effects: (4) The innocent
spouse may revoke the designation of the other spouse who acted in
bad faith as beneficiary in any insurance policy, even if such
designation be stipulated as irrevocable. (Art. 43, FC)
2. The effects provided for by paragraphs (2), (3), (4) and (5) of Article
43 and by Article 44 shall also apply in the proper cases to marriages
which are declared ab initio or annulled by final judgment under
Articles 40 and 45. (Art. 50, FC)
3. After the finality of the decree of legal separation, the innocent
spouse may revoke the donations made by him or by her in favor of
the offending spouse, as well as the designation of the latter as
beneficiary in any insurance policy, even if such designation be
stipulated as irrevocable. (Art. 64, FC)
4. Double insurance and over insurance
1. Already in the codal.
2. Double insurance (PISI)
1. Same Person insured
2. Two or more insurers
3. Same subject
4. Same interest
1. There can be no overinsurance, such as when the aggregate value
of the policies is equal to the interest insured.
3. Overinsurance
1. The amount of insurance exceeds the value of the interest insured.
1. This can happen even with one insurer.
4. Double insurance and overinsurance; Solidary obligation
1. The insurers are severally liable
2. Hence, the insured may claim payment from the insurer in such order
as he may select
3. Further, each of them shall contribute ratably to the loss in
proportion to the amount of liability in his contract
4. Further, the insured shall hold in trust the sums he received in excess
of his insurable interest.
5. Ground to revoke a non-life insurance
1. Discovery of other insurance coverage that makes the total
insurance in excess of the value of the property insured. (Sec. 64(f))
5. Multiple or several interests on same property
1. Examples wherein multiple persons may each have insurable interest over
the same property:
1. Corporations – the corporation and its stockholders have insurable
interest over the corporate assets.
2. Partnerships – the partnership and the partners composing it have
insurable interest over its assets.
3. Assignments – the assignor and assignee have insurable interest over
the property assigned.
4. Trusts – the trustor and trustee have insurable interest over the
property in trust.
5. Lease Agreements - the lessor, lessee and sub-lessees have insurable
interest over the property in lease.
6. Mortgages – the mortgagor and mortgagee/s have insurable interest
over the property mortgaged.
2. Multiple Interests over Mortgaged Property
1. The Insurance Code recognizes that:
1. Both the mortgagor and mortgagee have each separate and
distinct insurable
interest in the mortgaged property.
2. They may take out separate policies with the same or different
insurance companies.
3. Insurance taken by one on his own name only, does not inure to
the benefit of the
other. [Sec. 53]
4. When a mortgagee insured his own interest and a loss occurs, he
is entitled to recover on the insurance. The mortgagee, however,
is not allowed to retain his claim against the mortgagor, but it
passes by subrogation to the insurer, to the extent of the
insurance money paid. [Palileo v. Cosio, G.R. No. L- 7667 (1955)]
Mortgagee
Mortgagor
As owner, the interest is equal to the
value of the property, regardless of
whether it equals to the mortgage debt
or not.
His interest lies in that the loss or
destruction of the property will not
extinguish his mortgage debt
Only to the extent of the debt secured
[Geagonia v. CA, G.R. No. 114427(1995)]
What is insured is not the property, but
his interest as mortgagee, which
subsists until the mortgage debt is
extinguished [CARALE]
3. Open Loss Payable Mortgage Clause
1. An open loss payable clause states that the proceeds of the
insurance contract is payable to the mortgagee as beneficiary.
2. The contract, however, is procured by the mortgagor for his interest in
the property. He is the party to the contract, not the mortgagee.
3. The acts of the mortgagor prior to the loss, which would otherwise
avoid the insurance, affects the mortgagee, even if the property is in
the hands of said mortgagee. (Sec. 8)
4. NOTE: Sec. 8 is a property insurance.
4. Union Mortgage or Standard Mortgage Clause
1. A standard or union mortgage clause makes a separate and distinct
1.
contract of insurance on the interest of the mortgagee, thus any act of
the mortgagor will not affect the mortgagee. [Carale; Sec. 8]
2. This clause is similar to an open loss payable clause, except that it is
stipulated that the acts of the mortgagor cannot invalidate the
insurance, provided that if the mortgagor fails to pay the premiums
due, the mortgagee shall, on demand, pay said premiums. [de Leon]
3. NOTE: Sec. 8 is a property insurance.
5. Mortgage Redemption Insurance (Life insurance on the life of the
mortgaged, for the benefit of both parties)
1. In Great Pacific Life Assurance Corp. v. Court of Appeals, we defined
mortgage redemption insurance as a device for the protection of both
the mortgagee and the mortgagor:
1. On the part of the mortgagee, it has to enter into such form of
contract so that in the event of the unexpected demise of the
mortgagor during the subsistence of the mortgage contract, the
proceeds from such insurance will be applied to the payment
of the mortgage debt, thereby relieving the heirs of the
mortgagor from paying the obligation.
