CHAPTER 5: THE POLICY Declarations.

Statements providing
information about the risk to be
 The policy insured and usually the basis for a
o The written instrument in which a contract decision regarding the issuance and
of insurance is set forth rating of the insurance (Circular
Letter No. 2015-15)
o Printed form  Binding Receipts
 The policy shall be in printed form which  Does not insure by itself
may contain blank spaces; and any word,  Merely conditional
phrase, clause, mark, sign, symbol,
signature, number, or word necessary to o Policy Form
complete the contract of insurance shall  Insurer generally free to provide for the
be written on the blank spaces provided terms and conditions of the policies that
therein. (Sec. 50, IC) it will issue, so long as provisions are not
contrary to law, morals, customs and
o On electronic forms public policy
 The policy may be in electronic form  Subject to approval of the Insurance
subject to the pertinent provisions of the Commission
Electronic Commerce act and to such  Insurance guidelines
rules and regulations as may be  Policy must not be inequitable,
prescribed by the commissioner unfairly discriminatory, misleading,
deceptive, obscure or that encourage
o Approval of the Insurance Commissioner misrepresentation
 No policy, certificate or contract of
insurance shall be issued or delivered  Basic Provisions
within the Philippines unless in the form o Terms of the contract constitute the
previously approved by the measure of the insurer’s liability and
Commissioner, and no application form compliance therewith is a condition
shall be used with, and no rider, clause, precedent to the insurer’s right of recovery
warranty or endorsement shall be from the insurer
attached to, printed or stamped upon
such policy, certificate or contract unless Sec. 51. A policy of insurance must specify: (PAPPIR
the form of such application, rider, P)
clause, warranty or endorsement has (a) The parties between whom the contract is
been approved by the Commissioner. made;
(Section 232, IC) (b) The amount to be insured except in the cases of
 Includes amendments to the standard open or running policies;
policy wordings that would require (c) The premium, or if the insurance is of a
approval as determined by the said body character where the exact premium is only
determinable upon the termination of the contract,
o Other Documents a statement of the basis and rates upon which the
 Application final premium is to be determined;
 The offer of the person who seeks to (d) The property or life insured;
procure and insurance policy. (e) The interest of the insured in property insured,
 Contains information and if he is not the absolute owner thereof;
declarations that may constitute (f) The risks insured against; and
representations of the applicant. (g) The period during which the insurance is to
continue.

o Classification of provisions
 Declarations
 Identify the insured, describe the
property, activity or life insured;
state the type of coverage purchased
 And the applicable policy limits and
term of the coverage
 Indicate the premium paid for each
separate coverage purchase
 Insuring Agreements
 Specify what the insurer promises to
do
 Characteristics of the events covered
under the contract
 Exclusions
 Limit the coverage provided under
the insuring agreements
 Conditions
 Define terms used in the other parts
of the contract
 Prescribe conditions that must be
complied before the insurer can be
made liable
 May describe the basis for computing
the premium
o Distinguished from Note
 Marine risk note. An
acknowledgement/declaration
confirming the specific shipment
covered by its marine open policy, the
evaluation of the cargo and the
chargeable premium. Such note is not
the policy itself.
o Non-waiver clause
 A clause stating that no change in the
policy is valid unless approved by an
executive officer of the insurer, or unless
that approval is endorsed on the policy,
attached to it, or both, and that no agent
has authority to change the policy or
waive any of its provisions
 Parties
o The parties who consent to perfect the
contract should necessarily be specified
o However, the person whose life is insured
need not be a party to the insurance contract
 Designation of Beneficiary
o Should be made in unequivocal terms
o The insurance proceeds shall be applied
exclusively to the proper interest of the
person in whose name or for whose benefit
it is made unless otherwise specified in the
policy. (Sec. 53
o Rules in designation
 Designation is not however invalid
despite absence of the specific name
 “Wife”. If without the specific name, the
second wife is the beneficiary in case the
first one dies
 “Children”. Include adopted children
and children by the wife designated as
beneficiary, and children of the previous
marriage. Also includes illegitimate
children.
 Note: Only children by the wife
designated as beneficiary is included
if the designation uses the terms “our
children” and “children of this
marriage”
 Estate. May be designated by expressly
providing
 “Mrs.” Merely descriptive. Considered
the beneficiary even if the person so
named is not married to the insured
 “Fiance”. Remains the beneficiary even if
the person so named is no longer the
fiancé of the insured.
