INSURANCE LAI,I/

First Semester 2012-2073

Claudette A. Dela Cerna Estelito P. Mendoza & Associates

877.0076

Grading 76-78 :2.75 79-87 = 2.5 82-84 :2.25 85-87 = 2.0

75% :3.0

88-90:7]5
91"-93

:1.5

94-96:'1.25
97-700 =7.0

15% Attendance and Quizzes / Nlisc 25% Recitation 25% Midterms - > JuL{ ar Irf, u^r.F r? *t^^.f 35% Finals

' ' ' ' ' ' . .

We may reapportion the breakdown as we go along. Exemptions in the finals may also be considered. Attendance may or may not be checked every meeting. If you are called for recitation and not around, you will be given a 5.0 for that day. You may be called to recite more than once during one session. Index cards wili be shuffled. Codal sections listed in the succeeding outline refer to the Insurance Code of 1,978, as amended, urLless otherwise indicated. References: The Insurance Code, The Civil Code (CC), specified Special Laws, insurance textbooks by Campc's, and De Leon. Please read assigned cases in the originai. Digests can only heip you so far. Class outlines of Dean Carale and Prof. Catindig were consulted in the preparation of this outline. No electronic gadgets on tabletops please, and turn off your cellphones. Good iuck and have fun !

h4EETING

PART I: INTRODUCTION Insurance Def inition Law\

1.

(B I ack' s

/-:::,n-^
.o${*,,.6a+L

A contract whereby, for a stipulatecl consideration, one party undertakes to compensate the other for loss on a specified subject by specified perils. A contract whereby one undertakes to indemnify another against loss, damage, or liability arising from an unknown or contingent event and is applicable only to some contingency or act to occur in the future. An agreement by which one party for a consideration prornises to pay money or its equivalent or to do an act valuable to the other party upon destrucfio.t, lors or injury of something in which the other party has an interest,

2. Obligation and Contract

' ' ,
tz..tiut f* .f

Elements of a contract, define

Pure and conditional obligations

4.;;
- CC

Arts.7779, 1181

'"e**ac4

;' ba';/{a. Mufual

*f :, 3. History

Guaranty and Suretyship C, {;tt^t l{ ., --2 i, vw

f4;fr.tf

-iry

- CC

tr"".^
(

insurance - concept of extending aid to a member of a group when that member is in crisis, from a poo"l of contributions.

a4o i< th irgvpr ? L UL* t*s biae, iaaulJd? u' Early maritime or marine insurance trh+ a/, 'ttr '+o-rrrs 1 . Vance, A Handbook on the Law of Insurance, J.d ed., pp.7-21. 1b rtsh kinl i*txd "',fl'*l ' Aboitiz Shipping a. Nertt India Assurance, 488 SCRA 563 (2006) L{ok,*$ik(

'
C.

Manila Steamship u. Insa Abdulhaman, 700 PhiL 32 (1956) r^ticete'd rylqfl.j madhttu lo* O^d ltrtt )rra,r
Sources of Insurance law in the Philippines

Development of Insurance in the Philippines

. Code of Commerce and Old Civil Code - Spanish period . Act No. 2427, Insurance Act, 1915, American Regime (repealing all insurance provisions in the Code of
Comrnerce) -'

ofottd' a\\ rnsltol1(r dte

R.A. No. 386, Civil Code, L950, repealing all insurance provisions in the Old Civil Code
Some Civil Code provisions on life annuities, donations, damages, subrogation, guarantees and sureties, restitution, other frauds, etc, and alPprovisions regarding contracts rvhich apply subsidiarily (furtl-rer discussion on applicable sections) Special laws (GSIS, SSS, PDIC, etc. Note: the Insurance Code governs primarily but for matters in question where the Code is silent, the contract provisions of the Civil Code and other relevant special laws kick in.

' . .

Gercio a, Sunlife Assurance, 48 Phil.53 (L925) cha$'r^.1 u'.l.iaaact

Ang Giok Chip u. Spingfield, 52 Phil.375 (1931)

riarr

Philippine Health Csre Products a. Commissioner of Internal Reaenue, 600 SCRA 413 (2008) **to lor ir'ruxr<

Musngi u.West Const Life lnsurance Co., U,

sirf4s _:7 oc.t+1,

,Y:UISJXL
I

Reuieu: Statute of Frauds, Statute of Limitations (CC Arts 1356-

1358)

toY'1:: lD ryarc sut'L lt'suiance a. CA,i?i:K;. 'rff[r, Marctt 73, tssT

tvri*|on

tl^'ol.ia W *lzvlstdJfuhw,

MEETING

PART

II:

THE CONTRACT OF INSURANCE. IN GENERAL

1. concepts fi1b,-"i;f?:.: X':^ff'*' .ro Tffi#" do"6 6a.^ ov\ ,n\vt^a) 01- u-)1^tlt'td a. Contract of Insuran.e se. z.' l'.*lt:"r -ir ffi n,. b. C on tr a c t o r s u r e ty hi p s e c lT " s -' f,.t?H,#H et'El'::T-:l]H::":,:TiY7'#h :" provisions on guarantees and suretyship cc3ffi_. i. Review Civil Code c. Doing an insurance business - definition based on Sec 2 (the (idr.* a"o

defined

"

th?:tr'F,tr*
'ffi,ffi*f
e '/

business side of insurance to be discussed at the end) t- ?rof*.r*\ b vrote, as in&urr a1 ir^suranu lzrry#t'l 6a) *k;ry

,'i f:X;m'f^"?i
w.6,,trc

or, oo$A\ * $f{ g^1t"1' c Urxstrra^tr Utxi^'& ' C.) ar.trr o*f) ki'*I o. b'r+rit , ixcf'rclirr1 xwry''r2^rc( ag carttU*-liry $L doi"h o( at insr'rronu ' 6^d*\ w'o;t^1 (* l-tis Eor& bvri,^ag "ilhirr {+l
r-l.jc Ca&'

i,^',

ffi?" ffi.

