Insurance Syllabus and Personal

Notes
By: Atty. Minda C. Gapuz
Insurance Code
PD 1460, as amended
Special Law
Not Covered: New Civil Code, Family Code
Insurance Defined
Agreement to indemnify another against
loss, damage, or liability
Arising from an unknown or contingent
event
Examples: fortuitous events, natural
disasters, and negligent acts
Characteristics:
o Risk-distributing device
o Contract of Indemnity (Property
Insurance)
o Aleatory contract (cannot be based on
wagering)
o Contract of Adhesion (Fine-Print
Rule)
o Uberrima Fides Contract (utmost
good faith, disclosure of facts)
o Consensual Contract (related with
Cognition Theory)
Elements:
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o Consent, Object, Cause or

Consideration
o Premium
o Insurable Interest
o Risk of Loss
o Assumption of Risk
o Scheme to Distribute Loss
INSURANCE POLICY
Insurance Policy Defined (Title 6)
Written instrument (Section 49). A written
instrument w/c the contract of Insurance
set forth.
Terms and conditions are set forth therein
Parties: Insurer and Insured
o Note: Public enemies may not be
insured.
Need not be signed by the insured
o Exception: When express warranties
are contained in separate documents
but part of the policy
Kinds (Section 59):
o Open (Section 60)
Value of the thing insured is not
agreed upon, to be ascertained
in case of loss
o Valued (Section 61)

Value of the thing insured is

expressed on the face of the
agreement
o Running (Section 62)
Contemplates successive
insurances
Object of the policy may be
redefined from time to time by
additional statements or
indorsements
Types:
o Life Insurance (Group, Industrial Life,
Endowment)
o Non-life Insurance (Marine, Fire,
Accident, Medical, Health)
o Suretyship/Surety bond (Contract
with an Indemnity Agreement)

Transfer of the Policy

Life Insurance
o May be transferred even without the
consent of the insurer
Property Insurance
o May not be transferred unless
consent of the insurer is obtained.
o Policy is suspended until the
subsequent owner becomes the
owner of both the policy and the thing
insured (Section 58).
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Parties to a Policy
Insurer
o The party that agrees to indemnify in
case of loss, damage, or liability
o Certificate of Authority from the
Insurance Commissioner required to
engage in the business
Insured
o The party to be indemnified/indemnify
in case of loss, damage, or liability
o Must not be a public enemy (Section
7)
Public Enemy: citizens and
corporations of a nation with
whom Philippines is at war
o General Rule: Insured may designate
anyone to be the beneficiary as long
as he has insurable interest on them.
Exception (NCC Art. 739 &
2012):
Persons guilty of adultery
or concubinage
Persons guilty of the same
crime, in the
consideration of thereof
Given to a public officer,
his wife, descendants and
ascendants, by reason of
his office

Conviction is not a
condition precedent
(Insular Life v. Ebrado)
Exception to the exception:
The designation of an
adulterous child as a
beneficiary is allowed.

Beneficiary
o The party who stands to be benefited
by the policy
o May not be a party to the policy
o Either revocable or irrevocable
o Note: A life insurance may be taken
out and be made payable to
whomsoever regardless of the
beneficiarys lack of insurable
interest.

Transfer of Policy
Life Insurance: may be transferred even
without the consent of the insurer
o Section 11: The insured shall have the
right to change the beneficiary he
designated in the policy, unless he has
expressly waived this right in the said
policy.
Property Insurance: may not be transferred
unless there is consent from the insurer
o Section 58: The mere transfer of a
thing insured does not transfer the
policy, but suspends it until the same
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person becomes the owner of both

the policy and the thing insured.

INSURABLE INTEREST
Insurable Interest Defined
The relation, connection, and concern in a
person or property that the insured will
derive pecuniary benefit or advantage from
its preservation and suffer pecuniary loss or
damage from its destruction, injury, or
death by the happening of an event insured
against.
In short, an interest to benefit from his or
its existence.
Insurable Interest: Life Insurance
Insurable Interest must only exist at the
perfection of the contract.
o Exception: Debtor insured and heirs
(?)
Every person has insurable interest on the
life and health of (Section 10):
o Himself, spouse, and children
o Person in whom he depends for
(wholly or partially) education or
support
o Person in whom he has pecuniary
interest

o Person who has a legal obligation for

the payment of money, property, or
services
o Person upon whose life any estate or
interest vested in him depends
Insurable Interest: Property Insurance
Types of Insurable Interests
o Existing Interest
Examples: Owner, lessee, or
mortgagee
o Inchoate Interest
Example: Stockholder
o Expectancy + Existing Interest
Example: Farmer, contractor
Must exist only at the time of perfection of
the insurance contract and when the loss
occurs
o Need not exist in the meantime
(Section 19)
Restrictions:
o A mere contingent or expectant
interest may not be insured due to a
lack of an insurable interest.
o A former creditor may not insure a
property of a former debtor.
o An offspring may not insure a
property of a parent.
Note: Mortgagees-Mortgagors and LesseesLessors have separate insurable interests.
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Hence, both parties may insure the