 Amount insured
o Fixes the limit of the liability of the insurer
o May provide for different amounts of
compensation depending on the type/cause
of loss
o Amount may vary depending on whether or
not certain conditions are complied with
o Must be construed in such a way as to
preclude the insurer from invalidating its
obligations
o May also stipulate an automatic increase in
coverage under certain circumstances
 Premium
 o No policy or contract of insurance issued by
an insurance company is valid and binding
unless and until the premium thereof has
been paid (Sec. 77)
o General rule: Premium should be specified in
the policy
o XC: When the exact premium is
determinable upon termination of the
contract
o Amount of premium cannot be left to the
sole will of one of the parties
 Identification of the insured
o When the description of the insured in a
policy is so general that it may comprehend
any person or any class of persons, only he
who can show that it was intended to
include him, can claim the benefit of the
policy. (Sec. 56)
 Agents, trustees, co-owners and partners
o When an insurance contract is executed with
an agent or trustee as the insured, the fact
that his principal or beneficiary is the real
party in interest may be indicated by
describing the insured as agent or trustee, or
by other general words in the policy. (Sec. 54)
o To render an insurance effected by one
partner or part-owner, applicable to the
interest of his co-partners or other part-
owners, it is necessary that the terms of the
policy should be such as are applicable to the
joint or common interest. (Sec. 55)
 Identification of the property insured
o Ideally, the description of the property
insured should be so specific as to leave no
room to doubt its identity
o However, an erroneous description of the
property insured will not necessarily avoid
the policy if the intention of the parties can
be determined
 Risk insured against
o Any contingent or unknown event, whether
past or future, which may damnify a person
having an insurable interest, or create a
liability against him, may be insured against,
subject to the provisions of this chapter. (Sec.
3)
o Indispensable elements of risk
 The event that constitutes the risk must
be contingent or unknown
 The happening of the event will damnify
the insured or will create a liability
against the insure
 Must be within the scope of the
contractual definition
 The nature of the event
 The time of its occurrence
 Place of its occurrence
 The nature of the loss suffered
 Named perils/all risk policy
o Named Peril. If policy specifies the risk
insured against
o All risk. All risks of accidental nature
 Riders
o Modify provisions in the standard policies by
adding special provisions thereto
o Endorsement. A written document attached
to an insurance policy that modifies the
policy by changing the coverage afforded
under the policy (Circular Letter 2015-58-A)
o Rider. An endorsement to a life insurance
policy that modifies clauses and provisions
of the policy, including or excluding coverage.
o Any rider, clause, warranty or endorsement
purporting to be part of the contract of
insurance and which is pasted or attached to
said policy is not binding on the insured,
 UNLESS the descriptive title or name of
the rider, clause, warranty or
endorsement is also mentioned and
written on the blank spaces provided in
the policy.
o Unless applied for by the insured or owner,
any rider, clause, warranty or endorsement
issued after the original policy shall be
countersigned by the insured or owner,
which countersignature shall be taken as his
agreement to the contents of such rider,
clause, warranty or endorsement. (Sec. 50)

o Requisites
 The rider, clause, warranty or
endorsement is attached to the policy
 The descriptive title or name of the rider,
clause, warranty or endorsement is
mentioned and written on the blank
spaces provided for in the original
printed policy form
 If not applied for by the insured or owner,
the rider, clause, warranty of
endorsement shall be countersigned by
the insured,
 Contact of adhesion
o Insurance policies are contacts of adhesion
because only one party prepared the written
contact
o Equally binding as any other contract
o Reading of the policy
 Gen. Rule: Injured person may accept
policies without reading, and it is not
negligence per se
 Receipt of the policy by the insured
without objection binds both the
acceptor and insured to the terms
thereof
 Interpretation and proof
o When the words and language of documents
are clear and plain or understandable by an
ordinary reader thereof, there is absolutely
no room for interpretation anymore
o Any doubt should be resolved against the
insurer because Insurance Contract is a
contract of adhesion
o The interpretation of obscure words or
stipulations in a contract should not favor
the party who caused the obscurity
o Reasonable expectation doctrine
 The language of the insurance policy is
interpreted to give effect to the
reasonable expectation of the insured
 Provisions defining the coverage of the
policy shall be construed to provide the
widest possible coverage
 Exclusions are construed narrowly
against the insured
o Forfeiture clauses
 Construed more strongly against whom
they are intended to operate
o Other rules of interpretation
 The mention of one thing implies
exclusion of another thing
 Written words>Printed form stipulations
 Particular provision should not be
construed in isolation
o Indivisibility
 The peculiar character of the insurance
contract raises a strong presumption in
all cases that its terms are to be
construed as parts of an individual whole
 Depends on intent of the parties
 When the insurance contract covers
separate subjects in consideration of
separate premiums, the contract is
divisible and invalidity of one does not
affect the other
 XC: Indivisible when breach or
misrepresentation of one regarding one
subject affects the other subject
o Proof
 If the terms and conditions of the policy
are in question in a case, the party who
seeks to prove such terms must present
the policy during the trial and formally
offer it as evidence
 Even if the plaintiff is an insurance
company that is trying to recovery based
on its right of subrogation (Malayan v
Regis)
o Signatory
 The officer who should sign the policy for
the insurer must be duly authorized to
sign the policy
 However, violation of the internal rules
of the insurer regarding contract
signatories cannot be used against the
accused (Capital Insurance v Del Monte
Motors)

 Cover Notes
o Interim/preparatory contracts of insurance
o Cover notes may be issued to bind insurance
temporarily pending the issuance of the
policy.