2. In a similar vein, ample protection is given to the mortgagor under
such a concept so that in the event of death, the mortgage
obligation will be extinguished by the application of the
insurance proceeds to the mortgage indebtedness. (Paramount
Life v Castro, 2016)
2. NOTE: Here, the life of the mortgagor is insured, not the property
mortgaged.
1. Why is this allowed? Because the mortgagee has an insurable
interest over the life of the mortgagor, who is under legal
obligation to him for the payment of money of which death may
delay/prevent the performance thereof.
2. Hence, there is no contract of indemnity.
Perfection of contract of insurance
1. Offer and acceptance/consensuality
1. Consensuality
1. An insurance contract is consensual, it is therefore perfected by mere
consent.
2. Cognition theory applies.
2. Delay in acceptance
1. Delay in acting on the application does not constitute acceptance
even though the insured has forwarded his first premium with his
application. [Perez v. CA, G.R. No. 112329 (2000)]
2. Hence, the contract is not perfected.
3. However, the supposed insurer can be liable for damages, in
3.
accordance with tort theory.
4. The insurance business is imbued with public interest, thus it is the
duty of the insurer to act with reasonable promptness in acting on
applications submitted to it. [Wallace v. Hartford Fire Insurance Co, 31
Idaho 48r, (1918)]
3. Delivery of policy
1. The delivery can be proof of the acceptance of the insurer of the offer
of the insured.
2. It is not, however, a pre-requisite of a valid contract of insurance.
2. Premium payment; Cash and carry Rule
1. An insurer is entitled to payment of the premium as soon as the thing
insured is exposed to the peril insured against. Notwithstanding any
agreement to the contrary, no policy or contract of insurance issued by an
insurance company is valid and binding unless and until the premium
thereof has been paid, except: (GACIE)
1. In the case of a life or an industrial life policy whenever the Grace
period provision applies,
2. An Acknowledgment in a policy or contract of insurance or the receipt
of premium is conclusive evidence of its payment, so far as to make
the policy binding, notwithstanding any stipulation therein that it shall
not be binding until the premium is actually paid;
3. Whenever under the broker and agency agreements with duly licensed
intermediaries, a ninety (90)-day Credit extension is given. No credit
extension to a duly licensed intermediary should exceed ninety (90)
days from date of issuance of the policy;
4. If the parties agreed to the payment in Installments of the premium
and partial payment has been made at the time of the loss; and
5. Using the principle of Estoppel, where an insurer consistently granted
a 60- to 90-day credit term for the payment of premiums despite in
full awareness of Section 77, and the insured had relief in good faith
on such practice. (UCPB v Masagana)
2. Authority of the agent to receive premium
1. Where an insurer authorizes an insurance agent or broker to deliver a
policy to the insured, it is deemed to have authorized said agent to
receive the premium in its behalf.
2. The insurer is bound by its agent’s acknowledgement of receipt of
payment of premium. [American Home Assurance Co. v. Chua, G.R.
No. 130421 (1999)]
3. Payment by post-dated check
1. It is NOT legal tender, so the contract of insurance is not binding until
the same is encashed.
