INSURANCE REVIEWER (ATTY.

DELA CERNA OUTLINE)

I. Introduction a. Definition (Blacks Law) A contract whereby, for a stipulated consideration, one part undertakes to compensate the other for loss on a specified subject by specified perils. A contract whereby one undertakes to indemnify another against loss, damage, or liability arising from an unknown or contingent event and is applicable only to some contingency or act to occur in the future. An agreement by which one party for a consideration promises to pay money or its equivalent or to do an act valuable to the other party upon destruction, loss, or injury of something in which the other party has an interest. b. Obligation and Contract Definition of a contract: Art. 1305. A contract is a meeting of minds between
two persons whereby one binds himself, with respect to the other, to give something or to render some service.

a.

Article 1181: In conditional obligations,

the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition.

Types: (1) SUSPENSIVE CONDITION the happening of which will give rise to the acquisition of right. The obligatory force is subordinated to the happening of a future or uncertain event. (2) RESOLUTORY CONDITION rights already acquired are lost once the condition is fulfilled. Guaranty and Suretyship 1. Guaranty - Art. 2047: By guaranty a person,
called the guarantor, binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so.

b.

2.

3.

Elements of a Contract 1. Consent - manifested by the meeting of the certain/definite offer & the absolute acceptance upon the thing & cause w/c constitute the contract; (requisites: plurality of subjects, capacity, intelligence and free will, manifestation of intent of the parties, cognition by the other party, conformity of the manifestation & cognition) 2. Object - the prestation. it is always a conduct w/c is to be observed; [requisites: within the commerce of man (already existing or in potency); not contrary to law, morals, good customs, public order, or public policy; possible legally/physically; determinate/determinable (determinate as to its kind; need not be individualized); transmissible] 3. Cause - the immediate/proximate cause why the parties enter into the contract; [requisites: must exist at the time the contract is entered into, must be true/real, and licit/lawful)] Pure and conditional obligations 1. Pure obligations a. Article 1179: Every obligation whose
performance does not depend upon a future or uncertain event, or upon a past event unknown to the parties, is demandable at once.

If a person binds himself solidarily with the principal debtor xxx. In such case the contract is called a suretyship. Suretyship - shall be deemed to be an insurance contract under the Insurance Code when made by a surety who or which, as such, is doing an insurance business.

2.

b. Definition: One without a condition or a term. It is demandable at once provided there in no absurdity. Conditional Obligations

c. History Mutual Insurance concept of extending aid to a member of a group when that member is in crisis, from a pool of contributions. Early maritime or marine insurance 1. Vance 2. Aboitiz Shipping v. New India Assurance 1 3. Manila Steamship v. Insa Abdulhaman 2 Development of Insurance Law in the Philippines 1. Sources of Insurance law in the Philippines a. Code of Commerce and Old Civil Code (Spanish Period) b. Act No. 2427, Insurance Act of 1915 (American Regime) repealed all insurance provisions in the Code of Commerce c. RA 386, 1950 Civil Code repealed all insurance provisions in the Old Civil Code d. Some Civil Code provisions on life annuities, donations, damages, subrogation, guarantees and sureties, restitution, other frauds, etc, and all provisions regarding contracts which apply subsidiarily e. Special Laws (GSIS, SSS, PDIC, etc.) Note: the Insurance Code governs PRIMARILY but for matters in question where the Code is silent, the contract provisions of the New Civil Code and other relevant special laws kick in. 1. Gercio v. Sunlife Assurance 3 2. Ang Giok Chip v. Springfield 4 3. Philippine Health Care Products v. CIR 5

4. Musngi v. West Coast Life Insurance 6 Review: 1. Statute of Frauds Art. 1403. The following contracts

are unenforceable, unless they are ratified: (1) Those entered into in the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers; (2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreement hereafter made shall be unenforceable by action, unless the same, or some note or memorandum, thereof, be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents: (a) An agreement that by its terms is not to be performed within a year from the making thereof; (b) A special promise to answer for the debt, default, or miscarriage of another; (c) An agreement made in consideration of marriage, other than a mutual promise to marry; (d) An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer accept and receive part of such goods and chattels, or the evidences, or some of them, of such things in action or pay at the time some part of the purchase money; but when a sale is made by auction and entry is made by the auctioneer in his sales book, at the time of the sale, of the amount and kind of property sold, terms of sale, price, names of the purchasers and person on whose account the sale is made, it is a sufficient memorandum; (e) An agreement of the leasing for a longer period than one year, or for the sale of real property or of an interest therein; (f) A representation as to the credit of a third person. (3) Those where both parties are incapable of giving consent to a contract.

A contract whereby one party called the insurer undertakes for a consideration to pay another party called the insured or his beneficiary, upon the happening of the peril insured against, whereby the arty insured or his beneficiary suffers loss or damage or is exposed to liability. Contract of Suretyship shall be deemed to be an insurance contract under the Insurance Code when made by a surety who or which, as such, is doing an insurance business. (Suretyship under the NCC: an agreement whereby one binds himself solidarily with the principal debtor) Doing an Insurance Business Sec 2 (2) IC
The term "doing an insurance business" or "transacting an insurance business", within the meaning of this Code, shall include: (a) making or proposing to make, as insurer, any insurance contract; (b) making or proposing to make, as surety, any contract of suretyship as a vocation and not as merely incidental to any other legitimate business or activity of the surety; (c) doing any kind of business, including a reinsurance business, specifically recognized as constituting the doing of an insurance business within the meaning of this Code; (d) doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this Code. In the application of the provisions of this Code the fact that no profit is derived from the making of insurance contracts, agreements or transactions or that no separate or direct consideration is received therefore, shall not be deemed conclusive to show that the making thereof does not constitute the doing or transacting of an insurance business.

b.

Elements Subject matter insurable interest, the thing insured Consideration based on probability of loss and extent of liability; premium payments Sec. 77: 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 in the case of a life or an industrial life policy whenever the grace period provision applies.

2.

Statute of Limitations
Art. 1106: By prescription, one acquires ownership and other real rights through the lapse of time in the manner and under the conditions laid down by law. In the same way, rights and conditions are lost by prescription.

1. Sun Insurance v. CA 7 II. The Contract of Insurance, in general a. Concepts defined Contract of Insurance 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 of Insurance Code).

Object and purpose transfer and distribution of risk of loss, damage or liability / risk-distributing scheme, assumption of risk o Subrogation