Name: Siplon, Charmila R.

Date: June 20, 2018

An Outline of the Insurance Code

Republic Act No. 10607 (Amending Presidential Decree 612)

1. Definition of Insurance
 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. (Sec.2, par. 2, R.A. 10607)

2. The Contract of Insurance

 REQUISITES OF A CONTRACT OF INSURANCE (The Insurance Code of the
Philippines Annotated, Hector de Leon, 2002 ed.)
1. A subject matter which the insured has an insurable interest.
2. Event or peril insured against which may be any future contingent or
unknown event, past or future and a duration for the risk thereof.
3. A promise to pay or indemnify in a fixed or ascertainable amount.
4. A consideration known as “premium”.
5. Meeting of the minds of the parties.

Gercio vs. Sunlife Insurance Co., 48: 53

 If the policy contains no provision authorizing a change of
beneficiary without the beneficiary's consent, the insured cannot
make such change.
 A life insurance policy of a husband made payable to the wife as
beneficiary, is the separate property of the beneficiary and beyond
the control of the husband.
 In the absence of a statute to the contrary, if a policy is taken out
upon a husband's life and the wife is named as beneficiary therein,
a subsequent divorce does not destroy her rights under the policy.

Fieldmen’s Insurance Co., Inc. vs. Vda. De Songco, 25 SCRA 70

 To borrow once again from the language of the Qua Chee Gan
opinion: "The contract of insurance is one of perfect good faith
(uberrima fides) not for the insured alone, but equally so for the
insurer; in fact, it is more so for the latter, since its dominant
bargaining position carries with it stricter responsibility."
 This is a case where the doctrine of estoppel undeniably calls for
application. It is now beyond question that where inequitable
conduct is shown by an insurance firm, it is "estopped from

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 enforcing forfeitures in its favor, in order to forestall fraud or
imposition on the insured." After petitioner had led the insured to
believe that he could qualify under the common carrier liability
insurance policy, and to enter into contract of insurance paying
the premiums due, it could not, thereafter, in any litigation arising
out of such representation, be permitted to change its stand to the
detriment of the heirs of the insured. As estoppel is primarily
based on the doctrine of good faith and the avoidance of harm
that will befall the innocent party due to its injurious reliance, the
failure to apply it in this case would result in a gross travesty of
justice.

a. What may be insured

 Section 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.
1. A future contingent Event Resulting in Loss or Damage
2. A Past Unknown Event Resulting in Loss or Damage
3. Contingent Liability

1. Kinds of insurable risk

 Personal risks – life or health risks
 Property risks – loss or damage to property
 Liability risks – involve liability of the insured for an injury caused to
the person or property of another

What are the requirements in order that a risk be insurable?

1. The loss to be insured against must be important enough to warrant
the existence of an insurance contract
2. Risk must permit a reasonable statistical estimate of the chance of loss
in order to determine the amount of premium to be paid
3. The loss should be definite as to cause, time, place and amount
4. The loss is not catastrophic
5. Risk is accidental in nature

2. Insurance by married woman

 ``A married woman may take insurance on her life or on that of
her children, without need of her husband’s consent. (Sec.3,
Insurance Code)

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  Under Sec. 5 of R.A. 7192, women, single or married, now have
the same contractual rights as men in entering into insurance
contracts.

3. Insurance by minors
 A minor under certain circumstances may be an insured, and can
exercise all the rights and privileges of an owner under the policy.
 If a policy is taken by a person on the life or health of a minor, the
policy vests in the minor on the death of that person who
procured the policy. (Sec. 3, Insurance Code)

b. Parties to the contract

 Insurer
- Person who undertakes to indemnify another.
- For a person to be called an insurance agent, it is necessary that he should
perform the function for compensation.
 Insured
- The party to be indemnified upon the occurrence of the loss. He must have
capacity to contract, must possess an insurable interest in the subject of the
insurance and must not be a public enemy.
- A public enemy- a nation with whom the Philippines is at war and it includes
every citizen or subject of such nation.
 Beneficiary
- A person designated to receive proceeds of policy when risk attaches.

i. Who may be an insurer

 Section 6. Every corporation, partnership, or association, duly authorized to
transact insurance business as elsewhere provided in this Code, may be an
insurer.

ii. Who may be insured

 Section 7. Anyone except a public enemy may be insured.

iii. Insurance by mortgagor and mortgagees

 Section 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,

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 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.
 Section 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
obligations on the assignee, making a new contract with him, the acts of the
mortgagor cannot affect the rights of said assignee.