2. If loss occurs before the check is encashed, the insurance was never
binding. “The notice of the availability of the check, by itself, does not
2.
produce the effect of payment of the premium. Trans-Pacific could
not be considered in delay in accepting the check because when it
informed petitioner that it will only be able to pick-up the check the
next day, petitioner did not protest to this, but instead allowed TransPacific to do so. Thus, at the time of loss, there was no payment of
premium yet to make the insurance policy effective.” (Gaisano v
Development Insurance, 2017)
3. Non-default options in life insurance
1. Already stated above.
4. Reinstatement of a lapsed policy of life insurance
1. Already stated above.
5. Refund of premiums
1. If the thing insured was never exposed to the risks insured against, the
whole premium should be refunded. [Sec. 80(a)]
2. Where the insurance is for a definite period and the insured surrenders his
policy, the portion of the premium that corresponds to the unexpired time
at a pro rata rate, unless a short period rate has been agreed upon and
appears on the face of the policy should be return. [Sec. 80(b)]
3. When the contract is voidable due to the fraud or misrepresentation of
insurer or his agent, the whole premium should be
refunded. [Sec. 82]
4. When by any default of the insured other than actual fraud, the insurer
never incurred any liability under the policy and the whole premium should
be refunded. [Sec. 82]
5. When the contract is voidable because of the existence of facts of which
the insured was ignorant without his fault, the whole premium should be
refunded. [Sec. 82]
6. When rescission is granted due to the insurer’s breach of contract.
7. When there is over-insurance by several insurers, the return premiums
should be proportioned to the amount by which the aggregate sum
insured in all the policies exceeds the insurable value of the thing at risk.
[Sec. 83]
Rescission of insurance contracts
1. Concealment
1. Already in the codal.
2. Misrepresentation/omission
1. Incontestability clause (life insurance; lifetime; 2 years)
1. After a policy of life insurance made payable on the death of the
insured
2. shall have been in force
3. during the lifetime of the insured (Tan v. CA, 1989)
4. for a period of two (2) years from the date of its issue or of its last
4.
reinstatement,
5. 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. (Sec. 48, IC)
2. Defenses NOT barred by the incontestability clause (VICE-PCP)
1. The fraud is of a particularly Vicious type
2. The person taking the insurance has no Insurable interest
3. The Conditions of the policy relating to military or naval service has
been violated
4. The cause of death of the insured is an Excepted risk
5. The Premiums have not been paid
6. The beneficiary failed to furnish proof of death or to comply with any
Condition imposed by the policy after the loss has happened
7. The action was not brought within the time specified or has
Prescribed.
3. Breach of warranties
1. Already in the codal.
4. Section 89 of the Insurance Code is clear. An insurer is not liable for a loss
caused by the willful act of the insured.
1. However, the insurer is not relieved from liability by the mere fact that the
loss was caused by the negligence of the insured, or of his agents or
others. Accordingly, it is no defense to an action on the policy that the
negligence of the insured caused or contributed to the injury. However,
when the insured's negligence is so gross that it is tantamount to
misconduct, or willful or wrongful act, the insurer is not liable. (UCPB
General Insurance Co., Inc. v. Asgard Corrugated Box Manufacturing
Corp., G.R. No. 244407, January 26, 2021)
Claims settlement and subrogation
1. Notice and proof of loss
2. Guideline on claims settlement
1. Unfair claims settlement; sanctions
1. Already in the codal.
2. Do not forget to read these
2. Prescription of action
1. General Rule:
1. It being based on a written contract, the action prescribes in ten
years. [Art. 1144, NCC]
2. Exception:
1. The parties may validly agree on a shorter period, provided it is
not less than one year from the time the cause of action accrues.
[Sec. 63]
2. In compulsory motor vehicle insurance, the action prescribes in
2.
one year from the denial of the claim. [Sec. 397]
3. When does the right of action accrue?
1. The cause of action in an insurance contract does not accrue
until the insured's claim is finally rejected by the insurer. This
is because before such final rejection, there is no real necessity
for bringing suit. [Eagle Star Insurance vs Chia Yu, G.R. No. L-5915
(1955)]
2. Hence, it is NOT at the time the loss actually occurs.
3. Subrogation
1. Subrogation is a process of legal substitution. The insurer, after
paying the amount covered by the insurance policy, steps into the
shoes of the insured and avails himself of the latter's rights that exist
against the wrongdoer at the time of loss.
2. The insurer becomes entitled to recover from the wrongdoer the
amount of the loss it may have paid to the insured.
3. Note: Subrogation applies only to property insurance and non-life
insurance.
