insurance - reviewer

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CHAPTER 1 – INTRODUCTION I. Origin and Growth of Insurance 1. Early maritime or marine insurance Vance: Origin of the modern commercial contract of insurance Maritime transportation practices; Bottomry loan – loan obtained for the value of the vessel on a voyage and the lender was repaid only if the vessel subject of the loan arrived safely at its destination Respondentia loan – loan obtained as security for the value of the cargo t o be transported and the lender was repaid only f cargo arrives safely at destination General average contribution – owners of cargo who benefited from the deliberate sacrifice of some goods to save the others from a sea peril, contribute to pay the loss suffered by the sacrifice Real and Hypothecary Nature of Maritime Law - The real and hypothecary nature refers to this relationship with the property attached. Real refers to a property relationship and hypothecary means to pledge - Ship-owner’s liability is limited to the value of the ship w/c is deemed pledged to answer for the liability - Risk-distributing scheme – pooling of resources of a big group to spread in an equitable manner the loss w/c would normally fall upon a single individual exposed to the same risks -confine liability of owner, agent arising from operation of ship to the vessel, equipment, and freight or insurance, if any so that if ship owner or agent abandoned ship, equipment, and freight, his liability is extinguished. -- Aboitiz Shipping v New India Insurance The doctrine of limited liability limits the amount of interest in a vessel to its pro rata share in the loss because of the real and hypothecary nature of maritime law. Before it could be invoke, carrier has to show that it exercised extraordinary diligence in transporting its goods. Carale Barks Limited liability – insurance proceeds will take the place of the vessel Q: If the value of the vessel is less than the voyage of goods A: vessel is no longer liable for the excess The real and hypothecary nature does not apply when another law applies – i.e. diligence of common carrier 2. Development of insurance (refer to D2009 reviewer) 3. Insurance business in the Philippines (refer to D2009 reviewer) 4. Office of the Insurance Commission Sec. 414. The Insurance Commissioner shall have the duty to see that all laws relating to insurance, insurance companies and other insurance matters, mutual benefit associations, and trusts for charitable uses are faithfully executed and to perform the duties imposed upon him by this Code, and shall, notwithstanding any existing laws to the contrary, have sole and exclusive authority to regulate the issuance and sale of variable contracts as defined in section two hundred thirty-two and to provide for the licensing of persons selling such contracts, and to issue such reasonable rules and regulations governing the same. The Commissioner may issue such rulings, instructions, circulars, orders and decision as he may deem necessary to secure the enforcement of the provisions of this Code, subject to the approval of the Secretary of Finance. Except as otherwise specified, decisions made by the Commissioner shall be appealable to

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Page 1: INSURANCE - reviewer

CHAPTER 1 – INTRODUCTION

I. Origin and Growth of Insurance

1. Early maritime or marine insuranceVance:Origin of the modern commercial contract of insurance

Maritime transportation practices; Bottomry loan – loan obtained for the value of the vessel on

a voyage and the lender was repaid only if the vessel subject of the loan arrived safely at its destination

Respondentia loan – loan obtained as security for the value of the cargo t o be transported and the lender was repaid only f cargo arrives safely at destination

General average contribution – owners of cargo who benefited from the deliberate sacrifice of some goods to save the others from a sea peril, contribute to pay the loss suffered by the sacrifice

Real and Hypothecary Nature of Maritime Law- The real and hypothecary nature refers to this relationship with the property attached. Real refers to a property relationship and hypothecary means to pledge- Ship-owner’s liability is limited to the value of the ship w/c is deemed pledged to answer for the liability- Risk-distributing scheme – pooling of resources of a big group to spread in an equitable manner the loss w/c would normally fall upon a single individual exposed to the same risks-confine liability of owner, agent arising from operation of ship to the vessel, equipment, and freight or insurance, if any so that if ship owner or agent abandoned ship, equipment, and freight, his liability is extinguished.--Aboitiz Shipping v New India InsuranceThe doctrine of limited liability limits the amount of interest in a vessel to its pro rata share in the loss because of the real and hypothecary nature of maritime law. Before it could be invoke, carrier has to show that it exercised extraordinary diligence in transporting its goods.

Carale Barks Limited liability – insurance proceeds will take the place of the vessel Q: If the value of the vessel is less than the voyage of goodsA: vessel is no longer liable for the excess

The real and hypothecary nature does not apply when another law applies – i.e. diligence of common carrier

2. Development of insurance(refer to D2009 reviewer)

3. Insurance business in the Philippines(refer to D2009 reviewer)

4. Office of the Insurance Commission

PhilAm v ArnaldoThe Insurance Commissioner has administrative power over insurance businesses. He has quasi-judicial power over relations bet insurance companies and the insured public. Agents of insurance companies do not fall under this. --Republic v Del Monte MotorsIt is the duty of the Insurance Commissioner to hold the security deposits under the Insurance Commission for the protection of the public. The security deposits are, under the law, exempt from execution.

II. Laws Governing Insurance Insurance Code as amended preceded by the Insurance Act (Act 2427; Dec 11, 1914; copied from California Insurance Act)

- Regardless of what law governs, the deficiencies in the law will have to be supplemented by the general principles prevailing on the subject in American jurisprudence. Using the prevailing principles the court ruled that the beneficiary cannot be changed without his/her consent. (Gercio v Sunlife; 1925)

- As the Philippine law was taken verbatim from the law of California, in accordance with well settled canons of statutory construction, the court should follow in fundamental points, at

Sec. 414. The Insurance Commissioner shall have the duty to see that all laws relating to insurance, insurance companies and other insurance matters, mutual benefit associations, and trusts for charitable uses are faithfully executed and to perform the duties imposed upon him by this Code, and shall, notwithstanding any existing laws to the contrary, have sole and exclusive authority to regulate the issuance and sale of variable contracts as defined in section two hundred thirty-two and to provide for the licensing of persons selling such contracts, and to issue such reasonable rules and regulations governing the same.

The Commissioner may issue such rulings, instructions, circulars, orders and decision as he may deem necessary to secure the enforcement of the provisions of this Code, subject to the approval of the Secretary of Finance. Except as otherwise specified, decisions made by the Commissioner shall be appealable to the Secretary of Finance.

Sec. 415. In addition to the administrative sanctions provided elsewhere in this Code, the Insurance Commissioner is hereby authorized, at his discretion, to impose upon the insurance companies, their directors and/or officers and/or agents, for any willful failure or refusal to comply with, or violation of any provision of this Code, or any order, instruction, regulation, or ruling of the Insurance Commissioner.

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least, the construction placed by California courts on a California law. (Ang Giok Chip v Springfield; 1931)

- US jurisprudence is persuasive in the construction of the Insurance Code. (Philippine Health Care Providers v Commissioner of Internal Revenue; 2009)

The Civil Code

Art 2011 provides that NCC is suppletory to special laws which govern insurance contracts

Special Laws (GSIS, SSS, PDIC, etc)

CHAPTER 2 – THE CONTRACT OF INSURANCE

A. Definitions

Carale Barks Important to find out why an establishment is doing

the business of insurance or notWhy? For purpose of determining what “doing an insurance business” means, we have to scrutinize the operations of the business as a whole. This is prudent and appropriate, taking into account the burdensome and strict laws, rules and regulations applicable to insurers and other entities engaged in the insurance business (Phil. Health Care Providers v CIR)Example:

SECURITY FUND – Chapter 5 - Sec 365 Only licensed companies and agents

B. Elements (IRDCR)1. Insurable interest

- interest in life or thing capable of pecuniary estimation2. Risk of loss or damage

- insured is subjected to risk through the destruction or impairment of that interest by the happening of designated peril

3. Designated peril as cause (risk coverage/qualifiers) - cause of damage or loss must be caused by the designated perils stated in the contract

4. Consideration: premium - insurer undertakes to assume the risk of loss for a consideration(premium) - premium is a ratable contribution to a general insurance fund 5. Risk distributing scheme (because of definition of insurance business) - not risk-transferring scheme, the assumption of risk is a part of the general schemes to distribute actual losses among a large group of persons bearing similar risks C. Characteristics (SPACCIE)1. Synallagmatic – Rights and obligations of the parties correlate and mutually correspond. Insurer assumes the risk of loss w/c insured might suffer in consideration of payments under a risk-distributing scheme. Pooling of resources, legal reserve. 2. Personal and uberrimae fides Personal – each party has in view character, credit and conduct of other Uberrimae fides – highest degree of good faith enjoined by law3. Aleatory – liability of insurer depends upon some event w/c is uncertain, or w/c though certain, is to occur at some future undetermined time4. Consensual and voluntary – meeting of mind of parties 5. Contract of adhesion – “take it or leave it” 6. Indemnity for non-life: you can’t recover more than the value of your lossfor life: investment – measure of economic security for the insured during his lifetime and for the beneficiaries during his death7. Executory and conditional – insurer has no obligation to pay until and unless the peril insured against takes place

D. Contracts for Contingent ServicesI . Health Maintenance Organizations

- Org where members pay an annual fee and are entitled to preventive, diagnostic, and curative medical services provided by its duly licensed physicians, etc

Health Care Agreement is non-life insurance since it satisfies all the elements, and also by virtue of Sec 10 (which actually refers to life insurance). And also for fraud to be a ground of rescission under Sec 27, there must be intent to defraud and not done in good faith and also rescission must be made before an action is filed. (PhilamCare v CA; 2002)

In Philamcare Health Systems, Inc. v. CA, 19 we ruled that a health care agreement is in the nature of a non-life insurance. It is an established rule in insurance contracts that when their terms contain limitations on liability, they should be construed strictly against the insurer. These are contracts of adhesion the

Sec 2.1 A contract of insurance is an agreement whereby one undertakes for a consideration to indemnify another against loss, damage, or liability arising from an unknown or contingent event.

A contract of suretyship shall be deemed to be an insurance contract, within the meaning of this Code, only if made by a surety who or which, as such, is doing an insurance business as hereinafter provided.

Sec 175 defines surety as a guaranty of the performance of an obligation

Sec 2.2 The term “doing an insurance business” or “transacting an insurance business” means:

a) making or proposing to make, as insurer, any insurance contract

b) making or proposing to make, as surety, any contract of suretyship as a vocation and not as merely incidental to any other legitimate business or activity of the surety

c) doing any kind of business, including a reinsurance business, specifically recognized as constituting the doing of an insurance business within the meaning of this Code.

d) doing or proposing to do any business in substance equivalent to

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terms of which must be interpreted and enforced stringently against the insurer which prepared the contract. This doctrine is equally applicable to health care agreements. 21 (Blue Cross v Olivares; 2008)

HMO not doing the business of insuranceArguments:1. Primary object and purpose test (service vs. indemnity)2. History of HMOs (development of American jurisprudence and also it helps make healthcare more affordable) – HMO already came but the law remained the sameAlso not in conflict with Philam Care and Blue Cross because this is a tax case and does not involve liability between member and HMO. (Philippine Health Care Providers v Commission of Internal Revenue; 2009)

II. Pre-Need

Carale Barks - No express stipulation that pre-need is insurance- It is placed under insurance commission. Does it make

it an establishment doing insurance? - Insurance based on phrase “mobilization of savings” in

the declaration of policy

III. Warranties covering goods sold/services renderedWarranty refers to the INHERENT QUALITY of the goods/service

- Can be foreseen Insurance has nothing to do with the goods purchased or its quality

E. General Classification of Insurance1. Life

a) Individual life; pure endowment

b) Group life

Pineda v CA & Insular LifeGroup insurance is essentially a single insurance contract that provides coverage for many individuals. In its original and most common form, group insurance provides life or health insurance coverage for the employees of one employer.

