INSURANCE LAW
WHAT IS INSURANCE? TEST:
Insurance is a plan for dealing with the − determined by its purpose, effect, contents, and
risk of economic loss resulting from the import and not necessarily by the terminology
happening of a future or contingent event or a used.
past event unknown to the parties.
The insured sacrifices a present monetary loss a. Applicable Laws
in the form of premium payment in order to originally enacted as P.D. No. 612
avoid a greater loss in the future. PD No. 1460, as amended
RA 10607 amended PD No. 1460
SOCIAL VALUE. o published in a newspaper of general
It has been said that insurance contributes to circulation on September 5,2013
society by favorably affecting the o consolidated all insurance codes in the
allocation of resources, engaging in loss- Philippines
prevention, indemnifying losses, serving as a o the law now includes a provision on
basis of the credit structure, eliminating worry, microinsurance, bancassurance, trust
facilitating trade and commerce, and providing operations of insurance companies, and
channel for investible funds. self-regulatory organizations.
o The amendment includes the ff:
NATURE (1) increase of the paid-up capital
a plan for dealing with the risk of and net worth requirements for
economic loss resulting from the happening insurers;
of a future or contingent event or a past event (2) new requirements for
unknown to the parties. unimpaired capital or assets and
The insured sacrifices a present monetary reserved;
loss in the form of premium payment in order (3) new provisions on financial
to avoid a greater loss in the future. reporting framework;34 (4)
adoption of corporate
GENERAL BENEFITS OF INSURANCE. governance rules;
1. It gives peace of mind; (5) changes in the provisions on
2. It keeps families and businesses together; margin of solvency;
3. It increases marginal utility of assets because it (6) changes in the provisions on
serves as intermediary between those who investments
have small need for a minor amount of capital (7) fixing the term of the
and those who have great needs for immediate Insurance Commissioner to six
use of large sums to meet losses they have years; and
suffered; (8) changes in the jurisdiction of
4. It facilitates credit transactions; the Insurance Commission over
5. It stimulates savings; insurance claims.
6. It provides investment capital; CIVIL CODE
7. It provides incentive to business or individuals o ART. 2011 – CC shall apply suppletorily
because they are relieved of fortuitous losses; o ART. 2012 – Grounds for disqualification of
and beneficiaries
8. It helps in loss prevention. o ART. 2207 - RIGHT OF SUBROGATION
“if the plaintiffs property has
General Provisions been insured, and he has
received indemnity from the
DEFINITION: insurance company for the injury
SEC. 2 (A), PD 10607 or loss arising out of the wrong or
“Contract of Insurance is an agreement whereby one breach of contract complained of,
undertakes for a consideration to indemnify another the insurance company shall be
against loss, damage or liability arising from an subrogated to the rights of the
unknown or contingent event. insured against the wrongdoer or
the person who has violated the
A contract of suretyship shall be deemed to be an contract. If the amount paid by
insurance contract, within the meaning of this Code, the insurance company does not
only if made by a surety who or which, as such, is fully cover the injury or loss, the
doing an insurance business as hereinafter provided. aggrieved party shall be entitled
See: SEC. 2047; Definition of SURETY to recover the deficiency from the
person causing the loss or injury.”
NOTE: Under SEC. 2 (B), the fact that no profit is
derived from the making of insurance contracts, CORPORATION CODE
agreements or transactions or that no separate or o Section 191, ICP, the provisions of the
direct consideration is received therefor, shall not be Corporation Code of the Philippines45
deemed conclusive to show that the making thereof shall apply to all insurance corporations
does not constitute the doing or transacting of an engaged in business in the Philippines
insurance business. insofar as they do not conflict with the
provisions of the Insurance Cod
destruction of his own
property
b. General Concepts of Insurance Fire and marine
insurance
ii. pays damages for
which the insured is
legally liable, the
consequence of
negligent acts that
result in injuries to
other persons or
damage to their
property.
Casualty and
surety
insurance
CLASSIFICATIONS UNDER THE CODE. 2. Cooperative Insurance
(1) Life insurance contracts which may be: “Cooperative” - associations
(a) individual life (see Sees. 179-183, 227.); usually operating under
(b) group life (see Sees. 50, last par., 228.); hospital, medical, fraternal,
and employee, or trade-union
(c) industrial life (see Sees. 229-231.); auspices
organized without regard to the
(2) Non-life insurance contracts which may be: profit motive and represent, in
(a) marine (see Sees. 99-166.); fact, an effort to accomplish
(b) fire (see Sees. 167-173.); and the ends of social insurance by
(c) casualty (see Sec. 174.); and private enterprise
(3) Contracts of suretyship or bonding.(Sec. 175- 3. Voluntary government Insurance
178.) distinguished from social
insurance in that there is no
CLASSIFICATIONS OF INSURANCE: element of compulsion
1. SOCIAL INSURANCE various plans offered are
Compulsory – Compulsion element is designed to benefit the
predicated upon the experience that some
persons cannot or will not voluntarily
entire community but are
used only by those persons
purchase insurance, and the obligation
who wish to use the
of the government to protect the
general welfare of its citizens. available benefits.
