LECTURE NOTES ON INSURANCE 2004 WHAT LAWS GOVERN INSURANCE The laws governing insurance in the order of priority

are (1) The Insurance Code [PD 146 !whose effectivity date is "une 11# 1$%&' (() In the a)sence of applica)le provisions# the Civil Code (() In the a)sence of applica)le provisions in the Insurance Code and Civil Code# the general principles on the su)*ect in the +nited ,tates (Constantino vs- .sia /ife Insurance# &% Phil (4&) 01a2ple3 4 applied for insurance with , Co2pany with offices in 5ontreal# CanadaThe application was 2ailed to , and on 6ove2)er (6# the insurer gave notice of acceptance )y ca)le- 4 never received the ca)le and he died on Dece2)er ( - The Insurance Code is silent as to acceptance )y ca)le- The Civil Code shall apply and under Article 1319, an acceptance made by letter shall not bind the person making the offer except from the time it came to his knowledge There was no valid contract as ! died without knowing the acceptance of his application "#nri$ue% vs &un 'ife Assurance of Canada, (1 )hil *+9, WHAT IS A CONTRACT OF INSURANCE . Contract of Insurance is an agree2ent where)y one underta7es for a consideration to inde2nify another against loss# da2age or lia)ility arising fro2 an un7nown or contingent event. Contract of ,uretyship shall also )e dee2ed an insurance contract if 2ade )y a surety who or which is doing an insurance )usinessDoing an insurance )usiness or transacting an insurance )usiness is3 a) 2a7ing or proposing to 2a7e as insurer# any insurance contract8 )) 2a7ing or proposing to 2a7e# as surety# any contract of suretyship as a vocation and not as 2erely incidental to any other legiti2ate )usiness or activity of the surety8 c) doing any )usiness including a reinsurance )usiness# specifically recogni9ed as doing an insurance )usiness within the 2eaning of the Code8 d) doing or proposing to do any )usiness in su)stance e:uivalent to any of the foregoing in a 2anner designed to evade the provisions of the Code(,ection () 6;T0 < the fact that no profit is derived fro2 2a7ing of insurance contracts# agree2ents or transactions or that no separate or direct consideration is received

shall not )e dee2ed C;6C/+,I=0 to show that the 2a7ing thereof does not constitute the doing or transacting of an insurance )usinessNATURE AND CHARACTERISTICS OF A CONTRACT OF INSURANCE 1IT I, .6 ./0.T;>? C;6T>.CT ! the lia)ility of the Insurer depends upon the happening of a contingent event- It is not a wagering contract(IT I, . C;6T>.CT ;@ I6D056IT? @;> 6;6!/I@0 < recovery is co22ensurate to the loss- IT I, .6 I6=0,T506T I6 /I@0 I6,+>.6C0 < secured )y the insured as a 2easure of econo2ic security for hi2 during his lifeti2e and for his )eneficiary upon his death 0AC0PT one secured )y the creditor on the life of the de)torBIT I, . P0>,;6./ C;6T>.CT ! an insurer contracts with reference to the character of the insured and vice versa4IT I, 0A0C+T;>? .6D C;6DITI;6./ ;6 T40 P.>T ;@ T40 I6,+>0> ! )ecause upon happening of the event or peril insured against# the conditions having )een 2et# it has the o)ligation to e1ecute the contract )y paying the insured- IT I, 0A0C+T0D ;6 T40 P.>T ;@ T40 I6,+>0D after the pay2ent of the pre2iu2 CIT I, ;60 ;@ P0>@0CT D;;D @.IT4 for )oth Insurer and Insured# )ut 2ore so for the I6,+>0># since its do2inant )argaining position i2poses a stricter lia)ilityEresponsi)ility6IT I, . C;6T>.CT ;@ .D40,I;6 < Insurance co2panies 2anage to i2pose upon the insured prepared contracts which the insured cannot changeConse:uently# they are construed as follows3 aIn case there is no dou)t as to the ter2s of the insurance contract# it is to )e construed in its P/.I6# ;>DI6.>?# .6D P;P+/.> ,06,0)If D;+FT@+/# .5FID+;+,# +6C0>T.I6 it is to )e construed strictly against the insurer and li)erally in favor of the insured )ecause the latter has no voice in the selection of the words used# and the language used is selected )y the lawyers of the Insurer- (G+. C400 D.6 v- /.H +6I;6 >;CI I6,- C;- /TD $& Phil- &C) I//+,T>.TI;6,3 aP Fan7 o)tained insurance against ro))ery which e1cluded loss )y any cri2inal act of the insured or any authori9ed representative- Hhile transferring funds fro2 one )ranch to another# the insuredJs ar2ored truc7 was ro))ed- The driver was assigned )y a la)or contractor with the insured# while the security guard was

assigned )y an agency contracted )y the insured- Foth driver and guard were found to )e involved- Can the loss )e e1cludedK 40/D3 T40 /;,, I, 0AC/+D0D# the D>I=0>ED+.>D ./T4;+D4 .,,ID60D F? /.F;> C;6T>.CT;>, < .>0 .+T4;>IL0D >0P>0,06T.TI=0,- T40 T0>5, .>0 C/0.> .6D +6.5FID+;+, (@ortune Insurance v- C.# (44 ,C>. B &))Personal .ccident policies providing pay2ent for Mloss of handN- The Insurance policy defines it as a2putation- Insured has an accident resulting in a te2porary total disa)ility )ut hand is not a2putated- 40/D3 Insurer is not lia)le (T? v- @irst 6ational ,urety and .ssurance Co2pany < 1% ,C>. B64) F+T < in a case where the policy provided for loss of )oth legs )y a2putation# a clai2 against the policy was allowed for a total paralysis to e1clude total paralysis is contrary to pu)lic policy# pu)lic good and sound 2orality# as it would force the insured to have his legs a2putated to )e a)le to clai2 on the policy (Panaton v- 5alayan < ( Court of .ppeals %&B)cHarranty in a fire insurance policy prohi)ited storage of oils having a flash point of )elow B @ahrenheit- Dasoline is stored- Is there a policy violationK 40/D3 The clause is a2)iguous- In ordinary parlance oil 2eans lu)ricants < not gasoline- There is no reason why gasoline could not )e e1pressed clearly in the language the pu)lic can readily understand- (G+. C400 D.6 $& Phil- &C) d.n action to recover the a2ount of P4P (# due to death )y drowning where the policy provided for inde2nity in the a2ount of P4P 1# - to P4P B# - - 40/D3 the interpretation of the o)scure stipulation in contract 2ust not favor the one who caused the o)scurity- 4ence# *udg2ent for an additional P4P (# - was affir2ed (Del >osario vs- 0:uita)le Insurance and Casualty Co2pany# & ,C>. B4B)eDenial of a clai2 on the ground that the insured vehicle was a private MownerN type vehicle on the ground that the policy issued to the insured was a Co22on CarrierJs /ia)ility Insurance Policy which covers a pu)lic vehicle for hire40/D3 Insurer is lia)le as it was aware all along that the vehicle of the insured was a private vehicle- (@ield2ans Insurance v- 5ercedes =argas vda De ,ongco# (C ,C>. % ) fDenial of clai2 for )enefit due to the death of @laviano /andicho in a plane crash under a D,I, Policy on the ground of non pay2ent of the pre2iu240/D3 The policy contained a provision that the application for insurance is authority for D,I, to cause the deduction of pre2iu2 fro2 the insuredJs salary (/andicho vD,I,# 44 ,C>. %) ;T40> C.,0 >0@0>06C0,3 6ew /ife 0nterprises v- C.# ( % ,C>. 66$

WHAT ARE THE ELEMENTS OF AN INSURANCE CONTRACT 1The insured should possess an interest of so2e 7ind# suscepti)le of pecuniary esti2ation < 7nown as Minsura)le interestN- D060>.//? < a person has insura)le interest in the su)*ect 2atter insured when3 40 4., ,+C4 . >0/.TI;6 ;> C;660CTI;6 HIT4# ;> C;6C0>6 I6# ,+C4 ,+F"0CT 5.TT0> T4.T 40 HI// D0>I=0 P0C+6I.>? F060@IT ;> .D=.6T.D0 @>;5 IT, P>0,0>=.TI;6 ;> HI// ,+@@0> P0C+6I.>? /;,, ;> D.5.D0 @>;5 IT, D0,T>+CTI;6# T0>5I6.TI;6 ;> I6"+>? F? T40 4.PP06I6D ;@ T40 0=06T I6,+>0D .D.I6,TIt is necessary )ecause its a)sence renders the contract =;ID- This is )ased on the principle that insurance is a contract of inde2nity- If the insured has no interest# he will not stand to suffer loss or in*ury )y the happening of the event insured againstIN WHAT DOES A PERSON HAVE INSURABLE INTEREST IN a0very person has an insura)le interest in the /I@0 and 40./T4 of (1) hi2self# his spouse and of his children (() any person on who2 he depends wholly or in fact for education or support# or in who2 he has a pecuniary interest (6ote .rticle 1$C of the @a2ily Code specifying the persons o)ligated to support each other- 01a2ple!pecuniary interest!partners# e2ployees) (B) any person under a legal o)ligation to hi2 for the pay2ent of 2oney# respecting property or services# of which death or illness 2ight delay or prevent perfor2ance (01a2ples3 5ortgagorsDe)tors) (4) any person upon whose life# any estate or interest vested in hi2 depends (01a2ple3 +sufructuary A allows ? to receive fruits of the land of the for2er as long as he is alive- ? has insura)le interest in the life of A# )ecause the death of A will ter2inate his right and cause hi2 da2age)- (,ection 1 ) WHAT IS THE BASIS OF INSURABLE INTEREST IN LIFE It e1ists when there is reasona)le ground founded on the relation of the parties# either pecuniary or contractual or )y )lood# or )y affinity to e1pect so2e )enefit fro2 the continuance of life of the insuredWHEN MUST INSURABLE INTEREST IN LIFE EXIST Insura)le interest in life 2ust e1ist at the ti2e of the effectivity of the policy and need not e1ist at the ti2e of the death of the insured as life insurance is not a contract of inde2nity-IT I, 50.6T T; DI=0 @I6.6CI./ ,0C+>IT? 0IT40> T; T40 I6,+>0D ;> 4I, F060@ICI.>I0, (,ection 1$)-4owever# insura)le interest of a creditor on the life of a de)tor 2ust e1ist not only at the ti2e of effectivity )ut also at the ti2e of the death of the de)tor< as in this instance it is a contract of inde2nity-4I, I6T0>0,T I, C.P.F/0 ;@ 0A.CT P0C+6I.>? 50.,+>0506T

WHAT IS THE EXTENT OF INSURABLE INTEREST IN ONES LIFE 4e has unli2ited interest in his own life or that of another person regardless of whether or not the latter has insura)le interest- Provided# that if the )eneficiary has no insura)le interest# there is no force or )ad faith- F+T# if he ta7es out a policy on the life of another and na2es hi2self as the )eneficiary# he 2ust have an insura)le interest in the life of the insuredIS THE CONSENT OF THE INSURED REQUIRED WHEN INSURANCE IS TAKEN The law does not re:uire the consent of the person insured and such has )een considered as not essential to the validity of the contract as long as there is insura)le interest at the )eginning). person also has insura)le interest in property as 0=0>? I6T0>0,T I6 P>;P0>T?# H40T40> >0./ ;> P0>,;6./# ;> .6? >0/.TI;6 T40>0T;# ;> /I.FI/IT? I6 >0,P0CT T40>0;@# ;@ ,+C4 6.T+>0 T4.T . C;6T05P/.T0D P0>I/ 5ID4T DI>0CT/? D.56I@? T40 I6,+>0D I, .6 I6,+>.F/0 I6T0>0,T (,ection 1B)- It 2ay consist of (1) .n e1isting interest ( 01a2ple3 Fy 2eans of a conditional deed of sale# . sold his house to F for P4P (# # - - F pays a down pay2ent of P4P C # - - Prior to full pay2ent and e1ecution of an a)solute sale# . has insura)le interest in the house e:uivalent to the )alance due hi2# while F has insura)le interest to the e1tent of the down pay2ent )ecause loss of the house will 2ean that he suffers a loss of P4P C # (() .n inchoate interest founded on an e1isting interest (Defined3 interest in real estate which is not a present interest )ut which 2ay ripen into a vested interest if not )arred# e1tinguished# or divested- 01a2ple3 Interest in Corporate property arising fro2 stoc7holdings )ut li2ited to its value (B) .n e1pectancy# coupled with an e1isting interest in that out of which the e1pectancy arises-(01a2ple3 . ship owner has insura)le interest in e1pected freight charges- @uture crops that a far2er will grow on land )elonging to hi2 at the ti2e of the issuance of the policy) 6ote that the e1pectancy 2ust )e founded on an actual right to the thing or a valid contract for it6ote also that a carrier or depository of any 7ind has insura)le interest in the thing held )y hi2 as such to the e1tent of his lia)ility )ut not to e1ceed the value thereof (,ections 1B# 14# 1C)Fut# a 2ere contingent or e1pectant interest in anything# not founded on contract or actual right to the thing is not I6,+>.F/0 < as there is no insura)le interest (,ection 16)01a2ples3 (1) a son has no insura)le interest on a )uilding owned )y father despite )eing designated as an heir in the will as the will does not produce any effect )efore the testatorJs death (() the owner of land on e1pected crops has insura)le interest as he owns the land

WHAT IS THE TEST OR MEASURE OF INSURABLE INTEREST IN PROPERTY Hhether one will derive pecuniary )enefit or advantage fro2 its preservation or will suffer pecuniary loss or da2age fro2 its destruction- (,ection 1%) MUST THE BENEFICIARY IN PROPERTY INSURANCE HAVE INSURABLE INTEREST ON THE PROPERTY INSURED ?0,# as no contract or policy of insurance on property shall )e enforcea)le 0AC0PT for the )enefit of so2e person having insura)le interest in the property insured0A.5P/03 The owner insures his )uilding against fire na2ing his nephew as )eneficiary- In case of loss < only the owner can recover < what is not enforcea)le is the designation of )eneficiary < not the entire policy itselfWHEN MUST INSURABLE INTEREST IN PROPERTY EXIST 5ust e1ist at the ti2e the insurance ta7es effect and when the loss occurs )ut need not e1ist in the 2eanti2e (,ection 1$) 0A.5P/0,3 1If . insures his house on 5ay ( ( for 1 yr < and without assigning the policy# he sold it to F < if a fire occurs after it is sold to F < . cannot recover- F cannot recover also as he has no insura)le interest at the ti2e the insurance was procured(.n unsecured creditor secures insurance over the house of his de)tor# .- The house is )urned- The creditor cannot recover as he has no insura)le interest at the ti2e the insurance was o)tainedHhat if . sold the house to the creditor )efore the lossK ,till no recovery as there was no insura)le interest at the ti2e it too7 effectBIf . re!ac:uires the property fro2 F )efore the fire < . can recover on the policyCOMPARE WITH INSURABLE INTEREST IN LIFE LIFE 1- not necessary < can )e )ased on consanguinity or affinity (- only at effectivity e1cept that ta7en )y a creditor in the life PROPERTY )ased on pecuniary interest e1ist at the ti2e of effectivity and loss

of the de)tor B- no li2it e1ist if )ased on de)tor creditor li2ited to actual volu2e insured

I6 >0/.TI;6 T; T40 600D @;> T40 0AI,T06C0 ;@ I6,+>.F/0 I6T0>0,T# P/,- 6;T03 That a change of interest in any port of a thing insured in acco2panied )y a corresponding change of interest in the insurance suspends the insurance to an e:uivalent e1tent until interest in the thing and interest in the insurance is vested in the sa2e person0D. )uyer of a property insured )y the previous owner who has not o)tained a transfer of the insurance policy in his na2e < cannot recover>0/.T0D G+0>? < 4ow a)out the seller < 6; < no insura)le interest at the ti2e of loss < (,ec 1$) H4.T C4.6D0 I, C;6T05P/.T0D .n a)solute transfer of the property 6;T /I@0 . /0.,0 E 5;>TD.D0 0AC0PTI;6, < 1- /ife# 4ealth or accident insurance )ecause they are not contracts of inde2nity and insura)le interest is not re:uired at the ti2e of loss(- . change of interest after occurrence of an in*ury and results in loss < does not affect the right of the insured to inde2nity < (,ec (1) after loss < the lia)ility of the insurer is fi1ed

B- a change of interest in one or 2ore several distinct things# separately insured )y one policy# does not avoid the insurance as to the others- (,ec (() 4- a change of interest )y will or succession on the death of the insured does not avoid the insurance < his interest passes on the thing insured (,ec (B) C- a transfer of interest )y one or several partners# *oint owners# or owners in co22on# who are *ointly insured < to the others# does not avoid insurance even though it has )een agreed that insurance shall lease upon an allocation of the thing insured-

6;T0 < there 2ust )e not stipulation against it < otherwise it is avoidedtransfer to strangers avoid the policy

6- when notwithstanding a prohi)ition# the consent of the insurer is o)tained %- when the policy is so fraud that it will insure to the )enefit of who2soever 2ay )eco2e the owner during the continuance of the ris7/.,T/? < The following are void stipulations in property insurance < .- a stipulation for the pay2ent of the loss whether the person insured has or has not interest in the property insured < )ecause it is a contract of inde2nityF- ,tipulation that the policy shall )e received as proof of such interest < e1istence of insura)le interest does not depend on the policy < C- every policy issued )y way of gaining or wagering shall )e voidThose insured without insura)le interest < as they do not suffer a da2age fro2 the occurrence of the event insured against < they vested profitC;6TI6+.TI;6 ;@ 0/0506T, < (- The insured is su)*ect to ris7 of loss through the destruction or i2pair2ent of that interest )y the happening of the designated ris7sB- The Insurer assu2es the ris7 of loss 4- ,uch assertion is part of a general sche2e to distri)uted actual loss a2ong a large group of persons )earing so2ewhat si2ilar ris7s C- .s a consideration for the insurerJs pro2ise# the insured 2a7es a rata)le contri)ution called a pre2iu2 to the general insurance fundWHAT MAY BE INSURED AGAINST .6? +6I6;H6 ;> C;6TI6D06T 0=06T# H40T40> P.,T ;> @+T+>0# H4IC4 5.? D.56I@? . P0>,;6 4.=I6D I6,+>.F/0 I6T0>0,T ;> C>0.T0 . /I.FI/IT? .D.I6,T 4I5# 5.? F0 I6,+>0D .D.I6,T (,ection B)

01a2ple3 Insurance against da2age# lia)ility#un7nown past event ( in 2arine insurance < insurance over the vessel against perils of the sea# lost or not lost)# or future event li7e loss or theft of the o)*ect In relation to the insurance so secured# 6;T0 (1) The consent of the hus)and is not necessary for the validity of an insurance policy ta7en )y a 5.>>I0D wo2an on her life and that of her children- +nder .rticle 14C of the @a2ily Code# she can also insure her separate property without the consent of the hus)and- (() . 2inor 2ay ta7e out a contract for life# health and accident insurance with any co2pany authori9ed to do )usiness in the Philippines# provided it )e ta7en out on his own life and the )eneficiary na2ed is his estate# father# 2other# hus)and# wife# child# )rother or sister- In so doing# the 2arried wo2an E 2inor 2ay e1ercise all the rights or privileges under the policy6;T03 >. 6& $ lowering the age of 2inority fro2 (1!1&F+T < H4.T I, T40 0@@0CT ;@ T40 D0.T4 ;@ T40 ;>IDI6./ ;H60> ;@ . P;/IC? H4IC4 C;=0>, T40 /I@0 ;@ . 5I6;># .40.D ;@ T40 5I6;>! all rights# title and interest in the policy shall auto2atically vest in the 2inor unless otherwise provided in the policyWHAT CANNOT BE INSURED .n insurance for or against the drawing of any lottery or for or against any chance or tic7et in a lottery drawing a pri9e- F0C.+,0 D.5F/I6D >0,+/T, I6 P>;@IT .6D I6,+>.6C0 ;6/? ,00I, T; I6D056I@? T40 I6,+>0D .D.I6,T /;,, (,ection 4)WHO ARE THE PARTIES TO A CONTRACT OF INSURANCE 1I6,+>0> ! 0very person# partnership# association or corporation duly authori9ed to transact insurance )usiness as provided in the Code 2ay )e an insurer- It is the party who agrees to inde2nify another upon the happening of specified contingency (,ection 6)(I6,+>0D < Party to )e inde2nified in case of a loss (,ection %)- .nyone e1cept a pu)lic ene2y (is a nation at war with the Philippines and every citi9en or su)*ect of such nation- H4? < the purpose of war is to cripple the power and e1haust the resources of the ene2y# and it is inconsistent to destroy itJs resources then pay it the value of what has )een destroyed) 2ay )e insuredWHO MAY INSURE A MORTGAGED PROPERTY

Foth the 5ortgagor and 5ortgagee 2ay ta7e out separate policies with the sa2e or different co2panies- The 2ortgagor < to the e1tent of the value of his property# the 2ortgagee < to the e1tent of his credit (,ection &)H4.T .>0 T40 C;6,0G+06C0, H40>0 T40 5;>TD.D;> I6,+>0, T40 P>;P0>T? 5;>TD.D0D I6 4I, ;H6 6.50 F+T 5.I0, T40 /;,, P.?.F/0 T; T40 5;>TD.D00 ;> .,,ID6, T40 P;/IC? T; 4I5+6/0,, T40 P;/IC? P>;=ID0, ;T40>HI,0 aThe insurance is still dee2ed to )e upon the interest of the 2ortgagor who does not cease to )e a party to the original contract- 406C0# if the policy is cancelled# notice 2ust )e given to the 2ortgagor).ny act of the 2ortgagor# prior to loss# which would otherwise avoid the policy or insurance# will have the sa2e effect# although the property is in the hands of the 2ortgagee- 406C0# if there is a violation of the policy )y the 2ortgagor # the 2ortgagee cannot recoverc.ny act re:uired to )e done )y the 2ortgagor 2ay )e perfor2ed )y the 2ortgagee with the sa2e effect as if it has )een perfor2ed )y the 2ortgagor01a2ple3 if notice of loss is re:uired# the 2ortgagee 2ay give itd+pon the occurrence of the loss# the 2ortgagee is entitled to recover to the e1tent of his credit# and the )alance# if any# is to )e paid to the 2ortgagor# since such is for )oth their )enefitse+pon recovery )y the 2ortgagee# his credit is e1tinguished-

