I.

INSURER
a. Definition
The party who assumes or accepts the risk of loss and undertakes for a consideration to indemnify the
insured or to pay him a certain sum on the happening of a specified contingency or event. (De Leon)
Includes all partnerships, associations, cooperatives, or corporations, including GOCCs or entities
engaged as principals in the insurance business, excepting mutual benefit associations.
Person who undertakes to indemnify another.
o For a person to be called an insurance agent, it is necessary that he should perform the
function for compensation. (Aisporna vs. CA, 113 SCRA 459)
b. Who May Insure
i. Professional Reinsurer
Any entity (partnership, association, corporation) that transacts solely and exclusively
reinsurance business in the Philippines. (Sec. 288)
ii. Mutual Insurance Company
Section 268 provides that any domestic stock life insurance company doing business in
the Philippines may convert itself into an incorporated mutual life insurer. To that end it
may provide and carry out a plan for the acquisition of the outstanding shares of its
capital stock for the benefit of its policyholders, or any class or classes of its policyholders,
by complying with the requirements of Chapter III, Title 17 of the Insurance Code.
iii. Cooperatives
Sec. 190 expressly includes cooperatives in the entities included in the terms insurer or
insurance company. RA 9520 a.k.a. Phil. Coop. Code of 2008 provides:
"ART. 105. Cooperative Insurance Societies. Existing cooperatives may organize themselves into a
cooperative insurance entity for the purpose of engaging in the business of insuring life and property of
cooperatives and their members.
"ART. 106. Types of Insurance Provided. Under the cooperative insurance program established and
formed by the virtue of the provisions of this Code, the cooperative insurance societies shall provide its
constituting members different types of insurance coverage consisting of, but not limited to, life insurance
with special group coverage, loan protection, retirement plans, endowment, motor vehicle coverage, bonding,
crop and livestock protection and equipment insurance.
"ART. 107. Applicability of Insurance Laws. The provisions of the Insurance Code and all other laws and
regulations relative to the organization and operation of an insurance company shall apply to cooperative
insurance entities organized under this Code. The requirements on capitalization, investments and reserves of
insurance firms may be liberally modified upon consultation with the Authority and the cooperative sector,
but in no case may be requirement to be reduced to less than half of those provided for under the Insurance
Code and other related laws.
"ART. 108. Implementing Rules. The Insurance Commission and the Authority, in consultation with the
concerned cooperative sector, shall issue the appropriate rules and regulations implementing the provisions of
this Chapter."

c.

iv. Foreign Insurance Corporations

1. Requirements for a Foreign Corporation to engage in insurance business in the
Philippines
Certificate of Authority
SEC. 193 provides that no insurance company shall transact any insurance business in the
Philippines until after it shall have obtained a certificate of authority for that purpose
from the Commissioner upon application therefor and payment by the company
concerned of the fees. A certificate of authority is required because contracts of insurance
involve public interest and regulation thereof by the State is necessary.
i. Basic Qualifications
SEC. 192 provides that no corporation, partnership, or association of persons shall
transact any insurance business in the Philippines except as agent of a corporation,

partnership or association authorized to do the business of insurance in the Philippines,

unless: (1) possessed of the capital and assets required of an insurance corporation doing
the same kind of business in the Philippines and invested in the same manner; (2) nor
unless the Commissioner shall have granted it a certificate to the effect that it has
complied with all the provisions of law which an insurance corporation doing business in
the Philippines is required to observe.
ii. Term of the Certificate
Sec. 193 provides that the certificate of authority issued by the Commissioner shall expire
on the last day of December, three (3) years following its date of issuance, and shall be
renewable every three (3) years thereafter, subject to the companys continuing
compliance with the provisions of this Code, circulars, instructions, rulings or decisions
of the Commission.
II.

INSURED
a. Definition
The person who applied for and to whom an insurance policy is issued to cover his life, property or the
life of or property of other person/s in whose life or property he has insurable interest or liability to
other persons.
Insuredthe person whose life is insured
Assuredthe person who took out an insurance on the life of the insured. (Ownerthe person who
obtained the policy)
The party to be indemnified upon the concurrence of the loss. He must have capacity to contract,
must possess an insurable interest in the subject of the insurance and must not be a public enemy.
b. Who May be Insured
Capacity of Party Insured:
o Natural person:
He must be competent to make a contract.
Art. 1327. The following cannot give consent to a contract:
o Unemancipated minors;
o Insane or demented persons, and deaf-mutes who do not know
how to write. (1263a)
Art. 1328. Contracts entered into during a lucid interval are valid. Contracts
agreed to in a state of drunkenness or during a hypnotic spell are voidable. (n)
Art. 1329. The incapacity declared in Article 1327 is subject to the modifications
determined by law, and is understood to be without prejudice to special
disqualifications established in the laws. (1264)
o

