Nielgem S.

Beja
LAW ON INSURANCE 2017
Justice Lloren

July 1, 2016 In the application of the provisions of this Code, the fact that no profit is
What is a rider? (Sec. 50) derived from the making of insurance contracts, agreements or
A rider is a small printed or typed stipulation contained on a slip of transactions or that no separate or direct consideration is received
paper attached to the policy and forming an integral part of the policy. therefor, shall not be deemed conclusive to show that the making
thereof does not constitute the doing or transacting of an insurance
Oldest Insurance in the Philippines business.
Ocean marine insurance. It is one of the oldest written forms of
insurance and has to do primarily with the insurance of sea perils.
What may be insured? (Sec. 3)
Section 3. Any contingent or unknown event, whether past or future,
The ___________________ insured has no interest in a contract of
which may damnify a person having an insurable interest, or create a
reinsurance (Sec. 98)
liability against him, may be insured against, subject to the provisions of
ORIGINAL this chapter.

Three instances when breach of Warranty does not avoid policy (p. 235) Insurable Interest in property consists of? (Sec. 14)
There is authority to the effect that a breach of warranty as to the value Section 14. An insurable interest in property may consist in:
of the property insured, which involves a matter of mere opinion, 1. An existing interest;
where the property does not have a fixed market value, must be
substantial in order to constitute a ground for avoiding the policy. 2. An inchoate interest founded on an existing interest; or
(Phoenix Ins. Co. vs. Pickel, 21 N.E. 546.)
3. An expectancy, coupled with an existing interest in that out
Breach of warranty operates to discharge the insurer from liability of which the expectancy arises
unless the insurer is liable because of a waiver of the warranty or an
estoppel. The doctrines of waiver and warranty are two devices which Distinguish insurable interest in life insurance from property insurance
frequently have been used to modify the harsh operation of the rules (sec. 19)
on concealment and warranty.
Section 19. An interest in property insured must exist when the
Waiver may be defined as "an intentional relinquishment of a known insurance takes effect, and when the loss occurs, but need not exist in
right." the meantime; and interest in the life or health of a person insured
must exist when the insurance takes effect, but need not exist
What are the 3 main classifications of insurance? (p. 43) thereafter or when the loss occurs.
1. Life insurance dependent upon human life.
a. Individual life In property In life
b. Group life As to extent:
c. Industrial life Limited to the actual value of the UNLIMITED
2. NonLife Insurance interest thereon
a. Marine As to time when interest must
b. Fire exist:
c. Casualty
3. Contracts of suretyship or bonding. (De Leon, The Insurance Code must exist when the insurance The interest must exist at the
Annotated, 2006) takes effect and when the loss time of the policy takes effect
occurs, but need not exist in the BUT need not exist at the time of
July 15, 2016 meantime loss

What is doing insurance business include? (Sec.2) As to the expectation of

The term doing an insurance business or transacting an insurance
Benefits to be received at the
business, within the meaning of this Code, shall include: time of loss:
(1) Making or proposing to make, as insurer, any insurance contract;
There must be a legal basis- The expectation of benefit to be
(2) Making or proposing to make, as surety, any contract of suretyship
If such legal basis exists, an derived from the continued
as a vocation and not as merely incidental to any other legitimate expected benefit, however existence of life need not have
business or activity of the surety;
remote, constitutes an insurable any legal basis whatever. A
interest reasonable probability is
(3) Doing any kind of business, including a reinsurance business,
sufficient
specifically recognized as constituting the doing of an insurance
business within the meaning of this Code;

(4) Doing or proposing to do any business in substance equivalent to

any of the foregoing in a manner designed to evade the provisions of When the facts material to the insurance policy (Sec. 31)
this Code.
Section 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

