FIRE INSURANCE #167 Fire Insurance Defined A fire insurance is defined is a contract of indemnity by which the insurer for

a stipulated premium, agrees to indemnify the insured against loss of, or damage to, a property caused by a hostile fire. Fire & Extended Coverage It includes insurance not only loss by fire, but also by allied lines (lightning, windstorm, tornado or earthquake, etc.), BUT only when such risks are covered by extension to fire insurance policies OR under separate policies, subject to the payment of additional premiums. The coverage may be attached by endorsements. Nature of Fire Insurance Fire insurance is essentially a contract of indemnity. This is its sole purpose and any contract that contemplates a possible gain to the insured by the happening of the event upon which the liability becomes fixed is contrary to its proper nature and is not allowed. Concept of Fire Fire is oxidation which is so rapid as to produce either a flame or a glow. Fire is always caused by combustion BUT combustion does not always cause a fire. The presence of heat, steam, or even smoke is evidence of fire, but taken but itself will not prove the existence of fire. UNLESS accompanied by ignition, heat sufficient to cause charring or scorching does not constitute fore. To constitute fire, combustion must proceed at a rate sufficiently fast to produce a flame. Fire may NOT be considered a natural disaster since it almost always arises from some act of man. It cannot be an act of God unless it is caused by a casualty not attributable to human agency. Risks or Losses Covered In determining whether a risk is written, the scope of a fire insurance policy & the intention of the parties, as indicated by their contract controls. They may also extend the coverage to indirect losses. Indirect Loss Coverage The standard fire contract is an agreement to repay the insured for direct loss. Nearly all other property insurance contracts are similarly restricted. The consequences of a direct loss may be greater than the damage itself (ex. 394) Kinds of Indirect Losses 1. Physical damage - Caused to other property (which is not usually covered by the policy) 2. Loss of earnings - Due to the interruption of business by damage to insureds property 3. Extra expense - Additional expenditure or charges incurred by the insured following damage or destruction of buildings or contents by an insured peril Ocean Marine & Fire Policies Distinguished 1. A policy of insurance on a vessel engaged in navigation - The contract is of ocean marine insurance although it insures against fire risks only. 2. Where the hazard is fire alone & the subject is an unfinished vessel, never afloat for a voyage - The contract to insure is a fire risk, especially in the absence of an express agreement that it shall have the incidents of marine policy OR where it insures materials in a shipyard for constructing vessels. Importance of the Distinction 1. Rules on constructive total loss & abandonment - Applies only to marine insurance 2. Rules on co-insurance - Applies primarily to marine insurance - Applies to Fire Insurance ONLY if expressly agreed on by the parties #168- 169 When alteration in thing insured entitles insurer to rescind 1. The use or condition of the thing is specifically limited or stipulated in the policy 2. Such use or condition as limited by the policy is altered 3. The alteration is made without the consent of the insurer 4. The alteration is made by means within the control of the insured; and