The coverage terms for group insurance are usually stated in a master agreement issued by the insurer to an employer. The employer acts as a functionary in the collection and payment of premiums and in performing related duties.

Although the employer may be the titular or named insured, the insurance is actually related to the life and health of the employee. EE is in the position of a real party to the master policy, and even in a non-contributory plan, the payment by the employer of the entire premium is a part of the total compensation paid for the services of the employee.

Group insurance traces its roots to insurance for the employees of an employer. There is contributory and non-contributory plan. Because of the control test, the employer is actually an agent of the insurer and not an agent of the employees.

Carale Barks No medical exams needed usuallyRequires a certain number of people to be included in the policy based on law of averages – a determinable % of members of group would die w/in contemplated period

RA 9829 – Pre-Need Code

Sec 4 (b) “pre-need plans” are contracts, agreements, deeds, or plans for the benefit of the planholders which provide for the performance of future services, payment of monetary considerations or delivery of other benefits at the time of actual need or agreed maturity date, as specified therein, in exchange for cash or installment amounts with or without interest or insurance coverage…

(c) “pre-need company” refers to any corporation registered with the Commission and authorized/licensed to sell or offer to sell pre-need plans…

Sec 5 All pre-need companies, as defined under this act, shall be under the primary and exclusive supervision and regulation of the Insurance Commission…

Sec 10 No person shall operate as a pre-need company or engage in the business of a pre-need company unless licensed by the Commission in accordance with this Code.

Sec 179 Life insurance is insurance on human lives and insurance appertaining thereto or connected therewith.

Sec 180 An insurance upon life may be payable on the death of the person, or on his surviving a specified period, or otherwise contingently on the continuance or cessation of life.Every contract or pledge for the payment of endowments or annuities shall be considered a life insurance contract for purposes of this code.

Sec 50 …Group insurance and group annuity policies, however, may be typewritten and need not be in printed form.Sec 228 …If a group life policy is on a plan of insurance other than term, it shall contain a non-forfeiture provision or provisions which in the opinion of the Commissioner is or are equitable to the insured or the policyholder: Provided, That nothing herein contained shall be so construed as to require group life policies to contain the same non-forfeiture provisions as are required of individual life policies.

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c) Industrial Life Insurance

2. Non-lifea) Marine insurance:

b) Fire

c) Casualty/liability

d) Suretyship

3. Other Modes of Classificationa) Private v public (voluntary and compulsory) Carale Barks - public – compulsory GSIS coverage, SSS coverage - private – ordinary insurance companies

b) First party insurance and third party insurance Carale Barks - 1st party – it is the insured who suffers the loss or damage. He is the one paid by the insurance company - 3rd party – insurance is for liability, payment is made to 3rd person for the injury caused by the insured; casualty insurance(sec 174)

4. Some life Insurance Plansa) whole life plan ordinary - insured agrees to pay premiums while he lives; insurer agrees to pay face value upon death of insured

limited payment – insured pays premium only for specified # of years after which he stops paying at all. Insurer pays when insured dies.

single premium – insured pays one premium

joint-life – 2 insured in one policy. Proceeds are paid even when only one dies

universal life – partial is for insurance and partial is for investment

variable life – performance of investment

- allows you to allocate a portion of your premiums to a separate account comprised of various instruments and investment funds within the insurance company's portfolio

b) term plan- insurer’s liability arises only upon death of insured within agreed term of period- if insured survives, contract terminates

c) modified life – combination of other kinds

d) pure endowment plan- if insured survives a period, he is paid proceeds. Should he die, insurer free from liability

e) endowment plan – most common- if insured outlives specified period, he is paid the face value. If he dies, beneficiaries get the proceeds- premium is higher

Sec 229 …that form of life insurance under which the premiums are payable either monthly or oftener, if the face amount of insurance provided in any policy is not more than five hundred times that of the current statutory minimum daily wage in the City of Manila, and if the words “industrial policy” are printed upon the policy as part of the descriptive matter… [it] shall not lapse for non-payment of premium if such non-payment was due to the failure of the company to send its representative or agent to the insured at the residence of the insured or at some other place indicated by him for the purpose of collecting such premium: Provided, That the provisions of this paragraph shall not apply when the premium on the policy remains unpaid for a period of three months or twelve weeks after the grace period has expired.

Sec 99: all kinds of property and interests therein in connection with any and all risks of navigation, transit or transportation, preparation for shipping, while awaiting shipment, or during delays, storage, transhipment, or reshipment.-persons or property in connection with or appertaining to marine, inland marine, transit or transportation insurance, including liability for loss of or damage-bridges, tunnels and other instrumentalities of transportation and communication, piers, wharves, docks and slips, and other aids to navigation and transportation, including dry docks and marine railways, dams and appurtenant facilities for the control of the waterways.-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.

Sec 167 As used in this Code, the term “fire insurance” shall include insurance against loss by fire, lightning, windstorm, tornado or earthquake and other allied risks, when such risks are covered by extension to fire insurance policies or under separate policies.

Sec 175 A contract of surety shipis an agreement whereby a party called the surety guarantees the performance of another party called the principal or obligor of an obligation or undertaking in favor of a third party called the obligee

Sec 174 …is insurance covering loss or liability arising from accident or mishap, excluding certain types of loss which by law or custom are considered as falling exclusively within the scope of other types of insurance… It includes but is not limited to: employer’s liability, motor vehicle liability, plate glass, burglary and theft, personal accident and health… as

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F. Construction/Interpretation1. Literal/strict interpretation

Cardinal rule: interpret in favor of insured only in case of DOUBT, not when intention is clear expressed in policy

Rationale:

Cebu Shipyard v William Lines- ship burned while on repair, fault of repairer, insurer

still paysWhen the terms of a contract are clear its stipulations control. Since William Lines is the only one insured then Cebu Shipyard can’t be a co-insured. On the other hand, contracts of adhesion must be construed taking in mind the circumstances involved as well as equity and fair play.

New Life Enterprises v CA- same agent but different insurers, violation of other

insurance clauseThe provisions of an insurance contract, if clear and unambiguous, give no room for construction. Such is the case in this other insurer clause even though it would be unfair and unjust especially since the agent of the insurer knew of the double-insurance.

First Quezon City Insurance v CA- dragged by bus while still boarding; insurer paid 12K

onlyIllustration of non-construction if clear since contract provides the limit that only 12k per passenger but no more than 50k per accident.

Ty v First NationalBecause of definition of partial loss as amputation there is no insurance coverage.

Misamis Lumber v Capital

- authorized repair limit of P150Because there is an express stipulation that consented repair liability is only up to P150 then it is only up to that that insurer is liable.

Sun Insurance v CA(1991)- insurance claim denied, filed MR. prescription runs

after 1st rejectionConstruction of words or terms in their plain and ordinary meaning preclude the construction that rejection refers to the final rejection of a claim and therefore the contractual prescriptive period begins during the initial rejection.

Fortune Insurance v CA- money, security, & payroll robbery insurance; done by

guard “authorized representatives”A contract of insurance is a contract of adhesion, thus any ambiguity therein should be resolved against the insurer, or it should be construed liberally in favor of the insured and strictly against the insurer. Limitations of liability should be regarded with extreme jealousy and must be construed in such a way as to preclude the insurer from non-compliance with its obligation. It goes without saying then that if the terms of the contract are clear and unambiguous, there is no room for construction and such terms cannot be enlarged or diminished by judicial construction. Because provisions cover both employees and authorized representatives, it covers contractual employees.

Perla v CA- bus figured in accident, passenger sued, insurer paid

12K, injured wants 50KInsurance policy is the law between the parties and the clear provision that consent of the insurer need be obtained before paying any claims to entitle her to reimbursement is binding upon them.

Oriental Assurance v CA- logs boarded in 2 ships, 1 sank, not total loss

The clear words that the insurance covers only total loss is binding. Also Sec 139 covers an indivisible unit per policy and since only one of the two barges resulted in the destruction of the logs the total ratio is only less than ½ and does not reach the required ¾ for total loss.

2. Liberal Interpretation

Cardinal Rule: any obscurities or ambiguities in an insurance contract must be strictly construed against insurer, the party who made it

Art 1370, CC: If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control.

If the words appear to be contrary to the evident intention of the parties, the latter shall prevail over the former.

Art. 1305. A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service.

Art. 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.

Art. 1308. The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them.

Art 1377 The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity.

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Rationale:Carry out the purpose of the contract which is to insure against risk of loss, damage, or liability

Malayan Insurance v CA- arrest of civil authority in south africa

Because ambiguities are strictly construed against those who have caused them and also because exceptions against liability are strictly construed against insurer then arrest shall cover civil arrest as well.

Western Guaranty v CA- 3rd party liability, “all sums necessary for discharge

liability of insured in respect of events”Limitations on certain liabilities is not exhaustive if not expressly stipulated and will not preclude claims of other forms of damages. This is because limitations in liability are strictly construed against insurer and contracts of adhesion construed strictly against maker.

Qua Chee Gan v Law Union- Contract prohibits oils, in warehouse there was

gasolineAmbiguities construed strictly against those causing ambiguity. The term oils therefore precludes gasoline since the normal use of the word refers to lubricants.

Del Rosario v Equitable- Drowning, no corresponding payment

Though the policy covers death by drowning, it did not specify the recoverable amount. The only amount referring to drowning is physical injuries by drowning. Because there is an ambiguity as to the recoverable amount, it is construed in favor of the insured.

Geagonia v CA- Different insurable interest since 1 is for mortgagor

other is for mortgagee of propertyAmbiguity in other insurance clause construed against insurer and therefore not covers insurance for benefit of mortgagee as well as stipulation that condition only applies to claims for more than 200k.

Sun Insurance v CA(1992)- Felix the guy who put a bullet on his head

Although there was negligence in the occurrence of the accident, because of strict construction against insurer, this does not mean the accident is not covered unless there is an express exemption.

Rizal Surety v CA- fire insurance “premises occupied by them forming

part of building”. Annex included.

Limitations of integral part of building and inside compound of insured is liberally construed because of ambiguity and also because factual findings of trial court and CA say so.

CHAPTER 3 – INSURABLE INSTEREST

A. Definition and purpose

Basis:

Carale Barks Insurable interest is in definition bec how can you suffer loss when you have no interesy?Insurable interest to the extent that you are damnifiedPurpose:

1. Prevents wagering2. Limits liability of insurer

May not be waived

B. Insurable interest in life/health:Sec 10 Every person has an insurable interest in the life and health:a) Of himself, of his spouse and of his children;b) Of any person on whom he depends wholly or in part for education or support, or in whom he has a pecuniary interestc) Of any person under a legal obligation to him for the payment of money, or respecting property or services, of which death or illness might delay or prevent the performance; andd) Of any person upon whose life any estate or interest vested in him depends.

Carale Barks Insurable interest exists where there is reasonable ground

founded on (1)relations of the parties either contractual or pecuniary, (2) or by blood and affinity, to expect some benefit or advantage from continuance of life of insured.

Insurable interest must exist at the time of inception (life)Except: (Gercio v Sun Life) husband who took out life policy for wife is still entitled to proceeds when she died even when they were already divorced then

Non –life – insurable interest at inception and time of loss

Art. 1373. If some stipulation of any contract should admit of several meanings, it shall be understood as bearing that import which is most adequate to render it effectual.

Sec 2.1 The contract of insurance is an agreement whereby one undertakes for a consideration to indemnify another against loss, damage, or liability arising from an unknown or contingent event.

Sec 25 Every stipulation in a policy of insurance for the payment of loss whether the person insured has or has not any interest in the property insured, or that the policy shall be received as proof of such interest, and every policy executed by way of gaming or wagering, is void.