I@ ;6 T40 ;T40> 4.6D# (,ection $)# the Insurer assents to the transfer of the insurance fro2 the 2ortgagor to the 2ortgagee# and at the ti2e of his assent# i2poses further :ualifications on the assignee# 2a7ing a new contract with hi2# the acts of the 5;>TD.D;> cannot affect the rights of the assignee < 6;T0 +6I;6 5;>TD.D0 C/.+,0 < Creates the relation of insured and insurer )etween the 2ortgagee and the insurer independent of the contract of the 2ortgagor- In such case# any act of the 2ortgagor can no longer affect the rights of the 2ortgagee < the insurance contract is now independent of that with the 2ortgagorH4.T I, T40 0@@0CT ;@ I6,+>.6C0 P>;C+>0D F? T40 5;>TD.D00 HIT4;+T >0@0>06C0 T; T40 >ID4T ;@ T40 5;>TD.D;>aThe 2ortgagee 2ay collect fro2 the insurer upon occurrence of the loss to the e1tent of his credit-

)+nless# otherwise stated# the 2ortgagor cannot collect the )alance of the proceeds# after the 2ortgagee is paidcThe insurer# after pay2ent to the 2ortgagee# )eco2es su)rogated to the rights of the 2ortgagee against the 2ortgagor and 2ay collect the de)t to the e1tent paid to the 2ortgageedThe 2ortgagee after pay2ent cannot collect any2ore fro2 the 2ortgagor F+T if he is una)le to collect in full fro2 the insurer# he can recover fro2 the 2ortgagoreThe 2ortgagor is not released fro2 the de)t )ecause the insurer is su)rogated in place of the 2ortgageeBF060@ICI.>? < the person who receives the )enefits of an insurance policy upon its 2aturityH4; 5.? F0 . F060@ICI.>I0, I6 /I@0 I6,+>.6C0 .nyone# e1cept those who are prohi)ited )y law to receive donations fro2 the insured- 6ote .rticle %B$ of the Civil Code# hence the following cannot )e designated as )eneficiaries (1)Those 2ade )etween persons guilty of adultery or concu)inage at the ti2e of the designation (()Those found guilty of the sa2e cri2inal offense in consideration thereof (B) Those 2ade to a pu)lic officer or his wife# descendants E ascendants )y reason of his office. P>I;> C;6=ICTI;6 @;> .D+/T0>? E C;6C+FI6.D0 I, 6;T >0G+I>0D# it can )e proven )y a preponderance of evidence in the sa2e action nullifying the designation- 6ote the cases of Insular /ife vs- 0)rado# & ,C>. 1&1# where a co22on law wife of the insured who is 2arried could not )e na2ed as a )eneficiary and ,,, vs- Davac# 1% ,C>. &6B# where the insured designated his second wife as a )eneficiary was upheld as the latter was not aware of the first 2arriageThe dis:ualification does not e1tend to the children of the adultery or concu)inage in view of the e1press recognition of the successional rights of illegiti2ate children (.rticle (&%#6CC and .rticle 1%6# @a2ily Code)5+,T T40 F060@ICI.>? 4.=0 I6,+>.F/0 I6T0>0,T ;6 T40 /I@0 ;@ T40 I6,+>0D It is recogni9ed that the insured 2ay na2e anyone he chooses# e1cept those dis:ualified to receive donations# as a )eneficiary in his life insurance# even if he is a stranger and has no insura)le interest in the life of the insured- The designation# however# 2ust )e in D;;D @.IT4 .6D HIT4;+T @>.+D ;> I6T06T T; 06T0>

I6T; . H.D0>I6D C;6T>.CT- (01a2ple3 "ose o)tains several life insurance policies that he cannot afford- 6a2ed as )eneficiary is "uan# the spouse or children of "ose are not na2ed as )eneficiaries- The pre2iu2s are paid )y "uan# who did not have insura)le interest in the life of "ose- In this case the policies are void )ecause they were entered into as wagering contracts) C.6 T40 F060@ICI.>? F0 C4.6D0D The insured shall have the right to change the )eneficiary he designated < unless he has e1pressly waived the right in the policy (,ection 11) If he has waived the right# the effect is to 2a7e the designation as irrevoca)le- 6ote though that the designation of the guilty spouse as irrevoca)le )eneficiary is revoca)le at the instance of the innocent spouse in cases of ter2ination of (1) a su)se:uent 2arriage (() nullification of 2arriage (B) annul2ent of 2arriage# and (4) legal separation (.rticle 4B (4) @a2ily Code) H4.T I, T40 0AT06T ;@ T40 I6T0>0,T ;@ T40 I>>0=;C.F/0 F060@ICI.>? I6 . /I@0 I6,+>.6C0 C;6T>.CT The )eneficiary has a vested right that cannot )e ta7en away without his consent- In fact should the insured discontinue pay2ent of the pre2iu2# the )eneficiary 2ay continue paying- 6either can the insured get a loan or o)tain the cash surrender value of the policy without his consent (6ario vs- Phila2life# ( ,C>. 4B4)- 6ote where the wife and 2inor children were na2ed irrevoca)le )eneficiaries# wife dies# the hus)and see7s to change the )eneficiaries with the consent of the children- The consent is not valid due to 2inority (Phila2life vs- Pineda# 1% ,C>. 416)H4.T I, T40 I6T0>0,T ;@ .6 I>>0=;C.F/0 F060@ICI.>? I6 .6 06D;H506T P;/IC? 4is interest is contingent as )enefits are to )e paid hi2 only if the assured dies )efore the specified period- If the insured outlives the period# the )enefits are paid to the insuredH4.T I, T40 0@@0CT ;@ T40 @.I/+>0 T; D0,ID6.T0 ;> F060@ICI.>? I, DI,G+./I@I0D The )enefits of the policy shall accrue to the estate of the insuredH4; >0C;=0>, I@ F060@ICI.>? P>0D0C0.,0, T40 I6,+>0D I@ D0,ID6.TI;6 I, I>>0=;C.F/0# the legal representatives of the )eneficiary 2ay recover unless it was stipulated that the )enefits are paya)le only MI@ /I=I6DN-

I@ D0,ID6.TI;6 I, >0=;C.F/0# and no change is 2ade# the )enefits passes to the estate of the insured- The rule holds also if )enefits were paya)le M only if livingN or Mif survivingN and the )eneficiary dies )efore the insuredH4.T 4.PP06, T; I6T0>0,T ;@ T40 F060@ICI.>? I6 /I@0 I6,+>.6C0 H40>0 40 HI//@+//? II//, T40 I6,+>0D If the 7illing is HI//@+/# the interest is forfeited if he is the principal# an acco2plice# or an accessory- The 60.>0,T >0/.TI=0 ;@ I6,+>0D D0T, T40 P>;C00D, I@ 6;T ;T40>HI,0 DI,G+./I@I0D (,ection 1()- If not willful or felonious# the provision does not applyOUTLINE OF GENERAL PROVISIONS II6,+>.6C0 .6D H4.T I, D;I6D .6 I6,+>.6C0 F+,I60,, [('

IIC4.>.CT0>I,TIC, .6D 0/0506T,3 Insura)le Interest! (a) Hhy it is necessary ()) Hhat it consists of ()-1) In /ife [1 ' ()-() In Property [1B#14#1C# 16' (c) Hhen it 2ust e1ist [1%#1&#1$' (d) 0ffect of a change [( #(1#((#(B#(4' IIIC;6T>.CT ;@ I6,+>.6C03 (a) Hhat 2ay )e insured against [B' ()) Hhat cannot )e insured against [4'- (c) =oid stipulations [(C'! .pplica)ility [C' I=P.>TI0,3 (a) Insurer [6' ()) Insured [%# &#$' (c) Feneficiary [11#1('

CONCEALMENT H4.T I, C;6C0./506T Conceal2ent is a neglect to co22unicate that which a party 7nows and ought to co22unicate (,ection (6) H4.T I, T40 0@@0CT ;@ C;6C0./506T Hhether intentional or not# it entitles the in*ured party to rescind the contract of insurance (,ection (%)- 6ote though that the right to rescind is optional on the part of the in*ured party- >escission is an option )ecause it 2isleads or deceives the insurer into accepting the ris7 or accepting it at the rate of pre2iu2 agreed upon01a2ples3 (1) The insured does not disclose sic7ness )ut dies of another causeThere is conceal2ent )ecause it is 2aterial to a deter2ination of the assu2ption of ris7 )y the insurer- (() The father of the insured o)tained an insurance policy over his daughter# )ut did not disclose that she was a 2ongoloid child# the child dies of influen9a# the conceal2ent relieves the insurer of lia)ility (Drepalife vs- C. &$ , C4B)

F.,I, ;@ P>;=I,I;6, ;6 C;6C0./506T E >0P>0,06T.TI;6 @unda2ental characteristic of a contract of insurance that it is one of P0>@0CT E+T5;,T D;;D @.IT4H4; 5+,T P>;=0 I6;H/0DD0 ;@ T40 @.CT C;6C0./0D The party clai2ing the e1istence of conceal2ent 2ust prove that there was 7nowledge on the part of the party charged with conceal2ent- 01a2ple3 If the Insured stated that there was no hereditary taint (illness that has affected 2e2)ers of the fa2ily) on either side of the fa2ily to 2y 7nowledge < I6 ;>D0> T; P>;=0 E ,4;H C;6C0./506T < the insurer 2ust prove that the hereditary taint alleged to e1ist was 7nown to the insured., ;@ H4.T TI50 5+,T T40 P.>T? C4.>D0D HIT4 C;6C0./506T 4.=0 I6;H/0DD0 ;@ T40 @.CT C;6C0./0D Denerally# a party 2ust have 7nowledge of the fact concealed at the ti2e of the effectivity of the policy- 6ote that even if a party did not 7now of the e1istence at the ti2e of application )ut )efore its effectivity# there is conceal2entInfor2ation ac:uired after effectivity is not conceal2ent and does not constitute ground to rescind the policy# as after the policy is issued# infor2ation su)se:uently ac:uired is no longer 2aterial as it will not affect or influence the party to enter into contract- 4owever# in case of the reinstate2ent of a lapsed policy# facts 7nown after effectivity )ut )efore reinstate2ent 2ust )e disclosed4;H I, T40 5.T0>I./IT? ;@ C;6C0./506T ;> >0P>0,06T.TI;6 D0T0>5I60D 5ateriality is deter2ined not )y the event# )ut solely )y the pro)a)le and reasona)le influence of the facts upon the party to who2 the co22unication is due# in for2ing his esti2ate of the disadvantages of the proposed contract or in 2a7ing his in:uiries (,ection B1)H4.T I, T40 T0,T ;@ 5.T0>I./IT? The test of 2ateriality is whether 7nowledge of the true facts could have influenced a prudent insurer in deter2ining whether to accept the ris7 or in fi1ing the pre2iu2s 5+,T T40>0 F0 . C.+,./ C;660CTI;6 F0TH006 T40 @.CT C;6C0>60D .6D T40 C.+,0 ;@ /;,,

Conceal2ent need not# in order to )e 2aterial# )e of facts which )ring a)out or contri)ute to# or are connected of the insuredJs loss- It is I55.T0>I./ that there is no causal relationship )etween the fact concealed and the loss sustained- IT I, ,+@@ICI06T T4.T T40 6;6!>0=0/.TI;6 4., 5I,/0D T40 I6,+>0> I6 @;>5I6D IT, 0,TI5.T0 ;@ DI,.D=.6T.D0 ;> @IAI6D T40 P>05I+501a2ples3 Insured concealed 7idney disease and enlarged liver < /ater he died of thro2)osis# is the insurer lia)leK 6;# since the fact concealed was 2aterial though the insured did not die therefro2- 4enson v- Phila2 < C ;D %B4(&- Insured had concealed that he had 7idney disease- 4e dies in plane crash- The I6,+>0> not lia)le (,unlife vs- C. < (4C ,C>. (6$) H4.T @.CT, T406 5+,T F0 C;55+6IC.T0D 0ach party to an insurance contract is )ound to co22unicate to the other all facts that 2eet the following re:uisites3 (1) ,uch facts that 2ust )e within his 7nowledge < as conceal2ent re:uires 7nowledge of the fact concealed )y the party charged with conceal2ent(() @actEs 2ust )e 2aterial to the contract < it 2ust )e of such nature that had the insurer 7nown of it# it would not have accepted the ris7 or de2anded a higher pre2iu2 (B) That the other party had no 2eans of ascertaining such factEs

(4) That the party with a duty to co22unicate 2a7es no warranty (,ection (&) as the e1istence of a warranty 2a7es the re:uire2ent to disclose superfluous F+T < an intentional and fraudulent o2ission on the part of the one insured to co22unicate infor2ation on a 2atter P>;=I6D ;> T06DI6D T; P>;=0 T40 @./,IT? ;@ . H.>>.6T? entitles the insurer to rescind (,ection ($)- 01a2ple3 Harranty that the ship is seaworthy < T40 I6T06TI;6./ .6D @>.+D+/06T ;5I,,I;6 ;@ T40 I6,+>0D T; state that the shipJs co22unications e:uip2ent is out of order will entitle the insurer to rescindH4.T 5.TT0>, 600D 6;T F0 C;55+6IC.T0D 01cept in answer to the in:uiries of the other3 (1) Those which the other 7nows < as the insurer cannot say that it has )een deceived or 2isled- 01a2ple3 Insured discloses that he has tu)erculosis to the agent of the insurer# who in turn o2its to state the sa2e in the application of the insured was dee2ed 7nowledge of the insurer (Insular /ife .ssurance Co vs- @eliciano# %4 Phil 46&)- Insurer had surveyed the location and surrounding area of a )uilding that is to )e insured against fire# an o2ission to state that there are neigh)oring )uildings will not avoid policy-

()) Those# which# in the e1ercise of ordinary care# the other ought to 7now# and of which# the for2er has no reason to suppose hi2 to )e ignorant- The facts that the other ought to 7now as per ,ection B( are3 (1) all the general causes which are open to his in:uiry# e:ually with that of the other# and which 2ay affect the political or 2aterial perils conte2plated- 01a2ple3 pu)lic events li7e the fact that a nation at war# or laws or political conditions in other countries- 4ere# the source of infor2ation is e:ually open to the insurer# who is therefore presu2ed to 7now the2# and ()) all the general uses of trade- 01a2ples3 >ules of navigation# 7inds of seasons# all the ris7s of navigationc) Those of which the other waives co22unication- . waiver ta7es place either# )y the ter2s of the insurance or )y the neglect to 2a7e in:uiries as to such facts where they are distinctly i2plied in other facts of which infor2ation is co22unicated (,ection BB)- 01a2ple3 where an application for insurance is 2ade in writing and the :uestions therein are unanswered or inco2pletely answered < and the insurer without further in:uiries# issues the policy- It there)y waives all right to a disclosure or to a 2ore co2plete answer- If :uestion as7s whether the insured has su)2itted hi2self to any infir2ary# sanitariu2 or hospital for consultation or treat2ent- Insured replies that he was confined at the Gue9on 5e2orial 4ospital for five days due to influen9a- There is no waiver and shall constitute conceal2ent as the answer was co2plete and could )e relied upon )y the insurer- If the insured answered MyesN# the answer would have )een inco2plete and a2)iguous- This would constitute a waiver as the insured did not 2a7e any further in:uiry- (6ote 6g Dan Lee vs- .sian Crusader /ife .ssurance# 1(( ,C>. 461) I,,+03 Is the waiver of a 2edical e1a2ination tanta2ount to a waiver of 2aterial infor2ation- 6;# )ecause waiver of 2edical e1a2ination is 2ade when the insured represents hi2self to )e in good health- It is reasona)le to assu2e that had the insured revealed 2aterial infor2ation < the insurer would not have waived the e1a2ination- 01a2ple3 . o)tained a non!2edical insurance- In the policy# it was stated that . never had cancer < )ut ( 2onths prior she was operated on for cancer < the )eneficiaries clai2ed pay2ent stating that there was no 2aterial 2isrepresentation in view of the waiver of the 2edical e1a2ination- The 2isrepresentation was to )e ta7en into consideration )efore issuing the policy# it was .Js representation that she had a clean )ill of health that led the insurer not to re:uire a 2edical e1a2ination (,aturnino v- Phil!.2 < % ,C>. B16) d) Those which prove or tend to prove the e1istence of a ris7 e1cluded )y a warranty# and which are not otherwise 2aterial- 01a2ple3 The insurance only covers loss due to hi*ac7ing or terroris2- . warranty has )een 2ade )y the insured that loss due to perils of the sea is e1cluded- Conse:uently# the fact that the vesselJs engines have )een fitted with used parts need not )e disclosed as the seaworthiness of the vessel is not 2ateriale) Those which relate to a ris7 e1e2pted fro2 the policy# and which are not otherwise 2aterial (,ection B )- 01a2ple3 Policy covers against loss )y theft- There

is no need to disclose that the area where the o)*ect is located is earth:ua7e prone area if loss due to earth:ua7es is not covered )y the policy;T40> 5.TT0>, T4.T D; 6;T 600D T; F0 C;55+6IC.T0D < aInfor2ation of the nature or a2ount of the interest of one insured need not )e co22unicated unless in answer to in:uiry# e1cept as prescri)ed )y ,ection C1 as the e1tent of the interest of the insured in property insured 2ust )e specified if he is not the a)solute owner- .lso < a trustee# 2ortgagee or )uilding contractor 2ust co22unicate his particular insura)le interest in the property even if no in:uiry is 2ade- (,ection B4) )6either party to a contract is )ound to co22unicate even upon in:uiry any infor2ation of his own opinion or *udg2ent upon the 2atters :uestion (,ection BC)-;nly 2aterial facts are re:uired < not opinions# speculations or e1pectations# 0AC0PT in 2arine insurance < where the )elief or the e1pectation of a B rd person in reference to a 2aterial fact is 2aterial and 2ust )e co22unicated- 01a2ple3 The insured is re:uired to disclose an opinion of 2arine e1perts as to seaworthiness of a vessel (,ee ,ection 1 &) REPRESENTATIONS H4.T I, . >0P>0,06T.TI;6 ;ral or written state2ent of a fact or a condition affecting the ris7 2ade )y the I6,+>0D to the insurance co2pany# tending to induce the insurer to ta7e the ris7 (,ection B6) H406 5.? . >0P>0,06T.TI;6 F0 5.D0 ,ince it is an induce2ent to entering a contract < IT 5+,T ;>DI6.>I/? F0 5.D0 .T T40 ,.50 TI50 ., ;> F0@;>0 < the issuance of the policy (,ection B%)6ote that it can also )e 2ade after the issuance of the policy when the purpose thereof is to induce the insurer to 2odify an e1isting insurance contract < as the provisions also apply to a 5;DI@IC.TI;6 (sa2e with C;6C0./506T) 4;H ,4;+/D . >0P>0,06T.TI;6 F0 C;6,T>+0D The language of a representation is to )e interpreted )y the sa2e rules as the language of contracts in general (,ection B&)- 406C0 # it need not )e literally true and correct E accurate in every respect# >.T40># it is sufficient if it is su)stantially or 2aterially true- In case of a pro2issory representation# it is sufficient if it is su)stantially co2plied with- 01a2ples3 (1) 4 )ought a car for P4P (#& and spent P4P $ - for repairs < 4 gave it to H as a gift- H secures insurance and says the price is around P4P 4# - # though the present actual value is a)out P4P B# - - Is H guilty of 2isrepresentation )ecause she did not pay for the carK

6;# )ecause the literal truth is not necessary- The insurer can value the car independentlyH4.T .>0 T40 @;>5, .6D II6D, ;@ >0P>0,06T.TI;6 >epresentations 2ay )e ;>./ or H>ITT06 and can either )e3 .@@I>5.TI=0! which is an affir2ation of a fact e1isting when the contract )egins01a2ple3 That the insured is of good health at the ti2e of the contractP>;5I,,;>? < which is a state2ent )y the insured concerning what is to happen during the ter2 of the insurance- 01a2ple3 That the insured will install additional fire e1tinguishers at a stipulated future date- . representation as to the future is to )e dee2ed a pro2ise# unless it was 2erely a state2ent of )elief or e1pectationI, . >0P>0,06T.TI;6 P.>T ;@ T40 C;6T>.CT 6o# it cannot :ualify as an e1press provision in a contract ( it is a collateral induce2ent to the contract) F+T it 2ay :ualify an i2plied warranty( ,ection 4 )01a2ple3 +nder ,ection 11B < it is i2plied that a ship is seaworthy- . representation )y the insured that its co22unication syste2 is defective will G+./I@? the warranty4ence# insured can still recover in case of lossC.6 . >0P>0,06T.TI;6 F0 HIT4D>.H6 ;> ./T0>0D ?es# as long as the insurance has not yet )een effected and the insured has not yet )een induced to issue the policy- If withdrawn or altered afterwards# the contract can )e rescinded as the insurer has already )een led to issue the policy (,ection 41)T; H4.T D.T0 D;0, . >0P>0,06T.TI;6 >0@0> It 2ust )e presu2ed to refer to the date on which the contract goes into effect (,ection 4()- 6;T03 there is no false representation if it is T>+0 at the ti2e the contract ta7es effect although false at the ti2e it is 2ade- 01a2ple3 Insured states at application that vessel is in T;I?; )ut is really in 4;6DI;6D# there is no false representation if at issuance vessel is already in T;I?;- C;6=0>,0/?# there is a false representation# if it is true at the ti2e it is 2ade )ut false at the ti2e the contract ta7es effect- 01a2ple3 Insured states that he has never )een affected with pneu2onia at application# )ut if in the 2eanti2e# he is afflicted with pneu2onia )efore the policy ta7es effect# and he does not disclose # there is a false representationH406 I, . >0P>0,06T.TI;6 ,.ID T; F0 @./,0 Hhen the facts fail to correspond with its assertions or stipulations (,ection 44)