"Q33f-

+rt p"ariclarr of 0)Wg1"t?b"d'{'e'1"'*!l*"c1'vivotr';ba1of3 ' il" OJSI... * a rv\wtr't'j( *i"X-A lo t,'n&

2- Elernents

a.

Subject matter

tjabitiiv e'E!fri.ir{,tr3j^"i' *#rf,ft" te'il tncvr<d 6i,^S.'- ' Object and purpose - trarrsfei and distridution of risk of loss, damage or liability / risk-clistributing scheme, assumptior-r of risk i. Reaiezu the concept cf subrogation (,CC Arts 2786,2207) (-: su*Jilv+t1 d. Catrse - designated peril
of toss and exteni of

- insurable interest, the thing insured Consideration - premium payqnents (Sec 77) - basetl on probability

ic vnor*air.r ffuLdNiclD oc,trur ak orn inOf'r,rn.irop dr"o'

$ff ff

i$fftsf.*flt,w,f --rc-i- -

agj-y aSalnlt ,t" oaucit\{|tal C. I). (-Oltsensual antJ VOIUntary (\*L- ArtS IJUS/ IJUO/ IJU6/ lJly) nrol r..cr6r/ Oarr s-Tf Ta1g41* oa 'J*VrConsensuarandvorunrarylct?'.tlTl*lt$u,ffi t Wkdli h.t b.{ @ia ty.tl,l,it< JJ,r J.{.r Wkda-t '* l-le Note: some insurance contracts are manclatory or required -.."irr orr. pa*." (raq}. -/ by some law (operations of law). E.g. compulsory motor r.o+ corrarulotl anor.irt rar+''os vr'a^{ ih@r93fr;L .rlhi.l" insurance, sss/GSIS, PHic (rinder labor laws and 'ccrr*. lrnnns 'And r 4u +u.1 ma4 4)lrrt canvruQ^' special laws), some mortgage contracts require insurance of Ctgq urr$ .,,u t< ri'a1C*) mortgaged properties

;'[t;'K*f ;nH

c.
fi'^

rl;o1 *

Unilateral - imposes a clut1, on the insurer to indemnify upon the happening of the event - but synallagmatic (See dissent of Vitug, J. in
UCPB General Insurance t,s. Mrtsagnna Telamart, 356 SCRA 3Q7 [20011) grlno*agr.o+rg

crr*

olt

{&

'o,&.* Condition precedent pavment of prcmiums ?t _f -).*i.-f" vototiSq/a' cor-rr,tarh*r tb +rr d. Conditional - subiectto conditions oF {t I'u.q! il.Evrr,c cgt+* C> hry.;\ /6Q lk *lrr. L? e. Contract of adhesion bit-L.qt cDs,*,r.T ri.
Contract of indemnity - not for gain, make good for the loss (except in cleath, since life is unquantifiable)

-2

l: g4h'{+( f:*.-*?illix\'%"itn,p_

r.

cot^'*

ta,"'-

g. h. 4.

Classes

- insurable interest -? '#&fruH$ H,"f;tProperty - a contract, a property in legal contemplation L'l* ,/'
Personal

H-

A)

Life ltl-' Hjffi m#[ *," or .nnr.*trl {ro,'l^ a. Individuai Life - Secs 779-783,227 - pure endowment b Grouplife- s:ETPt*.,?f tr:*{i3*?*-jr*'
i.
Pineda u. CA anrl Irtsular Life, 226 SCRA 7554

"fj5;.g"#fu a

ow,

qa4d<

czE+

?u*.;

ctccl

on

c. Industriai Lif; -siczig-zzr %f?^l$:-,e lffilt;fu**l.t*"

(1ggil
gah\r W\^wdrc E+e"lvt

.f;rffitJffi |a,h,{o-rrt
&it"t ,ou*tr..
a
A

fiiiwll,r:.,

B) Non-Life

-t QeC<9Jo\ orrtttd Other modes of classification:

C) Suretyship G]''',.d

(definitions) r'oeqn mri tt , 99-766 / / rvv a. Marine - Sec < -v +nildt \lar.ot-t 4,oe{rtn1 I ' ir, b. Fire- Sec167-773 c. Casualty or liability - Sec 774 C= llaWh'h tuzeata okl faok 7 Vr 9pu,Gu ?rrits t
.

/ Reinsurance - Sec 175-178

a.

social (government, compulsory) v. private (voluntary: personal, property)

as to interests being protected, in relation to the insured:

b. c.

i.

ladivst lo1g d/r4+ ,o{c. first-party v. third-party insuralce

v..

ail risks

4wl6$Vti b ' i. Pan American World Ainoays Inc. u. Aetna Casualty Co., 505 F.2d 989

specified risk

-z

<yc'iftc Yicrf

-"

463t^{ \adk

ot

avr,b,f'Vl
t Surety

Note: The general definition of insurance can cover any kind of loss, damage or liability associated with any lawful activity. , . What kind of insurance would be prohibited bv statute or public policy?

5. Construction / Interpretation/AppUcation
Fowt on v.r,\csl lic* deun +rXsl

Reaieru: Statutory Construction, CC provisions on Interpretation of Contracts (Arts. 1370_1379,,1

Ang Giok Chip,1931, supra
\attd cqtP^c da'Lb<lo,. Gercio, 1925, supra . I :La,.,^,,^L,^ a'orJvol -^,^.r I -ft.:" Nrrrc o o ao,*t\otl a*cQo(r ilc chgulc4lon.g Cebu Shipvsrd a.William -Li!r91, q06 SCRA.762 (1999) cour+r pt' o(t6r-a !o mar* corrriva*rt- 5r +ta ?o?tr.t

+r.. L".Urrf f,f u)'t*...r-

rot ipca

toqJrt'7
rr,ac

'Hr

dals ).r+ *riY.it'l Ocb)r vflct Sglil,nr |{

rtu^J

*il;;