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Justice Lloren

whom the communication is due, in forming his estimate of the (3) The insurer assumes that risk of loss;
disadvantages of the proposed contract, or in making his inquiries.
(4) Such assumption of risk is part of a general scheme to
Meaning of Perils of the seal (Sec. 101) distribute actual losses among a large group or
The phrase "perils of the sea" or "perils of navigation" includes only substantialnumberof persons bearing a similar risk; and
those casualties due to the unusual violence or extraordinary action of
wind and wave, or to other extraordinary causes connected with (5) As consideration for the insurer's promise, the insured
navigation. (Vance, p. 296.) makes a ratable contribution called "premium," to a general
insurance fund,
(a) The phrase thus embraces all kinds of marine casualty such as
shipwreck, foundering, stranding, collision, and every specie of damage Nature of Insurance (p. 19)
done to the ship or goods at sea by the violent action of the wind and (difference between charactereistics?)
waves (45 C.J.S., 934.) or losses occasioned by the jettisoning of cargo if
it is made for the purpose of saving a vessel rendered unworthy during
the voyage, not through the fault of the captain. ([Link]
England [Link] Ins. Co., 14 Allen 300.) Define marine insurance (Sec. 101)
"Section 101. Marine Insurance includes:
Implied warranties in marine insurance (p. 354) (a) Insurance against loss of or damage to:
An implied warrrantyis a warranty which from the very nature of the 1. Vessels, craft, aircraft, vehicles, goods, freights, cargoes,
contract or from the general tenor of the words, although no express merchandise, effects, disbursements, profits, moneys,
warranty is mentioned, is necessarily embodied in the policy as a part securities, choses in action, instruments of debts, valuable
thereof and which binds the insured as though expressed in the papers, bottomry, and respondentia interests and all other
contract kinds of property and interests therein, in respect to,
appertaining to or in connection with any and all risks or
Thus, in every policy of marine insurance, there is an implied warranty perils of navigation, transit or transportation, or while being
that the ship is seaworthy when the policy attaches. assembled, packed, crated, baled, compressed or similarly
prepared for shipment or while awaiting shipment, or during
When is deviation in marine insurance proper? any delays, storage, transhipment, or reshipment incident
Sec. 124 A deviation is proper: thereto, including war risks, marine builders risks, and all
1. When caused by circumstances over which neither the personal property floater risks;
master nor the owner of the ship has any control; 2. Person or property in connection with or appertaining to a
marine, inland marine, transit or transportation insurance,
2. When necessary to comply with a warranty, or to avoid a including liability for loss of or damage arising out of or in
peril, whether or not the peril is insured against; connection with the construction, repair, operation,
maintenance or use of the subject matter of such insurance
3. When made in good faith, and upon reasonable grounds of (but not including life insurance or surety bonds nor
belief in its necessity to avoid a peril; or insurance against loss by reason of bodily injury to any
person arising out of ownership, maintenance, or use of
4. When made in good faith, for the purpose of saving human automobiles);
life or relieving another vessel in distress. 3. Precious stones, jewels, jewelry, precious metals, whether in
Sec. 123. Deviation is a departure from the course of the voyage course of transportation or otherwise; and
insured, mentioned in the last two sections, or an unreasonable delay in 4. Bridges, tunnels and other instrumentalities of
pursuing the voyage or the commencement of an entirely different transportation and communication (excluding buildings,
voyage. their furniture and furnishings, fixed contents and supplies
held in storage); piers, wharves, docks and slips, and other
Concept of insurance (page 16, Sec. 2) aids to navigation and transportation, including dry docks
Insurance is a contract.a contract of insurance is an agreement by which and marine railways, dams and appurtenant facilities for the
one party (insurer) for aconsideration (premium) paid by the other control of waterways.
party (insured),promises to pay money or its equivalent or to do some "(b) Marine protection and indemnity insurance, meaning insurance
actvaluable to the latter (or his nominee), upon the happening of aloss, against, or against legal liability of the insured for loss, damage, or
damage, liability, or disability arising from an unknown orcontingent expense incident to ownership, operation, chartering, maintenance,
event (de Leon) use, repair, or construction of any
Define Fire insurance (Sec. 169)
Elements of Insurance (p. 23) Section 169. As used in this Code, the term fire insurance shall include
insurance against loss by fire, lightning, windstorm, tornado or
(1) The insured possesses an interest of some kind earthquake and other allied risks, when such risks are covered by
susceptible of pecuniary estimation, known as insurable extension to fire insurance policies or under separate policies.
interest
(2) The insured is subject to a risk of loss through the Casualty insurance (Sec. 176)
destruction or impairment of that interest by the happening "Section 176. Casualty insurance is insurance covering loss or liability
of designated perils; arising from accident or mishap, excluding certain types of loss which by
law or custom are considered as falling exclusively within the scope of