4. Right of Subrogation
5. The insurance company shall be subrogated to the rights of the
insured against the wrongdoer or the person who has violated the
contact if:
1. The plaintiff’s property has been insured, and
2. The plaintiff has received indemnity from the insurance company
for the injury or loss arising out of the wrong or breach of contract
complained of. [Art. 2207, NCC]
6. Rights Transferred
1. A subrogee-insurer cannot succeed to a right not possessed by
the subrogor. A subrogee can recover only if the insured likewise
could have recovered. [Sulpicio Lines, Inc. v. First Lepanto-Taisho
Ins. Corp., G.R. No. 140349 (2005)]
7. Right to Recover Deficiency Not Subrogated
1. If the amount paid by the insurance company does not fully cover
the injury or loss, the aggrieved party shall be entitled to recover
the deficiency from the person causing the loss or injury. [Art.
2207, NCC]
2. The insured can no longer recover from the offended party what
was paid to him by the insurer, but he can recover any deficiency
if the damages suffered are more than what was paid. The
deficiency is not covered by the right of subrogation.
3. The insurer must present the policy as evidence to determine the
extent of its coverage. [Wallem Phil. Shipping v. Prudential
Guarantee, G.R. No. 152158 (2003)]
8. Where There is No Right of Subrogation
1. Where the insured by his own act releases the wrongdoer or third
party liable for the loss or damage;
2. Where the insurer pays the insured the value of the loss without
notifying the carrier who has in good faith settled the insured’s
claim for loss;
3. Where the insurer pays the insured for a loss or risk not covered
by the policy; [Pan Malayan Ins. Co. v. CA, G.R. No. 81026 (1990)]
4. In life insurance;
5. For recovery of loss in excess of insurance
coverage.
9. The right of subrogation is not dependent upon, nor does it grow out
of, any privity of contract or upon written assignment of claim. It
accrues simply upon payment of the insurance claim by the insurer.
[Pan Malayan Ins. Co v. CA, G.R. No. 81026 (1990)]
10. Should the insured, after receiving payment from the insurer, release
the wrongdoer who caused the loss, the insurer loses his rights
against the latter. But in such a case, the insurer will be entitled to
recover from the insured whatever it has paid to the latter, unless the
release was made with the consent of the insurer. [Manila Mahogany
v. CA G.R. No. L- 52756 (1987)]
3. Claims involving life insurance; Period to settle
1. For policies maturing upon the expiration of the term set forth
therein:
1. The proceeds of a life insurance policy shall be paid immediately upon
maturity of the policy, unless such proceeds are made payable in
installments or as an annuity, in which case the installments, or
annuities shall be paid as they become due.
2. For policies maturing at the death of the insured occurring prior to the
expiration of the term stipulated:
1. The proceeds thereof shall be paid within sixty (60) days after
presentation of the claim and filing of the proof of death of the
insured.
3. Refusal or failure to pay the claim within the time prescribed will entitle the
beneficiary to collect interest on the proceeds of the policy for the
duration of the delay at the rate of twice the ceiling prescribed by the
Monetary Board, unless such failure or refusal to pay is based on the
ground that the claim is fraudulent.
4. The proceeds of the policy maturing by the death of the insured payable
to the beneficiary shall include the discounted value of all premiums paid
in advance of their due dates but are not due and payable at maturity
(Sec. 248, IC).
Business of insurance; requirements
1. Already in the codal.
2. Do not forget to read these.
Insurance Commissioner and its powers
1. Already in the codal.
2. Concurrent jurisdiction (with regular civil courts) over cases where any single
claim does not exceed P5,000,000 involving liability arising from:
1. Insurance contract;
2. Contract of suretyship;
3. Reinsurance contract;
4. Membership certificate issued by members of mutual benefit association
[Sec. 439]
3. The power of the Commissioner does not cover the relationship between the
insurance company and its agents/brokers but is limited to adjudicating
claims and complaints filed by the insured against the insurance company.
(Sec. 439, IC)
1. Hence, for suits between the insurance company and the agent/broker,
the regular courts shall be the proper body.
4. Primary and exclusive jurisdiction over claims for benefits involving pre-need
plans where the amount of benefits does not exceed P100,000 (Sec. 55, RA
9829)
5. Do not forget to read these.
Reinsurance
Double Insurance
The insurance contracts involve
different insurable interests.
The insurance contracts involve the
same insurable interest.
The original insurer becomes the
insured in relation to the reinsurer.
The insurer remains the insurer in such
capacity.
The original insured has no interest in
reinsurance contract.
The insured under the first policy is a
party in interest in the other policy/ies.
The subject matter of insurance is the
original insurer’s risk.
The subject matter of insurance is the
property or thing of the insured.