5. The alteration increases the risk - But the contract of fire insurance is not affected by any act of the insured subsequent to the execution to the execution of the policy, WHICH DOES NOT VIOLATE ITS PROVISIONS Increase of risk or hazard in general 1. Implied undertaking of insured - That he will not change the premises/character of the business carried there so as to increase the risk of loss by fire. - Every contract of insurance is made withreference to the conditions surrounding the subject matter of the risk & the premium is fixed 2. Character of the increase in risk - An increase of hazard takes place when the insured property is PUT TO SOME NEW USE & THE NEW USE INCREASES THE CHANCE OF LOSS. - Mere negligent acts which temporarily endangers property will not violate the policy NOR the temporary acts which whave ceased prior to the occurence of the loss. - There must be actual increase of the risk and while it is not necessary that the increased risk should have contributed to the loss, still necessary that the increase be of substantial character. Alterations avoiding policy 1. Where risk of loss increased - The policy is avoided by any alteration in the use or condition of the property insured (ex. 397) 2. Where the increase no longer existing at time of loss - The insurer would still liable UNLESS there is a breach of warranty that no hazardous goods should be stored or kept in the property insured. Alterations Not avoiding policy 1. Where risk of loss not increased - Where a different use is made of the insured premises, which use is not of a dangerous character and does not differ materially from the use specified in the policy, even though an additional premium may be demanded 2. Where questioned articles required by insureds business - If the articles are necessary in the business conducted in the insured premises, even though the policy contains certain provisions prohibiting specified articles 3. Where insured property would be useless if questioned acts were prohibited - Such acts are not to be regarded as increasing the risk since the property would be useless to the insured if such acts were prohibited EVEN THOUGH BY REASON THEREOF, THE PROPERTY MAY BE EXPOSED TO SOME ADDITIONAL RISK Where insured has NO control or knowledge of alteration 1. Insurers liability unaffected - Policy will not be avoided UNLESS ACTUALLY KNOWN TO THE INSURED 2. Insureds knowledge presumed - Every act of insureds tenant permanently affecting the conditions of the property so as to increase the risk WOULD BE PRESUMPTIVELY KNOWN TO INSURED Application of Section 75 & 169 - In 169, AN ALTERATION in the risk or condition of the thing insured WHICH DOES NOT INCREASE THE RISK WILL NOT AFFECT a contract of fire insurance. This applies to policies in which Sec. 75 is silent on the subject. - In 75, The breach of an immaterial provision does not avoid the policy - However in 75, the insurer is Given the right to insert terms & conditions in the policy which if violated would avoid it...An alteration made in the use or condition of the thing insured will avoid the policy IF SUCH ALTERATION IS EXPRESSLY PROHIBITED ALTHOUGH IT DOES NOT INCREASE THR RISK. #170 Where act of insured NOT in violation of policy This is the exception to #168. The contract is not affected by such alteration EVEN THOUGH IT INCREASES THE RISK & IS THE CAUSE OF THE LOSS. #171- 172 Measure of indemnity under an open policy 1. Amount of actual loss sustained - In the absence of express valuation, the insured is only entitled to recover the amount of actual loss sustained and the burden is upon him to establish the amount of such loss by a preponderance of evidence. - The insured is entitled to receive the amount necessary to indemnify him OR to have the thing in the same condition in which it was at time of loss 2. Limit to amount

- Liability of insured shall in no event exceed what it would cost the insured to repair or replace the thing with materials of like kind & quality (with proper deduction for depreciation considering the age or condition of the thing before the loss) 3. Market value in case of personal property - If this can readily be determined. This maybe applied in determining the actual loss sustained. Measure of indemnity under a valued policy The effect of valuation in a policy of fire insurance IS THE SAME AS IN A POLICY OF MARINE INSURANCE. 1. Valuation conclusive between the parties - In the adjustment of total/partial loss if the (1) Insured had an insurable interest AND (2) was not guilty of fraud 2. Amount stated in policy/amount of partial loss - The valuation may be fixed as provided in #172. - In case of a TOTAL LOSS, insured can recover the whole amount so insured and in PARTIAL LOSS, the full amount of the partial loss. - The TOTAL LOSS exists when the result of the fire is to render the property WHOLLY UNFIT FOR USE however valuable it may be as mere material 3. Pro-rata contribution to payment of loss, if insured under 2 or more policies Insured Not a co-insured under fire policies In the Absence of Stipulation 1. UNDER USUAL CONTRACT OF FIRE INSURANCE, - In case of partial loss, insurer is required to give full indemnity for such loss up to the amount written in the policy even though the property be very inadequately insured. 2. UNDER MARINE INSURANCE, rule is otherwise (Rule 157 - In case of partial loss, insurer is liable only for such proportion of the amount insured by him as the loss bears to the value of the whole interest of the insured in the property insured. - When the property is insured for less than its value, the insured is considered a co-insurer of the difference between the amount of insurance and the value of the property. Reason for co-insurance clause in fire policies - The co-insurance clause requires the insured to maintain insurance to an amount equal to the value of the insured property UNDER PENALTY OF BECOMING CO-INSURER TO THE EXTENT OF SUCH DEFICIENCY. - It divides the potential risk between the insured and the insurer in case of partial loss or destruction of the insured property. - To prevent property owners from taking out small amount of insurance, thereby reducing the premium payments, the insurers often insert a co-insurance clause. This reduces the recovery in case of partial loss to but a portion of the sum named in the policy though in case of total loss, the insurer is liable for the amount named in the policy. Option to rebuild clause - THE MERE FACT THAT THE PARTIES HAVE FIXED A VALUATION in the policy does NOT PREVENT THEM from stipulating in the policy concerning the repairing, rebuilding, or replacing of structures wholly or partially damaged. - THUS, the insurer may be given the option to reinstate or replace the property damaged or any part thereof, instread of paying the amount of loss or damage. - Insurer may excercise this option WITHIN the time stipulated in the policy or in the absence of stipulation within a reasonable time. - THE CHOICE BY THE INSURER SHALL PRODUCE NO EFFECT EXCEPT FROM THE TIME IT HAS BEEN COMMUNICATED TO THE INSURED. - Unless the policy has limited the cost of rebuilding to the amount of the insurance, THE INSURER, AFTER ELECTING TO REBUILD CAN BE COMPELLED TO PERFORM HIS UNDERTAKING, EVEN THOUGH THE COST MAY EXCEED THE ORIGINAL AMOUNT OF INSURANCE #173 Pledge, etc. of fire insurance policy AFTER A LOSS 1. Consent of/Notice to insurer NOT REQUIRED - The insured may pledge, hypothecate or transfer a fire insurance policy or rights thereunder. It is not the personal contract which is being assigned, but a right of action on the policy against the insurer. - As a general rule, the assignee acquires no greater rights against the insurer than had the one towhom the policy was issued. 2. Limitation - Transfer of a policy to any person/company who acts as agent or otherwise represents the insurer. - Any such pledge shall be VOID and of no effect insofar as it may affect other creditors of the insured.