o Within sixty (60) days after issue of a cover
note, a policy shall be issued in lieu thereof,
including within its terms the identical
insurance bound under the cover note and
the premium therefor.
o Cover notes may be extended or renewed
beyond such sixty (60) days with the written
approval of the Commissioner if he
determines that such extension is not
contrary to and is not for the purpose of
violating any provisions of this Code.
o The Commissioner may promulgate rules
and regulations governing such extensions
for the purpose of preventing such violations
and may by such rules and regulations
dispense with the requirement of written
approval by him in the case of extension in
compliance with such rules and regulations.
(Sec. 52)
o When approval is dispensed of
 Upon certification of the president, vice
president, general manager of the
insurer
 Risk involved, values of the risk involved,
values of such risk and premium has not
yet been determined
 Extension is not contrary to insurance
code/any other rule
 Kinds of property insurance policy
o Open Policy
 An open policy is one in which the value
of the thing insured is not agreed upon,
and the amount of the insurance merely
represents the insurer’s maximum
liability.
 The value of such thing insured shall be
ascertained at the time of the loss. (Sec.
60)
o Valued Policy
 A valued policy is one which expresses on
its face an agreement that the thing
insured shall be valued at a specific sum
(Sec. 61)
 Life insurance is always a valued policy
because the amount fixed in the policy is
not always related to the actual loss.
o Running Policy
 A running policy is one which:
 contemplates successive insurances,
 provides that the object of the policy
may be from time to time defined
 especially as to the subjects of
insurance, by additional statements
or indorsements. (Sec. 62)
 Cancellation
o Section 64. No policy of insurance other than
life shall be cancelled by the insurer except
upon prior notice thereof to the insured, and
no notice of cancellation shall be effective
unless it is based on the occurrence, after
the effective date of the policy, of one or
more of the following:
 (a) Nonpayment of premium;
 (b) Conviction of a crime arising out of
acts increasing the hazard insured
against;
 (c) Discovery of fraud or material
misrepresentation;
 (d) Discovery of willful or reckless acts or
omissions increasing the hazard insured
against;
 (e) Physical changes in the property
insured which result in the property
becoming uninsurable;
 (f) Discovery of other insurance coverage
that makes the total insurance in excess
of the value of the property insured; or
 (g) A determination by the Commissioner
that the continuation of the policy would
violate or would place the insurer in
violation of this Code.
o Section 65. All notices of cancellation
mentioned in the preceding section shall be
in writing, mailed or delivered to the named
insured at the address shown in the policy,
 or to his broker provided the broker is
authorized in writing by the policy owner to
receive the notice of cancellation on his
behalf, and shall state:
 Which of the grounds set forth in Section
64 is relied upon; and
 (b) That, upon written request of the
named insured, the insurer will furnish
the facts on which the cancellation is
based.
o Section 80. A person insured is entitled to a
return of premium, as follows:
 (b) Where the insurance is made for a
definite period of time and the insured
surrenders his policy, to such portion of
the premium as corresponds with the
unexpired time, at a pro rata rate
 unless a short period rate has been
agreed upon and appears on the face of
the policy, after deducting from the
whole premium any claim for loss or
damage under the policy which has
previously accrued
 Provided, That no holder of a life
insurance policy may avail himself of the
privileges of this paragraph without
sufficient cause as otherwise provided by
law.
