E. CONSTRUCTION 1.

Where there is ambiguity or doubt : GENERAL RULE: contracts of insurance are to be construed or interpreted liberally in favour of the insured and strictly against the insurer resolving all ambiguities against the latter; So as to effect its dominant purpose of indemnity or payment to the insured, especially where a forfeiture is involved. Limitations of liability must be construed in such a way as to preclude the Insurer from non-compliance with its obligations. As a CONTRACT OF ADHESION: most of the terms of the contract do not result from mutual negotiation between the parties as they are prescribed by the insurer in final printed forms which the insured may reject or to which he may adhere if he chooses but which he cannot change. A bargaining contract, in contrast, both parties participate in drawing up its terms and conditions or determining its wording; Duty of insurer: to make its meaning clear if it desires to limit or restrict the operation of the general provisions of its contract by special proviso, exception, or exemption; Where restrictive provisions are open to two interpretations, that which is most favourable to the insured is adopted; Where an insurance contains a provision that the same is effective, valid and binding until terminated by disapproving the insurance application, the mere inaction of the insurer on the insurance application must not work to the prejudice of the insured; the termination must be explicit and unambiguous; Where terms are clear: Cardinal principle of insurance law of interpreting insurance contracts favourably to the insured is APPLICABLE ONLY in cases of doubt, NOT when the intention of the policy is clear or the language is sufficiently clear to convey the meaning of the parties although the contract may be rather onerous. Court bound to adhere the insurance contract as the authentic expression of the intention of the parties; It must be construed and enforced according to the sense and meaning of the terms which the parties themselves used; if the terms are certain, their plain and ordinary sense must be taken;

Acceptance made by letter or telegram does not bind the offerer except from the time it came to his knowledge. The contract, in such a case, is presumed to have been entered into in the place where the offer was made. (1262a) In an insurance contract, the applicant usually makes the offer to the insurer thru an application for insurance which is usually attached to policy and made a part of the insurance contract: 1. IN PROPERTY AND LIABILITY INSURANCE it is the insured who technically makes an offer to the insurer, who accepts the offer, rejects it, or makes a counter-offer. The offer is usually accepted by an insurance agent on behalf of the insurer; 2. IN LIFE AND HEALTH INSURANCE the situation depends upon whether the insured pays the premium at the time he applies for insurance; a. If he does not pay the premium, his application is considered an invitation to the insurer to make an offer which he must then accept before the contract goes into effect; if he pays with his application, his application will be considered an offer; b. Life and health insurance agent, however, do not have the authority to bind immediately the insurers they represent; instead, they customarily issue a binding receipt that makes the coverage effective on the date of the application or the date of the medical examination, if the insurer determines later that the applicant was insurable on that date; the binding receipt therefore is a conditional acceptance by the insurer; c. Where the application for insurance constitutes an offer by the insured, a policy issued strictly in accordance with the offer is an acceptance of the offer that perfects the contract; if the policy issued does not conform to the insureds application, it is an offer to the insured which he may accept or reject; PERFECTION OF INSURANCE CONTRACT 1. Acceptance of application if an application for insurance has not been either accepted or rejected, there is no contract yet as it is merely an offer or proposal; Mere signing of an application for life insurance and the payment of the first premium do not bind the insurer to issue a policy where there is no evidence of any contract between the parties that such acts should constitute a contract of insurance; To be binding from the date of application, the contract must have been a completed contract; there can be no contract of insurance unless the minds of the parties have met in agreement; LIFE INSURANCE: contract not perfected where the applicant dies before the approval or it does not appear that the acceptance of the application ever came to the knowledge of the applicant; Acceptance must be unconditional, but it need not be by formal act; reception and retention of the policy without objection beyond a reasonable time may be deemed to be an acceptance;

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F. PERFECTION OF CONTRACT Art. 1315. Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. (1258) Art. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer.

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Compliance with conditions precedent the parties may impose additional conditions precedent to the validity of the policy as a contract as they see fit; Usual conditions found in the application are that the contract shall not become binding until the policy is delivered and the first premium paid; No valid and binding insurance contract when there is no premium paid unless credit is given or there is a waiver or some agreement obviating the necessity for prepayment of the premium; BUT when the premium is previously paid the contract is perfected upon approval of the application although the policy has not yet been issued, UNLESS stipulated otherwise; The insurance applied for has never been in force where the applicant dies after the disapproval of the insurance application notwithstanding the initial premium has been paid and a binding deposit receipt issued, where the receipt contains the following conditions: 1. That the insurer shall be satisfied that the applicant was insurable; 2. That if the insurer does not accept the application but offers another plan, the insurance contract shall not take effect unless the applicant accepts the same; and 3. That if the applicant is not insurable and the insurer disapproves the application, the insurance applied for shall not be in force and the premium paid shall be returned to the applicant; the binding receipt is intended to be merely a provisional or temporary insurance contract and to be binding only upon compliance with the said conditions; In life insurance, a binding slip or binding receipt does not insure by itself; Cover notes may be issued to bind the Insurance temporarily pending the issuance of the policy;

