This document discusses key concepts in insurance law, including the definition of an insurance contract, the parties involved, and insurable interest.
It defines an insurance contract as an agreement where one party agrees to indemnify another against loss from an unknown event, in exchange for consideration. The main parties are the insurer, who assumes the risk of loss, and the insured, whose loss is covered. For a valid contract, the insured must have an insurable interest.
It also outlines what can be insured against, such as fire, death, accidents, and defines other important terms like premium, insurable interest, and beneficiaries. It notes that beneficiaries in life insurance must have an insurable interest, and certain prohibited persons
This document discusses key concepts in insurance law, including the definition of an insurance contract, the parties involved, and insurable interest.
It defines an insurance contract as an agreement where one party agrees to indemnify another against loss from an unknown event, in exchange for consideration. The main parties are the insurer, who assumes the risk of loss, and the insured, whose loss is covered. For a valid contract, the insured must have an insurable interest.
It also outlines what can be insured against, such as fire, death, accidents, and defines other important terms like premium, insurable interest, and beneficiaries. It notes that beneficiaries in life insurance must have an insurable interest, and certain prohibited persons
This document discusses key concepts in insurance law, including the definition of an insurance contract, the parties involved, and insurable interest.
It defines an insurance contract as an agreement where one party agrees to indemnify another against loss from an unknown event, in exchange for consideration. The main parties are the insurer, who assumes the risk of loss, and the insured, whose loss is covered. For a valid contract, the insured must have an insurable interest.
It also outlines what can be insured against, such as fire, death, accidents, and defines other important terms like premium, insurable interest, and beneficiaries. It notes that beneficiaries in life insurance must have an insurable interest, and certain prohibited persons
INSURANCE LAW Interest which a person is deemed to have
in the subject matter of the insurance where he A. Basic Concepts has a relation or connection to it. The person connected to it will derive What is an Insurance Contract? pecuniary benefit or advantage from the It is an agreement whereby one preservation of the subject matter or will undertakes, for a consideration, to indemnify suffect pecuniary loss or damage from its another against loss, damage or liability arising destruction, termination or injury by the from an unknown or contingent event. happening of the event insured against it.
Contract of Surety **if the person applying for insurance has no
It should be considered as an insurance insurable interest on the insurance contract contract only if made by a surety who or which, as then the contract is void** such is doing an insurance business as defined by the Insurance Code. What may be insured against? 1. Any contingent or unknown event, may it Parties to a Contract of Insurance: be from the past or future
1. Insurer – assumes the risk of loss and Examples of Perils:
undertakes for a consideration to 1. Fire, and the risks allied to it indemnify the insured upon the happening a. Lightning of the designated peril. b. Windstorm - every corporation, partnership c. Tornado or association duly authorized d. Earthquake (and other similar to transact insurance business risks) by the Insurance commission may be an insurer 2. Loss or damage in Marine Insurance - a natural person is not allowed 3. Death or Injury to be an insurer 4. Casualty or Liability in case of accident or mishap 2. Insured – person whose loss is the 5. Non-performance by the principal debtor occasion for the payment of the insurance of his obligation to the creditor proceeds by the insurer. Anyone except a public enemy is insured. Actuarial Risk - Possibility that the assumption made by the 1. Elements of an Insurance Contract actuaries, in pricing specific insurance policies, may prove to be inaccurate or wrong a. Insured has an insurable interest capable of - Actuaries determine the chances of future pecuniary estimation; risks, like birth, disability, accidental injury, b. The insured is subject to a risk or loss by a fire, damage to property, need for medical happening of a designated peril care, or premature death, and calculate the cost c. Insurer assumes the risk of loss of financing these uncertain events by d. Assumption of risk is part of general insurance or other related means. scheme to distribute actual losses among a large group of persons bearing a similar Insurance Premium risk. - Amount of money a person pays for an e. In consideration of the insurer’s promise, insurance policy in consideration for the the insurer pays a premium. assumption by the insurance of the risk of loss as a result of the happening of the designated peril. 