 Rescission
o Termination. Any practice or act by an
insurer which has the effect of discontinuing
an insurance policy. Includes non-renewal.
o Section 64. No policy of insurance other than
life shall be cancelled by the insurer
 EXCEPT upon prior notice thereof to the
insured,
o No notice of cancellation shall be effective
unless it is based on the occurrence, after
the effective date of the policy, of one or
more of the following:
 (a) Nonpayment of premium;
 (b) Conviction of a crime arising out of
acts increasing the hazard insured
against;
 (c) Discovery of fraud or material
misrepresentation;
 (d) Discovery of willful or reckless acts or
omissions increasing the hazard insured
against;
 (e) Physical changes in the property
insured which result in the property
becoming uninsurable;
 (f) Discovery of other insurance coverage
that makes the total insurance in excess
of the value of the property insured; or
 (g) A determination by the Commissioner
that the continuation of the policy would
violate or would place the insurer in
violation of this Code.
 Renewal of Policy
o Renewal. The issuance and delivery by an
insurer of a policy for the same or similar
coverage superseding at the end of the
policy period a policy previously issued an
delivered by the same insurer
 OR an issuance and delivery of a
notice extending the terms of a
policy beyond its period or term (IC
Circular 2015-58-A)
o However, the insured will not have any right
to renew if notice of the intention not to
renew is given by the insurer at least 45 days
prior to the examination of the policy (Sec.
66)
 Reformation of the policy
o Happens when what was agreed upon is
different from what is written in the policy
o Court could have such power to reform
contracts
o In order to do this, it must be made clearly
to appear that:
 the minds of the contracting parties did
actually meet in agreement
 that they labored under some mutual
error or mistake in respect to the
expression of their purpose
o Mistake
 Not necessary that there be reformation
of the policy.
 CHAPTER 6: ASCERTAINING AND
CONTROLLING RISKS
 Devices that ascertain and control risks (WRECC)
o Concealment
o Representation
o Warranty
o Condition
o Exception
o Correct estimation of the risk may be made
if all material information are disclosed and
if the parties are certain that disclosed
information can be relied upon
o Delimitation of the risk
 May be made by specific description of
the risk consisting of the designation of
the specific person or property interest
to be covered and the specification of
the perils.
 Further accomplished by using
exceptions that are inserted in the policy
or stated in the rider
o Control of the risk
 Done by resorting to promissory
warranties and conditions that will
prevent the occurrence of risks or
hazards that may happen after the policy
has been issued
 Concealment
o Section 26. A neglect to communicate that
which a party knows and ought to
communicate, is called a concealment.
o Section 28. Each party to a contract of
insurance must communicate to the other,
in good faith, all facts within his knowledge
which are material to the contract and as to
which he makes no warranty, and which the
other has not the means of ascertaining.
o Duty to disclose is required because
insurance contracts are described as
contracts uberrimae fidae, of utmost good
faith
o Materiality
 Only material facts are required to be
disclosed
 In relation to the insured, material
matters, those that will affect the
insurer’s action on his application
 In relation to the insurer, material
matters, those that will affect the
decision of the insured to enter into an
insurance contract
 Section 31. Materiality is to be
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
disadvantages of the proposed contract,
or in making his inquiries.
 Matter considered material if it relates to
physical or moral hazard
 Material information obtained after the
filing of the application but before the
insurance takes effect should also be
disclosed.
 Applicant for life insurance policy is
under a duty to disclose to the
insurer changes in his health
o Causation not necessary
 The matter concealed need not be the
cause of the loss
 It is sufficient that his non-disclosure
misled the insurer in forming his
estimates of the risks of the proposed
insurance policy or in making inquieies
(Sun Assurance Company of Canada v CA
and Sps. Bacani)
o Requisites to rescind on the ground of
concealment
 The party involved must know the fact
concealed or at least he ought to know
the same
 The fact concealed must be material
 No warranty is extended by the part
regarding the fact concealed
 The other party does not have the means
of ascertaining (Secs. 26 and 27)
o Knowledge of the agent of the insured
 Knowledge on the part of the agent can
be imputed to the insured himself when
the ff circumstances are present
 It was the duty of the agent to
acquire and communicate
information of the facts in question
 It was possible for the agent, in the
exercise of reasonable diligence, to
have made such communication
before the making of the insurance
contract (Vance)
o When there is no concealment
 Section 30. Neither party to a contract of
insurance is bound to communicate
information of the matters following,
except in answer to the inquiries of the
other:
 (a)Those which the other knows;
 (b) Those which, in the exercise of
ordinary care, the other ought to
know, and of which the former has
no reason to suppose him ignorant;
 (c) Those of which the other waives
communication;
 (d) Those which prove or tend to
prove the existence of a risk excluded
by a warranty, and which are not
otherwise material; and
 (e) Those which relate to a risk
excepted from the policy and which
are not otherwise material.