property separately.
CONCEALMENT (TITLE 4)
Concealment Defined
A neglect to communicate that which a
party knows and ought to communicate
(Section 26)
Entitles the injured party to rescind a
contract of insurance (Section 27)
Insured need not die of disease concealed
to make the insurer liable.
o Exception: Marine Insurance; one of
the following must be proximate
cause of the loss or the seizure of the
vessel or its cargo: Refer to Art. 110
National characteristic of the
vessel
Seizure from breach of foreign
laws
Want of necessary documents
Use of false or simulated
documents
No concealment in the following (Section
30):
o Those which the other knows
o Those which the other ought to know
o Those not material and risks excluded
by a warranty (example: warranty of
seaworthiness)
o Those risks exempted in the policy

Life

o Those which are based on opinion or

speculation
Insurance (Incontestability Clause)
If the insured died within 2 years from the
beginning of the beginning of the contract
or reinstatement and the concealment was
discovered within the said 2-year period:
o The insurer can rescind the contract.
If the concealment was discovered before
the death of the insured:
o The insurer can cancel the policy and
return the premium.
Section 48 (Par 2):
o If in the life insurance policy is made
payable on the death of the insured is
in force during the lifetime of the
insured
o For a period of at least 2 years from
the date of its issue/contract or from
the date of the reinstatement
o The insurer cannot prove that the
policy is void ab initio or is
rescindable by reason of fraudulent
concealment or misrepresentation of
the insured if insurance contract was
enforced for more than 2 years
o Exceptions for not applying the
incontestability clause despite the
lapse of the 2-year period :
Non-payment of premium
No insurable interest
No proof of death
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Cause of death was expected

Fraud

Healthcare or Medical Insurance

A type of a casuality or a non-life insurance
In case of concealment, insurer cannot
rescind:
o The fact of concealment may only be
used as an affirmative defense to be
established by the insurer.
If concealment is one of the exclusion
included in the insurance contract:
o The insurer may refuse to pay
because he is not liable because of
the said exclusion clause included in
the contract of insurance.
The Incontestability Clause (Section 48,
Par. 2) does not apply on non-life or
casuality insurance.
SC Ruling: Insofar as healthcare or medical
insurance is concerned, the rule on
concealment also applies as a defense of
the insurer provided the matter concealed
is not excepted or excluded in the
insurance contract.
PREMIUM (TITLE 8)
Premium Defined
The consideration paid to the insurer for
undertaking to indemnify the insured
against a specified peril.

Cash/Carry Provision:
o The insurance contract is not valid
unless and until the premium is paid
Exceptions:
If there is an
acknowledgement receipt
from the premium
although premium has not
yet been paid (Section
78).
If a grace period provision
applies in case of life and
industrial life polices.
If partial payment of the
premium was accepted
and the loss occurred
before the full payment of
the premium.
If the premium is payable
on installment or term
payment basis even if the
loss occurred before the
full payment of the
premium
If an insurance agent has
already received the
premium but failed to
remit it to the head office.
If the insurer sent a
Notice of Non-Renewal
but the said notice was
not received by the
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insured who paid the

premium before the loss
occurred.
The premium may be returned in the
following instances:
o If the thing insured is not exposed to
the risks insured against (Section 79)
o If the contract is voidable due to
fraud or misrepresentation of the
insurer or his agent (Section 81)
o If the contract is voidable due to
facts, the existence of which the
insured was ignorant without his fault
(Section 81)
o If the insured defaulted (cannot
amount to fraud), the insurer never
incurred any liability
o If there is a case of over-insurance
(pro rata sharing of the excess
premium)
o If rescission is granted (?)

FIRE INSURANCE
Fire Insurance Defined
Insurance against loss or damage caused by
fire
o May also cover other risks covered by
an extension on the insurance
contract:
Lighting
Windstorm

Tornado
Earthquake
Other allied risks
The insurer is liable if the proximate cause
of the loss is caused by fire or other allied
risks except:
o If the direct cause of the loss is a
expected peril (example: gas
explosion)
It is not necessary that the property was
directly damaged by fire as long as the loss
was a consequence of the fire.
o Examples:
Smoke and water damage when
the firemen were trying to put
out the fire
Collapse of a building damaging
other property
Damage caused by efforts to
rescue or remove people and
property
Theft after a blaze
Friendly Fire v. Hostile Fire
o Friendly Fire
A type of fire that burns in a
place where it is supposed to
burn.
Examples: gas stove, fire
place
o Hostile Fire
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A type of fire that escapes and

burns in a place where it is not
suppose to burn.
The insurer is liable for the loss
or damage.

