GENERAL CONCEPTS

DEFINITIONS
An agreement whereby one undertakes for a consideration, to indemnity
Insurance Code,
Contract of insurance another against loss, damage, or liability arising from an unknown or
Section 2
contingent event.
An agreement whereby a party called the surety guarantees the
Insurance Code,
Contract of suretyship performance by another called the principal or obligor of an obligation or
Section 2
undertaking in favor of a third party called the obligee.
1. Making or proposing to make as insurer, any insurance contract
2. Making or proposing to make as surety, any contract of suretyship as a
Doing an insurance or
vocation, not as a mere incident to any other legitimate business of a Insurance Code,
transacting an insurance
surety. Section 2
business
3. Doing any insurance business like reinsurance and similar acts
4. Doing or proposing to do any business equivalent to the above.

Mutual Insurance Entity owned by the policyholders that caters only to the insurance needs Republic vs.
Companies of the same policyholders / members Sunlife

Presentation and sale to bank customers by an insurance company of its

Insurance Code,
Bancassurance insurance products within the premises of the head office of such bank
Sec. 375
duly licesnsed by the BSP or any of its branches.

CHARACTERISTICS
(RA-CONTRACT x 4)
Insurance serves to distribute risk of economic loss among as many as
possible to those who are subject to the same kind of risk. Each member
Risk-distributing device
contributes to a small degree toward compensation for losses suffered by
any member of the group.
 Most of the terms of the contract are prescribed by the insurer in printed
form to which the insured may "adhere" if he chooses but which he cannot Rizal Surety and
Contract of Adhesion
change. Hence, in case of doubt, the contract shall be interpreted strictly Insurance Co.
against the insurer and liberally in favor of the insured
However, if the terms of the contract are clear, there is no room for
interpretation and the courts are bound to adhere to the insurance contract
although the contract may be rather onerous. Courts cannot make a new
contract for the parties.
Insured, who has insurable interest over a property, is only entitled to
Contract of Indemnity recover the amount of actual loss sustained and the burden is upon him to
establish the amount of such loss.
Applicable only to property insurance, except creditor insuring the life of his
debtor.
Life insurance is not a contract of indemnity. There is no over insurance
over life insurance. There is over insurance only in property insurance.
Uberimmae Fides The contract of insurance is one of perfect or utmost good faith not for the
Contract insured alone, but equally so for the insurer.
It requires the parties to the contract of insurance to disclose conditions
affecting the risk of which he is aware, or material fact, which the applicant
knows, and those, which he ought to know.
The insurer, in deciding whether or not to accept a risk, must rely primarily
upon the information supplied to him by the applicant.
The law presumes that the insurer considered the personal qualifications
Personal contract
of the insured in approving the insurance application.
 The obligation of the insurer to pay the proceeds of the insurance arises
Article 2010, Civil
Aleatory only upon the happening of an event which is uncertain, or which is to
Code
occur at an indeterminate time.

ELEMENTS OF
INSRUANCE
 Insurance Code,
Elements of Insurance 1. Payment of premium
Section 77
Insurance Code,
2. Assumption of risk
Section 2
Insurance Code,
3. Existence of insurable interest
Sections 10-25

Insurance Code,
4. Risk of Loss
Section 51
5. Scheme to distribute losses

PERFECTION
An insurance contract is a consensual contract and is therefore perfected
the moment there is a meeting of minds with respect to the object and the
Consensual contract cause or consideration. (cognition theory) Generally, the insured is the one
making the offer by submitting an application to the insurer and the latter
accepts the offer by approving the application.