 Section 32. Each party to a contract of
insurance is bound to know all the
general causes which are open to his
inquiry, equally with that of the other,
and which may affect the political or
material perils contemplated; and all
general usages of trade.
 Section 33. The right to information of
material facts may be waived, either by
the terms of insurance or by neglect to
make inquiry as to such facts, where they
are distinctly implied in other facts of
which information is communicated.
 Section 34. Information of the nature or
amount of the interest of one insured
need not be communicated unless in
answer to an inquiry, except as
prescribed by Section 51.
 Section 35. Neither party to a contract of
insurance is bound to communicate,
even upon inquiry, information of his
own judgment upon the matters in
question.
o Knowledge of the insurer
 Where the insurer, at the time of the
issuance of a policy of insurance, has
knowledge of existing facts which, if
insisted on, would invalidate the
contract from its very inception, such
knowledge constitutes a waiver of
conditions in the contract inconsistent
with the facts, and the insurer is
estopped thereafter from asserting the
breach of such conditions. (Qua Chee
Gan v Law Union and Rock Insurance Co.)
o Intentional and unintentional concealment
 Section 27. A concealment whether
intentional or unintentional entitles the
injured party to rescind a contract of
insurance.
 Every concealment, whether arising
from accident, negligence, inadvertence,
or mistake, will be equally fatal to the
contract as if it were intentional or
fraudulent (Dover)
 Section 29. An intentional and fraudulent
omission, on the part of one insured, to
communicate information of matters
proving or tending to prove the falsity of
a warranty, entitles the insurer to rescind.
o Knowledge of the fact concealed
 The actual knowledge of the insured is
not necessary to give the insurance
company the right to avoid the policy on
the ground of concealment. (Saturnino v
Philippine American Life Insurance
Company)
 Exceptions
  The matter allegedly concealed is a
matter of opinion
 When the insurer waived his right to
the information as in the case where
the insured gave an imperfect
answer
 Eg., the Insurer cannot avoid the
policy on the ground of concealment
if the matter concealed involves an
opinion on the medical condition of
the insured (Philamcare Health
System v CA)
o Waiver of insurer
 Where upon the face of the application,
a question appears to be not answered
at all or to be perfectly answered, and
the insurers issue a policy without any
further inquiry, they waive the
imperfection of the answer and render
the omission to answer more fully
material. (Ng Gan Zee v Asian Crusader
Life Assurance Corporation)
o Remedy
 Section 27, rescission
 The right to rescind should be exercised
previous to the commencement of an
action on the contract.
 Subject to incontestable clause
 Representation
o Statements made to give information to the
insurer to induce him to enter into the
insurance contract
o Falsehood in such representations is not
shown to vary or add to the contract, or to
terminate a contract which has once been
made, but to show that no contract has ever
existed
o Time of representation
 Section 37. A representation may be
made at the time of, or before, issuance
of the policy.
 Section 47. The provisions of this chapter
apply as well to a modification of a
contract of insurance as to its original
formation.
 The representation may also be one
that induces the party to agree to
modify the contract
o Distinctions and similarities
Concealment Representation
Involves an Involves a positive
omission—non- assertion or
disclosure affirmation
Cannot refer to Can pertain to the
future acts future because it
can be promissory
Same test of Same test applies
materiality applies
A party can rescind A part can rescind
o Kinds
 Affirmative representations. Involve
statements dealing with facts existing at
the time the contract is made
 Promissory representations.
Statements made by the insured
concerning what is to happen at the time
the insurance is already effective.
 Section 39. A representation as to the
future is to be deemed a promise, unless
it appears that it was merely a statement
of belief or expectation.
o Interpretation
 Representations are construed liberally
in favor of the insured and are required
only to be substantially true (Vance)
 Section 38. The language of a
representation is to be interpreted by
the same rules as the language of
contracts in general.