designed to provide a minimum of
economic security for large groups of GENERAL TYPES OF INSURANCE CONTRACTS
persons, particularly those in the lower 1. MARINE
income groups 2. PROPERTY - insurance against loss or
concerns itself primarily with the impairment of property interests.
unfavorable losses (income and costs) 3. PERSONAL - insurance against loss of earning
resulting from the perils
CONCEPT: insurance which are required by
power due to death {life insurance), accidental
the government and have for their object injury, ill-health, sickness, old age or other
the provision of a minimum standard of disability, or even unemployment;
living. 4. LIABILITY - insurance against contingent
liability to make payment to another ; insured
2. VOLUNTARY INSURANCE is protected against his loss with regard to
Not based on government compulsion claims for damages,
sought by the insured to meet a reinsurance (Sec. 95.),
recognized need for protection workmen's compensation insurance
TYPE OF VI: and motor vehicle liability insurance
1. Commercial Insurance – Usual
insurance people have in mind when
they refer to insurance business Cases:
PERSONAL Republic v. Sunlife Ins. Co., G.R. No. 158085,
PROPERTY INSURANCE - 14 October 2005
every form that has for its White Gold Marine Services v. Pioneer Ins., G.R.
purpose the protection against No. 154514, 28 July 2005
loss arising from the ownership
or use of property.
TWO (2) CLASSIFICATIONS:
i. Indemnification in the c. Characteristics
event of loss arising (CVA-2EUC-CP)
from damages to or 1. CONSENSUAL
− Perfected by mere consent. a. Equitably distributes losses out of a
2. VOLUNTARY general fund contributed by all.
− not compulsory and the parties may b. Provides protection against
incorporate such terms and conditions absorbing one's losses alone.
as they may deem convenient
INSTANCES WHEN INSURANCE MAY − Insurance company, by using the science of
NOT BE VOLUNTARY: probability and the law of large numbers ,
may be required by law in can predict with considerable accuracy the
certain instances such as for number of insureds to similar risks who will
motor vehicles (Sees. 373- incur losses during a specified period and
389.), or the extent of such losses.
employees (Arts. 168-184, a. As a result, amounts of premium can be
Labor Code.), or calculated such that the income
as a condition to granting a therefrom should be just enough to meet
license to conduct a business expected losses incurred by that group,
or calling affecting the public together with expenses, taxes and a
safety or welfare reasonable profit but low enough to make
the insurance saleable. Thus, the risk
may arise by operation of law assumed by the insurance company is
reduced to a minimum
3. ALEATORY
− It depends upon some contingent II. CONTRACT OF ADHESION OR FINE PRINT
event RULE
Case: Rizal Surety and Insurance Co. v. Court of
− ART. 2010, CC: Appeals, 336 SCRA 12, 2000
By an aleatory contract, one of the
parties or both reciprocally bind III. ALEATORY
themselves to give or to do
something in consideration of what IV. CONTRACT OF INDEMNITY
the other shall give or do upon the − It is the basis of all property insurance.
happening of an event which is
uncertain, or which is to occur at an − The insured who has insurable interest over a
indeterminate time. property is only entitled to recover the
4. EXECUTED amount of actual loss sustained and the
5. EXECUTORY burden is upon him to establish the amount of
6. UNILATERAL such loss.
7. CONDITIONAL
− − RULES:
8. CONTRACT OF INDEMNITY A. Applies only to property insurance
− Except life and accident insurance, except when the creditor insures the
the insurer promises to make good life of his debtor.
only the actual loss of the insured. B. Life insurance is not a contract of
− SEC. 18 indemnity.
No contract or policy of C. Insurance contracts are not wagering
insurance on property shall be contracts. (Sec. 4)
enforceable except for the
benefit of some person having
an insurable interest in the V. UBERRIMAE FIDES CONTRACT
property insured. − An insurance contract requires utmost good
9. PERSONAL faith (uberrimae fidei) between the parties.
− GR: Non-transferrable − The applicant is enjoined to disclose any
− SEC. 83 material fact, which he knows or ought to
As a rule, the insured cannot know.
assign, before the happening
of the loss, his rights under a − Reason: An insurance contract is an aleatory
property policy to others contract. The insurer relies on the
without the consent of the representation of the applicant, who is in the
insurer. best position to know the state of his health.
d. Essential Elements of Contract of Insurance;
I. INSURANCE AS A RISK DISTRIBUTING 1. Existence of an insurable interest capable of
DEVICE pecuniary estimation
− REASON: Broad sharing of economic risk is 2. Risk of loss
the principle of risk-distribution; the risk of − insured is subject to a risk of loss by
loss is not actually transferred to the insurer the happening of the designated peril.
but a number of people constituting the − Risk is the uncertainty of loss
clients of the insurer contribute to a − SEC. 3: Risk must be:
common fund by paying premiums. i. a contingent or unknown event,
whether past or future; and
ii. it must damnify the insured or Aside from being a pure risk, insurance contracts are
create liability against him. “ACTUARIAL RISK” - a risk that the cost of insurance
claims might be higher than the premiums paid.