The mere submissioin of the application without the corresponding (Great Pacific
approval of the policy does not result in the perfection of the contract of Life Assurance
insurance (Great Pacific Life Assurance Corp) Corp vs. CA)

Mere delay in acceptance of the insurance application will not result in a

binding contract. (Exception: Where there is a prior agreement fixing the
date of effectivity
"The acceptance of an offer by letter does not bind the offerer except from
the time it came to his knowledge. In this case, KC did not receive the
Enriquez vs. Sun
letter of acceptance, hence, the contract was never perfected and the
Life Assurance
obligation of the insurer which was supposed to be covered by the
Co. of Canada
premium did not materialize. Consequently, the insurer is bound to return
the consideration that it received from the insured."
 "The action against DBP MRI Pool for non-payment of the proceeds of the
insurance will not prosper but the action against DBP will prosper. The
power to approve the insurance application rests with DBP MRI Pool.
Since the Pool did not approve the application, no insurance contract was
perfected. Since the Pool did not approve the application, no insurance
contract was perfected. The fact that the premium was deducted from the
loan proceeds is not material because it does not appear that the Pool
DBP vs. CA
accepted the premium payment. Hence, there is no contractual obligation
to pay the insurance proceeds. However, the claim against DBP should
prosper. DBP was waring two hats in the transactions - as a lender and as
an insurance agent. JD was also made to believe that the approval is
already forthcoming. Under the Civil Code, an agent is liable to third
persons if they are unaware of the limit of authority of the agent and they
have been deceived by the non-disclosure thereof by the agent.

COVER NOTES
Persons who wish to be insured may get protection before the perfection of
the insurance contract - notice of approval of the application - by securing Insurance Code,
Cover Notes
a cover note. The cover note issued by the insurer shall be deemed an Section 2
insurance contract.
1. Issued or renewed only upon prior approval of the Insurance
Commission.
2. Valid and binding not more than 60 days from the date of its issuance.
3. No separate premium required
4. May be cancelled by either party upon prior notice to the other of at least
7 days.
5. Policy should be issued within 60 days after the issuance of the cover
note.
6. 60-day period may be extneded upon written approval of the Insurance
Commission.
 7. Written approval of the Insurance Commission is dispensed with upon
the certification of the president, vice-president, or general manager of the
insurer that the risk involved, the values of such risks and premiums
therefor, have not as yet been determined or established and the
extension or renewal is not contrary to or is not for the purpose of violating
the ICP or any rule.

THE POLICY
Written instrument where the terms and conditions of the contract of Insurance Code,
Policy of Insurance
insurance are set forth. Section 49
The policy is not necessary for the perfection of the contract. However, the
Insurance Code,
law provides that no policy of insurance shall be issued or delivered unless
Section 232
in the form previously approved by the Insurance Commission.
1. Parties
2. Property or Life Insured
3. Period during which the insurance is to continue.
Basic contents of a
4. Amount of Insurance (except in open or running policies)
policy (PPPAIRR)
5. Interest of the Insured in the Property (if he is not the absolute owner)
6. Rate of Premium
7. Risk insured against
Attahcment to an insurance policy that modifies the conditions of the policy
Rider by expanding or restricting its benefits or excluding certain conditions from
the coverage.
Riders, together with other attachments to the policy like clause, warranty
or endorsements, are not binding on the insured unless the descriptive title Insurance Code,
or name thereof is mentioned and written on the blank spaces provided in Section 50
the policy.
When the requirements for a rider are complied with, it is considered part
of the policy.
"A rider containing an "automatic incrase clause" - one that increases the
CIR vs. Lincoln
coverage subject to the attaiment of a certain age of the insured - is not a
Philippine Life
separate contract. It is part of the original policy which is in the nature of a
Insurance Co.
conditional obligation."
 1. Conviction of a crime
2. Discovery of other insurance coverage
3. Fraud or material misrepresentation
Grounds for cancellation Insurance Code,
4. Non-payment of premium
of non-life policy Section 64
5. Physical changes in the property
6. Policy violates the Insurance Code
7. Willful or reckless acts or omission
1. Prior notice of cancellation to insured
2. Notice must be based on the occurrence after effective date of the policy
Requisites for of one or more of the grounds mentioned Insurance Code,
cancellation of non-life 3. Notice must be in writing, mailed or delivered to the named insured, or Sections 64 and
policy. to his broker, provided the broker is authorized 65
4. Notice must state the grounds relied upon provided in Section 64 of the
Insurance Code
Open policy - value of thing insured is not agreed upon, but left to be
Insurance Code,
Kinds of policies ascertained at time of loss. The amount of the insurance merely represents
Section 60
the insurer's maximum liability.

