INSURANCE LAW

TRANPORTATION INSURANCE – concerned with

the perils of property in (or incidental to) transit
as opposed to property perils at a generally fixed
location
 MARINE INSURANCE
• Traditionally, marine insurance includes
policies that covers risks connected with
navigation, to which a ship, cargo, freightage,
profits or other insurable interest in movable
property, may be exposed during a certain
voyage or a fixed period of time. Under the
present laws, it covers inland marine
insurance.
• INLAND MARINE INSURANCE – covers primarily
the land or over the land transportation perils of
property shipped by railroads, motor trucks,
airplanes, and other means of transportation
CLASSES
• Property in transit
• Bailee liability
• Fixed transportation property
• floater
• OCEAN MARINE INSURANCE- insurance of sea
perils
• Ships or hulls
• Good or cargoes
• Earnings such as freight, passage money,
commissions or profits, and
• Liability for the insured property by reason of
maritime perils
 SCOPE OF MARINE INSURANCE
INSURANCE AGAINST LOSS OR DAMAGE
• Vessels, crafts, aircraft, vehicles, goods, freights,
cargoes, merchandise, effects, disbursements,
profits, moneys xxxxxxxx in connection with any
and all risks or perils of navigation, transit or
transportation, or while being assembled, packed
xxxxx or similarly prepared for shipment or during
any delays, storage, transhipment, xx including
war risks, marine builder’s risks and all personal
property floater risks
• Person or property in connection with or
appertaining to a marine, inland marine,
transit or transportation insurance, including
liability for loss or damage arising out of or in
connection with the construction, repair,
operation, maintenance or use of the subject
matter of such insurance xxxxx
• Precious stones, jewels, jewelry, precious
metals, whether in course of transportation or
otherwise
• Bridges, tunnels and other instrumentalities of
transportation or communication (excluding
buildings and furnitures or fixtures xxxx),
piers, wharves, docks and other aids to
navigation including dry docks, and marine
railways, dams and appurtenant facilities for
the control of waterways
MARINE PROTECTION AND INDEMNITY
INSURANCE
• Insurance against, or against legal liability of
the insured for loss, damage, or expense
incident to ownership, operation, chartering,
maintenance, use, repair or construction of
any vessel, craft or instrumentality in use of
ocean or inland waterways, including liability
of the insured for personal injury, illness, or
death or for loss of or damage to the property
of another person
• Marine insurance is not limited to insurance
that secures vessels and its cargoes against
the perils of navigation
• Cargo can be the subject of marine insurance,
and once it is entered into, the implied
warranty of seaworthiness immediately
attaches to whoever is insuring the cargo,
whether he be the shipowner or not.
Although he has no control over the vessel,
the shipper has control in the choice of vessel
 RISK INSURED AGAINST
• Perils of the sea which may be insured against
unless perils of the ship are covered by an all-
risk policy
• Perils of the sea must be the proximate cause
of the loss in order that the insurer may be
held liable
• The insurer does not undertake to insure
against perils of the ship . The purpose of
marine insurance is to secure an indemnity
against accidents which may happen and not
against event which must happen
 Perils of the Sea/Navigation
• Include only those casualties due to the
unusual violence or extraordinary causes
connected with navigation. Xxx losses as are
of extraordinary nature or arise from some
overwhelming power which cannot be
guarded against by the ordinary exertion of
human skill or prudence, as distinguished
from the ordinary wear and tear of the voyage
and from injuries suffered by the vessel in
consequence of her not being unseaworthy
Includes
• Unusual violence
• Extraordinary action of wind and wave, and
• Other extraordinary causes connected with
navigation
• Rusting of steel pipes in the course of the
voyage is a peril of the sea in view of the
effects of the wind, water and salt conditions
 Perils of the Ship
• Loss which in the ordinary course of events,
results from the ordinary, natural and
inevitable action of the sea; from ordinary
wear and tear of the ship, and
• From the negligent failure of the ship’s owner
to provide the vessel with the proper
equipment to convey the cargo under ordinary
conditions
• In the absence of stipulation, the risks insured
against are only perils of the sea. Insured is
bound to prove that the cause of the loss is a
peril of the sea
• However, in an all risk policy, all risks are
covered unless expressly excepted. Xx insurer
to prove that the loss is caused by a risk that is
excluded
 Special marine contracts and clauses
• All-risks policy – insurance against all causes of
conceivable loss or damage except those
excluded in the policy or due to fraud or
intentional misconduct of the insured
• Barratry clause – provides that no recovery on
