NOTES INSURANCE (August 22, 2025)
1. Health cards/ HMO- In medicard, the contract is not insurance. In fortune medicare, it’s
insurance. (2 cases) Why different? Applied the test to determine.
2. Memorize the definition of: Sec 2 A (definition of insurance), Principal object and purpose test
(whether the assumption of risk and the indemnification of loss is the principal object and
purpose of the contract).
- "(a) 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.
- Test- whether the assumption of risk and the indemnification of loss is the principal object
and purpose of the contract
3. Health care agreements are not insurance contract. (but depends on the nature, title is not
controlling)
4. Warranties- not insurance, no assumption of risk and no indemnification of loss.
5. Elements of Insurance Contract:
a. Insurable Interest
b. Risk (past or future- in a marine insurance pag di pa aalam na lumubog na pala ang
barko, so the risk is yung discovery of the loss.)
c. It is a Risk Distributing Device- payment gathered by all the insured will answer the loss...
d. Gghj
6. From the moment you pay the premium, the liability of the insurer attaches.
7. Consensual- how the contract is perfected
8. Contract of Insurance is perfected upon the meeting of the minds…
a. No consent is needed with regard the beneficiary.
9. Perfection starts with the offer and ends with the acceptance.
a. Insured as a general rule is the one who makes the offer in the form of an application. In
the case LBP, there was no offer (failed to submit application)
b. Insurer accepts. The offeror must be notified that it was accepted (cognition theory)
i. Without notice, there is still no perfected contract except if it is not an approval
but a mere counteroffer.
c. It is possible that the insurer is the one who offers and the insured accepts. It may be
done through an agent. (check Loyola case *pag bumili ka ng pre-need plan, meron ka
ng insurance) another ex. meron din na through memorial lots, pag bumili ng memorial
lots meron na insurance coverage.
10. Suretyship- not always doing an insurance business
11. Liability to pay exemplary damages- example of insurance against public policy.
12. Characteristics (Article 2010 of Civil Code *aleatory contract)
a. Aleatory
b. Unilateral
c. Check notes
13. Upon the payment of the premium, the liability of the insurer attaches - Memorize.
14. To know if there is risk, check the policy. If it is specified/ enumerated it’s called a (1) Named-
Peril Policy. (2) All-Risk Policy- there are only exceptions that are provided, di sya literal na lahat
ng risk ay kasama (platinum case)
15. SEC. 10- Memorize also.
"Section 10. Every person has an insurable interest in the life and health:
"(a) Of himself, of his spouse and of his children;
"(b) Of any person on whom he depends wholly or in part for education or support, or in whom he has
a pecuniary interest;
"(c) Of any person under a legal obligation to him for the payment of money, or respecting property or
services, of which death or illness might delay or prevent the performance; and
"(d) Of any person upon whose life any estate or interest vested in him depends.
16. Take note Art. 19,20,21 of the Civil Code (Abuse of Rights).
UCPB GENERAL VS ASGARD (check the highlighted portions sa sinned ni atty sa tg)
Memorize Sec. 13 – you should answer as legal basis if the question is “who has insurable interest”
"Section 13. 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, is an
insurable interest.
Test of insurable interest- if he would derive a benefit from its existence or would suffer loss from its
destruction.
There can be 1 property but 2 people have insurable interest.
A sold his car to b. b now the owner. And chuchu check bar exam q 2023. Who has insurable interest?
Both a and b.
Why b? obviously he is the owner…
Why A? the seller who is now a secured creditor under the PPSA now has insurable interest because he
has a lien. If the car is destructed, he will suffer collateral. There’s no more property to answer
A-L-A-C answer always
You can have insurable interest even if you are not the owner. Kelangan lang meron kang economic value
in a sense na mag susuffer ka pag nadestroy yung property. Even a mere possessor; tenant, lessee,
usufructuary, etc
Common carriers have insurable interest with its cargos. They can have liability if the cargos are lost.
Even warehouseman, depositary
Vessel na nabenta na at the time of the loss. If I am the owner of the vessel and I sold it and thereafter I
insured it. Can I recover if it’s lost? No. It will no longer damnify me since I am no longer the owner. I will
also not derive benefit from it anymore.