Valued policy - definite valuation is agreed by both parties, and written on Insurance Code,
the face of policy. Section 61

Running policy - contemplates successive insurances and which provides

that the subject of the polcy may from time to time be defined.
The stipulation in a life insurance policy giving the insured the privilege to
Reinstatement of the reinstate it upon written application does not give the insured absolute right
policy to such reinstatement by the mere filing of an application. The insurer has
the right to deny the reinstatement.

TYPES OF INSURANCE
CONTRACTS

Insurance Code,
Individual Life Insurance on human lives
Section 181
Group Life Blanket policy covering a number of individuals. IC, Sec 234
 Form of life insurance under which the premiums are payable either
Industrial Life monthly or oftener, if the face amount of insurance provided in any policy is IC, Sec 235
not more than 500x that of the current statutory minimum daily wage
Non-life insurance Marine, fire, casualty
Contract of suretyship
Financial product or service that meets the risk protection needs of the
poor, contribution does not exceed 7.5% of the current daily minimum
Microinsurance wage for non-agricultural workers in Metro Manila, maximum sum of IC, Sec 187
guaranteed benefits not more than 1000x the current daily minimum wage
rate for non-agricultural workers in Metro Manila

PARTIES TO
INSURANCE
CONTRACT
Insurer Person who undertakes to indemnify another.
May be partnerships, associations, or corporations who are duly IC, Secs. 190-
authorized by the Insurance Commission to engage in insurance business. 193
No longer includes individuals RA 10607
Includes professional reinsurer, mutual insurance companies, and
cooperatives.
Foreign insurance corporations may be authorized by the Commission to
engage in insurance business in the Philippines
No insurance company shall transact any insurance business in the
Phiippines until after it shall have obtained a certificate of authority for that
purpose from the Insurance Commissioner. - shall expire on the last day of IC, Sec. 193
December, 3 years frollowing its date of issuance, shall be renewable
every 3 years thereafter.
Person with capacity to contract and have an insurable interest in the life
Insured
or property of the insured.
A public enemy may not be insured. IC, Sec. 7
Minors cannot enter into insurance contract - voidable.
The consent of the spouse is not necessary for the validity of an insurance
policy taken out by a married person on the life of the spouses themselves IC, Sec. 3
or his or her children.
 All rights, title and interest in the policy of insurance taken out by an
original owner on the life or health of the person insured shall automatically
IC, Sec 3
vest in the latter, upon the death of the original owner, unless otherwise
provided for in the policy.
Beneficiary Person designated to receive proceeds of policy when risk attaches.
When one insures his own life, he may designate any person as the
beneficiary, whether or not the beneficiary has an insurable interest in the
life of the insured.
Exceptions (Art. 739):
1. Those made between persons who were guilty of adultery or
concubinage at the time of donation.
2. Those made between persons guilty of the same criminal offense, in
consideration thereof
3. Those made to a public officer or his wife, descendants or ascendants
by reason of his office.
Reason: Founded on liberality. Designation is void, but policy is binding.
Estate will get the proceeds.
"A beneficiary is like a donee because from the premiums of the policy The Insular Life
which the insured pays out of liberality, the beneficiary will receive the Assurance Co.
proceeds of the insurance." vs Ebrado
The interest of a beneficiary in a life insurance policy shall be forfeited
When the beneficiary is the principal, accomplice, or accessory in willfully
bringing about the death of the insured. In such a case, the forfeited share
shall pass on to:
1. other beneficiaries, unless disqualified.
2. in accordance with the policy contract
3. estate of the insured
If a person will insured the life of another payable to himself, he must have
insurable interest on the life of the person whose life he is insuring.
In property insurance, the beneficiary must have insurable interest on the
property.
The designation is revocable unless the right to revoke is expressly waived
IC, Sec. 11
in the policy.
The insured cannot assign the policy if the designation is irrevocable. The
irrevocable beneficiary has a vested right.
 If there is no waiver of the right to revoke, assignment of the policy may be
deemed as implied revocation.
If th insured refuses to pay the premiums, the designated irrevocable
beneficiary may continue the policy by paying the premiums that are due.
If premiums are paid out of the conjugal funds, the proceeds are
considered conjugal. If the beneficiary is other than the insured's estate,
the soure of premiums would not be relevant.
The designation of the illegitimate children as beneficiaries in the
Heirs of Loreto
deceased father's insurance policy is valid because no legal proscription
Maramag vs.
exists in naming as beneficiaries the children of illicit relationships by the
Maramag
insured.