the policy in case of any willful misconduct on the
part of the master or crew in pursuance of some
unlawful or fraudulent purpose without consent
of owners, and to the prejudice of the owner’s
interest
• Inchmaree clause – makes the insurer liable
for loss or damage to the hull of machinery
arising from the negligence of the captain,
engineers etc, explosions, breakage of shafts,
and latent defect of machinery or hull
• Sue and labor clause – insurer become liable
to pay the insured, in addition to the loss
actually suffered, such expenses as he may
have incurred in his efforts to protect the
property against a peril for which the insurer
would have been liable (exception to the
contract as one of indemnity)
 INSURABLE INTEREST IN MARINE
INSURANCE
• Shipowner – over the vessel, expected freightage
• Cargo owner – over the cargo and expected
profits
• Charterer – over the amount he is liable to the
shipowner, if the ship is lost or damaged during
the voyage; over his expected profits or
freightage if he accepts cargoes from other
persons for a fee; over his own cargo or client’s
• Owner/debtor- difference between the value
of vessel or goods and the amount of loan;
repayment of loan is subject to condition that
the vessel or goods, given as a security shall
arrive safely at the port of destination
(bottomry/respondentia)
• Creditor/Lender – amount of the loan
 Implied warranties
• Ship is seaworthy at the inception of the
insurance
• Ship will not deviate from the agreed voyage
unless deviation is proper
• The ship will not engage in an illegal venture
• Warranty of possession of documents of
neutrality; that the ship will carry the requisite
documents of nationality or neutrality of the ship
or cargo where such nationality or neutrality is
expressly warranted
• Presence of insurable interest
• Seaworthiness – ship’s fitness to perform the
service and to encounter the ordinary perils of
the voyage contemplated by the parties to the
policy
• A ship which is seaworthy for the purpose of
insurance upon the ship may be unseaworthy
for the purpose of the insurance upon the
cargo
• Seaworthiness is complied with if the ship be
seaworthy at the time of the commencement
of the risk
• Prior or subsequent unseaworthiness is not a
breach of warranty nor is it material
 Exception: Seaworthiness
• Time policy- ship must be seaworthy at the
commencement of every voyage that she may
undertake during the period of the coverage
• Cargo policy- each vessel upon which the
cargo is shipped or transhipped must be
seaworthy at the commencement of each
particular voyage
• Voyage policy contemplating a voyage in
different stages- ship must be seaworthy at
the commencement of each particular voyage

Note: even if there is bareboat charter, if injury

or damage during the voyage is caused by
unseaworthiness, insurer of the shipowner is
still liable
 Implied warranty of seaworthiness,
applied to cargo owner
It becomes an obligation of cargo owner to look
for reliable common carrier which keeps its
vessels in seaworthy conditions. Shipper may
have no control over the vessel but he has
control in the choice of the common carrier that
will transport his goods
 Coverage of Seaworthiness
• Condition of the structure of the ship
• Ship must be properly laden
• Provided with a competent master
• Sufficient number of competent officers and
seamen
• Requisite appurtenances and equipment
• Other necessary or proper stores and
implements for the voyage
• When the ship becomes unseaworthy during
the voyage to which an insurance relates, an
unreasonable delay in repairing the defect
exonerates the insurer from liability from any
loss arising therefrom
 DEVIATION
• Departure from the course of the voyage
insured, or an unreasonable delay in pursuing
the voyage, or the commencement of an
entirely different voyage
• Unexcused departure from the regular course
or route of the insured voyage or any other
act which substantially alters the risk
 DEVIATION: INSTANCES
• Deviation from agreed voyage
• Departure of vessel from the course of the
sailing fixed by mercantile usage
• Departure of vessel from the most natural,
direct, and advantageous route if not fixed by
mercantile usage
• Unreasonable delay in pursuing voyage
• Commencement of an entirely different
voyage
 Kinds of Deviation
• Proper – when caused by circumstances
outside the control of ship captain/owner;
made in good faith to avoid a peril; necessary
to comply with a warranty or to avoid a peril;
made in good faith to save human life or to
relieve another vessel in distress
--insurer is still liable
• Improper- every deviation not specified above
--insurer not liable, increase in risk of
contribution to loss is immaterial
 Loss in marine insurance
• Actual (total)–absolute loss which exists when
the subject matter of the insurance is wholly
destroyed or lost or when it is so damaged as
no longer to exist in its original character
Complete physical destruction of the subject
matter is not essential to constitute actual total
loss. Loss exists where the form and specie of
