1 | INSURANCEL AW (AQUINO)

members and the money collected from among them

is solely for their own protection and member is both
the insurer and insured.

CHAPTER 1: GENERAL
CONCEPTS

APPLICABLE LAWS:
CONTRACT OF INSURANCE agreement whereby Insurance Code of the PH originally PD 602
one undertakes for a consideration to indemnify
another against loss, damage or liability arising from
an unknown or contingent event.
Regulatory Provisions: (8)
TEST: (2)
1. Determined by its purpose, effect, contents and
import
2. Depends on the nature of the promise, act
required to be performed and the exact nature of
agreement in the light of occurrence, contingency
or circumstances where performance becomes a
requisite.
SURETYSHIP agreement whereby one
himself solidarily with the principal debtor.

binds

PRE-NEED PLANS contracts, agreements, deeds or

plans for the benefit of the planholders which provide
for the performance of future service/s, payment of
monetary considerations or delivery of other benefits
at the time of actual need or agreed maturity date, in
exchange for cash or installment amounts with or
without interest or insurance coverage and includes
life, pension, education, interment, and other plans,
instruments, contracts or deeds.
VARIABLE CONTRACTS any policy on either a
group / individual issued by an insurance company
providing for benefits or other contractual payments
or values thereunder to vary so as to reflect
investment results of any segregated portfolio of
investments or of a designated separate account in
which amounts received in connection of such
contracts shall have been placed and accounted for
separately and apart from other investments and
accounts.
DOING AN INSURANCE BUSINESS: (4)
1. Making or proposing to make, as insurer, any
insurance contract;
2. Making or proposing to make, as surety, any
contract of suretyship as a vocation and not as
merely incidental to any other legitimate business
or activity of the surety;
3. Doing any kind of business, including reinsurance,
specifically recognized as constituting the doing of
an insurance business;
4. Doing or proposing to do any business in
substance equivalent to any of the foregoing in a
manner designed to evade the provisions of this
Code.

Fact that no profit is derived from the making of

insurance contracts shall not be deemed
conclusive to show that the making thereof does
not constitute doing of insurance business.

BANCASSURANCE presentation and sale to bank

customers by an insurance company of its insurance
products within the premises of the head office of
such bank duly licensed by BSP.
MUTUAL INSURANCE COMPANIES Company
owned by policyholders. Promotes the welfare of its

1. Increase of the paid-up capital and net-worth

requirements for insurers
2. New requirements for unimpaired capital or
assets and reserved
3. New
provisions
on
financial
reporting
framework
4. Adoption of corporate governance rules
5. Changes in the provisions on margin of
solvency
6. Changes in the provisions on investments
7. Fixing the term of Insurance Commissioner to 6
years
8. Changes in the jurisdiction of the IC over
insurance claims
RIGHT OF SUBROGATION if the plaintiffs
property has been insured, and he has received
indemnity from the insurance company for the
injury / loss arising out of the wrong / breach of
contract complained of, the insurance company
shall be subrogated to the rights of the insured
against the wrongdoer who violated the contract.
If amount paid is not enough, aggrieved party
shall be entitled to recover the deficiency from the
person causing the loss or injury.
ELEMENTS OF INSURANCE CONTRACTS: (5)
1. Insured has insurable interest
2. Insured is subject to a risk of loss by the
happening of designated peril
3. Insurer assumes the risk
4. Such assumption of risk is part of a general
scheme to distribute actual losses among a
large group of persons bearing a similar risk
(DISTRIBUTION OF LOSSES)
5. In consideration of the insurers promise, the
insured pays a premium.
REQUISITES OF A VALID CONTRACT: (3)
1. Consent of contracting parties
2. Object certain which is the subject matter of
the contract
3. Cause of the obligation which is established
RISK any contingent or unknown event, whether
past or future, which may damnify a person having
an insurable interest, or create liability against
him, may be insured against..; not the same with
fortuitous event.
REQUIREMENTS OF INSURABLE RISK: (6)
1. There must be a large number of homogenous
exposure units
2. Loss must be accidental or unintentional
3. Loss must be determinable and measurable
4. Loss should not be catastrophic
5. Chance of loss must be calculable
6. Premium must be economically feasible