CASUALTY INSURANCE #174 Casualty insurance defined Casualty insurance includes all forms of insurance against loss or liability arising from accident or mishap excluding certain types of loss or liabilty which are not within the scope of other types of insurance (Marince, Fire, Suretyship & Life) 1. Employers Liability Insurance 2. Workmens Compensation 3. Public Liability 4. Motor Vehicle Liability 5. Plate Glass 6. Burglary & Theft 7. Personal Accident & Health Risk or losses covered Section 174 defines casualty insurance by a process of elimination. Without the exclusion of the other types of insurance, casualty insurance would apply to almost any kind of insurance. 1. Accepting casualty to mean accident - Or a violent mishap which arises from an unexpected cause. So casualty insurance might be presumed to inslude any loss or damage when an accident is the cause of the loss. 2. In burglary, robbery & theft insurance - The opportunity to defraud the insurer is so great that the insurers fill their policies with restrictions to reduce the hazard. Persons frequently excluded under such provisions are those in the insureds service & employment. PURPOSE: to guard against liability should the theft be committed by one having unrestricted access to the property.

Two general divisions of casualty insurance Insurance against specified perils 1. Which may affect the person and/or property of the insured 2. Which may give rise to liability on the part of the insured for claims to injuries to others or for damage to their property Liability insurance defined Liability insurance has been said to be a contract of indemnity for the benefit of the insured and those in privity with him OR those to whom the law upon the grounds of public policy extends the indemnity against liability - Indemnity is provided to the insured in respect of his legal liability to pay damages, usually arising out of negligence or nuisance and occassionally under contract. Liability insurable 1. Liability for quasi-delict or non-fulfillment of contract - This refers to financial responsibility that one party has to do to another party as a consequence of doing or failing to do something. - May involve Negligence OR Terms of of an existing contractual agreement. - Liability involving commission of a quasi-delict ( civil injury) and not a felony (public injury) 2. Liability for criminal negligence - That arising out of acts of negligence which are also criminal are also insurable on the ground that such acts are accidental. - Liability consequences of deliberate criminal acts are not insurable Insurable interest in liability insurance As a general rule, Liability Insurance MUST BE SUPPORTED BY AN INSURABLE INTEREST IN THE INSURED, although there is some authority to the contrary. When liability insurance in policy payable (General Distinction Between) 1. Insurance against liability - The coverage attaches when the liability of the insured to the injured third party attaches, regardless of actual loss at the time - The insurer assumes the obli of paying the injured third parties to whom the insured is liable. From the moment that the insured becomes liable to the third person, the insured acquires an interest in the insurance contract which may be garnished like any other credit. 2. Insurance against actual loss - An action against the insurer does not lie until an actual loss is sustained by the insured. Right of injured person to sue insurer of part at fault (depends WON contract of insurance is intended to benefit third persons also OR only the the insured)