the thing is destroyed although the materials of
which it consisted still exists.xxx
 Actual loss
• Damage rendering the thing valueless to the
owner for the purpose for which he held it
• Irretrievable loss by sinking or by being broken
up
• Total destruction, or
• Other event which effectively deprives the
owner of the possession, at the port of
destination
• Constructive or Technical (total)– loss,
although not actually total, is of such
character that the insured is entitled, if he
things fit , to treat it as total by abandonment
and gives the insured a right to abandon in
the following cases
 Constructive loss
• Damage reducing by more than ¾ the value of
vessel and of cargo
• Expense of transshipment exceeds ¾ of value
of cargo
• Actual loss of more than ¾ of the value of the
object
• Contemplated voyage cannot be performed
without incurring an expense of more than ¾
of the value of thing abandoned
In case of constructive total loss, insured may
abandon goods or vessel to the insurer and
claim for whole insured value; OR
Without abandoning vessel, claim for actual loss

• PARTIAL LOSS- that which is not total

 Measure of indemnity
1. Valued policy- parties are bound by the
valuation if the insured had some interest at risk
and there is no fraud except if hypothecated by
bottomry or respondentia before its insurance
2. Open policy- value of ship- value at the
beginning of risk; value of cargo- actual cost
when laden on board or market value at the
time and place of lading; value of freightage-
gross freightage
 Loss of profits separately insured
• Insured is entitled to recover in case of loss, a
proportion of such profits equivalent to the
proportion which the value of the property
lost bears to the value of the whole

Formula for amount of recovery

(value of property lost/value of whole property
insured) x amount of insurance= amount of
recovery
 AVERAGE
• Any extraordinary or accidental expense
incurred during the voyage for the
preservation of the vessel, cargo, or both and
all damages to the vessel or cargo from the
time it is loaded and the voyage commenced
until it ends and the cargo unloaded
 Simple or Particular Average
• Expenses and damages caused to the vessel or
cargo have not inured to the common benefit of
all persons interested in the vessel or cargo-
insurer has no liability if the parties stipulated for
general average
Ex: cargo damage from its embarkation until it is
unloaded; ship damage and expenses from the time
it is put to sea from the port of departure until it
anchors in the port of destination; wages of the
crew when vessel is detained or embargoed by
legitimate order or force majeure
 General or Gross Average
• Damage and expenses deliberately caused in
order to save the vessel, its cargo or both,
from real and known risks. Liability of insurer
is his portion, share
Ex. Effects jettisoned to lighten the vessel
whether they belong to the cargo, to the vessel,
or to the crew; damage caused to the vessel
which had to be opened, scuttled or broken in
order to save the cargo
GENERAL AVE PARTICULAR AVE
Inured to the common Has not insured to the
benefit and profit of all
common benefit and
persons interested in profit of all persons
the vessel and cargo interested in the vessel
and her cargo
To be borne equally by To be borne alone by
all of the interests owner of the cargo or
concerned in the the vessel, as the case
venture may be
 REQUISITES to the Right to Claim
General Ave Contribution
• Common danger to the vessel or cargo
• Part of the vessel or cargo was sacrificed
deliberately
• Sacrifice must be for the common safety or for
the benefit of al
• Sacrifice must be made by the master or upon
his authority
• It must be successful (resulted to the saving of
vessel or cargo)
• It must not be caused by any fault of the party
asking for contribution, AND
• It must be necessary
 Formula in determining share or
contribution

(interest of the party/total loss interest) x loss=

contribution
 Right of insured
• General Ave- insured may hold insurer directly
liable for the whole of the insured value of
property sacrificed for the general benefit
subrogating him to his own right or
subrogation OR demand contribution from
the other interested parties as soon as the
vessel arrives at her destination
• Particular Ave- insured can only claim from his
own insurer and cannot demand contribution
• Free from Particular Average (FPA) Clause-
insurer shall not be liable for a particular
average but shall continue to be liable for his
proportion of all general average losses upon
the thing insured
• Exception: when there is total deprivation on
the part of the insured of the possession of
the thing insured
 CO-INSURANCE
• Marine insurer is liable upon partial loss, only
for such proportion of the amount insured by
him as the loss bears to the value of the whole
interest of the insured in the property insured
• When the property is insured for less than its
value the insured is considered a co-insurer of
the difference between the amount of