2 | INSURANCEL AW (AQUINO)
PRINCIPLE OF DE MINIMIS NON CURAT LEX 3. Unilateral payment of premium is not
while catastrophic losses are not insurable, the
traditionally imposed as obligation but an event
losses should also not be too miniscule or trivial.
that gives the contract obligatory force; it is the
insurers obligation to pay the proceeds of the
PURE RISK possibility is either the person
insurance in case of loss.
involved will suffer a loss or he wont; possibility 4. Personal contract is entered into with due
that ones property may be destroyed / one may
consideration to the circumstances of the parties;
suffer economic loss because of premature death
character, credit and conduct of the person who
or injury.
insures a property are important considerations;
insurer accepts the risk because of the insurability
SPECULATIVE RISK either result in gain or loss
of the insured.
PERIL specific cause of loss that is insured 5. Consensual perfected by mere consent without
the need of delivery or any formality.
against
6. Uberrimae Fidae contract is one of perfect good
PAST EVENT only applicable in Marine
faith; both parties must perform obligations in
Insurance
good faith and avoid material concealment or
misrepresentations.
HAZARD: (3)
7. Executory and Conditional contract is executory
to the insurer and is subject to the main condition
1. Physical refers to physical condition of the thing /
(among others): the happening of the event
person that increases the chance of loss
insured against.
2. Moral involves dishonesty or character defects in
the individual
GENERAL BENEFITS OF INSURANCE: (7)
3. Morale includes carelessness / indifference to a
loss because of the existence of the insurance
1. Gives peace of mind
LOSS end result of the risk insured against; involves
diminution of value or disappearance of value
resulting from a risk.
ASSUMPTION OF RISK insurer promises to pay the
insured if the risk insured against occurs; promises to
deliver the equivalent of the property that was lost.
NATURE & PURPOSE OF INSURANCE Insured
sacrifices a present monetary loss in the form of
premium payment in order to avoid a greater loss in
the future.
HOW PEOPLE DEAL WITH RISKS: (5)
1.
2.
3.
4.
5.

Risk avoidance
Risk retention
Risk transfer
Loss control
Insurance

HOW INSURANCE DEALS WITH RISK individuals

trade present loss by way of premium payments with
future recompense for greater loss.
RISK DISTRIBUTING DEVICE risk of loss is not
actually transferred to the insurer but a number of
people constituting the clients of the insurer
contribute to a common fund by paying premiums.
Insurer will get the amount to be paid to each insured
in case of loss from this pool or common fund.
LAW OF LARGE NUMBERS the greater the number
of exposures, the more closely will the actual results
approach the probable results that are expected from
an infinite number of exposures.
CHARACTERISTICS: (6)
1. Aleatory one of the parties or both reciprocally
bind themselves to give / do something in
consideration of what the other shall give / do
upon the happening of an uncertain event or
which is to occur at an indeterminate time; what
the insured pays is not equal to what he will
receive in case of loss.
2. Commutative what the insured paid for is the
equivalent of what he got, that is, the promise of
the insurer to indemnify the insured in case of
loss.

2.
3.
4.
5.
6.
7.
8.

Keeps families and businesses together

Increases marginal utility of assets
Facilitates credit transactions
Stimulates savings
Provides investment capital
Provides incentive to business / individuals
Helps in loss prevention

PERFECTION contract is perfected by meeting

of minds with respect to the object and
consideration of the contract
Art. 1319: Consent is manifested by the meeting
of the offer and the acceptance upon the thing
and the cause which are to constitute the
contract. The offer must be certain and the
acceptance absolute. A qualified acceptance
constitutes a counter offer.
COGNITION THEORY insurance contract is
perfected the moment the offeror learns of the
acceptance of his offer by the other party.
INSURED MAKES THE OFFER insured submits
application to the insurer; insurer accepts offer by
approving the application and the contract is
perfected upon receipt of notice by the insured of
such approval.
EFFECT OF NON-ACCEPTANCE contract
cannot be deemed perfected if there is only an
offer to enter into an insurance contract through
an application; there can be no contract if there is
no meeting of the minds between the parties as to
the object and consideration.

Mere delay by insurer does not estop him to

deny the existence of the contract
Implied acceptance can be established only
through other circumstances that will indicate
such acceptance other than inaction or delay
Even if there is no perfected contract, insurer
can be subject to tort liability for abuse of right
/ acting contrary to morals and good customs.

KINDS OF INSURANCE (SOCIAL INSURANCE

CONTRACTS): (2)
1. Private insurance SSS
2. Government insurance GSIS

3 | INSURANCEL AW (AQUINO)
CLASSIFICATIONS: (3)
1. Life / health insurance
2. Property insurance
3. Liability insurance
SPECIAL TYPES: (6)
1.
2.
3.
4.
5.
6.

Marine
Casualty
Fire
Life
Compulsory Third Party Liability
Microinsurance

KINDS OF LIFE INSURANCE: (3)

1. Term temporary basis / for a limited period
only
2. Whole life entire lifetime
3. Endowment Policy insured is paid a certain
amount or the face value of the policy if the
insured survives a certain period and the
beneficiary will get the proceeds if he doesnt
survive.
KINDS OF PROPERTY INSURANCE: (4)
1.
2.
3.
4.

Fire
Allied
Marine
Casualty

MICROINSURANCE financial product / service that

meets the risk protection needs of the poor where:
a. The amount of contributions, premiums, fees /
charges, computed on a daily basis, doesnt
exceed 7.5% of the current daily minimum wage
rate for nonagricultural workers in MM
b. Maximum sum of guaranteed benefits is not more
than 1,000 times of the current daily minimum
wage rate for nonagricultural workers in MM

ASSURED person who takes out an insurance on

the insureds life
OWNER person who obtains the policy
CAPACITY voidable if one of the parties is a minor,
insane person or incapacitated to enter into a
contract. A capacitated person however, can validly
enter into a contract insuring the life of any of the
three.