based on the occurrence, after the effective date of the policy, of one or more of the following: (a) non-payment 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 wilful or reckless acts or omissions increasing the hazard insured against; (e) physical changes in the property insured which result in the property becoming uninsurable; or (f) a determination by the Commissioner that the continuation of the policy would violate or would place the insurer in violation of this Code. Sec 66 In case of insurance other than life, unless the insurer at least forty-five days in advance of the end of the policy period mails or delivers to the named insured at the address shown in the policy notice of its intention not to renew the policy or to condition its renewal upon reduction of limits or elimination of coverages, the named insured shall be entitled to renew the policy upon payment of the premium due on the effective date of the renewal. Any policy written for a term of less than one year shall be considered as if written for a term of one year. Any policy written for a term longer than one year or any policy with no fixed expiration date shall be considered as if written for successive policy periods or terms of one year. Sec 306 The premium, or any portion thereof, which an insurance agent or insurance broker collects from an insured and which is to be paid to an insurance company because of the assumption of liability through the issuance of policies or contracts of insurance, shall be held by the agent or broker in a fiduciary capacity and shall not be misappropriated or converted to his own use or illegally withheld by the agent or broker. Any insurance company which delivers to an insurance agent or insurance broker a policy or contract of insurance shall be deemed to have authorized such agent or broker to receive on its behalf payment of any premium which is due on such policy or contract of insurance at the time of its issuance or delivery or which becomes due thereon.

PREMIUM PAYMENT Sec 77 An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the peril insured against. Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid, except in the case of a life or an industrial life policy whenever the grace period provision applies. Sir: 77 is only for property insurance because of the use of the word thing and also because a grace period will only apply after the payment of the first premium; but may apply to life insurance if no payment of first premium made. Sec 78 An acknowledgment in a policy or contract of insurance of the receipt of premium is conclusive evidence of its payment, so far as to make the policy binding, notwithstanding any stipulation therein that it shall not be binding until the premium is actually paid. Sec 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

DELIVERY OF POLICY Delivery is the act of putting the insurance policy the physical document into the possession of the insured. SIGNIFICANCE Process of forming of a contract important as evidence of the making of a contract and of its terms; and as communication of the insurers acceptance of the insureds offer; Determination of policy period fact of delivery is important; it may affect the term of the coverage e.g. where a policy provides that the coverage terminates one year after delivery; Absence of delivery delivery is not, however, a prerequisite to a valid contract of insurance; the contract may be completed prior to delivery of the policy or even without the delivery of the policy depending on the intent; Widespread use of binding receipts has made delivery less important but delivery still has significance as the decisive act that ordinarily marks the end of the insurers opportunity to decline coverage.

MODES Actual/constructive delivery actual manual transfer of the policy is not a prerequisite to its validity unless the parties have so agreed in clear language; constructive delivery may be sufficient; 1. may be made to the insured in person or to his duly constituted agent; 2. where no further conditions are to be fulfilled, a policy of insurance may be constructively delivered when it is deposited in the mail duly directed to the insured or his agent; Delivery, primarily a matter of intention depends upon the intention of the parties and not the manual possession by the insured; but possession by the insured raises the presumption that there was not delivery made; if the application contains a provision that the insurance shall not be effective until the delivery of the policy, delivery is essential for the consummation of the contract; DELIVERY TO INSURERS AGENT AS DELIVERY TO INSURED Suppose the applicant dies after a life policy has been delivered to the insurance agent by the Head Office but before it is delivered to the applicant, can his beneficiary recover on the policy? 1. Beneficiary cannot recover view that the insurance agent is not his agent; 2. Beneficiary can recover other view says that the contract is deemed complete when the policy is delivered to the agent; EFFECT OF DELVIERY OF POLICY Where delivery is conditional non-performance of the condition precedent prevents the contract from taking effect; Where delivery unconditional delivery of an insurance policy corresponding to the terms of the application ordinarily consummates the contract, and the policy as delivered becomes the final contract between the parties; Where premium still unpaid after unconditional delivery but the insurer cannot be presumed to have extended credit from the mere fact of unconditional delivery of the insurance policy without the prepayment of premium; and even if such presumption may be inferred, there must be a clear and express acceptance by the insured of the insurers offer to extend credit; in the absence of any clear agreement granting credit extension, the policy will lapse if the premium is not paid, at the time and in the manner specified in the policy; DELAY IN DELIVERY: TORT OR IMPLIED ACCEPTANCE? Carale Barks Tort theory - No contract yet perfected bec application has not yet been approved due to delay in insurers part Damages are paid to the would-be insured due to delay in insurers part Why? Bec applicant was deprived of opportunity to seek insurance from other sources Tort theory is an exception to the requirement that a policy has to be issued before the insured can recover from an insurer. It is applicable to circumstances where there is fault or negligence on the part of the insurer in processing the application of the would be insured. In such a case insured may recover on the basis of tort.