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INSURANCE (Atty. Minda Gapuz) only as a spouse that is void.

He can
still insure the life of the mistress.
ELEMENTS: COC-II-ER-AR-S-P • Illegitimate child can be insured
because the law does not distinguish
1. Consent, object, consideration what kind of child should be insurable.
2. insurable interest (sec. 6)The insurer must be registered under the laws
3. exposure of risk insured against of the Philippines through the insurance commissioner.
4. assumption of risk • for regulation purposes
5. scheme of distributing loss • for the fine print rule
6. premium

WHO/WHAT MAY NOT BE INSURED:
Insurance is –
Public enemy
• an agreement
Paramour
• for a consideration Wager (any chance or ticket in a lottery drawing a
• to indemnify another against LOSS, prize)
DESTRUCTION, OR LIABILITY
• arising from an unknown or contingent (sec. 10) INSURABLE INTEREST IN LIFE AND HEALTH:
event (Family, depend – E/S, debtor, other dependents)
A past event may be covered by MARINE INSURANCE, 1. Of himself, his spouse, and of his children
provided that the loss of vessel in the past could not be 2. Of any person on whom he depends wholly or in
known by ordinary means of communication. part for education or support, or in whom he
has a pecuniary interest
Characteristics: R-I-A-U-C 3. Or anyone who has legal obligations to him for
the payment of money or respecting property
1. Risk-distributing (contribution of all to a or services of which death or illness might
certain fund will be used for the payment of delay or prevent the performance;
insurance of one – insurance fund) 4. Of any person whose life any estate or interest
2. Contract of indemnity (exchange of value for vested in him depends.
value – aleatory or uncertain)
** waging contract depends on chance (sec. 11)The insured shall have the right to change the
beneficiary he designated in the policy, unless he has
3. Contract of adhesion (fine print rule, policy
expressly waived this right:
already approved by the commission; generally
construed in favor of the insured) IRREVOCABLE BENEFICIARY
4. Uberrimae Fides contract (utmost good faith A beneficiary in a life insurance policy or segregated
contract; disclose facts) fund contract whose compensation cannot be changed
5. Consensual contract (perfected from the time without his or her consent.
of meeting of minds with respect to object,
cause, or consideration) The interest of the beneficiary in the insurance policy
will be FORFEITED if he willfully brings about or causes
In insurance, the insurer is the OFFEROR because the the death of the insured, whether he is the principal,
insured is the one who applies. If there is no policy accomplice, or accessory to the crime. With this, the
given, then there is no acceptance by the insurance nearest relative of the insured shall receive the
company or the insured, there is no meeting of the proceeds of the insurance as long as that person is not
minds. disqualified.

INSURABLE INTEREST (sec. 14) An insurable interest in property consist in:


 The relationship with a person or interest to benefit 1. An exiting interest;
from the person or the thing insured. 2. An inchoate interest founded on an existing
• protect the person or the thing because interest;
of the PECUNIARY BENEFIT and to 3. An expectancy coupled with an existing
prevent PECUNIARY LOSS interest from which the expectancy arises.
• every interest in property, real or
personal, of such nature that a A carrier or depository has insurable interest to the
contemplated peril might directly thing he holds to the extent of his liability only.
damnify the insured
• Generally , mistress cannot be insured (sec. 19) The interest in the property insured must
by a married man. However, if he exist when the insurance takes effect (e.g. when
derives pecuniary interest from such claiming under the insurance) and when the loss
mistress (support), it is the designation occurred. It may not exist in the meantime (if the
insurance is not yet for claiming or when the risk 5. Those which relate to a risk exempted from the
insured against has not yet happened). policy and which are not material.

The interest in the life or health of a person insured Generally, if there is concealment or
must exist when the insurance takes effect (when misrepresentation, the contract (policy) is VOID.
claiming) but need not exist thereafter or when the - Because there is deceit or fraud in obtaining
loss occurs. the consent of the insurer with the conditions
of the policy.
- The insurer is entitled to rescind the contract.
(sec. 20) In case of property insurance, a change in
interest in any part of a thing insured, unaccompanied CANCELLATION VS. RESCISSION
by a corresponding change in the insurance, suspends
the insurance to an equivalent extent, until the Cancellation
interest in the thing and the interest in the insurance • insurance for a certain period, the
are vested in the same person.
premium paid within the unexpired
- if there is change in the interest in the thing
period
without change in the interest in the insurance
(policy), the insurance is deemed suspended. It • where the property is insured for more
will continue when the interest in the thing and than its value
interest in the insurance is vested in the same • the interest was not exposed to the
person. peril insured against
• void ab initio – no insurable interest
A change in interest in the thing insured after the loss • contract is voidable (fraud or
does not affect the right of the insured to indemnity misrepresentation of insurer)
for the loss. • premium should be returned