INSURABLE INTEREST
Every person has an insurable interest in the life and health:
1. of himself, or his spouse, and of his children
2. of any person on whom he depends wholly or in part for education or
support, or in whom he has a pecuniary interest
Life Insurance 3. of any person under a legal obligation to him for the payment of money, IC, Sec. 10
or respecting property or services, of which death or illness might delay or
prevent the performance.
4. of any person upon whose life any estate or interest vested in him
depends.
In general, the test is whether or not the person is interested in the
preservation of the insured life despite the insurance.
Any interest therein, or liability in respect thereof, which may consist in:
1. an existing interest
Property Insurance IC, Sec 13 & 14
2. an inchoate interest founded on an existing interest
3. any expectancy coupled with an existing interest.
In general, a person has an insurable interest in the property if he derives Filipino
pecuniary benefit or advantage from its preservation, or would suffer Merchants
pecuniary loss, damage or prejudice by its destruction,whether he has or Insurance Co. vs.
has no title therein, or lien upon, or possession of the property Inc
 "Although delivery is a mode of transferring ownership in a contract of sale,
it does not mean that the buyer has no existing insurable interest over the Filipino
goods that he purchased. A purchaser of goods under a perfected contract Merchants
of sale already acquires interest on the property pending delivery. Hence, Insurance Co. vs.
Pablo had insurable interest over the machinery even before actual receipt Inc
of the goods."
Canot be invoked. Existence of insurable interest is a matter of public
Principle of estoppel
policy.
Not insurable. Must be coupled with existing interest out of which the
expectancy arises. Must be founded an an actual right to the the thing or
Hope or expectancy upon a valid contract. Example: an owner of a business can insure against IC, Sec. 14
a contingency which may cause loss of profits resulting from the cessation
or interruption of his business
May insure the things deposited to him. He will be liable in case of damage
Depositary
or destruction to the thing. He will be damnified by its loss.
Ang Ka Yu vs.
Person having mere May insure its full value in his own name, stands to benefit from its Phoenix
right of possession continued existence or to be prejudiced by its destruction. Assurance Co.
Ltd.
Heir Has no insurable interest over properties that he will inherit.
Owner whose property Retains insurable interest during the redemption period, still the owner
was levied upon by a during that period. However, the bueyr during the auction sale also has an
judgment creditor and interest over the subjet property subject to the condition that it will not be
who lost the same in an redeemed. Hence, the purchaser acquires insurable interest at the time of
execution sale the purchase.
Carrier Has insurable interest over the goods that are being shipped
A buyer of goods has an insurable interest in the goods purchased after
perfection of the contract and before delivery of the goods. The shipping
arrangment is immaterial in determining whether the vendee has an
insurable interest or not in the goods in transit. The perfected contrac of
sale, even without delivery, vests in the vendee an equitable title, an
existing interest over the goods sufficient to be the subject of insurance.

