Chapter 13.14, and 15 (Guillermo Suyan Jr.

)
Sec. 181. Life insurance is insurance on human lives and insurance appertaining thereto or connected
therewith.

 Life insurance is a contract whereby one party insures a person against loss by the death of
another
 Includes in which the payment of the insurance money is contingent upon the loss of life
 Life insurance includes accident insurance, since life insurance is insured under either contract.
 Under stature providing that ‘any life insurance’ on the life of husband shall insure to benefit of
widow and children exempt from husband’s deb, proceeds of policy insuring against death by
accident insured to widow’s benefit free form husban’s debts.
 Insurance policy including a death benefit and a health or accident disability benefit constituted
life insurance policy.

Valued Policy- Life insurance is not a contract of indemnity; the measure of indemnity is whatever is fixed
in the policy.

Kinds of Insurance
-an insurance upon life may be made payablae on the death of the person, or his surviving a specific period, or
otherwise contigently on the continuance or cessaction of life.

Whole Life insurance -offers permanent protection, the life of person is covered for life.
May be further be classified according to the modes of payment of premium:
 Single Premium – there is single or one time payment for substantial amount of premium
 Continuous Premium or Ordinary Life Insurance – Premiums are paid until the death of the insured
 Limited Payment Period- Premium are paid for a limited number of year
 Cash Value Life Insurance – is a form of life insurance where the pre,iums paid are sufficient to pay not
only the insurance claims and expenses but it also a cash value or savings fund within the policy.

Term Insurance – insurer pays once only, and he is insured for a specified period. If he dies within the period, his
beneficiaries benefits. If he outlives the period, no person benefits from the insurance.

Endowment Policy – pays premium for specified period. If he outlives the period, the face value of the policy is
paid to him; if not, his beneficiaries receive the benefit

Industrial Life - life insurance entitling the insured to pay premiums weekly, or where premiums are payable
monthly or oftener.

VARIABLE Life or Variable unit-Linked (VUL) Insurance CONTRACTOR policy - Any policy or contract on either a
group or individual basis issued by an insurance company providing for benefits or other contractual payments or
values thereunder to vary so as to reflect investment results of any segregated portfolio of investment.

Group Life Insurance – Essentially a single insurance contract that provides coverage for many individuals.
Examples: In favor of employees, “mortgage redemption insurance”.

LIABILITY OF INSURER IN CERTAIN CAUSES OF DEATH OF INSURED

Suicide
Insurer is liable in the following cases:
1. If committed after two years from the date of the policy’s issue or its last reinstatement;
2. If committed in a state of insanity regardless of the date of the commission unless suicide is an excepted peril.
(Sec. 180-A)
3. If committed after a shorter period provided in the policy
Any stipulation extending the 2-year period is null and void. 2. At the hands of the law (E.g. by 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.
Note: Justice Vitug believes that death by suicide (if the insured is sane) or at the hands of the law obviates against
recovery as being more in consonance with public policy and as being implicit under Section 87, ICP. (Pandect of
Commercial Law and Jurisprudence, 1997 ed. P. 191)

Killing by the beneficiary

GENERAL RULE: The interest of a 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. (Sec. 12)

EXCEPTIONS:
1. Accidental killing
2. Self-defense
3. Insanity of the beneficiary at the time he killed the insured
- If the premiums paid came from conjugal funds, the proceeds are considered conjugal. If the beneficiary is
other than the insured’s estate, the source of premiums would not be relevant. (Del Val v. Del Val, 29 Phil
534)
- The measure of indemnity in life or health insurance policy is the sum fixed in the policy except when a
creditor insures the life of his debtor. (Sec. 183)

IS THE CONSENT OF THE BENEFICIARY NECESSARY TO THE ASSIGNMENT OF A LIFE INSURANCE POLICY?

It depends. If the designation of the beneficiary is irrevocable, the beneficiary’s consent is essential because of his
vested right. If the designation is revocable, the policy may be assigned without such consent because the
beneficiary only has a mere expectancy to the proceeds. (The Insurance Code of the Philippines Annotated, Hector
de Leon, 2002 ed.)
Cash Surrender Value - As applied to a life insurance policy, 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.

CASUALTY OR ACCIDENT INSURANCE

Insurance covering loss or liability arising from accident or mishap, excluding those falling under other types of
insurance such as fire or marine. (Sec. 176)

Includes the following:

robbery/theft insurance
personal accident and health insurance as written by non-life insurance
plate glass insurance
emmployer’s liability insurance
Motor vehicle liability insurance
Other substantianlly similar kinds of insurance

Insurable interest is based on the interest of the insured in the safety of persons, and their property, who may
maintain an action against him in case of their injury or destruction, respectively.
Examples: workmen’s compensation, motor vehicle liability
In a third party liability (TPL) insurance contract, the insurer assumes the obligation by paying the injured third
party to whom the insured is liable. Prior payment by the insured to the third person is not necessary in order that
the obligation may arise. The moment the insured becomes liable to third persons, the insured acquires an interest
in the insurance contract which may be garnished like any other credit.

Aside from compulsory motor vehicle liability insurance, the Insurance Code contains no other provisions
applicable to casualty insurance. Therefore, such casualty insurance are governed by the general provisions
applicable to all types of insurance, and outside of such statutory provisions, the rights and obligations of the
parties must be determined by their contract, taking into consideration its purpose and always in accordance with
the general principles of insurance law.