San Miguel Brewer vs. Law Union and Rock Insurance Co., 40:6
 A brewery company, as mortgagee of real property, procured a
policy of insurance to be written thereon payable to itself, in case
of loss. The insurer was notified that the brewery was merely a
mortgagee, but no information was asked or given as to the
personality of the owner. Held: That the brewery company had an
insurable interest but could recover on the policy only to the
extent of the credit secured by the mortgage.
 A purchaser of insured property who does not take the precaution.
to obtain a transfer of the policy of insurance cannot, in case of
loss, recover upon such contract, as the transfer of the property
has the effect of suspending the insurance until the purchaser
becomes owner of the policy as well as of the property insured.
 In order to justify the reformation of a contract of insurance on the
ground of failure of the contract to express the intention of the
contracting parties, the proof must be of the most satisfactory
character, and it must be made clearly to appear that the minds of
the contracting parties did actually meet in agreement and that
there was some mutual mistake in the expression of their purpose.
Gonzales La O vs. Yek Tong Lin, 55:396
 The fact that the plaintiff himself presented in evidence the
policies mortgaged to the Bank of the Philippine Islands gives rise
to the presumption that the debt secured by the mortgage has
been paid, in accordance with article 1191 of the Civil Code. On
the other hand, "Insured may be regarded as 'the real party in
interest, although he has assigned the policy for the purpose of
collection, or has assigned as collateral security any judgment he
may obtain."
 The tobacco insured in the other companies was different from
that insured with the defendant, since the number of bales of
tobacco in the warehouse greatly exceeded that insured with the

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 defendant and the other companies put together. And according
to the doctrine enunciated in 26 Corpus Juris, 188, "to be
insurance of the sort prohibited the prior policy must have been
insurance upon the same subject matter, and upon the same
interest therein."
 If, with the knowledge of the existence of other insurances which
the defendant deemed violations of the contract, it has preferred
to continue the policy, its action amounts to a waiver of the
annulment of the contract.
Bachrach vs. British American Ass. Co., 17:562
 When property is insured any condition upon which the insurer
wishes to rely, in order to avoid liability in case of a loss, must be
expressed in the policy.
 Interest in property insured does not pass by the mere execution of
a chattel mortgage, and, while the chattel mortgage is a
conditional sale, there is no alienation, within the meaning of the
insurance law, until the mortgagee acquires a right to take
possession by default under the terms of the mortgage.
 Where the terms of an insurance policy require that notice of loss
be given, a denial of liability by the insurers under the policy
operates as a waiver of notice of loss because if the policy is null
and void the furnishing of such notice would be vain and useless.
Immediate notice means within a reasonable time.
c. Insurable interest
i. Insurable interest in general
Insurable interest is 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 (Sec. 13, Insurance
Code; See Gaisano v. Insurance, 490 SCRA 286).

Filipinas Cia. De Seguros vs. Christian Huenfeld & Co., Inc., G.R. No. L-
2294, May 25, 1951
 The nationality of a private corporation is determined by the character or
citizenship of its controlling stockholders.
 Where majority of the stockholders of a corporation were German
subjects, the corporation became an enemy corporation upon the
outbreak of the war between the United States and Germany.
 As the Philippine Insurance Law (Act No. 2427, as amended), in its section
8, provides that "anyone except a public enemy may be insured," an

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 insurance policy ceases to be allowable as soon as an insured becomes a
public enemy.
 Where an insurance policy ceases to be effective by reason of war, which
has made the insured an enemy, the premiums paid for the period
covered by the policy from the date war is declared,
should be returned.

ii. Insurable interest in life

Insurable interest in life is the interest which a person has in his life, or the
interest which her may have in the lives of other persons (1) on whom he
depends whole or in part for education or support, (2) under legal
obligation to him to pay money, to deliver property, or to render service,
(3) upon whose life any estate or interest vested in him depends.

Insurable Interest in One’s Life

Every person has an insurable interest in the life and health of himself.
(Philamcare v. CA, 379 SCRA 356)

Insurable Interest in the Life of Others

A person may have an insurable interest in the life of another in the ff.
cases:
a) Of any person on whom he depends wholly or in part for education or
support e.g. wife insuring the husband’s life.
b) Of any person under a legal obligation to him for payment of money,
or respecting property or service, of which death or illness might delay
or prevent performance e.g. a creditor insuring the life of its general
manager.
c) Of any person upon whose life any estate or interest vested in him
depends e.g. legatee of a usufruct insuring the life of the usufructuary
on whose death the usufruct will be distinguished.

