1.

What are the instances wherein transfer of insurable interest would not suspend the
validity of the policy?
1. In life, health and accident insurance.(Sec. 20);
2. Change in interest in the thing insured after occurrence of an injury which results in a
loss. (Sec. 21);
3. Change in interest in one or more of several distinct things separately insured by one
policy.(Sec. 22);
4. Change of interest, by will or succession, on the death of the insured. (Sec. 23);
5. Transfer of interest by one of several partners, joint owners, or owners in common,
who are jointly insured, to others. (Sec. 24);
6. When a policy is so framed that it will inure to the benefit of whomsoever, during the
continuance of the risk, may become the owner of the interest insured. (Sec. 57);
7. When there is an express prohibition against alienation in the policy, in case of
alienation, the contract of insurance is not merely suspended but
2. Enumerate the instances wherein deviation is proper in Marine Insurance
a. Departure of vessel from the course of the sailing fixed by mercantile usage
b. Departure of vessel from the most natural, direct and advantageous route if not fixed
by mercantile usage
c. Unreasonable delay in pursuing voyage
d. Commencement of an entirely different voyage (Secs. 121-123)
3. Distinguish Perils of the sea from perils of the ship
PERILS OF THE SEA
Includes only those
casualties due to the:
1. unusual violence; or
2. extraordinary action of
wind and wave; or
3. Other extraordinary
causes connected with
navigation.

PERILS OF THE SHIP

A loss which in the ordinary
course of events, results from
the:
1. natural and inevitable action
of the sea
2. ordinary wear and tear of the
ship or
3. Negligent failure of the
ships owner to provide the
vessel with proper equipment to
convey the cargo under
ordinary

4. What is an all risk marine insurance policy?

All Risks Policy insurance against all causes of conceivable loss or damage, except: 1)
as otherwise excluded in the policy; or 2) due to fraud or intentional misconduct on the
part of the insured.
5. State the insurable interest of the following
1. Shipowner
a. Over the vessel to the extent of its value, except that if chartered, the insurance
is only up to the amount not recoverable from the charterer. (Sec. 100).
b. He also has an insurable interest on expected freightage. (Sec. 103).
c. No insurable interest if he will be compensated by charterer for the value of the
vessel, in case of loss.
2. Cargo owner
Over the cargo and expected profits (Sec. 105).
3. Charterer
Over the amount he is liable to the shipowner, if the ship is lost or damaged
during
4. Creditor/lender
Amount of the loan

6. Distinguish concealment in property insurance from marine insurance

MARINE INSURANCE

OTHER PROPERTY
INSURANCE
The information of the belief
The information or belief of a 3rd
or expectation of 3rd persons
party is not material and need not be
is material and must be
communicated unless it proceeds
communicated
form an agent of the insured whose
duty it is to give information
The concealment of any fact
Concealment of any material fact will
in relation to any of the
vitiate the entire contract, whether or
matters stated in Sec. 110 does not the loss results for the risk
not vitiate the entire contract
concealed.
but merely exonerates the
insurer from a risk resulting
from the fact concealed
7. Enumerate the implied warranties in marine insurance

IMPLIED WARRANTIES
1. Seaworthiness of the ship at the inception of the insurance (Sec. 113);
2. Against improper deviation (Sec. 123, 124, 125);
3. Against illegal venture;
4. Warranty of neutrality: the ship will carry the requisite documents of nationality or
neutrality of the ship or cargo where such nationality or neutrality is expressly warranted;
(Sec. 120)
5. Presence of insurable interest.
8. Enumerate the instances wherein there is deviation in Marin Insurance
a. Departure of vessel from the course of the sailing fixed by mercantile usage
b. Departure of vessel from the most natural, direct and advantageous route if not fixed
by mercantile usage
c. Unreasonable delay in pursuing voyage
d. Commencement of an entirely different voyage (Secs. 121-123)
9. Distinguish total actual and total constructive loss
Total:
a. Actual i. Total destruction;
ii. Irretrievable loss by sinking;
iii. Damage rendering the thing valueless; or
iv. Total deprivation of owner of possession of thing insured. (Sec. 130)
b. Constructive i. Actual loss of more than of the value of the object;
ii. Damage reducing value by more than of the value of the vessel and of cargo;
and
iii. Expense of transshipment exceed of value of cargo. (Sec. 131, in relation to
Sec. 139)
10. Distinguish general average from particular average
General
Has inured to the
common benefit and
profit of all persons
interested in the vessel
and cargo

Particular
Has not inured to the common
benefit and profit of all persons
interested in the vessel and her
cargo.