5+,T T40 I6,+>0D C;55+6IC.T0 I6@;>5.TI;6 ;@ H4IC4 4., 6; P0>,;6./ I6;H/0DD0 F+T 50>0/? >0C0I=0, T40 ,.50 @>;5 ;T40>, Hhen a person has no P0>,;6./ I6;H/0DD0 ;@ . @.CT, < 40 5.? ;> 5.? 6;T co22unicate such infor2ation to the insurer- If he does co22unicate# he is not responsi)le for its truth (,ection 4B)- 4ence# there can )e no 2isrepresentation H406 I, T40 I6,+>0D >0G+I>0D T; DI,C/;,0 I6@;>5.TI;6 @>;5 . B >D P0>,;6 Hhen the infor2ation 2aterial to the transaction was ac:uired )y an agent of the insured# as 7nowledge of the agent is also 7nowledge of the principal- 01a2ple3 If a ship captain is aware of a defect that affects the seaworthiness# that defect 2ust )e co22unicated as the ship captain is under o)ligation to disclose it to the ownerH4.T I, T40 0@@0CT ;@ 5I,>0P>0,06T.TI;6 ;6 . 5.T0>I./ P;I6T If it is false on a 2aterial point# whether affir2ative or pro2issory < the in*ured party is entitled to rescind the contract fro2 the ti2e the representation )eco2es false4;H0=0># the right to rescind is considered waived )y the acceptance of pre2iu2 pay2ents despite 7nowledge of the ground to rescind (,ection 4C) 01a2ple3 Insurer was aware of the lac7 of e1tinguishers re:uired )y the policy- F+T there is no waiver < if the insurer had no 7nowledge of the ground at the ti2e of the acceptance of the pre2iu2- 01a2ple3 +nauthori9ed driver- (,to7es vs- 5alayan 1(% ,C>. %66) 4;H I, 5.T0>I./IT? D0T0>5I60D The sa2e as conceal2ent (,ection 46) pro)a)le and reasona)le influence of the facts upon the party to who2 the representation is 2ade in for2ing his esti2ate of the advantageEdisadvantages of the contract or in 2a7ing in:uiriesH406 I, T40 >ID4T T; >0,CI6D ,+PP;,0D T; F0 0A0>CI,0D < (,ec 4&) The right to rescind 2ust )e e1ercised P>0=I;+, to the co22ence2ent of an action on the contract (,ection 4&)- 6ote the case of T.6 C4.? 4I6D vs- H0,T C;.,T /I@0 I6,+>.6C0 C;# C1 P4I/ & # where an insurer interposed the defense in an action to clai2 the proceeds that the contract is null and void- ,ection 4& was held to apply only when T40>0 I, . C;6T>.CT T; >0,CI6DIT I, ./,; G+./I@I0D F? ( 6D P.> ;@ ,0CTI;6 4& H4IC4 P>;=ID0, that after a policy of life insurance paya)le on the death of the insured shall have )een in force during the lifeti2e of the insured for a period of ( years fro2 the date of issue or its last reinstate2ent# the insurer cannot prove that the policy is =;ID .F I6ITI; or is

su)*ect to rescission )y reason of a fraudulent conceal2ent or 2isrepresentation of the insured or his agent ( I6;H6 ., T40 I6C;6T0,T.FI/IT? C/.+,0) H4.T I, T40 T40;>? .6D ;F"0CT F04I6D T40 I6C;6T0,T.FI/IT? C/.+,0 ;n the part of the I6,+>0> < an insurer hasEshould have a reasona)le opportunity to investigate the state2ents which are 2ade )y the applicant and that after a definite period# it should no longer )e per2itted to :uestion its validity;n the part of the I6,+>0D < its o)*ect is to give the greatest possi)le assurance that the )eneficiaries would receive pay2ent of the proceeds without :uestion as to validity of the policyH4.T .>0 T40 >0G+I,IT0, The re:uisites are (1)It is a life insurance policy (()It is a paya)le on the death of the insured (B) It has )een in force during the lifeti2e of the insured for .T /0.,T TH; ?0.>, fro2 date of issue E or last reinstate2ent- 6;T03 T.6 vs- C. < 1%4 ,C>. 4 B! D+>I6D T40 /I@0TI50 ;@ T40 I6,+>0D 50.6, T4.T T40 P;/IC? I, 6; /;6D0> I6 @;>C0 I@ T40 I6,+>0D DI0,- @acts3 Phila2 issued policy on 6ove2)er 6# 1$%B- ;n .pril (6# 1$%C the insured died- The )eneficiaries clai2ed )ut the insurer denied the clai2 on ,epte2)er 11# 1$%C and rescinded the policy on the ground of 2isrepresentation and conceal2ent- 40/D < Insurer has two years fro2 date of issue E reinstate2ent within which to contest the policy whether or not the insured still lives within the periodH4.T D0@06,0, .>0 6;T F.>>0D F? I6C;6T0,T.FI/IT? 0=06 .@T0> T40 /.P,0 ;@ ( ?0.>, The defenses that are not )arred are (1) non!pay2ent of pre2iu2s (() lac7 of insura)le interest (B) that the cause of death was e1cepted or not covered )y the ter2s of the policy (4) that the fraud was of a particular vicious type such as (a) policy was ta7en in furtherance of a sche2e to 2urder the insured ()) where the insured su)stituted another for the 2edical e1a2ination (c) where the )eneficiary feloniously 7illed the insured (C) violation of a condition in the policy relating to 2ilitary or naval service in ti2e of war (6) the necessary notice or proof of death was not given (%) action is not )rought within ti2e specified in the policy# which in no case should )e less than 1 year as per ,ection 6BWHAT ARE THE EFFECTS OF INCONTESTABILITY The insurer can no longer escape lia)ility tender the policy or )e allowed to prove that the policy is void a) initio or 2ay )e rescinded )y reason of conceal2ent or 2isrepresentation )y the agent of the insured or the insured-

DISTINGUISH CONCEALMENT FROM REPRESENTATION Conceal2ent is the neglect of one party to co22unicate to the other 2aterial factsThe infor2ation he gives in co2pliance with his duty to reveal infor2ation is representation- >epresentation therefore# is the co22unication re:uired to co2ply with the prohi)ition against conceal2entConceal2ent is the passive and 2isrepresentation is the active for2 of the sa2e )ad faithC;6C0./506T .6D >0P>0,06T.TI;6 C;5P.>0D 1In conceal2ent < the insured withholds infor2ation of 2aterial facts# while in representation < the insured 2a7es erroneous state2ents (In conceal2ent and 2isrepresentation )oth give the insurer the right to rescind the contract of insurance BThe 2ateriality of conceal2ent and representation are deter2ined )y the sa2e rules 4Hhether the conceal2ent or representation is intentional or not# the in*ured party can rescind C,ince insurance contracts are of ut2ost good faith < the insurer is also covered )y the rules POLICY D0@I60 P;/IC? It is the written instru2ent in which a contract of insurance is set forth (,ection 4$)4;H I, IT C;6T>+0D# H4.T I@ T40 I6,+>0D D;0, 6;T +6D0>,T.6D T40 C;6T06T, ;@ T40 P;/IC? Denerally in favor of the insured and against the insurer- The )urden of proving that the ter2s of the policy have )een e1plained is upon the party see7ing to enforce itThe clai2 of the )eneficiary that since the insured was illiterate and spo7e Chinese only# she could not )e held guilty of conceal2ent )ecause the application and policy was in 0nglish (Tang vs- C.# $ ,C>. (B6)

@;>5 ;@ T40 P;/IC? It shall )e printed and 2ay contain )lan7 spaces and any word# phrase# clause or 2ar7# sign# sy2)ol# signature# or nu2)er necessary to co2plete it shall )e written in the )lan7 spaces (,ection C )- I@ there are >ID0>,# C/.+,0,# H.>>.6TI0, ;> 06D;>,0506T, purporting to )e part of the contract of insurance and which are pasted or attached to the policy is 6;T FI6DI6D on the insured < +6/0,, the descriptive title of the sa2e is also 2entioned and written on the )lan7 spaces provided in the policy- 6;T0 < if pasted or attached to the original policy at the ti2e it was issued < the signature of the insured is not necessary to 2a7e it )inding- if after the original policy is issued# it 2ust )e counter!signed )y the insured +6/0,, applied for )y the insured6o rider# clauses# or warranties# or endorse2ents shall )e attached# printed or sta2ped on the policy unless the for2 of such application has )een approved )y the Insurance Co22issioner>ID0>, < are for2s attached to the policy when the co2pany finds it necessary to alter or a2end the applicantJs answer to any :uestion in the applicationC/.+,0, < are for2s containing additional stipulationsH.>>.6TI0, < are written state2ent E stipulations inserted on the face of the contract or incorporated )y proper words of reference < where the insured contracts as to the e1istence of facts# circu2stances or conditions < the truth of which are essential to the validity of the contract06D;>,0506T, < are agree2ents not contained )ut 2ay )e written or attached to policy to change or 2odify a part thereofH4.T 5+,T . P;/IC? ,P0CI@? . policy 2ust specify (1) The parties )etween who2 the contract is 2ade (() The a2ount to )e insured e1cept in open or running policies (B) The pre2iu2# or if the pre2iu2 is to )e deter2ined at the ter2ination of the contract# a state2ent of the )asis and rates upon which the final pre2iu2 is to )e deter2ined (4)The property or life insured (C) The interest of the insured in the property insured# if not the a)solute owner (6) The ris7s insured against (%) The period during which the insurance is to continue (,ection C1) H4.T .>0 C;=0> 6;T0, It is a written 2e2orandu2 of the 2ost i2portant ter2s of a preli2inary contract of insurance intended to give protection pending investigation )y the insurer of the ris7 or until the issuance of the for2al policy (,ection C()- It is ./,; I6;H6 ., FI6DI6D ,/IP ;> >0C0IPT ;> FI6D0>

0@@0CTI=IT? ;@ . C;=0> 6;T0 The effectivity of a cover note is 6 D.?, < as within such period# a policy shall )e issued including in its ter2s the identical assurance found under the cover rate and the pre2iu2 therefore- It 2ay however# )e e1tended )eyond 6 days and with the written approval of the Insurance Co22issioner if he deter2ines that it does not violate the Insurance Code6;T03 The following rules have )een pro2ulgated )y the Insurance Co22issioner! (1) . cover note is valid for 6 days whether or not a pre2iu2 is paid )ut it 2ay )e cancelled )y either party upon at least % day notice to the other party (() if the cover note is not cancelled# a regular policy 2ust )e issued within 6 days fro2 the date of issue of the cover note#including within its ter2s the identical insurance (B) It 2ay )e e1tended with the written approval of the co22issioner )ut 2ay )e dispensed with )y a certification of the Pres- =P or D5 of the insurer that the ris7s involved and the e1tension do not violate the code (4) Insurance co2panies 2ay i2pose a deposit pre2iu2 e:uivalent to at least (CO of the esti2ated pre2iu2 )ut in no case less than P4P C - H406 HI// . C;=0> 6;T0 DI=0 .D0G+.T0 I6,+>.6C0 P>;T0CTI;6 It gives ade:uate insurance protection when it is a preli2inary contract of P>0,06T I6,+>.6C0 and not a 2ere agree2ent to insure at a future ti2e# ., on acceptance of the application or issuance E delivery of the policy- (44 C", $C&)01a2ple3 (1) .gent issued a provisional policy ac7nowledging receipt of pre2iu2s and stating that the insurance shall )e effective upon approval and issuance of the policy )y the head office- There is no protection as it is a 2ere ac7nowledg2ent of the pay2ent of pre2iu2s as the effectivity of the insurance is e1pressly provided (/I5 vs- ,+6/I@0 < 41 P4I/ (6C) (() In life insurance# a )inding slip does not insure )y itself as it was stated that it was su)*ect to the approval of the insurer and the sa2e was su)se:uently disapproved (D>0P./I@0 vs- C.# &$ ,C>. C4B)I, P.?506T ;@ . P>05I+5 P.?506T @;> T40 C;=0> 6;T0 60C0,,.>? T; F0 P>;T0CT0D .D.I6,T T40 >I,I I6,+>0D .D.I6,T Cover note held to )e )inding despite the a)sence of a pre2iu2 pay2ent for its issuance- 6o separate pre2iu2s are intended or re:uired to )e paid on a cover note )ecause they D; 6;T C;6T.I6 T40 P.>TIC+/.>, ;@ T40 P>;P0>T? I6,+>0D T4.T H;+/D ,0>=0 ., T40 F.,I, @;> T40 C;5P+T.TI;6 ;@ P>05I+5, < such )eing the case no pre2iu2 can )e fi1ed- The C;=0> 6;T0, should not )e treated as a separate policy )ut should )e integrated in the regular policy su)se:uently issued so that pre2iu2s on the regular policy should include that for the cover note( P.CI@IC TI5F0> vs- C.# 11( ,C>. 1$$)-

H4;,0 I6T0>0,T I, I6,+>0D < 1The insurance proceeds shall )e applied e1clusively to the proper interest of the person in whose na2e or for whose )enefit it is 2ade# unless otherwise specified in the policy (,ection CB)- 01a2ple3 (1) In the case of Del =al v- Del =al# ($ P4I/ CB4# the designation of sister as sole )eneficiary in a life insurance cannot )e defeated )y the contention of the of plaintiff that proceeds )elong to the estate of the insured was disregarded as insurance is to )e governed )y special law# not )y the law covering donations or succession (() In the case of Fonifacio Fros v- 5ara# D> 6o- ( &CB# 5ay ($# 1$6%-! .ction to recover cost of repairs and la)or to a 2otor vehicle where the policy states loss is paya)le to 4-,- >eyes# the 2ortgagee of the vehicle who had no 7nowledge of the fact that 5ara had it repaired with Fonifacio Fros-# where the court ruled that 4-,- >eyes is the one entitled to the proceeds )ecause a policy of insurance is a separate and independent contract )etween the insured and the insurer# and that third persons have no right to the proceeds of the insurance5.? . B>D P0>,;6 ,+0 T40 I6,+>0> < unless otherwise specified in the policy# a Brd person 2ay sue if (1) the insurance contract contains a stipulation in favor of a Brd person# the latter though not a party 2ay sue to enforce )efore the contract is revo7ed )y the parties- 01a2ple3 In the case of C;G+I. v- @I0/D506, I6,+>.6C0 C; < (6 ,C>. 1%$# the insurance co2pany undertoo7 to inde2nify any authori9ed driver who was driving the 2otor vehicle insured- Co:uia# while driving the insured 2otor vehicle# 2et and accident and died- 4is heirs were allowed to sue the insurer# the policy )eing considered in the nature of a contract pour autrui and therefore the enforce2ent thereof 2ay )e de2anded )y a B rd party for whose )enefit it was 2ade (() the insurance contract provides for inde2nity against lia)ility to Brd persons- 01a2ple3 In the case of D+I6D;6 v- D0/ 5;6T0 ( ,C>. 1 4B# the insured procured insurance that would inde2nify hi2 against any and all su2s which he 2ay )e legally lia)le to pay in respect to the death or )odily in*ury to any person- . *eepney covered )y the insurance had )u2ped Duingon and had caused his death- The insurance was held to )e one for inde2nity for lia)ility to third persons (T4I>D P.>T? /I.FI/IT?)# and therefore# such third person is entitled to sue the insurer- T40 T0,T T; D0T0>5I60 H40T40> . B >D P0>,;6 5.? DI>0CT/? ,+0 T40 I6,+>0> ;@ T40 H>;6DD;0> is3 if the contract provides for inde2nity against lia)ility to Brd persons# then the latter to who2 the insured is lia)le 2ay directly sue the insurer# ;6 T40 ;T40> 4.6D# if the insurance is for inde2nity against actual loss or pay2ent < then the B rd person cannot sue the insurer < recourse is against the insured alone(If the contract is e1ecuted with an agent or trustee as the insured# the fact that his principal or )eneficiary is the real party in interest 2ay )e indicated )y descri)ing the insured as the agent E trustee or )y general words in the policy (,ection C4)- If not indicated# it is as if the insurance is the ta7en out )y the agent E trustee alone# conse:uently the principal has no right against the insurer-

BIf a partner or part owner effects insurance# it is necessary that the ter2s of the policy should )e such as are applica)le to the *oint or co22on interest so that it 2ay )e applica)le to the interest of his co!partners E owners (,ection CC)Conse:uently# the policy 2ust state that the interest of all is insured# if not# it is only the interest of the one getting the policy that is insured4Hhen the description of the insured in the policy is so general that it 2ay co2prehend any person or any class of persons# only he who can show that it was intended to include hi2 can clai2 the )enefit of the policy (,ection C6)- 01a2ple3 In a @ire insurance policy where the insured is Dela Cru9 P .ssociates# A to )e a)le to recover his share 2ust prove that he is a partnerCHhen a policy is so fra2ed that it will inure to the )enefit of who2soever# during the continuance of the ris7# 2ay )eco2e the owner of the interest insured (,ection C%)- The proceeds )eco2e paya)le to who 2ay )e the owner at the ti2e the loss or in*ury occurs- This is an e1ception to ,ection ( 6The 2ere transfer of a thing insured does not transfer the policy )ut suspends it until the sa2e person )eco2es the owner of )oth the policy and the thing insured (,ection C&)- 6ote the e1ceptions to this rule as found in ,ections ( !(4 and C% H4.T .>0 T40 II6D, ;@ I6,+>.6C0 P;/ICI0, The 7inds of policies are (1) ;pen (() =alued# or (B) >unning (,ection C$).n ;P06 P;/IC? is one in which the value of the thing insured is not agreed upon# )ut is left to )e ascertained in case of loss (,ection 6 )- Hhat is 2entioned as the a2ount is not the value of the property )ut 2erely the 2a1i2u2 li2it of the insurerJs lia)ility- In case of loss# the insurer only pays the actual cash value at the ti2e of loss- 01a2ple3 @I>0 I6,+>.6C0# where the loss is to )e deter2ined )ut pay2ent is li2ited to the a2ount stated in the policy. =./+0D P;/IC? is one which e1presses on it face that the thing insured shall )e valued at a specified su2 (,ection 61)- The valuation of the property insured is conclusive )etween the parties- In the a)sence of fraud or 2ista7e# such value will )e paid in case of a total loss. =./+0D P;/IC? DI,TI6D+I,40D @>;5 .6 ;P06 P;/IC? (1) In a valued policy# proof of value of the thing after the loss is not necessary- In an open policy# the insured 2ust prove the value of the thing insured (() In a valued policy# the parties have conclusively stipulated that that property insured is valued at a specified su2- In an open policy# the value is not agreed )ut left to )e ascertained upon loss (6;T03 this does not violate the principle that a contract of insurance is a contract of inde2nity as long as the valuation is reasona)le and is )onafide)-

. >+66I6D P;/IC? is one which conte2plates successive insurances and which provides that the o)*ect of the policy 2ay )e fro2 ti2e to ti2e defined especially as to the su)*ects of insurance# )y additional state2ents or indorse2ents (,ection 6()This is ./,; I6;H6 ., a @loating policy < usually issued to provide inde2nity for property which cannot )e covered )y specific insurance )ecause of a fre:uent change in location and :uantity- 01a2ple3 Insurance procured )y a retail esta)lish2ent to cover its inventory that fluctuates in :uantity# or is located in several areasC.6 T40>0 F0 .D>00506T, ., T; P>0,C>IPTI;6 ;@ .6 .CTI;6 ;> /I5IT.TI;6, ;6 T40 P0>I;D ;@ TI50 T; F>I6D .6 .CTI;6 ?0,# provided the period agreed upon should 6;T F0 /0,, T4.6 ;60 ?0.> (,ection 6B)- If less than one year# the agree2ent is =;ID- The period so agreed shall )e considered as having co22enced fro2 the ti2e the cause of action accrues+sually# the C.+,0 ;@ .CTI;6 accrues fro2 the date of the insurerJs re*ection of the clai2 of the )eneficiary or of the insured < ,I6C0 F0@;>0 >0"0CTI;6 there is no necessity to )ring suit- H406 6; P0>I;D I, ,TIP+/.T0D ;> I@ T40 ,TIP+/.TI;6 I, =;ID# the period is within 1 years under .rticle 1144# 6CC# it )eing a written contract (0.D/0 ,T.> vs- C4I. ?+ $6 P4I/ 6$6# .CC@. vs./P4. I6,+>.6C0# (4 ,C>. 1C1)- I@ T40 I6,+>0D .,I, @;> . >0C;6,ID0>.TI;6 ;@ T40 D06I./# the period is still counted fro2 the ti2e the clai2 is denied at the first instance < 6;T >0C;6,ID0>.TI;6 < as it gives the insured a sche2e or devise to waste ti2e until evidence that 2ay )e considered against hi2 can )e destroyed( ,un /ife ;ffice /td vs- C.> 1$C ,C>. 1$B)- The period does not run if action is )rought against an agent of the insurerH4.T I, T40 P>0,C>IPTI=0 P0>I;D @;> 5;T;> =04IC/0 I6,+>.6C0 ;ne year fro2 denial of the clai2 < 6;T D.T0 ;@ .CCID06T < (,u22it Duaranty vs- De Du92an 1C ,C>. B&$ H40>0 I, T40 .CTI;6 @I/0D .n action 2ay )e filed in the following3 (1) Courts (() Insurance Co22issioner# who has concurrent *urisdiction with courts for clai2s not e1ceeding P4P 1 # - (B) P;0. E D;/0 have the power to co2pel a surety to 2a7e good on a solidary underta7ing in the sa2e proceeding where the lia)ility of the principal o)ligor is deter2ined- 6ote that the clai2 )eco2es an .CTI;6 upon filing with the CourtC.6C0//.TI;6 ;@ T40 P;/IC? 6o policy other than life shall )e cancelled )y the insurer 0AC0PT +P;6 P>I;> 6;TIC0 T40>0;@ T; T40 I6,+>0D- 6; 6;TIC0 ;@ C.6C0//.TI;6 ,4.// F0 0@@0CTI=0 I@ 6;T F.,0D ;6 T40 ;CC+>>06C0# .@T0> 0@@0CTI=0