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(a) own life- one has unlimited in his life so he can designate anyone to be beneficiary - beneficiary need not have insurable interest in life of insured so long as not one of those prohibited in law

spouse – should be legal, legitimate- mere love and affection will not be enough to

constitute insurable interest

children – may be illegitimate, legitimate, minors or of legal age, married or not

(b) life of person whom he depends for support

- Child may procure insurance on life of parent (here not a)- child taken by person from orphanage – w/ insurable interest bec of expectation of support- no insurable interest in lives of cousins, nephews, aunts and other relatives. Not even in-laws. UNLESS: they have pecuniary interest so they fall under (c)

(c) person who has legal obligation of which death or illness might delay or prevent the performance Creditor can take life insurance for debtor- no insurable interest in secured debts- insurable interest in unsecured debts so if debtor dies something will still answer for debt-limit of insurable interest: amount of debt- insurable interest must exist both at inception and at time of loss bec dedbt may have already been paid by then

ER can insure like of EE; if EE has already severed ties with ER- El Oriente Fabrica v Posadas: contract is deemed to indemnify ER for loss suffered due to death, but ER no longer suffered loss of death since no more ties!- the loss was resignation, so should have insured against resignation!

d) Of any person upon whose life any estate or interest vested in him depends.- usufrutory has insurable interest in life of naked owner

Insurable interest in health:Philamcare v. CA: the insurable interest of person in obtaining health care agreement is his own health

C. Insurable interest in property:1. Definition

- interest of such nature that a contemplated peril might damnify the insured - he will be benefited by continuing existence of thing or suffer pecuniary loss by its destruction

2. Amplified by:

Insurable interest in property may consist in(a) existing interest- actual interest- e.g. interest of the owner, mortgagee or lessee

(b) inchoate interest- interest exists but it is incomplete or unripe interest; will ripen upon happening of an event- must be founded on ACTUAL existing interest- e.g. interest of stockholders with respect to dividends in case of profits ad shares in the assets

(c) expectancy coupled with actual interest

- mere expectancy not enough. It must be coupled with an actual interest- e.g. farmer has insurable interest in the yield of his rice field bec of his existing right since he planted the rice- a son has no insurable interest in a property of his father since he only has mere expectation.

Art. 195, FC. Subject to the provisions of the succeeding articles, the following are obliged to support each other to the whole extent set forth in the preceding article: (1) The spouses; (2) Legitimate ascendants and descendants; (3) Parents and their legitimate children and the legitimate and illegitimate children of the latter; (4) Parents and their illegitimate children and the legitimate and illegitimate children of the latter; and (5) Legitimate brothers and sisters, whether of full or half-blood

Art. 196. Brothers and sisters not legitimately related, whether of the full or half-blood, are likewise bound to support each other.

Sec 13 Every interest in property, whether real or personal, or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril might directly damnify the insured, is an insurable interest.

Sec 18 No contract or policy of insurance on property shall be enforceable except for the benefit of some person having an insurable interest in the property insured.

Sec 14 An insurable interest in property may consist in:a) An existing interestb) An inchoate interest founded on an existing interestc) An expectancy, coupled with an existing interest in that out of which the expectancy arises

Sec 16 A mere contingent or expectant interest in anything, not founded on an actual right to the thing, nor upon any valid contract for it, is not insurable.

Art 777, CC The rights to the succession are transmitted from the moment of the death of the decedent.

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Cha v CA-lessor-lessee. Contract says: “LESSEE shall not insure against fire the chattels… in the leased premises without first obtaining the written consent and approval of the LESSOR. Otherwise policy is deemed assigned and transferred to the LESSOR for its own benefit”-lessor claims proceeds due to contract- Sec 18, Sec 25, Sec 17- insurable interest over merchandise remains with the insured, the lessee. automatic assignment of the policy to lessor is void. Use sec 25. - without prejudice to any action of lessor to lessee for liability for violating their lease contract. --

Filipino Merchants Insurance v CAA perfected sales contract is enough to establish an insurable interest although ownership has yet to be transferred through delivery. - consignee has insurable interest in the cargo bec of the profit it will derive from it (pasok sa c) -- Gaisano Cagayan v Insurance Co of North AmericaOwnership is not only basis for insurable interest in property since vendor‘s lien is also considered insurable interest. - insurable interest is not title but substantial economic interest

3. Measure of insurable interest:

- being a contract of indemnity, measure of insurable interest in property is the extent to w/c the insured might be damnified by the loss - indemnity principle: the insured may not recover a greater value than that of his actual loss4. When should insurable interest exist?

- insurable interest in property should exist both at the (1) time the insurance takes effect and (2) when the loss occurs- insurable interest does not have to exist in between inception and occurrence of loss

- in life, insurable interest must exist only at the time of the inception except in some cases: life of debtor- so if insured property is sold and loss occurs when ownership was on another, then no more insurable interest at time of loss, unless maybe there is right of redemption

5. Change of interest

GR: absolute transfer of ownership (change of interest in thing) without transfer of interest in policy SUSPENDS the insurance until ownership of thing is back in policy holder

EXCEPT:1. change of interest after loss does not affect the policy

- after the loss occurs, liability of insurer becomes fixed and subsequent change of interest does not affect the right of insured to indemnity- the extent of loss had already been fixed, so you can definitely transfer it!!!

2. change of interest in policy insuring several things separately

- application: single policy insures several distinct things separately- conveyance of one or more of the separate things does not affect the policy in respect to the others not conveyed

3. change of interest on death of insured, by will or succession

- insured’s interest passes to his legal heirs. The heir may continue the insurance on the property by paying the premiums

Sec 15 A carrier or depository of any kind has an insurable interest in a thing held by him as such, to the extent of his liability but not to exceed the value thereof.

Sec 17 The measure of an insurable interest in property is the extent to which the insured might be damnified by loss or injury thereof.

Sec 20 Except in the cases specified in the next four sections, and in the cases of life, accident, and health insurance, a change of interest in any part of a thing insured unaccompanied by a corresponding change in interest in the insurance, suspends the insurance to an equivalent extent, until the interest in the thing and the interest in the insurance are vested in the same person.

Sec 21 A change in interest in a thing insured, after the occurrence of an injury which results in a loss, does not affect the right of the insured to indemnity for the loss.

Sec 22 A change of interest in one or more several distinct things, separately insured by one policy, does not avoid the insurance as to the others.

Sec 19 An interest in property insured must exist when the insurance takes effect, and when the loss occurs, but not exist in the meantime; and interest in the life or health of a person insured must exist when the insurance takes effect, but need not exist thereafter or when the loss occurs.

Sec 23 A change of interest, by will or succession, on the death of the insured, does not avoid an insurance; and his interest in the insurance passes to the person taking his interest in the thing insured.

Art 777, CC The rights to the succession are transmitted from the moment of the death of the decedent.

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4. transfer of interest by one of several partners or co-owners

- any transfer of interest does not avoid the policy since a co-owner or partner also as insurable interest in the thing, only that the interest is increased after the transfer

---Automatic transfer of interest

- GR: (sec 53 main part) upon maturity, proceeds given exclusively to proper interest of person in whose name or for whose benefit it is madeException: - express stipulation in the policy that proceeds will inure to the benefit of person who may become owner of interest f insured, and the insurance is deemed transferred together w/ the property

Property Insurance v Life Insurance1. Property is strictly indemnity, Life is not indemnity and is more an investment than anything else.2. Life can never be pecuniarily estimated.3. A lot of consequences:- in property insurable interest must exist at the time the insurance takes effect and at the time of the loss- in life it must exist only in the beginning4. Commercial/financial is like property insurance5. Period of life is longer than property which is only one year.

D. Double Insurance v Over Insurance

Requisites:1. Same person insured 2. Several insurers3. Subject matter insured is the same4. Interest insured is the same5. Risk/peril insured against is also the same

- not prohibited if policy does not contain any stipulation against double or additional insurance- additional insurance without insurer’s consent may void the policy- Rationale: prevent situation where loss would e profitable to insured

Overinsurance

- Overinsurance: amount of insurance is beyond the value of the insurable interest

Double Interest Over insuranceSeveral insurer Can only be one, or can be

manySum total of policies need not exceed insurable interest:VALID

Amount of insurance is ALWAYS beyond the value of insurable interest - VOID

E. Multiple/Several Interests

Sec 24 A transfer of interest by one of several partners, joint owners, or owners in common, who are jointly insured, to the others, does not avoid an insurance even though it has been agreed that the insurance shall cease upon an alienation of the thing insured.

Sec 53 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 57 A policy may be so framed that it will inure to the benefit of whomsoever, during the continuance of the risk, may become the owner of the interest insured.

Sec. 181. A policy of insurance upon life or health may pass by transfer, will or succession to any person, whether he has an insurable interest or not, and such person may recover upon it whatever the insured might have recovered.

Sec 93 A double insurance exists where the same person is insured by several insurers separately in respect to the same subject and interest.

Sec 94 Where the insured is overinsured by double insurance:a) The insured, unless the policy otherwise provides, may

claim payment from the insurers in such order as he may select, up to the amount for which the insurers are severally liable under their respective contracts;

b) Where the policy under which the insured claims is a valid policy, the insured must give credit as against the valuation for any sum received by him under any other policy without regard to the actual value of the subject matter involved

c) Where the policy under which the insured claims is an unvalued policy he must give credit, as against the full insurable value, for any sum received by him under any policy

d) Where the insured receives any sum in excess of the valuation in the case of valued policies, or of the insurable value in the case of unvalued policies, he must hold such sum in trust for the insurers, according to their right of contribution among themselves

e) Each insurer is bound, as between himself and the other insurers, to contribute ratably to the loss in proportion to the amount for which he is liable under his contract.

Sec 8 Unless the policy otherwise provides, where a mortgagor of property effects insurance in his own name providing that the loss shall be payable to the mortgagee, or assigns a policy of insurance to a mortgagee, the insurance is deemed to be upon the interest of the mortgagor, who does not cease to be a party to the original contract, and any act of his, prior to the loss, which would otherwise avoid the insurance, will have the same effect, although the property is in the hands of the mortgagee, but any act which, under the contract of insurance, is to be performed by the mortgagor, may be performed by the mortgagee therein named, with the same effect as if it had been performed by the mortgagor.

Sec 9 If an insurer assents to the transfer of an insurance from a mortgagor to a mortgagee, and, at the time of his assent, imposes further obligation on the assignee, making a new contract with him, the act of the mortgagor cannot affect the rights of said assignee.

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-mortgagor and mortgagee each have separate and distinct insurable interest in the mortgaged propertyInsurance taken by mortgagor

Geagonia v CAAs to a mortgaged property, the mortgagor and the mortgagee have each an independent insurable interest therein and both interests may be covered by one policy, or each may take out a separate policy covering his interest, either at the same or at separate times. The mortgagor's insurable interest covers the full value of the mortgaged property, even though the mortgage debt is equivalent to the full value of the property. The mortgagee's insurable interest is to the extent of the debt, since the property is relied upon as security thereof, and in insuring he is not insuring the property but his interest or lien thereon. His insurable interest is prima facie the value mortgaged and extends only the amount of the debt, not exceeding the value of the mortgaged property. Note: Geagonia is an incorrect application of the principle that it stated and against Sec 8 since it considered an insurance taken by Mortgagor for benefit of Mortgagee as insurable interest of Mortgagee.

Tai Tong Chuache v Insurance Commission-mortgage creditor obtained insurance for mortgage property. Mortgagor also procured 3 insurance policies. All shared in payment of loss- Perfect illustration of distinctiveness of insurable interest of mortgagor and mortgagee where both claims were upheld by the court.