To be borne equally by
all of the interests
concerned in the venture.

To be borne alone by the owner

of the cargo or the vessel, as
the case may be.

Requisites for the right to claim contribution:

1. Common danger to the
vessel or cargo;
2. Part of the vessel or cargo was sacrificed deliberately;
3. Sacrifice must be for the common safety or for the benefit of all;
4. Sacrifice must be made by the master or upon his authority;
5. It must be not be caused by any fault of the party asking the contribution;
6. It must be successful, i.e. resulted in the saving of the vessel or cargo; and
Necessary.

11. Differentiate the bases of insurable interest in property insurance and casualty
insurance

12. What is No-fault clause?

A clause that allows the victim (injured person or heirs of the deceased) to an option to
file a claim for death or injury without the necessity of proving fault or negligence of any
kind.
13. What are the requirements that must be satisfied in order that a claim under a nofault clause may prosper?
1. Total indemnity - maximum of P5,000
2. Proofs of loss a. Police report of accident;
b. Death certificate and evidence sufficient to establish proper payee;
c. Medical report and evidence of medical or hospital disbursement.
3. Claim may be made against one motor vehicle only
4. Proper insurer from which to claim a. In case of an occupant: Insurer of the vehicle in which the occupant is riding,
mounting or dismounting from;
b. In any other case: Insurer of the directly offending vehicle. (Sec. 378)
14.Distinguish suretyship from property insurance.
SURETYSHIP
Accessory contract
3 parties: surety, obligor, oblige
Credit accommmodation

PROPERTY INSURANCE
Principal contract
2 parties: insurer, insured
Contract of indemnity

Surety can recover from the principal

Insurer has no such right; only right of

subrogation
Bond can be cancelled only with the consent of May be cancelled unilaterally either by insured
the oblige, commissioner, or court
or insurer on the grounds provided by law
Requires acceptance of oblige to be valid
No need of acceptance by any third party
Risk-shifting device; premium paid being in the Risk-distributing device; premium paid as a
nature of a service fee
ratable contribution to a common fund
15. Discuss in details the rule on insurance claims when the insured commits suicide.
Insurer is liable in the following cases:
1. If committed after two years from the date of the policy issue or its last
reinstatement;
2. If committed in state of insanity regardless of the date of commission
unless suicide is an excepted peril (Sec. 180-A); and
3. If committed after a shorter period provided in the policy.
NOTE: Any stipulation extending the two-year period is null and void.
16. Distinguish Double Insurance from Over Insurance.
DOUBLE INSURANCE
OVER INSURANCE
In double insurance, there may be no over- There is over-insurance when the amount
insurance as when the sum total of the
of the insurance is beyond the value of the
amounts of the policies issued does not
insureds insurable interest
exceed the insurable interest of the insured.
There are always several insurers
There may be only one insurer involved
THEREFORE, double insurance and over-insurance may exist at the same time or neither
may exist at all.
17. Discuss in details the rule on insurance claims when the insured dies at the hands
of the law.
*EXAMPLE: legal execution*
It is one of the risks assumed by the insurer under a life insurance policy in the
absence of a valid policy exception.
If the insured is sane, it obviates against recovery as being more in consonance
with public policy and as being implicit under section 87, ICP.

18. Discuss in details the rule on insurance claims when the insured is killed by the
beneficiary.
General Rule: The interest of the 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, in which event, the nearest
relative of the insured shall receive the proceeds of said insurance if not otherwise
disqualified (Section 12).
Exceptions:
1. Accidental killing;
2. Self-defense;
3. Insanity of the beneficiary at the time he killedthe insured.
NOTE: if the premiums paid came from conjugal funds, the proceeds are
considered conjugal. If the beneficiary is other than the insureds estate, the
source of premiums would not be relevant.
NOTE: The measure of indemnity on life or health insurance policy is the sum
dixed in the policy except when a creditor insures the life of his debtor.