D.T0 ;@ ;60 ;> 5;>0 D>;+6D, (1) non!pay2ent of pre2iu2 (() conviction of a cri2e arising out of acts increasing the ha9ard insured against- 01a2ple3 insured has )een convicted of arson or car theft (B) discovery of fraud or 2aterial 2isrepresentation- 01a2ple3 insured represents hi2self as the owner )ut is not actually the owner (4) discovery of willful or rec7less acts or o2issions increasing the ha9ard insured against- 01a2ple3 storage of ha9ardous 2aterials in the pre2ises (C) physical changes in the property insured which result in the property )eing uninsura)le- 01a2ple3 private vehicle )eing converted into a racing vehicle (6) deter2ination )y the insurance co22issioner that a continuation of the policy would place the insurer in violation of the code- 01a2ple3 policy was issued a)sent insura)le interest (,ection 64)@;>5 ;@ 6;TIC0 ;@ C.6C0//.TI;6 It 2ust )e in writing# 2ailed or delivered to the na2e insured at the address shown in the policy which shall state (1) The grounds relied upon as per ,ection 64# and (() that upon written re:uest of the na2ed insured# the insurer will furnish the facts on which cancellation is )ased (,ection 6C)- 6;T0,3 (1) a fire insurance policy is cancelled on ;cto)er 1C# 1$&1- The insurerJs cler7 allegedly sent notice of cancellation )y 2ail )ut there was no proof that it was actually 2ailed and receivedInsurer relies on the presu2ption of regularity- 40/D3 Considering the strict language of the law that no policy can )e cancelled without prior notice < it )ehooved on the insurer to 2a7e sure that cancellation was actually sent and received )y the insured (5alayan vs- .rnaldo# 1C6 ,C>. 6%()- (() . insured his )uilding against fire and 2ade the loss paya)le to 2ortgagee- +pon cancellation notice was sent to the 2ortgagee-40/D3 There was no valid notice of cancellationThe notice is personal to the insured and not to any unauthori9ed person (,aura I2port 01port vs- Philippine International ,urety Co# Inc-# & ,C>. 14B) D;0, T40 I6,+>0D 4.=0 T40 >ID4T T; >060H 4I, P;/IC? ?es# in insurance other than life# the 6.50D I6,+>0D# 2ay renew the policy upon pay2ent of the P>05I+5 due on the effective date of the renewal# I@# he has not )een given notice F? T40 I6,+>0> ;@ T40 I6T06TI;6 6;T T; >060H ;> T; C;6DITI;6 >060H./ +P;6 >0D+CTI;6 ;@ /I5IT, ;> 0/I5I6.TI;6 ;@ C;=0>.D0, )y 2ail or delivery at least @;>T? @I=0 D.?, in advance of the 06D of the P;/IC? (,ection 66)WARRANTIES D0@I60D It is a state2ent or pro2ise stated in the policy or incorporated therein )y reference# where)y the I6,+>0D < e1pressly or i2pliedly (,ection 6%) contracts as to the past# present or future (,ection 6&) e1istence of certain facts conditions or circu2stances < the /IT0>./ T>+T4 of which is essential to the validity of the contract- 01a2ples3 ., T; P.,T < That he never had a heart ail2ent# ., T; T40 P>0,06T < That he

is in good healthE That house is )eing utili9ed as a residence- ., T; T40 @+T+>0 < That insured will not store e1plosives @;>5 6o particular for2 of words is necessary to create a warranty (,ection 6$)- Hhat is essential is what the parties intend a state2ent to )e# and if so intended as a warranty it 2ust )e included as part of the contract- 6;T03(1) Hhether a warranty is constituted or not depends upon the intention of the parties# the nature of the contract# or the words used thereto (() In case of dou)t# the state2ent is presu2ed to )e a representation not a warrantyH4.T .>0 T40 II6D, ;@ H.>>.6TI0, 1.ffir2ative < those that relate to 2atters that e1ist .T or F0@;>0 the issuance of the policy- 01a2ple3 that vessel is e:uipped of a co2petent crew(Pro2issory < those where the insured pro2ises or underta7es that certain 2atters shall e1ist or will )e done or will )e o2itted after the policy ta7es effect- It is a state2ent in the policy# which i2ports that it is intended to do or not to do a thing which 2aterially affects the ris7# is a warranty that such act or o2ission shall ta7e place (,ection %()- 01a2ple3 That a house shall not )e leased out- That the insuredJs pre2ises will )e fenced6;T0 that unless the contrary intention appears# the courts will presu2e that the warranty is 2erely an affir2ative warranty- 01a2ple3 . description of the property as )eing a two storey residence! there is no pro2issory warranty that it will )e 2aintained as a residence ;> there is a state2ent that M there is a security guard on duty at nightN is not a pro2issory warranty that a security guard will )e 2aintainedB01press < a state2ent in a policy of a 2atter relating to the person or thing insured# or to the ris7 as a fact (,ection %1) and where the assertion or pro2ise is clearly set forth in the policy or incorporated therein )y reference- They can )e affir2ative or pro2issory warranties.6 0AP>0,, H.>>.6T? 5.D0 .T ;> F0@;>0 T40 0A0C+TI;6 ;@ T40 P;/IC? ,4;+/D F0 C;6T.I60D (a) in the policy itself- ()) in another instru2ent signed )y the insured and referred to in the policy as 2a7ing a part of it (,ection % )This includes a >ID0> ! it is a part of the policy# it need not )e signed unless the rider was issued after the original policy too7 effect4I2plied < where the assertion or pro2ise is not e1pressly set forth in the policy )ut )ecause of the general tenor of the ter2s of the policy or fro2 the very nature of the insurance contract# a warranty is necessarily inferred or understood- 6ote that

the law only provides for i2plied warranties in contracts of 2arine insurance- ,ee ,ections 11B (seaworthiness) and 1(6 (deviation)0@@0CT ;@ =I;/.TI;6 ;@ . H.>>.6T? The violation of a 2aterial warranty# or other 2aterial provision of the policy# on the part of either party thereto# entitles the other to rescind (,ection %4) 6ote that the insured can e1ercise the right also when the insurer violates a warranty# li7e when it refuses to grant a loan on the policy- F+T as far as the insured# 6;T0 ./,; that (1) while a policy 2ay declare that a violation of specified provisions thereof shall avoid it# ;T40>HI,0 the )reach of an i22aterial provision does not avoid the policy (,ection %C)- 50.6I6D! ;>DI6.>I/? . F>0.C4 ;@ .6 I55.T0>I./ P>;=I,I;6 D;0, 6;T .=;ID . P;/IC?# however# if stipulated that any )reach avoids the policy# the policy is avoided- (() a )reach of warranty without fraud# 2erely e1onerates an insurer fro2 the ti2e it occurs# or where it is )ro7en at its inception# prevents the policy fro2 attaching to the ris7 (,ection %6)- 50.6I6D! that if the )reach is without fraud! the policy is avoided only fro2 the ti2e of the )reach# prior to the )reach it is still effective- Conse:uently# the insured is entitled to a pro! rate return of the pre2iu2 paid under ,ection %$ ()) or all pre2iu2s# if the )reach occurs at the inception of the contract# as such is void a) initio and had never )eco2e )inding6;T0 that a C.+,./ C;660CTI;6 )etween the violation of the warranty is not necessary < ,o# even if the violation did not contri)ute to the loss < the other party 2ay still rescind- 01a2ple3 . insured )uilding against fire- . warranty stated that no ha9ardous goods would )e stored-. stored firewor7s- The )uilding was )urned and the firewor7s were discovered stored in the area not affected )y the fire- The Insurer was not held lia)le as the storage had increased the ris7 (?oung v- 5idland Te1tile Ins- < B P4I/ 61%) T40 6;6!P0>@;>5.6C0 ;@ . P>;5I,,;>? H.>>.6T? D;0, 6;T .=;ID T40 P;/IC? H406 F0@;>0 T40 .>>I=./ ;@ T40 TI50 @;> P0>@;>5.6C0 (1) the loss insured against happens- 01a2ple3 There is a warranty that a firewall will )e constructed# )ut fire occurs )efore the period for co2pliance (() the perfor2ance )eco2es unlawful at the place of the contract01a2ple3 . law or ordinance prohi)its the construction of the specified firewall (B) the perfor2ance )eco2es i2possi)le- 01a2ple3 . severe lac7 of 2aterials to construct- (,ection %B) DISTINGUISHING IT FROM REPRESENTATIONS. 1. warranty is part of the contract# while a representation is 2erely a collateral induce2ent thereto-

(. warranty is e1pressly set forth in the policy or incorporated therein )y reference while a representation 2ay )e oral or written in another state2entB. warranty 2ust )e strictly and literally perfor2ed while a representation 2ust )e su)stantially true4so. warranty is presu2ed 2aterial while a representation 2ust )e shown to )e

C. )reach of warranty is a )reach of the contract itself while a (2is) representation is ground to rescind the contractPREMIUM D0@I60D The agreed price for assu2ing and carrying the ris7 H406 I, T40 I6,+>0> 06TIT/0D T; . P>05I+5 The insurer is entitled to the pay2ent of a pre2iu2 as soon as the thing insured is e1posed to the peril insured against- 6otwithstanding any agree2ent to the contrary# no policy or contract of insurance issued )y an insurance co2pany is valid and )inding unless and until the pre2iu2 is paid 0AC0PT in (1) In case of life or industrial life (life insurance policy where the pre2iu2 is paya)le 2onthly or oftener) whenever the grace period applies (,ection%%)# (() Hhen the insurer 2a7es a written ac7nowledg2ent of the receipt of pre2iu2# such is conclusive evidence of the pay2ent of the pre2iu2 to 2a7e it )inding notwithstanding any stipulation therein that it shall not )e )inding until the pre2iu2 is paid (,ection %&) 406C0# the effect of an ac7nowledg2ent in a policy or contract of insurance of the receipt of the pre2iu2 < is that it is conclusive evidence of its pay2ent < so far as to 2a7e the policy )inding- 4;H0=0># it is conclusive only to 2a7e the policy )inding and not for the purpose of collecting the pre2iu2# and (B) Hhere the o)ligee has accepted the )ond or suretyship contract in which case such )ond or suretyship contract )eco2es valid and enforcea)le irrespective of whether or not the pre2iu2 has )een paid )y the o)ligor to the surety(,ection 1%%)6;T0 < that there is no e1cuse for non!pay2ent of the pre2iu2 since pay2ent on ti2e is of the essence- T40 ;6/? >0C;D6IL0D 0AC0PTI;6 is when failure is due to the wrongful conduct of the insurer- 01a2ple3 the refusal to accept a validly tendered pay2ent of the pre2iu2H4.T I, T40 0@@0CT ;@ P.>TI./ P.?506T ;>DI6.>I/?# the o)ligation to pay pre2iu2 when due is considered an I6DI=I,IF/0 ;F/ID.TI;6-4ence# forfeiture is not prevented )y a part pay2ent +6/0,,#pay2ent )y install2ent has )een agreed upon or is the esta)lished

practice < F.,IC P>I6CIP/0, ;@ 0G+IT? .6D @.I>60,, would not allow the insurer to collect and accept install2ents and later deny lia)ility as pre2iu2s were not paid in full- (,ee Philippine Phoeni1 ,urety and Ins- v- Hoodwor7s < ( ,C>. 1(% # 5a7ati Tuscany Condo2iniu2 Corporation v- C.# (1C ,C>. 46( ! pay2ent )y install2ent was agreed upon# 6;T0 ./,; TIF.? v- C. < (C% ,C>. 1(6 < any partial pay2ent when there is an agree2ent that the policy shall not )e effective pending pay2ent of full pre2iu2 was in the concept of deposit-) P.?506T T; I6,+>.6C0 .D06T ;> F>;I0> is pay2ent to the insurance co2panyHI// P.?506T F? P>;5I,,;>? 6;T0 ;> C40CI F0 ,+@@ICI06T T; 5.I0 T40 P;/IC? FI6DI6D 6o# .rt 1(4$ (nd paragraph of the Civil Code# that such produces pay2ent only when it is encashedH406 I, T40 I6,+>0D 06TIT/0D T; . >0T+>6 ;@ T40 P>05I+5, P.ID The insured is entitled to a return when (1) To the whole pre2iu2# when no part of the interest in the thing insured is e1posed to any of the perils insured against (,ection %$ <a)- 01a2ple3 insurance on a vessel for a voyage that did not ta7e place (() where the insurance is 2ade for a definite period of ti2e and the insured surrenders his policy )efore the e1piration of the period- 4ere# the insured only recovers a portion of the policy pre2iu2s corresponding with the une1pired ti2e F+T it does not apply if (a) the policy is not for a definite period ()) a short period rate (insurance is for a period of less than a year and a rate has )een agreed to if the policy is surrendered- 01a2ple3 If the policy is in force for a 2onth# the insurer retains ( O of the pre2iu2) has )een agreed upon (c) the policy is a life insurance policy < it is indivisi)le )ut he has a cash surrender value (B) when the contract is voida)le on account of fraud or 2isrepresentation of the insurer or the agent (,ection &1)- 01a2ple3 where insurer 2a7es a representation not contained in the policy )ecause policy is not that applied for (4) where the contract is voida)le on account of facts# the e1istence of which the insured was ignorant without his fault (,ection &1)- 01a2ple3 when the insurance is ta7en )y the insured# who is ignorant of the facts# that he did not have insura)le interest or a person# not 7nowing that that his car has )een totally da2aged# procured insurance over it-(C)- when )y any default of the insured other than actual fraud# the insurer never incurred any lia)ility under the policy (,ection &1) 01a2ple3 a person insured his vessel for a trip# )ut vessel is destroyed )efore the trip- (6) In case of over!insurance- 4ere the insurance is in e1cess of the a2ount of the insura)le interest of the insured and it is insured )y several insurers# the insured is entitled to a >.T.F/0 >0T+>6 ;@ P>05I+5# proportional to the a2ount )y which the aggregate su2 insured in all the policies e1ceeds the insura)le value- 01a2ple3 .Js house is valued at 1-C2illion# he o)tained the following policies < 4ere . is entitled to the return of C# fro2 A and 1 fro2 ?

Insurer A ?

Pre2iu2 1 # ( #

.2ount 1# # (# #

T; H4;5 .>0 T40 P>05I+5, >0T+>60D +nless otherwise stated they shall )e returned to the insured who paid the2H406 .>0 T40? 6;T >0C;=0>.F/0 Pre2iu2s cannot )e recovered3 (1) if the peril insured against has e1isted# and the insurer has )een lia)le for any period# the period )eing entire and indivisi)le (,ection & )- 01a2ple3 The vessel is insured for a voyage that will ta7e C days# ( days into a voyage# the policy is surrendered (() In life insurance < (,ection %$!))# and (B) when the insured is guilty of fraud or 2isrepresentation (,ection &1) LOSS AND NOTICE OF LOSS H4.T .>0 T40 >+/0, T; D0T0>5I60 H40T40> T40 I6,+>0> I, /.IF/0 @;> T40 /;,, ;@ T40 T4I6D I6,+>0D They are3 (1) /oss of which a peril insured against is the pro1i2ate cause ( P>;AI5.T0 C.+,0 < that which# in a natural and continuous se:uence# un)ro7en )y any efficient intervening cause# produces an in*ury and without which the in*ury would not have occurred)# although a peril not conte2plated )y the contract 2ay have )een a re2ote cause F+T the insurer is not lia)le for a loss of which the peril insured against was only a re2ote cause (,ection &4)01a2ple3 In life insurance that covers death )y accident# if the insured sustains an accident that renders hi2 wea7# while in said state# he contracts a cold that develops into pneu2onia- The pro1i2ate cause is the accident# while the re2ote cause is the pneu2onia# the insurer is lia)le- .n e1a2ple of a loss# where the peril insured against is only a re2ote cause is3 fire2en train their hoses at the house of the insured# da2aging windows and furnitures# though not necessary to put out the fire as the sa2e was affecting the house of the neigh)or- The insured cannot clai2 loss due to fire as it is only a re2ote cause>0C;D6ILI6D T4.T T40>0 .>0 P>;F/05, I6 D0T0>5I6I6D P>;AI5.T0 C.+,0 < 6;T0 T40 @;//;HI6D >+/0,3

(a) If there is a single cause which is an insured peril# clearly it is the pro1i2ate cause and there is lia)ility- 01a2ple3 Insurance is against fire and the property insured is )urned ;> Insurance covers accidental death and the insured dies in an accident ()) If there are concurrent causes (those happening together) with no e1cluded perils# there is lia)ility if one of the causes is an insured peril# the others 2ay )e ignored- 01a2ple3 In accident insurance where the insured has a heart disease- 4e is involved in an accident that causes in*uries# which coupled with his wea7 heart causes his death- The pro1i2ate cause is the accident- The insurer is lia)le(c) If there are concurrent causes with an e1cepted peril (insured peril and e1cepted peril operate together to produce the loss) the clai2 will )e outside the scope of the policy- 01a2ple3 6o lia)ility in a clai2 for property stolen )y rioters under a )urglary policy# if the policy e1clude riot ris7s(d) Fut# if the results of the operation of the insured peril can )e clearly separated fro2 the effects of the e1cepted peril# the insurer is lia)le- 01a2ple3 a personal accident policy will cover death )y accident although the insured was suffering fro2 a disease e1cluded )y the policy (B) Hhere a nu2)er of causes operate one after the other# and the original cause happens to )e a peril insured against # there is lia)ility- 01a2ple3 Insured scratches an open wound# which gets infected# which ulti2ately results in death F+T if the direct chain of events can )e traced to an e1cepted peril there is no lia)ility01a2ple3 .n earth:ua7e (if e1cepted) causes a fire that spreads# all resulting fire da2age is dee2ed caused )y an e1cepted peril- F+T# if the chain of events is )ro7en )y the intervention of a new an independent cause# lia)ility will depend upon whether the new cause is an insured or e1cepted peril- 01a2ple3 if the insured is treated in the hospital for an accident )ut while there he contracts a disease# the disease is the pro1i2ate cause# there will )e no lia)ility under the accident policy# if death )y disease is covered# then the insurer is lia)le(() /oss caused )y efforts to rescue the thing insured fro2 a peril insured against that would otherwise have caused a loss# if in the course of such rescue# the thing is e1posed to peril not insured against# which per2anently deprives the insured of its possession# in whole or in part# or where a loss is caused )y efforts to rescue the thing insured fro2 a peril insured against (,ection &C)- 4ere the principle of pro1i2ate cause is e1tended to loss incurred while saving the thing insured01a2ple3 (a) Hhen the thing insured is water da2aged due to efforts to put out a fire# the fire )eing a peril insured against ()) theft )y B rd persons while the goods are )rought out in the course of rescuing the2 fro2 a fire# which is the peril insured against F+T < no loss if the goods are left out and are lost < it is now due to lac7 of reasona)le care and vigilance (c) . insured the contents of his house against fire- .