Spouses the consent of the spouse is not

necessary for the validity of an insurance policy
taken out by a married person on his or her life or
that of his or her children (including life of a child
who is not also the child of the other spouse).

EFFECT OF OWNERS DEATH all rights, title and

interest in the policy of insurance taken out by the
original owner on the life / health of the insured will
automatically vest in the latter upon the formers
death unless otherwise provided for in the policy.
PUBLIC ENEMY anyone is a state (and its citizens)
at war with PH
INSURER

every
person,
partnership,
association, or corporation, government-owned /
controlled corporations engaged as principals in
the insurance business, excepting mutual benefit
associations.
PROFESSIONAL REINSURER any person,
partnership, etc. that transacts solely and
exclusively reinsurance business.
REQUISITES TO BE AN INSURER:

GR: insured should not collect more than the actual

cash value of the loss. This is to prevent the insured
from unjust compensation

1. Possess capital and assets required of an

insurance corporation doing the same kind of
business in the PH and invested in the same
manner
2. Commissioner shall have granted him a
CERTIFICATE OF AUTHORITY proving that he
has complied with all the provisions of law
(because insurance business involves public
interest).

XPNS:

TERM OF CERTIFICATE:

1. Life insurance because the amount to be paid can

never be equal to the life of the insured
2. Valued policies under which the insurer will pay
the valued fixed in the policy regardless of the
actual cash value in case of total loss

1. Shall expire on the last day of December, 3

years following its date of issuance
2. Renewable every 3 years, subject to the
companys continuing compliance.

PRINCIPLE OF INDEMNITY:

MANIFESTED THROUGH THE FOLLOWING: (3)

1. Insurable interest is indispensable
2. Value of interest destroyed or damage is generally
the measure of indemnity
3. Co-insurance clause in marine insurance
4. Subrogation in property insurance

CHAPTER TWO: THE

PARTIES
INSURED person who applied for and to whom an
insurance policy is issued to cover his life, property or
the life / property of other person/s in whose life /
property he has insurable interest / liability to other
persons.

GROUNDS
FOR
APPLICATION: (4)

DISAPPROVAL

OF

1. Refusal will best promote the interest of the

people
2. There is evidence that the applicant company
is not qualified
3. Grant of such authority appears to be
unjustified in the light of:
a. Economic requirements
b. Direction, administration, integrity and
responsibility of the organizers and
administrators
c. Financial organization and the amount of
capital
d. Reasonable assurance of the safety of the
interests of the policyholders and the
public
4. Name of applicant belongs to any other
known company transacting a similar
business in the PH misleading.

4 | INSURANCEL AW (AQUINO)
PROHIBITED ACTS: (9)

Sec. 11: Insured shall have the right to change the

beneficiary he designated in the policy, unless he has
1. To transact in the PH both the business of life expressly waived this right in the said policy.
and non-life insurance concurrently unless Notwithstanding the foregoing, in the event the
authorized to do so;
insured does not change the beneficiary during his
2. Have equity in an adjustment company;
lifetime, the designation shall be deemed irrevocable.
3. Negotiate any contract of insurance other
than is plainly expressed in the policy or other EFFECT IF IRREVOCABLE:
written contract issued to or to be issued as
GR: Irrevocable beneficiary cannot be replaced.
evidence thereof;
4. Directly / indirectly, by giving or sharing a
XPN: Art. 64, Family Code: after finality of the
commission, pay or allow or offer to pay or
decree of legal separation, the innocent spouse may
allow to the insured or to any employee of
revoke the designation as beneficiary in any insurance
such insured, either as an inducement to the
policy, even if stipulated as irrevocable. Written
making of such insurance;
notification is required.
5. Give or offer to give any valuable
consideration or inducement of any kind, not FORFEITURE OF BENEFICIARYS RIGHTS:
specified in the policy;
6. Make an discrimination against any Filipino Interest of beneficiary shall be forfeited when he is
giving him less advantageous rates, dividends the principal, accomplice, or accessory in willfully
or policy conditions that are accorded to other bringing about the death of the insured.
nationals;
7. Issue or circulate any sort misrepresenting the Proceeds of insurance shall be paid in
terms of any policy issued by any insurance accordance with the following rules: (3)
company of the benefits or advantages 1. Forfeited share if the disqualified beneficiary shall
promised;
pass on to the other beneficiaries;
8. Use any name or title of any policy or class of 2. If none, proceeds shall be paid in accordance with
policies misrepresenting the true nature
the policy contract;
thereof;
3. If policy is silent, proceeds will be paid to the
9. Make any misleading representation or
estate of the insured.
incomplete comparison of policies to any
person insured for the purpose of inducing GROUNDS FOR DISQUALIFICATION: (3)
such person to lapse, forfeit or surrender his
1. Those made between persons who were guilty of
insurance.
adultery or concubinage at the time of donation
rd
(conviction not needed; illegitimate children are
BENEFICIARY can be a 3 person unless he is the
still qualified);
insured himself; he is not one of the contracting
2.
Those made between persons found guilty of the
parties
same criminal offense, in consideration thereof;
3rd party beneficiary named in the policy has the
3. Those made to a public officer or his wife,
right to file an action against the insurer in case of
descendants and ascendants, by reason of his
loss
office.
No other party can recover the proceeds other
ASSIGNEE OF LIFE INSURANCE can be
than the beneficiary.
transferred even without the consent of the
If there is a named beneficiary and valid
insurer; no formalities required; assignment of
designation, he is entitled to receive the proceeds
rights should be applied; delivery of policy may
and not the heirs of the insured.
transfer ownership of policy of the insurance;
Proceeds are the separate and individual property
notice is not necessary.
of the beneficiary, not the heirs of the person
whose life was insured.
DOUBLE ASSIGNMENT: (2)
If there is no beneficiary, or when designation is
1. English Rule assignee who first gives notice
void, laws of succession are applicable and shall
is the one entitled to the proceeds if he has
form part of the estate of the deceased insured.
no notice of any prior assignment.
THIRD PARTIES insurer has no obligation to turn
2. American Rule assignee under the first
over the proceeds of the insurance to 3 rd persons even
assignment has the preferable claim; first in
if such are immediate relatives if there is a designated
time, stronger in right (what applies in this
beneficiary.
jurisdiction).
USE OF CONJUGAL FUNDS if these are used to
pay premiums, proceeds of the policy constitute
community property if the policy was made payable to
the deceaseds estate; one half belongs to the estate
and the other half to the surviving spouse.
VESTED INTEREST OF THE BENEFICIARY should
be measured on its full face value because in case of
death of the insured, said beneficiaries are paid on
the basis of its face value; beneficiaries may continue
paying it and are entitled to automatic extended term
or paid-up insurance options and that said vested
right cannot be divisible at any given time.