insurance and the value of the property
• Loss is partial, amount of insurance is less
than the value of the property insured
• Applies only to marine insurance
• Applies to fire insurance only when stipulated
• Formula re: insurer’s liability
(Loss/value of property) x amount insured=
insurer’s share/liability
 FIRE INSURANCE
• Contract by which the insurer for a
consideration agrees to indemnify the insured
against loss of, or damage to, property by
hostile fire, including loss by lightning,
windstorm, tornado or earthquake and other
allied risks, when such risks are covered by
extension to fire insurance policies under
separate policies
• Contract of indemnity
• Insurer to pay direct loss only except if
covered by extension policy
• Hostile fire – one that escapes from the place
where it was intended to burn and ought to
be. It can also be a fire that started as friendly
fire but escapes from its original place or it
becomes too strong as it becomes out of
control; Insurer is liable
• Friendly fire- one that burns in a place where
it was intended to burn and ought to be;
insurer not liable
 Risks covered
• Business interruption insurance – loss suffered
consisting of loss of earnings comprising of
the net profits that could have been realized
had the business continued and expenses that
continue despite the interruption of the
business
• Rent insurance – protects the insured from
loss of rental income
• Indirect or consequential losses like physical
damage caused to other property not covered
by the insurance policy; loss or earnings due
to the interruption of business by damage to
insured’s property; extra expense or charges
incurred by insured following damage or
destruction of buildings or contents by an
insured peril
• Direct losses
• Extra expense insurance – extraordinary
expenses that may be incurred in an effort to
avoid any interruption of service
 Ocean marine policy vs Fire policy
• A policy of insurance on a vessel engaged in
navigation is a contract of ocean marine
insurance although it insures against fire risk
only. However, where the hazard is fire alone
and the subject is an unfinished vessel, never
afloat for a voyage, the contract to insure is a
fire risk, especially in the absence of an
express agreement that it shall have the
incidents of marine policy, or where it insures
materials in a shipyard for use in constructing
vessel (important for distinction re:co-ins)
 Measure of indemnity
• Open policy – only the expenses necessary to
replace the thing lost or injured in the
condition it was at the time of the injury
• Valued policy- the parties are bound by the
valuation, in the absence of fraud or mistake
 Insurer’s liability in valued policy
• Total loss – whole amount so insured
• Partial loss – full amount of partial loss
 Co-insurance clause
• Requires the insured to maintain insurance to an
amount equal to the value or specified
percentage of the value of the insured property
under penalty of becoming co-insurer to the
extent of such deficiency, the difference between
the value or percentage insured and the amount
of the insurance
• Purpose: to prevent property owner from taking
out small amount of insurance and thus, reduce
the premium payments and increase the rate of
premium for all
 Alteration
• Alteration in the use or condition of a thing
insured from that to which it is limited by the
policy made without the consent of the insurer,
by means within the control of the insured, and
increasing the risks, entitles the insurer to rescind
a contract of fire insurance
• ex:. Converting an insured residential house to a
factory; transferred of insured machineries and
equipment from one building to another that
was not stipulated in the policy without insurer’s
consent
Gen Rule: not all alterations rescind the policy,
EXCEPT
• When alteration increases the risks
• When there is a violation of the provisions of
the policy (increase in risk or loss is not
necessary)
 Alteration as a ground for recession
• Alteration made without the consent of
insurer
• Such use or condition as limited by the policy
is altered
• The use or condition of the thing is specially
limited or stipulated in the policy
• There must be a violation of the provision of
the policy
• Alteration increases the risk
• Alteration is made by means within the
control of the insured
 Alterations not avoiding policy
• When risk or loss not increased
• Questioned articles are required by insured’s
business
• Where insured property would be useless if
questioned acts are prohibited
• Act of the insured not in violation of the policy
• Increase of risk is caused by accident
Every act of the insured’s tenant substantially
and permanently affecting the conditions of the
property so as to constitute an increase in risk,
would be presumptively known to the insured
• Fall of building clause – if the building or any part
thereof falls, except as a result of fire, the policy
shall immediately cease
• Option to rebuild clause – option given to insurer
to reinstate or replace the property damaged or