If the insured dies, such death does not avoid insurance Rescission
and his interest in the insurance passes to the person • there is fraud, concealment,
taking his interest in the thing insured. misrepresentation in obtaining the
insurance policy
DEVICES TO CONTROL THE RISKS used by the insurer: • no return of premium
1. Concealment (a neglect to communicate that • right to rescind should be exercised
which a party knows or ought to communicate) prior to the commencement of an
2. Warranties (additional contracts: riders; a action in the contract (before any
promise not to do something after the claim is made)
execution of the contract) The right to rescind granted by law to the insurer is
3. Misrepresentation ( when all the facts fail to waived by the acceptance of premium payments
correspond with the represented assertions or despite the knowledge of the ground for rescission.
stipulations)
4. Exceptions (placed in the policy itself) THE FACT CONCEALED NEED NOT BE THE CAUSE OF THE
5. Those which are not placed in the policy as the LOSS OR DEATH.
risk insured against. (if a particular risk is not
the one insured against, e.g. fire, it cannot be INCONTESTABILITY CLAUSE
covered by the insurance policy)  If the concealment or misrepresentation has been
discovered after 2 years from the time the policy was
CONCEALMENT and MISREPRESENTATION enforced (executed), insurer INSURER CANNOT RESCIND
the policy. The 2-year period is enough for him to
• (sec. 27) The fact that there is investigate.
concealment, whether intentional or
not, the insurer can RESCIND the The incontestability clause is applicable only in life or
contract. industrial life insurance, except when EXPRESSLY
Exceptions: (sec. 30) applied in non-life insurance.
1. Those which the other knows;
2. Those which the other ought to know in the In life and industrial life insurance – the computation
exercise of ordinary care, and of which the for incontestability clause will be from the date of
former has no reason to suppose him ignorant; reinstatement which starts on the date of payment.
3. Those of which the other waives (example: 6-months grace period, and the insured paid
communication; premium on the 4th months, the computation starts
4. Those which prove or tend to prove the from the 4th month)
existence of a risk excluded by a warranty and
which are not material;
In non-life insurance (health or casualty or medical VALUED POLICY – a policy which expresses on its face
insurance), if there is no clear stipulation in the an agreement that the thing insured shall be valued at
contract regarding concealment, the rule on a specific sum.
concealment from the code should be followed; if (the value of the thing stated in the policy)
there are stipulations against concealment as
exception, the insurer is NOT liable. RUNNING POLICY – a policy which contemplates
successive insurances, and which provides that the
Concealment is only an affirmative defense in not object of the policy may be from time to time defined
paying the insured if there is no express stipulation by additional statements or indorsements.
against it. The contract cannot be rescinded (insured shall make inventory of the properties every
automatically by the insurer. now and then to the insurer)

The non-payment of premium does not affect the (sec 64) The commencement of an action under the
incontestability rule, if the policy has been issued and insurance should not be less that one year from the
payment has already been acknowledged. time when the cause of action accrues (refusal of the
insurer to pay the insured), otherwise, the agreement
Incontestability clause cannot be invoked when: as to the time is void.
1. failure to pay premium – no premium no pay
2. material concealment found within 2 years Grounds for RESCISSION of Policy:
from the enforcement of the policy 1. non-payment of premium
3. there is no insurable interest (void ab initio) 2. conviction of a crime arising out of acts
4. no proof of death increasing then hazard insured against
5. willful act (to expose the subject to the risk 3. discovery of fraud or material
insured against) misrepresentation
6. exempted risk 4. discovery of willful or reckless acts or omissions
increasing the hazard insured against
MATERIALITY OF CONCEALED FACT 5. physical changes (material alteration) to the
- Determined by the probable and reasonable property insured which result in the property
influence of the facts upon the insurer in becoming uninsurable
forming his estimate of the disadvantages of 6. determination by the commissioner that the
the proposed contract or in making his continuation of the policy would violate the
inquiries. code or would place the insurer in violation of
the code
Each party in the contract is bound to know all the 7. Breach of warranty.
general causes which are open to his inquiry which may ** As long as the activity does not change the risk, the
affect the material perils contemplated. insurer is still liable.