ASSIGNEE OF PROPERTY INSURANCE:

GR: Mere transfer of a thing insured does not
transfer the policy, but suspends it until the same
person becomes the owner of both the policy and
thing insured.
XPNS:
1. Insurers consent is not necessary even if
successors-in-interest
of
the
insured
substitute the latter.
2. Transfer through will / succession and other
instances of transfer by operation of law
3. Where there is transfer among partners.

5 | INSURANCEL AW (AQUINO)
INSURANCE
AGENT
person who for
liability in respect thereof, of such nature that a
compensation solicits or obtains insurance on
contemplated peril might directly damnify the said
behalf of an insurance company or transmits for a
insured.
person other than himself an application for a 2. Whether one will derive pecuniary benefit or
advantage from its preservation, or will suffer
policy or contract of insurance to negotiate for
pecuniary loss or damage from its destruction.
such insurance; represents the insurer.
INSURANCE BROKER person who for KINDS OF INSURABLE INTEREST: (3)
compensation acts in any manner in soliciting,
1. Existing interest includes the interest of an
negotiating or procuring the making of any
owner; title or ownership is not essential.
insurance contract or in placing risk or taking out
insurance on behalf of an insured other than Following persons have insurable interest:
himself; acts for and in behalf of the insured.
a. Lessee
Insurance company who goes through an b. Depositary
insurance agent / broker shall be deemed to c. Usufructuary
have authorized such agent or broker to d. Borrower in commodatum
receive on its behalf payment of any premium
One has insurable interest if he is situated with
which is due on such policy at the time of
respect to the property that he will suffer loss
issuance or delivery.
as the proximate result of its damage or
IC does not cover insurer-agent relationship.
destruction.
In sale of goods, unpaid seller retains insurable
interest even if ownership has already been
transferred to the vendee upon delivery.

Vendee or buyer has insurable interest over

CHAPTER THREE: INSURABLE
the goods even while the goods are in transit.
INTEREST
Insurable interest exists in the ff (person will
suffer due to loss to a peril insured against):
o When insured possess a legal title to the
CLASSES OF INSURABLE INTEREST IN LIFE
property insured
INSURANCE: (4):
o When he has equitable title of whatever
character in whatever manner acquired
1. Blood relationship limited to insurable
o
When he possesses a qualified property or
interest over the life of a spouse or his
possessory right in the subject of the
children. Does not include parents or siblings.
insurance
2. Business relationship any person whom he
o When he has mere possession or right of
depends wholly or in part for education or
possession
support, or in whom he has a pecuniary
o When he has neither possession of the
interest:
property nor other legal interest in it but
Education / support
stands in such a way that he will suffer
Pecuniary interest one has insurable
from its destruction
interest over the life of his partner or his
2.
Inchoate
Interest founded on an existing interest,
employee; pecuniary benefit is derived by
otherwise,
loss of the property will not directly
the person who will take out an insurance
damnify
the
insured.
policy with the continued preservation of
3.
Expectancy