 Section 42. A representation must be
presumed to refer to the date on which
the contract goes into effect.
 Section 40. A representation cannot
qualify an express provision in a contract
of insurance, but it may qualify an
implied warranty.
o Test of materiality
 There is deemed to be material
misrepresentation if the knowledge of
 one party thereof will affect the insurer’s
action on his application.
 Representation as to age in Life
Insurance
 (d) A provision that if the age of the
insured is considered in determining
the premium and the benefits
accruing under the policy, and the
age of the insured has been
misstated, the amount payable
under the policy shall be such as the
premium would have purchased at
the correct age;
o Remedy
 Section 45. If a representation is false in
a material point, whether affirmative or
promissory, the injured party is entitled
to rescind the contract from the time
when the representation becomes false.
 When rescission is unavailable
 When there is a waiver
 When an action has already been
commenced on the contract
 When the incontestable clause
applies
 Estoppel no longer applicable. The
insurer can still rescind the policy even if
it accepted the premium despite
knowledge of the ground for rescission,
provided that other defenses are not
available like the incontestability clause.
(Sec. 48)
 Warranties
o An affirmation of fact or promise that forms
part of the terms and condition of the policy.
o Section 68. A warranty may relate to the past,
the present, the future, or to any or all of
these.
o Kinds
 Express warranty. One that stated in the
policy or any of its attachments
 Implied Warranty. Natural element of
the contract imposed by law and is a part
of the policy without the need to be
stated in the policy (eg., warranty of
seaworthiness in Marine Insurance)
 Affirmative Warranty. An affirmation of
fact that exists at the time they are made.
 Promissory warranty. Certain things
shall be done or a specified condition
shall exist during the currency of life of
the insurance contract
o Rules on promissory warranties
 Section 72. A statement in a policy,
which imparts that it is intended to do or
not to do a thing which materially affects
the risk, is a warranty that such act or
omission shall take place.
 Section 73. When, before the time
arrives for the performance of a
warranty relating to the future, a loss
insured against happens, or
performance becomes unlawful at the
place of the contract, or impossible, the
omission to fulfill the warranty does not
avoid the policy.
o Formalities of express warranty
 Section 70. Without prejudice to Section
51, every express warranty, made at or
before the execution of a policy, must be:
 contained in the policy itself, or
 in another instrument signed by the
insured and referred to in the policy
as making a part of it.
o Breach of warranty by the insured
 Breach of warranty by the insured
renders the contracts defeasible
 HOWEVER, in order to avoid the policy,
the insurer must prove such breach
consistent with the rule that any
violation must be established by the
person who is making such allegation
o Remedy
 Section 74. The violation of a material
warranty, or other material provision of
a policy, on the part of either party
thereto, entitles the other to rescind
 Section 75. A policy may declare that a
violation of specified provisions thereof
 shall avoid it, otherwise the breach of an
immaterial provision does not avoid the
policy.
 Breach of immaterial provision does not
avoid the policy
 HOWEVER, the policy may make what
would normally be considered an
immaterial warranty into one that is
material
 Non-compliance with a warranty is
excused when by reason of change of
circumstances, or when compliance with
the warranty is rendered unlawful by
subsequent law (Dover)
 Gen rule: if the insurer desires to
limit or restrict the operation of the
general provisions of its contract by
special proviso x x x the policy should
express such limitation in clear and
unmistakable language (Malayan
Insurance v CA)
 Incontestable Clause
o Section 48. Whenever a right to rescind a
contract of insurance is given to the insurer
by any provision of this chapter, such right
must be exercised previous to the
commencement of an action on the contract.

o Breach without fraud o After a policy of life insurance made payable

 Section 76. A breach of warranty without on the death of the insured shall have been
fraud merely exonerates an insurer from in force during the lifetime of the insured for
the time that it occurs, or where it is a period of two (2) years from the date of its
broken in its inception, prevents the issue or of its last reinstatement, the insurer
policy from attaching to the risk. cannot prove that the policy is void ab
initio or is rescindable by reason of the
o Distinctions fraudulent concealment or
Warranty Representation misrepresentation of the insured or his
Part of the Not part of the agent.