19. What is Cash Surrender Value?

It is the amount the insured in case of default, after the payment of at least 3 full
annual premiums, is entitled to receive if he surrenders the policy and releases his claims
upon it.

20. What is Authorized Driver Clause?

A clause which aims to indemnify the insured owner against loss or damage to the
car but limits the use of the insured vehicle to the insured himself or any person
who drives on his order or with his permission. (Villacorta v. Insurance
Commissioner)
21. Enumerate the compulsory insurance coverage under the insurance code and
related laws
Compulsory Motor Vehicle Liability Insurance (Note: it is the only compulsory insurance
coverage under the insurance code)
-

A species of compulsory insurance that provides for protection coverage that will
answer for legal liability for losses and damages for bodily injuries or property
damage that may be sustained by another arising from the use and operation of motor
vehicle by its owner.

Method of coverage
1. Insurance Policy
2. Surety Bond
3. Cash Deposit

22. Define Seaworthiness in Marine Insurance

A relative term depending upon the nature of the ship, voyage, service and goods,
denoting in general a ships fitness to perform the service and to encounter the ordinary
perils of the voyage, contemplated by the parties to the policy. (Sec. 114)

23. What are the implied warranties in Marine Insurance?

1.
2.
3.
4.

Seaworthiness of the ship at the inception of the insurance (sec.113);

Against improper deviation (sec. 123, 124, 125);
Against illegal venture;
Warranty of neutrality: the ship will carry the requisite documents of nationality or
neutrality of the ship or cargo where such nationality or neutrality is expressly
warranted; (sec. 120)
5. Presence of insurable interest.

24. What are the matters embraced by the term doing an insurance business?
Doing an insurance business or transacting an insurance business shall include
(RISO)
a) 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;
b) making or proposing to make as an insurer, any Insurance contract;
c) making or proposing to make as a surety any contract of Suretyship as a
vocation and not as merely incidental to any other legitimate business of
the surety;
d) Others doing or proposing to do any business in substance equivalent to
any of the forgoing in a manner designed to evade any of the provisions of
this code.

25. Distinguish insurable interest in life insurance from insurable interest in

property as to definition, coverage, limitation or extent, as to the time it must exist
and as to rules with regard to beneficiary.
INSURABLE
INTEREST IN LIFE

INSURABLE
INTEREST IN
PROPERTY

DEFINITION
COVERAGE

LIMITATION/EXTEN
T
EXISTENCE

RULES AS TO
BENEFICIARY

Unlimited except in life Limited to actual value

insurance effected by
of interest in property
the creditor on life of
insured
the debtor

Must exist onlyt at the Must exist at the time

time the policy takes
the policy takes effect
effect and need not
and when the loss occurs
exist at the time of loss
The expectation
An expectation of
of benefit to be
the benefit to be
derived from
derived from the
the continued
continued
existence of life
existence of the
need not have
property insured
any legal basis
must have a legal
whatever. A
basis.
reasonable
The beneficiary
probability is
must have an
sufficient
insurable interest
without more.
over the thing
The beneficiary
insured.
need not have
an insurable
interest over the
life of the
insured if the
insured himself
secured the
policy. However
if the life
insured was
obtained by the
beneficiary, the
latter must have
insurable
interest over the
life of the
insured.

26.) Discuss concealment as regards definition and remedy given to injured party in case of
concealment.
Concealment A neglect to communicate that which a party knows and ought to communicate
(Sec. 26)
Requisites:
a. A party knows a fact which he neglects to communicate or disclose to the other.
b. Such party concealing is duty bound to disclose such fact to the other.
c. Such party concealing makes no warranty as to the fact concealed.
d. The other party has not the means of ascertaining the fact concealed.
e. Material
Remedy: Entitles insurer to rescind, even if the death or loss is due to a cause not related to the
concealed matter (Sec. 27)

27.) How is materiality determined in a regular insurance contract?