coupled with existing interest; heir

the life of the partner or employee.
does
not
have
insurable interest over the
3. Creditor legal obligation to him for the payment
properties of his successor-in-interest.
of money, or respecting property or services, of
which death or illness might delay or prevent the
performance.
4. Mortgage Redemption Insurance:
Debtors may be insured into this group life
insurance
Device for the protection of both mortgagee
and mortgagor
Mortgagee it has to enter into such form of
contract so that in that in the event of
unexpected
demise
of
the
mortgagor,
proceeds from such insurance will be applied
to the payment of the mortgage debt, thereby
relieving the heirs of the mortgagor from
paying the obligation.
Mortgagor pays the insurance premium,
making the loss payable to the mortgagee, the
insurance is on the mortgagors interest, and
he continues to pay the contract.
INSURABLE INTEREST IN PROPERTY INSURANCE:
TEST: (2)
1. Can be determined by asking if the insured has
interest in property, whether real or personal, or

AS TO:

EXTENT

TIME OF
EXISTENCE

NEED FOR
LEGAL BASIS

BENEFICIARYS
INTEREST

I.I. IN
PROPERT
Y
Only up to
value
of
property
At
the
time
of
perfection
, and time
of loss
Expectatio
n
of
benefit
must have
legal basis
Beneficiar
y
must
have i.i.

I.I. IN LIFE

Unlimited
except
if
secured by
creditor
At the time
of
perfection

Expectation
of
benefit
need
not
have legal
basis
i.i.
not
necessary if
insured
took out the
policy
on
his own life

6 | INSURANCEL AW (AQUINO)
and
designated
another.
Beneficiary
must have
i.i. if one
took out an
insurance
on the life
of another.

INSURABLE INTEREST OF BENEFICIARY IN LIFE

INSURANCE: (2)
1. When not necessary - if insured takes out an
insurance on his own life and just designate
anybody.
2. When necessary if insured takes out an
insurance on the life of another designating
him/herself or a 3rd person as beneficiary.
ASSIGNEE IN LIFE INSURANCE policy can be
transferred even without the consent or notice of
insurer.

INSURABLE INTEREST OF BAILEE carrier may

be damnified by the loss of the goods because he ASSIGNEE IN PROPERTY INSURANCE necessary
may be obligated to pay the shipper any damage that the transferee has insurable interest over the
thing insured.
to the property; similar to a depositary.
MORTGAGOR & MORTGAGEE:

A clause in agreement providing for automatic

assignment of policy VOID
If transfer of property insurance is made after loss,
insurable interest of beneficiary is no longer
necessary.

Each have independent insurable interest

therein and both interests may be covered by
one policy, or each may take out a separate
policy covering his interest, either at the same
/ separate time.
Mortgagors interest covers the full value of
property
CHAPTER FOUR: PREMIUM
Mortgagees interest is only to the extent of
the debt and in insuring, he is not insuring the
property but his interest or lien thereon.
PREMIUM REQUIRED FOR POLICY TO BE BINDING
LOSS PAYABLE CLAUSE any act of the insurer is entitled to payment of premium as soon as
mortgagor which defeats his right will also defeat the thing insured is exposed to the peril insured
the right of the mortgagee.
against. Contract is valid and binding when premium
is paid.
UNION MORTGAGE CLAUSE there is a
transfer of an insurance from the mortgagor to EFFECT OF NON-PAYMENT obligation of insurer
the mortgagee with the assent insurer.
will not be valid and binding if 1st premium isnt paid;
unpaid subsequent premiums will have the contract
GR: A thing insured unaccompanied by a
deemed to have lapsed.
corresponding change in interest in the
insurance, suspends the insurance to an GR: If insurance is unpaid = not valid = insurer has no
equivalent extent, until the interest in the thing liability = he has no right to demand for unpaid
and in the insurance (object and policy) are premiums
vested in the same person (already owned by
XPNS: (8)
that person).
XPNS:
1. In cases of life, accident, health insurance
2. When consent is given in advance by the
insurer and the policy will inure to the benefit
of anyone to whom the property is
transferred.
CHANGE OF INTEREST will not suspend the
insurance in these cases:
1. In a thing insured, after the occurrence of an
injury which results in a loss
2. In one / more several distinct things,
separately insured by one policy (insured
separately)
3. By will or succession, on the death of the
insured
4. Transfer of interest by one of several partners,
joint owners, or owners in common, who are
jointly insured, to the others.
INSURABLE INTEREST OF BENEFICIARY IN
PROPERTY INSURANCE beneficiary must have
insurable interest in the property; it will be considered
a wagering contract if he will be allowed to recover it
even if he has no insurable interest.