1. Indemnity against third party liability - Third persons to whom the insured is liable can sue directly the insurer upon the occurence of the injury or event upon which the liability depends. - It becomes operative as soon as the liability of the person indemnified arises irrespective of WON he has suffered actual loss - PURPOSE: To protect injured person against the insolvency of the insured who causes such injury 2. Indemnity against actual loss or payment - Third persons cannot sue insurer, the contract being solely to reimburse the insured for liability actually discharged by him through payment of third persons. PRIOR PAYMENT BY THE INSURED IS NECESSARY so that the obli of the insurer may arise. Basis and extent of insurers liability 1. Contract of insurance - Insurers direct liability DOES NOT MEAN that the insurer can be held solidarily liable with the insured. The liability of insurer to the third party is based on contract; that of the insured is based on tort. 2. Sum limited in the contract - While in a solidary obli, the creditor may enforce the entire obli against one of the solidary debtors...in an insurance contract, the insurer undertakes to indemnify the insured against loss, damage or liability arising from an unkown event. TO MAKE THE INSURER SOLIDARILY LIABLE W/ THE LATTERS ENTIRE OBLI BEYOND THE SUM LIMITED IN THE INSURANCE would result in breach of the concept of solidary obli - The third-party liability of the insurer is only up to the extent of the policy and that required by law. Any award beyond the insurance coverage will already be the sole liability of the insured / the other parties, if any, at fault Accident & Health Insurance Burden of proof- The insureds beneficiary has the burden of proof in demonstrating that the cause of death is due to the covered peril. Once that fact is established, the burden then shifts to the insurer to show any excepted peril that may have been stipulated by the parties. Meaning of Accident & Accidental as used in accident policy They are construed by the courts in their ordinary and common acceptation. Thus, the terms have been taken to mean that which happens by chance or fortuitously, without intention or design, and which is unexpected, unusual and unforseen - It is an event which happens without any huam agency or if happening through human agency, an event which is unusual & not expected by the person to whom it happens. The concept accident is not synonymous with the concept of no fault. It may be due to fault or negligence of parties Rule as to Death or Injury resulting from Accidental or Accidental Means General Rule: - Death or injury does not result from accident or accidental means within the terms of an accidental policy if it is the natural result of the insureds voluntary act, unaccompanied by anything unforeseen except the death or injury. Exception: Where the death or injury is not the natural or probable result of the insureds voluntary act, or if something unforeseen occurs in the doing of the act which produces the injury, the resulting death is within Suicide & Willful Exposure to needless peril - Both are in pari matere because they both signify a disregard for ones life. The only difference is in degree, as suicide imports a positive act of ending such life whereas in the 2nd act indicates a reckless risking of it that it is almost suicidal in intent. - Voluntary exposure to a known danger is generally held to negate the accidental character of whatever followed from the known danger. Meaning of Intentional as used in Accident Policy Intentional implies the excercise of the reasoning faculties. Where a provision of the policy excludes intentional injury, it is the intention of the person inflicting the injury that is controlling. If the injuries suffered by the insured clearly resulted from the intentional act of a third person, the insurer is relieved from liability as stipulated. Effect of no action clause in policy of liability insurance The policy requires that suit and final judgement be first obtained against the insured; that only thereafter can the person injured recover on the policy; it expressly disallows suing the insurer as a co-defendant of the insured in a suit to determine the layyers liability to the third person.