,ra 'e; ' .H^t

u. &,\.rtA ua,8 vtslra {+{ r*rg[e a.f.ol G {r, FTq" .ro"$d

r^"tt- rUgtrga*

ff i n$n v'rr,.lalrl s<rrltt^, tel",ei^

UfiUS *re, :e: +^rW

W,W

ca,rze.l

First Quezon City Insurance a. CA, 278 SCRA 526 (1993) Tv u. First Nstional,l SCRA 7324 (1961) {*l bo&na1 cttlor -obsou\t ro,rdc sh..ld br iu+rrper'i"a(Oi"+lrt gts?x t^,^' oa"sJ U' Misnmis Lumber u. Capitnl Inc., i7 SCRA 228 (1966) oes'@'l'tr

"/hmfb**^.,?lt ffi:i"hx$ 7di,t,, |,,o.A$o 7

? ilJ "\i"fu s{ o*".l -1''r,\$sr' oob,p6n4 Fortune lhs. zt. CA,244 SCRA 305 (1,995) a^r+IDic-.l rtgs.l,t*a;v
"

I,ffiKn(ft.,fl;

n*

ri u.r^1

"

. ry1;6:' ,.
.
-uo^

Perla a. CA,7B5 SCRA 741 (1990) Yls au)at*

trrur -rld ll4 co^rrfa.+

conc,ti1",tr

{U

qnraOnr

!e Ir* ir.,cuurL \iabi\tt't, at\A l,OP1Pl ,an.,

'!Lrrr,r'{r'' i3

orie.nilt #s:!ry"rp,.#,,,?!,%s,c*i)4ss Malayan Ins. v. c4,270 scRA 242

(lssl)6f1r,'
*s

(1997)

#t

?tiffi* fi* ar
i:ffi3
br -ro carr.{.'.z-da<
{vrobr*L++2

tuloe Inn;q,

th\r4{4at(

.t-t

tr ;m'.:t*#if;ffiFffi g{z#*,if rei!*ffi

.

(1990) Western Guarantrt Guarantu u. CA, 652 fi990) 7B7 SCRA LB7^SCRA i<=*jrrfil..[i. fa*o&to\ lir*i+alio$c -*' e' td;i['4 l'daill+. -li-arl#!t*iJ-i{s#*irl't irr 'rrtrrar tr Cl'a^ Q ad.@t lir,'ni+ado.^s c4tt cqrcl trr +o.tq'.,.bt^tfaak W, b,{ t\r.rc.r,frc . O,,n z, I nt,, I l-in- OA Dl,;l thOtl{ b1 r<try16. eq /-ro((\ t iL,8"2ll:f i u.9::z " i-kJLuiJK, &9,1t,, "1ffi16 t).

Geagonia a. CA, 241 SCRA 152 (1995)

qeR A 554 (1992) Sun Insursnce u CA )11 otiidi;6^- - A"i.f.i "C)' Rizal Surety a. CA,336 SCRA 12 Q0A0)

tA.r*ffi ,t_.

Kr6,g

.sLa-tC

':,X

' .

2#i ;d,*;;ilil,t;i b.ra.l tfgalsr b4a.^

ggg u \t.n+'oLtinaL1o* 1e+'ot

i'*,rtr Caq

'

Gaisano Cagayan Inc. u. Insurance Co. of North Ameica, G.R. No. 147839, lt'me 8,2006 '3o..r
t

Important: presence of the elernents of the contract of insurance, the title is not controlling

'

Sec5

. ..

Applicability
Flierarchy: Insurance Code v. special Iaws v. Civil Code

6.

Health care agreements:

" . . .

PFIILAMCARE Health Systems a. CA, 379 SCRA 356 (2002)

Blue'Cross Health Care u. Oliaares, 544 SCRA 550 (2008)

Philippine Health Care Proaiders o. Commission of Internal Reaenue, 554 SCRA 477 (lune 2, 2008) and 600 SCRA 473 (September 78, 20A9) resolution of Motion for Reconsideration Summarize highlights of the Pre-Need Code of the Philippines

(R.A.No.9829) pr-*d
C>'+wLrtQrut

Fn

SeC

+o lC

MEETING
PART
t

* aur ':1-131 il^ffil"''ffit" L'ttE *tdtl or' ^ '-iaLrr<fut

uq/igltg * d uortlr'/q. of irs'Orq r, $doir.st rra*ttr tr qffr} lt.r,r41pal tgt hr

III: WHAT MAY BE INSURED - SEC 3 A. TAIOIOV1 9 \ TX^4-8'"I !& vxirar ntr,ri't
or.i\ - ' drrv,,*r(1,a t i*q4aA $vcl' orr lqarrabt{ rhr..tst ?r4Fi Y|l|rtE

' ilfrF" r:::*#:"L

I

F*d*

? v

'f

' orrf{u'1,L4'"9 da oolziiabt{ g,'.,1\ ,ar,,r, cDi..t lo lass or d,,;ry.,.i'cort*- & ,-r r
--

sutisr

*^N

r.

tne rarv requires the owner of an insurance policy to have ir-r the person or thing insured. Necessary for the validity of the conhact.

rnsurabrti.iff,ei'itiiHffifrFh'i"ngwhich
.

a tAt}",?laA v,o*a'n

3. ?,,?,,f..lirsxu,rtr :;H'{trt. '-z ft- h$'%tsS;*a-HHgngi#"':fif&"1il'.h"'i#o. tnt#t", wourd be l,,tl..'c t,'.w.t 4lttoFlff ' '$ I gambling _- prohibiteg !y law an<i. policy. (Secs 4, 78, 25, RPC sec 125) ' il#ir?* gfoia.+ fr+t -t"+ti^1::fftl%ft,.6& r,t\rr'drac oustwr$a. r.tirqLorlr. ,auciar,t ilrffvZ '(l,r' -!il.*Li,r^o". \ oLa.'c, n's(.rtrr ' ;;J.-p"t* r0blr.rr nourr t o.d4 i."uJt' (-'r*i;i gfr.rrarh{ 2, Event or peril insured against- i"tl,..tr idliardb - .e,attt |rAr* J&r {+ar i- i{t
vieareol ocb,r ir rr$osru p*rr l.qxa ac o pila1 fo *|\r