fire )rea7s out# while re2oving the contents# they were stolen or they were )ro7en or da2aged# theft or )rea7age not )eing perils insured againstBHhere a peril is especially e1cepted in a contract of insurance# a loss# which would not have occurred )ut for such peril# is there)y e1cepted although the i22ediate cause of the loss was a peril which was not e1cepted (,ection &6)- The i22ediate cause is the C.+,0 ;> C;6DITI;6 60.>0,T T40 TI50 .6D P/.C0 ;@ T40 I6"+>?- 4ere# the insurer will )e lia)le if )oth the i22ediate cause and the pro1i2ate cause are not e1cepted- If the pro1i2ate cause is e1cepted and the i22ediate cause is not# the insurer is not lia)le01a2ple3 . factory is insured against fire# )ut it e1cepts loss through e1plosion- If an e1plosion occurs and results into a fire that creates a loss# the insurer is not lia)le- If a fire occurs first# then an e1plosion is caused# the insurer is lia)le4.n insurer is not lia)le for a loss caused )y the willful act or through the connivance of the insured8 )ut he is not e1onerated )y the negligence of the insured# or of the insuredJs agent or others (,ection &%)- Conse:uently# if the insured was 2erely negligent# the insurer is still lia)le as one of the principal reasons for procuring insurance is to protect hi2self against the conse:uences of his own negligence or that of his agents01a2ple3 The insured carelessly used 7erosene in lighting a stove# causing his house to catch fire# the insurer is lia)le for loss F+T if the negligence is so gross so as to )e sufficient )asis for fraudulent intent < it can a2ount to a willful actT>.6,@0> ;@ C/.I5, .n agree2ent not to transfer the clai2 of the insured after the loss happens < I, =;ID if 5.D0 F0@;>0 T40 /;,, e1cept as otherwise provided in case of life insurance (,ection &B)- This 2eans that the insured has an a)solute right to transfer his clai2 against the insurer .@T0> T40 /;,, occurs# what is prohi)ited is a transfer prior to the loss- This is so )ecause such a stipulation after the loss occurs shall hinder the trans2ission of property- 6either does it affect the insurer as its lia)ility is already fi1ed and what is actually assigned is the 2oney clai2# not the contract itself- The 0AC0PTI;6 is ,ection 1%B that provides that the transfer of a fire insurance policy to any person or co2pany who acts as an agent for or otherwise represents the issuing co2pany is prohi)ited and is void insofar as it affects other creditors of the insuredNOTICE AND PROOF OF LOSS H406 5+,T 6;TIC0 ;@ /;,, F0 DI=06 .6D F? H4;5 6otice of /oss 2ust )e given without unnecessary delay )y the insured or so2e person entitled to the )enefit of the insurance- I@ 6;T DI=06# the insurer is e1oection &&)- 50.6I6D ;@ HIT4;+T +660C0,,.>? D0/.? is within a

reasona)le ti2e# depending on circu2stances of a peculiar case# although courts have construed the re:uire2ent li)erally in favor of the insured- 6;T0 T40 ,P0CI@IC .PP/IC.TI;6 T; @I>0 I6,+>.6C0 due to the nature of the loss and urgent need to deter2ine the cause thereof- The longer the period that lapses fro2 the ti2e of loss# the greater is the opportunity of the insured to ta2per with the evidence in preparation for a fraudulent clai2P>;;@ ;@ /;,, If the policy re:uires Preli2inary Proof of /oss (evidence given the insurer of the occurrence of the loss# its particulars# and data necessary to ena)le it to deter2ine lia)ility and the a2ount thereof) IT I, 6;T 60C0,,.>? that the insured give such proof < ., 5.? ;> H;+/D F0 60C0,,.>? I6 . C;+>T ;@ "+,TIC0- H4.T I, ,+@@ICI06T is the F0,T 0=ID06C0 which he has in his power at that ti2e (,ection &$)H406 .>0 D0@0CT, I6 T40 6;TIC0 ;> P>;;@ ;@ /;,, D0050D H.I=0D F? T40 I6,+>0> 1Hhen the insurer fails to specify to the insured any defect which the insured can re2edy without delay- 01a2ple3 It is re:uired to )e sworn to )ut is accepted )y the insurer (Hhen the insurer denies lia)ility on a ground other than the defect in the notice or proof of loss- 01a2ple3 Denial is )ased on nullity of the contract (,ection $ ) H406 I, D0/.? I6 T40 DI=I6D ;@ 6;TIC0 H.I=0D 1If it is caused )y any act of the insurer- 01a2ple3 The insurer accepts pay2ent of the pre2iu2 with full 7nowledge that the pre2ises have )een lost or da2aged will )e estopped fro2 clai2ing delay in the giving of notice of loss(If the insurer o2its to 2a7e an o)*ection pro2ptly and specifically on that ground- 50.6I6D3 despite delay# the insurer does not o)*ect (,ection $1) >0G+I>0506T ;@ C0>TI@IC.TI;6 ;> T0,TI5;6? ;@ . T4I>D P0>,;6 If in the giving of preli2inary proof of loss# a certification or testi2ony of a third person other than the insured is re:uired# it is sufficient for the insured to use >0.,;6.F/0 DI/ID06C0 to procure it- In case of >0@+,./ to give it# the insured can furnish >0.,;6.F/0 0=ID06C0 to the insurer that such refusal H., 6;T I6D+C0D F? .6? "+,T D>;+6D, ;@ DI,F0/I0@ in the facts necessary to )e

certified or testified < ;6C0 ,4;H6 or DI=06 the re:uire2ent 2ay )e dispensed with (,ection $()H4.T 4.PP06, .@T0> P.?506T F? T40 I6,+>0> ,+F,0G+06T T; DI=I6D ;@ 6;TIC0 ;@ /;,, In property insurance# after the insured has received pay2ent fro2 the insurer of the loss covered )y the policy# the insurance co2pany is ,+F>;D.T0D to the rights of the insured against the wrongdoer or the person who has violated the contract- The right of su)rogation accrues upon pay2ent of the insurance clai2- 6;T03 That su)rogation ta7es effect )y operation of law and does not re:uire the consent of the wrongdoer (@ire2anJs @ire Insurance vs- "a2illa P Co2pany# % ,C>. B(B)- T40>0 I, 6; ,+F>;D.TI;6 in (a) /ife Insurance as it is not a contract of inde2nity ()) when pro1i2ate cause of the loss is the insured hi2self (c) when the insurer pays to the insured a loss not covered )y the policy- T40 I6,+>0D I, 6; /;6D0> 06TIT/0D T; C;//0CT @>;5 T40 H>;6DD;0> if the a2ount that he received fro2 the insurer has fully co2pensated for the lossDOUBLE INSURANCE H406 D;0, D;+F/0 I6,+>.6C0 0AI,T Hhere the sa2e person is insured )y several insurers separately in respect to sa2e su)*ect or interest (,ection $B)- Its >0G+I,IT0, are3 (1) sa2e person is insured (() there are several insurers (B) su)*ect insured is the sa2e (4) interest insured is the sa2e (C) ris7 or peril insured against is the sa2e- There is a prohi)ition T; P>0=06T ;=0>!I6,+>.6C0# thus preventing fraud0@@0CT, ;@ ;=0>!I6,+>.6C0 F? D;+F/0 I6,+>.6C0 1Insured# unless the policy otherwise provides# 2ay clai2 pay2ent fro2 the insurers in such order as he 2ay select up to the a2ount for which the insurers are severally lia)le under their respective contracts- 01a2ple3 . house is insured with A Insurance for 1 I# with ? Insurance for ( I# and with L Insurance for ( I- It is valued at ( I- In case of loss < . can recover 1 I!fro2 A Insurance and 1 I fro2 either ? Insurance or L Insurance (Hhere the policy under which the insured clai2s is a valued policy# the insured 2ust give credit as against the valuation for any su2 received )y hi2 under any policy without regard to the actual value of the su)*ect 2atter insured- 01a2ple3 . owns a house valued at 4 I- 4e insured it with A Insurance for BCI and with ? Insurance for CI- The value of the house with )oth co2panies is ( I- If it is lost < . can collect CI fro2 ? Insurance- 4e cannot collect BCI fro2 ? Insurance )ut only the difference )etween the value of the house (( I) and the value of the policy with ? Insurance (CI)

BHhere the policy under which the insured clai2s is an unvalued policy# he 2ust give credit# as against the full insura)le value# for any su2 received )y hi2 under any policy- 01a2ple3 . insured his house with A Insurance for 4 I and with ? Insurance for B I# and with L Insurance for ( I- The policies are open- The loss is % I- If ? Insurance and L Insurance have paid C I# A Insurance will only have to pay .# the difference )etween what he received fro2 ? and L (C I) and the a2ount of loss (% I) or ( I4Hhere the insured receives any su2 in e1cess of the valuation in case of a valued policy or the insura)le value in case of an unvalued policy# he 2ust hold such su2 in trust for the insurers# according to their right of contri)ution a2ong the201a2ple3 if . collects BCI fro2 A Insurance and CI fro2 ? Insurance when the value of the house is only ( I# he 2ust hold the ( I e1cess in trust- If the policies are open# if . can collect 4 I fro2 A Insurance# B I fro2 ? Insurance and ( I fro2 L Insurance# when the actual loss is only % I < he 2ust hold the e1cess in trustCIn relation Paragraph (4) < 0ach insurer is )ound# as )etween hi2self and the other insurers to contri)ute rata)ly to the loss in proportion to the a2ount for which it is lia)le under his contract- ./,; >0@0>>0D T; ., T40 P>I6CIP/0 ;@ C;6T>IF+TI;6 < H4IC4 4., ./>0.D? F006 I6C;>P;>.T0D I6 ./5;,T .// P;/ICI0, < that should there )e other insurances covering the sa2e property# the lia)ility of the co2pany would )e li2ited to its rata)le proportion of the loss or da2age (.lso 7nown as C;6T>IF+TI;6 C/.+,0) The for2ula is3 Insurer Policy E total a2ount of policies ti2es the a2ount of loss e:uals the share of the insurer 01a2ple3 1 I 1 ( I Q 4# C I ( I 1 ( I Q &# C I ( I 1 ( I Q &# C I < A Insurance < ? Insurance < L Insurance

If L Insurance paid ( I )ut since itJs share is only &I# it 2ay collect 4# fro2 A Insurance and &I fro2 ? Insurance# so that it only pays its rata)le share (,ection $4) T0,T T; D0T0>5I60 0AI,T06C0 ;@ D;+F/0 I6,+>.6C0 Hhether the insured# in case of happening of the ris7# can )e directly )enefited )y recovering on )oth policiesK If yes < there is dou)le insurance-

I, D;+F/0 I6,+>.6C0 =./ID If there is an ;T40> I6,+>.6C0 C/.+,0 < one that prevents other insurance on the property e1cept with the consent of the co2pany < T406 IT HI// P>0=06T 06@;>C0506T ;@ T40 P;/IC?# the policy then will )e 6+// .6D =;ID- If there is no ;T40> I6,+>.6C0 C/.+,0# then dou)le insurance is allowed )ut the provisions of ,ection $4 2ust )e followed )ecause property insurance is a contract of inde2nityDI,TI6D+I,4I6D ;=0> < I6,+>.6C0 @>;5 D;+F/0 I6,+>.6C0 1In dou)le insurance# there 2ust )e ( or 2ore insurers- In over insurance# 1 insurer is sufficient(In dou)le insurance# the total a2ount of the policies need not e1ceed the value of insura)le interest- In over insurance# the value 2ust always )e in e1cess of the insura)le interestREINSURANCE H4.T I, >0I6,+>.6C0 >einsurance occurs when an insurer procures a B rd person to insure hi2 against loss or lia)ility )y reason of such original insurance (,ection $C) H406 I, >0I6,+>.6C0 C;5P+/,;>? 1Hhen a non!life insurer insure in any one ris7 or ha9ard an a2ount e1ceeding ( O of its net worth# the insurer needs reinsurance of the e1cess over such li2it (,ection (1C# Paragraph 1) (Hhen a foreign insurance co2pany withdraws fro2 the Philippines# it should cause its pri2ary lia)ilities under policies insuring residents of the Philippines to )e reinsured )y another co2pany authori9ed to transact an insurance )usiness in the Philippines (,ection (%C) DI,TI6D+I,4 >0I6,+>.6C0 @>;5 D;+F/0 I6,+>.6C0 1In dou)le insurance# the insurer re2ains an insurer- In reinsurance# the insurer )eco2es the insured(In dou)le insurance# the su)*ect 2atter is property- In reinsurance# the su)*ect 2atter is the insurerJs ris7 or lia)ility BIn dou)le insurance# the sa2e interest and ris7 is insured with another- In reinsurance# different ris7 and interest are insured#

H4.T 5+,T F0 C;55+6IC.T0D H406 T40 ;>IDI6./ I6,+>0> ;FT.I6, >0I6,+>.6C0 01cept in auto2atic reinsurance treaties (where two or 2ore insurance co2panies agree in advance that they will reinsure a part of any line of insurance ta7en )y the other- ,ince such contracts are self!e1ecuting and the o)ligation attaches auto2atically# the infor2ation re:uired to )e co22unicated herein could not influence the reinsurer in deciding whether or not to accept the reinsurance )ecause it is auto2atic)# it 2ust co22unicate (1) all representations of the original insured (() all infor2ation or 7nowledge he possesses whether previously or su)se:uently ac:uired# which are 2aterial to the ris7 (,ection $6)- 01a2ple3 after issuance of the policy# the original insured had a )ad reputation and that he had )urned a )uilding# the reinsurance is rendered void if it is not disclosed- 6;T03 the fact that the representations on the original insured were untrue at the ti2e of the e1ecution of the reinsurance will not affect lia)ility of the insurer# provided they were true at the ti2e of the original contractH4.T II6D ;@ C;6T>.CT I, >0I6,+>.6C0 It is presu2ed to )e a contract of inde2nity against lia)ility# and not 2erely against da2age (,ection $%)- .s a >+/0# the reinsurer is not lia)le to the reinsured for a loss under an original policy if the reinsured is not lia)le to the original policy holder01a2ple3 . insured his car against vehicular accidents with F Insurance- F Insurance reinsures the policy with C Insurance- . violates the policy )y allowing an unlicensed driver to use the vehicle- F insurance cannot clai2 against C Insurance on the reinsurance as it was never lia)le to .! F+T when the reinsured )eco2es lia)le under the original policy# it 2ay o)tain pay2ent fro2 the reinsurer even )efore paying the loss to the original insured- 01a2ple3 . insured his house with A Insurance- A Insurance reinsures with L Insurance- The house is )urned# )ut A Insurance cannot pay )ecause it is insolvent- A Insurance can still collect fro2 L Insurance )ecause it is a contract of inde2nity against lia)ility and not 2erely against da2age- 6;T03 The su)*ect of the reinsurance contract is the insurerJs ris7 not the property insured in the original policy < T4+,# IT I, 6;T 60C0,,.>? T4.T T40 I6,+>0> @I>,T P.? ;6 . C/.I5 ;6 T40 ;>IDI6./ P;/IC? F0@;>0 C/.I5I6D @>;5 T40 >0I6,+>0>H4.T I, T40 0AT06T ;@ T40 /I.FI/IT? ;@ T40 >0I6,+>0> The lia)ility of the reinsurer is 2easured )y the lia)ility of the reinsured to the original policy holder P>;=ID0D# it does not e1ceed the a2ount of reinsurance- 01a2ple3 . insures his house valued at 1 2illion A Insurance for 1-C 2illion- A Insurance reinsured with L Insurance for 1-( 2illion- The house )urns- The lia)ility of L Insurance is only up to 1 2illion# which is the lia)ility of A Insurance- H4.T I@ ;>IDI6./ I6,+>0D .6D I6,+>.6C0 C;5P.6? ,0TT/0, @;> /0,,# the lia)ility of L Insurance is still only up to what is paid )y A Insurance ;T40>HI,0#

the original insurer profits and thus violates that the principle that it is a contract of inde2nityH4.T I, T40 I6T0>0,T ;@ T40 ;>IDI6./ I6,+>0D I6 T40 C;6T>.CT ;@ >0I6,+>.6C0 The original insured has no interest in the contract of reinsurance (,ection $&)4ence# only the reinsured can clai2 against the reinsurerCLASSES OF INSURANCE MARINE INSURANCE H4.T I, 5.>I60 I6,+>.6C0 Insurance against loss or da2age to3 (a) =essels# craft# aircraft# vehicles #goods# freights# cargoes# 2erchandise# effects# dis)urse2ents# profits# 2oneys# securities# choses in action# evidences of de)t# valua)le papers# )otto2ry or respondentia interest and all other 7inds of property and interests therein# in respect to# appertaining to or in connection with any and all ris7s or P0>I/, ;@ 6.=ID.TI;6# T>.6,IT ;> T>.6,P;>T.TI;6 ;> H4I/0 F0I6D .,,05F/0D# P.CI0D# C>.T0D# F./0D# C;5P>0,,0D ;> ,I5I/.>/? P>0P.>0D @;> ,4IP506T ;> H4I/0 .H.ITI6D ,4IP506T ;> D+>I6D .6? D0/.?,# ,T;>.D0# T>.6,4IP506T ;> >0,4IP506T I6CID06T T40>0T;# including H.> >I,I,# 5.>I60 F+I/D0>J, >I,I# .6D .// P0>,;6./ P>;P0>T? @/;.T0> >I,I, (follows property wherever it 2ay )e) ()) Person or property in connection with or appertaining to 2arine# island 2arine# transit or transportation insurance# including lia)ility for loss or in connection with the construction# repair# operation# 2aintenance# use of the su)*ect 2atter of the insurance (F+T 6;T I6C/+DI6D /I@0 I6,+>.6C0# ;> ,+>0T? F;6D,# 6;> I6,+>.6C0 .D.I6,T /;,, F? >0.,;6 ;@ F;DI/? I6"+>? T; .6? P0>,;6 .>I,I6D ;+T ;@ T40 ;H60>,4IP# 5.I6T06.6C0# +,0 ;@ .+T;5;FI/0,) (c) Precious stones# *ewels# *ewelry# precious 2etals whether in the course of transportation or otherwise(d) Fridges# tunnels or other instru2entalities of transportation and co22unications (e1cluding )uildings# their furniture and furnishings# fi1ed contents# and supplies held in storage)# piers# wharves # doc7s# slips# and other aids to navigation and transportation# including dry doc7s# 2arine railways# da2s and appurtenant facilities for the control of waterways.6D < M5arine Protection and Inde2nity insuranceN 2eaning insurance against# or against legal lia)ility of the insured for loss da2age or e1pense incident to

ownership# operation# chartering# 2aintenance# use# repair or construction of any vessel# craft or instru2entality in use in ocean or island waterways# including lia)ility of the insured for personal in*ury# illness or death or for loss or da2age to the property of another person( ,ection $$)6;T0 < that 2arine insurance is really T>.6,P;>T.TI;6 I6,+>.6C0 which is a 7ind of insurance which is concerned with the perils of property in (or incidental to) transit as opposed to property perils at a generally fi1ed location- F+T it does not include nor2al 2otor vehicle insurance which is treated separately )y lawH4.T .>0 T40 DI=I,I;6, ;@ T>.6,P;>T.TI;6 I6,+>.6C0 The divisions of transportation insurance are3 (1) Oc !" M!#$" I"%&#!"c pertaining pri2arily to sea perils of ships and cargoes# and (() I"'!"( M!#$" I"%&#!"c pertaining pri2arily to land or over land ()ut so2eti2es water) transportation perils of property shipped )y railroads# 2otor truc7s# airplanes and other 2eans of transportation- These includes four )asic policies3 (a) )#*) #+, $" +#!"%$+- providing protection to property fre:uently e1posed to loss while in transport fro2 one place to another ()) .!$' '$!.$'$+,! providing protection to persons who have te2porary custody of goods or personal property of others (c) /$0 ( +#!"%)*#+!+$*" )#*) #+,- providing protection to fi1ed property considered aids to the 2ove2ent of property# li7e )ridges and tunnels# and (d) /'*!+ #- providing protection to personal property (such as precious stones# *ewelry# wor7s of art) wherever it 2ay )e located su)*ect always to the territorial li2its of the contract and need not necessarily )e in the course of transportation- 6;T0 also that 2arine insurance 2ay )e in the for2 of property insurance# inde2nifying the insured for loss or da2age to property (Par- 1# ,ection $$) or lia)ility insurance# protecting the insured against the conse:uences of legal lia)ility for loss or da2age to property or for personal in*ury# illness or death of a person (Par- (# ,ection $$) H4.T >I,I, .>0 I6,+>0D .D.I6,T The )asic ris7 insured against is what is co22only 7nown as P0>I/, ;@ T40 ,0. (all 7inds of 2arine casualties and da2ages done to the ship or goods at sea )y the violent action of the winds or waves# one that could not )e foreseen and is not attri)uta)le to the fault of any)ody- 01a2ples3 shipwrec7s# foundering# stranding# collision# including the *ettisoning of cargo if 2ade for the purpose of saving the vessel) although it also includes @I>0# 0605I0,# PI>.T0,# T4I0=0,# "0TTI,;6# ,+>P>I,./,# T.II6D .T ,0.# .>>0,T,# >0,T>.I6T,# D0T.I6506T, ;@ II6D,# P>I6C0,, .6D P0;P/0 ;@ H4.T 6.TI;6# C;6DITI;6 ;> G+./IT?# F.>>.T>? ;@ T40 5.,T0> .6D .// ;T40> P0>I/, /;,,0,# 5I,@;>T+60, T4.T 4.=0 ;> ,4.// C;50 T; 4+>T# D0T>I506T ;> D.5.D0 ;@ T40 ,.ID D;;D,# 50>C4.6DI,0# ,4IP ;> .6? P.>T T40>0;@-

H4.T .>0 6;T C;=0>0D Denerally < P0>I/, ;@ T40 ,4IP .>0 6;T C;=0>0D (losses or da2ages that result fro2 (a) natural and inevita)le action of the sea ()) ordinary wear and tear of the ship (c) negligent failure of the ship owner to provide the vessel with the proper e:uip2ent to convey the cargo under ordinary conditions- 01a2ple3 (a) Insurance upon a cargo of rice# when sea water entered the co2part2ent where the rice was found through a defective steel pipe ()) The insured loaded logs unto a )arge- The logs are covered )y insurance- The )arge san7 due to i2proper loading and lea7s )ecause the )arge was not provided with tarpaulins that could have prevented the )arge fro2 retaining sea water splashing into it during the voyageH4; 5+,T C40CI ;6 T40 ,0. H;>T4I60,, ;@ . =0,,0/ ,ince there is an i2plied warranty of seaworthiness# it )eco2es the o)ligation of the cargo owner or the insured to loo7 for a relia)le co22on carrier which 7eeps it vessels seaworthy- The insured 2ay have no control on the vessel )ut has full control in the choice of co22on carrierH4.T P0>I/, .>0 I6,+>0D I6 .6 M .// >I,I, P;/IC?N It is to )e construed as creating a special insurance and e1tending to all ris7s than are usually conte2plated and will cover all losses e1cept such that 2ay arise fro2 intentional fraud# intentional 2isconduct# or that otherwise e1cluded- It 2ay include all losses whether arising fro2 a 2arine peril or not# to include pilferage during a war (@ilipino 5erchants Insurance Co- vs- C.# 1%$ ,C>. 6B&)D0@I6ITI;6 ;@ ;T40> T0>5, F.>>.T>? is a willful act of the 2aster and crew in pursuance of so2e fraudulent or unlawful purpose without the consent of the owner and to the pre*udice of his interest- 01a2ple3 )urning of the ship or unlawfully selling the cargoI6C45.>00 C/.+,0 is a provision in 2arine insurance that it shall cover loss or da2age to the hull or 5.C4I60>? T4>+ T40 60D/ID06C0 ;@ T40 5.,T0># C4.>T0>0>,# 5.>I60>,# 06DI600>,# or PI/;T, T4>+ 0AP/;,I;6# F+>,TI6D ;@ F;I/0>,# F>0.I.D0 ;@ ,4.@T, ;> T4>;+D4 .6? /.T06T D0@0CT I6 T40 4+// ;> 5.C4I60>? 6;T >0,+/TI6D @>;5 H.6T ;@ D+0 DI/ID06C0- T4I, I, ./,; ., I6;H6 I6 5.>I60 I6,+>.6C0 ., T40 M60D/ID06C0 C/.+,-N .// >I,I, C/.+,0! one that covers any loss other than a willful and fraudulent act of the insured and avoids putting upon the insured the )urden of esta)lishing that the loss was due to a peril within the policyJs coverage# whether arising fro2 a 2arine peril or not P>;=ID0D the ris7 is not e1cluded-