SURETYSHIP #175 Suretyship defined It is an agreement where one undertakes to answer, under specified terms & conditions, for the debt, default or miscarriage of another (obligor) , SUCH as failure to perform a contract or certain duties or for breach of trust, negligence and the like, in favor of a third party (obligee) Undertakings within the scope of suretyship A contract of suretyship includes official recognizances, stipulations, bonds or undertakings issued by any company under the provisions of RA 536, as amended by RA 2206, An Act relative to recognizances, stipulations, bonds & undertakings & allow certain corporations to be accepted as surety thereon - Under RA 536, whenever any RSB&U conditioned for the faithful performance of any duty or of any contract made w/ public authority OR for doing or refraining from doing anything in such RSB&U specified is required by law to be given with one surety or w/two or more sureties, the execution of the same or the guaranteeing of the performance of the condition thereof shall be sufficient when executed or guranteed by any corporation organized under Phil laws authorized to become a surety upon official RSBU - The Act requires that such RSBU be approved by the head of Dept, court, judge, officer, board or body, executive, legislative, or judicial, required to approve the same #176 Nature of liability of surety - The contract of surety is evidenced by writing called surety bond which is essentially a promise to guarantee the debt or obli of the obligor. 1. Solidary - The liability of the surety under a bond is joint & several or solidary. This means that upon default by the obligor in complying with his obli as secured by the bond, the surety becomes primarily liable to the obligee who has right to demand payment under the terms & conditions of the bond 2. Limited or fixed - It is limited to the amount of the bond 3. Contractual - It is determined strictly by the terms of the contract of suretyship in relation to the principal contract between the obligor & obligee. A surety is merely a collateral contract. Its basis is the principal contract which it secures. Distinctions between Suretyship & Property Insurance Suretyship Property Insurance Classification Accessory contract, A principal contract in itself because it is dependent for its existence on a principal contract Number of parties There are always 3: Surety, There are only 2: Principal Debtor & the Insurer & Insured Creditor Nature A credit accomodation w/ Generally a contract of indemnity the surety assuming primary liability Recovery Surety is entitled to There is no right of recovery for reimbursement from the the loss the insurer may sustain principal & his guarantors except when the insurer is for the loss it may suffer entitled to subrogation. under the contract In case of subrogation, however, the third party against whom the insurer may proceed is not a party to a contract Cancellation Generally, a bond may be A contract of insurance may be cancelled by or with the cancelled unilaterally either by consent of the obligee or the insured or by the insurer on by the Commissioner or by grounds provided by law a court of competent jurisdiction Acceptance Requires the acceptance of Does not need the acceptance of the obligee before it any third party becomes valid & enforceable Scheme Is a risk-shifting device, Is a risk-distributing device, the premium paid being in the premium paid being the nature of a service fee considered a ratable contribution

to a common fund #177 Rule for the Payment of Premiums - The premium is the consideration for furnishing the bond or the guaranty and the obli to pay the same subsists for as long as the liability of the surety shall exist 1. The premium becomes a debt as soon as the contract of suretyship or bond is perfected and delivered to the obligor. 2. The contract of suretyship shall not be valid & binding UNLESS and UNTIL the premium has been paid. 3. Where the obligee has accepted the bond, it shall be valid and enforceable notwithstanding that the premium has not been paid. 4. If the contract of suretyship or bond is not accepted by, or filed with the obligee, the surety shall collect only a reasonable amount. 5. If the non-acceptance of the bond due to the fault or negligence of the surety, no service fee, stamps or taxes imposed shall be collected by the surety 6. In case of a continuing bond (for a term longer than one year or with no fixed expiration date), the obligor shall pay the subsequent annual premium as it falls due until the contract is cancelled. Types of surety bonds 1. Contract bonds - The bonds are connected with construction & supply contracts. They are for the protection of the owner against a possible default by the contractor to comply with his contract or his possible failure to pay materials, and laborers. The position of surety is to answer for a failure of the principal to perform in accordance w/ the term & specifications of the contract. a. Performance bond - One covering the faithful performance of the contract b. Payment bond - One covering the payment of laborers & material men