El Oriente vs. Posadas, 56: 147

 Considering, therefore, the purport of the stipulated f acts,
considering the uncertainty of Philippine law, and considering the
lack of express legislative intention to tax the proceeds of life
insurance policies paid to corporate beneficiaries, particularly
when in the exemption in favor of individual beneficiaries in the
chapter on this subject, the clause is inserted "exempt from the
provisions of this law," we deem it reasonable to hold the

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 proceeds of the life insurance policy in question as representing an
indemnity and not taxable income.

iii. Insurable interest in property

Insurable interest in property is every interest in property whether real or
personal, or any relation thereto, or liability in respect thereof, of such
nature that the contemplated peril might directly cause damage to the
insured. (1951 Bar)

An insurable interest in property may consist of: a) an existing interest; b)

an inchoate interest founded on an existing interest; and c) an expectancy
coupled with an existing interest in that out of which the expectancy
arises. (1967, 1953 Bar)

PAL vs. Heald Lumber Co., 70 SCRA 323

 If a property is insured and the owner received the indemnity from
the insurer, it is provided in Article 2207 of the Civil Code that the
insurer is deemed subrogated to the rights of the insured against
the wrong doer and if the amount paid by the insurer does not
fully cover the loss then the aggrieved party is the one entitled to
recover the deficiency. Evidently, under this legal provision, the
real party in interest with regard to the portion of the indemnity
paid is the insurer and not the insured.
 The payment of the indemnity by the insurer to the insured does
not make the latter a trustee of the former as in the American law.
This matter being statutory, the same must be governed by our
own law in this jurisdiction.

Lamparo vs. Jose, 30: 437

 A building contractor has an insurable interest in the completed
building pending the payment of the construction price.
 A building contractor is not obligated to surrender to the owner or
her grantees any part of the proceeds of a policy insuring his own
interest exclusively and paid for by him, for the mere reason that,
at the time of the fire, the amount of the policy exceeds that still
due him on the construction price.

Garcia vs. Hongkong Fire & Marine Ins. Co., 45:122

 Where G was the owner of a stock of merchandise in a building
which he did not own and desired to insure his merchandise, and,

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 through a friend, applied for insurance and paid the premium, but
by mistake the policy, which was issued, covered the building,
which G did not own, and was written in the English language
which he could not read and did not understand, but he noted that
the amount of the policy was correct, and where later G assigned
the policy to a bank as collateral security for the payment of a
loan, and the bar.' notified the insurance company in writing "that
the merchandise insured by you against fire in favor" of G, giving
the amount and number of the policy, and requested that the
insurance company should make the proper endorserment in favor
of the bank, and the insurance company acknowledged receipt of
the letter and complied with the request, and nothing was said
about the mistake, and where about six months later both the
building and the merchandise were destroyed by fire, upon the
facts shown the insurance company is liable for the amount of the
policy which it issued to G.

Lopez vs. del Rosario and Quiogue, 44: 99

 The law is that a policy effected by bailee and covering by its
terms his own property and property held in trust; inures, in the
event of a loss, equally and proportionately to the benefit of all
the owners of the property insured. Even if one secured insurance
covering his own goods and goods stored with him, and even if
the owner of the stored goods did not request or know of the
insurance and did not ratify it before the payment of the loss, yet
it has been held by a reputable court that the warehouseman is
liable to the owner of such stored goods for his share.
 Moreover, defendant has acknowledged her responsibility to the
owners of the stored merchandise, against risk of loss by fire.
Plaintiff's rights to the insurance money have not been forfeited
by failure to pay the insurance provided for in the warehouse
receipts. A preponderance of the proof does not demonstrate
that the plaintiff ever ordered the cancellation of his insurance
with the defendant nor is it shown that the plaintiff ever refused
to pay the insurance when the bills were presented to him, and
that notice of an intention to cancel the insurance was ever given
the plaintiff.

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 2. When insurable interest must exist
3. Effect of change of interest
4. Assignment of insurance policies
San Miguel Brewer vs. Law Union and Rock Insurance Co., 40:6
Central Surety & Insurance Co. vs. Silva, (CA) O.G. No. 2, Jan. 31, 1958,
p.376: the mere delivery of an insurance policy or the assignment of the
receipts thereunder cannot be construed as payment in just the same way
that delivery of other mercantile and negotiable instruments do not
constitute payment until the proceeds are realized in accordance with
Article 1249 of the Civil Code. The reason is that an insurance policy is but
an evidence of a right to claim indemnification for loss occasioned by the
risk insured against.
5. Correct estimation of risk
6. Delimitation of the risk
7. Control of the risk
8. Concealment
Musgni vs. West Coast Life Insurance Company, 61:804
Argente vs. West Coast Life Insurance Company, 51:275
De Leon vs. Crown Life Ins. Co., C.A. GR 44842: there was concealment
where applicant did not disclose he had pneumonia, diabetesor syphilis
which avoided the insurance policy although the cause of death was
totally unconnected to the material fact misrepresented.
Insular Life Ass. Vs. Pineda, CA GR 43967: in the absence of evidence of
the uninsurability of a person afflicted with chronic cough,concealment
thereof is no ground for annulment of the policy
Yu Pang Cheng vs. CA, GR No. L-12465, May 29, 1959
Saturnino vs. Philamlife, 7 SCRA 316
9. Duty to Disclose
d. Representations
1. Definition and nature
2. Promissory representation
3. Affirmative representation
4. Effect of falsity of representation
Insular Life Ass. Ltd. vs. Feliciano, 73: 201
Sison vs. Manufacturer’s Life, 37 OG 1663: after the insurance policy was
issued to A, it was found out that a brother and sister of his had
previously died of pulmonary tuberculosis and that he was already
spitting blood at the time he filed his application. In this case, the