Juridical person:
Art. 44. The following are juridical persons:
(1) The State and its political subdivisions;
(2) Other corporations, institutions and entities for public interest or purpose,
created by law; their personality begins as soon as they have been constituted
according to law;
(3) Corporations, partnerships and associations for private interest or purpose to
which the law grants a juridical personality, separate and distinct from that of
each shareholder, partner or member. (35a)
Art. 45. Juridical persons mentioned in Nos. 1 and 2 of the preceding article are
governed by the laws creating or recognizing them.

c.

Public enemy
A nation with whom the Philippines is at war and it includes every citizen or subject of such
nation.
See discussion in page 78 of de leon and p. 29 of other book
d. Minors
e. Spouses
f. Effect of death of owner of the policy
All rights, title and interest in the policy of insurance taken out by an original owner on the life or
health of the person insured shall automatically vest in the latter upon the death of the original
owner, unless otherwise provided for in the policy.

III.

BENEFICIARY
a. Definition
A person designated to receive proceeds of policy when risk attaches
b. Who may be beneficiaries
Any person in general can be a beneficiary.
Exception: The only persons disqualified from being a beneficiary are those not qualified to
receive donations under Art. 739. They cannot be named beneficiaries of a life insurance policy
by the person who cannot make any donation to him.
In case of adultery, concubinage does the disqualification extend to the illegitimate
children?
NO. The disqualification does not extend to the children, and as such, they may be made
beneficiaries.
What is the old rule regarding revocability of designation of beneficiary as
enunciated in the case of Gercio v. Sunlife?
The OLD rule is: When the insured did NOT expressly reserve his right to revoke the designation
of his beneficiary, such designation is irrevocable and he cannot change his beneficiary without the
consent of the latter.
What is the current rule?
The rule now is: The insured has the power to revoke the designation of the beneficiary even
without the consent of the latter, whether or not such power is reserved in the policy. Such right must be
exercised specifically in the manner set forth in the policy or contract. It is of course, extinguished at his
death and CANNOT be exercised by his personal representatives or assignees.
Under the current rule, when does the insured lose the right to change the beneficiary?
When the right to change the beneficiary is expressly waived in the policy, the insured has no
power to make such change without the consent of the beneficiary.
What if the beneficiary dies before the insured and the insured did not change the designation,
who gets the proceeds?
There is a divergence of opinion, but the general trend is to give it to the estate of
the beneficiary.
c.
d.
e.
f.
g.

Kinds of beneficiary
Limitations in the appointment of beneficiaries
Rights of insured to change beneficiary in life insurance
Disqualifications of beneficiaries
Bar Exam Questions

Rules in the designation of the beneficiary:

a. LIFE
i. A person who insures his own life can designate any person as his beneficiary, whether or not the beneficiary
has an insurable interest in the life of the insured subject to the limitations under Art. 739 and Art. 2012 of the
NCC.
Reason: in essence, a life insurance policy is no different form a civil donation insofar as the beneficiary is
concerned. Both are founded on the same consideration of liberality. (Insular Life vs. Ebrado, 80 SCRA 181)
ii. A person who insures the life of another person and name himself as the beneficiary must have an insurable
interest in such life. (Sec. 10)
iii. As a general rule, the designation of a beneficiary is revocable unless the insured expressly waived the right to
revoke in the policy. (Sec. 11)
iv. The interest of a beneficiary in a life insurance policy shall be forfeited when the beneficiary is the principal
accomplice or accessory in willfully bringing about the death of the insured in which event, the nearest relative
of the insured shall receive the proceeds of said insurance if not otherwise disqualified. (Sec. 12)
b. PROPERTY
The beneficiary of property insurance must have an insurable interest in such property, which must exist not
only at the time the policy takes effect but also when the loss occurs. (Sec. 13 and 18).
Effects of Irrevocable Designation Of Beneficiary
Insured cannot:

1. Assign the policy

2. Take the cash surrender value of the policy
3. Allow his creditors to attach or execute on the policy;
4. Add new beneficiary; or
5. Change the irrevocable designation to revocable, even though the change is just and reasonable.
The insured does not even retain the power to destroy the contract by refusing to pay the premiums for the beneficiary
can protect his interest by paying such premiums for he has an interest in the fulfillment of the obligation. (Vance, p. 665,
cited in de Leon, p. 101, 2002 ed.)