- Same lang even if you insured it when you own it then you sold it, you don’t have insurable
interest anymore. “Insurable interest in a property must be present at time of the perfection
and at the time of its loss”.
UCPB vs Prabel sec 48 also applied
Nabenta na yung vessel, di na owner yung insured. However, alam ng insurance company na di na dapat
mag bayad, pero nagbayad parin yung insurer. “the payment is ex gratia”.
Pag ex gratia, wala ng bawian. You cannot reimburse…
Take note insurable interest in property vs life.
LIFE INSURANCE
Memorize Section 10.
"Section 10. Every person has an insurable interest in the life and health:
"(a) Of himself, of his spouse and of his children;
"(b) Of any person on whom he depends wholly or in part for education or support, or in whom he has
a pecuniary interest;
"(c) Of any person under a legal obligation to him for the payment of money, or respecting property or
services, of which death or illness might delay or prevent the performance; and
"(d) Of any person upon whose life any estate or interest vested in him depends.
Just check if the life of the person is under sec 10.
If you insure your own life you can assign anyone as your beneficiary. Sec 10 not applicable to
beneficiaries.
But if you are insuring the life of another, kelangan yung life ng person is in sec 10.
Di kelangan ng policy para maperfect yung contract of insurance. Perfected by mere consent.
Policy is prepared by the insurer. Meron na silang template nyan that’s why you apply the adhesion rule.
Take note – rider, cover note
Sec. 77
“It is not valid and binding until the premium is paid” what does it mean
- Charties vs Cyber City (Study this 3)
o Tatlong situations. Yung isa di pa nag bayad. What is the effect? It is still perfected, it
is not void. The insurance liability will not just attach. The only effect therefore is
that the liability of the insurer will not attach.
o They can agree that the insurer is liable even without payment of premium. As
long as they both agree. (credit term ang tawag)
Insurance contract is unilateral. Only the seller has the obligation. Non payment naman ng premium is
not enforceable kasi di naman yan obligation. Effect of nonpayment lang naman is walang liability yung
insurer. There’s no legally enforceable right on the part of the insurer to demand payment of the
premium.
But there is also this thing called grace period.
In life insurance, pag may one term na meron na nabayaran, for example 1 yr na nabayaran mo. Meron
kang grace period which id 30 days which means na by law, kahit di pa bayad yung premium and there’s
a loss insurer is liable as long as di pa lambas sa grace period.
Double Insurance
- Same insured, same interest. NOT PROHIBITED but if you will not disclose that to the insurer
and later madiscover ng insurer at tinotal inexcess yung coverage it’ll result to
OVERINSURANCE then they can cancel.
- Ex. 1m yung property. Ininsure kay A for 1m. tas ininsure din kay B for 1m din. Di dinisclose.
B later discovered. B can cancel since there is overinsurance.
- The key word is discovery. It is possible na alam ng lahat yan na meron na insurance.
- Pwede pa rin sya pero he can recover 1m only to one.
- Pwede ba sya gawing illegal? YES it can be a condition in the policy that you will not get
another insurance.
- Other insurance clause. Di naman pinagbabawal, ang kelangan lang ay inotify.
Devices that control risks expressly provided in the policy.
- By putting conditions
- Exclusions/ exception
Cause of loss should be the risk insured against.
Devices not provided in the policy
- Concealment
o Can be intentional or unintentional
o But it would only matter if material ba yung matter that was concealed/
misrepresented.
o Heirs of Alvares Case
Concealment, negative (not disclosing something)
Representation, positive (you promised something) pero it’s an inducement
to enter to a contract.
Representation in this case kasi may sinabi sya na eto yung age nya
which is not true. There is fraud. Misrepresentation
- Representation
- Warranty
- SEC 31. Important in relation to materiality “ TEST OF MATERIALITY”
o "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 whom the
communication is due, in forming his estimate of the disadvantages of the proposed
contract, or in making his inquiries.
