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CONTRACTS OF INSURANCE - risks involved in its use, or

- the insured's risk of loss or liability,
WHAT MAY BE INSURED - that he may suffer loss or be compelled to indemnify
for the loss suffered by a third person.

Requisites of a contract of insurance Casualty insurance includes :

(1) A subject matter in which the insured has an insurable
interest
(2) Event or peril insured against which may be any (future)
contingent or unknown event, past or future (Sec. 3.), and a
duration for the risk thereof
1. personal accident and
2. health insurance
- as written by non-life insurance companies and
- all insurance against loss or liability
- which is not within the scope of the other types of
insurance, namely, fire, marine, suretyship and life.

(3) A promise to pay or indemnify in a fixed or ascertainable

amount Event or peril insured against

(4) A consideration for the promise, known as the / / premium, Under Section 3 (par. 1.), the contingency or unknown event
, must be such that its happening will
and
(1) damnify or cause loss to a person having an insurable
(5) A meeting of minds of the parties upon all the foregoing interest or
essentials, Of course, the parties must be competent to enter
into the (2) create a liability against him. The unknown event may be
Contract past or future,

In a contract of insurance, the insurer is liable for a

Under Section 226, it is provided that "no policy of insurance
shall be issued or delivered within the Philippines unless in
the
form previously approved by the Insurance
Commissioner/7 Of
course, the contract must not be for a purpose contrary to law
or
public policy.
Subject matter of contract of insurance.
(1) In general — Anything that has an appreciable
pecuniary value,
a. which is subject to loss or deterioration or
b. of which one may be deprived so that his
pecuniary interest is
c. or may be prejudiced
(2) Property insurance. —The property covered by a
policy
a. is regarded the subject matter of the
insurance,
b. but it is apparent that in the last analysis,
c. it is the risk of loss of such property that is
primarily involved,
(3) Life, health, and accident insurance. — While it is
true that in life, health, or accident insurance the
person becomes the subject of insurance, the matter
is generally viewed as one in reference to the insured
as a party to the contract.
(4) Casualty insurance. — In insurance (not falling within the
scope of the other types of insurance) against perils which
may affect the person and/or property of the insured and give
rise to liability on his part to pay damages to others, the
subject matter
is the
fortuitous event if it is the event or peril insured against and
is the proximate cause of the loss,
EXAMPLES:
(1) Y's vessels left for a voyage on June 15 from Manila to
San Francisco, U.SA. Y insured said vessel against the perils
of the sea (see Sec. 99.) "lost or not lost" on June 19 with X
Insurance Co. Without the knowledge of both parties, the
vessel had already sunk on June 18. Here, the sinking of the
vessel is a past event at the time the policy took effect.
The contract is valid and X Insurance Co. is liable because it
agreed to pay even though the vessel be already lost. An
insurance against an unknown past event is peculiar only to
marine insurance. In case of fire insurance, the fire must be a
future, not a past event.
(2) Y owns a car which he drives himself. If he injures
pedestrians or causes damage to property by the use of his car,
he thereby incurs liability. Now he may insure himself against
liability to third persons that may be created by this
contingent event, (see Sec. 174.) A clear example of this kind
of insurance is also seen in reinsurance, (see Sec. 95.) But if
the contract is to indemnify Y against actual loss or payment
to third persons, the insurance is one of indemnity merely and
not against liability.
Insurance by a married woman
A married woman may take out an insurance on her life or
that of her children without the consent of her husband, or
that of her husband, she having an insurable interest in the
latter, (see Sec. 10.)
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She may also take out insurance on her paraphernal or
separate property, or on property given to her by her
husband.
Insurance by a minor.
(1) Life, health, or accident insurance. —
a minor may enter into a valid contract of insurance provided
that:
(a) He is 18 years of age or over;
(b) The contract is for life, health, or accident insurance;
(c) The insurance is taken on his life; and
(d) The beneficiary (the person designated to receive the
proceeds of the insurance upon the happening of the event
insured against) is any of those enumerated by law.
(2) Other insurance. — A contract of insurance other than
life, health, or accident insurance, such as fire or marine
insurance, entered into by a minor is not entirely void.
a. It is one which is merely voidable, that is, it is
valid until annulled in a proper action in court
by the minor or his legal representative.
If the contract is not disaffirmed by the minor
- the insurer cannot escape liability by pleading minority as
a defense because "persons who are capable cannot allege the
incapacity of those with whom they contracted."
- But if the contract is fair and no fraud or undue influence
was practiced by the insurer, the minor cannot recover the
premiums paid, if he cannot return the benefits received
The result is that an insurance company contracting with a
minor is bound by the contract; the minor ordinarily is not.
Ownership of life insurance policy
(1) Interest of person who insured his own life.
— Ownership of a modem life insurance policy is
divided between the insured and the beneficiary
a. the insured being the owner of its various
marketing and sales features,
b. such as the loan and cash surrender values,
c. and the beneficiary being the owner of a
promise to pay the proceeds at the death of
the insured subject to the insured's right of
revocation
One who takes a policy of insurance on his own life
becomes, in so doing, a party to the contract, - even though
the benefits of the insurance are to accrue to someone else
known as beneficiary.
Such contract remains his, at least, in part, and may be
maintained by suit, if necessary, for the protection of those in
whose favor it is made.
(2) Interest of beneficiary. —
a. In general, the nature of the interest of the
beneficiary depends on the terms of the
insurance contract,
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b. Including the existing statutes by which the
insurer and its policyholders are bound.
c. Under our Code, the married woman or the
minor allowed to take out an insurance
policy may exercise all the rights and
privileges of an owner, as insured and/or
beneficiary.
(3) Transfer of rights to minor insured upon death of
original owner of policy. —
a. Upon the death of the original owner of a
policy of insurance taken out by him on the
life or health of a minor,
b. all rights, title and interest in the policy
shall automatically vest in
the minor unless otherwise provided for in the policy. (Sec. 3,
par. 5.) This contemplates a case where X took a life
insurance on the life or health of his son Y, a minor,
appointing himself (X) as beneficiary, and later X died. Sec.
4.
The preceding section does not authorize an insurance for or
against the drawing of any lottery, or for or against any
chance or ticket in a lottery drawing a prize.
Concept of lottery
Lottery - extends to all schemes for the distribution of prizes
by chance, such as:
1. policy playing,
2. gift exhibition,
3. prize concerts,
4. raffles at fairs, etc.,
5. and various forms of gambling.
The three essential elements of lottery are:
(1) consideration;
(2) prizes; and
(3) chance.
There is consideration of price paid if it appears that the prizes
offered by whatever name they may be called came out of the
fund raised by the sale of chances among the participants in
order to win the prizes.
- Conversely, if the prizes do not come out of the fund
or contributions by the participants, no consideration
has been paid and consequently, there is no lottery.
Thus, there is no lottery where a company, to promote the
sale of certain products, resorts to a scheme which envisions
the giving away for free of certain prizes for the purchase
of said products
- for the participants are not required to pay more than the
usual price of the products.
- Under the scheme, prizes can be obtained without any
additional consideration.
It can be clearly seen from the language of Section 4 that a
sweepstake holder cannot insure himself against the
failure of his ticket to win a prize because even if he were
not to win,
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- it cannot be said that he suffered a "loss" of the interest in the subject
prize. of insurance
- In other words, the failure to win a prize would not
damnify or create a liability against him.