CHAPTER 4 – PERFECTION OF CONTRACT OF INSURANCE

A. Offer and acceptance- perfection is meeting of the minds between insured and insurer- the application of the would-be insured is only an offer subject to acceptance of insurerDelay in acceptance – “tort theory”

Carale Barks Tort theory - No contract yet perfected bec application has not yet been approved due to delay in insurer’s part

- Damages are paid to the would-be insured due to delay in insurer’s 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 the would be insured may recover on the basis of tort.

Perez v CA- Delay in forward of application bec of agent’s fault

Filing of application is offer and the issuance of a policy is the acceptance. This case also contemplates the possibility of a claim through tort theory however because there was no negligence in the processing of the application, the insurer could not be held liable.

Vda de Sindayen v Insular- aunt accepted policy and paid premium but insured

already dedAlthough there is a receipt of payment clause, the insurer is bound by the acts of its agent who is authorized to deliver the policy. Agent considered that of insured. The court here used in reverse Par 2 Sec 306 of the code.

Enriquez v Sun Life- insurer sent letter of acceptance but was not mailed.

Insured died. Notice of acceptance occurs upon cognition of the acceptance as provided for in Art 1262 of the civil code. Acceptance made by letter shall not bind offeror except from time it came to its knowledge.

B. Premium PaymentSec 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,

Art 2176 Whoever by act or omission causes damage or injury to another, there being fault or negligence, is obliged to pay for the damage done.

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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 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 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; 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.

Velasco v Apostol- premium paid after accident took place

Illustration of the old Insurance Act which expressly allowed credit extensions.

Valenzuela v CA- insurer jealous of agent wants to get a share. Insurer

asks agent to pay premiums of insured.

Under Section 77 of the Insurance Code, the remedy for the non-payment of premiums is to put an end to and render the insurance policy not binding.

Tibay v CA- out of 3K,only 600 was paid

Policy is not binding. Phoenix and Tuscany are implied and express waivers respectively. Phoenix is implied because it sued for payment of premium and Tuscany is express because there was express agreement to pay in installments. Sec 77 is based on the fact that insurance is a risk-distributing device.

Makati Tuscany v CA- Makati Tuscany paid only 2 installments out of 4.

This is actually a case to collect unpaid premiums by the insurer after the lapse of the coverage period. Three years of payment by installment speaks of intent of insurer to answer for risk even if payment by installment. This is another exception to Sec 77.

South Sea Surety v CA- Insured logs lost when ship capsized. Agent received

payment. Only two exceptions to Sec 77: 1) Life/Industrial Life where grace period applies and 2) A written acknowledgement of the receipt of the premium. It is also an illustration of Sec 306 par 2.

Areola v CA- Don’t mess with a lawyer! Company cancelled contract

bec payment was not received!Act of employee to receive premium is binding on the insurer and the insurer must answer for the malfeasance of employee in appropriating for himself the premiums. The reinstatement of the policy does not preclude the recovery of damages since the injury has already been inflicted and the damage done.

UCPB General Insurance v Masagana Telamart- Premium not paid before loss occurred in fire. UCPB

has been granting insured 60-90 day creditCasus omissus of Sec 72 of Insurance Act and Sec 77 of Insurance Code. Exceptions to Sec 77 are:1) life/industrial life policy when the grace period applies2) acknowledgement in policy/contract of the receipt of premium3) payment by installment as in Makati Tuscany4) credit extension granted by insurer5) estoppel

Sir: Other exceptions are 1) Cover notes as in Pacific Timber and 2) Oral Contracts

American Home Assurance v Chua- Check payment was made but was encashed after the

lossPayment by check if agent issues receipt is binding on insurer even if not yet encashed. Also admission of loss adjuster of prior knowledge of other insurers will render inutile the “other insurance clause.”

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C. Non-default options in life insuranceSec 227(f) A provision specifying the options to which the policyholder is entitled to in the event of default in a premium payment after three full annual premiums shall have been paid. Such option shall consist of: (1) A cash surrender value payable upon surrender of the policy which shall not be less than the reserve on the policy, the basis of which shall be indicated, for the then current policy year and any dividend additions thereto, reduced by a surrender charge which shall not be more than one-fifth of the entire reserve or two and one-half per centum of the amount insured and any dividend additions thereto; (2) One or more paid-up benefits on a plan or plans specified in the policy of such value as may be purchased by the cash surrender value;

(h) A table showing in figures cash surrender values and paid-up options available under the policy each year upon default in premium payments, during at least twenty years of the policy beginning with the year in which the values and options first become available, together with a provision that in the event of the failure of the policyholder to elect one of the said options within the time specified in the policy, one of said options shall automatically take effect and no policyholder shall ever forfeit his right to same by reason of his failure to so elect;

def. Cash Surrender Value: is the accumulated reserve on the policy after at least three full annual premiums and is payable upon surrender of the policy.

- it is a portion of the reserve in a life policy which accumulates from premium overcharges over the years

- premium payment is uniform all throughout but the risk is lesser when insured was younger, thus cost of protection was smaller and there is an excess amount paid

- The cash surrender value is an amount w/c the insurance company holds in trust for the insured to be delivered to him upon demand. It is therefore a liability of the company to the insured (Manufacturer’s Life v Meer)

- To get CSV: surrender policy and contract is terminated

def. Extended Insurance(shorter period): is a form of non-default option which uses the CSV as a SINGLE SINGLE SINGLE premium and extends the insurance contract until the CSV can afford.

- Face value of insurance remains the same but only within the term covered by value of CSV

- During extended period: insured can recover if he dies or he can reinstate his policy

- After extended period: contract terminates and cannot even reinstate

def. Paid-up Insurance (smaller face value): is a form of non-default option where the total CSV is treated as a SINGLE SINGLE SINGLE premium and will cover an entire period that the CSV can purchase except that it only covers the “paid up value”.

- obligation to pay premiums is deemed consummated forever and can reinstate the policy anytime

- better option if insured is young and then just reinstate the policy later

def. Automatic Premium Loan: is a form of non-default option where the CSV is used as payment of the premium but only as a loan with interest as illustrated in Manufacturer’s Life Insurance v Meer. It is also provided for in Sec 227 (g)

- insurer lends/advances to the insured w/o need of application amount necessary to pay overdue premium

- insurance continues in force for period covered by CSV---Manufacturer’s Life Insurance v Meer

- BIR wants to tax insurance company during war. In applying automatic premium loan, insurer in effect loaned person the amount due and paid his premium with it.

The cash surrender value is an amount w/c the insurance company holds in trust for the insured to be delivered to him upon demand. It is therefore a liability of the company to the insured. When the company’s credit for advances is paid out of the CSV, that value and the company’s liability is diminished pro tanto. Net assets of insurer increased since decrease in liability means corresponding increase in net assets.

D. ReinstatementSec 227 (j) A provision that the policyholder shall be entitled to have the policy reinstated at any time within three years from the date of default of premium payment unless the cash surrender value has been duly paid, or the extension period has expired, upon production of evidence of insurability satisfactory to the company and upon payment of all overdue premiums and any indebtedness to the company upon said policy, with interest rate not exceeding that which would have been applicable to said premiums and indebtedness in the policy years prior to reinstatement.

Andres v Crown Life Insurance- Was not able to pay all past due premiums

Failure to pay full premium due will result in non-reinstatement of policy unless there is a clear and positive waiver on the part of the insurer.

E. REFUND

Sec 79 A person insured is entitled to a return of premium, as follows: (a) To the whole premium if no part of his interest in the thing insured be exposed to any of the perils insured against; (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

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paragraph without sufficient cause as otherwise provided by law.

Sec 80 If a peril insured against has existed, and the insurer has been liable for any period, however short, the insured is not entitled to return of premiums, so far as that particular risk is concerned.

Sec 81 A person insured is entitled to return of the premium when the contract is voidable, on account of fraud or misrepresentation of the insurer, or of his agent, or on account of facts, the existence of which the insured was ignorant without his fault; or when by any default of the insured other than actual fraud, the insurer never incurred any liability under the policy.

Sec 82 In case of an over-insurance by several insurers, the insured is entitled to a ratable return of the premium, proportioned to the amount by which the aggregate sum insured in all the policies exceeds the insurable value of the thing at risk.---Grepalife v CA

- insurer asks for more payment and another medical exam even after the premium was paid. Insured asked for refund

The fact that the policy was inoperative or ineffectual from the beginning, the company was never exposed to the risk hence it is not entitled to the premium.

Cases where refund is possible:1. if no part of his interest in the thing insured be

exposed to any of the perils insured against, refund whole premium(79)

- ex: Grepalife v CA2. 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(79)

3. contract is voidable, on account of fraud or misrepresentation of the insurer, or of his agent, or on account of facts, the existence of which the insured was ignorant without his fault (81)

- car was already lost at time of insurance4. any default of the insured other than actual fraud, the

insurer never incurred any liability under the policy.(81)

over-insurance by several insurers, the insured is entitled to a ratable return of the premium, proportioned to the amount by which the aggregate sum insured in all the policies exceeds the insurable value of the thing at risk

CHAPTER 5 – THE POLICY, THE PARTIES AND THEIR RIGHTS

A. Insurance Policy

Sec 49 The written instrument in which a contract of insurance is set forth, is called a policy of insurance.

Sec 50 The policy shall be in printed form which may contain blank spaces; and any word, phrase, clause, mark, sign, symbol, signature, number, or word necessary to complete the contract of insurance shall be written on the blank spaces provided therein.

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.

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.

Group insurance and group annuity policies, however, may be typewritten and need not be in printed form.

Sec 51 A policy of insurance must specify:

(a) The parties between whom the contract is made;

(b) The amount to be insured except in the cases of open or running policies;

(c) The premium, or if the insurance is of a character where the exact premium is only determinable upon the termination of the contract, a statement of the basis and rates upon which the final premium is to be determined;

(d) The property or life insured;

(e) The interest of the insured in property insured, if he is not the absolute owner thereof;

(f) The risks insured against; and

(g) The period during which the insurance is to continue.

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Sec 226 No policy, certificate or contract of insurance shall be issued or delivered within the Philippines unless in the form previously approved by the Commissioner, and no application form shall be used with, and no rider, clause, warranty or endorsement shall be attached to, printed or stamped upon such policy, certificate or contract unless the form of such application, rider, clause, warranty or endorsement has been approved by the Commissioner.

Sec 52 Cover notes may be issued to bind insurance temporarily pending the issuance of the policy. Within sixty days after the issue of the 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 therefore.

Cover notes may be extended or renewed beyond such sixty 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. 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.

A provisional policy that only acts as a receipt of premium payment is not enough to bind the insurer during the interim period. The provisional policy to be a binding contract must have been complete that leaves nothing to be done, nothing to be completed, nothing to be passed upon, or determined before it shall take effect. (Lim v Sun Life Assurance)

A conditional binding receipt cannot bind the insurer unless the conditions set forth are met. (Great Pacific Life v CA)

If a loss occurs during the period covered by a cover note and an insurance policy is later on given accounting for the loss during the cover notes, the insurance company is still liable by virtue of the cover note. (Pacific Timber Export v CA)

Types of non-life insurance policies

Sec 59 A policy is either open, valued, or running.

Sec 60 An open policy is one in which the value of the thing insured is not agreed upon, but is left to be ascertained in case of loss.

Sec 61 A valued policy is one which expresses on its face an agreement that the thing insured shall be valued at a specific sum.

Sec 62 A running policy is one which contemplates successive insurances, and which 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 156 A valuation in a policy of marine insurance is conclusive between the parties thereto in the adjustment of either a partial or total loss, if the insured has some interest at risk, and there is no fraud on his part; except that when a thing has been hypothecated by bottomry or respondentia, before its insurance, and without the knowledge of the person actually procuring the insurance, he may show the real value. But a valuation fraudulent in fact, entitles the insurer to rescind the contract.

