University of San Jose Recoletos – School of Law
INSURANCE LAW OUTLINE
First Semester, SY 2018-2019 ● Judge Christine S. Muga-Abad
Part I
History
Applicable Laws – Presidential Decree No. 612, as Amended
by R.A. No. 10607
Important new provisions under R.A. 10607
Implementing Office – Sec. 430, ICP
Nature of Insurance
A. Concepts Defined
1. Contract of Insurance (Sec.2) – Case: Mayer Steel
Pipe vs Court of Appeals G.R. No. 124050 | 1997-
06-19 ;
2. Doing or Transacting an Insurance Business (Sec.2,
no.2) – Phil Health Care Providers vs Commissioner
of Internal Revenue, GR. No. 167330 (9/18/09)
3. Contract of Adhesion or Fine Print Rule – Eternal
Garden Memorial vs. Phil American Life Insurance
GR No. 166245 (4/9/08); Western Guaranty
Corporation vs CA 187SCRA652
4. Parties in Insurance Contract - Insurer and Insured
(Sec.6), beneficiary (Arts. 739 & 2012 of the NCC).
Case: Great Pacific Life vs CA, 316 SCRA 677;
5. Interpretation of Insurance Contracts – Case: Rizal
Surety vs CA, 336 SCRA 12 (2000); American Home
Assurance vs Tantuco GR. NO. 138941, 8 October
2001; Pan Malayan Insurance vs CA, GR No. 81026
(4/3/90)
B. Characteristics of Insurance Contract
1. Aleatory Insurance- Malayan Insurance vs Arnaldo
& Pinca, GR. No. L-67835 (10/12/87). Article 2010
NCC
2. Contract is considered a risk-distributing device –
Tibay vs CA GR No. 119655 (5/24/95)
3. Uberrima Fides (perfect good faith) - Fieldman’s
Insurance vs CA GR No. L-24833 (9/23/68)
4. Contract of Indemnity- White Gold Marine vs
Pioneer Insurance GR. 154514 (7/28/05)
5. Personal Contract – Insular Life vs Ebrado G.R. No.
L-44059 (10/28/77)
C. Classes of insurance
a. Marine
b. Fire
c. Casualty
d. Suretyship
e. Life
f. Compulsory Motor Vehicle Liability Insurance
D. What may be insured against
1. A future contingent event resulting in loss or
damage
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2. A past unknown event resulting in loss or damage
3. Contingent liability
E. Parties to an insurance contract – Sec 6-9
1. The insurer – Sec. 6, ICP
2. The Insured
a. Public Enemy -Sec 7, ICP
b. Minors – R.A. 6809 (Age of majority is
18 years)
c. Married women – R.A. 6809
3. The Beneficiary
a. Beneficiary of one who insures his own life –
Insured may designate any person as his
beneficiary . Exception: Persons specified in
Article 739, NCC. Insular Life vs Ebrado, 80
SCRA 181 (1977).
b. Beneficiary of life insurance on the life of
another person – insured must have interest
on the life of the person whose life he is
insuring.
c. Beneficiary of property insurance
d. The designation is revocable unless the right to
revoke is expressly waived in the policy (Sec.11,
ICP)
e. Sec 64, Family Code – allows the innocent
spouse to revoke the designation of the other
spouse as irrevocable beneficiary after legal
separation.
f. Designation of illegitimate children – Heirs of
Loreto Maramag v. Maramag, GR No. 181132,
June 5,2009.
F. Insurable Interest – Sec. 13-14
1. Insurable interest defined- Gaisano Cagayan vs
Insurance Company of North America GR. No.
147839 (6/08/06)
2. Insurable interest in life/Health – Hilario Gercio vs
Sunlife GR No. 23703 (48 Phil 53)
3. Insurable Interest in Property (Sec. 13 & 14) –
Filipino Merchants Co. vs CA 179 SCRA 638.
4. Gen Rule: Sec 20. Effect of change of interest in
thing. Exceptions: Sec 21, 22,24 & 57.