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Justice Lloren

other types of insurance such as fire or marine. It includes, but is not

limited to, employers liability insurance, motor vehicle liability Insurable interest in property, explain each (sec. 14)
insurance, plate glass insurance, burglary and theft insurance, personal
accident and health insurance as written by non-life insurance Section 14. An insurable interest in property may consist in:
companies, and other substantially similar kinds of insurance. (a) An existing interest;
(b) An inchoate interest founded on an existing interest; or
Suretyship (Sec. 177) (c) An expectancy, coupled with an existing interest in that
Section 177. A contract of suretyship is an agreement whereby a party out of which the expectancy arises.
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, Double insurance and over insurance (p. 308)
stipulations, bonds or undertakings issued by any company by virtue of Section 95. A double insurance exists where the same person is insured
and under the provisions of Act No. 536, as amended by Act No. 2206. by several insurers separately in respect to the same subject and
interest.
Life Insurance (Sec. 181)
Section 181. Life insurance is insurance on human lives and insurance 4 kinds of warranties
appertaining thereto or connected therewith. 1. EXPRESS
An agreement contained in the policy or clearly
Every contract or undertaking for the payment of annuities including incorporated therein as part thereof whereby the
contracts for the payment of lump sums under a retirement program insured stipulates that certain facts relating to the risk
where a life insurance company manages or acts as a trustee for such are or shall be true or certain acts relating to the same
retirement program shall be considered a life insurance contract for subjects have been or shall be done.
purposes of this Code. 2. IMPLIED
A warranty which from the very nature of the contract
July 22, 2016 or from the general tenor of the words, although no
Time frame sa insured sa property and life and how do you distinguish it express warranty is mentioned, is necessarily
with life insurance (p. 128) embodied in the policy as a part thereof and which
binds the insured as though expressed in the contract
3. APROMISORY
One where the insured stipulates that certain facts or
conditions pertaining to the risk shall exist or that
certain things with reference thereto shall be done or
omitted, (see ibid.) It is in the nature of a condition
subsequent.
4. AFFIRMATIVE
One which asserts the existence of a fact or condition
Existence of insurable interest of property and life insurance at the time it is made, (see ibid.,p428; Vance, op. cit., p.
410.) The warranty is continuing if it is one that must
In property In life be satisfied during the entire coverage period of the
As to time when interest must The interest must exist at the insurance.
exist:must exist when the time of the policy takes effect
insurance takes effect and when BUT need not exist at the time of Incontestability period (Sec. 48)
the loss occurs, but need not loss Section 48. Whenever a right to rescind a contract of insurance is given
exist in the meantime to the insurer by any provision of this chapter, such right must be
exercised previous to the commencement of an action on the contract.