destroyed or any part thereof, instead of paying
the amount of the loss or the damage
• If a person obliged to do something fails to do it,
the same shall be executed at his cost
 Casualty/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
Note: aside from the compulsory motor vehicle
liability insurance, casualty insurance is
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
 coverage
• Theft, robbery and burglary insurance –
against loss of property by the depreciation of
burglars and thieves except persons in the
insured’s service and employment
• Compulsory motor vehicle liability insurance –
against passenger and third party liability for
death or bodily injuries and damage to
property arising from motor vehicle accidents
• Plate glass insurance – against loss from
accidental breaking of plate-glass windows,
doors, etc
• Personal accident insurance and health
insurance- indemnify the assured against
expense, loss of time, suffering from accidents
causing him physical injury, usually by payment at
a fixed rate per week while consequent disability
lasts, and sometimes payment of a fixed sum to
heirs in case of death by accident within the term
of the policy
• Public utility insurance –indemnifies against
liability on account of injuries to the person or
property of another. Extends to automobiles,
elevators, flywheels , libel, theaters and vessels
• Employer’s liability and workmen’ insurance-
insurance on the liability of the assured to make
compensation or pay damages for an accident,
injury or death, occuring to a servant or other
employee, in the course of his employment under
statutes imposing such liability on employers
• Other substantially similar kinds – medical
malpractice, pollution liability, etc
 GENERAL DIVISIONS OF CASUALTY
INSURANCE
• Accident or health insurance – insurance against
specified perils which may affect the person
and/or property of the insured such as personal
accident, robbery or theft, insolvency of debtors,
defalcation of employees, etc
• Third party liability insurance – insurance against
specified perils which may give rise to liability on
the part of the insured for claims for injuries to
others or for damage to their property, such as
workmen’s compensation, motor vehicle liability,
professional liability, product liability, etc
Note: Insurer assumes the obligation by paying
the injured third party to whom the insured is
liable. Prior payment by the insured to 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
(Perla v Ramolete)
 LIABILITY INSURANCE
• It is a contract of indemnity for the benefit of
the insured and those in privity with him, or
those to whom the law upon the grounds of
public policy extends the indemnity against
liability
Insurable Interest in Liability Insurance
• It is the interest which the insured has in the
safety of persons, and their property, who
may maintain an action against him in case of
their injury or destruction, respectively
• Right of insured to sue insurer of party at fault
– this depends on whether the contract of
insurance is intended to benefit third persons
also or only the insured
• Indemnity against third party – injured third
party can directly sue the insurer
• Indemnity against actual loss or payment –
third party has no cause of action against the
insurer; recourse directed to the insured alone
 Basis and extent of insurer’s liability
• Insurer is not solidarily liable with the insured.
The insurer’s liability is based on contract
while that of the insured is based on torts.
Furthermore, the insurer’s liability is limited
by the amount of the insurance coverage.
 Rules as to death or injury resulting
from accidental means
Gen. Rule: death or injury does not result from
accident or accidental means if it is the natural
result of the insured’s voluntary act,
unaccompanied by anything unforeseen except
the death or injury
Exception:
There is no accident when a deliberate act is
performed resulting to injury or death
• The mere act of insured of pointing a gun to
his temple, believing that the gun was not
loaded and the gun fired when he pulled the
trigger resulting in his death, was held to be
an accident. The insured was unquestionably
negligent but it will not prevent his
beneficiaries from recovering under the
insurance policy (Sun insurance vs CA)
• Intentional as used in an accident policy
excepting intentional injuries inflicted by the
insured or any other person implies the
exercise of the reasoning faculties xxx xxx. 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 a third person, the insurer is
relieved from liability as stipulated
The terms “accident” and “accidental” as used in
insurance contracts have not acquired any
technical meaning. They are construed by the
courts in the ordinary and common acceptation.
Thus, the terms have been taken to mean that
which happens by chance or fortuitously,
without intention or design, which is
unexpected, unusual and unforeseen. Xx Not
synonymous with no fault. Xx utilized simply to
distinguish intentional or malicious acts from
negligent or reckless acts xxx.