Test of Materiality: Determined not by the event, but solely by the probable and reasonable
influence of the facts upon the party to whom the communication is due, in forming his estimate
of the advantages of the proposed contract, or in making his inquiries (Sec. 31).

28.) Discuss incontestability clause as covered section 48 of the Insurance Code.

Incontestability Clause - Clause in life insurance policy that stipulates that the policy shall be
incontestable after a stated period.
Requisites:
Life insurance policy
Payable on the death of the insured
It has been in force during the lifetime of the insured for a period of at least two years
from the date of its issue or of its last reinstatement
Note: The period of 2 years may be shortened but it cannot be extended by stipulation.

29.) What are the defenses NOT barred by the Incontestability Clause
That the person taking the insurance lacked insurable interest as required by law;

 That the cause of the death of the insured is an excepted risk;

That the premiums have not been paid (Secs. 77, 227[b], 228[b], 230[b]);
That the conditions of the policy relating to military ornaval service have been violated
(Secs. 227[b],228[b]);
That the fraud is of a particularly vicious type;
That the beneficiary failed to furnish proof of death or to comply with any condition
imposed by the policy after the loss has happened; or
That the action was not brought within the time specified.

30.) PROBLEM

31.) Distinguish Cover Note with Binding Receipt.

Cover Note is a written memorandum of the most important terms of a preliminary contract of
property insurance, intended to give temporary protection pending the investigation of the risk by
the insurer or until the issuance of the policy.
On the other hand, a Binding Receipt is for life insurance. It is considered as a mere
acknowledgment on behalf of the insurance company that its branch office had received from
the applicant the insurance premium and had accepted the application subject to processing by
the head office.

32.) What are the instances wherein NON payment of policy would nevertheless make the
policy valid and binding?
In case of life or industrial life insurance, when the grace periods applies; (Sec. 77)
When the insurer makes a written acknowledgment of the receipt premium; (Sec. 78)

 If the parties have agreed to the payment of the premium in installments and partial
payment has been made at the time of the loss.
Where a credit term has been agreed upon.
Where the parties are barred by estoppel.

33.) PROBLEM

34.) What is cash and carry rule?

GENERAL RULE: No policy issued by an insurance company is valid and binding until actual
payment of premium. Any agreement to the contrary is void.

35.) When is an insured entitled to a return of premium?

ENTITLEMENT OF INSURED TO RETURN OF PREMIUMS PAID
A. Whole:
1. If the thing insured was never exposed to the risks insured against; (Sec. 79)
2. If contract is voidable due to the fraud or misrepresentation of insurer or his agents; (Sec. 81)
3. If contract is voidable because of the existence of facts of which the insured was ignorant
without his fault; (Sec. 81)
4. When by any default of the insured other than actual fraud, the insurer never incurred liability;
5. When rescission is granted due to the insurers breach of contract. (Sec. 74)
B. Pro rata:
1. When the insurance is for a definite period and the insured surrenders his policy before the
termination thereof;
Exceptions:
a. policy not made for a definite period of time
b. short period rate is agreed upon
c. life insurance policy

2. When there is over-insurance (Sec. 82);

36.) What are the effects of a designation of beneficiary as irrevocable?
Insured cannot:
Assign the policy
Take the cash surrender value of the policy
Allow his creditors to attach or execute on the policy;
Add new beneficiary; or
Change the irrevocable designation to revocable, even though the change is just and
reasonable.
37.) Distinguish double insurance from re-insurance.
In double insurance, the insurer remains as the insurer of the original insured. While in
reinsurance, the insurer becomes the insured, insofar as the reinsurer is concerned. As to subject
of Insurance Contract, the subject of double insurance is property, while in reinsurance; the
subject is the original insurers risk.
Moreover, in double insurance, the insured is the party in interest in all the contracts, while in
reinsurance, the original insured has no interest in the contract of reinsurance which is
independent of the original contract of insurance. Lastly, in double insurance, the insured has to
give his consent, while in reinsurance, the consent of the original insured is not necessary.
38.) PROBLEM

39. What are the rules that would govern issuance of Cover Notes?

The cover note shall be issued or renewed only upon prior approval of the insurance
commission
The cover note shall be valid and binding not more than 60 days from the date of its
issuance
The cover note may be cancelled by either party upon prior notice to the other of at least
7 days
The policy should be issued within 60 days after the issuance of the cover note and
The 60 day period may be extended upon written approval of the Insurance Commission