Sec 161 In estimating a loss under an open policy of marine insurance the following rules are to be observed:

(a) The value of a ship is its value at the beginning of the risk, including all articles or charges which add to its permanent value or which are necessary to prepare it for the voyage insured;

(b) The value of the cargo is its actual cost to the insured, when laden on board, or where the cost cannot be ascertained, its market value at the time and place of lading, adding the charges incurred in purchasing and placing it on board, but without reference to any loss

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incurred in raising money for its purchase, or to any drawback on its exportation, or to the fluctuation of the market at the port of destination, or to expenses incurred on the way or on arrival;

(c) The value of freightage is the gross freightage, exclusive of primage, without reference to the cost of earning it; and

(d) The cost of insurance is in each case to be added to the value thus estimated.

Sec 171 If there is no valuation in the policy, the measure of indemnity in an insurance against fire is the expense it would be to the insured at the time of the commencement of the fire to replace the thing lost or injured in the condition in which at the time of the injury; but if there is a valuation in a policy of fire insurance, the effect shall be the same as in a policy of marine insurance.

Is an illustration of a co-insurance clause except that in a co-insurance clause it is necessary to establish the actual value of the property at the time of the loss. It is also an illustration of an open insurance where the liability of the insurer is only equivalent to the loss at the time of the loss. (Development Insurance v IAC)

In a valued policy the value is simply the cost of the property and not necessarily the cost of acquisition. In the absence of fraud on the part of the insured, if the insurer agrees on the value stated then he shall be bound by it. (Harding v Commercial Union Assurance)

Parties: Insurer

Sec 6 Every person, partnership, association, or corporation duly authorized to transact insurance business as elsewhere provided in this code, may be an insurer.

Sec 184 For purposes of this Code, the term "insurer" or "insurance company" shall include all individuals, partnerships, associations, or corporations, including government-owned or controlled corporations or entities,

engaged as principals in the insurance business, excepting mutual benefit associations. Unless the context otherwise requires, the terms shall also include professional reinsurers defined in section two hundred eighty. "Domestic company" shall include companies formed, organized or existing under the laws of the Philippines. "Foreign company" when used without limitation shall include companies formed, organized, or existing under any laws other than those of the Philippines.

Sec 185 Corporations formed or organized to save any person or persons or other corporations harmless from loss, damage, or liability arising from any unknown or future or contingent event, or to indemnify or to compensate any person or persons or other corporations for any such loss, damage, or liability, or to guarantee the performance of or compliance with contractual obligations or the payment of debt of others shall be known as "insurance corporations".

The provisions of the Corporation Law shall apply to all insurance corporations now or hereafter engaged in business in the Philippines insofar as they do not conflict with the provisions of this chapter.

Parties: Agents and Brokers

Sec 299 requires the licensing of agents and brokers and prohibits them from practicing and receiving commissions without said license.

Sec 300 Any person who for compensation solicits or obtains insurance on behalf of any insurance company or transmits for a person other than himself an application for a policy or contract of insurance to or from such company or offers or assumes to act in the negotiating of such insurance shall be an insurance agent within the intent of this section and shall thereby become liable to all the duties, requirements, liabilities and penalties to which an insurance agent is subject.

Sec 301 Any person who for any compensation, commission or other thing of value acts or aids in any

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manner in soliciting, negotiating or procuring the making of any insurance contract or in placing risk or taking out insurance, on behalf of an insured other than himself, shall be an insurance broker within the intent of this Code, and shall thereby become liable to all the duties, requirements, liabilities and penalties to which an insurance broker is subject.

Sec 306 states that premiums received by agents shall be held in trust and that if agent is authorized to deliver a policy then his receipt of premium payment is receipt of insurer.

Parties: Insured

Sec 7 Anyone except a public enemy may be insured.

Sec 54 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 55 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 56 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 57 A policy may be so framed that it will inure to the benefit of whomsoever, during the continuance of the risk, may become the owner of the interest insured.

RA 6809 Sec 4 Upon the effectivity of this Act, existing wills, bequests, donations, grants, insurance policies and similar instruments containing references and provisions favorable to minors will not retroact to their prejudice.

Art 110 FC The spouses retain the ownership, possession, administration and enjoyment of their exclusive properties.

Either spouse may, during the marriage, transfer the administration of his or her exclusive property to the other by means of a public instrument, which shall be recorded in the registry of property of the place where the property is located.

Art 111 FC A spouse of age may mortgage, encumber, alienate or otherwise dispose of his or her exclusive property, without the consent of the other spouse, and appear alone in court to litigate with regard to the same.

Art 1390 NCC The following contracts are voidable or annullable, even though there may have been no damage to the contracting parties:

1) those where one of the parties is incapable of giving consent to a contract;

2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud.

These contracts are binding, unless they are annulled by a proper action.

Corporation where majority stockholders are public enemies are disqualified from being insured. (Filipanas Cia de Seguros v Huenefeld)

Parties: Beneficiaries

Sec 11 The insured shall have the right to change the beneficiary he designated in the policy, unless he has expressly waived this right in said policy.

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Art 739 NCC The following donations shall be void:

1) Those made between persons who were guilty of adultery or concubinage at the time of the donation;

2) Those made between persons found guilty of the same criminal offense, in consideration thereof;

3) Those made to a public officer or his wife, descendants and ascendants, by reason of his office.

In the case referred to in No. 1 the action for declaration of nullity may be brought by the spouse of the donor or donee; and the guilt of the donor and donee may be proved by preponderance of evidence in the same action.

Art 2011 NCC The contract of insurance is governed by special laws. Matters not expressly provided for in such special laws shall be regulated by this Code.

Art 2012 NCC Any person who is forbidden from receiving any donation under Art 739 cannot be named beneficiary of a life insurance policy by the person who cannot make any donation to him, according to said article.

Illustration of prohibitin in Art 2012 in relation to Art 739. No criminal conviction for adultery or concubinage is necessary as guilt may be established by preponderance of evidence in the same proceeding for declaration of nullity as provided for in the Art 739. Also used Matabuena v Cervantes. (Insular v Ebrado)

When second marriage in good faith, the two spouses split the insurance proceeds. (Consuegra v GSIS)

There being no proof of knowledge of prior marriage, there can be no concubinage/adultery. Proceeds from SSS do not form part of the estate of the insured and therefore the beneficiary stated is the one entitled to the proceeds if he/she is not disqualified. (SSS v Davac)

Under code of commerce a life insurance does not form part of the estate. The civil code is unavailing as it has no provision specifically for life insurance. A repurchase under the name of all the heirs is not enough to establish that the person repurchasing had the intent to donate the share of the others to them. (Del Val v Del Val)

The beneficiary of a life insurance cannot be changed without the consent of the beneficiary as the beneficiary has proprietary rights over the insurance. Of course this was before the Insurance Code. (Gercio v Sun Life Assurance)

Under the Insurance Act an insurance contract can’t be changed from irrevocable to revocable if:

1) There is a stipulation stating that it is irrevocable and no contingency is given to change such stipulation

2) The consent of ALL beneficiaries was not obtained, and in the case of minor children with respect to their father, the father can’t act in behalf of his children as there is a conflict of interest. (PhilAm Life v Pineda)

Sec 12 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.

Sir: Bakit kasama ang accessory (after the fact) kung tapos na ang boxing?

VI. Rescission: concealment, misrepresentation & breach of warranties .

Basis/Rationale

1. Uberrimae fidei

2. Risk management

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3. Ground for rescission

Concealment

Sec 26 A neglect to communicate that which a party knows and ought to communicate, is called a concealment.

Sec 27 A concealment whether intentional or unintentional entitles the injured party to rescind a contract of insurance.

Sec 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.

Sec 29 An intentional or fraudulent omission, on the part of the insured, to communicate information of matters proving or tending to prove the falsity of a warranty, entitles the insurer to rescind.

Sec 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.

Sec 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,

Sec 33 The rights of 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.

Sec 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 fifty-one.

Sec 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.

Sec 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.

The interim between 1978 and 1985 still does not require that concealment be made intentionally. Intentional and unintentional cancel each other out leading to just concealment. As such sinus tachycardia should have been revealed. (Canilang v CA)

Fact of being a mongoloid is a material fact that needs to be stated. (Great Pacific Life v CA ‘79)

Mere possibility of previous hypertension not enough to establish that there was concealment. (Great Pacific Life v CA ‘99)

Misrepresentation

Sec 36 A representation may be oral or written.

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Sec 37 A representation made may be at the time of, or before, issuance of the policy.

Sec 41 A representation may be altered or withdrawn before the insurance is effected, but not afterwards.

Sec 42 A representation must be presumed to refer to the date on which the contract goes into effect.

Sec 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.

Sec 43 When a person insured has no personal knowledge of a fact, he may nevertheless repeat information which he has upon the subject, and which he believes to be true, with the explanation that he does so on the information of others; or he may submit the information, in its whole extent, to the insurer; and in neither case is he responsible for its truth, unless it proceeds from an agent of the insured, whose duty is to give the information.

Sec 44 A representation is to be deemed false when the facts fail to correspond with its assertions or stipulations.

Sec 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. The right to rescind granted by this Code to the insurer is waived by the acceptance of premium payments despite knowledge of the ground for rescission.

Sec 227(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

Sec 46 The materiality of a representation is determined by the same rules as the materiality of a concealment.

If policy requires that they be informed of other insurers in writing then violation of this would be tantamount to fraud. (Pacific Banking v CA)

Posing as someone for medical exam is misrepresentation… DUH! (Equaras v Great Eastern)

Intent to defraud necessary for there to be misrepresentation. Overstatement by 20% of price on 70% of stocks done in good faith. (Qua v Law Union)

The insurer is not entitled to rescission for misrepresentation of age if the birth date on the policy leads to the conclusion that the insured is beyond the age covered by policy in which case the insurer is deemd to have waived any requirement. (Edillon v Manila Bankers)

No misrepresentation as to the price of the Studebaker because it was based on opinion of dealer. Also no misrepresentation as to cost because although it was acquired free it doesn’t mean there was no cost. (Harding v Commercial Union)

The incontestable clause

Sec 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.

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Sec 227(b) A provision that the policy shall be incontestable after it shall have been in force during the lifetime of the insured for a period of two years from its date of issue as shown in the policy, or date of approval of last reinstatement, except for non-payment of premium and except for violation of the conditions of the policy relating to military or naval service in time of war

The incontestability clause is construed as two years from creation of policy or reinstatement. Disregard provision on life. (Tan v CA)

This case is no longer applicable because of the amendment in 227 that it also applies to void whereas in Tan Chay it does not. (Tan Chay v West Coast Life)

Warranties

Kinds

1. Express

Sec 71 A statement in a policy of matter relating to the person or thing insured, or to the risk, as a fact, is an express warranty thereof.

2. Implied (marine only)

3. Affirmative

Sec 68 A warranty may relate to the past, the present, the future, or to any or all of these.

4. Promissory

Sec 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.

Sec 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.

Sec 69 No particular form of words is necessary to create a warranty.

Sec 70 Without prejudice to section fifty-one, 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.

Sec 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.

Sec 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.

Sec 76 A breach of warranty without fraud merely exonerates an insurer from the time that it occurs, or where it is broken in its inception, prevents the policy from attaching to the risk.

Warranties in fire insurance

Sec 168 An 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 an insurer to rescind a contract of life insurance.

Sec 169 An alteration in the use or condition of a thing insured from that to which it is limited by the policy, which does not increase the risk, does not affect a contract of fire insurance.

Sec 170 A contract of fire insurance is not affected by any act of the insured subsequent to the execution of the policy, which does not violate its provisions, even though it increases the risk and is the cause of the loss.