Parties involved in a policy of life insurance - One person might occupy all three positions by naming his estate as beneficiary; or each of the three positions may be held by a separate party 1. The owner of the policy, who has the power to name or change the beneficiary to assign the policy, cash it in for its surrender value, or use it as collateral in obtaining a loan; and the obli to pay the premiums 2. The person whose life is the subject of the policy (cestui que vie) 3. The beneficiary to whom the proceeds are paid Nature of Life Insurance 1. Liability absolutely certain - The ordinary life insurance contemplates the certain payment of a SPECIFIED SUM AT AN UNCERTAIN TIME; and the premiums are so calculated that in accordance with the insureds expectancy of life under a specified mortality table, there will be paid to the insurer in premiums and interest thereon, a sum equal to an amount to become due on the death of the insured plus the expense of administration 2. Amount of insurance generally without limit - There is no limit as to the amount of insurance which may be legally be placed upon the life of any person even though that person might be one whose life was rather a burden upon the party in interest than a benefit possessing a pecuniary value. When the insured dies, the insurer must pay face the amount of the policy to the named beneficiary. 3. Life policy is a valued policy - They are valued by the purchaser when the policy is purchased and the value placed on the insured is basically decided by the amount the purchaser is willing to pay in premiums. The amount is determined by the factors affecting the life of the insured such as his age, health & occupation 4. Direct pecuniary loss not required - When settlement is made, the beneficiaries are under no obligation to demonstrate as a condition precedent to recovery, a direct pecuniary loss as a result of the death of the insured. Life Insurance distinguished from Fire & Marine Insurance Life Insurance Fire & Marine Insurance
Not a contract of indemnity (except that effected by a creditor on life of debtor) but a contract of investment Valued policy May be transferred or assigned to any person even if he has no insurable interest The consent of the insurer is not essential to the validity of the assignment of a life policy Insurable interest need not exist after the insurance takes effect or when the loss occurs Insurable interest need not have any legal basis The contingency that is contemplated is a certain event, the only uncertainty being the time when it will take place The liability of the insurer to make payment is certain, the only uncertain element being when such payment must be made... So the amount insured will have to be paid sooner or later Although it may be terminated by the insured, cannot be cancelled by the insurer, and therefore, is usually a long-term contract The loss to the beneficiary is under no obli to prove actual financial loss as a result of the death of the insured in order to collect the insurance The beneficiary is under no obli to prove actual financial loss as a result of th death of the insured in order to collect the insurance Contracts of indemnity

2.Fidelity bonds
- In case of a fidelity bond, the obli of the employee to be honest with his employer is implied rather than contractual. The ordinary surety bond, obligates the surety to hold himself responsible for the performance of an express obligation of the principal - They pay an employer for loss growing out of a dishonest act of his employee. For the purposes of underwriting, they are classified as: a. Industrial bond - One required by private employers to cover loss through dishonesty of employees; and b. Public official bond - One required of public officers for the faithful performances of their duties and as a condition of entering upon the duties of their offices and as a condition of entering upon the duties of their offices. c. Judicial bonds - They are those which are required in connection with judicial proceedings. Some of the most common kinds are injunction bonds, attachment bonds, replevin bonds, bail bonds, and appeal bonds. The purpose of requiring a litigant to furnish a judicial bond is to indemnify the adverse party against damages resulting from the proceeding #178 Pertinent Civil Code provisions applicable in a suppletory character

May be Open or Valued The transferee or assignee must have an insurable interest in the thing insured In the absence of waiver by the insurer is essential in the assignment Insurable interest must exist only when the insurance takes effect but also when the loss occurs Must have a legal basis The contingency insured against may or may not occur Liability is uncertain because the happening of the peril insured against is uncertain... The amount insured may not have to be paid May be cancelled by either party and is usually for a term of one year The reverse is generally true of the loss of property

LIFE INSURANCE #179- 180 Life Insurance defined 1. Life insurance is an insurance on human lives and insurance appertaining thereto or connected therewith 2. It is an insurance payable on the death of a person or his surviving a specified period, or otherwise contingently on the continuance or cessation of life. It is a contract to make specific payments to pay to a certain person, the beneficiary, upon the death of a person whose life has been insured.

The insured is required to submit proof of his actual pecuniary loss as a condition precedent to collecting the insurance

Any person who is forbidden from receiving any donation under Article 739 cannot be named beneficiary of a life insurance policy by the person who cannot make any donation to him Exemption of Life Insurance policies from Execution Under the Rules of Court, all moneys, benefits, privileges or annuities accruing or in any manner growing out of any life insurance are exempt.