-? 7,*4v'z-

J^iI,x{i:ilH

Lalican u.Insular Life Insurance Co. Ltd. 597 SCRA 159 (2009) * O.f&t l3\ettfot<t a.r*fo(et a Wr;r.Or -? 6l,ia hor :?,}tiffit^,2;crrt?3"1il|pl{ t*l w'i*er icwt&''tt'

q*h*-

"

That which is the proximate cause of the loss (for further discussion) See Sec 84 snd CC Art 7774

ps<trto{ia

\ ofr*.
fl*l*

o,

,1.

in a.? life and health - sec 1o Sd,#*, Incurabte r o$ttrrrrrFr or-yf . upon one's life - unlimited, Presumption of good faith, t"S." frt*rrr+ rylu q'* o(nc generally a donation to the beneficiary lbeneficiaiy need not ffi.. n-r. clltdrrn -? q|+l^r rt pqfut . ct.^..,t rr.o^ o,^ have interest on the life of the insured) xr*&.rp tf,o'r l\r dlilr\d. inrraOpl rOfrr . upon the life of anoiher - interest must be pecuniary in nutr",.!. *;^ffi;' otlli bcrro'rt'r ls o[ actual monetary loss from death" v* (oe tatc. or nafure -"#v;; "-'. - "risk .ecl.{tra)k 'rut^ w l* iltAr; r""ir raJ;tio- -c'trJ !*ryiu 6r Vc o.{,r -lr&o[it r*"r" 'Sffi,ffi} -"' forbenefitof t^or r"ornr'rrot' ,r' t'r ti .r.e in;;rbd
3. Insurable interest

caeuctq lhorvols rf cztvc,,*at 'i3L ws or tjabilitl

ffiffii.i !*
tl^*tat

l'**il;;il-.-' .

..advAftoqt {fi\

ff:';A; tna{r{ft'

1;;'j

oB1 ?r,rcq.

ud.vo

o for benefit of another person (3 parties: the policy

[*:]Ffo"
a
Ot Or,ra gr/rcott\ uf'oh

. blood relationship - Reuietu Arts 195 n,,' 1Q6 nf ail. irc..r.+ I; "^tcr*orr rerrrr in un or.cprr,4s. th,;*ir;;;';;"'ii#*;r#flrffi,"4ii:4.#iqiE.* t?ffifi:,,'%t#iiitff-'fl.*-* *f-+ror '^tb ?*"o'+*t under a t"gui
comrnercial
it is only based on the amount of obligation)

fi-l#ilffi,'t*" h^dl

rtUtl

.r '..1*fr1?f
or ihrrtt

iJ#;J|",fr: y:,#'y",:;.$T;x':l! li: ??:1'.'"#

have an insurable interest on the cestui que aie)

aaa*h

'

interest

15.".il;::T;ff:,Tt"rv

reasonable

debtor/creditor relationship re'u lar+r (essentially a form of property insurance sinc-e '.1#Hi"

or

t*

*at'

health

See

PHILAMCARE Health Systents,2002, supra

4.

Insurable interest in property

' definition

sec 13 - anyone has an insurable interest in property who derives a benefit frorn its existence or vvould suffer loss from its destruction

ownership -'ilt.#",?..!:o*j*[1,.1.^ffi*fl -ro o relation thereto .ul.i,' lrr inar+or 33 o liability in respect of ' what it consists of - Secs 14,16-', *.. rlr.rr,1^r 1-{ 6crarlr o existing legal or equitable title o inchoate interest founded on existing interest for preservation of expectancy

o o o
trrd.rir,Cr.r-l

(differentiale from sec 16) interest

expectancy co'pred

reasonable expectation of fruition

scR_A 635 (198s)

with an existing

Filipino Merchants lns. Co. a. Cotrrt of Appeals, L79

-7W

}/4ou4.e

Gaisano Cagayan, 2006, supra . measure - secs '1,7,15 -.7 sqTytv * atra\ tt@\q fd.{idr h.,or,( g.' eupu/.el 19{ro pa rrtrtr l{.e 1"gj,1.1 ' enforceability - Sec 18 -" Jnl tsio*,a*t f4r ,l.Lt t;l,.te4l o?

h,trtD|.t{ l*.q

?n/'rq {

lit

ftcr.<rror

- tots r'
It

5. Existence

secs rg,

;U-tf"i* H""'Lfr"-d 7''t4+:rff,ffi, 15 hrwvrr" loht

zs 't4'

'
6.

' . .
-

upon execution of contract, upon ross, intervening period

Change of interest

Secs 20-24,59,57, CC

Art

1306

general rule - suspension exceptions

ChA^"o thlncl-- Itr oarf qo*A o {,lr;n1 euctAx,, vvtoctatr*rx;!
t&^ A ohA.'y { lrlrerc.r ri igwtrls , eqqVAt4t, Lr1r/*

1"

.|.ron ruqrrJ ic
' .,oJ..,

t'1,

7. Double insurance/ Co-insurance v. over-ins.tian'ce slcs --

arfrrrf.r {f. t C.rnOrq }o ar, -r vr{,l 6dL1arrl r$ \fr .ltr.-., Oh.f {Itr ,ha(rr, \

,.

&.o or troer i.,rfur'fC tlralr1 o{etrqr.lf

t.
E. 3-

*tr'1r.f h.l*."r rt {u

. '

9g-94 o.

Requisites of double insurance

Pioneer Insurance

{|* 09rtuv6tu. V6ua ^ 'lk caaq fia.r

surety Corp. u. yap, 6i scRA

Secs g-9

426 (1974)

ll.lgr+ lrccr.rl-l+ {h Aa-t r{a& v ?trrtt

s,,

a/ro

8.