INSURABLE INTEREST
IN PROPERTY vs. LIFE
Extent Life - unlimited (except: life insurance effected by creditor on life of debtor)
Property - limited to the actual value of the interest thereon
Life - at the time the policy takes effect, need not exist at the time of the
Time when it must exist
loss.
Property - when the insurance takes effect and when the loss occurs, but
need not exist in the meantime.
Expectation of benefit to
Life - need not have any legal basis
be derived
Property - needs legal basis
Life - beneficiary need not have insurable interest over the life of the
insured if the insured himself secured the policy. However, if the life
Beneficiary's interest
insurance was obtained by the beneficiary, the latter must have insurable
interest over the life of the insured.
Property - must have insurable interest over the thing insured

INSURABLE INTEREST
OF MORTGAGOR AND
MORTGAGEE
Mortgagor and
Have an insurable interest in the property mortgaged
mortgagee
Interest is separate and distinct from the other.
May take out separate policies at the same or at separate times.
An insurance procured by either the mortgagor or mortgagee will not inure
to the benefit of the other. Insurance is a personal contract and takes effect
only between the contracting parties, their heirs, successors and
assignees, unless it contains a stipulation in favor of a third person. .
However, while an insurance procured by a mortgagor does not inure for
the benefit of the mortgagee, the latter has a lien on the proceeds of hte
policy.
As owner, has an insurable interest to the extent of its value. Reason: loss
Mortgagor
or destruction of the property insured will not extinguish the mortgage debt.
 When the mortgagor secures life insurance, the mortgagee may be made
the beneficiary employee in the following ways: (PALMS – C)
1. pledgee (without consent of insurer)
2. assignee (with consent of insurer)
3. loss payable clause (making the policy payable to the mortgagee)
4. mortgage clause (contained in the original policy)
5. standard mortgage clause (containing a collateral independent contract
between the mortage insurer) may be attached.
6. The policy, though by its terms is absolutely payable to the mortgagor,
may have been procured by a mortgagor under a contract duty to insure
for the mortgagee’s benefit, in which case the mortgagee acquires an
equitable lien upon the proceeds.
In the policy obtained by the mortgagee with loss payable clause in favor
of the mortgagee as his interest may appear, the mortgagee is only a
beneficiary under the contract, and recognized as such by the insurer but
not made a party to the contract itself.
"The mortgagors paid the premiums but the losses were made payable to
the mortgagee, DBP. Hence, the insurance policies where held to be on
the mortgagor's interests and that the mortgagors continued to be parties
Great Pacific Life
to the contract. Consequently, if DBP (mortgagee) already recovered the
Insurance vs. CA
total amount of the obligation by resorting to foreclosure, it can no longer
and IC, Sec. 8
recover under the group insurance policy. However, the heirs of the
morgagors can recover because the mortgagors did not cease to be
parties to the contract
Has an insurable interest in the mortgaged property to the extent of the
Mortgagee debt secured; such interest continues until the mortgage debt is
extinguished.
A mortgagee may procure a policy as a contracting party in accordance
with the terms of an agreement by which the mortgagor is to pay the
premiums upon such insurance.
Where the mortgagor takes out an insurance over the mortgaged property
and endorsed the same to the mortgagee, the insurance proceeds of the
endorsed policy shall be applied exclusively ot the proper interest of the
IC, Sec. 53
person for whose benefit it was made - the mortgagee. Hence, creditors of
the mortgagor cannot garnish or levy upon the proceeds up to the extent of
the debt to the mortgagee.
INSURABLE INTEREST
OF BENEFICIARY AND
ASSIGNEE
Property Insurance Beneficiary and assignee must have insurable interest.
Consent must be secured before the assignment.
"CKS cannot demand payment of the insurance proceeds from the insurer.
CKS cannot be validly a beneficiary of the fire insurance policy because he
did not have insurable interest over the goods. The automatic assignment Cha vs. CA
of the policy to CKS under the provision of the lease contracr is void for
being contrary to law and/or public policy.
If the insured takes the insurance on his own life, he can designate
Life Insurance
anybody who does not have insurable interest.
If a third person takes the policy, the beneficiary must have insurable
interest.
In case of assignment, the assignee need not have insurable interest.