Application of exemption to Accident Insurance 1. When accident insurance regarded as life insurance - A life insurance is distinct and different from an accident insurance. However, when one of the risks insured in the latter is the death of the insured by accident, then such accident I may also be regarded as life I. 2. Burden of proof - The insureds beneficiary has the burden of proving that the cause of death is due to the covered peril. Once that fact is established, the burden then shifts to the insurer to show any excepted peril that may have been stipulated by the parties. An accident insurance is not thus likened to an ordinary life insurance where the insureds death, regardless of the cause thereof would normally be compensable. Kinds of Life Insurance Policies 1. Ordinary life policy - Is one under the terms of which the insured is required to pay a certain fixed premium annually throughout his entire life and the beneficiary is entitled to receive payment under the policy only after the death of the insured. Many insurance companies consider this policy paid-up when the insured reaches the age of 100. Thus the ultimate payment of the insurance proceeds is as certain as death itself. - An alternative form of payment can come through payment of the cash surrender value of the policy in case it is cancelled by the owner or it lapses through nonpayment of premiums. 2. Limited payment life policy - Is one under the terms of which the premiums are payable only during a limited period of years. When the specified number of premium payments have been made, the insurance is fully paid for. It is like ordinary life policies in that it is payable only at the death of the insured. - The insured can take advantage of the investment aspect of the policy. If the insured should die within the specified period, his beneficiary is entitled to all the proceeds of the policy w/out any liability for the unpaid premiums. 3. Term insurance policy - One which provides coverage only if the insured dies during a limited perid. It is an insurance for a fixed or a specific term. If the insured dies within the period specified, the policy is paid to the beneficiary. If he survives the period, the contract expires at the end of the time period. 4. Endowment policy - One under the terms of which the insurer binds himself to pay a fixed sum to the insured if he survives for a specified period, or if he dies within such period, to some other person indicated. Scope of Life Insurance Life insurance undertakes to protect the insureds family, creditors or others against pecuniary loss which may be the outgrowth of the death of the insured. The loss occasioned by death against which life insurance attempts to provide protection is the cessation of the current earning power of the insured. The permanent loss of current earning capacity amounts to an economic death which may be: a. Actual death- casket death

payments as long as he lives Appears more like an investment instead of an insurance, which may or may not turn out to be profitable

insureds death the lump sum payment Has a characteristic like indemnity, the insurer will reimburse the insureds beneficiaries a large sum upon the insureds death

#180-A Liability of insurer in case of suicide When Liable: The policy cannot provide a period longer than 2 years. Thus if the policy provides for a 3-year period AND the suicide is committed within said period BUT after 2 years, the insurer is liable. 1. The suicide is comitted after the policy has been in force for a period of 2 years from the date of its issue or of its last reinstatement; 2. The suicide is committed after a shorter period provided in the policy although within the 2-year period; and 3. The suicide is committed in the state of insanity regardless of the date of commission, UNLESS suicide is an exepted risk. When NOT Liable: 1. The suicide is not by reason of insanity and is committed within the 2-year period 2. The suicide is by reason of insanity but is not among the risks assumed by the insurer regardless of the date of the commission AND 3. The insurer can show that the policy was obtained with the intention to commit suicide even in the absence of any suicide exclusion in the policy. #181 Right of insured to assign life insurance policy 1. Insurable interest of assignee in life insurance not required - All life insurance policies are declared by law to be assignable regardless of whether the assignee has an insurable interest in the life of the insured or not. A provision in a contract of life insurance denying the insured his right to assign without the consent of the insurer will be void. 2. Where assignment used as a cloak to hide an illegal scheme - Not allowed. The usual evidence of this scheme is the fact that the assignment occured almost immediately after the policy is issued. Necessity of consent of beneficiary to assignment 1. With waiver of right to change beneficiary - In accordance with the rule that a beneficiary of an ordinary life insurance policy which contains an express waiver of the righ to change the beneficiary acquires a vested & absolute interest which cannot be divested without his consent, it is consequently true that the insured cannot assign such a policy without the consent of the beneficiary 2. Without such waiver - The insured may assign the policy without the consent of the beneficiary. The beneficiary has a mere expectancy and he cannot make an assignment of the policy until his interest in the proceeds thereof becomes absolutely fixed by the death of the insured. #182 Notice to insurer of transfer 1. Notice not required by policy - If the policy does not expressly require the insured to give notice of an assignment or transfer of the policy to the insurer, such notice is not essential to the validity of the assignment 2. Notice required by policy - Without such notice, in the absence of waiver, shall have no effect so far as the insurer is concerned. This means that the insurer without notice is relieved of any responsibility in case payment is made to the beneficiary before receipt by the insurer of the notice. Even without notice to the insurer, the assignment is binding upon the assignor and the assignee. 3. Assignment with consent of insurer - WON the policy expressly requires that notice of an assignment or transfer must be given to the insurer, the assignment with the consent of the insurer creates in effect, a novation. - The assignee takes the newly formed contract free of defenses available to the insurer against the insurer under the old contract #183 Measure of indemnity under life policy

b. c.