2. Characteristics and Nature of Insurance Insurable Interest Contracts ATQ Personal Notes for Bar 2023 1 1. Of Himself, of his spouse and of his 1. Consensual – perfected by the meeting of children the minds 2. Of any person on whom he depends 2. Voluntary – not compulsory, parties may wholly or in part for education or support, incorporate terms and conditions or in whom he has a pecuniary interest 3. Aleatory – depends upon a contingent 3. Of any person under a legal obligation to event him for the payment of money, pr 4. Executory – as to the insurer respecting property or services, of which 5. Risk-distributing – risk of economic loss is death or illness might delay or prevent the distributed among a large group or performance substantial number of persons bearing the 4. Of any person upon whose life any estate same or similar risk or interest vested in him depends 6. Uberrimae Fides Contract – or one of perfect good faith **In life/Health interest, the beneficiary need not 7. A contract of Indemnity – insured is have an Insurable interest on the life of the entitled to recover only the amount of total insured.** loss actually sustained. **Applicable only to Property Persons specified in Article 739 and as such Insurance** cannot be designated beneficiary of the 8. Contract of Adhesion – it is a ready-made insured: contract, other party generally adheres to 1. Persons in illicit relations – adultery or the terms and conditions thereof concubinage (no need for conviction) 9. Personal Contract – each party has in mind 2. Persons found guilty of adultery or the character, qualifications and conduct of concubinage the other. 3. Public Officer or his wife, descendants or ascendants Additional Characteristics: a. No contract or policy of insurance on **The Donees prohibited in Article 739 of the property shall be enforceable except for Civil Code are also the ones prohibited being the benefit of some person having an designated as beneficiaries in a life insurance insurable interest in the property insured policy** (Section 18, Insurance Code) - Reason: Life Insurance Policy is the same b. Rule on Interpretation of Insurance from donation in terms where the Contract: beneficiary is concerned. Life Insurance i. In resolving ambiguities in the and Donation are both founded on provision of the insurance contract, liberality. A beneficiary in life insurance is the same are to be construed like a donee because the proceeds from the liberally in favor of the insured and premiums of the policy came from the strictly against the insurer who liberality of the insured to pay the drafted the insurance policy. insurance contract.
3. Insurable Interest Guide to Insurable Interest:
a. Proceeds of a life insurance does not form - An interest which a person is deemed to part of the estate of the insured have in the subject matter of the insurance b. Insurance proceeds shall be applied where he has a relation or connection to it exclusively to the proper interest of the such that the person will either derive person in whose name or for whose benefit pecuniary benefit from the preservation of the it is made unless otherwise specified in the subject matter or will suffer pecuniary loss or policy. damage from its destruction. c. A person has no insurable interest on the life of his parents and other ascendants Insurable Interest in Life/Health ATQ Personal Notes for Bar 2023 2 except when he depends upon them for 2. Revocable Designation of Beneficiary education and/or support. - A person who can be changed d. A person can take insurance on the life of anytime during the lifetime of another person and designate him as his the insured beneficiary if he has pecuniary interest on - In case the insurance policy is the person he is insuring. silent on the nature of the designation, in such case, it will Examples of persons under a Legal be deemed to be revocable Obligation to him for the payment of money, or respecting property or services, **General Rule: If the insured is silent about the of which death or illness might delay or revocation of the beneficiary, then the prevent the performance: beneficiary is deemed to be IRREVOCABLE, unless he stipulates to the contrary** a. A mortgagee can insure the life of the mortgagor up to the extent of the mortgage Insurable Interest in Property: debt to the mortgagee b. A seller may insure the life of the buyer if An insurable interest in property may consist in: the latter has the obligation to deliver a 1. An existing interest specified property under a contract to sell. 2. An inchoate interest founded on an c. A law firm may procure a keyman existing interest insurance policy on its Managing Partner 3. An Expectancy coupled with an existing d. An employer corporation has an insurable interest that out of which expectancy interest on its manager where the death of arises. the manager will be detrimental to the corporation’s operations. Who does not have an insurable interest in property? Can an Insured Change his beneficiary? 