5. Insurable Interest of mortgagor & mortgagee over
mortgaged property. Rizal Commercial Banking
Corp v. CA 289 SCRA 292 (1998).
G. Perfection of the Contract of Insurance
a. Offer and Acceptance/Consensuality
(1) Delay in acceptance - Virginia Perez vs BF
Lifeman Insurance GR No. 112329 (1/28/2000)
(2) Delivery of Policy
b. Premium Payment
 University of San Jose Recoletos – School of Law
INSURANCE LAW OUTLINE
First Semester, SY 2018-2019 ● Judge Christine S. Muga-Abad
c. Non-Default Options in Life Insurance –
i. Grace Period
ii. automatic loan policy
iii. application of dividend
iv. Reinstatement of a Lapsed Policy of Life
Insurance – Sec 227, ICP. Rufino Andres vs The
Crown Life Insurance G.R. No. L-l0874 January 28,
1958
Part II
DEVICES TO DELIMIT SUBJECT MATTER OF INSURANCE
a. Concealment – Sec. 26, ICP.
i. Test of Materiality: Sunlife Assurance vs
CA, 245 SCRA 268; Philamcare Health
Systems vs CA and Julita Trinos, GR No.
125678, March 18, 2002;
ii. Effects of Concealment – Sec. 27, ICP
iii. Cause of Loss
iv. Is good faith a defense in concealment?
v. Waiver & Estoppel – Edillon v. Manila
Bankers Life,117 SCRA 187 (1982).
b. Representation (sec.36-48) –
i. Kinds (Sec.39); affirmative , promissory
ii. Test of Materiality - Sec.31
iii. Effects of Misrepresentation
c. Warranties – Effect of Breach of warranty (sec.67-
76). Case: Perla Cia De Seguros Inc vs CA, 208 SCRA
487.
i. Kinds (Sec 67) – Express, Implied,
Affirmative, Promissory
ii. Effect of Breach of Warranty
iii. Immaterial Provisions – Sec.75,ICP
d. Condition
e. Exceptions Country Banker’s Insurance vs Lianga
Bay G.R. No. 136914, Jan. 25, 2002.
Part III
THE POLICY OF INSURANCE
A. Policy defined -Sec. 49 - 66
1. Form
2. Cover notes – Sec 52. case: Pacific Timber Export vs
CA, 112 SCRA 199
B. Contents of the policy - Sec. 51
C. Specific Code Provisions relating to policies –
i. Incontestability clause-Sec.48,ICP;Florendo v.
Philam Plans G.R. No186983, 22 Feb.2012)
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-Requisites
Defenses that are not Barred by Incontestability
Clause
ii. Rider - Sec.50
D. Unilateral Cancellation of Policy (sec. 64 65 and 79)
1. By the INSURER – case: Malayan Insurance CO. Inc.
vs Cruz Arnaldo, 154 SCRA 672
2. Only grounds for cancellation
3. Cancellation by the INSURED (sec.79)
4. Kinds of Policies – Open Policy (sec.60), Valued
Policy (sec.61) Running Policy (sec.62)
E. The Premium (Sec.77 Amended and 78 – Salary
deduction for govt employees ) – Cash and Carry
Provision
1. Effect of non-payment of premium – Case: Areola
vs CA, 236 SCRA 643
2. Effect of partial payment of premium – Case: Tibay
vs CA, 257 SCRA 126
3. Payment of premium by check – case: American
Home Assurance vs Chua, 309 SCRA 250
4. Payment of premium by installments – Case:
Mercantile Insurance vs Felipe Ysmael Jr; 169 SCRA
66; UCPB General Insurance vs Masagana Telamart
308 SCRA 259; UCPB Genera Insurance vs Masagana
Telamart, GR no. 137172, 4 April 2001. Sec 77 -
includes credit extension.
5. Effect of payments of premium through agent –
case: South Sea Surety vs CA 244 SCRA 744 (1995)
6. When the Insured is Entitled to Return of Premiums
Paid – Sec. 79, 81 & 82)
F. Period of Prescription (Sec.63, 384) - cases: Travellers
Insurance vs CA, 272 SCRA 536; Jacqueline Jimenez Vda.