After a policy of life insurance made payable on the death of the

insured shall have been in force during the lifetime of the insured for a
period of two (2) years from the date of its issue or of its last
Insurable interest in property and distinguish each (Sec. 13, p. 116) reinstatement, the insurer cannot prove that the policy is void ab initio
or is rescindable by reason of the fraudulent concealment or
In property In life misrepresentation of the insured or his agent.
As to extent:
Limited to the actual value of the UNLIMITED
interest thereon Distinguish warranties from misrepresentation(p. 229)

Section 17. The measure of an insurable interest in property is the MISREPRESENTATION/REPRESENTATION WARRANTIES
extent to which the insured might be damnified by loss or injury A representation is required to be On the other hand a
thereof. substantially true, i.e., the material warranty must be strictly
portion of the statement must be and literally complied with.
Section 18. No contract or policy of insurance on property shall be literally true even though the immaterial
enforceable except for the benefit portion of the statement need not be

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Justice Lloren

true or correct misrepresentation and gives the

if the insurers want to avoid the contract Any breach whether insurer a right to rescind the
on grounds of misrepresentation, it has material or immaterial is contract
to be proved by the insurers that the enough for the insurers to Whether intentional or not, the -
misrepresentation relates to a material avoid the contract. injured party is entitled
fact to rescind a contract of insurance
A representation does not appear in the a warranty must appear in on ground of concealment or
policy the policy either expressly false representation.
or by way of reference. Since the contract of insurance is -
said to be one of utmost good
Subrogation and to what extent applicable and exceptions to the faith on the part of both parties
doctrine of subrogation (to the extent of the amount paid by the insurer to the agreement, the rules on
to the mortgagee insured; applicable only to property insurance, p. 8 concealment and representation
and 9) apply likewise to the insurer.
The doctrine of subrogation is basically a process of legal substitution;
the insurer, after paying the amount covered by the insurance policy,
stepping into the shoes of the insured, as it were, and availing himself
of the latter's rights that exist against the wrongdoer at the time of the Definition of warranty (p. 226)
loss Warranty is a statement or promise by the insured set forth in the policy
itself or incorporated in it by proper reference, the untruth or
EXTENT: nonfulfillment of which in any respect and without reference to
The right of subrogation under Article 2207 applies only to property, whether the insurer was in fact prejudiced by such untruth or
and not to life insurance. The value of human life is regarded as nonfulfillment, renders the policy voidable by the insurer
unlimited and, therefore, no recovery from a third party can be deemed
adequate to compensate the insured's beneficiary.
What are the contents of a policy (sec. 51)
Prevailing rule on changing beneficiary in life insurance (Sec. 11 p. 104) Section 51. A policy of insurance must specify:
Section 11. The insured shall have the right to change the beneficiary he 1. The parties between whom the contract is made;
designated in the policy, unless he has expressly waived this right in said 2. The amount to be insured except in the cases of open or
policy. Notwithstanding the foregoing, in the event the insured does not running policies;
change the beneficiary during his lifetime, the designation shall be 3. The premium, or if the insurance is of a character where the
deemed irrevocable exact premium is only determinable upon the termination of
the contract, a statement of the basis and rates upon which
Hostile and friendly fire (p. 288) the final premium is to be determined;
HOSTILE FRIENDLY 4. The property or life insured;
when it occurs outside of the So long as a fire bums in a place 5. The interest of the insured in property insured, if he is not
usual confines or begins as a where it was intended to burn, the absolute owner thereof;
friendly fire and becomes hostile and ought to be, it is to be 6. The risks insured against; and
by escaping from the place where regarded as merely an agency for 7. The period during which the insurance is to continue
it ought to be to some place the accomplishment of some
where it ought not to be. purpose and not as a hostile peril. Period to file action if claim is rejected and exception (p. 217)
It is a friendly fire. The right of the insured to the payment of his loss accrues from the
happening of the loss. However, the cause of action in an insurance
contract does not accrue until the insured's claim is finally rejected by
the insurer. This is because before such final rejection, there is no real
necessity for bringing suit.
The period for commencing an action under a policy of insurance under
Section 63 is to be computed not from the time when the loss actually
Concealment v. Misrepresentation (p. 170) occurs but from the time when the insured has a right to bring an action
against the insurer
CONCEALMENT MISREPRESENTATION If no stipulation: ordinary rules under NCC
the insured withholds information the insured makes erroneous CONTRACT- 10 years
of material facts from the insurer statements of facts with the In such case, it shall start from the time of loss
intent of inducing the insurer to
enter into the insurance contract. If there is a stipulated period:
The materiality of concealment is - The period shall commence from the date of rejection
determined by the same rules as
applied in cases of (re check)
misrepresentation.
A concealment on the part of the - Period to renew when insurance is non-life (p. 224)
insured has the same effect as a Section 66. In case of insurance other than life, unless the insurer at
least forty-five (45) days in advance of the end of the policy period mails