 INTENTIONAL ACCIDENTAL
Implies the exercise of reasoning That which
faculties, consciousness and happens by
volition chance or
Note: fortuitously,
1.Provision of the policy excludes without
intentional injury-intention of intention or
person inflicting is controlling design, which
2. Injuries suffered by the is unexpected
insured clearly resulted from the and
intentional act of the third unforeseen
person- insurer is relieved from
liability as stipulated
 No action clause
• Requires 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
 Compulsory motor vehicle liability
insurance
• 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 a
motor vehicle by its owner
• Purpose: to give immediate financial assistance to
victims of motor vehicle accidents, xxx
• Applies to all vehicles whether public or private
 Persons subject to the CMVLI
requirement
• Motor vehicle owner- actual legal owner of a
motor vehicle in whose name such vehicle is
registered with the LTO
• Land transportation operator- the owner of
motor vehicle being used for conveying
passengers for compensation including school
buses
• Substitutes include surety bond, insurance
policy or cash deposit
Note: land transpo operator or a motor vehicle
owner cannot operate his vehicle in public
highways if there is no policy insurance or
guaranty in cash or surety bond in force to
indemnify the death or injury of the third party
or passenger
 Scope of coverage required
1. For owners of private motor vehicles-
coverage must be comprehensive against
third party liability for death or bodily injurie
note: private vehicle used to transport
passengers for compensation, in addition, shall
include passenger liability
2. For operators of land transpo- coverage must
also be comprehensive against both passenger
and 3rd party liabilities for death or bodily
injuries
• Payment of premium- paid by operator or
owners of vehicle. It is unlawful to require
drivers or employees to contribute in the
payment of premium
 Schedule of indemnity
KINDS OF INDEMNITY MAXIMUM AMOUNT
ACCIDENT INDEMNITY P100,000
ADDITIONAL LIABILITY
• If common carrier P100,000
• Death indemnity P70,000
• Burial and funeral
expenses P30,000
• Parties may however enter into an insurance
contract which provides for a bigger coverage
• All motor vehicles and other vehicles must be
registered
• No Fault Indemnity Claim- P15,000 for all
motor vehicles
• No Fault Clause- gives the victim(injured
person or heirs of deceased) 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 victims in motor vehicle
accidents
• No fault claim does not apply to property
damaged
• Proof of loss-police report, death certificate,
medical report, reimbursements, etc
 Claim settlement in CMVLI
• Passenger-fare paying person including
persons authorized by law or by vehicle
operator or his agents to ride without fare
• Third Party- any person other than the
passenger, excluding member of household or
member of family within second degree, of a
motor vehicle owner or land transpo operator
or his employee in respect of death or bodily
injury arising out of and in the course of
employment
 Insurer from which to claim
• Maybe made against one motor vehicle only
• In case of passenger/occupant of a vehicle-
insurer of vehicle in which occupant is riding,
mounting or dismounting from
• In any other case- insurer of the directly
offending vehicle
• 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 vehicle in which
the occupant is riding etc. that 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 vehicle responsible for the accident
 Finding of fault
• If total indemnity claims exceed P15,000 and
there is controversy in respect thereto, the
finding of fault may be availed of by the
insurer only as to the excess. The first P15t
shall be paid without regard to fault
• Essence is to provide victims xxxxxpending
final determination of who is responsble xxx it
is immaterial whether or not the fault or
negligence lies with the other vehicle involved
in the accident
 Special clauses
• Cooperation clause – provides in essence that
the insured shall give all such information and
assistance as the insurer may require, usually
requiring attendance at trials or hearings
• Authorized driver clause- indemnify the
insured owner against loss or damage to the
carb tu limits the use of the insured vehicle to
insured himself or any person who drives on
his order or with his permission
The person other than the insured owner who
drives the vehicle on the insured’s order or with
his permission must be a duly licensed driver
and has no disqualification to drive a motor
vehicle.
License requirement does not apply to the
insured himself who drives the insured vehicle.