EFFECT OF CHANGE
OF INTEREST IN
THING INSURED
UNACCOMPANIED BY
A CHANGE IN
INTEREST IN
INSURANCE
A change of interest in any part of a thing insured unaccompanied by a
change in interest in the insurance suspends the insurance to an
General Rule IC, Sec. 20
equivalent extent, until the interest in the thing and the interest in the
insurance are vested in the same person.
Exceptions 1. life, health and accident insurance IC, Sec. 20
2. change of interest in the thing insured after the occurrence of the injury IC, Sec. 21
3. change of interest in one or more of several distinct things, separately
IC, Sec. 22
insured by one policy.
4. change of interest by will or succession on the death of the insured IC, Sec. 23
 5. a transfer of interest by one of several partners, joint owners, or owners
IC, Sec. 24
in common, who are jointly insured, to the others.
6. when a policy is so framed that it will inure to the benefit of whomsover,
during the continuance of the risk, may become the owner of the interst IC, Sec. 57
insured.
When there is an express prohibition against alienation in the policy, in
Alienation case of alienation, the contract of insurance is not merely suspended but
avoided.

RISKS INSURED
AGAINST
A future event is the only event that can be covered by an insurance
General Rule
contract.
A past event may be covered by a marine insurance - if the loss of the
Exception vessel in the past could not have been known by ordinary means of
communication.

PREMIUM
Consideration paid to an insurer for undertaking to indemnify the insured
Premium
against a specified peril
No insurance policy issued or renewed is valid and binding until actual
General Rule IC, Sec. 77
payment of the premium. An agreement to the contrary is void.
Exceptions 1. In case of life and industrial life whenever the grace period applies IC, Sec. 77
2. Where there is an acknowledgment in the contract or policy of insurance
IC, Sec 78
that the premium had already been paid
Makati Tuscany
3. Parties have agreed to the payment of the premium in installments and
Condominium vs.
partial payment has been made at the time of the loss.
CA
UCPB General
4. Credit term was agreed upon, where the insurer granted a 60-90-day Insurance Co.,
credit term for the payment of the premiums despite full awareness of Inc. vs.
Section 77. (estoppel) Masagana
Telemart
 5. 90-day credit extension may be given whenever credit extension is
given under the broker and agency agreements with duly licensed
intermediaries. The credit extension must be provided for under the broker
and agency agrrements, and the credit extension to a duly licensed
intermediary should not exceed 90 days from date of issuance of policy.
The rule where an insurer authorizes an insurance agent or broker to
deliver a policy to the insured, it is deemed to have authorized said agent
Rule on Agents
to receive the premium in its behalf. The insurer is also bound by its
agent's acknowledgment of receipt of payment of premium.
Maturity subsequent to the loss - insufficient to put insurance into effect;
Rule on payment of bearing a date prior to the loss, assuming an availability of the funds
premium by post-dated thereof - sufficient even if it remains unencashed at the time of the loss.
check The subsequent effects of encashment would retroact to the date of the
instrument and its acceptance by the creditor.
Return of premiums 1. Never exposed to the risk insured against Sec 80
2. Insurer's fraud or misrepresentation or that of his agent (contract
Sec 82
voidable)
3. Insurer never incurred liability (insurer) Sec 82
4. Insurer's breach of contract (rescissible)
5. Insured surrenders his policy before termination (insurance is for a
definite period)
6. Insured's ignorance of the existence of facts without his fault (contract
voidable)
7. over-insurance Sec 83
Insured may avail of:
1. Reinstatement Clause
To prevent the lapse of
2. Automatic Policy Loan from the policies’ cash surrender value
life insurance policy
3. Application of dividend
4. Grace Period
Shall have the policy reinstated at any time with 3 years from date of
Reinstatement of a default of premium payment unless the cash surrender value has been
lapsed policy of life duly paid to the insured or the extension period has expired. However, Sec 233
insruance there must be proof of insurability, and payment of overdue premiums and
any indebtedness plus interest.
TRANSFER OF POLICY
Life insurance Does not require consent of insurer Sec 184
Requires consent of insurer because the insurer approved the p;ocy based
on the personal qualification and the insurable interest of the insured. If
Property Insurance without consent of the insurer, the insurance policy is suspended and will
not be avoided until the interest in the thing and the interest in the
insurance are vested in the same person.