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Justice Lloren

or delivers to the named insured at the address shown in the policy Limitations to appointment of a beneficiary
notice of its intention not to renew the policy or to condition its
renewal upon reduction of limits or elimination of coverages, the Article 2012 of the Civil Code provides as follows:
named insured shall be entitled to renew the policy upon payment of "Any person who is forbidden from receiving any donation under Article
the premium due on the effective date of the renewal. Any policy 739 cannot be named beneficiary of a life insurance policy by the
written for a term of less than one (1) year shall be considered as if
person who cannot make any donation to him, according to said article,
written for a term of one (1) year. Any policy written for a term longer
than one (1) year or any policy with no fixed expiration date shall be (n)"
considered as if written for successive policy periods or terms of one (1)
year. Article 739 above referred to provides as follows:
The following donations shall be void:
Rule on Succession in life insurance if beneficiary dies (Sec. 23 , p. 132) (1) Those made between persons who were guilty of
adultery or concubinage at the time of the donation;
Section 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. (2) Those made between persons found guilty of the same
criminal offense, in consideration thereof;
When does alteration of the things insured invalidate the insurance
(sec. 170) (3) Those made to a public officer or his wife, descendants
Section 170. An alteration in the use or condition of a thing insured and ascendants, by reason of his office.
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
Who will inherit in case the beneficiary is forfeited?
increasing the risks, entitles an insurer to rescind a contract of fire
insurance. Sec. 12. The interest of a beneficiary in a life insurance policy shall
be forfeited when the beneficiary is the principal, accomplice, or
State the rule on succession on the proceeds if the beneficiary accessory in willfully bringing about the death of the insured; in
subsequently is disqualified (sec. 12, page 109) which event, the nearest relative of the insured shall receive the
Section 12. The interest of a beneficiary in a life insurance policy shall proceeds of said insurance if not otherwise disqualified.
be forfeited when the beneficiary is the principal, accomplice, or
accessory in willfully bringing about the death of the insured. In such a
case, the share forfeited shall pass on to the other beneficiaries, unless
otherwise disqualified. In the absence of other beneficiaries, the
What is double insurance and its requisites?
proceeds shall be paid in accordance with the policy contract. If the
policy contract is silent, the proceeds shall be paid to the estate of the Sec. 93. A double insurance exists where the same person is insured
insured. by several insurers separately in respect to the same subject and
interest.

When is deviation from insurance of a voyage proper (sec. 126, p. 366) Measure of insurable interest in property (Sec.17)
Sec. 17. The measure of an insurable interest in property is the extent
Section 126. A deviation is proper:
to which the insured might be damnified by loss or injury thereof.
1. When caused by circumstances over which neither the
master nor the owner of the ship has any control;
Matters that must be communicated in the absence of inquiry
2. When necessary to comply with a warranty, or to avoid a
peril, whether or not the peril is insured against; Sec. 51. A policy of insurance must specify:
3. When made in good faith, and upon reasonable grounds of (a) The parties between whom the contract is made;
belief in its necessity to avoid a peril; or (b) The amount to be insured except in the cases of open
4. When made in good faith, for the purpose of saving human or running policies;
life or relieving another vessel in distress. (c) The premium, or if the insurance is of a character
where the exact premium is only determinable upon the
Implied warranties, marine insurance (sec. 115, p. 354) termination of the contract, a statement of the basis and
Section [Link] every marine insurance upon a ship or freight, or rates upon which the final premium is to be determined;
(d) The property or life insured;
freightage, or upon any thing which is the subject of marine insurance,
(e) The interest of the insured in property insured, if he is
a warranty is implied that the ship is seaworthy. not the absolute owner thereof;
(f) The risks insured against; and
(g) The period during which the insurance is to continue.