1. Grace period applies in life and industrial life

policy; period after the date of the premium is due
during which the premium can be paid with no
interest charged and the policy remaining in force.
2. Acknowledgement conclusive evidence of its
payment to make policy binding, notwithstanding
any stipulation therein that is shall not be binding
until premium is actually paid.
3. Installment basis
4. Credit extension a 90-day credit extension may
be given under the broker and agency agreements
with duly licensed intermediaries.
Requisites:
a. Credit extension must be provided for
under the broker and agency agreements
b. Should not exceed 90 days from date of
issuance of policy
5. Estoppel may bar an insurer from taking
refuge under sec. 77 if insured relied in good
faith on a practice that they have been
following with the insurer.
6. Salary Deductions for Government employees
insurance is already binding although
premium is paid through installment by a
government employee. There should be

7 | INSURANCEL AW (AQUINO)
authorization from government employee for ADVANCE PAYMENT premium can be paid in
the deduction.
advance.
7. Surety already liable even if there is nonpayment of premium if the obligee has
already accepted the bond. Surety is entitled
to payment of the premium as soon as the
contract of suretyship is perfected and
CHAPTER FIVE: THE POLICY
delivered to the obligor and no contract of
premium has been paid.
XPN: when obligee has accepted the bond CONSENSUAL insurance contract is perfected by
mere consent of the parties and no formalities is
where it becomes valid and enforceable
required for its perfection. Absence of a policy does
8. Valid tender of payment still binding if the not bar the contract from coming into existence.
non-payment was due to the fault of the
POLICY should be issued by the insurer
insurer.
HOW TO PREVENT LAPSE: (4)
1. Grace period
2. Automatic policy loan and cash surrender
value amount of money the company agrees
to pay to the holder of the policy if he
surrenders it and releases his claims upon it.
The more premiums paid, the greater the
surrender value, but surrender value is always
lesser sum than the total amount of premiums
paid.
3. Dividends may either be:
Participating insured is entitled to the
dividends available; policy must contain
a provision that the company shall
periodically ascertain and apportion any
divisible surplus accruing on the policy
under conditions specified therein;
dividend shall be applied to the
premiums due / payable.
Non-participating
4. Reinstatement Clause policy must contain a
provision that policyholder is entitled to have a
policy reinstated at any time within 3 years
from date of default of premium payment
unless the cash surrender value has been duly
paid or extension period has expired.
Not an absolute right will not be
approved by just mere application;
there should be evidence of insurability
and payment of overdue premiums and
any indebtedness to the company.
GROUNDS FOR RETURN OF PREMIUM: (6)
1. When the thing was not exposed to the peril
insured against where risk is entire and
contract is indivisible however, insured is not
entitled to refund of premiums paid if property
insured was exposed to the risk insured for
any period.
2. Time policy amount paid is actually for the
entire period and is spread to the entire term;
premium corresponds to a certain unit/s of
time.
3. Voidable policy refund is warranted if
contract is voidable but should not be due to
the insured or his agent. Should be on the
account of fraud / misrepresentation of the
insurer / his agents (insured acted in good
faith).
4. When by any default of the insured other than
actual fraud, the insurer never incurred
liability under the policy.
5. When there is over-insurance by several
insurers.

1. In printed form which may contain blank spaces;

any word, phrase, clause, mark, sign, symbol,
signature, number or word necessary to complete
the contract of insurance should be written on the
blank spaces provided.
2. May be an electronic document
3. Should be approved by the Insurance Commission
POLICY OF INSURANCE MUST SPECIFY / PARTS
OF THE DECLARATION: (7)
1. Parties between whom the contract is made;
2. Amount to be insured except in the cases of open
or running policies;
3. Premium, or if exact premium is only determinable
upon termination of contract, a statement of the
basis and rates upon which final premium is to be
determined;
4. Property or life insured;
5. Interest of the insured in the property insured, if
he is not the absolute owner thereof;
6. Risk insured against;
7. Period during which the insurance is to continue.
INSURING AGREEMENTS specify what the insurer
promises to do; describes the characteristics of the
events covered under the contract
EXCLUSIONS limit the coverage provided under the
insuring agreements; exclude specified perils,
property, sources of liability, persons, losses, locations
and time periods.
CONDITIONS define terms used in the other parts
of the contract, prescribe conditions that must be
complied before the insurer can be made liable and
may describe the basis for computing the premium.
MARINE RISK NOTE acknowledgement confirming
the specific shipment covered by its Marine Open
Policy, the valuation of the cargo, and the chargeable
premium. This is not the policy itself.
DESIGNATION OF THE BENEFICIARY:
GR: insurance proceeds shall be applied exclusively to
the proper interest of the person in whose name or for
whose benefit it is made.
XPN: otherwise specified
IDENTIFICATION OF THE INSURED:
AGENT OR TRUSTEE principal may be damnified
(caused injury to) by the loss of the property that he
owns that is under the care of a trustee or agent. The
agent or trustee who takes care of the property may
also be damnified by propertys loss. Both the
principal and his agent can insure the property under
the latters care.

8 | INSURANCEL AW (AQUINO)
PARTNER OR CO-OWNERS may have
insurable interest of the property owned in
common; terms of the policy should be expressly
provided that the insurance are applicable to the
joint or common interest. Express provision is
very necessary.