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Storage of hazardous materials

Alteration in use or condition

Sole ownership clause

Other insurance clause

Violation of the other insurer clause avoids contract without further action if provided for. (Pioneer v Yap)

With regard to other insurer clause, notification to the agent is not notification to the insurer. (New Life Enterprises v CA)

Condition that filing of claim before filing of case is valid and binding upon parties. (Pacific Banking v CA)

Knowing that there are only 2 fire extinguishers despite the warranty of 11 and yet issuing the policy nonetheless constitutes a waiver on the part of the insurer. (Qua Chee Gan v Law Union)

Storing excludes small quantities intended for daily use or consumption. To place 3 boxes of fireworks in the bodega for future sale is storing. The fact that the fireworks did not cause the fire does not affect the right to rescind the contract. (Young v Midland Textile Insurance)

Grounds & exercises of rights

Sec 63 A condition, stipulation, or agreement in any policy of insurance, limiting the time for commencing an action thereunder to a period of less than one year from the time when the cause of action accrues, is void.

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 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 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) a determination by the Commissioner that the continuation of the policy would violate or would place the insurer in voilation of this Code

Sec 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, and shall state (a) which of the grounds set forth in section sixty-four 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.

Sec 170 A contract of fire insurance is not affected by any act of the insured subsequent to the execution of the policy, which does not violate its provisions, even though it increases the risk and is the cause of the loss.

Sec 380 No cancellation of the policy shall be valid unless written notice thereof is given to the land transportation operator or owner of the vehicle and to the Land Transportation Commission at least fifteen days prior to the intended effective date thereof.

Upon receipt of such notice, the Land Transportation Commission, unless it receives evidence of a new valid insurance or guaranty in cash or surety bond as prescribed in this chapter, or an endorsement of revival of the cancelled one, shall order the immediate confiscation of the plates of the motor vehicle covered by such cancelled policy. The same may be re-issued only upon presentation of a new insurance policy or that a guaranty in cash or

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surety bond has been made or posted with the Commissioner and which meets the requirement of this chapter, or an endorsement or revival of the cancelled one.

Refusal to grant a loan to an insured is a valid ground of rescission and entitles the insured to a return of the premiums since the insurer had the benefit of using the financial resources to earn some money. (Filipinas Life Assurance v Nava)

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VII. Risks and Coverages .

In general

Sec 3 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.

The consent of a husband is not necessary for the validity of an insurance policy taken out by a married woman on her life or that of her children.

Any minor of the age of nineteen years or more, may, notwithstanding such minority, contract for life, health and accident insurance, with any insurance company duly authorized to do business in the Philippines, provided the insurance is taken on his own life and the beneficiary appointed is the minor’s estate or the minor’s father, mother, husband, wife, child, brother, or sister.

The married woman or the minor herein allowed to take out an insurance policy may exercise all the rights and privileges of an owner under a policy.

All rights, title and interest in the policy of insurance taken out by an original owner on the life or health of a minor shall automatically vest in the minor upon the death of the original owner, unless otherwise provided for in the policy.

Sec 84 Unless otherwise provided by the policy, an insurer is liable for a loss of which a peril insured against was the proximate cause, although a peril not contemplated by the contract may have been a remote cause of the loss; but he is not liable for a loss which the peril insured against was only a remote cause.

Sec 86 Where a peril is especially excepted in a contract of insurance, a loss, which would not have occurred but for such peril, is thereby excepted although the immediate cause of the loss was a peril which was not expected.

Def. proximate cause: that cause, which, in natural and continuous sequence, unbroken by an efficient intervening cause, produces the injury, and without which the result would not have occurred. (Bataclan v Medina)

Sec 85 An insurer is liable where the thing insured is rescued from a peril insured against that would otherwise have caused a loss, if, in the course of such rescue, the thing is exposed to a peril not insured against, which permanently deprives the insured of its possession, in whole or in part; or where a loss is caused by efforts to rescue the thing insured from a peril insured against.

Sec 87 An insurer is not liable for a loss caused by the willful act or through the connivance of the insured; but he is not exonerated by the negligence of the insured, or of the insurance agents or others.

The carrier’s insurer albeit liable even for the ordinary negligence of the insured cannot be held liable for acts of gross negligence. Leaving a barge at the wharf in the middle of a storm is gross negligence. (FGU v CA)

Life insurance

Sec 179 Life insurance is insurance on human lives and insurance appertaining thereto or connected therewith.

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Sec 180 An insurance upon life may be made payable on the death of the person, or on his surviving a specified period, or otherwise contingently on the continuance or cessation of life.

Ever contract or pledge for the payment of endowments or annuities shall be considered a life insurance contract for purposes of this Code.

In the absence of a judicial guardian, the father, or in the latter’s absence or incapacity, the mother, or any minor, who is an insured or a beneficiary under a contract of life, health or accident insurance, may exercise, in behalf of said minor, any right under the policy, without necessity of court authority or the giving of a bond, where the interest of the minor in the particular act involved does not exceed twenty thousand pesos. Such right may include, but shall not be limited to, obtaining a policy loan, surrendering the policy, receiving the proceeds of the policy, and giving the minor’s consent to any transaction on the policy.

Sec 180-A The insurer in a life insurance contract shall be liable in case of suicides only when it is committed after the policy has been in force for a period of two years from the date of its issue or of its last reinstatement, unless the policy provides for a shorter period: Provided, however, That suicide is committed in the state of insanity shall be compensable regardless of the date of commission. (cf. Sec 87)

A personal accident insurance policy covers death through homicide. Homicide after attending maskara festival is an accident in that it occurs without expectation and without intent or design on part of the insured. Also since it is not expressly included then it cannot bar recovery. (Finman v CA)

Expressly excluding death caused by intentional acts of third persons excludes robbery with homicide from coverage. Of course Teehankee dissents and cites Calanoc

v CA which interpreted a similar provision oppositely. (Biagtan v Insular)

Pointing a gun to your head when the magazine is removed is not a suicidal act and a death resulting there from is accidental and covered by an insurance policy. It’s not suicidal. (Sun Insurance v CA)

Current jurisprudence removes any delineation between accidental death and accidental means. Assuming there is a difference slipping and then being punched in a boxing competition still falls within the definition of accidental means because the slipping being the cause was accidental. (De la cruz v capital insurance)

Sec 50 The policy shall be in printed form…

Group insurance and group annuity policies, however, may be typewritten and need not be in printed form.

Sec 228 last par The provisions of par (f) and (j) shall not apply to policies issued to a creditor to insure his debtors. If a group life policy is on a plan of insurance other than term, it shall contain a non-forfeiture provision or provisions which in the opinion of the Commissioner is or are equitable to the insured or the policyholder: Provided, That nothing therein contained shall be so construed as to require group life policies to contain the same non-forfeiture provisions as are required of individual life policies.

The employer, although the insured, is considered the agent of the insurer and any acts prejudicial to his employees shall not be binding on the employees in a group life insurance. (Pineda v CA)

Provision that insurance is immediately effective upon approval of loan and at the same time subject to insurer’s approval means that insurance is valid until denied by insurer. As such any delay in the approval/disapproval of the claim means the policy is valid and binding. (Eternal Gardens v Philamlife)

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Mortgage redemption insurance is in the interest of both mortgagee and mortgagor. (GREPALIFE v CA)

Def. industrial life insurance: life insurance under which the premiums are payable either monthly or oftener, if the face amount of insurance provided in any policy is not more than five hundred times that of the current statutory minimum daily wage in Manila. (Sec 229)

Sec 229 An industrial life policy shall not lapse for non-payment of premium if such non-payment was due to the failure of the company to send its representative or agent to the insured at the residence of the insured or at some other place indicated by him for the purpose of collecting such premium: Provided, That the provisions of this paragraph shall not apply when the premium on the policy remains unpaid for a period of three months or twelve weeks after the grace period has expired.

Sec 262 Any domestic stock life insurance company doing business in the Philippines may convert itself into an incorporated mutual life insurer. To that end it may provide and carry out a plan for the acquisition of the outstanding shares of its capital stock for the benefit of its policholders, or any class or classes of its policyholders, by complying with the requirements of this chapter.

A stock life insurance company that has converted itself into a mutual life insurer is tax exempted. (Republic v Sunlife)

Fire Insurance

Sec 167 As used in this Code, the term “fire insurance” shall include insurance against loss by fire, lightning, windstorm, tornado or earthquake and other allied risks, when such risks are covered by extension to fire insurance policies or under separate policies.

Fire in our jurisdiction is not considered a fortuitous event unless caused by lightning, natural disaster, or causality independent of human agency. More often it is caused by some act of man or human means. In this case, the acetylene cylinder caught fire due to the crew’s negligent acts. Nonetheless, the carrier could have still asked for general averages had it complied with the notice requirements under Art 813 and 814 of Code of Commerce. (Phil Home Assurance v CA)

Sec 168 An 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 an insurer to rescind a contract of fire insurance.

Sec 169 An alteration in the use or condition of a thing insured from that to which it is limited by the policy, which does not increase the risk, does not affect a contract of fire insurance.

Sec 170 A contract of fire insurance is not affected by any act of the insured subsequent to the execution of the policy, which does not violate its provisions, even though it increases the risk and is the cause of the loss.

Sec 171 If there is no valuation in the policy, the measure of indemnity in an insurance against fire is the expense it would be to the insured at the time of the commencement of the fire to replace the thing lost or injured in the condition in which at the time of the injury; but if there is a valuation in a policy of fire insurance, the effect shall be the same as in a policy of marine insurance.

Sec 172 Whenever the insured desires to have a valuation named in his policy, insuring any building or structure against fire, he may require such building or structure to be examined by an independent appraiser and the value of the insured's interest therein may then be fixed as between the insurer and the insured… in case of a total loss under such policy, the whole amount so insured upon the

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insured's interest in such building or structure, as stated in the policy upon which the insurers have received a premium, shall be paid, and in case of a partial loss the full amount of the partial loss shall be so paid, and in case there are two or more policies covering the insured's interest therein, each policy shall contribute pro rata to the payment of such whole or partial loss. But in no case shall the insurer be required to pay more than the amount thus stated in such policy.

Casualty/Liability insurance

Sec 174 Casualty insurance is insurance covering loss or liability arising from accident or mishap, excluding certain types of loss which by law or custom are considered as falling exclusively within the scope of other types of insurance such as fire or marine. It includes, but is not limited to, employer’s liability insurance, motor vehicle liability insurance, plate glass insurance, burglary and theft insurance, personal accident and health insurance as written by non-life insurance companies, and other substantially similar kinds of insurance.

Supra case on construction of “authorized representatives.” Something about moral hazard and shit. (Fortune Insurance v CA)

Suretyship

Sec 175 A contract of surety ship is an agreement whereby a party called the surety guarantees the performance by another party called the principal or obligor of an obligation or undertaking in favor of a third party called the obligee. It includes official recognizances, stipulations, bonds or undertakings issued by any company by virtue of and under the provisions of Act No 536 as amended by Act No 2206

Sec 176 The liability of the sureties shall be joint and several with the obligor and shall be limited to the amount of the bond. It is determined strictly by the terms of the contracts of suretyship in relation to the principal contract between the obligor and the obligee.