Multiple interests on property -

il;J gu\

i,s", tr'

. '

&(qxl dil*

Geagoniaa. CA,7gg|, supra Tai rong Chuache t Co. zt. Insuranc:e Contmission, 1sB scRA 366 (1988) -FJd,

dtft1

r'o

br

MEETING 4
PART IV: THE CONTRACT OF INSURA]\CE

A.

FoRM AND FUNCTIoN

Execution - offer and acceptance Perfection

1. 2.

- consent (review

concepts in CC)

a. Written form Sec 226

. Mandatory provisions in life policiesSec22T . Non-default options Sec 227(f),(h)

. '
b.

Manufacturer's Life [nsurance a. Meer, 89

(7e51)

phil

357

Reinstatement of lapsed policy Sec 227(1)

Andres u. Croutn Life Insurance, 702 phil g1g (1gSS)

Formal acceptance - stipulations (i.e. delivery, approval)

'.';'

c.

Tort - CC Art2776 Premium payments - Secs 77-78, 64, 66,306

. .

; ::,i,i;'i'#"::: :'::,

(1 s 3 s

Enriquez u. Sun Life, 47

Plil. 269 (1920)

. Defined . Duty to pay Sec77 . Effect of premium - effectivity

of policy

. .

General rules Sec77 Exceptions:

a. Life and industrial life policy b. Written acknowledgement of the receipt of

premium by insurer
Sec 78

c. Payment in installments - Makati Tuscnny

Condominium Corp. u. CA,215 SCRA 462 (1992)

d. Credit extension for the payment e. Estoppel

of premium

. Effect of non-payment

Philippine Phaenix Surety as. Woodztrorks, Inc., G.R. L-22684, August 31,1967 Effect of partial payment

UCPB General Insurance as. Masagana Telemart, Inc., G.R. 137172, lune 15,1999, supra o Effect of Payment by check

. .

Tibay, et aI. as. CA, G.R.1L9655, May 24,1996

Effect of Payment through agent

. . .

Malayan Insurance as. Arnaldo, et al, G.R. L-67835, October

12, L987 South Sea Surety vs. CA, G,R. L02253,lune 2,1995 Secs 79-81-

. Return of premiums

When right to return exists

1. risk never attached

o Edillon as. Manila Bankers Life, et al,, 202 Phil.

(1e82)

508

Great Pacific Life as. CA and Teodoro Cortez, G.R. L57308, April23, 1.990

2. policy surrendered before termination

3. contract is voidable

- fraud, mistake
13,1990

o Lumibao vs.IAC, et al., G.R, 64677, September

4. contract is voidable due to facts unknown to insurer 5. insurer never incurred liabilify due to insured default

o Tibay, et al. as. CA, G.R.1-19655, May 24, 1996

o
American Home Assurance us. Chua, G.R. 1-30421, lune 28,1999

6. over-insurance

7. rescission due to breack o Areolaas. CA, G.R.95641,

September 22,1994

8.

No right to return of premiums Sec 80

10

MEETING

B. THE POLICY: PARTIES

AND RIGHTS

1.

Parties

a.

Immecliate Parties

i.

The insurer Secs 6,'184,195,299_301,306

. ' ii.

White GoId Marine Seraices a. pioneer Insurance Steamship Mutual,464 SCRA 449 (2005)

the

Pandiman o. Marine_Manning Management Corp. t singhid, 460 SCRA 415 (2005)

insurance)

The insured secs T, s4-s7 (reaiezu ',cestui que uie,' in life

. ' .

Capacity - CC Arts 1327-1929, 1390 (note: RA 6g09 in relation to Sec 3,par.3)

Juridical person property it owns

Public Enemy

see CC

Arts 44-46 - insurance

on

. .
b.

Filipinas Ga de Seguros a. Christern Huenefeld. Phir. 54 (1e51)

&

Co., g9

Constantino a. Asia Life Ins. Co., g7 phil24S (1950)

Other parties affected

i.

The beneficiarv Sec 53

. . .

- right to change Sec 12 - forfeiture

Sec 11

Limitations CC Arts 739, 2017, 2012

. Insular o. Ebrado,80 SCRA 151(j.977) . Consuegra u. GSIS, 37 SCRA 315 (1971) . SSS o. Dauac,17 SCRA 863 (7966) . DeI Vala. DeI Val,29 Phil. S34 (1915) . Gercio a. Sun Life Assurance, 48 PhiI. 53 (7925), supra . Philippine American Ltf" Insurance a. Pineda, 175 SCRA
416 (1s8e)

. ii.

Heirs of Loreto Maramagu. de Guzman et al, G.R. j81132, June 5,2009

Secs B-9

Mortgagor /mortgagee

11

2.

The Policy

a. Defined Sec 49 b. Fonl Secs50,226 c. Riders and endorsements Sec 50,par. 2 d. Contents Sec 57.227 i. Void stipulations Secs 25,63 ii. Reaiezp Sun Insurance a. CA, G.R. 89747, Mnrch 13, 7997 e. Cover Notes Sec 5? i. Instr.rance Memorandum Circular No. 3-7S,Sept. 29, 7975 ii. Insurance Circular Letter, January 17,7980 iii. Binding Receipt ' . Great Pacifc Life r:. CA, Bg SCRA 543 (1g7g) iv. Pacifc Timber Export a. CA, 772 SCRA 199 (1952) f . Kinds of Policies Sec 59 i. Open Sec 60
I

. Deuelopment

Insurance

-o.

IAC, 143 SCRA 62 (1986)

ii. iii. i. ii. iii.

Valued Sec 61
(c.f. Cebu Shipyard a. William Lines, 1999, supra)

. Harding a. Comntercinl Union Assttrance, 38 Plul. 464 (1918)

RurLning or successive Sec 62

g. Unilateral

canceilation of non-life policies

By the insurer Secs 64-65

Bv the insured Sec 79

Paulino zt. Capitnl Insurance, 105 Phil1315 (1g5g)

Sec 66

Non-renewal bv insurer

3. Rights of the Insured a. Right to assign/change

Secs 11, 787-782

' .