The right to information of material facts may be CASH AND CARRY PROVISION
waived, either by the terms of the insurance of by - no premium, no insurance
neglect of the other party to make inquiry as to such - except:
facts. 1. In life or in industrial life insurance – because
there is a grace period in which the insured has
already been entitled to the insurance without
POLICY – the contract of insurance having paid the premiums for the agreed
period.
Cover notes – temporary insurance issued pending the 2. In case of temporary receipt or
issuance of insurance policy which usually lasts for 60 acknowledgment of premium by the insurer
days. It may be extended with the written approval of (even if there is actually no payment yet)
the commissioner if he determines that such extension through the principle of ESTOPPEL. However,
is not contrary to any provision of the insurance code. the insured is not exempt from payment of the
proceeds of insurance.
(sec. 58) The mere transfer of a thing insured does not - if there is credit: for as long as the insured paid
transfer the policy, but suspends it until the same within the period stipulated, and the insured
person becomes the owner of both the policy and the paid even after the loss, the insurer is liable.
thing insured. - If the insurer willingly accepted the payment
even after loss, the insurer is lable.
OPEN POLICY – a policy in which the value of the thing 3. If the payment was given to the agent of the
insured is not agreed upon, but is left to be ascertained insurer, the act of the agent is the act of the
in case of loss. principal. The insurer is still liable.
(the value of the thing at the time of the loss) 4. The insurer is liable as long as the check has
sufficient funds.
Insurance by installment – If the insured paid a part of
the insurance, and the property has been damaged or
lost before the completion of premium, the insurer
should pay the insured, but the insured is still liable to
pay the proceeds of the insurance.
CAN A POLICY BE TRANSFERRED? MARINE INSURANCE
- Covers all risks in the shipment or navigation of
LIFE insurance – can always be transferred even a vessel, including the goods shipped, profits,
without the consent of the insurer. and the ship itself.
- CHARTERER (lessee) has insurable interest with
PROPERTY insurance – could only be transferred with the freightage of the goods.
the consent of the insurer. - Owner of the VESSEL has insurable interest with
- insurable interest must exist at the time of the vessel itself and the goods
execution and risk, but may not exist in the - Owner of the GOODS has insurable interest with
mean time; suspended until the insurable the goods themselves.
interest and the policy is vested in the same - INSURABLE:
person. o Any peril during the voyage
o Any peril for a certain period
PROXIMATE CAUSE – cause which was uninterrupted by o Ay peril for a certain voyage
any event, without which, the injury would not have - PERILS OF THE SHIP : ordinary wear and tear of
occurred. the ship, ordinary occurrences in the voyage
- PERILS OF THE SEA: unexpected and inevitable
** With FIRE INSURANCE – as ling as fire is the circumstances and casualties due to the
proximate cause, whatever the immediate cause is, the violence of the sea (INCH MARIE CLAUSE)
insurer is still liable.
Implied warranty of sea worthiness – ship is reasonably
WARRANTIES fit to perform service and must be able to encounter
- These are promises written in the insurance, the ordinary perils of the voyage. It is not limited to
wherein the insured and the insurer signed, and the physical structure of the vessel, but must be laden
appended the same in the policy. with the proper equipment, machinery, crew members,
- If there is breach, the insurer may rescind the and food for passengers.
policy.
- If there is insurer’s knowledge of breach of Implied warranties of the ship:
contract by the insured, and he did not take 1. W. of seaworthiness
action, and the insured still received insurance 2. W. that the vessel will not deviate from the
money, the insurer is ESTOPPED from the return route
of such money. 3. W. that the vessel will not engage in illegal
papers
FIRE INSURANCE 4. W. that the vessel has the proper documents
- Proximate cause of loss should be fire
- May include fire caused by natural disaster. IN THE ABSENCE OF ANY STIPULATION, ONLY THE PERILS
- Property must be consumed by fire, or when OF THE SEA IS INSURED, UNLESS “ALL-RISK POLICY” IS
the reason for loss or damage is caused by STIPULATED.
trying to save the property (water damages or
theft), or when the wall of the house collapsed ALL-RISK POLICY – exempting clauses arte important;
to another infrastructure because of the fire… concealment will not vitiate the contract except when
there is a right to claim from the insurer. such concealment is the cause of damage or loss.
- If the proximate cause is excepted from the
liabilities stipulated in the policy, the insurer is BAREBOAT or DEMISE charter
not liable for the loss (example: explosion) - charterer: ship becomes common carrier
- FRIENDLY FIRE: the fire is on that place where
it is supposed to burn. If the fire escapes from - the real owner: becomes private carrier, tasked
where it is supposed to burn, it becomes to observe diligence of a good father of a
HOSTILE fire. family

THE INSURERE IS STILL LIABLE EVEN IF THE IMMEDIATE VOYAGE OR TIME CHARTER- AFREIGHTMENT
CAUSE OF THE LOSS IS NOT THE PERIL INSURED, AS - the owner of the vessel is the common carrier
LONG AS THE PROXIMATE CAUSE IS THAT PERIL INSURED. (extraordinary diligence)
- shipper is a private carrier

INSURABLE INTEREST IN MARINE INSURANCE:


Shipper – cargo, expected profits No fault indemnity clause – right to claim without
Charterer – the ship and the goods proving fault or negligence; made on the vehicle within
Ship-owner – the ship itself which the injured is riding at the time of the accident;
indemnity not exceeding PhP 5,000; proof for claim –
medical cert, or death cert, or police report of the
accident.