De Gabriel vs CA, GR no. 103883, Nov. 4, 1996
Part IV
DOUBLE INSURANCE (Sec.95-96)
REINSURANCE (Sec. 97-100) – effects of double insurance
(Sec.94) case: Geagonia vs CA, 241 SCRA 152 (1995)
OVER INSURANCE
PART V
A. LOSS – Sec.85-89
a. Proximate Cause & Immediate Cause
b. Loss for which insurer liable – Sec. 87
c. Loss for which insurer not liable- Sec.89
B. Claims Settlement and Subrogation
a. Notice (Sec 88, ICP) and Proof of Loss (Sec 89, ICP)
 University of San Jose Recoletos – School of Law
INSURANCE LAW OUTLINE
First Semester, SY 2018-2019 ● Judge Christine S. Muga-Abad
b. Guidelines on Claims Settlement 8. Theft Clause- Perla Compania de Seguros vs. CA,
1) Life Insurance- Sec 242, ICP 208 SCRA 487 (1992).
2) Property Insurance – Sec 243, ICP
D. Life insurance
3) Effects of Delay of Insurer, Sec 244,ICP
1. Definition – Sec.181, ICP
4) When is Insurer liable to pay damages and
2. Kinds – Ordinary Life, Limited Payment,
Interest under Sec243-244 – Tio Kho Chio
Endowment, Term, Industrial Life
v. CA 202 SCRA119.
3. Effect of Death of Insured Through:
C. PERIOD OF prescription - Secs.63, 384, ICP
a. Suicide – Sec. 183, ICP
D. Right of SUBROGATION – Article 2207, NCC
b. Killing of insured by beneficiary
i. Cases when there is no right of Subrogation – Pan
Malayan Insurance Co. vs CA, 184 SCRA 54 E. Group Insurance
F. Microinsurance (Sections 187-188)
PART VI G. Insurance Companies, Organization, Capitalization and
Particular Insurance Authorization (Sections 190-199)
A. MARINE insurance (Sec.101)
1. Coverage of marine insurance
Reference:
2. Special marine insurance contracts
1. Codal, Commercial Laws of the Philippines vol. I
a. Insurance against all risks
2. De Leon, The Insurance code of the Philippines,
b. Inchamaree clause
Annotated, 11th edition
3. Insurable interest in marine insurance
3. Martin, Insurance law and other special laws, vol.
4. Concealment – Sec.109-112
11
5. Implied Warranties – Sec.115-122, ICP.
4. Sundiang & Aquino, Review on Commercial Law,
Philamgen vs CA, 273 SCRA 262 (1997)
2014
6. Voyage and Deviation – Sec 123-128
7. Loss – Actual Total Loss (Sec.130,ICP); Constructive
Total Loss (Sec.131, in relation to Sec.139);
Abandonment (Sec 138)
8. Perils of Sea vs Perils of the Ship
B. Fire Insurance (Sec. 169-175,ICP)
1. Definition
2. Alteration in use or in condition – Sec. 168
3. Measure of indemnity – Development Insurance
Corp v. IAC,143 SCRA 62
4. Other insurances
C. Casualty Insurance (Sec.176)
1. Definition – Sec.176
2. “Intentional” vs. “Accidental” as used in Insurance –
Pan Malayan Insurance Corp v. CA, 184 SCRA 54
3. Compulsory Motor Vehicle Liability- Sec. 386-399
a. Method of coverage
b. Vehicles covered
4. Non-fault clause – Sec. 378
i. Total Indemnity shall not exceed P15,000
(Insurance Memo Circular 4-2006)
ii. Proofs of Loss
5. Time to File & Process Claim Under CTPL – Sec.384
& 385. Vda de Gabriel vs. CA, 264 SCRA 137 (1996)
6. Applicability
7. Authorized Driver Clause – Villacorta v. I.C. 100
SCRA 467 (1980),

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