NOTE: The risk “must be real
and such that neither the insured
nor the insurance company may e. Perfection
hasten or prevent. Cases:
3. Assumption of the risk of loss Eternal Gardens Memorial Park v. Philamlife Insurance
4. Such assumption is part of a general scheme to Company, G.R. No. 166245, 08 April 2008;
distribute actual losses Development Bank of the Philippines v. Court of
5. Payment of premium Appeals, 231 SCRA 370;
Great Pacific Life Assurance Corp. v. Court of Appeals,
NOTES: G.R. No. L-31845, 30 April 1979;
All the elements must be present, otherwise there can be Enriquez v. Sun Life Assurance Co. of Canada, 41 Phil.
no contract of insurance. 269
o Constitutes Risk-distributing device
o If only first three elements are present – Risk- II. Parties
shifting device
a. Insured
Even if the contract contains all the elements, it is not an
insurance contract within the context of the Insurance b. Insurer
Code if the primary purpose of the parties is the c. Beneficiary
rendering of service and not the indemnification of a Cases: Heirs of Loreto Maramag v. Maramag, G.R.
party for loss, damage, or liability incurred by the latter. No. 181132, 05 June 2009
The Insular Life Assurance Co. v. Ebrado, 80
Requisites of Insurance SCRA 181, 28 October 1997
(SEP-CM) Del Val v. Del Val, 29 Phil. 534
1. A subject matter which the insured has an BPI v. Posadas, 56 Phil. 215
insurable interest. III. Insurable Interest
2. Event or peril insured against which may be a. Insurable Interest in Life Insurance
any future contingent or unknown event, past b. Insurable Interest in Property Insurance
or future and a duration for the risk thereof. Cases: Gaisano Cagayan, Inc. v. Insurance Company
3. A promise to pay or indemnify in a fixed or of North America, G.R. No. 147839, 08 June 2006
ascertainable amount. Rizal Commercial Banking Corporation v. CA,
4. A consideration known as “premium”; rate is 289 SCRA 292
measured by the character of the risk Armando Geagonia v. CA, 241 SCRA 152,
assumed. 161
5. Meeting of the minds of the parties. Filipino Merchants Insurance Co., Inc. v. CA,
G.R. No. 85141, 28 November 1989
Harvardian Colleges of San Fernando v.
Cases: Country Bankers Ins. Corp., CA-G.R. CV No. 03771, 06
Philippine Health Care Providers, Inc. v. CIR, G.R. No. January 1986
167330, 18 September 2009; Ang Ka Yu v. Phoenix Assurance Co. Ltd., CA-
Gulf Resorts, Inc. v. Phil. Charter Insurance Corp., G.R. G.R. No. 27881-R, 28 September 1961
No. 156167, 16 May 2005; c. Insurable Interest of Beneficiary in Life Insurance
Philamcare Health Systems, Inc. v. Court of Appeals, d. Insurable Interest of Beneficiary in Property
G.R. No. 125678, 18 March 2002 Insurance
Case: Cha v. CA, 277 SCRA 690
Requisites of INSURABLE RISK
1) There must be a large number of homogenous
exposure units;
2) Loss must be accidental and unintentional;
3) Loss must be determinable and measurable;
4) Loss should not be catastrophic;
5) Chance of loss must be calculable; and
6) Premium must be economically feasible
KINDS OF RISKS:
1) PURE RISK - a situation where the possibility is
either the person involved will suffer a loss or he
will not suffer a loss.
2) SPECULATIVE RISK - may either result in gain or
loss.
Pure risk results in either loss or “no loss” while speculative
risk results in either loss or gain.
WHO ARE AUTHORIZED PROVIDE INSURANCE
CONTRACTS?
Section 6. Every corporation, partnership, or
association, duly authorized to transact insurance
business as elsewhere provided in this Code, may
be an insurer.
Insurer” or “insurance company” shall
include all partnerships, associations,
cooperatives or corporations, including
governmentowned or controlled
corporations or entities, engaged as
principals in the insurance business,
excepting mutual benefit associations.
o Individuals are no longer identified as
persons who can be an insurer under the
present law.
INSURANCE AGENT (pg 69) V. INSURANCE
BROKER (pg 75)
INSURANCE BROKER – Acts in behald of the
insured
INSURANCE AGENT – acts in behalf of and
represents the insurer