Sources of Insurance contract (p.5)

1. Spanish Period: Code or Commerce
2. American regime: Act no. 2427
3. RA 386 Civil Code
4. PD 612

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Nielgem S. Beja
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Justice Lloren

5. PD No. 1460 The insurer may still contest the policy by way of defense to a suit
Purposes of Subrogation (p. 9) brought upon the policy or by action to rescind the same, on any of the
a. Principal Purpose: to make the person who caused the loss following grounds:
legally responsible for it (1) That the person taking the insurance lacked insurable interest as
b. Prevent the insured from receiving double recovery from the required by law;
wrongdoer and insurer (2) That the cause of the death of the insured is an excepted risk;
(3) That the premiums have not been paid (Secs. 77, 227[b], 228[b],
Life insurance v. Fire v. Marine insurance? 230[b].);
(4) That the conditions of the policy relating to military or naval service
Life Fire Marine have been violated (Secs. 227[b], 228[b].);
(5) That the fraud is of a particularly vicious type, as where the policy
was taken out in furtherance of a scheme to murder the insured, or
where the insured substitutes another person for the medical
examination, or where the beneficiary feloniously kills the insured(6)
That the beneficiary failed to furnish proof of death or to comply with
any condition imposed by the policy after the loss has happened (see
Sec. 242.); or
Define Life Insurance (7) That the action was not brought within the time specified, (see Sec.
63.)
Sec. 180. An insurance upon life may be made payable on the
death of the person, or on his surviving a specified period, or Define incontestable policy Clause (p. 172- Sec. 48)
otherwise contingently on the continuance or cessation of life.
Sec. 48. Whenever a right to rescind a contract of insurance is
Every contract or pledge for the payment of endowments or given to the insurer by any provision of this chapter, such right
annuities shall be considered a life insurance contract for purpose must be exercised previous to the commencement of an action on
of this Code. the contract.

Nature and characteristics of an Insurance contract After a policy of life insurance made payable on the death of the
insured shall have been in force during the lifetime of the insured
1. Consensual
for a period of two years from the date of its issue or of its last
2. Voluntary reinstatement, the insurer cannot prove that the policy is
3. Aleatory void ab initio or is rescindible by reason of the fraudulent
4. Unilateral concealment or misrepresentation of the insured or his agent.
5. Conditional
6. Contract of Indemnity Requisites for Incontestability (p. 173)
7. Personal Under our law, in order that the insurance shall be incontestable, the
8. Property following requisites must be present:
9. Risk Distributing Device (1) The policy is a life insurance policy;
10. Onerous (2) It is payable on the death of the insured; and
11. Uberrimae fides Contract (3) It has been in force during the lifetime of the insured for at least two
Modern Classification of insurance contract: Marine & Property (2) years from its date of issue or of its last reinstatement

Every person has an insurable interest in _______ ? Sec.10

Sec. 10. Every person has an insurable interest in the life and
Effect of insurance taken by a minor p. 68 health:
Section 3 :
Xxx (a) Of himself, of his spouse and of his children;

Any minor of the age of eighteen years or more, may, (b) Of any person on whom he depends wholly or in part
notwithstanding such minority, contract for life, health and for education or support, or in whom he has a pecuniary
accident insurance, with any insurance company duly authorized to interest;
do business in the Philippines, provided the insurance is taken on
his own life and the beneficiary appointed is the minor's estate or (c) Of any person under a legal obligation to him for the
the minor's father, mother, husband, wife, child, brother or sister. payment of money, or respecting property or services, of
which death or illness might delay or prevent the
performance; and