Living death- permanent disability Retirement death- living beyond the earning capacity

Contract of Life Annuity defined The debtor binds himself to pay an annual pension or income during the life of one or more determinate persons in consideration of a capital consisting of money or other property, whose ownership is transferred to him at once with burden of the income. The Annuity Concept Upside-Down Application of Life Insurance Principle This concept is based on the notion that the purpose of life insurance is the creation of an estate, whereas the purpose of the annuity is the scientific liquidation of an estate. Annuity contracts Distinguished from ordinary life policies Both provide protection from a substantial risk. A person may take life insurance and at the same time enter into a contract of annuity to provide security both against the risk of premature death & against tthe risk of long life Annuity contracts Insures against economic problems resulting from a long life rather than an early death Form an insurers viewpoint, annuity looks to transciency The lump sum is paid to the insurer immediately and the annuitant receives the annuity Ordinary Life Policies

To longevity The insured pays to the insurer an annuity and his beneficiary receives at the

- There could be no exact pecuniary measurement of a persons interest in his life or the life of another. Hence, a person can purshase life insurance for any amount as long as he can pay the premium. - The exception is when a person insures the life of another, as where a creditor insures the life of his debtor. In this case, the interest of the creditor in the life of the debtor is susceptible of exact pecuniary measurement or estimation.

Title 2 - 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. 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. The cost of such examination shall be paid for by the insured. A clause shall be inserted in such policy stating substantially that the value of the insured's interest in such building or structure has been thus fixed. In the absence of any change increasing the risk without the consent of the insurer or of fraud on the part of the insured, then in case of a total loss under such policy, the whole amount so insured upon the 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. This section shall not prevent the parties from stipulating in such policies concerning the repairing, rebuilding or replacing of buildings or structures wholly or partially damaged or destroyed. Sec. 173. No policy of fire insurance shall be pledged, hypothecated, or transferred to any person, firm or company who acts as agent for or otherwise represents the issuing company, and any such pledge, hypothecation, or transfer hereafter made shall be void and of no effect insofar as it may affect other creditors of the insured. Title 3 - CASUALTY 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 glassinsurance, burglary and theft insurance, personal accident and health insurance as written by non-life insurance companies, and other substantially similar kinds of insurance.

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 a shorter period: Provided, however, That suicide committed in the state of insanity shall be compensable regardless of the date of commission. (As amended byBatasang Pambansa Blg. 874). 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. 182. Notice to an insurer of a transfer or bequest thereof is not necessary to preserve the validity of a policy of insurance upon life or health, unless thereby expressly required. Sec. 183. Unless the interest of a person insured is susceptible of exact pecuniary measurement, the measure of indemnity under a policy of insurance upon life or health is the sum fixed in the policy.

Title 4 - SURETYSHIP Sec. 175. A contract of suretyship 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 surety or 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 contract of suretyship in relation to the principal contract between the obligor and the obligee. (As amended by PD No. 1455). Sec. 177. The surety is entitled to payment of the premium as soon as the contract ofsuretyship or bond is perfected and delivered to the obligor. No contract ofsuretyship or bonding shall be valid and binding unless and until the premiumtherefor 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 premium has been paid by the obligor to the surety: Provided, That if the contract ofsuretyship or bond is not accepted by, or filed with the obligee, the surety shall collect only reasonable amount, not exceeding fifty per centum of the premium due thereon as service fee plus the cost of stamps or other taxes imposed for the issuance of the contract or bond: Provided, however, That if the non-acceptance of the bond be due to the fault or negligence of the surety, no such service fee, stamps or taxes shall be collected. In the case of a continuing bond, the obligor shall pay the subsequent annual premium as it falls due until the contract of suretyship is cancelled by the obligeeor by the Commissioner or by a court of competent jurisdiction, as the case may be. 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. Title 5 - LIFE INSURANCE Sec. 179. Life insurance is insurance on human lives and insurance appertaining thereto or connected therewith. 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. Every contract or pledge for the payment of endowments or annuities shall be considered a life insurance contract for purpose 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