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 misrepresentation was material and sufficient to avoid the contract of
insurance.
5. Rescission of insurance contracts
Saura Import & Export vs. Phil. Int’l Co., GR No. L-15184, May 31, 1963
6. Effect of waiver and estoppel
7. Incontestable clause
8. Preliminary contracts of insurance
9. Informal writings to evidence insurance
10. The insurance policy
De Lim vs. Life Ass. of Canada, 41:263
Enriquez vs. Sun Life of Canada, 41:269
Bonifacio Bros. vs. Mora, 20 SCRA 261
Ty vs. First National Surety, 1 SCRA 1324
Ty vs. Filipinas Compania de Seguros, 17 SCRA 365
Ang Giop Chip vs. Springfield, 56:275
11. Construction and reformation of insurance policy
Sindayen vs. Ins. Life Ass., 62:9
Young vs. Midland Textile, Inc., 30: 617
Misamis Lumber vs. Capital Ind. & Surety, 17 SCRA 228
Tuarus Taxi Co. vs. Capital Ass. & Surety, 24 SCRA 254
Jarque vs. Union Fire, 56: 758
Phil. Mfg. vs. Union Ins. Society of Canada, 42: 378
12. Matters to be stated in the policy
Paris Manila Perfume Co. vs. Phoenix Ass., 49: 753
Lim Cuan Sy vs. Northern Ass. o., 55:248
Sharruf & Co. vs. Baloise Fire Ins., 64: 258
13. To whom proceeds of policy payable
14. Open, valued and running policy
15. Effect of certain stipulations in policy
Paulino vs. Capital Ins., No. L-11728, May 9, 1959

e. Warranties
1. Definition and nature
2. Warranties vs. representations, conditions, etc.
Harding vs. Commercial Union Ass. Co., 38:454
Pioneer Insurance & Surety vs. Yap, 61 SCRA 426
Filipinas Life Assurance vs. Nava, 17 SCRA (1966)
3. Effects of violation of warranty
f. Premium
1. Definition

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 2. Time, place, mode, etc. of payment of premium
Capitol Ins. & Surety vs. Plastic Era Co., Inc., 65 SCRA 134
3. Effect of non-payment
4. Relief of harshness from forfeiture clauses. grace period, cash surrender
value
5. Reinstatement of lapsed policy
6. Excuse of non-payment of premiums
7. Recovery of premiums paid
g. Loss
1. Meaning of proximate cause
2. Losses for which insurer not liable
h. Notice of loss
i. Double insurance
j. Reinsurance
k. Payment of claims
3. Classes of Insurance
4. The Business of Insurance
5. Security Fund
6. Compulsory Motor Vehicle Liability Insurance
7. Mutual Benefit Associations and Trusts for Charitable Uses

INTRODUCTORY JURISPRUDENCE

1. ABOITIZ SHIPPING vs. INSURANCE COMPANY OF NORTH AMERICA , G.R. No.

168402, August 6, 2008
2. ASIAN TERMINALS, INC., vs. MALAYAN INSURANCE, CO., INC., G.R. No. 171406, April 4, 2011
3. DBP POOL OF ACCREDITED INSURANCE COMPANIES vs. RADIO MINDANAO NETWORK,

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 INC., G.R. NO. 147039, January 27, 2006
4. VIOLETA R. LALICAN vs. THE INSULAR LIFE ASSURANCE COMPANY
LIMITED, G.R. No. 183526, August 25, 2009

5. MALAYAN INSURANCE CO., INC. vs. RODELIO ALBERTO and

ENRICO ALBERTO REYES, G.R. No. 194320, February 1, 2012
6. PHILIPPINE HEALTH CARE PROVIDERS, INC. PROVIDERS, INC., vs. COMMISSIONER OF
INTERNAL REVENUE, G.R. No. 167330, September 18, 2009
7. THE PHILIPPINE AMERICAN LIFE & GENERAL INSURANCE COMPANY vs. HON. AUGUSTO
BREVA, G.R. No. 147937. November 11, 2004
8 STANDARD INSURANCE CO., INC.v. ARNOLD CUARESMA AND JERRY B. CUARESMA,
G.R. No. 200055, September 10, 2014

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