REQUISITES: (5)

1. Shall be issued or renewed only upon prior

approval of the IC
2. Shall be valid and binding not more than 60
days from the date of issuance
3. May be cancelled by either party upon prior notice
to the other of at least 7 days
INSURED IDENTIFIED IN GENERAL TERMS
insured is not specifically identified; may 4. Policy should be issued within 60 days after the
issuance of the cover note
comprehend any person or any class of persons,
5.
The 60 day period may be extended upon written
only ha who can show that it was intended to
approval of the IC.
include him can claim the benefit of the policy; it
ICs approval can only be dispensed with upon
is a question of proof.
certification of the president, vice president, or
POLICY FORM insurer is generally free to
general manager of the insurer that the risk
provide for the terms and conditions of the
involved.
policies that it will issue so long as the same are
No separate premium is required for the cover
not contrary to law, moral, customs and public
note.
policy; there are minimum requirements for the
approval of insurance plans / forms for policy, KINDS OF PROPERTY INSURANCE POLICY: (3)
certificate or contract, application, rider, clause,
1. Valued policy expresses agreed valuation of a
warranty or indorsements.
thing insured on the face of the policy.
This valuation is binding on the parties; no
POLICIES
WITH
MINIMUM
MANDATORY
party can establish a different valuation in
PROVISIONS: (4)
case of loss.
1. Individual life
The amount to be paid by the insurer as
2. Endowment insurance
indemnity may not necessarily be related to
3. Group life
the actual loss
4. Industrial life
Measure of indemnity is the agreed valuation
and not the actual loss
REQUISITES
FOR
CLAUSE,
RIDER,
ENDORSEMENT, WARRANTY (CREW) NOT 2. Open / Unvalued policy no valuation is
stipulated; insured is only entitled to recover the
ORIGINALLY PART OF THE CONTRACT: (3)
amount of actual loss
1. The CREW is attached to the policy
3. Running policy extent of the property insured
2. The descriptive title or name of CREW is
shall be defined from time to time because of the
mentioned and written on the blank spaces
nature of the business that is being insured.
provided in the original printed policy form
3. If not applied for by the insured / owner, PROBLEMS (from the book):
CREW shall be countersigned by the insured.
A Owns a house worth 600K, and insured the
ENDORSEMENT a written agreement attached same with 3 fire insurance companies: X 400K,
to a policy to add or subtract insurance Y 200K, Z 600K.
coverages.
Q: In the absence of any stipulation in the policies,
RIDER an endorsement to an insurance policy from which insurance company may A recover in case
that modifies clauses and provisions of the policy, of fire should destroy his house completely?
including or excluding coverage.
A: He can recover from any, any 2, or from all
provided that the total amount recovered does not
RULES IN CASE OF INCONSISTENCY:
exceed his loss.
1. Between written and printed portions of the
Q: If each of the policies is an open policy, and it was
policy written prevails
2. Between rider and printed clause rider immediately determined after the fire that the value
of the house was 2.4M, how much may he collect from
prevails
X Y and Z?
CONTRACT OF ADHESION where only one
party (insurer) prepares the written contract while A: He can recover full amount of coverage from each
the other party (insured) merely adheres to the insurer if all policies are open policies total of 1.2M.
contract.
Q: If each insurance policy is a valued policy, and
Any doubt should be resolved against the house was valued at 1M, how much would he recover
from X if he has already obtained full amount of
insurer
payment from Y and Z?
PROOF party who seeks to prove such terms
and conditions must present the policy during A: He can only recover 200k. The valuation of the
trial and formally offer it as evidence. Any person property is binding on the parties and is no longer
who relies on the policy as the basis of his cause necessary to determine actual value thereof.
of action must also attach the same to the
Q: If in Q1, A was able to collect from Y and Z, may he
complaint as an actionable document.
keep the entire amount he was able to collect from
COVER NOTES interim or preparatory said 2 companies?
contracts of insurance. It may be necessary
A: No. He can only be indemnified for his loss. A must
because the insurer may need more time to
hold the excess amount of his insurable interest in the
process the insurance application.
house, 200k, in trust for the insurers Y and Z.

9 | INSURANCEL AW (AQUINO)
Q: in Q1, what is the extent of the liability of the
insurance companies among themselves?
A: Each insurer is bound to contribute pro-rata to the
loss, in proportion to the amount for which he is liable
under his contract.

CHAPTER SIX: ASCERTAINING

& CONTROLLING RISKS

(Amount of policy / Total insurance taken x loss =

liability of insurer)

CONCEALMENT a neglect to communicate that

which a party knows and ought to communicate/

1. X = 200K (400K/1.2M x 600K)

2. Y = 100K (200K/1.2M x 600K)
3. Z = 300K (600K/1.2M x 600K)

CANCELLATION:
GR: No property insurance
cancelled by the insurer

policy

shall

be

XPN: upon prior notice to the insured

GR: No notice of cancellation shall be effective

XPN: on the following grounds: (6)
1. Non-payment of premium
2. Conviction of a crime arising out of acts
increasing the hazard insured against
3. Discovery of fraud or material representation
4. Discovery of willful / reckless acts / omissions
increasing the hazard insured against
5. Physical changes in the property insured
which result in the property becoming
uninsurable
6. Discovery of other insurance coverage that
makes the total insurance in excess of the
value of the property insured.
7. Commissioner determines that continuation of
the policy would violate the Code.