Sun Life Assurance of Cnnada u. lngersoll, 41 Phil. 331 (1921) Grent Pacific Lrf,

,.

CA, 316 SCR 4 677 (1999)

b. Right to borrow Sec 227(9) c. Right to dividends Sec 227(e)

I2

MEETING
PART

V: IMPLEMENTATION/RESCISSION

OF INSURANCE CONTRACTS

DEVICES THAT DELIMIT SUBJECT MATTER OF INSURANCE

A. Concealment

a. b.

Defined

Secs 26,28

Effect Secs27,29

" . c. . . . . .

Argente u. West Const Life, 51

Plil.

725 (1928)

Great Pacif.c Life u. CA,7999 supra

Elements Ng a. Asian Crusader 122 SCRA 461 (1953)

Cqnilang a. CA 223 SCRA 443 (1993) Sunlife a. CA,245 SCRA 268 (1995) Great Pacific Lrfr

r. CA,

89 SCRA 643 (1979)

YuPang Cheng a. CA 705 Phil. 930 (1959)

d. Matters which need not be disclosed - Secs 30.32-35 e. Test of materiality Sec 31 f . Consequences of concealmentSec 27
. Exceptions:
- incontestability

Secs 48,227(b)

'

Tsn a. CA, 174 SCRA 403 (1989)

B. Misrepresentations - the aclive form of concealment

Representations

a. form and when made Sec 36, 37,47,42 b. as to future Sec 39 c. as to information Sec 43 d. effects Sec 44-45 e. as to age 227(d) ' Edillon u. Manila Bankers Life, 717 SCRA 187 (1982), supra f . test of materiality Sec 46 ' Pacifc Banking u. CA 168 SCRA 1 (1988)

r.1

g. Defenses not barred by incontestability

'

Eguaras a. Great Enstern 33 Phil. 263 (1916)

C. Warranties Secs 67-76

a. Defined b. Kinds Secs 67, 68,71.,72 . Qua Chee Gan a. Laut Union 98 PhiI. 85 (1,955), sltpra . Young u. Midland Textile Insurnnce 3a Plil. 51/ (1915) c. Form Sec 69 d. When omission does not avoid Sec73 e. Effect of breach Secs 74-76 . Pioneer Insurnnce t Surety u. Yip 67 SCRA 426 (1974), supra . Nezrr Ltfe Enterprises a. CA 207 SCRA 609 (1992) (cf. Pacifc Banking
a. CA, 168 SCRA 1) (1988)

f.
g. h.

Meaning of warranty condition - Prudential Guarnntee

and Assurance

Inc. u. Trans-Asia Shippirtg Lines Inc., G.R.1,51890, lune 20,2006

Warranties in fire insurance policies; standa.rd clauses Secs 168-170

Warrar-rties in fire insurance policies, standard clauses Secs 168-170

'

Young

zt.

Midland Textile lnsurnnce, 30 Phil'

61'7

MEETING 7
RISKS

1. Terms defined
a. Loss

Bonifncio Bros. a. Mora, 20 SCRA 261 (7969)

b. Proximate cause

- vda. De Batackm

a. Medina,102 Phil

l9l

(1957)

2. Loss

for which insurer liable

a. Loss the

proximate cause of which is the peril insured against

Sec 84

'

Allied Banking Corp u. Lim Sio Wan, 549 SCR-A (2008)

T4

b. Loss the irnrnediate cause of which is the peril insured against except where the proximate cause is an excepted peril Sec 86

c. Loss through the negligence of the ir-rsured

FCU a. CA, 454 SCR-A 337 (2005)

Sec 87

d. Loss caused by efforts to rescue the thing from the peril insured against
Sec. 85

3. Loss

for Which insurer not liable

a. b.

Loss by the insured's

willful act Sec 87

Loss due to connivance of the insured Loss where the excepted peril is the proximate cause sec 86

c.

'

Paris-Manila Perfumery

1,.

Phoenix Assurance Co., 49 Phil753 (L926)

4. Prerequisite to

recovery for loss in insurance against fire

a. Notice of loss Sec 88 b. Proof of loss Sec 89

c.

Waiver of defects in notice or proof of loss Sec 90

d. Waiver of delay in presentation of notice or proof Sec 91 e. Effect of failure to secure certificate or testimony of third persons
92

Sec

MEETING

CO\rERAGE

A.

Life Insurance

1.

Defined, when payabie Secs 179, 180

a.
b. c.

Transfer of policy; notice Secs 181-182 Measure of indemnity Sec 183 Effect of death of insured through:

i. .

Suicide Sec 180-4

Labor case 1

.F,

\ 93 6q

scgt'

t*o.*

co.,Vurh

v.

tc , Sori8aD

h6

15

Labor

case2 6''u n44ql

9&?r

' q l1(1

Na2

sCff? v'

NLP(

n. iii. iv.

Death at the hands of the law

Killing of insured by beneficiary

Sec 12

Accidental death; cf. death by accidental means

' ' ' 45. .

Finman a. CA, 213 SCk4 493 (1992) Cnlanoca. CA,98 Phil.79 (7955) u. Insulnr, 44 SCRA 58 (zuith dissenting opinion) (1972)

. Biagtan

Sun Insurance a. CA, 21'1 SCRA 554 (1992)

Group life insurance Sec. 50;228,last par

Pineda u. CA, 1993, supra
Sec 229

Induslrial life

6. Mutual Life Insurance

comPanies Sec262

' 7. B.

Republica. Sunlife, 473 SCRA 129 (2005)

Life Annuities (CC Arts 2027-2026)

Fire insurance

1.

Defined Sec 767

' ' 2. ' . ' 3. 4. 5. 6.