RESPONSIBILITY OF THE SHIPPER - should look for a 3 party suit against insurer – depends on the policy
seaworthy ship (sometimes, the person at fault pays first, then the
- INSURER should investigate first the insurer pays afterwards)
seaworthiness of the ship before paying the
claimant. Compulsory 3rd party liability - the purpose is to give
financial assistance to victims of motor vehicle
CONCEALMENT IN MARINE INSURANCE accidents or their dependents
- opinion of 3rd persons are material and must be
disclosed (example: Pag-asa report, Engineer of Compulsory motor vehicle liability insurance
the ship report on the machine of the ship) - contract of insurance against liability for death
- if due to concealment, there was loss or or bodily injuries of passengers or 3rd parties
damage, that us the only time that the insurer arising from motor vehicle accidents
may rescind the contract
- CANNOT RESCIND contract with the following PROCESS UNDER COMPULSORY 3RD PARTY LIABILITY
grounds: 1. File notice of claim within 6 months from date
o National character of the ship of accident. Include cert. of physician.
o Falsified or simulated documents 2. Prescriptive period- action should be filed in:
o Illegal goods/contraband a. Insurance commission – less than Php
100,000 claim
GENERAL AVERAGE LOSS – damages and expenses b. RTC – more that Php 100,000 claim
incurred for the salvation of the cargo or ship from a
Within 1 year from denial of claim (with
real or known risk  everybody benefits!
stipulation) or 10 years (without stipulation)
PARTICULAR AVERAGE LOSS – damages and expenses 3. If there is agreement, the insurer should make
incurred not for the common benefit of all but only for payment within 5 days of Compulsory 3rd party
particular or certain persons. liability;
4. If there is no agreement, insurer shall pay “no
CONSTRUCTIVE TOTAL LOSS fault indemnity” without prejudice to pursue
– if the owner of the vessel would spend more claim further. The insurer has the right of
than ¾ of the value of the vessel to save it, or subrogation to sue for recovery against the
if the injury reduced the value of the thing vehicle at fault.
insured for more than ¾.
– the owner should abandon everything to the Authorized drivers clause – driver should be duly
insurer, so the insurer would look for something licensed or with permission, even if the license is fake.
to salvage from it. The insurer will pay the - Expired license of the driver (not the insured himself)
value of the vessel. is not authorized driver.
– Need to notify the insurer immediately, must
Theft Clause – if there is theft clause and the vehicle is
be made within reasonable time after receipt
unlawfully taken, insurer is liable under the clause and
of reliable information of the loss
authorized driver clause DOES NOT APPLY. Insured can
recover even if thief has no license.
HOW ABANDONMENT IS MADE:
1. notice (generally in writing) to the insurer
OVER INSURANCE – same property insured for greater
2. notice should be made explicitly stating the
value; insured is entitled to ratable return of premium
cause of abandonment
proportioned to the amount by which the aggregate
3. if oral notice is made, there should be a
sum insured exceeds the insurable value of the thing at
written notice within 7 days from the oral
risk.
notice
DOUBLE INSURANCE – 2 or more insurance, same
VEHICLE INSURANCE
property, not exceeding value of property
Comprehensive insurance for vehicles – all risk
RE-INSURANCE – taken by the original insurer to insure
insurance
his liability
SETTLEMENT OF CLAIMS:
1. Notice of loss given within reasonable time: so
that the insurer will have ample time to
investigate on the loss/ destruction/ death.
2. Notice of claim to the insurer should be given
within 6 months after notice of loss. Submission
of evidence of loss.
3. Insurer should pay
a. NON-LIFE – 30 days after proof of loss is
received by the insurer, and the loss/
damage has been ascertained through
agreement or arbitration;
b. NON-LIFE – 90 days after receipt of
proof of loss, and the ascertainment
had not been made within 60 days after
such receipt;
c. LIFE INSURANCE – immediately upon
maturity of policy (except when
payable in installments or as an
annuity, they are payable as they
become due);
d. LIFE INSURANCE - within 60 days from
filing of proof of death.

DOUBLE INTEREST DOCTRINE – The insurer must pay


immediately upon maturity, otherwise, the insurer
pays:
(12% interest per annum x 2) of the principal + other
damages at 6% per annum

WHEN DOES THE CAUSE OF ACTION ACCRUE?


- upon final denial of the claim
- MR filed in the insurance company does not
affect the prescriptive period.

** When the insurer pays, there is the right of


subrogation. The insurer steps into the shoes of the
insured. Need not be stipulated.

** Subrogation does not apply in:


- LIFE insurance
- or when the insurer released the wrong doer
- or when he pays for a risk which is not covered
by the policy
- or when he pays more than the value of the
insurance.