SOUTHWESTERN INSTITUTE OF BUSINESS AND TECHNOLOGY, INC.

DISCIPLINE…ACCOUNTABILITY…PROFESSIONALISM…HUMILITY
NAUTICAL HIGHWAY, PANGGULAYAN, PINAMALAYAN, ORIENTAL MINDORO
Contact Nos.: +63917-127-8500 | +63912-448-6518

HANDOUTS 1

Corporation Law and Insurance

Name: __________________________
Course /Year /Section: ______________________
GENERAL PROVISIONS from the first year up to the
expiration of the insurance
Section 1: This Decree shall be known as “The contract or the happening of the
Insurance Code of the Philippines” loss or unknown event.
3. The Insurance Contract is reciprocal in
Section 2: Contract of Insurance is an nature.
agreement whereby one undertakes for a The Insured in making his
consideration to indemnify another against loss, application for insurance,
damage or liability arising from an unknown or considers the reputation and
contingent event. capacity to pay of the insurance
company.
3 Parties to a contract of insurance 4. A contract of insurance is conditional in
1. Insurer- the company which undertakes nature as it depends largely on the
to indemnify the insured for the loss of happening of the event insured against.
life, property etc.
2. Insured the party who applied for
insurance coverage and pays the
premium as required by the insurer 3 FORMS OF INSURANCE CONTRACT
3. Beneficiary’s the person or persons
named in the insurance contract who 1. Life Insurance: Life insurance is a
stand to benefit or received the contract between the insured individual
proceeds of the insurance contract for and the insurance company. In this form
the loss incurred. of insurance, the insured pays regular
premiums to the insurance company,
and in return, the insurance company
provides a death benefit to the
CHARACTERISTIC OF AN INSURANCE
designated beneficiaries upon the
CONTRACT:
insured's death. Some life insurance
1. An Insurance Contract is aleatory in
policies also offer cash value
nature and not a wager contract.
accumulation over time.
It means that the parties
reciprocally bind themselves to 2. Property Insurance: Property insurance
is a contract that provides coverage for
give or do something in
damage or loss to physical property,
consideration of what the other
such as homes, buildings, or vehicles.
2. Insurance Contract is Unilateral
The insured pays premiums to the
It only the insured who must start
insurance company, and in the event of
paying the premium agreed upon
 covered perils like fire, theft, or natural
disasters, the insurance company
compensates the insured for the
damage or loss, up to the policy's limits
and deductibles.
3. Health Insurance: Health insurance is a
contract that provides coverage for
medical expenses and healthcare
services. Individuals or employers pay
premiums to the insurance company,
and in return, the insurance company
covers a portion of the medical costs
incurred by the insured, such as doctor
visits, hospitalization, prescription
medications, and preventive care. Health
insurance policies can vary in terms of
coverage, deductibles, and network
providers.
CHAPTER ONE
TITLE I- WHAT MAY BE INSURED
Section 3: Any contingent or unknown event,
whether past or future, which may dignify a
person having an insurable interest or create a
liability against him, may be insured against,
subject to the provisions of this.
Notes:
1. A married woman may have her own life
or the life of her children insured even
without the consent of her husband. The
premiums paid may come from the
conjugal property provided her estate, or
her husband, or her children are the
beneficiaries.
2. A minor who is eighteen (18) years old
or above may enter into an insurance
contract in his own name for his life,
health or accident provided that his
beneficiary is his own estate, any or all
of his parents, or his own family.
3. The insurance company must be
authorized to do business in the
Philippines.
4. Parental consent
a. If the insurance contract deals with
the minor’s property. The contract
becomes voidable if entered into
without the consent of the minor’s
parents.
b. If the minor is suffering from other
incapacity such as insanity, parental
consent is required even if the
insurance pertains to the minor’s life,
health or accident.
c. If the parent takes out insurance on
the life of his minor child, he pays
the premiums.
Section 4: The preceding section does not
authorize an insurance for or against the
drawing of any lottery, or for or against any
chance or ticket in a lottery drawing a prize.
The above instance refers to a wagering
contract and not to an insurance contract
because it contemplates gain through chance.
In a wagoring or gambling contract (as in this
case or in actual gambling or in any other form
of gambling), the law prohibits the insurance of 3. The insurance company must meet all
one’s life or property against a game of chance. the requirements of the Insurance
Commission to do insurance business in
Section 5: All kinds of insurance are subject to the Philippines.
the provisions of this Chapter so far as the 4. Directors, officers and personnel must,
provisions can apply. in general, be of sterling character,
unblemished integrity, reasonably
competent. The Insurance
TITLE 2- PARTIES TO THE CONTRACT Commissioners may prescribe the
Section 6: Every person, partnership, necessary qualifications of such officers
association, or corporation duly authorized to of the insurance company.
transact insurance business as elsewhere
provided in this code, may be an insurer. Section 7: Anyone except a public enemy may
Insurer is one who deals in the be insured.
insurance business, capable of indemnifying or