"Hostile" {ire and "friendly" fire

Phil. Home Assurance a. CA,257 SCRA 468 (1996)

Alteration resulting in use or condition Alteration resulting in rescission

Sec L68

Deaelopment Insurance as.IAC, et al., G.R. L-71360, July 1,6,'1.986

Alteration not resulting in rescission

Sec 171

Sec 169

|leasure of indemnitY

Valuation of building for fire insurance Sec772 Pledge or lransfer of fire insurance to insurer sec 173
Other insurance clause

. '

Nezrr Ltfe Enterprises, et nl. us. CA, et al., G.R. 94077,

March 31,1992

Geagonia as. CA, 7995, suPra

n/

-LO

MEETING

C.

Casualty & LiabilitY Insurance

1. 2.

Defined Sec174

Fortune Insurance u. CA,244 SCRA 309 (2005)

Compulsory Motor Vehicle Liability

a.

Method of CoverageSec3T4

b -:";;':"';,:;:,:'u,un
c. e.

,,*

144 (1ss8)

Period of filing and action to recover damages Sec 384

Nature of liability of insurer

Secs 385-386

d. Cases:

.';';::-::;
' '

20

8 scR'A 487

(1

es2)

i::':H:,::,:,:,im

Vda. de Maglanaa. Consolacion,2l2 SCRA 268 (1992)

Far Eastern Surety u. Misa, 25 SCRA 663 (L968)

'. o;:,:i'!J,i,;,:
3. D.

: z'# :,':' :::),

insurer
First Integrnted Bonding
7).

Third-party suit against

Hernando, G.R.5122L, July 37, 1991.

Suretyship

1. 2. 3. 4. 5-

Defined Secs2,775
Extent of liabilitY Sec176

' '

Zaragoza u. Fidelino, L63 SCRA 443 (1988)

Premium PaYment Sec177

Philippine Pryce Assurance u. CA,230 SCRA 764 (L994)

Applicability of Civil Code Sec 178

Cnses:

'
' '

National Pouer Corp.u. CA, 145 SCRA 529 (1986)

Zaragoza u. Fidelino, 163 SCRA 443 (1988) Enstern Assurance u. IAC, 179 SCRA 567 (7989)

1'7

' ' '

.

Stronghold Insurance u. CA, 208 SCRA 336 (7992)

Prudential a. Equinox, 533 SCRA 257 (2007)

Intrn-Strotau. Republic,557 SCRA 363 (2008)

Reparntions Commissiott u. Uniaersnl Deep Sea Fishing Corp.,83 SCRA 764 0979)

E.

Double Insurance and Reinsurance

Double Insurance

7. 2. 3.

Defined Sec 93
Rules of payment Sec 94

Distinguish from reinsurance

Reinsurance

1. 2. 3. 2.

Defined Sec 95

. Artex Deuelopment Co. a. Wellington Ins. Co., 51SCRA 352 (1,973) Duty to disclose Sec 96
Distinguish from co-insurance
Cases:

'

PHILAMa. Auditor,22 SCRA 135 (1968)

. Fieldmanu. Asian Surety,34 SCRA 36 (1970) . Equitsble Insurance u. Rursl Insuraflce, 4 SCRA 343 (1962)

MEETING 10
PART

VI: MARINE INSURANCE

Definition and coverage Sec 99 Perils of the sea vs. perils of the ship

1.. 2.

' '

Cathay Insurance u. CA,757 SCRA 710 (1987)

Roque a.

IAC,

139 SCRA 596 (1985)

10 1()

' . 4-

La Razon u. Union Insurance, 40

P|fl.40 (1919)

Malnynn Insurance a. CA,270 SCRA 242 (1997)

Special marine insurance contracts

Insurance against all risks

, . .

Chon u.

CA,183 SCR 4 223 (1990)

Mayer Steel a. CA

Sottthsen Suretq, 274 SCRA 432

Inchmaree clause
Extension of coaer to include damage or loss due to latent csuses su:h as breakage of the ship's driae shafts, bursting of its boilers, unseen defects in

its hull, machinery, and auxiliary equipment; as toell as due to errors in

nauigation, or negligence of its captnin, fficers, engineers, crezo, pilots, etc. It is named after the stip Inchmaree inaolued in a landmark 7887 case (Thames t Mersey Marine Insurance Co. o. Hamilton, Fraser a Co) Trhgys a llK court declared that the aboue causes do not ft the defnition of iall other perils ... Iosses or misfortunes".

5.

Insurable interest in marine insurance

a.

Shipowner Secs 100-104

Filipino Merchants Insursnce us. CA, 1989, supra

b.

Cargo owner Secs 15, 105

":n"t:;,n?;::":"
Lea

:;:;::scRA

7s6 (1ss5)

Mer lndusties u. Malayan Insurance, 471 SCRA 695 (2005)

Loadstar Shipping u. Pioneer, 479 SCRA 655 (2006)

Cebu Salaage u. PhiI. Home Assurance,572 SCRA 667 (2007)

6-

Concealment and representation

a.

Defined Sec 107 in relation to Sec 28

' ' ' b. ' '

Shicter duty to communicate Sec 107

Opinions or expectations of third persons is rnaterial Sec 108 Presumptive knowledge of loss Sec 109
\Alhen concealment dos not vitiate the entire contract Sec 110

Effects of concealment

Effect of false representation Sec 111

t9

'

Effect of eventual falsity as to expectation Sec L72

7.

Implied Warranties

a.

of seaworthiness Secs 113-119

. ' b. c.

Roque, et sl.

as.IAC, et sl, 7985, supra

Philippine American General lnsurance as.

Shipping Lines, G.R.776940, June 71,1997

CA and Feldman

will not deviate from agreed voyagr- S.-cs 121-126 Where nationality or neutrality of a ship or calgo is expressly
that vessel

warranted Sec L20

MEETING

11

8.

Loss

a.

Kinds of losses Sec127

i.

Total Sec729 Actual Secs 130, 132,737

o o

Code of Commerce, Book III, Arts. s\'i, 590,837 (limited liability rule)
Aboitiz Shipping a. CA, 569 SCRA 29/. (2008)
sec 131

,, ;^,,:;:::;:"" b. d.
Extended liability of insurer in case of reshipment Sec 133 Abandonment

i. ii. iii. iv. v. vi.