MARINE INSURANCE
Coverage of Marine Insurance (Section 99)
Risks connected with navigation to which a
ship, cargo, freightage, profits or other
insurable interests maybe exposed to peril
during the duration of a voyage OR a fixed
time period.
Insurer is liable for loss or damage
occasioned by perils of the sea, NOT for
perils of the ship (Implied Warranty of
Seaworthiness):
o Warranty of Seaworthiness: that the
ship is reasonably fit to perform the
service and to encounter ORDINARY
perils of the voyage
o Perils of the Sea: unusual violence or
extraordinary perils of navigation
o Perils of the Ship: losses from
ordinary and natural action of the
sea, wear and tear of the ship
General Rule: Risks insured against are
against the perils o the sea
o Exception: All-Risk Policy: all risks
are covered

AVERAGE, ACTUAL, & CONSTRUCTIVE

LOSSES
General Average Loss
Damages and expenses to save the vessel
and its cargo from a real or a known risk
o Examples:
Jettison
Proper Deviation
Arrival under Stress
Definition of Deviation
o Departure of the vessel from the
course of the voyage.
o Proper when:
Due to circumstances beyond
the control of the captain
Done to comply with a warranty
Done in good faith to avoid peril
Done to save lives or another
distressed vessel
Insurer cannot deny claim if the deviation is
proper which inured to the common benefit
of all
Insurer of the vessel or the cargo saved is
liable for the general contribution of the
owners
Particular Average Loss
Expenses incurred which have not inured to
the common benefit of all
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Actual Loss (Section 130)

Total destruction of the thing insured
Irretrievable loss of the thing by sinking Or
by being broken up
Damage to the thing which renders it
valueless for the purpose for which it was
held
Event which deprives the owner of the
possession, at the port of destination, of the
thing insured
Constructive Total Loss (Section 139)
Loss of more than:
o 75% of the value actually lost or
would have to be expended to recover
it; OR
o 75% reduction in value due to
damage; OR
o 75% of the value of the thing
abandoned would need to be
expended to perform the obligation

To avail of Constructive Total Loss:

o Owner should give a Notice of
Abandonment to the insurer
o Insurer may deny the said notice
o Remedy of the Insured: File a claim
for partial or actual loss

MOTOR VEHICLE INSURANCE

Motor Vehicle Liability Insurance

Contract of insurance against liability for
death, bodily injuries of passengers, OR 3rdparty liability for death or injury arising
from motor vehicle accidents
Compulsory Third-party Liability Insurance
Purpose: immediate financial assistance to
victims of motor vehicle accidents or their
dependents
No Fault Indemnity Clause (Section 378):
o Injured party is given the option to
file a claim for death or injury arising
from motor vehicle accidents
WITHOUT proving fault or negligence
provided the following:
Police repot of the accident,
AND
Death Certificate and evidence
sufficient to establish the payee;
OR
Medical Report t and Hospital
Disbursement
o Total indemnity should not exceed
P5000
Claim shall be made against the insurer of
the vehicle in which the occupant was
riding; in the absence of such, insurer of
the directly offending vehicle
TIME TO FILE & PROCESS CLAIM UNDER
CTPL:
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1. Insurer has 30 days after receipt of

Proof of loss/damage to ascertain
loss/damage.

If ascertainment not made w/in 60 days

from the receipt of evidence/proof :
-Insurer should be liable w/in 90 days,
OTHERWISE, double interest applies

2. File Notice of claim

includes Certificate of Doctor- w/in 6
moths from the date of accident, IF NOT
PAID in #1
3. Prescriptive period
Action be filed in court of INSURANCE
COMMISSIONER w/in 1 year from the
denial of the claim.
Motion for Reconsideration filed by
Insured- does not suspend the
prescriptive period of 1-year from denial
of claim
4. If theres agreement or ascertainment
of loss
Payment w/in 5 days; OTHERWISE,
DOUBLE INTEREST RULE applies
5. If no agreement:
Insurer shall pay NO FAULT
INDEMNITY w/o prejudice to pursue
the claim further

OTHER MATTERS:
SUBROGATION

General Rule: Insurer has automatic

right of Subrogation to recover from
party at fault

OVER-INSURANCE

Same property/ insurable interest for

greater value.

DOUBLE INSURANCE
2 or more insurers/same property
REINSURANCE
By the original insurer to insure its
liability
BOLDERAUX
Bk where Insurer enters its assumed
risks
POWERS OF INSURANCE COMMISSIONER:
Adjudicatory or Quasi-judicial
INSURANCE COMMISSIONER has
CONCURRENT JURISDICTION w/ RTC for
claims:
Below 100K (INSURANCE
COMMISSIONER)
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Over 100K (RTC)

PRE-NEED PLANS CLAIMS- Insurance

Commissioner