Jurisdiction over the person of the issuer of a counter-bond is acquired upon filing of the bond in court. (Zaragoza v Fidelino)

Liability in a surety bond is not determined by abstract nature, caption, or title but by its particular terms and conditions. Execution constructed in its common use involves not only entering into a contract but also the performance of the obligations in the contract. (Eastern Assurance v IAC)

Surety is automatically liable for damages in replevin suit arising from acts of party obtaining counter bond unless he raises defenses not previously raised by his principal. (Stronghold Insurance v CA)

Invoking the jurisdiction of a quasi-judicial body in the trial court and actively participating in the quasi-judicial body’s proceedings estops a party from subsequently questioning the quasi-judicial body’s jurisdiction. The surety is considered the same party as the obligor. The liability of the surety is direct and primary although the contract of suretyship is merely an accessory contract. (Prudential v Equinox)

In suretyship there are two relationships that are independent from each other. Notice to the surety as to withdrawal of items subject to duties by government not required as the government being the creditor has no obligation to the surety. The surety has unilateral obligation to government. Any requirement of notice is between debtor and surety. (Intra-Strata v Republic)

Sec 177 The surety is entitled to a payment of the premium as soon as the contract of suretyship or bond is perfected and delivered to the obligor. No contract of surety ship or bonding shall be valid and binding unless and until the premium therefor has been paid, except where the obligee has accepted the bond, in which case the bond becomes valid and enforceable irrespective of whether or not the

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premium has been paid by the obligor to the surety… [but if the suretyship/bond is not accepted then the surety is only entitled to at most 50% of the premium and only if the non acceptance is not the surety’s fault.]

As long as surety is liable it can ask for the payment of premiums even during trial. (Reparations Commission v Universal Deep Sea)

Even if there is non-payment of premium, acceptance by the creditor of the surety contract already binds the surety. Had it been true that they issued a surety contract without authority, it is an act done in fraud and a party cannot benefit from its fraudulent acts. (Philippine Pryce Assurance v CA)

Sec 178 Pertinent provisions of the Civil Code of the Philippines shall be applied in a suppletory character whenever necessary in interpreting the provisions of a contract of suretyship.

Motor Vehicle Insurance

All vehicles must have insurance against death, bodily injury, and/or damage to property of a third-party or passenger arising from the vehicles use. (Sec 374)

The authorized driver clause is not applicable to the theft clause and the absence of a valid license is immaterial to the payment of a claim grounded on theft. There is an unjust refusal on the part of Perla for denying the claim making them liable for moral and exemplary damages. (Perla Compania de Seguros v CA)

Motor vehicle liability insurer may be impleaded as third-party defendant in a criminal case because the cause of action against it arises from the moment of injury and also the civil aspect being instituted in the criminal action: the criminal case involves matters related to the policy. (Shafer v Judge)

The liability of the insurer is direct and primary as to the victim but it cannot be held solidarily liable with the insured. (Vda de Maglana v Consolacion)

Taxi company liable for damages due to estoppel because of sign on cabs that says passengers are insured from accident. However the insurer cannot be held liable because there was no physical damage caused by the use of the taxi since it was the gravel trucks fault. (Far Eastern Surety v Misa)

The validity of the confiscation of the driver’s license is immaterial to the authorized driver clause since at the time of the accident the driver did not have a license and his temporary operators permit had already expired. (Peza v Alikpala)

Supra case, refer to previous entry. (Western Guaranty v CA)

A claim in motor vehicle liability insurance for death or physical injury need not prove fault or negligence if:

1. Claim is below P5,000

2. The following proofs are submitted:

-police report

-death certificate and evidence sufficient to establish proper payee

-medical report or medical/hospital disbursement in respect of which refund is claimed

3. The claim is only for one motor vehicle. The passenger sues insurer of vehicle he’s riding, for all else claim with the insurer of the vehicle at fault. (Sec 378)

There is no option of insurer to claim no-fault liability from. The use of the word shall means that the

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passengers/occupants can only sue the insurer of the vehicle they were riding. (Perla v Ancheta)

Reinsurance

Def. reinsurane: a contract where an insurer procures an insurance to insure him against loss or liability by reason of such original insurance. (Sec 95)

Sec 96 Where an insurer obtains a reinsurance, except under automatic reinsurance treaties, he must communicate all the representations of the original insured, and also all the knowledge and information he possesses, whether previously or subsequently acquired, which are material to the risk.

A reinsurance is a liability insurance. (Sec 97)

Sec 98 The original insured has no interest in a contract of reinsurance.

A reinsurance policy is a contract of insurance and is for indemnity from liability. A reinsurance treaty on the other hand is a contract for insurance where one cedes and the other accepts reinsurance. (Philam v Auditor)

Cancellation of reinsurance treaty/agreement does not meant cancellation of individual policies ceded to the reinsurer. (Fieldmens v Asian Surety)

Def. facultative reinsurance: is a reinsurance where the reinsurer has the right to accept or not accept participation in the risk insured. But once share is accepted, the obligation is absolute and there is no other prestation which can be substituted for the payment of indemnity. (Equitable Insurance v Rural Insurance)

There is no privity of contract between the insured and the insurer’s reinsurers. It is therefore no defense on the part of the insurer that he has procured reinsurances since the insured cannot go after these reinsurers unless there is a stipulation pour autrui. (Artex Development v Wellington)

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VIII. Marine Insurance .

Def. Marine Insurance: is insurance against…

1. Loss or damage to:

-vessels, crafts, aircraft, vehicles, goods, freights, cargoes, marchandise, effects disbursements, profits, moneys, securities… bottomries, respondentas, and all other kinds of property and interests therein, in respect to… or in connection with any and all risks or perils of navigation, transit, or transportation… or being prepared for shipment or while awaiting shipment, or during any delays…

-person or property in connection with… a marine, inland marine, transit or transportation insurance, including liability for loss of or damage arising out of or in connection with the construction, repair, operation, maintenance or use of the subject matter…

-precious stones, jewels, jewelry, precious metals, whether in course of transportation or otherwise

-bridges, tunnels and other instrumentalities of transportation and communication… piers, wharves, docks… and other aids to navigation and transportation…

2. Legal liability of the insured for loss, damage, or expense incident to ownership, operation, chartering… including liability of the insured for personal injury, illness or death or for loss of or damage to the property of another person. (Sec 99)

Def. Averages: the following are considered averages:

1. All extraordinary or accidental expenses which may be incurred during the voyage in order to preserve the vessel or cargo or both.

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2. All damages or deterioration the vessel may suffer from the time she puts to sea from the port of departure until she casts anchor in the port of destination, and those suffered by the merchandise from the time it is loaded in the port of shipment until it is unloaded in the port to which it is consigned. (Art 806 CoC)

Averages does not include ordinary expenses of navigation such as pilot age, lighter age and towage, anchorage, inspection, health, qurantine, etc. (Art 807 CoC)

Simple or particular averages shall be, as a general rule, all the expenses and damages caused to the vessel or to her cargo which have not inured to the benefit and common profit of all (Art 809 CoC). The owner of the goods which gave rise to the expense or suffered the damage shall bear the simple or particular averages (Art 810 CoC).

General or gross averages shall be, as a general rule, all the damages and expenses which are deliberately caused in order to save the vessel, her cargo, or both at the same time, from a real and known risk (Art 811 CoC). All persons having an interest in the vessel and cargo therein at the time of the occurrence of the average shall contribute (Art 812 CoC). However, in order for there to be gross or general average it is necessary that the Captain with the crew and interested parties onboard should deliberate on the matter. After such deliberation the captain shall pass a resolution on the matter (Art 813 CoC). This resolution, the meeting, and the objections to the resolution and reasons thereof must be entered in the logbook (Art 814 CoC).

If particular average is excluded in the coverage then the insurer shall not be liable even if the subject matter of the insurance is damaged as long as the insured is not deprived of the whole of such thing. But the insurer shall still be liable for general averages (Sec 136).

The insurer shall be liable for general average if it was brought about by a peril insured against limited by the co-insurance between him and the insured (Sec 164).

If the subject matter of insurance is what was sacrificed, the insured may claim the loss from the insurer thus subrogating the insurer in the insured’s rights to collect contribution from the others. However this can no longer be exercised after separation of the interests liable to the contribution or when the insured has neglected or waived the right to contribution (Sec 165).

Requisites for general average (by Tolentino):

1. Common danger that is imminent

2. For common safety, part of the vessel, cargo, or both is sacrificed deliberately

3. The vessel or cargo is successfully saved

4. Taking proper legal steps and authority

Running aground in the mouth of a river in fine weather due to shifting sand bars does not fall under par 6 of Art 811 of the CoC. It is also not an imminent danger but a distant peril. The cost of floating therefore must be born exclusively by the carrier. (A Magsaysay v Agan)

Marine policy usually covers: the adventures and perils of the Seas, Men-of-War, Fire, Pirates, Rovers, Thieves, Jettison, Letters of Mart and Countermart, Surprisals, and Takings at Sea. Arrest, Restraint and Detainments, of all Kings Princes and People of what Nation, Condition or Quality so ever; Barratry of the Master and Marines, and of all other Perils, Losses and Misfortunes, that have or shall come to the Hurt, Detriment, or Damage of the said Vessel or any part thereof. This is also the case to cite if one wishes to make liable the insurer for total loss only for general averages using Art 859 of the CoC. (Jarque v Smith Bell)

Supra, see previous entry. (Phil Home Assurance v CA)

Perils of the sea and perils of the ship

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Rusting of steel pipes in the course of a voyage is a "peril of the sea" in view of the toll on the cargo of wind, water, and salt conditions. This is in line with the cardinal rule that any ambiguity therein should be construed against the maker/issuer/drafter thereof, namely, the insurer. Besides the precise purpose of insuring cargo during a voyage would be rendered fruitless. (Cathay insurance v CA)

The provisions of a marine insurance policy cover only perils of the sea limited to sea damage or by violence of elements. Perils of the sea are not covered unless expressly stated. A violation of the warranty of sea-worthiness is a peril of the ship. The implied warranty of sea-worthiness also applies to consignees and shippers. It is their responsibility to make sure that the carrier’s vessel is reliable and seaworthy. (Roque v IAC)

Def. barratry: is any willful misconduct on the part of the master or crew in pursuance of some unlawful or fraudulent purpose without the consent of the owners, and to the prejudice of the owner’s interest. It is a willful and intentional act that precludes negligence or honest error of judgment. (Roque v IAC)

The words "all other perils, losses, and misfortunes" are to be interpreted as covering risks which are of like kind (ejusdem generis) with the particular risks which are enumerated in the preceding part of the same clause of the contract. It must be considered to be settled, furthermore, that a loss which, in the ordinary course of events, results from the natural and inevitable action of the sea, from the ordinary wear and tear of the ship, or from the negligent failure of the ship's owner to provide the vessel with proper equipment to convey the cargo under ordinary conditions, is not a peril of the sea. Such a loss is rather due to what has been aptly called the "peril of the ship." Impliedly binds implied warranty of sea-worthiness to shipper/consignee. (La Razon v Union Insurance)

The Standard Form of English Marine Policy does not cover arrests by ordinary judicial process. However since there was an express stipulation covering risks excluded from

SFEMP, ordinary judicial process is covered. (Malayan Insurance v CA)

Insurable Interest

Persons having insurable interest:

1. The owner of the ship with respect to the ship even if the ship has been chartered by one who covenants to pay for the loss as long as the insurer is liable only for irrecoverable sum. (Sec 100)

2. The owner of a ship hypothecated by bottomry with respect to the ship but only in excess of the amount secured by bottomry. (Sec 101)

3. The owner of the ship with respect to expected freightage (Sec 103). However if the ship is chartered the interest will only exist from the time the ship has broken ground. For the carriage of goods, it exists at the time the goods are on the vessel or, if there is a contract for putting them on board, when the ship and goods are ready for the voyage (Sec 104).

4. One who has an interest in the thing (vessel or cargo). If there are expected profits from the thing, then there is also an insurable interest over said profits. (Sec 105)

5. The charterer has an interest to the extent that he will be damnified by the loss. (Sec 106)

Def. freightage: is all the benefits derived by the owner, either from chartering or from carrying his own goods or those of others.