H4.T C;6,TIT+T0, I6,+>.F/0 I6T0>0,T I6 ;C0.6 5.>I60 I6,+>.6C0 1The owner of a vessel has insura)le interest in the vessel# and such shall continue even if (a) the vessel has )een chartered )y one who covenants to pay the owner the value of the vessel upon loss F+T# in case of loss# the insurer is lia)le only for the part of the loss which the insured cannot recover fro2 the fro2 the charterer (,ection 1 ) (The insura)le interest of the owner of a ship hypothecated )y )otto2ry is only the e1cess of its value over the a2ount secured )y )otto2ry (,ection 1 1) F;TT;5>?E>0,P;6D06TI. D0@I60D is a loan paya)le only if the vessel given as security for said loan arrives safely at port fro2 conte2plated voyage (F;TT;5>?) or a loan paya)le only upon the safe arrival in port of the goods given as security (>0,P;6D06TI.)These C;6T>.CT, .>0 I6 T40 6.T+>0 ;@ . 5;>TD.D0 as the owner )orrows 2oney for the use# e:uip2ent or repair of the vessel for a definite ter2 with the ship as security with 2ariti2e or e1traordinary interest on account of the ris7s )orne )y the lender# it )eing stipulated that if the ship )e lost during the voyage or within a li2ited period# the lender also loses his 2oney (6;T0 T4.T T40 /06D0> 4., I6,+>.F/0 I6T0>0,T T; T40 0AT06T ;@ /;.6) 01a2ple3 The owner of the vessel valued at P4P B # as security for a loan of P4P ( # - - 4is insura)le interest is the e1cess of the value of the vessel over the loan or P4P 1 # - - If the vessel is lost# the owner does not have to pay the loan of P4P ( # - BThe ;H60> ;@ . =0,,0/ ./,; 4., I6,+>.F/0 I6T0>0,T I6 0AP0CT0D @>0ID4T.D0# H4IC4 .CC;>DI6D T; T40 ;>DI6.>? C;+>,0 ;@ T4I6D, 40 H;+/D 4.=0 0.>60D F+T @;> T40 I6T0>=06TI;6 ;@ . P0>I/ I6,+>0D .D.I6,T ;> ;T40> P0>I/ I6CID06T T; T40 =;?.D0( ,ection 1 B) @>0ID4T.D0 D0@I60D are the )enefits derived )y the owner fro2 (a) chartering of the ship ()) its e2ploy2ent for the carriage of his own goods or those of others (,ection 1 () IT 0AI,T, (a) In case of a charter party < when the ship has )ro7en on the chartered voyage ()) if a price is to )e paid for the carriage of goods# when they are actually on )oard or there is contract to put the2 on )oard .6D the vessel and goods are ready for the specified voyage (,ection 1 4).>0 T40>0 P0>,;6,E P.>TI0, ;T40> T4.6 T40 ;H60> H4; 4., I6,+>.F/0 I6T0>0,T 1;ne who has an interest in the thing fro2 which profits are e1pected to proceed# has insura)le interest on the profits (,ection 1 C)- 01a2ple3 owner of cargo

transported on a vessel not only has insura)le interest on the cargo )ut also on the e1pected profits fro2 a future sale(The charterer of a ship has insura)le interest to the e1tent that he is lia)le to )e da2nified )y its loss (,ection 1 6)- 01a2ple3 . charters FJs vessel on condition that . would pay F in case of loss the a2ount of P4P B # - - . has insura)le interest to the e1tent of P4P B # - C;6C0./506T I6 5.>I60 I6,+>.6C0 . P.>T? I, F;+6D T; C;55+6IC.T0# in addition to what is re:uired )y ,ection (& (facts within his 7nowledge# 2aterial to the contract# other party has not the 2eans of ascertaining# as to which party with a duty to co22unicate 2a7es no warranty) I6@;>5.TI;6 that he possesses# that are 2aterial to the ris7 .6D# to state the 0A.CT and H4;/0 T>+T4 in relation to all 2atters that he represents# or upon in:uiry discloses or assu2es to disclose 0AC0PT those that the insurer 7nows or those in the e1ercise of ordinary care# the other ought to 7now# and which the for2er has no reason to suppose hi2 to )e ignorant under ,ection B (,ection 1 %) 6;T03 that the rules on conceal2ent in 2arine insurance are stricter as it is sufficient that the insured is in P;,,0,,I;6 ;@ T40 5.T0>I./ @.CT# ./T4;+D4 40 I, +6.H.>0 ;@ IT- 01a2ple3 If an agent fails to notify principal of the loss of the cargo and the latter# after the loss )ut ignorant thereof# secured insurance lost or not lost# the insurance will )e void due to conceal2ent. P.>T? I, ./,; F;+6D T; C;55+6IC.T0# the infor2ation )elief or e1pectation of a Brd person# in reference to a 2aterial fact# is 2aterial- 6ote3 under ,ection BC such is not re:uired to )e co22unicated in ordinary insurance (,ection 1 &) P>0,+5PTI;6 ;@ . P>I;> /;,, Insured in 2arine insurance is presu2ed to have 7nowledge# .T T40 TI50 ;@ I6,+>I6D# of a prior loss# if I6@;>5.TI;6 5ID4T P;,,IF/? 4.=0 >0.C40D 4I5 I6 T40 +,+./ 5;D0 ;@ T>.6,5I,,I;6 .6D .T T40 +,+./ >.T0 ;@ C;55+6IC.TI;6 (,ection 1 $) 0@@0CT ;@ C;6C0./506T H4I/0 C;6C0./506T ., . >+/0 06TIT/0, T40 I6"+>0D P.>T? T; >0,CI6D# the rule 2ust yield to ,ection 11 < as it does not vitiate the contract )ut 2erely e1onerates the insurer @>;5 . /;,, >0,+/TI6D @>;5 T40 >I,I, C;6C0./0D as related to (a) the national character of the insured ()) the lia)ility of the thing insured to capture and detention (c) the lia)ility to sei9ure fro2 )reach of foreign laws of trade (d) the want of the necessary docu2ents (e) the use of falseEsi2ulated docu2ents- 01a2ple3 The vessel is sei9ed due to lac7 of docu2ents#

the insurer is e1onerated- If the vessel is lost due to a stor2# the insurer is lia)le despite conceal2ent of lac7 of docu2entsDI,TI6D+I,4I6D I6,+>.6C0 ;>DI6.>? C;6C0./506T @>;5 T4.T I6 5.>I60

1In ordinary insurance# opinion or )elief of a B rd person or own *udg2ent of the insured is not 2aterial and need not )e co22unicated (,ection BC)# in 2arine insurance# )elief or e1pectation of a B rd person in reference to a 2aterial fact is 2aterial and has to )e co22unicated(In ordinary insurance# a causal connection )etween the fact concealed and cause of loss is not necessary for the insurer to rescind# in 2arine insurance the conceal2ent of any of the 2atters stated in ,ection 11 2erely e1onerates the insurer fro2 loss# if the loss results fro2 the fact concealed>0P>0,06T.TI;6 I6 5.>I60 I6,+>.6C0 H406 I, T40 I6,+>0> 06TIT/0D T; >0,CI6D If the representation is I6T06TI;6.//? @./,0 I6 .6? 5.T0>I./ >0,P0CT# ;># in respect of any fact on which the character and nature of the ris7 depends# the insurer 2ay rescind (,ection 111) F+T < the eventual falsity of a representation as to an 0AP0CT.TI;6 does not# I6 T40 .F,06C0 ;@ @>.+D# avoid the contract (,ection 11()- 01a2ple3 state2ent as to ti2e of sailing# nature of the cargo or a2ount of profitsH4.T .>0 T40 I5P/I0D H.>>.6TI0, I6 5.>I60 I6,+>.6C0 (1) In every contract of 2arine insurance upon a ,4IP ;> @>0ID4T# @>0ID4T.D0 or +P;6 .6?T4I6D H4IC4 I, T40 ,+F"0CT ;@ 2arine insurance# there is an i2plied warranty that the ,4IP I, ,0.H;>T4? (,ection 11B). ,4IP I, ,0.H;>T4? when it is reasona)ly fit to perfor2 the service and to encounter the ordinary perils of the voyage# conte2plated )y the parties to the policy (,ection 114)- 6;T0 that it is relative and is 2ade to depend on the circu2stancesT40 I5P/I0D H.>>.6T? ;@ ,0.H;>T4I60,, I, C;5P/I0D HIT4 as a D060>./ >+/0 when it is seaworthy at the ti2e of the co22ence2ent of the ris7 0AC0PT (a) when the insurance is 2ade for a specified length of ti2e# it 2ust )e seaworthy at the co22ence2ent of every voyage it underta7es at that ti2e ()) when the insurance is upon cargo# which )y the ter2s of the policy# description of the voyage# or esta)lished custo2 of trade# is re:uired to )e transshipped at an i22ediate port# in which case < each vessel upon which the cargo is shipped or transshipped 2ust )e seaworthy at the co22ence2ent of each particular voyage (,ection 11C)- (c) where different portions of the voyage conte2plated in the policy differ in respect to the things re:uisite to 2a7e the ship seaworthy# in which case it

2ust )e seaworthy at the co22ence2ent of each portion (,ection 11%)- 01a2ple3 the voyage will pass thru rivers < then seas < the warranty is not co2plied with if at the ti2e it goes out to sea < it is not seaworthy to encounter the perils of the seaT; H4.T D;0, T40 H.>>.6T? ;@ ,0.H;>T4I60,, 0AT06D T; The warranty of seaworthiness e1tends not only to the condition of the structure of the ship# )ut it re:uires that (a) it )e properly laden or loaded with cargo ()) is provided with a co2petent 2aster# sufficient nu2)er of officers and sea2en (c) it 2ust have the re:uisite e:uip2ent and appurtenances /II0 )allasts# ca)les# anchors# cordage# sails# food# water# fuel# lights and other necessary and proper stores and i2ple2ents for the voyage (,ection 116)6;T0 that H406 . ,4IP F0C;50, +6,0.H;>T4? D+>I6D T40 =;?.D0 < it will not avoid the policy < ., /;6D ., <there is no +6>0.,;6.F/0 D0/.? I6 >0P.I>I6D T40 D0@0CT- ;T40>HI,0 < the insurer is e1onerated on the ship or the shipownerJs interest fro2 any lia)ility fro2 any loss arising therefro2 (,ection 11&)- 406C0# if loss is not one due to the defect or peril was not increased )y the defect I6,+>0> is still lia)le./,;# while a ship 2ay )e seaworthy for purposes of insurance on it# it 2ay )y reason of F0I6D +6@ITT0D T; >0C0I=0 C.>D;# )e unseaworthy for the purpose of insurance on the C.>D; (,ection 11$)- 01a2ple3 . cargo of wheat was laden on a ship which had a port hole insecurely fastened at the ti2e of lading- The port hole was foot a)ove the water line# and in the course of the voyage# water entered the cargo area and da2aged the wheat- The ship was dee2ed unworthy with reference to the cargo# hence the insurer of the cargo was not lia)le (,teel vs- ,tate /ine ,tea2ship# cited in Do Tiaco vs- +nion ,ociety of Canton# 4 Phil 4 ) (() It shall carry the re:uisite docu2ents to show its nationality or neutrality and that it ,4.// 6;T carry any docu2ent that will cast reasona)le suspicion on the vessel (,ection 1( )- T4I, H.>>.6T? .>I,0, ;6/? H406 6.TI;6./IT? ;> T40 60+T>./IT? ;@ T40 =0,,0/ ;> C.>D; I, 0AP>0,,/? H.>>.6T0D(B) That the vessel shall not 2a7e any i2proper deviation fro2 the intended voyage4;H I, T40 I6T06D0D =;?.D0 D0T0>5I60D (a) Hhen it is descri)ed )y places of )eginning and ending# the voyage is the course of sailing fi1ed )y 2ercantile usage )etween those places (,ection 1(1)()) Hhen it is not fi1ed )y 2ercantile usage# the voyage is the way )etween the places specified which to a 2aster of ordinary s7ill and discretion would see2 the 2ost natural# direct and advantageous (,ection 1(()-

H4.T I, . D0=I.TI;6 It is a departure fro2 the course of the voyage as defined )y ,ections 1(1 and 1(( ;> an unreasona)le delay in pursuing the voyage ;> the co22ence2ent of an entirely different voyage (,ection 1(B)H406 I, . D0=I.TI;6 P>;P0> (a) Hhen it is caused )y circu2stances over which neither the 2aster nor the owner of the ship has any control- 01a2ple3 .n ail2ent stri7es the crew of the vessel()) Hhen necessary to co2ply with a warranty# or to avoid a peril# whether or not the peril is insured against- 01a2ple3 Hhen repairs are necessary or to avoid getting caught in a conflict(c) Hhen 2ade in good faith# and upon reasona)le grounds of )elief in its necessity to avoid a peril- 01a2ple3 Hhen underta7en to avoid the eye of a stor2(d) Hhen 2ade in good faith# for the purpose of saving hu2an life or relieving another vessel in distress- 01a2ple3 Hhen assistance is given .6? D0=I.TI;6 T4.T I, 6;T ,; I6C/+D0D I, 6;T P>;P0> (,ections 1(4 and 1(C) C;6,0G+06C0 ;@ .6 I5P>;P0> D0=I.TI;6 Insurer is not lia)le for any loss happening to the thing insured su)se:uent to an i2proper deviation (,ection 1(6)- This applies whether the ris7 has )een increased or di2inished(4) That the vessel does not or will not engage in any illegal venture-

/;,,0, I6 5.>I60 I6,+>.6C0 /osses in 2arine insurance 2ay )e partial or total (,ection 1(%)- . loss that is not T;T./ is P.>TI./ (,ection 1(&)II6D, ;@ T;T./ /;,,0, . total loss 2ay )e .CT+./ or C;6,T>+CTI=0 (,ection 1($)-

(1) If it is an .CT+./ T;T./ /;,, it 2ay )e caused )y 3 (a) total destruction of the thing insured ()) the irretrieva)le loss of the thing )y sin7ing or )y )eing )ro7en up (c) any da2age to the thing which renders it valueless to the owner for the purpose that he held it (d) any other event which effectively deprives the owner of the possession# at the port of destination# of the thing insured (,ection 1B ) 01a2ple3 Hhen palay was rendered valueless )ecause they )egan to ger2inate# thus it no longer re2ains as the sa2e thing# it was an .CT+./ T;T./ /;,, (Pan 5alayan vC. ( 1 ,C>. B&() .6 .CT+./ T;T./ /;,, C.6 ./,; F0 P>0,+50D fro2 the continued a)sence of the ship without )eing heard of (,ection 1B()- The length of ti2e which is sufficient to raise this presu2ption D0P06D, on the CI>C+5,T.6C0, of the case I@ T40 =0,,0/ F0 P>0=06T0D# .T .6 I550DI.T0 P;>T# @>;5 C;5P/0TI6D T40 =;?.D0# )y the perils insured against# the lia)ility of the 2arine insurer on the cargo continues after they are reshipped (,ection 1BB) and the lia)ility e1tends to da2ages# e1penses of discharging# storage# reship2ent# e1tra freightage and all other e1penses incurred in saving the cargo reshipped +P T; T40 .5;+6T I6,+>0D < 6;T4I6D ,4.// >06D0> T40 I6,+>0> /I.F/0 @;> .6 .5;+6T I6 0AC0,, ;@ T40 I6,+>0D =./+0 ;> I@ 6;60# ;@ T40 I6,+>.F/0 =./+0 (,ection 1B4)+P;6 .CT+./ T;T./ /;,,# the insured is entitled to pay2ent without notice of a)andon2ent (,ection 1BC) .6D I@ T40 insurance is confined to an .CT+./ /;,, it will not cover a C;6,T>+CTI=0 /;,,# )ut it will cover any loss# which necessarily results in depriving the insured of possession# at the port of destination of the entire thing insured (,ection 1B%) (() It is a C;6,T>+CTI=0 T;T./ /;,, when the person insured is given a right to .F.6D;6 under ,ection1B$ (,ection 1B1) .F.6D;6506T is the act of the insured )y which# .@T0> . C;6,T>+CTI=0 T;T./ /;,,# he declares to the insurer the >0/I6G+I,4506T in its favor of his I6T0>0,T in the thing insured (,ection 1B&) . person insured )y a contract of 2arine insurance 2ay a)andon the thing insured# or any particular portion thereof separately valued )y the policy# or otherwise separately insured .6D >0C;=0> . T;T./ /;,, < H406 T40 C.+,0 ;@ /;,, I, . P0>I/ I6,+>0D .D.I6,T I@ (a) 2ore than R thereof in value is actually lost or would have to )e e1pended to recover it fro2 the peril ()) if it is in*ured to such e1tent as to reduce its value )y 2ore than R of value (c) if the thing in*ured is a ship# and the conte2plated voyage cannot lawfully )e perfor2ed without incurring either an e1pense to the insured of 2ore than R the value of the thing a)andoned ;> a ris7 which a prudent 2an would not ta7e under the circu2stances (d) if the insured is

@>0ID4T.D0 ;> C.>D; < and the voyage cannot )e perfor2ed < 6;> another ship procured )y the 2aster < HIT4I6 . >0.,;6.F/0 TI50 HIT4 >0.,;6.F/0 DI/ID06C0 < to forward the cargo without incurring the li7e e1pense or ris7 2entioned in ite2 (c) F+T# @>0ID4T.D0 cannot )e a)andoned unless the ship is also a)andoned (,ection 1B$).F.6D;6506T 5+,T 60IT40> F0 P.>TI./ 6;> C;6DITI;6./( ,ection 14 )4ence# it 2ust )e T;T./ and .F,;/+T0 .F.6D;6506T 5+,T F0 5.D0 within a reasona)le ti2e after receipt of >0/I.F/0 infor2ation of the loss F+T# where the infor2ation is of D;+FT@+/ C4.>.CT0># the I6,+>0D is entitled to a reasona)le ti2e to 2a7e an in:uiry (,ection 141)- This is to ena)le the insurer to ta7e steps to preserve the propertyIf the infor2ation proves I6C;>>0CT or thing insured is >0,T;>0D when the a)andon2ent was 2ade that there was then in fact 6; T;T./ /;,, < the a)andon2ent )eco2es I60@@0CT+./ (,ection 14() 4;H 6;TIC0 ;@ .F.6D;60506T I, 5.D0 Fy giving notice oral or written notice to the insurer F+T if orally given# a written notice of such 2ust )e su)2itted within seven days fro2 giving oral notice (,ection 14B)- The notice 2ust )e e1plicit and specify the P.>TIC+/.> cause of the a)andon2ent F+T need state only enough to show that there is P>;F.F/0 C.+,0 T40>0@;>0 and need 6;T )e acco2panied )y P>;;@ ;@ I6T0>0,T ;> ;@ /;,, (,ection 144)- The re:uire2ent as the e1plicitness of the notice is due to the fact that a)andon2ent can only )e sustained upon the cause specified in the 6;TIC0 (,ection 14C)0@@0CT, ;@ .F.6D;6506T (1) it is e:uivalent to a transfer )y the insured of his interest to the insurer# with all the chances of recovery and inde2nity (,ection146)- 6;T0 T4;+D4# if the insurer pays for a loss as if it were an actual total loss# he is entitled to whatever 2ay re2ain of the thing insured# or its proceeds or salvage as if there has )een a for2al a)andon2ent- 40>0 T40 I6,+>0> 4., ;PT0D T; P.? @;> . T;T./ .CT+./ /;,, notwithstanding the a)sence on actual a)andon2ent (() acts done in good faith )y those who were agents of the insured in respect to the thing insured ,+F,0G+06T T; T40 /;,,# are at the ris7 of the insurer and for his )enefit- (,ection 14&)- T40 .D06T, ;@ T40 I6,+>0D F0C;50 .D06T, ;@ T40 I6,+>0>- This retroacts to the date of the loss when a)andon2ent is effectively 2ade-