paying the Insured party or parties for the loss The above Section is also self-
of life, property, etc. However, because of the explanatory. Except for a person who is known
complexities of the insurance business, the as a “public enemy” there is no limitation as to
amount of capital involved, the character and who can be insured.
reputation of the insurance company, etc. many
insurance companies of the world, particularly Section 8: Unless the policy otherwise
in the Philippines, are big and solvent provides , where a mortgagor of property
corporations who have passed the legal effects insurance in his own name providing
qualifications with flying colors. The insurance that the loss will be payable to the mortgagee,
business cannot be left in the hands of any fly- or assigns a policy of insurance to a mortgagee,
by-night operators. the insurance is deemed to be upon the interest
of the mortgagor, who does not cease to be a
To become a bona fide Insurer, the following party to the original contract, and any act of his
requirements must be as follows: prior to the loss, which would otherwise avoid
1. The insurance company must obtain a insurance, will have the same effect, although
Certificate of Authority from the the property is in the hands of the mortgagee,
Insurance Commission, renewable but any act which under the contract of
every year. insurance is to be performed by the mortgagor,
2. It must have the minimal paid -up may be performed by the mortgagee therein
capital, reserves. The required paid -up named, with same effect as if it is been
capital at present is P5,000,000.00. performed by the mortgagor.
Mortgagor he is the debtor who owes money to
the Creditor, and offering his property as a
collateral for the loan.
Under this Section, the debtor or mortgagor
insures his property in his own name either:
1. Name the mortgagee as his beneficiary in
the contract of insurance or
2. Assigns his Policy to the mortgagee.
Section 9: If an insurer assents to the transfer
of an insurance from a mortgagor to a
mortgagee, and at the time of his assent,
imposes further obligations on the assignee,
making a new contract with him, the mortgagor
cannot affect the rights of such assignee.
TITLE 3 – INSURABLE INTEREST
Section 10-Every person has an insurable
interest in the life and health:
a. Of himself, of his spouse, and of his
children
b. Of any person on whom he depends
wholly or in part for education or
support, as in when he has pecuniary
interest
c. Of any person under legal obligation to
him for the payment of money. Or
respecting property or services, of which
death or illness might delay or present
the performance and
d. Of any person upon whose life any
estate or interest vested in
depends.
Insurable Interest
Insurable interest refers to the financial
or legal interest that a person has in a property
or person, which would result in a financial loss
if that property or person were to be damaged
or lost. It is the basis for purchasing insurance
coverage, as it ensures that the person buying
the insurance has a legitimate reason to protect
against potential losses. In simple terms,
insurable interest means having a stake in
something that you want to insure to avoid
financial harm.
Section 11: the insured shall have the right to
change the beneficiary he designated in the
policy, unless he has expressly waived this right
in said policy.
This section refers to a revocable
appointment of a beneficiary. The Insured can
change his revocable beneficiary whenever he
wants to. However, if the beneficiary is
irrevocable named in the policy, he cannot be
change without his consent nor can the policy
be assigned by the Insured without the
irrevocable beneficiary’s consent.
Section 12: 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.
him
Section 13: Every interest in prosperity, real or
personal, or any relation thereto, or liability in
respect thereof, of such nature that a
contemplated peril might directly damnify the
insured, is an insurable interest.
Section 14: An insurable interest on property
may consist in:
a. An existing interest
b. An inchoate interest founded on an
existing interest or
c. An expectancy coupled with an existing
interest in that out of which the
expectancy arises
Inchoate mean as the beginning, just begun or
in the early stage. Thus, in a sale with right to
repurchase, the Vendee-a retro may have an
insurable interest on the property of the seller. If
the vendor -a retro fails to redeem or buy back
the property he sold after one year from the
date of sale, the vendee-a-retro acquires
ownership of the property.
Section 15: A carrier or depository of any kind
has an insurable interest on a thing held by him
as such, to the extent of his liability but not to
exceed the value thereof.
Section 16: A mere contingent or expectant
interest in anything not founded on an actual
right to the thing, nor upon any valid contract for
it is not insurable.
Section 17: The measure of an insurable
interest on property is the extent to which the
insured might be damnified by loss or injury
thereof.
The insurance company may pay the
Insured only whatever amount has been agreed
upon by both the insurance company and the
Insured as covered by the total premium
payable.
Section 18: No contract or policy of insurance
on property shall be enforceable except for the
benefit of some person having an insurable
interest in the property insured.
Section 19: An Interest in property insured
must exist when the insurance takes effect, and
interest in the life or health of a person insured
must exist when the insurance takes effect,