• Theft clause – includes theft as among the
risks insured against

i.e taking of vehicle by another person without

the permission or authority from the owner – is
sufficient
 Notice of claim
• Any person having any claim upon the CMVLI
policy shall without unnecessary delay present
to the insurance company concerned a written
notice of claim within six months from the
date of the accident; otherwise, the claim will
be deemed waived
• 6 months- period for the filing of notice of
claims
• 1 year-period for bringing an action or suit in
proper cases
• One year prescriptive period shall begin to run
only upon the denial of the claim by the
insurance company
• Prescription starts to run from the first denial
of the claim, not from the denial of the
request for reconsideration
 Cancellation of CMVLI
• Written notice of cancellation of policy must
be given to the LT operator or owner of the
vehicle or LT Commission at least 15 days prior
to the intended effective date
• Cancellation by insurer – upon receipt, LTO
shall order the immediate confiscation of
plates of the motor vehicle unless it receives
evidence of either revival of the cancelled
policy or presentation of new policy
• Cancellation by the insured – insured shall
secure similar policy of insurance or surety
bond to secure that which was cancelled
before the latter becomes ineffective and
without any gap file with LTO and notify the
insurance company concerned of the
cancellation
 Change of ownership
It does not suspend the policy provided that
• Insurance company shall agree to continue
such policy
• The change of ownership or of the engine
shall be indicated in an endorsement by the
insurer, and
• Signed duplicate of endorsement filed with
LTO
 microinsurance
• An activity providing specific insurance,
insurance-like and other similar products and
services that meet the needs of the low-
income for risk
FEATURES:
1. Premiums, contributions, fees, or charges are
collected prior to occurrence of a contingent
event
2. Guaranteed benefits are provided upon
occurrence of contingent events
 SURETYSHIP
• Agreement whereby one called the surety
usually an insurance co, undertakes to answer,
under specified terms and conditions, for the
debt, default, or miscarriage of
another(principal/obligor) in favor of a third
party (obligee)
• Considered an insurance contract if executed
by the surety as a vocation, and not
incidentally
• Includes official recognizances, stipulations,
bonds or undertakings
 Liability of surety
• Although the contract of suretyship is in
essence secondary only to a valid principal
obligation, the surety becomes liable for the
debt or duty of another although it possesses
no direct or personal interest over the
obligations nor does it receive any benefit
therefrom. Xxx, surety assumes liability as a
regular party to the undertaking (GR 177839)
 Nature of liability of surety
• Solidary (joint and several)
• Limited to the amount of the bond and
• Determine strictly by the terms of the contract
of suretyship in relation to the principal
contract between obligor and obligee;
(GR 158820-21)
Surety has no right to intervene in the principal
contract
 TYPES OF SURETY BONDS
• Contract bond – connected with construction
and supply contracts for the protection of the
owner against possible default by the
contractor to comply with his contract or his
possible failure to pay material men, laborers,
and sub-con, which may either be
PERFORMANCE BOND- covering faithful
performance of the contract or PAYMENT
BOND-payment of laborers and material men
• Fidelity Bond – one which pays an employer
for loss growing out of a dishonest act of his
employee, which may either be: INDUSTRIAL
BOND- one required by private employers to
cover loss through dishonesty of employees or
a PUBLIC OFFICIAL BOND-one required of
public officers for the faithful performance of
their duties and as a condition of entering
upon the duties of their offices
• Judicial bond- one required in connection with
judicial proceedings
 reimbursement
• A surety who paid the obligee can recover
what he paid from the principal. The right is
covered by a separate indemnity agreement
whereby the principal expressly agrees to
reimburse the surety whatever the amount
that it will be required to pay the obligee
• Pertinent provisions in Civil Code apply
suppletorily to suretyship contract
interpretation of provisions
 Double insurance
• Exists where the same person is insured
by several insurers separately, in respect
to the same subject and interest
 Requisites: Double insurance
• Two or more insurers insuring separately
• Same insured person
• Same risk or peril insured against
• Same interest insured and
• Same subject matter
 Over-insurance
• Exists when the insured insures the same
property for an amount greater than the
value of that property
 TESTS
• Indemnity against third party liability – injured
third party can directly sue the insurer.
Purpose: to protect injured person against the
insolvency of the insured who caused such
injury
• Indemnity against actual loss or payment –
third party has no cause of action against the
insurer. The third person’s recourse is limited
to the insured alone
 Basis and Extent of Insurer’s Liability
• Insurer is not liable with the insured. The
insurer’s liability is based on contract while
that of the insured is based on torts.
Furthermore, the insurer’s liability is limited
by the amount of the insurance coverage
Rules on death or injury resulting from
accidental means
• Gen. Rule: Death or injury does not result
from accident or accidental means if it is the
natural result of the insured’s voluntary act,
unaccompanied by anything unforeseen
except the death or injury
• Excption: there is no accident when a
deliberate act is performed resulting to injury
or death
• The mere act of the insured of pointing a gun
to his temple believing that the gun was not
loaded and the gun fired when he pulled the
trigger resulting to his death, was held to be
an accident. The insured unquestionably was
negligent but it will not prevent his
beneficiaries from recovering under the
insurance policy (Sun v CA)
 No action clause
• Requirement in the 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.