0@@0CTI=IT? ;@ .F.6D;6506T (1) .)andon2ent )eco2es effective upon the acceptance of the insurer.CC0PT.6C0 2ay either )e 0AP>0,, or I5P/I0D fro2 the conduct of the I6,+>0>- The 50>0 ,I/06C0 of the insurer for an +6>0.,;6.F/0 /06DT4 ;@ TI50 after 6;TIC0 shall )e construed as acceptance (,ection 1C )- ;6C0 .CC0PT0D# it is conclusive )etween the parties# The loss is ad2itted together with the sufficiency of the a)andon2ent (,ection 1C1)- IT I, ./,; I>>0=;C.F/0 upon acceptance and upon its )eing 2ade +6/0,, the ground upon which it is was 2ade proves to )e +6@;+6D0D (,ection 1C()- Thus# if the insurer accepts the a)andon2ent# it cannot raise any :uestion as to insufficiency of the for2 under ,ection 14B# ti2e for giving notice under ,ection 141# or right to a)andon under ,ection 1B$- T40 ;6/? 0AC0PTI;6 T406 is under ,ection 1C( when the ground is unfounded which is defined in ,ection 14(# andE or as related to ,ection 14C(() ;n an accepted a)andon2ent involving a ship# @>0ID4T.D0 earned previous to the loss )elongs to the insurer of the @>0ID4T.D0# that su)se:uently earned )elongs to the insurer of the ,4IP (,ection 1CB)- 01a2ple3 The conte2plated voyage for the transport of cargo is fro2 Point A to Point ?- In )etween# a loss occurs and the ship is a)andoned- The freightage already earned fro2 Point A until the point of loss# )elongs to the insurer of the freightage- If the ship is su)se:uently repaired# and continues on to point ?# the freightage due )elongs to the insurer of the ship(B) I@ .F.6D;6506T I, 6;T .CC0PT0D despite its validity# the insurer is lia)le upon an .CT+./ T;T./ /;,,# deducting fro2 the a2ount any proceeds of the thing insured that 2ay have co2e to the hands of the insured (,ection 1C4)- This is due to the fact that under ,ection 14$ which provides that if notice is properly given# it does not pre*udice the insured# if the I6,+>0> refuses to accept the a)andon2entI@ .F.6D;6506T I, 6;T 5.D0 ;> ;5ITT0D The fact that a)andon2ent is not 2ade or is o2itted does not pre*udice the insured as he 2ay nevertheless recover his .CT+./ /;,, (,ection 1CC) /I.FI/IT? @;> .=0>.D0, .=0>.D0 D0@I60D < is any e1traordinary or accidental e1pense incurred during the voyage for the preservation of the vessel# cargo# or )oth .6D all da2ages to the vessel or cargo fro2 the ti2e it is loaded and the voyage co22enced until it ends and the cargo is unloadedII6D, ;@ .=0>.D0, .>03 (a) P.>TIC+/.> ;> ,I5P/0 .=0>.D0 is a da2age or e1pense caused to the vessel or cargo which has 6;T I6+>0D to the C;55;6 F060@IT and P>;@IT of all P0>,;6, interested in the C.>D; or the =0,,0/-

This da2age or e1pense is )orne ordinarily )y the owner of the vessel or cargo that gives rise to the e1penses or suffered the da2age- 01a2ples3 Da2age sustained )y a cargo fro2 the ti2e it is loaded to the ti2e it is unloaded ;> additional e1penses that are incurred )y the vessel fro2 the ti2e it puts out to sea until it reaches its destination ()) D060>./ ;> D>;,, .=0>.D0 is an e1pense or da2age suffered deli)erately in order to save the vessel or its cargo or )oth fro2 a >0./ or I6;H6 ris7- T4+,# all persons having an interest in the =0,,0/ and C.>D; or )oth at the occurrence of the .=0>.D0 shall contri)ute- 01a2ple3 "ettisoning of cargo., . >+/0# H406 IT 4., F006 .D>00D T4.T .6 I6,+>.6C0 +P;6 . P.>TIC+/.> T4I6D ;> C/.,, ;@ T4I6D, ,4.// F0 @>00 @>;5 P.>TIC+/.> .=0>.D0# a 2arine insurer is not lia)le for a particular average loss 6;T D0P>I=I6D T40 I6,+>0D ;@ T40 P;,,0,,I;6# .T T40 P;>T ;@ D0,TI6.TI;6# of the whole such thing# or class of things# even though it )eco2es entirely worthless# F+T such insurer is lia)le for his proportion of all general average loss assessed upon the thing insured (,ection 1B6) I6 C.,0 ;@ . D060>./ .=0>.D0 /;,, The insurer is lia)le for the loss falling upon the insured# through a contri)ution in respect to the thing insured when re:uired to )e 2ade )y hi2 towards a general average loss called for a peril insured against F+T lia)ility is li2ited to the proportion of the contri)ution attaching to his policy value where this is less than the contri)uting value of the thing insured (,ection 164)- 50.6I6D that the insured can hold his insurer lia)le for his contri)ution up to the value of the policy>ID4T ;@ ,+F>;D.TI;6 Hhen a person insured in a contract of 2arine insurance has a de2and against the others for C;6T>IF+TI;6# 40 5.? C/.I5 T40 H4;/0 /;,, @>;5 4I, I6,+>0> su)rogating the insurer to his own right to contri)ution F+T no such clai2 can )e 2ade upon the insurer if (a) there is separation of the interest lia)le to contri)ution- 01a2ple3 Hhen the cargo lia)le for contri)ution has )een re2oved fro2 the vessel# 6;> ()) when the insured having the right and opportunity to enforce contri)ution fro2 others# has 60D/0CT0D ;> H.I=0D the e1ercise of the right (,ection 16C)- 50.6I6D that the insured has a choice of recovery on the happening of a general average loss- They are3 (a) enforcing the contri)ution against interested parties# or ()) clai2ing fro2 the insurer- If it )e the latter# su)rogation ta7es place50.,+>0 ;@ I6D056IT? I6 5.>I60 I6,+>.6C0 (1) I@ T40 P;/IC? I, =./+0D (a) . valuation in the policy of 2arine insurance is conclusive )etween the parties thereto in the ad*ust2ent of either a partial or total loss# if the insured has so2e interest at ris7 and there is no fraud on his part- If there is fraud in valuation# it

06TIT/0, T40 I6,+>0> T; >0,CI6D ., IT I, .6 0AC0PTI;6 ., T; C;6C/+,I=060,, (,ection 1C6) If however# hypothecated )y )otto2ry or respondentia < F0@;>0 I6,+>.6C0 .6D HIT4;+T I6;H/0DD0 ;@ T40 P0>,;6 ,0C+>I6D IT < he 2ay show the real value- 01a2ple3 a person purchases a vessel su)*ect to )otto2ry )ut he is not aware of it # he 2ay upon a loss show the real value of the vessel- The insurer cannot rescind()) .n Insurer is lia)le upon a partial loss < ;6/? @;> ,+C4 P>;P;>TI;6 ;@ T40 .5;+6T I6,+>0D F? 4I5 < as the loss )ears to the whole interest of the insured (,ection 1C%)- The effect is that the insured is dee2ed a co!insurer if the value of the insurance is less than the value of the property- T4I, .PP/I0, 0=06 I6 T40 .F,06C0 ;@ . ,TIP+/.TI;6 I6 C;6T>.CT .6D I, ./,; I6;H6 ., T40 .=0>.D0 C/.+,0- 01a2ple3 . vessel valued at P4P C # - is insured for P4P 4 # - - The vessel is da2aged to the e1tent of P4P ( # - - The insurer is lia)le not for the P4P ( # )ut only for P4P 16 # - - The for2ula )eing3 Insurance 1 /oss Q /ia)ility =alue T40 ( >0G+I,IT0, @;> T40 .PP/IC.TI;6 ;@ T40 .=0>.D0 C/.+,03 (1) insurance is for less than actual value (() the loss is partial 6;T03 That co!insurance e1ists in 5arine Insurance- In @ire Insurance# there is no co!insurance unless e1pressly stipulated (,ections 1%1E1%()- In /ife Insurance# there is none also as value is fi1ed in the policy (,ection 1&B) 6;T0 ./,;3 That ,ection 1C% is further :ualified )y ,ection 166# which provides3 That I6 C.,0 ;@ . P.>TI./ /;,, ;@ T40 ,4IP ;> IT, 0G+IP506T the old 2aterials are to )e applied towards the pay2ent of the new .6D +6/0,, ,TIP+/.T0D I6 T40 P;/IC?# the insurer is lia)le only for (EB of the re2aining cost or repairs after the deduction 0AC0PT T4.T .6C4;>, .>0 P.ID I6 @+// (,ection 166)(c) In case profits are separately insured in a contract of 2arine insurance (,ee ,ection 1 C)# the insured can recover in case of a loss (.6D under ,ection 16 # there is a conclusive presu2ption of a loss fro2 the loss of the property out of which they were e1pected to arise# and the valuation fi1es their a2ount)# a proportion of such profits e:uivalent to proportion of the value of the property lost )ears to the value of the whole (,ection 1C&)- 01a2ple3 Doods are valued at P4P C # - # e1pected profits are P4P C # - - Doods suffer a partial loss of P4P 1 # - The insured can recover P4P 1 # - on the insurance over profitsInsurance of profits 1 loss Q .2ount >ecovera)le

=alue of Doods (d) In case of a valued policy on freightage or cargo# if only a part of the su)*ect is e1posed to the ris7# the valuation applies only in proportion to such part (,ection 1C$)- 01a2ple3 goods are valued at P4P C # - # if only P4P (C # are shipped and e1posed to the ris7# the valuation is reduced )y S- In case of a total loss# the insured can only de2and S of valuation or P4P (C # - I@ T40 P;/IC? I, ;P06 (a) The value of the ship is its value .T T40 F0DI66I6D ;@ T40 >I,I# including all articles or charges which add to its per2anent value or which are necessary to prepare it for the voyage insured- 6ote3 The value at the ti2e it was )uilt or ac:uired is not the value that is 2aterial()) The value of the cargo is its actual cost to the insured# H406 /.D06 on )oard ;> where that cost cannot )e ascertained# its 5.>I0T =./+0 at the ti2e and place of /.DI6D# adding the charges incurred in P+>C4.,I6D .6D P/.CI6D it on F;.>D < F+T without reference to any /;,, incurred in raising 2oney for its purchase or any draw)ac7 on its e1portation or fluctuation of the 2ar7et at the port of destination or e1penses incurred on the way or on arrivalD>.HF.CI < govern2ent allowance upon duties on i2ported 2erchandise when the i2porter re!e1ports instead of selling it(c) =alue of freightage is the D>;,, @>0ID4T.D0# e1clusive of P>I5.D0# without reference to the cost of earning itP>I5.D0 < co2pensation paid )y the shipper to the 2aster of the vessel for his care and trou)le )estowed on the goods of the shipper# which he retains in the a)sence of a contrary stipulation with the owner of the vessel(d) The cost of insurance is in each case to )e added to the value thus esti2ated (,ection 161)I@ C.>D; I, I6,+>0D .D.I6,T P.>TI./ /;,, If it arrives at the port of destination in a D.5.D0D C;6DITI;6# the loss of the insured is dee2ed to )e the ,.50 P>;P;>TI;6 ;@ T40 =./+0 H4IC4 T40 5.>I0T P>IC0 .T T4.T P;>T ;@ T40 T4I6D ,; D.5.D0D F0.>, T; T40 5.>I0T P>IC0 IT H;+/D 4.=0 F>;+D4T I@ ,;+6D (,ection 16()- 5eaning if reduction in value is 1EC# then a2ount of recovery on the insurance is also 1EC-

The for2ula is3 (a) 5ar7et Price in sound state less 5ar7et Price in da2aged state e:uals >eduction in =alue()) >eduction in =alue divided )y 5ar7et Price in sound state 2ultiplied with the .2ount of Insurance e:uals the .2ount of >ecovery C;6TI6+.TI;6 ;@ 50.,+>0 ;@ I6D056IT? >0D.>D/0,, ;@ H40T40> P;/IC? I, =./+0D ;> ;P06 (() .n insurer is lia)le (a) for all the e1penses attendant upon a loss that forces the ship into port to )e repaired- These refer to e1penses for repairing the ship due to da2ages attri)uta)le to perils insured against# as well as other e1penses such as launching# towing# raising and navigating the vessel- These e1penses are also called P;>T ;@ >0@+D0 0AP06,0,- ()) If so stipulated# that the insured shall /.F;> for recovery of the property insured# the insurer is lia)le for e1penses incurred there)y- 01a2ple3 Hhen the vessel is unlawfully detained- This is also 7nown as the ,+0 .6D /.F;> C/.+,0- In either case# said e1penses are to )e added to a T;T./ /;,,# if that afterwards occurs (,ection 16B)-

FIRE INSURANCE H4.T I, I6C/+D0D I6 @I>0 I6,+>.6C0 Insurance against fire includes loss or da2age due to /ID4T6I6D# HI6D,T;>5# T;>6.D;# 0.>T4G+.I0 ;> ;T40> .//I0D >I,I, when such ris7s are covered )y e1tensions to the fire insurance policy or under separate policies (,ection 16%)- 4ence# while it is not li2ited to loss or da2age due to fire# coverage as to other ris7s is not auto2atic@I>0 D0@I60D In insurance# it is defined as the active principle of )urning# characteri9ed )y heat and light co2)ustion- Co2)ustion without visi)le light or glow is not fire ( 01a2ple3 Da2age caused )y s2o7e fro2 a la2p when no ignition occurred outside the la2p) T; .//;H >0C;=0>?# it 2ust )e the pro1i2ate cause of the da2age or loss .6D the fire 2ust )e 4;,TI/0 (If it (a) )urns at a place where it is not intended to )urn ()) starts as a friendly fire )ut )eco2es hostile if it should escape fro2 the place where it is intended to )urn and )eco2es uncontrolla)le (c) is a friendly fire which )eco2es hostile )y not escaping fro2 its proper place )ut )ecause of the unsuita)le 2aterial used to light it and it )eco2es inherently dangerous and uncontrolla)le) as opposed to @>I06D/? @I>0 (one that )urns in a place where it is intended to )urn and

e2ployed for the ordinary purpose of lighting# heating or 2anufacturing) F+T the policy itself 2ay li2it or restrict coverage to losses under ordinary conditions )ut not those due to e1tra!ordinary circu2stances or a)nor2al conditions li7e war# invasion# re)ellion# civil war or si2ilar causes- In these cases recovery is still possi)le./T0>.TI;6 D0@I60D Is a change in the use or condition of a thing insured fro2 that to which it is li2ited )y the policy# 2ade without the consent of the insurer# )y 2eans within the control of the insured# and increasing the ris7# which entitles the insurer to rescind the contract of insurance (,ection 16&)@ro2 the foregoing definition# the re:uisites 2ust )e present to constitute an alteration so as to allow the rescission of the contract# to wit3 (a) The use or condition of the thing insured is specifically li2ited or stipulated in the policy F+T under ,ection 1% # the contract of insurance is not affected )y an act of the insured ,+F,0G+06T to the e1ecution of the policy# which does not violate its provisions# even though it increases the ris7 and is the cause of the loss01a2ple3 (1) If the insured stored thinner# paints and varnish- . fire su)se:uently occurs and there is no e1press prohi)ition as to storage of such ite2s# even if the ris7 is increased# the insurer is still lia)le (F.C4>.C4 v- F>ITI,4 .,,+>.6C0#1% Phil CCC)# ;> (() The policy states that the 1 st floor is unoccupied# it is later occupiedThere is no alteration that entitles the insurer to rescind# the description of the house cannot )e said to )e a li2itation as to use (4;DD0, v- C.PIT./ I6,+>.6C0 (6 ;-D- (((%) ()) (c) There is an alteration in the said use or condition The alteration is without the consent of the insurer-

(d) The alteration is 2ade )y 2eans within the insuredJs control- If the alteration )e )y accident or 2eans )eyond the control of the insured# the re:uisite is not 2et01a2ple3 The alteration is 2ade )y a tenant with the consent or 7nowledge of the insured# the insurer can rescind- If the alteration was underta7en )y the tenant without the consent or 7nowledge of the insured# the insurer cannot rescind(e) The alteration increases the ris7 of loss F+T under ,ection 16$ any alteration in the use or condition of the thing insured fro2 that to which is li2ited )y the policy# which does not increase the ris7 does not affect the contract-

F+T T40>0 5+,T 6;T F0 .6? =I;/.TI;6 ;@ T40 C;6T>.CT ;T40>HI,0T40 F.,I, @;> >0,CI,,I;6 I, T4.T pay2ent of the pre2iu2 is )ased on the ris7 as assessed at the ti2e of the issuance of the policy when the ris7 is increased without a corresponding increase in pre2iu2# it is as if no pre2iu2 is paid50.,+>0 ;@ I6D056IT? I6 @I>0 I6,+>.6C0 In an ;P06 P;/IC?# it is the e1pense it would )e to the insured at the ti2e of the co22ence2ent of the fire to replace the thing lost or in*ured in the condition in which it was at the ti2e of the in*ury- In a =./+0D P;/IC?# it is the sa2e as in 2arine insurance# the valuation as agreed upon )y the parties is conclusive in the ad*ust2ent of either a partial or total loss in the a)sence of fraud (,ection 1%1)4;H I, T40 =./+.TI;6 5.D0 (1) Hhenever the insured would li7e to have a valuation stated in a policy insuring a )uilding or structure against fire# it 2ay )e 2ade )y an independent appraiser# who is paid )y the insured and the value 2ay then )e fi1ed )etween the insurer and the insured(() ,u)se:uently# the clause is then inserted in the policy that said valuation has thus )een fi1ed(B) In case of loss# P>;=ID0D there is no change increasing the ris7 without the consent of the insurer or fraud on the part of the insured# the insurer will pay the whole a2ount so insured and stated in the policy is paid- If it is a P.>TI./ /;,,# the whole a2ount of the partial loss is paid- In case there are ( or 2ore policies# each shall contri)ute pro!rata to the total or partial loss F+T the lia)ility of the insurers cannot )e 2ore than the a2ount stated in the policy(4) ;> the parties 2ay stipulate that instead or pay2ent# the option to repair# re)uild or replace the property wholly or partially da2aged or destroyed shall )e e1ercised (,ection 1%()6o policy of @ire insurance shall )e pledged# hypothecated or transferred to any person# fir2 or co2pany that acts as agent for or otherwise represents the issuing co2pany# such shall )e void and of no effect insofar as it 2ay affect other creditors of the insured (,ection 1%B)-

CASUALTY INSURANCE C.,+./T? I6,+>.6C0 D0@I60D Denerally# it is one that covers loss or lia)ility arising fro2 an accident or 2ishap 0AC/+DI6D T4;,0 T4.T @.// 0AC/+,I=0/? HIT4I6 ;T40> T?P0, ;@ I6,+>.6C0 /II0 @I>0 ;> 5.>I60- It includes 02ployerJs lia)ility# wor72enJs co2pensation# pu)lic lia)ility# 2otor vehicle lia)ility# plate glass lia)ility# )urglary and theft #personal accident and health insurance as written )y non!life co2panies# and other su)stantially si2ilar insurance (,ection 1%4)D0@I6ITI;6, 02ployerJs lia)ility < is insurance o)tained )y the e2ployer against lia)ility to an e2ployee for da2ages caused or arising fro2 in*uries )y reason of his e2ploy2ent Hor72enJs co2pensation < is insurance secured )y an e2ployer for the )enefit of his e2ployees and la)orers for loss resulting fro2 in*uries# disa)le2ent# or death through industrial accident# casualty# or disease in connection with their e2ploy2ent6;T0 that 2ost if not all types of this insurance is underwritten )y the D,I, or the ,,,Pu)lic lia)ility < is insurance against lia)ility of the insured to pay da2ages for accidental )odily in*ury or da2age to property arising fro2 an activity of the insured defined in the policy5otor vehicle lia)ility < is insurance against loss or in*ury arising fro2 the use of a 2otor vehicle )y its owner as opposed loss or da2age to the vehicle itself- Coverage for )oth 2ay however )e contained in one policyPlate glass < is insurance that inde2nifies the insured against loss caused )y the accidental )rea7ing of plate glass# windows# doors or show casesFurglary and Theft < is insurance against loss of property through )urglary or theft Personal accident < is insurance against e1pense# loss of ti2e and suffering fro2 accidents that cause a physical in*ury4ealth < is insurance for inde2nity for e1penses or loss occasioned )y sic7ness or diseaseSURETYSHIP D0@I60D .n agree2ent where)y a party called the surety guarantees the perfor2ance )y another party called the P>I6CIP./ or ;F/ID;> of an o)ligation or underta7ing in favor of a Brd party called the o)ligee (,ection 1%C)-

I6C/+D0, < official recogni9ances# )onds or underta7ings issued )y any co2pany under .ct 6o- CB6# as a2ended )y .ct 6o- (( 6 (D;=0>6506T T>.6,.CTI;6, < F? .+T4;>IL0D C;5P.6I0,) H4.T I, T40 /I.FI/IT? ;@ T40 ,+>0T? It is *oint and several (solidary) with the ;F/ID;> )ut li2ited to the a2ount of the F;6D .6D D0T0>5I60D ,T>ICT/? F? T40 T0>5, ;@ T40 C;6T>.CT I6 >0/.TI;6 T; T40 P>I6CIP./ C;6T>.CT F0TH006 ;F/ID;> < ;F/ID00 (,ection 1%6)I, . ,+>0T?,4IP C;6T>.CT =./ID .6D FI6DI6D H40>0 T40 P>05I+5 4., 6;T ?0T F006 P.ID Denerally# pay2ent of the pre2iu2 is a condition precedent- 4ence the )ond is not valid- .n 0AC0PTI;6 is when it is issued and accepted )y the o)ligee# it is valid despite non pay2ent of the pre2iu2 (,ection 1%%) H4.T ;T40> /.H, D;=0>6 . ,+>0T?,4IP C;6T>.CT I6 T40 .F,06C0 ;@ ,P0CI@IC P>;=I,I;6,# CI=I/ C;D0 P>;=I,I;6, .PP/? I6 . ,+PP/0T;>? C4.>.CT0> I@ 60C0,,.>? T; I6T0>P>0T T40 C;6T>.CT P>;=I,I;6, (,ection 1%&) DI,TI6D+I,40D HIT4 D+.>.6T? (1) . surety assu2es lia)ility as a regular party to the agree2ent# a guarantorJs lia)ility depends on an independent agree2ent to pay if pri2ary de)tor fails to pay (() . surety is pri2arily lia)le# a guarantor is secondarily lia)le (B) a surety is not entitled to 0A4.+,TI;6# a guarantor is entitled to 0A4.+,TI;6 LIFE INSURANCE D0@I60D Is insurance on hu2an lives and insurance appertaining thereto or connected therewith (,ection 1%$) H406 I, IT P.?.F/0 .n insurance upon life 2ay )e 2ade paya)le on (1) death of the person# or (() his surviving a specified period# or (B) or otherwise# contingently on the continuance or cessation of life-

C;55;6 II6D, H4;/0 /I@0E;>DI6.>? /I@0E,T>.ID4T /I@0 < pre2iu2s are paya)le for life and the insurer agrees to pay the face value upon the death of the insured/I5IT0D P.?506T /I@0 < insured pays pre2iu2s for a li2ited period after which he stops with a guarantee )y the insurer that upon death the face a2ount is to )e paid < if death occurs while pay2ent is not co2plete < )eneficiary receives face a2ountT0>5 P;/IC? < Insurer is lia)le only upon death of the insured within the agreed ter2 or period- If insured survives the insurer is not lia)le06D;H506T < protection is for a li2ited period# if the insured is still alive at the end of the period# the value of the policy is paid to hi2- If he dies )efore the end of the period# it is paid to the )eneficiaries.66+IT? < where the insured or a na2ed personEs is paid a su2 or su2s periodically during life or a certain period (6;T0 that C;6T>.CT, @;> T40 P.?506T of endow2ent or annuities are C;6,ID0>0D ., /I@0 I6,+>.6C0 C;6T>.CT,) Distinguishing /ife Insurance fro2 Pay2ent of .nnuity- In the for2er# it is paya)le upon the death of the insured# while in the latter# it is paya)le during the lifeti2e of the annuitant- In the for2er# the pre2iu2 is paid in install2ents# while in the latter# annuitant pays a single pre2iu2- In the for2er# there is lu2p su2 pay2ent upon death# while in the latter# annuities are paid until death6;T0 T4.T ,ection 1& also provides that as far as a 2inor# who is the insured or a )eneficiary in an insurance contract# in the a)sence or incapacity of a "+DICI./ D+.>DI.6# the father# in default# the 2other# 5.? .CT I6 F04./@ ;@ T40 5I6;> HIT4;+T 600D ;@ F;6D ;> C;+>T .+T4;>IT? when it involves the e1ercise of any right under the policy# to include )ut not li2ited to o)taining a policy loan# surrendering the policy# receiving the proceeds of the policy and giving the 2inorJs consent to any transaction on the policy P>;=ID0D the interest of the 2inor does not e1ceed P4P ( # - H4.T >I,I, .>0 C;=0>0D < (1) Denerally < all causes of death are covered +6/0,, e1cluded )y law# )y the policy or pu)lic policy- 01a2ples3 Fy law! )eneficiary is the principal# acco2plice or accessory in )ringing death of the insured- Fy the policy! when it does not cover assault# 2urder or in*uries inflicted intentionally )y a B rd person F+T where the insured is not the intended victi2# insurer is lia)le (Calanoc vs- C.# $& Phil %$) Hhat 2ust )e considered is that death or in*ury is not the natural or pro)a)le result of the insuredJs voluntary act (@in2an Deneral .ssurance Corporation vs- C.# (1B ,C>.