Defined Sec 138

Requirernents of valid abandonment Secs 738-744

Orietttal Assurance

us.

CA, G.R. 94052, August

g, 7gg1

Effects of valid abandonment Sec 745-746

Rights of a marine insurer who pays for a loss as if it were an achial total loss Sec747 Insurer liable for acts of insured's agents Sec 148
Refusal of insurer to accept abandonment Sec 149

vii. Form and effect of acceptance of abandonment Secs 150-153 viii. Effect of refusai to accept valid abandonment Sec 154
20

ix. 9.

Recovery of actual loss upon omission to abandon Sec 155

Measure of Indemnity

a. b. c. d. e. f. g. h. ' i. j. k.

Valued policy

Sec 156

Insured co-insurer Sec 157 Where profits are separately insured Sec 158
lrVhen only part of the cargo exposed to risk Sec 159

Presumption of loss of profits Sec 160 Rules in estimating a loss under an open policy

Sec L61

Where cargo insured against partial loss Sec 162

Liability of insurer for expenses of repair and recovery Sec 163 Liability of. insured as to averages Sec 136; see Code of Comrnerce
Art.806 Rights of insured in case of general average loss Sec 164

Right of insured to claim whole loss frorn insurer

equipment Sec L66

Sec 165

Liability of insurer in the case of a partial loss of ship or

its

MEETING 12
PART

VII:

CLAIMS SETTLEMENT AND SUBROGATION

1.

Notice and proof of loss

. Sections BB to 92 ' PHILAM u. CA, 344 SCRA 620 (2000) " Aboitiz Shippingu. Insurance Company of North America,561 SCPA 262
(2008)

2.

Guidelines on claims settlement

'

Unfair claims settlement; sanctions

Secs 24L

to 244

LI

. . . . . .

Londres a. National Lrf", 94 Phil. 627 (7984) Fernandez a. National Life, 105 Phil. 59 (1959) Tio u. CA, 202 SCRA 119 (1991) Cathay u. CA, 774 SCRA 11 (1989)

Nodnz;. Cruz-Arnnldo,151 SCRI 227 (1967)

Finman Ceneral a. CA, 367 SCRA 214 (2000)

MEETING 13

3.

Prescription of action

. ' . . . . . . . . 4.

Secs 53,

231(a),384,416

CC Art1144
Ang a. Fulton,2 SCRA 945 (1961)
Traaellers Insurance a. CA,272 SCRA 536 (1997)
Lopez a. Filipinas, 16 SCRA 855 (1966)

Eagle Star a. Chin Yu, 96 Phil. 696 (7955)

ACCFA'a. Alpha Ins., 24 SCRA 151 (1968)

Sun lnsurance a. CA,195 SCful 193, supra (1991)

Mayer Steel cose. supra

Vda. De Gabriel a. CA.264 SCRA 137

Subrogation

. . . . ' ' ' . . '

Articles

1,236

&2207, Civil Code

Maglana a. Consolacion, 212 SCRA 268 (1992)

Cebu Shipyard a. WiIIiam Lines, 306 SCRA 762 (1999)

Pioneer Insurance a. CA, 175 SCRA 668 (1989)

Manila Mahogany a. CA,764 SCRA 652 (1957)

Firemttn's Funda. Jamilla, T0 SCRA 323 (1976)

PHILAMGEN a. CA,273 SCRA 262

(1997)

St. Paul u. Macondray, 70 SCR 4 122 (1976)

Malayan Insurance a. CA, 165 SCRA 536 (1988)

FEDEX a. Ameican Homes Assurnnce, 437 SCRA 50 (2004)

22

Lorenzo Shipping a. Chubb & Sons,Inc. et.al., 431 SCRA 265 (2004)
Pan Malayan Insurance 7). CA, G.R. 87026,

. ' '

Api\3,1990

Danzns CorporntioT"r a. Abrlgar, G.R.747462, December lS, 2A0S Delsnn Trnnsport u. CA,369 SCR 4 24 (2004)

MEETING 14
PART

VIII: DOING BUSINESS

THE BUSINESS OF INSURANCE

A.

' ' ' . . ' .

Insurance corporations, defined Sec 185 Provisions designed to assure solvency of insurance companies and to protect policy holders/ limitations or resh'icfions on insurance companies Secs 1,87 -188, 19 4-798, 210, 215_27 6, 222, 226

Mandatory provisions in individual life and endowment contracts

Sec 227

Variable contracts, defined Sec 232[2] Payment of life insurance proceeds Sec 242 Payment by insurer for any joss or damage under a non-life poiicy
Sec 243

Mutuahzation

Secs 262, et seq. and

demutualization

B. AGENTS AND OTHER SERVICE PROVIDERS

. . . . . . . .

Insurance agent and broker, defined Secs 300-301 Resident agent Sec 314 Settling agent: Smith BelI as. CA, et al., G.R. 170668, Febntanl 6, Tggl
Reinsurance broker Sec 310

Kincis of insurance adjusters Sec 324

Actuary

Secs 335, et seq.

Rating organization Sec 339 Security Fund, defined Sec 365

23

C.

MUTUAL BENEFIT ASSOCIATION

Muh:al benefit association defined Secs 390, 392-393

D. THE INSURANCE COMMISSIONEIT

Administrative functions Adjudicative function

(1ee4)

Secs 187, 41.4,475;

PD 1141

Secs 416

Philippine American Life, et al. as., Ansaldo, et aI., 234 SCRA 509

Almendras Mining Corporation as. Offce

C,ommissioner, 1.60 SCRA
65

6 (1.9 88)

"f

the

lnsurance

.. .

Jurisdiction Sec.416; Sec. 9[3] BP 729 Binding effect of decision, order or ruling Secs L, 4, Rules of Court FINALS

4'1.6;

Rule 43

cdc 6.1.12

24