Def. bareboat/demise charter party: is an agreement where the charterer is considered the owner of the vessel for the specified voyage. The vessel is manned by the charterer’s people. (Coastwise v CA citing Puromines v CA)

Def. contract of affreightment: is the second kind of charter party. In this contract the owner of the vessel leases part or all of its space to haul goods for others. It is a contract of special service where possession, command, and

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navigation of the vessel is retained by its owner. (Coastwise v CA citing Puromines v CA)

A bareboat/demise charter converts a common carrier into a private carrier. However a contract of affreightment does not affect the carrier’s nature as a common carrier. As such the presumption of negligence is present when goods are given in good order but are delivered in bad order as in the case of the molasses. (Coastwise v CA)

Private carriers are governed by the stipulations between the parties whereas common carriers are governed by the law on common carriers. The presumption of negligence can only be rebutted by:

1. Flood, storm, earthquake, lightning, or other natural disaster/calamity

2. Act of public enemy (whether international or civil)

3. Act of omission of shipper

4. Inherent vice or defect in packaging of goods

5. Order/act of competent public authority

Absent any explanation or showing of the causes eliminating their liability, the carrier is liable for the silica sand lost. (Leamer v Malayan Insurance)

Same same but this time as applied to cement. (Loadstar Shipping v Pioneer)

Even if common carrier used a vessel not owned by it, its nature as a common carrier does not change. It is also the party privy to the contract of carriage and not the owner of the vessel used. The voyage charter trumps the bill of lading and is then limited to a receipt of the goods. Carrier liable for loss of silica quartz. (Cebu Salvage v Phil Home Assurance)

(Tabacalera)

(North Front Shipping)

Concealment and misrepresentation

A party in marine insurance is required to communicate all that is required in Sec 28. In addition, he must mention all information in his possession material to the risk except those in Sec 20 (Sec 107). This includes information on the belief or expectation of a third person in reference to a material fact (Sec 108).

The insured is also presumed to know of a prior loss at the time of insuring if the information might possibly reach him in the usual mode of transmission and usual rate of communication. (Sec 109)

A concealment in a marine insurance generally vitiates the entire contract (Sec 27). However, a concealment as to any of the following merely exonerates the insurer from the loss resulting from them:

1. National character of insured

2. Liability of thing to capture and detention

3. Liability to seizure from breach of foreign laws and trades

4. Want of necessary documents

5. Use of false and simulated papers (Sec 110)

An intentionally false misrepresentation in any material respect, or in respect of any fact on which the character and nature of the risk depends, entitles the insurer to rescission. (Sec 111)

Without fraud, the eventual falsity of a representation as to expectation does not avoid the insurance contract. (Sec 112)

Implied warranties

1. Seaworthiness of vessel

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Def. seaworthiness: is the reasonable fitness to perform the service and to encounter the ordinary perils of the voyage contemplated in the policy (Sec 114). It covers the ship itself, it must be properly laden, with a competent master, sufficient number of competent seamen, required equipment, and other necessary or proper stores and implements for the voyage (Sec 116).

Every insurance on ship or freight, or freightage, or upon any thing which is the subject of marine insurance has an implied arranty of seaworthiness (Sec 113).

If the ship is seaworthy at the time of the commencement of the risk then there is compliance with the warranty except:

a) If the policy covers a period then the warranty must be complied with at every commencement of a voyage.

b) If the policy covers cargo which will pass through an intermediate port then ship must be seaworthy at every port. (Sec 115)

If a voyage has different portions, each one requiring a different standard of seaworthiness. It is complied with if at the commencement of each portion the ship is seaworthy (Sec 117).

HOWEVER if the ship becomes unseaworthy in the middle of the voyage, an unreasonable delay in repairing it exonerates the insurer of the ship or ship owner’s interest (Sec 118).

ALBEIT, a ship is seaworthy in general, it may be deemed unseaworthy with respect to cargo it is unfitted to receive (Sec 119).

See previous note (Roque v IAC)

Payment of proceeds, although constituting a waiver of the enforcement of the implied warranty against seaworthiness,

it is not an automatic admission of the vessel’s seaworthiness. (Delsan Transport v CA)

2. Warranty against improper deviation

Def. deviation: is a departure from the course of the voyage or an unreasonable delay in pursuing the voyage or the commencement of an entirely different one (Sec 123).

The proper course of a journey set by beginning and end is determined by the following respectively:

a) Mercantile usage (Sec 121)

b) The most natural, direct, and advantageous course to a master of ordinary skill and discretion (Sec 122)

Def. proper deviation: is there if

a) it is caused by circumstances beyond the master or ship owner’s control

b) it is necessary to comply with warranty or to avoid any peril (whether covered or not)

c) when done in good faith upon reasonable grounds that it is necessary to avoid a peril

d) when done in good faith to save human life or a vessel in distress (Sec 124)

Def. improper deviation: is a deviation that is not proper (Sec 125).

An insurer is not liable for any loss happening after an improper deviation (Sec 126).

3. Warranty of proper documentation

With an express warranty of nationality or neutrality comes an implied warranty that:

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a) the ship will carry the required documents to show such nationality or neutrality

b) the ship will not carry any documents that will cast doubt as to its nationality/neutrality (Sec 120)

Kinds of losses

Def. actual total loss: exists when…

a) there is a total destruction of thing insured

b) the irretrievable loss of the thing by sinking or breaking up

c) damage that renders the thing valueless for the purpose of owner

d) any other event which effectively deprives the insured the possession of the thing insured at the port of destination (Sec 130).

The insured suffering an actual total loss is entitled to payment without notice of abandonment (Sec 135).

If a ship is continuously absent without being heard from, it raises the presumption of its actual total loss. The length of time to raise the presumption depends upon the circumstances (Sec 132).

If an insurance policy covering actual total loss does not cover constructive total loss (Sec 137).

If a ship is prevented from completing the voyage at an intermediate port due to the perils insured against, the insurer’s liability subsists upon reshipment. However if the delay increases the hazard the insurer may ask for an increase in the premium (Sec 133). The insurer shall also be liable for the expenses of discharging, storage, reshipment, extra freightage, and all other expenses in saving the reshipped cargo up to the amount insured (Sec 134).

Def. constructive total loss: entitles the insured to abandon the thing insured (Sec 131). It exists when…

a) more than ¾ of the thing’s value is lost or would have to be expended to recover it from peril

b) if it’s injury diminishes its value by more than ¾

c) the thing insured is a ship and its voyage can’t continue without spending more than ¾ its value or by taking a risk a prudent man wouldn’t take

d) the thing insured is cargo or freightage and the voyage can’t be performed nor another ship procured by the master without incurring the expense or risk mentioned in (c) and freightage can’t be abandoned unless the ship is abandoned (Sec 139).

Def. abandonment: is the declaration of the insured to relinquish all his rights in the thing insured to the insurer. It may only be exercised after a constructive total loss (Sec 138). It is equivalent to a transfer by the insured of his interest to the insurer, with all chances of recovery and indemnity (Sec 146).

How done?

By giving notice of abandonment to the insurer, either written or oral. However a written notice of abandonment must be given within 7 days from the oral notice (Sec 143).

The notice must be explicit and must specify the ground for abandonment and show that there is probable cause therefore. It need not be accompanied by proof of interest or loss (Sec 144).

It must also be made within a reasonable time after receiving reliable information of the loss. If the information is doubtful, the insured is entitled to a reasonable time to make inquiry (Sec 141).

Abandonment can’t be partial or conditional (Sec 140).

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After abandonment, acts done in good faith by the agents of the insured in respect to the thing insured after the loss are at the risk of the insurer or for his benefit (Sec 148).

An abandonment can only be sustained upon the case specified in the notice (Sec 145).

If the information on which the abandonment is based proves to be wrong, and there was no total loss, the abandonment is ineffectual (Sec 142).

An abandonment is subject to insurer’s acceptance. The insurer’s acceptance may be express or implied. The insurer’s silence for an unreasonable length of time is construed as acceptance (Sec 150).

The acceptance of the abandonment is conclusive upon the parties and admits of the loss and the sufficiency of abandonment (Sec 151). It is also irrevocable; BUT if the ground upon which it is based proves untrue it can be revoked (Sec 152).

On an accepted abandonment, freightage earned prior to the loss belongs to the insured while those earned after pertain to the insurer (Sec 153).

If the abandonment is refused by the insurer, it will not prejudice the rights of the insured (Sec 149).

Sec 154 If an insurer refuses to accept a valid abandonment, he is liable as upon actual total loss, deducting from the amount any proceeds of the thing insured which may have come to the hands of the insured.

If insurer pays for actual total loss, he is entitled to whatever may remain of the thing insured, or its proceeds or salvage, as if there had been a formal abandonment (Sec 147).

The omission of an abandonment shall not be a bar to recover actual losses (Sec 155).

Def. partial loss: is a loss that is not total (Sec 128).

Alam mo na dapat ito! (Oriental Assurance v CA)

This is a case of actual total loss. Although out of the 34,000 bags shipped only 6,000 remain in the carrier’s warehouse the fact is that all the seeds have been drenched and as such have begun germinating. It is a destruction of the form and specie of the thing. The rice can no longer be used for its original intended purpose to feed Vietnam. Also no payment has been made by the carrier for the bags and no bags have been returned either (Pan Malayan v CA).

All risk policies cover everything except those excluded in the policy or due to fraud or intentional misconduct by the insured. In this case only inherent vice and delay were excluded and so the destruction of the lactose crystals is covered (Choa v CA).

The purpose of an all-risk policy is to give protection to the insured in those cases where difficulties of logical explanation or some mystery surround the loss or damage to property. The onus probandi of the insured is simply to establish that the cargo was in good condition when shipped but damaged when unloaded. From there the burden shifts to the insurer to prove that the loss was caused by a peril not covered by the policy. As such the insurer is liable for the fishmeal (Filipino Merchants v CA).

Measure of indemnity

The policy’s valuation is binding upon the parties. BUT if the item insured was hypothecated by bottomry or respondentia before the insurance and without the knowledge of the insured then the insured may show the value of the thing

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based on the hypothecation. A fraudulent valuation entitles the insurer to rescission (Sec 156).

In case of partial loss, the insurer is only liable to a proportion of the amount insured as the loss bears to the value of the property insured (Sec 157). In other words, all marine insurers have an implicit co-insurance clause.

However if profits are separately insured then a partial loss would entitle the insured to a proportion of the expected profits as the loss bears to value of the thing insured (Sec 158). In this case there is no longer an implicit co-insurance clause.

Sec 159 In case of a valued policy of marine insurance on freightage or cargo, if a part only of the subject is exposed to the risk, the evaluation applies only in proportion to such part.

Profits that are valued and insured are conclusively presumed to be lost upon the loss of the property from which they are expected to arise and the valuation fixes their amount (Sec 160).

Rules on open policy valuation does not matter according to dean so disregard Sec 161...

Sec 162 If cargo insured against partial loss arrives at the port of destination in a damaged condition, the loss of the insured is deemed to be the same proportion of the value which the market price at that port, of the thing so damaged, bears to the market price it would have brought if sound.

Sec 163 A marine insurer is liable for all the expenses attendant upon a loss which forces the ship into port to be repaired; and where it is stipulated in the policy that the insured shall labor for the recovery of the property, the insurer is liable for the expense incurred thereby, such

expense, in either case, being in addition to a total loss, if that afterwards occurs.

Sec 166 In the case of a partial loss of ship or its equipment, the old materials are to be applied towards payment for the new. Unless otherwise stipulated in the policy, a marine insurer is liable for only two-thirds of the remaining cost of repairs after such deduction, except that anchors must be paid in full.

_____________________________________________

IX. Claims Settlement & Subrogation .

Notice and proof of loss

Guideliness on claims setttlement

Prescription

Subrogation

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