4$B) as opposed to an act of the insured to confront )urglars (Fiagtan vs- Insular /ife .ssurance Co2pany# 44 ,C>. C&)- Fy pu)lic policy! when the insured is e1ecuted for a cri2e co22itted(() ,+ICID0# if co22itted after the policy has )een in force for a period of two years fro2 date of issue or last reinstate2ent unless policy provides a shorter period F+T it is nevertheless co2pensa)le if co22itted in the state of insanity regardless of date of co22ission (,ection 1& .) I, . /I@0 I6,+>.6C0 P;/IC? T>.6,@0>.F/0 ;> .,,ID6.F/0 ?es# it 2ay pass )y transfer# will or succession to any person# whether he has insura)le interest or not (,ection 1&1)- 0@@0CT# the person to who2 it is transferred 2ay recover upon it whatever the insured 2ight have recovered6;T0 while there is no need for the assigneeEtransferee to have insura)le interest# it should not )e used to circu2vent the law prohi)iting insurance without insura)le interest- T4+,# an assign2ent C;6T05P;>.60;+, with I,,+.6C0 2ay invalidate the policy unless 2ade in good faithI, 6;TIC0 T; T40 I6,+>0> ;@ T>.6,@0> ;> F0G+0,T >0G+I>0D It is not necessary to preserve the validity of the policy +6/0,, T40>0F? 0AP>0,,/? >0G+I>0D (,ection 1&() I, T40 C;6,06T ;@ T40 F060@ICI.>? >0G+I>0D ?es# if he is designated as an irrevoca)le )eneficiary as he has ac:uired a vested rightH4.T I, T40 50.,+>0 ;@ I6D056IT? I6 /I@0 I6,+>.6C0 +6/0,, the interest of a person insured is suscepti)le of pecuniary esti2ation# the a2ount stated or specified in the policy is the 2easure of inde2nity (,ection 1&B)406C0 a life insurance policy has )een held to )e a =./+0D P;/IC?BUSINESS OF INSURANCE ;>D.6IL.TI;6# C.PIT./IL.TI;6 .6D .+T4;>IL.TI;6 >0G+I>0506T, @;> . C0>TI@IC.T0 ;@ .+T4;>IT? @>;5 T40 I6,+>.6C0 C;55I,,I;6 The re:uire2ents for a certificate of authority are3 (a) :ualified )y Philippine /aws to transact insurance )usiness ()) has a na2e that is not in anyway si2ilar to another

co2pany (c) if organi9ed as a stoc7 corporation# it should have a paid up capital of no less than P4P C# # (d) If it is organi9ed as a 2utual co2pany (one whose capital funds are not contri)uted )y stoc7holders )ut )y policy holders) it 2ust have availa)le cash assets of at least P4P C# # a)ove all lia)ilities for losses reported# e1penses# ta1es# legal reserves and reinsurance of all outstanding ris7s# and the contri)uted surplus fund e:ual to the a2ounts re:uired of stoc7 corporations (P4P 1# # - if a life insurance co2pany or P4P C # - # if a non!life insurance co2pany)- If a foreign insurance co2pany# it 2ust appoint a resident agent# deposit securities and 2aintain a legal reserve (,ections 1&4! 1$B)5.>DI6 ;@ ,;/=06C? The 2argin of solvency is the e1cess of the value of insurance co2panyJs ad2itted assets 0AC/+,I=0 of its paid up capital- In case of a D;50,TIC I6,+>.6C0 C;5P.6? and the e1cess of the value of its ad2itted assets in the Philippines e1clusive of security deposits over the a2ount of its lia)ilities# unearned pre2iu2s# and reinsurance reserves in the Philippines (,ection 1$4)The re:uired 2argin is in case of life insurance co2panies is TH; P0>C06T ((O) of the total a2ount of its insurance in force as of the preceeding calendar year on all policies e1cept ter2 insurance .6D in case of non life insurance co2panies# at least T06 P0>C06T (1 O) of total a2ount of its net pre2iu2 during the proceeding calendar year F+T I6 6; C.,0 T; F0 /0,, T4.6 P4P C # - - I@ 6;T 50T# the insurance co2pany is (a) not per2itted to ta7e on any new ris7 and no dividends can )e declared (,ection 1$C)-

COMPULSORY MOTOR VEHICLE LIABILITY INSURANCE

C;6C0PT ;@ C;5P+/,;>? 5;T;> =04IC/0 /I.FI/IT? I6,+>.6C0 It is to provide protection or coverage to answer for )odily in*ury or property da2age that 2ay )e sustained )y another arising fro2 the use of a 2otor vehicle- P/0.,0 6;T0 T4;+D4 that what is now co2pulsory is death or )odily in*ury arising fro2 2otor vehicle accidents ., P0> .6 .506D506T T; T40 I6,+>.6C0 C;D0 F? PD 1&14 and PD14CC )rought a)out )y insurance losses due to padded clai2s for property da2age- 406C0# property da2age is now optional4;H IT, C;5P+/,;>? 6.T+>0 I, 06@;>C0D The co2pulsory nature of the insurance is enforced )y prescri)ing that any land transportation operator (ownerEs or 2otor vehicles for transportation of passengers for co2pensation# including school )uses) or owner of a 2otor vehicle (actual legal owner of a 2otor vehicle in whose na2e the vehicle is registered with the /T;) would )e considered as unlawfully operating a 2otor vehicle (is any vehicle as

defined in ,ec (B) >. 41B6 which is propelled )y any power other than 2uscular power using pu)lic highways with e1ceptions (a) road rollers# holley cars# street sweepers# sprin7les# lawn 2overs# )ulldo9ers# graders# for7lifts# a2phi)ian truc7s# or cranes not used on pu)lic highways ())Those that ran on rails or trac7s (c) Tractor# trailers (when propelled or intended to )e propelled )y an attach2ent to a 2otor vehicle is classified as a 2otor vehicle without power rating)# traction engines of all 7inds used e1clusively for agricultural purposes) +6/0,, there is a (a) policy of insurance (contract of insurance against passenger or B rd party lia)ility for death or )odily in*ury arising fro2 2otor vehicle accidents)#or ()) guaranty in cash# or (c) surety )ond# to I6D056I@? T40 D0.T4 ;> I6"+>? T; . T4I>D P.>T? other than a passenger# e1cluding a 2e2)er of the household# or a 2e2)er of the fa2ily of a 2otor vehicle owner or lane transportation operator or his e2ployee in respect to death# )odily in*ury or da2age to property arising out of and in the course of e2ploy2ent) ;> P.,,06D0> (any fare paying person )eing transported or conveyed in and )y 2otor vehicle for transportation of passengers for co2pensation# including persons e1pressly authori9ed )y law or )y the vehicleJs operator or his agents to ride without fare) .>I,I6D @>;5 T40 +,0 T40>0;@ (,ections B%B# B%4)C;5P/I.6C0 )y the 2otor vehicle owner or the land transportation operator is 2onitored as the /and Transportation ;ffice shall not allow registration or renewal of registration without co2pliance with ,ection B%4 (,ection B%6)0AT06T ;@ T40 /I.FI/IT? C;=0>.D0 0very insurance policy# surety or cash deposit re:uired )y ,ection B%4 shall co2ply with the 2ini2u2 li2its prescri)ed under ,ection B%%- (a) if a /and Transportation ;perator < it is P4P 1(# - per passenger# plus P4P C # - for vehicles with capacity of (6 or 2ore passengers ;> P4P 4 # - for vehicles with capacity of 1( to (C passengers ;> P4P B # for vehicles with capacity of 6 to 11 passengers# ;> P4P C# - per passenger for vehicles with capacity of C or less passengers P>;=ID0D# that if a cash deposit or surety )ond is posted with the Co22issioner# it shall )e resorted to in case of accidents# the inde2nities for which H0>0 6;T ,0TT/0D )y the /and Transportation ;perator# and in that event# said deposit of surety )ond shall )e replenished or surety reposted or restored within 6 days fro2 i2pair2ent or e1piration ;T40>HI,0# he will )e re:uired to get an insurance policy- 6;T0 ./,; that the cash deposits 2ay )e invested in readily 2ar7eta)le govern2ent )onds and E or securities )y the Co22issioner ()) If a 5otor =ehicle ;wner for a Fanta2 or /ight Car! P4P ( # - # a 4eavy Car!P4P B # - - @or other private vehicles Tricyles E ,cooters E5otorcycles < P4P 1(# - # =ehicles with unladed 2ight of (6 7ilos or less!P4P ( # - # if over (6 1 7ilos )ut not over B$B 7ilos < P4P B # - # if over B#$B 7ilos < P4P C # - -

DI,TI6D+I,40D @>;5 ;H6 D.5.D0 C;=0>.D0 .6D C;5P>0406,I=0 5;T;> =04IC/0 I6,+>.6C0 Third Party /ia)ility answers for lia)ilities arising fro2 death or )odily in*ury to B rd persons or passengers;wn Da2age Insurance answers for rei2)urse2ent of the cost of repairing the da2age to vehicle of the insuredCo2prehensive Insurance answers for all lia)ilitiesEda2ages arising fro2 the useEoperation of a 2otor vehicle# it includes Third Party# ;wn Da2age# Theft and Property Da2ageH406 D;0, T40 /I.FI/IT? ;@ T40 I6,+>0> .CC>+0 In an insurance policy that directly insures against lia)ility# the insurerJs lia)ility accrues i22ediately upon the occurrence of the in*ury upon which lia)ility depends# and does not depend on the recovery of *udg2ent )y the in*ured party against the insured- 4ence# there is no need for the insured to wait for a decision of the court finding hi2 guilty of rec7less i2prudence- The occurrence of an in*ury for which the insured 2ay )e lia)le i22ediately gives rise to insurer lia)ility ( ,hafer vs"udge# 16% ,C>. B&6)- In fact a third party can )ring a clai2 or an action directly against the insurer as the general purpose of the statute is to protect the in*ured against the insolvency of the insured6.T+>0 ;@ T40 /I.FI/IT? ;@ T40 I6,+>0> It is not solidary with the insured- The lia)ility of the insurer is )ased on contract# while that of the insured is )ased on tort- (5alayan Insurance v- C. 16C ,C>. CB6) H4; C.6 I,,+0 P;/IC? ;> ,+>0T? F;6D Those authori9ed )y the co22issioner in the list furnished to /and Transportation ;ffice (,ection B%C)- If the 5otor =ehicle ;wner or the /and Transportation ;perator is una)le to o)tain or is unreasona)ly denied the policy of insurance# they will )e re:uired to show proof of a cash deposit with the co22issioner# )ut the authority of the insurance co2pany to engage in casualty or surety lines of )usiness shall )e withdrawn i22ediately (,ection B%$) C.6C0//.TI;6 ;@ T40 P;/IC? F? T40 I6,+>0> # re:uires written notice to 5otor =ehicle ;wnerE/and Transportation ;perator at least 1C days prior to intended effective date- I@ ,;

C.6C0//0D# the /and Transportation ;ffice 2ay order the i22ediate confiscation of license plates +6/0,, it receives new valid insurance E surety E proof of cash deposit or revival )y endorse2ent of the cancelled policy (,ection B& )F? T40 I6,+>0D # the 5otor =ehicle ;wnerE/and Transportation ;perator shall secure a si2ilar policy or surety )efore the cancelled policy E surety ceases to )e effective or 2a7e a cash deposit .6D file the sa2e or proof thereof with the /and Transportation ;ffice (,ection B&1)0@@0CT ;@ . C4.6D0 I6 ;H60>,4IP ;> C4.6D0 I6 06DI60 There is no need to issue a new policy until the ne1t date of registration P>;=ID0D# the insurer shall agree to continue the policy and such change shall )e indicated in a second duplicate which is filed with the /and Transporation ;ffice (,ection B&();T40> P>;4IFIT0D .CT, (1) The 5otor =ehicle ;wner or the /and Transportation ;perator cannot re:uire driverEsEe2ployees to contri)ute to the pay2ent of the pre2iu2 (,ection B&6) (() .ny govern2ent office or agency having the duty to i2ple2ent the provisions# official or e2ployee thereof shall not act as an agent in procuring the policy or surety )ond and in no case shall the co22ission of the procuring agent e1ceed 1 O of the pre2iu2s paid (,ection B&%)P06./TI0, @;> =I;/.TI;6 The penalties for a violation )y the 5otor =ehicle ;wner or the /and Transportation ;perator is a fine of not less than P4P C - nor 2ore than P4P 1# and E or i2prison2ent for not 2ore than 6 2onths- If a /and Transportation ;perator violates ,ection B%% (2ini2u2 li2its of coverage) it is sufficient cause for revocation of a certificate of pu)lic convenience (,ection B&&)If the violation is co22itted )y a corporation E association or govern2ent office E entity# the e1ecutive officerEs who shall have 7nowingly per2itted or failed to prevent the violation shall )e held lia)le as principals (,ection B&$)P.?506T ;@ C/.I5, . clai2 for pay2ent is to )e filed without any unnecessary delay# within 6 2onths fro2 the date of accident )y giving written notice setting forth the nature# e1tent and duration of the in*uries as certified )y a duly licensed physician (,ection B&4)-

0@@0CT ;@ @.I/+>0 T; @I/0 C/.I5 HIT4I6 P0>I;D The failure to file a clai2 will )e dee2ed a waiver- If a clai2 is filed )ut denied# an action 2ust )e )rought within 1 year fro2 date of denial with the Insurance Co22issioner or the Court# otherwise the right of action will )e dee2ed as having prescri)edH4.T ,4.// I6,+>.6C0 C;5P.6? D; +P;6 @I/I6D ;@ T40 C/.I5 It shall forthwith ascertain the truth and e1tent of the clai2 and 2a7e pay2ent within C wor7ing days after reaching an .D>00506T- If 6; .D>00506T I, >0.C40D# IT 5+,T 60=0>T40/0,, P.? T40 6; @.+/T I6D056IT? (,ection B%&) without P>0"+DIC0 T; . @+>T40> P+>,+IT ;@ T40 C/.I5 < I6 H4IC4 C.,0 40 ,4.// 6;T F0 >0G+I>0D ;> C;5P0//0D T; 0A0C+T0 . G+IT C/.I5 ;> >0/0.,0 @>;5 /I.FI/IT?- 6ote though that in case of dispute as to enforce2ent of policy provisions# the ad*udication shall )e within the original and e1clusive *urisdiction of the co22issioner su)*ect to ,ection 416# which provides for concurrent *urisdiction )ut the filing with the Insurance Co22issioner shall preclude filing with the court (,ection B&C)H4.T I, 6; @.+/T I6D056IT? . no fault inde2nity clai2 is a clai2 for pay2ent for death or in*ury to a passenger or third party without 60C0,,IT? ;@ P>;=I6D @.+/T ;> 60D/ID06C0- This is paya)le )y the insurer P>;=ID0D (a) inde2nity in respect of one person shall not e1ceed P4P C# - ()) the necessary proof of loss under oath to su)stantiate the clai2 is su)2itted# these are3 police report of accident and either the death certificate and sufficient evidence to esta)lish the payee ;> the 2edical report and evidence of 2edical or hospital dis)urse2ent in respect of which refund is 2ade.D.I6,T H4;5 I, T40 P.?506T C/.I50D . clai2 under the no fault inde2nity clause 2ay )e 2ade against one 2otor vehicle insurer only as follows3 (a) in case of an occupant of a vehicle! against the insurer of the vehicle in which the occupant is riding# 2ounting or dis2ounting fro2 ()) in any other case# fro2 the insurer of the directly offending vehicle (c) in all cases# the right of the party paying the clai2 to recover against the owner of the vehicle responsi)le for the accident shall )e 2aintainedI6T0>P>0T.TI;6 ;@ T40 .+T4;>IL0D D>I=0> C/.+,0 The authori9ed driver clause is interpreted to refer to the insured or any person driving on the order of the insured or with his per2ission P>;=ID0D# such person is

per2itted to operate a 2otor vehicle in accordance with our licensing laws or regulations and who is not otherwise dis:ualified6;T0 the following *urisprudence (1)If license is e1pired# person is not authori9ed to operate a 2otor vehicle (Tarco "r- v- Phil Duaranty < 1C ,C>. B1B)# (() Issued a Te2porary ;peratorJs Per2it or a Te2porary =ehicle >eceipt# a person is authori9ed to operate a 2otor vehicle# )ut if it has e1pired# it is as if he had no license (Dutierre9 v- Capital Insurance 1B ,C>. 61&# P0L. v- .li7pala# 16 ,C>. B1)# (B) . tourist with license )ut in the country for 2ore than $ days# is not authori9ed to operate a 2otor vehicle )ecause it is as if he has no license (,to7es vs- 5alayan 1(% ,C>. %66)# (4) . driverJs license that )ears all the ear2ar7s of a duly issued license is presu2ed genuine (C) a license is not necessary# where the insured hi2self is the driver (Paterno v- Pyra2id Insurance 161 ,C>. 6%%# 1$&6 F.>) ;T40> P>;=I,I;6, 1Chapter =II! 5utual Fenefit .ssociations (,0C- B$ - .ny society# association or corporation# without capital stoc7# for2ed or organi9ed not for profit )ut 2ainly for the purpose of paying sic7 )enefits to 2e2)er# or furnishing financial support to 2e2)ers while out of e2ploy2ent# or of paying to relatives of deceased 2e2)ers of fi1ed or any su2 of 2oney# irrespective of whether such ai2 or purpose is carried out )y 2eans of fi1ed dues# assess2ents# or voluntary contri)utions# or of providing# )y the issuance of certificates of insurance# pay2ent to its 2e2)ers of accident or life insurance )enefits# out of due or assess2ents collected fro2 the 2e2)ers# shall )e 7nown as a 2utual )enefit association within the intent of this Code- .ny society# association# or corporation principally organi9ed as a la)or union shall )e governed )y the /a)or Code notwithstanding any 2utual )enefit feature provisions in its charter as incident to its organi9ation-) and Trusts for Charita)le +se (,0C- 41 - The ter2 Mtrust for charita)le usesN within the intent of this Code# shall include# all real or personal properties or funds# as well as those ac:uired with the fruits or inco2e therefro2 or in e1change or su)stitution thereof# given to or received )y any person# corporation# association# foundation or entity# e1cept the 6ational Dovern2ent# its instru2entalities or political su)divisions# for charita)le# )enevolent# educational pious# religious# or other uses for the )enefit of the pu)lic at large or a particular portion hereof or for the )enefit of an indefinite nu2)er of persons-) (,ections B$6 to 41B) (Chapter =III! Insurance Co22issioner (,ection 414! .d2inistrative @unctions# ,ection 41C! Power to I2pose @inesE,uspensions! ,ection 41C# .d*udicatory Powers!6ote3 it is concurrent with courts )ut the filing with the co22issioner shall preclude civil courts fro2 ta7ing cogni9ance of a suit over the sa2e su)*ect 2atterDecisions are appeala)le to the C. within B days )y notice of appeal (,ection 416)-