Section 20: Except in the cases specified in the
next four sections, and in the case of life,
accident, and health insurance, a change of
interest in any part of a thing insured
unaccompanied by a corresponding change of
interest in the insurance, suspends the
insurance to an equivalent extent, until the
interest in the thing and the interest in the
insurance are vested in the same person
Section 21: A change of interest in a thing
insured after the occurrence of an injury which
results in a loss, does not affect the right of the
Insured to indemnity for the loss.
Section 22: A change of interest to one or
more several distinct things, separately insured
by one policy, does not avoid the insurance as
to the others.
Section 23: A change of interest, by will or
succession, on the death of the insured, does
not avoid an insurance, and his interest in the
insurance passes to the person taking his
interest in the thing insured.
When the Insured dies testate or
intestate, before the maturity of the Policy, the
heirs who will inherit the property insured, will
be able to collect the proceeds of the insurance
policy.
Section 24: A transfer of interest by one of
several partners, joint owners or owners in
common, who are jointly insured to the others,
does not avoid an insurance even though it has
been agreed that the insurance shall cease
upon an alienation of the thing insured.
Section 25: Every stipulation in a policy of
insurance for the payment of loss whether the
person insured has or has no any interest in the
property insured, or that the policy shall be
received as proof of such interest, and every
policy executed by way of gaming or wagering
is void.
This section simply states that any
insurance policy is void where the insured has
no Insurable interest whatsoever. This applies
to gaming or wagering which is not considered
insurance and therefore void.
TITLE 4- CONCEALMENT
Section 26: A neglect to communicate that
which a party knows and ought to
communicate, is called a Concealment.
Concealment defined, to hide, to keep secret.
“Hemphill’s” defines the improper suppression
of a fact or circumstance by one party to a
contract, which suppression ought to be known
to the other party.
ELEMENTS OF CONCEALMENT:
1. The Insured has knowledge of the facts
being concealed;
2. He failed to divulge the concealed facts
to the Insurer;
3. The concealed facts are material to the
risk being insured against;
4. The Insurer has no means of verifying
the facts concealed
Section 27: A concealment, whether intentional
or unintentional, entitles the injured party to
rescind a contract of insurance
Section 28: Each party to a contract of
insurance must communicate to the other, in
good faith, all facts within his knowledge, which
are material to the contract and as to which he
makes no warranty, and which the other has
not the means of ascertaining.
Section 29: An intentional and fraudulent
omission on the part of one insured, to
communicate information of matters proving or
intending to prove the falsity of a warranty,
entiles the insurer to rescind.
Section 30 of the Corporation and Insurance
refers to the "PPF Scheme" which stands for
the Policy Owners' Protection Scheme. This
scheme is established under the Deposit
Insurance and Policy Owners' Protection
Schemes Act 2011. The PPF Scheme provides
compensation or assistance to insured policy
owners and beneficiaries under certain
circumstances. It is aimed at protecting policy Section 33: the right to information of materials
owners and providing limited compensation in facts may be waived either by the terms of
case of certain contingencies. insurance, or by neglect to make inquiry as to
such facts, where they are distinctly implied in
other facts of which information is
Section 31: Materiality is to be determined not
communicated.
by event, but solely by the probable and
reasonable influence of the facts upon the party
Section 34: Information of the nature or
to whom the communication is due, in forming
amount of the interest of one insured need not
his estimate of the disadvantages of the
be communicated unless in answer to an
proposed contract, or in making his inquiries.
inquiry, except as prescribed by section fifty-
one
Section 32: Each party to a contract of
insurance is bound to know all general causes
Section 35: Neither party a contract of
insurance is bound to communicate even upon
which are open to his inquiry, equally with that
inquiry, information of his own judgement upon
of the other, and which may affect the political
the matters in question.
or material perils contemplated, and all general
usages of trade.
Activity: Corporation Law and Insurance

Name: _______________________
Year/ Section: _________________

Answer and explain briefly the following cases.

1. A is a minor fifteen (15) years old. He inherited from his grandfather a House/Lot which
he insured without the consent of his parents. Later the house was destroyed by fire.
The insurance company has to pay on the contract. Is A’s parents can collect from the
insured on behalf of their minor child?

2. A bought a sweepstake ticket granting a P1,000,000.00 first prize. A wanted his chance
of winning the P1,000,000.00 covered by an insurance. Is A can get an insurance to the
company?

3. A man who was actually 55 years old, was insured by the insurance company based on
the representation of the of the Insured that he was only 35 years old. Is the Insurer pay
the proceeds of the policy?

4. A has poor parents and his education is being financed by a rich neighbor who has no
children of his own. Is this an example of insurable interest? Why or why not?