Defenses notbarred by incontestability clause

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Justice Lloren

(d) Of any person upon whose life any estate or interest Conditions for application of no Fault Clause
vested in him depends.
Sec. 378. Any claim for death or injury to any passenger or third
party pursuant to the provisions of this chapter shall be paid
without the necessity of proving fault or negligence of any kind;
Provided, That for purposes of this section:
Who may be insurers?
Sec. 6. Every person, partnership, association, or corporation duly (i) The total indemnity in respect of any person shall not
authorized to transact insurance business as elsewhere provided in exceed fifteen thousand pesos;
this code, may be an insurer.
(ii) The following proofs of loss, when submitted under
oath, shall be sufficient evidence to substantiate the
claim:
Valued Policy (Sec. 61)
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. (a) Police report of accident; and

Running Policy (Sec. 62) (b) Death certificate and evidence sufficient to
establish the proper payee; or
Sec. 62. A running policy is one which contemplates successive
insurances, and which provides that the object of the policy may
(c) Medical report and evidence of medical or
be from time to time defined, especially as to the subjects of
hospital disbursement in respect of which
insurance, by additional statements or indorsements.
refund is claimed;
Reinsurance Policy v. Reinsurance Treaty
Sec. 95. A contract of reinsurance is one by which an insurer (iii) Claim may be made against one motor vehicle only. In
procures a third person to insure him against loss or liability by the case of an occupant of a vehicle, claim shall lie against
reason of such original insurance. the insurer of the vehicle in which the occupant is riding,
mounting or dismounting from. In any other case, claim
A reinsurance treaty is an agreement between two insurance shall lie against the insurer of the directly offending
companies whereby one agrees to cede and the other to accept vehicle. In all cases, the right of the party paying the claim
reinsurance business pursuant to provisions specified in the treaty to recover against the owner of the vehicle responsible for
(de leon) the accident shall be maintained.

Sec. 385. The insurance company concerned shall forthwith

Extent of the Insurable Interest of the mortgagor and mortgagee ascertain the truth and extent of the claim and make payment
a. Extent of insurable interest of mortgagor. The mortgagor within five working days after reaching an agreement. If no
agreement is reached, the insurance company shall pay only
of property, as owner, has an insurable interesttherein to the
the "nofault" indemnity provided in section three hundred
extent of its value, even though the mortgage debt equals seventy-eight without prejudice to the claimant from pursuing his
such value. (Higginson vs. Dali, 13 Mass. 96.) The reason is claim further, in which case, he shall not be required or compelled
that the loss or destruction of the property insured will not by the insurance company to execute any quit claim or document
extinguish his mortgage debt. releasing it from liability under the policy of insurance or surety
bond issued. (As amended by Presidential Decree No. 1455).
b. Extent of insurable interest of mortgagee. The mortgagee
In case of any dispute in the enforcement of the provisions of any
(or his assignee) as such has an insurable interest in the
policy issued pursuant to this chapter, the adjudication of such
mortgaged property to the extent of the debt secured, since dispute shall be within the original and exclusive jurisdiction of the
the property is relied upon as security thereof, and in Commissioner, subject to the limitations provided in section four
insuring, he is not insuring hundred sixteen.

No fault Clause
No-fault insurance is essentially the substitution of first-party insurance Right of mortgagee under mortgagors policy (p. 85)
for tort liability. The victim of a tort, instead of looking to the tortfeasor Sec. 8. Unless the policy otherwise provides, where a mortgagor of
and his insurer for reimbursement, looks to his own insurer for first- property effects insurance in his own name providing that the loss
party protection. 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
The term "no-fault" connotes that the victim recovers for his loss from
contract, and any act of his, prior to the loss, which would
his own insurer, without regard to the fault of the third party or his own
otherwise avoid the insurance, will have the same effect, although
contributory fault. the property is in the hands of the mortgagee, but any act which,
under the contract of insurance, is to be performed by the

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Nielgem S. Beja
LAW ON INSURANCE 2017
Justice Lloren

mortgagor, may be performed by the mortgagee therein named, Effect of transfer of thing insured
with the same effect as if it had been performed by the mortgagor.
Effect when policy becomes incontestable

Life Annuity Definition (p. 459)

By the aleatory contract of life annuity, 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 oncewith the
burden of the income.