40. Distinguish each kind of policy

-

Open policy Value of thing insured is notagreed upon, but left to be ascertained attime
of loss;
Valued policy Definite valuation is agreedupon by both parties, and written on the
faceof the policy;
Running policy Contemplates successiveinsurances and which provides that thesubject
of the policy may from time to time bedefined

41. What are the grounds for cancellation of policy?

-

Prior notice of cancellation to insured;

Notice must be based on the occurrenceafter effective date of the policy of one ormore of
the grounds mentioned;
Notice must be in writing, mailed or deliveredto the insured at the address shown in
thepolicy; and
Notice must state the grounds relied uponand upon request of insured, to furnish factson
which cancellation is based.

42. What is an automatic increase clause?

-

This policy extends to cover amounts representing increase in value in excess of sum
insured up to 10% over the existing cover limit for each item it being understood that the
insured undertakes to advise such additions, within 60 days and to pay the additional
premium required from the date of inception thereof, and those upon this policy shall be
endorsed accordingly following endorsement of any additional amounts the provisions of
this clause are fully reinstated.

43. May a life insurance be covered by a running policy? Explain.

-

No, a running policy is intended for indemnity in property because of its frequent change
of location and quality. However it is considered valued policy since one cannot simply
measure the pecuniary loss that may suffered by the beneficiary.

44. What are the requirements for a foreign company to be allowed to do insurance
business in the Philippines?
-

Appointment of resident agent to serve notice, proof of loss and summons

Unimpaired paid-up capital of 1 Billion pesos
Deposit as security for policy holders and securities to satisfy the commission
Investments should not exceed 20% of its net worth or 20% of its capital
Certificate of authority

45. Who are the persons who cannot be named beneficiary?

-

Those made between persons who were guilty of adultery or concubinage at the time of
the donation
Those made between persons found guilty of the same criminal offense, in consideration
thereof
Those made to a public officer or his wife, descendants and ascendants, by reason of his
office

46. What are the effects of irrevocable designation of beneficiary?

-

Insured cannot:
o Assign the policy
o Take the cash surrender value of the policy
o Allow his creditors to attach or execute on the policy
o Add new beneficiary
o Change the irrevocable designation to revocable, even though the change is just
and reasonable

47. Distinguish insurable interest in life and in property

-

Insurable interest in life insurance

o Every person has an insurable interest in the life and health:
(a) Of himself, of his spouse and of his children;
(b) Of any person on whom he depends wholly or in part for education or
support, or in whom he has a pecuniary interest;
(c) Of any person under a legal obligation to him for the payment of
money, or respecting property or services, of which death or illness might
delay or prevent the performance; and
(d) Of any person upon whose life any estate or interest vested in him
depends.

Insurable interest in property insurance

o A person has an insurable interest in the property, if he derives pecuniary benefit
or advantage from its preservation or would suffer pecuniary loss by its prejudice.
o Hence, pecuniary interest over property is always necessary

o An insurable interest in property may consist in:

An existing interest;
An inchoate interest founded on an existing interest; or
An expectancy, coupled with an existing interest in that out of which the
expectancy arises.
48. Discuss the insurable interest of the mortgagee and mortgagor.
-

The mortgagors insurable interest

o Covers the full value of the mortgaged property, even though the mortgage debt is
equivalent to the full value of the property

The mortgagees insurable interest

o Is to the extent of the debt, since the property is relied upon as security thereof,
and in insuring he is not insuring the property but his interest or lien thereon

49. What is fire insurance?

-

It is a contract of indemnity bywhich the insurer for a consideration agrees toindemnify

the insured against loss of, or damageto, property by fire, but may include loss
bylightning, windstorm, tornado or earthquake andother allied risks, when such risks are
covered byextension to fire insurance policies or underseparate policies.

50. What is liability insurance?

-

Liability insurance (also known as casualty insurance) refers to coverage for injury to
another person or damage to a person's property for which you are legally responsible.
General liability is a standard element of most business owner's policies.