- To determine if that fact will affect the decision of the insurer to enter into that insurance
contract or makakapekto ba sa desisyon to enter into a contract. Kung yes, material yun.
- Memorize “will it affect your decision to enter into a contract”
- There are times na cause yung issue.
o The matter concealed need not be the cause of the loss.
o Cinonceal na may cancer, namatay dahil sa vehicular accident- is the concealment
material? Still yes.
Incontestability Clause – 2 years from the issuance or last reinstatement
- Incontestable- di pwede ideny ang claim on the ground of concealment or representation.
- Sun Life vs Sybia
o The court held that if the insured dies within 2 years, magiging incontestable na rin.
o Atty does not agree to this decision.
o There were decisions in the past na maski na mamatay within 2 years, contestable
pa rin. Pwede pa rin ideny ang claim. Tan case.
o For exam purposes better if both ang icite then choose which view you should
choose. For atty, Tan sya mas in favor.
Sec 48 (important)
"Section 48. Whenever a right to rescind a contract of insurance is given 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
reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindable by reason of the
fraudulent concealment or misrepresentation of the insured or his agent.
UCPB General vs Prabel Fishing
- Walang insurable interest at the time of the loss kasi binenta na nya, pero nagbayad parin
(ex gratia payment).
- Concealment niraise pero should have just raised lack of insurable interest??
LOSS
- Establish proximate cause
- The loss, damage, liability must be proximately caused by the risk insured against.
- Immediate cause vs proximate cause- both makakarecover
- If the subsequent event is just the cause of the proximate cause, still the same.
- Ex. Explosion (immediate cause) is the risk insured against. Fire ang proximate cause. Can the
insured recover? It depends. Pwede pa rin, so long as fire is not an excepted peril.
- Check notes.
- Acts of a third person can be a risk insured against. Theft, arson, etc
NOTICE
- Can notice be required within a 15-day period? Yes.
- Notify without unnecessary delay
- Upon payment of the insurer, there is right of subrogation
SUBROGATION (in property only not in life)
- Upon payment, the insurer will step in the shoes of the insured. Kung ano yung remedy ng
insured, mapupunta sa insurer.
- It is not a new source of obligation, mapapasa lang.
- Ex. Insured insures his bike, binagga ni A negligently. Insured pwede habulin si insurer and
once you receive payment from the insurer, insurer will be subrogated. Insurer now can file a
case against A… within 3 years?
- 3rd party liability insurance – 1 yr prescription
- For all other, stick to the rule on the Civil code on extinctive prescription
CLASSES OF INSURANCE
- Marine Insurance
o Loans on Bottomry?
The loan is hypothecated (secured) by the vessel. Kung di dumating sa
destination at na loss yung vessel, wala na bayaran yun.
Payment is conditioned on the safe arrival of the vessel
o Respondentia
Same concept pero cargo
o These 2 has effect on the insurable interest
Pag nagkaron ng loss yung vessel at meron loan on bottomry. Madadamnify
pa ba yung ship owner pag for ex nawalang yung 50m nya na. Hindi na kasi
the loan takes the value. So yung Lender ang magsusuffer kasi di na sya
makakasingil pag Nawala nayung vessel.
Sec 112
- Check
- In marine insurance, you might be required under 109, 110 to give your opinion.
- In ordinary insurance, and youre not an expert, you are not required to disclose your
opinion.
- The rest halos pareho na sa marine insurance at ordinary ang rules abour concealment
May implied warranties sa insurance
- Sea worthiness
- Co-insurance clause
CO-insurance
- Nevermind computations
- GAA
o You are trying to save the vessel, you have to make a sacrifice
o Know the concepts
Reinsurance
- Insurance against liability
- Liability of the original insurer
FIRE INSURANCE
- Includes lightning, earthquake, anything similar
- Ex. Apply rules on alteration…?
- Option to rebuild clause sec 174
Life insurance
- Suicide clause 2 yrs from reinstatement din unless merong suicide?
- Minority, the amount is 500,000 bond?
SEC 233, enumerated mandatory provisions in Life insurance including grace period and reinstatement
clause.