Fire Insurance (p. 402)

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.

Contract of Suretyship (p. 435)

Casualty insurance (p. 417)

When alteration in the thing insured entitles insurer to rescind (p. 406)

Concealment v. Minor Representation

Limitations on the designation of beneficiary (p. 102)

Double insurance v. Over insurance v. Reinsurance

Valued policy v. Open policy

Contingent event v. Unknown event

When policy is valid and binding notwithstanding the non-payment of

premium

When is insured entitle to recover premiums

Extent of amount of recovery (MOR v. MEE)

Separate Ins. Int. Of the MOR

Why insurance is not considered as a wagering contract? (5 distinctions)

7 items contained in a non-life insurance policy (Sec. 51)

Requisites of incontestability

Who cannot be a beneficiary? Rights of Subrogation of Insurer to Rights of Insured against wrong doer

Is contributory negligence applicable in the contract of insurance? (Sec. Doctrine of Subrogation is a process of legal Substitution
89 last par.)

8
Nielgem S. Beja
LAW ON INSURANCE 2017
Justice Lloren

Basis of the Right: the insurer, after paying the amount covered by the o He is only entitled to the amount of the injury
insurance policy, stepping into the shoes of the insured, as it were and - But if the amount paid by the insurance company does not
availing himself of the latters rights that exist against the wrongdoer at fully cover the injury or loss, it is the AGGRIEVED PARTY and
the time of the loss. not the INSURER, who is entitled to recover the deficiency.

Note: Limit to the right of recovery by the insurer

right of Subrogation is applicable only to property insurance - Limited to the amount recoverable by the insured to the
This is not available to life insurance
insurer
Reason: the value of Human is unlimited. Hence,
- Provided it does not exceed the amount ACTUALLY paid to
no recovery from a third party can be deemed
adequate to compensate the insureds the insured
beneficiary.
Life insurance contracts are not contracts of INDEMNITY. Exercise of right of subrogation by the insurer
- This is discretionary

Privity of Contract or assignment by the insured of claim not essential:

Loss of right of subrogation by act of insured or insurer
- Payment by the insurer to the insured operates as an
equitable assignment to the former of all the remedies If the insured after receiving the payment from the insurer, release by
which the latter may have against the third party whose his win act the wrongdoer or third party
negligence or wrongful act caused the loss. - The insurer loses his rights
Note:
The right of subrogation is not dependent upon any privity of Limitations to the right of subrogation
contract or written assignment of claim. 1. Both the insurer (of goods covered by bill of lading) and the
consignee are bound by the contractual stipulations under
When does the right accrue (subrogation)?
the bill of lading
- Upon payment of the insurance claim by the insurer
2. The insurer can be subrogated only to the rights as the
Note: insured may have against the wrongdoer
The presentation of the insurance policy as evidence is not
indispensible before the insurer may recover.
The Subrogation receipt by itself is sufficient to establish not
only the
(1) Relationship of the insured and insurer, and
(2) The amount paid to settle the insurance

Loss or injury for risk must be covered by the policy

- This is a requirement
- When the insurer pays the insured for a loss or right not
covered by the policy, the insurer has no right of subrogation
o This is called VOLUNTARY SUBROGATION
EXPN:Article 1236. The creditor is not bound to accept
payment or performance by a third person who has no
interest in the fulfillment of the obligation, unless there
is a stipulation to the contrary.
Whoever pays for another may demand from the
debtor what he has paid, except that if he paid without
the knowledge or against the will of the debtor, he can
recover only insofar as the payment has been
beneficial to the debtor.

Right of insured to recover from both insurer and third party

- The insured can only recover ones

o He may recover from either of them