Contract of insurance not a wagering contract

A contract of insurance is a contract of indemnity and is not
a wagering or gambling contract,
While it is based on a contingency, it is not a contract of
chance and is not used for profit.
The very purpose of insurance : is the reimbursement of
the holder of insurance for actual loss suffered from specified
risks.
The distinctions are the following:
Similarity between insurance and gambling
Insurance and gambling are similar in only one respect. In
both cases, one party promises to pay a given sum to the other
upon the occurrence of a given future event, the promise
being conditioned upon the payment of, or agreement to pay,
a stipulated amount by the other party to the contract.
This means that in either case, one party may receive more,
much more, than he paid or agreed to pay. At this point,
similarity ceases between gambling and insurance.

Gambling contracr Insurance Contract EXAMPLES:

parties contemplate parties seek to
gain through mere distribute possible loss (1) Ten members of a cycling team contributed P2,000.00
chance by reason of mischance each to a fund available for the use of any member injured
{i.e., occurrence of the while participating in the Tour of Luzon contest. This is
contingent event), insurance. Each member contributes to a common fund, out
of which he
gambler courts fortune the insured seeks to is reimbursed for losses he may suffer.
avoid misfortune
tends to increase the contract of insurance (2) Suppose, in the same example, the agreement was that the
inequality of fortune tends to equalize entire sum of P20,000.00 would be given to any team member
fortune who would win the most laps. This is a wager. Here, the
The essence of what one insured gains parties contemplate gain based upon uncertain events. Sec. 5.
gambling is this: is not at the expense of All kinds of insurance are subject to the provisions of this
whatever one person another insured. chapter so far as the provisions can apply.
wins from a wager is
lost by the other Basically, it can be said Applicability of provisions of Chapter 1
wagering party that the entire group of
insureds provides The Contract of Insurance are also applicable to :
through the premiums
paid, 1. Marine Insurance,
2. Fire Insurance
- the funds 3. Casualty Insurance
which make 4. Suretyship
possible the 5. Life Insurance and
payment of all 6. To any other kind of insurance so far as said
claims; and provisions can apply.
7. Matters not expressly provided for in the Insurance
As soon as a party The purchase of Code and special laws on insurance are regulated by
makes a wager, he insurance does not the Civil Code.
creates a risk of loss to create a new
himself where no such and, therefore, non- So, an insurance contract under Republic Act No. 1161
risk existed previously existing risk of loss to (Social Security Act of 1954.), as amended,
the purchaser. Instead,
the only intelligent - shall be governed primarily by the said law and
reason for purchasing subsidiarily,
insurance is that - by Chapter 1 of the Insurance Code,
- and in the absence of applicable provisions in both
the purchaser faces an laws,
already existing risk of - the pertinent provisions of the Civil Code shall be
economic loss. applied.

One can insure only if

he has an insurable