DEVICES USED FOR

ASCERTAINING AND
CONTROLLING RISK
OR LOSS
Four Primary Concerns 1. Correct estimation of risk (to determine if he will approve the policy and
of the insurer (CCDD) at what premium rate)
2. Control of risk (to guard against incrase of risk)
3. Delimitation of risk
4. Determine if loss occurs (and the amount)
Devices used by the
1. Concealment
insurer (CCREW)
2. Condition
3. Representation
4. Exception
5. Warranty
Neglect to communicate that which a party knows and ought to
Concealment Sec 26
communicate.
Protects the insurer against fraud, which take the form of either conditions
precedent or subsequent. For instance, there are conditions (subsequent)
Conditions
requiring immediate notice of loss or injury and detailed proofs of loss
within a limited period.
Factual statements made by the insured at the time of or prior to the
Representations issuance of the policy to give information to the insurer and otherwise Sec 46
induce him to enter into the insurance contract.
Make more definite the coverage indicated by the general description of
Exceptions
the risk by excluding certain specified risks.
 Country Banker's
Insurance
Corporation vs.
The burden of proving that the loss was caused by an excepted peril rests
Lianga Bay and
with the insurer.
Community
Multi-Purpose
Cooperative
Statements or promises by the insured, the untruth or nonfulfillment of
Warranties which render the policy voidable. May be express, implied, affirmative, or
promissory.

CONCEALMENT
Materiality is determined not by the event, but solely by the probable and
reasonable influence of the facts upon the party to whom the Vda de Canilang
Test of materiality
communication is due, in forming his estimate of the disadvantages of the vs. CA
proposed contract, or in making his inquiries or in fixing the premium rate.
Sunlife
"The waiver of a medical examination in a non-medical insurance contract
Assurance
renders even more material the information required of the applicant
Company of
concering previous conditions of health and diseases suffered."
Canada vs. CA
"Answers o the applicant, who is not a doctor, regarding the medical
history of his wife, largely depends on opinion rather than fact. Where Philamcare
matters of opinion or judgment are called for, answers made in good faith Health Systems,
and without intent to deceive will not avoid the policy even though they are Inc. vs. CA
untrue."
Vitiates the contract and entitles the insurer to rescind, even if the death or
Effects of concealment Sec 27
loss is due to a cause not related to the concealed matter.
 "The insured disclosed the fact that he consulted a doctor but only for
cough and flu complications and answered in the negative all other
questions although two weeks prior to his application he was confined at a
Sunlife
hospital for renal failure. The insured died in a plane crash after the
Assurance
issuance of the policy. The Supreme Court sustained the denial of the
Company of
policy on the ground of material concealment. The insured need not die of
Canada vs. CA
the disease he had failed to disclose to the insurer. It is sufficient that his
non-disclosue misled the insurer in forming the estimates of the risks of the
proposed insurance policy or in making inquiries."
Not a defense in concealment. The materiality of the facts concealed does
not depend on the state of mind of the insured but rather to the probable
Good faith
and reasonable influences of the facts upon the party to whom
communication should have been made.
Insurer may be estopped from raising concealment as a defense if it
Edillon vs.
accepts the premium payments and issues the policy even if the insured
Manila Bankers
Waiver and Estoppel already supplied the insurer such facts or information which could hardly
Life Insurance
be overlooked in the application form considering its prominence and its
Co.
materiality in the coverage applied for.
However, the insurer is not estopped from raising concealment as defense
if there was connivance between the insured and the soliciting insurance
agent as well as the medical examiner.