In burglary, robbery and theft insurance, the opportunity to defraud the insurer – the moral hazard – is so great
that insurer have found it necessary to fill up the policies with many restrictions designed to reduce the hazard.
Persons frequently excluded are those in the insured’s service and employment. The purpose of the exception is to
guard against liability should theft be committed by one having unrestricted access to the property. (Fortune
Insurance vs. CA, 244 SCRA 208)

Right of a third party injured to sue the insurer

1. Indemnity against liability – A third party injured can directly sue the insurer.
2. Indemnity for actual loss or reimbursement after actual payment by the insured – A third party has no cause of
action against the insurer (Sec. 53, Bonifacio Bros. v. Mora, 20 SCRA 261).

The insurer is not solidarily liable with the insured. The insurer’s liability is based on contract; that of the insured is
based on torts. Furthermore, the insurer’s liability is limited by the amount of the insurance coverage (Pan
Malayan Insurance Corporation v. CA, 184 SCRA 54).

“INTENTIONAL” vs. “ACCIDENTAL” AS USED IN INSURANCE POLICIES

1. Intentional – Implies the exercise of the reasoning faculties, consciousness and volition. Where a provision
of the policy excludes intentional injury, it is the intention of the person inflicting the injury that is
controlling. If the injuries suffered by the insured clearly resulted from the intentional act of the third
person, the insurer is relieve from liability as stipulated. (Biagtan v. the Insular Life Assurance Co. Ltd., 44
SCRA 58, 1972)

2. Accidental – That which happens by chance or fortuitously, without intention or design, which is
unexpected, unusual and unforeseen.

NO ACTION CLAUSE A requirement in a policy of liability insurance which provides that suit and final judgment be
first obtained against the insured; that only thereafter can the person injured recover on the policy. (Guingon vs.
Del Monte, 20 SCRA 1043)

COMPULSORY MOTOR VEHICLE LIABILITY INSURANCE (CMVLI)

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. Purpose: To give immediate financial assistance to victims of motor
vehicle accidents and/or their dependents, especially if they are poor regardless of the financial capability of motor
vehicle owners or operators responsible for the accident sustained (Shafer v. Judge, RTC, 167 SCRA 386).

Claimants/victims may be a “passenger” or a “3rd party” It applies to all vehicles whether public and private
vehicles.
Note: It is the only compulsory insurance coverage under the Insurance Code.
Method of coverage 1. Insurance policy 2. Surety bond 3. Cash deposit

Passenger – Any fare-paying person being transported and conveyed in and by a motor vehicle for transportation
of passengers for compensation, including persons expressly authorized by law or by the vehicle’s operator or his
agents to ride without fare. (Sec. 373[b])

Third Party – Any person other than the passenger, excluding a member of the household or a member of the
family within the second degree of consanguinity or affinity, of a motor vehicle owner or land transportation
operator, or his employee in respect of death or bodily injury arising out of and in the course of employment. (Sec.
373[c])

“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.

Purpose: To guarantee compensation or indemnity to injured persons in motor vehicle accidents.

Rules:
1. Total indemnity - maximum of P100,000 plus another 100,000 for carrier
* however, LTFRB requires insurance coverage per person basis. 150,000 per passenger while loss of two
limbs and loss of sign in both eyes 75,000

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.

The claimant is not free to choose from which insurer he will claim the “no fault indemnity” as the law makes it
mandatory that the claim shall lie against the insurer of the vehicle in which the occupant is riding, mounting or
dismounting from. That said vehicle might not be the one that caused the accident is of no moment since the law
itself provides that the party paying may recover against the owner of the vehicle responsible for the accident.
(Perla Compania de Seguros, Inc. v. Ancheta, 169 SCRA 144)

This no-fault indemnity claim does not apply to property damage. the total indemnity claim P15,000 for all motor
vehicles without the necessity of proving fault.

The essence of the no-fault indemnity insurance is to provide victims of vehicular accidents or their heirs
immediate compensation although in limited amount, pending final determination of who is responsible for the
accident and liable for the victims injuries or death. (Ibid.)

SPECIAL CLAUSES

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)
The requirement that the person driving the insured vehicle is permitted in accordance with the licensing laws or
other laws or regulations to drive the motor vehicle (licensed driver) is applicable only if the person driving is other
than the insured.
B.
Theft Clause - A clause which includes theft as among the risks insured against.
Where the car is unlawfully and wrongfully taken without the owner’s consent or knowledge, such taking
constitutes theft, and thus, it is the “theft clause” and not the “authorized driver clause that should apply (Palermo
v. Pyramids Ins., 161 SCRA 677).
SURETYSHIP
An agreement whereby a surety guarantees the performance by the principal or obligor of an obligation or
undertaking in favor of an obligee.
- It is essentially a credit accommodation.
- It is considered an insurance contract if it is executed by the surety as a vocation, and not incidentally.
- When the contract is primarily drawn up by 1 party, the benefit of doubt goes to the other party
(insured/obligee) in case of an ambiguity following the rule in contracts of adhesion. Suretyship, especially
in fidelity bonding, is thus treated like non-life insurance in some respects.

Nature of liability of surety

1. Solidary;
2. Limited to the amount of the bond;
3. It is determined strictly by the terms of the contract of suretyship in relation to the principal contract between
the obligor and the obligee.

SURETYSHIP PROPERTY INSURANCE

Accessory contract Principal contract 3 parties: surety, obligor and oblige

2 parties: insurer and insured Credit accommodation Contract of indemnity

Surety can recover from principal

Insurer has no such right; only right of subrogation
Bond can be cancelled only with consent of obligee,
Commissioner or court May be cancelled unilaterally either by insured or insurer on grounds provided by law
Requires acceptance of obligee to be valid
No need of acceptance by any third party
Risk-shifting device; premium paid being in the nature of a service fee Risk-distributing device; premium paid as a
ratable contribution to a common fund .