contract contract but a
collateral o Mandatory incontestable clauses
inducement  For individual life/endowment policy
Written on a policy Can be oral or in  (b) A provision that the policy shall be
or its rider writing incontestable after it shall have been
Presumed to be Must be established in force during the lifetime of the
material to be material insured for a period of two (2) years
There must be Must be from its date of issue as shown in the
strict compliance substantially true policy, or date of approval of last
reinstatement, except for
 Other Devices nonpayment of premium and except
o Exceptions, exclusions and conditions for violation of the conditions of the
o Conditions policy relating to military or naval
 In the nature of collateral terms service in time of war (Sec. 233, b);
 Include  For group life insurance policies
 Promises/obligations regarding  (b) A provision that the validity of the
claims procedure that are not policy shall not be contested, except
fundamental to the validity of the for nonpayment of premiums after it
contract has been in force for two (2) years
 Conditions conferring more from its date of issue; and that no
rights to the insurer enlarging or statement made by any insured
repeating the minimum rights under the policy relating to his
provided by law insurability shall be used in
o Exception, exclusion or exemption contesting the validity of the
 insurance with respect to which such
statement was made after such
insurance has been in force prior to
the contest for a period of two (2)
years during such person’s lifetime
nor unless contained in a written
instrument signed by him (Sec. 233);
 For group life insurance policies
 (b) A provision that the policy shall be
incontestable after it has been in
force during the lifetime of the
insured for a specified period, not
more than two (2) years from its date
of issue, except for nonpayment of
premiums and except for violation of
the conditions of the policy relating
to naval or military service, or
services auxiliary thereto, and except
as to provisions relating to benefits in
the event of disability as defined in
the policy, and those granting
additional insurance specifically
against death by accident or by
accidental means, or to additional
insurance against loss of, or loss of
use of, specific members of the body;
 The incontestability period is one year
only for a Term Insurance Coverage
under a Group Life Insurance policy that
is required to cover planholders of pre-
need plans
o Rationale
 Designed to induce the insurer to
investigate and act with reasonable
promptness if it wishes to avoid the
policy.
o Effect of Death within two years
o Policy can still be rescinded or the claim can
still be denied if the insured dies within the
two-year period (Tan v CA)
o When inapplicable
 Non-payment of premium
 Violation of the conditions of the policy
relating to military or naval service in
times of way
 Property insurance
 Absence of insurable interest
 When vicious fraud was employed in
obtaining the policy
 Where the cause of the loss is an
excepted risk
 Where the beneficiary failed to comply
with the conditions subsequent
 If the claim is barred by extinctive
prescription
 War limitation rider or war clause
o The moment the parties include a war clause
in the policy, the beneficiaries can no longer
invoke the incontestable clause if the war
clause is violated
 Defenses of insured against revocation
o Guaranteed insurability clause, Failure to
invoke before commencement of the action,
and Estoppel
o Guaranteed insurability clause. Statements
that tend to show that the insured is
insurable cannot be used against him in the
ff cases:
 If the insurance has been in force prior to
the contest for a period of two years
during the person’s lifetime
 If the statement is not in writing and/or
not signed by the insured
o Timeliness of Rescission
 Section 48. Whenever a right to rescind a
contract of insurance is given to the
insurer by any provision of this chapter,
such right must be exercised previous to
the commencement of an action on the
contract.
o Waiver
 Intentional relinquishment of a known
right
 The right to information of material facts
may be waived, either by the terms of
the insurance or by neglect to make
inquiry as to such facts, where they are
distinctly implied in other facts of which
information is communicated
 o Estoppel
 Through estoppel, an admission or
representation is rendered conclusice
upon the person making it, and cannot
be denied or disproved as against the
person relying thereon. (Art. 1431, NCC)

CHAPTER 7: LOSS AND NOTICE OF

LOSS

 Loss
o The injury or damage sustained by the
insured in consequence of the happening of
one or more of the accidents or misfortune
against which the insurer, in consideration of
the premium, has undertaken to indemnify
the insured
o In property insurance
 Loss, the pecuniary detriment consisting
of the total cash value thereof in case of
partial loss (Bonifacio v Mora)
o In life insurance
 When the person insured dies (Bataclan
v Medina)
o In health insurance
 Loss occurs in case of injury to or
disability of the insured.
o In both cases of life and health insurance, the
loss must have been caused by the peril
insured against or is otherwise covered by
the insurance policy

o Proximate cause
 That cause which, in natural and
continuous sequence, unbroken by any
efficient intervening cause, produces
injury, and without which the result
would not have occurred. (Bataclan v
Medina)

 Distinguished from Remote Cause

 That cause which some independent
force merely took advantage of to
accomplish something which is not
the natural effect thereof