REPRESENTATION
Factual statements made by the insured at the time of or prior to the
Representations issuance of the policy to give information to the insurer and otherwise Sec 46
induce him to enter into the insurance contract.
Kinds Affirmative - affirmation of a fact when the contract beings
Promissory - promise to be performed after the policy was issued.
Materiality is determined not by the event, but solely by the probable and
reasonable influence of the facts upon the party to whom the
Test of materiality
communication is due, in forming his estimate of the disadvantages of the
proposed contract, or in making his inquiries or in fixing the premium rate.
Effects of Entitles the injured party to rescined from the time when the representation
Misrepresentation becomes false.
 Acceptance of the premium will not estop the insurer from rescinding the
Sec 45
policy on the ground of misrpepresentation

WARRANTY
Statements or promises by the insured, the untruth or nonfulfillment of
Warranties
which render the policy voidable.
Kinds Express
Implied - deemed includied in the contract (only found in marine insurance)
Affirmative - asserts the existence of a fact or condition at the time it is
made
Promissory - certain facts or conditions shall exist or thing shall be done or
omitted
Effect of Breach of
Gives the insurer the right to rescind
Warranty
Except:
1. loss occurs before the time of performance of the warranty
2. performance becomes unlawful
3. performance becomes impossible Sec 73
Do not avoid the policy except when the parties stiupate that violation of
Immaterial provisions
particular provision shall avoid the policy.

REPRESENTATION VS.
WARRANTY
Representation Collateral inducement
Need not be written
Should be established to be material
Requires only to be substantially true
Warranty Part of the contract
Written on the policy or in a valid rider or attachment
Generally conclusively presumed to be material
Must be strictly complied with

OTHER INSURANCE
CLAUSE
 A clause in the policy that provides that the policy shall be void if the
Definition
insured procures additoinal insurance without the consent of the insurer.
Effect of breach Warranty that entitles the insurer to rescind in case of breach
May be subject to waiver but the waiver must be express or if implied,
Waiver
conduct must be clearly indicative of a clear intent to waive such right.
"The insured may recover, since there is no violation of the "other General
insurance clause". The face of the plicy contains a notation "co-insurance Insurance and
declared. This means that the insurer is deemed notified of the existence Surety
of other insurance contracts on the property insured." Corporation

INCONTESTIBABILITY
CLAUSE
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 2
years from the date of its issue or of its last reinstatement, the insurer
Definition Sec 48
cannot prove that the policy is void ab initio or is rescindible by reason of
the fraudulent concealment or misrepresentation fo the insured or his
agent.
Period May be shortened but it cannot be extended by stipulation.
1. Cause of death an excepted risk
2. Conditions relating to military or naval service have been violated
3. Failed to furnish proof of loss or comply with condition imposed after
Defenses not barred by
loss has happened
incontestability clause
4. Fraud of vicious type
(CC-FLAP)
5. Lacked insurable interest
6. Action was not brought within the time specified.
7. Premiums have not been paid
*bank itself prohibited to engage in insurance business.
*the basis of all property insurance
*in a sense, however, the contract of insurance is commutative because there is still an exchange of equivalents. The
amount paid by the insured is deemed the equivalent of the protection given by the insurer based on the insurance
contract.
*delivery of the policy is not necessary for its perfection.
*life insurance policies are always valued.
*Section 64 of the Family Code allows the innocent spouse to revoke the designation of the other spouse as irrevocabl
beneficiary after legal separation.
*the interest of the creditor over the life of the debtor ceases upon full payment.

*friendship alone is not the insurable interest contemplated in life insurance.

*pecuniary interest is always necessary.