1. A mere contingent or expectant insurable Yes. An insured has the right to change his interest not founded on an actual right to beneficiary he designated in the policy during his the thing lifetime unless he expressly waived his right in said policy. **The measure of an insurable interest in The moment that the insured does not property is the extent to which the insured might change the beneficiary during his lifetime, the be damnified by loss or injury thereof** designation is irrevocable. Existing Interest in Property: Revocable vs. Irrevocable designation of 1. A carrier or depository of any kind has an beneficiaries: insurable interest in a thing held by him as 1. Irrevocable Designation of Beneficiary such, to the extent of his liability but not to - Person that was chosen to be a exceed the value thereof. beneficiary has certain rights with 2. Both the mortgagor and mortgagee may regard to the death benefit of the insure the mortgaged property against fire. insured The mortgagor may insure it up to the - A beneficiary you must consent to any extent of the value while the mortgagee up changes an insurer may take in his to the extent of the mortgage debt. insurance policy 3. A depositor may insure his deposits in - Usually a primary beneficiary excess of the PDIC insurance coverage. - The beneficiary acquires a vested right on the life insurance policy Insurable Interest in Property Insurance vs. - Any act on the part of the insured which Insurable property in Life Insurance may impair the interest of the irrevocable beneficiary is null and void. INSURABLE INTEREST
ATQ Personal Notes for Bar 2023 3
Property Life Insurance Insurance Double Insurance vs. Over-Insurance As to Value Actual Value of There is no limit Double (or multiple) insurance happens of Insurance the Interest to the amount of when a single person is insured by 2 or more therein is the limit insurance that insurers separately with regard to the same subject of the insurance may be taken that can be validly upon life matter and interest. place thereon (Exception: Over-insurance, on the other hand, Creditor securing happens when the amount of the insurance is the life of Debtor) greater than the insured's insurable interest. Both As to Interest insured Insurable interest double and over-insurance may or may not exist Existence of must exist at the is enough to exist Interest time when the at the time when together; it depends on the insured himself. insurance takes the contract is In case there is over-insurance because of effect and when made but not double/multiple insurance, the insurers are not loss occurs necessarily during required to pay for the whole loss. Their the time of loss obligation is only pro-rata. The insured, on the As to Beneficiary must Anyone can be a Beneficiary have insurable beneficiary other hand, isn't allowed to recover more than his interest over the (except those insurable interest. property insured prohibited to and must be receive donation) covered by the even though he insurance policy has no insurable interest on the life of the insured
Open Policy and Valued Policy Requisites for Double Insurance
Open Policy a. The person insured is the same
- An insurance policy which the amount b. Two or more insurers insuring separately payable in the event of a claim is settled c. There is identity of the subject matter after the loss or damage has occurred d. There is identity of interest insured e. There is identity of the risk or peril insured Valued Policy against - Policy pays a predefined loss amount not related in any way to the actual incurred If an insurance policy prohibits on the property loss insured without the insurer’s consent, such provision being valid and reasonable, a Effect on change of interest in any part of a violation by the insured; thing insured unaccompanied by a a. Reduces the value of the policy corresponding change of interest in the b. Avoids the policy insurance c. Offsets the value of the policy with the 1. Suspends the insurance in an equivalent additional insurances’ value extent until the interest in the thing and the d. Forfeits premiums already paid interest in the insurance are vested in the same person. If insured is Over Insured by double insurance, the insured is governed by the following rules: 4. Double Insurance and Over-Insurance a. The insured may claim payment from the Double Insurance insurers in such order as he may select, up - Exists where the same person is insured to the amount for which the insurers are by several insurers separately in respect severally liable under their respective to the same subject and interest contracts, unless the policy otherwise - Only applies to property insurance provides
ATQ Personal Notes for Bar 2023 4
b. If the policy under which the insured claims is a valued policy, any sum received by him under any other policy shall be deducted from the value of the policy without regard to the actual value of the subject matter insured c. If it is under an unvalued policy any sum received by him under any policy shall be deducted from the full insurable value for any sum received by him under any policy d. If the insured receives any sum exceeding the value, if it is a valued policy, or if it exceeds the insurable value if it is under an unvalued policy, he must hold the excess sum in trust for the insurers, according to their right of contribution among themselves. e. Each insurer is bound, as between himself and the other insurers, to contribute ratable to the loss in proportion to the amount for which he is liable under his contract. The insurers, in double insurers are considered as co-insurers.