Each party to a contract 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 no means of ascertaining
(uberrimae fidae).
REMEDY: Whether intentional or unintentional
entitles the injured party to RESCIND a contract of
insurance.
There would still be concealment even if the
insured had no knowledge of the duty to disclose.

TEST OF MATERIALITY only material facts are

required to be disclosed those that will affect
insurers action on his application, either by approving
it with higher premium, or rejecting the policy; those
that will affect the decision of the insured to enter into
the contract (probable and reasonable influence of the
facts).
CAUSATION NOT NECESSARY matters concealed
need not be the cause of loss facts concealed need
not have a bearing on the cause of death of insured.
REQUISITES FOR CONCEALMENT: (4)

1. Party involved must know the fact concealed or at

least he ought to know the same.
2. Fact concealed should be material.
1. Prior notice of cancellation to insured
3. No warranty is extended by the party regarding
2. Notice must be based on the occurrence after
the fact concealed.
effective date of the policy of one or more
4. The other party doesnt have the means of
grounds
ascertaining.
3. Must be in writing, mailed or delivered to
named insured at the address shown in the KNOWLEDGE OF THE AGENT OF INSURED can
policy or to his authorized broker actual only be imputed to the insured on the following
receipt is necessary.
circumstances:
4. Must state grounds
1. It was the duty of the agent to acquire and
RENEWAL OF POLICY insured has the right to
communicate information of the facts in question
renew non-life policy by simply paying the 2. It was possible for the agent, in the exercise of
premium due on the effective date of the
reasonable diligence, to have made such
renewal. He however, will not have the right to
communication before the making of the
renew if notice of the intention not to renew is
insurance contract.
given by the insurer at least 45 days prior to
NO MATERIAL CONCEALMENT WHEN: (9)
expiration of the policy.
REQUISITES OF CANCELLATION: (4)

REFORMATION OF POLICY can happen when

what was agreed upon is different from what is
written in the policy. Court has the power to
reform the contracts and give effect to them in
the sense which the parties intended to be
bound. It must be made clearly though that the
minds of the contracting parties did actually meet
in agreement to begin with.

Proof must be of the most satisfactory

character, and it must clearly appear that the
contract failed to express the real agreement
between the parties.

MISTAKE it is also possible for the insured to

recover even if there was a mistake, not
necessary that there be reformation of the policy.

1. Matters are known to the other party.

2. In the exercise of ordinary care, one party ought to
know, and of which the other party has no reason
to suppose him ignorant.
3. When there is waiver of communication.
4. When matters are those which prove / tend to
prove the existence of risk excluded by a warranty
and which are not material.
5. When matters are those which relate to a risk
accepted from the policy and which are not
material.
6. When the matter involves general causes that are
open to inquiry of each party and which may
affect the political or material perils.
7. When matter is included in general usages of
trade

10 | I N S U R A N C E L A W ( A Q U I N O )
8. Information of the nature or amount of the insured
property is not disclosed unless in answer to an
inquiry.
9. When what is involved is information of the partys
own judgment upon the matters in question.

Concealment
cannot
refer to future acts

JUDGMENT OR OPINION neither party is bound to

disclose information of his own judgment upon
matters in question. Opinions need not be
communicated.

Remedy: rescind

Test
of
applies

materiality

Can pertain to the

future because it can
be promissory
Same test applies
Remedy: rescind

KNOWLEDGE OF THE INSURER when the insurer

at the time of issuance of policy, had knowledge of
existing facts which would actually invalidate the
contract from its very inception, such knowledge
constitutes a waiver of conditions in the contract
inconsistent with the facts, and the insurer is
estopped from asserting breach of such conditions.

INTERPRETATION

representations
are
construed liberally in favor of the insured and are
required to be only substantially true.

KNOWLEDGE OF THE FACT CONCEALED actual

knowledge of the insured is not necessary to give the
insurer the right to avoid the policy on the ground of
concealment.

KINDS OF WARRANTIES: (4)

WARRANTIES an affirmation of fact or promise

that forms part of the terms and conditions of the
policy. It may relate to the past, present, future.

1. Express 2 ways:
a. Must be contained in the policy itself
b. May be expressed in another instrument
provided that the separate instrument is
WAIVER OF INSURER when upon the face of the
signed by the insured and referred to in
application a question appears to be not answered at
the policy.
all or be imperfectly answered and the insurers issue
2. Implied natural element of the contract
a policy without any further inquiry, they waive the
imposed by law and are part of the policy
imperfection of the answer and render the omission to
without the need to be stated in the policy.
answer more fully immaterial.
3. Affirmative affirmation of the fact that exist at
the time they are made; undertaking that some
REPRESENTATION statements made to give
positive allegation of fact is true.
information to the insurer to induce him to enter
4.
Promissory stipulates that certain things shall be
into the insurance contract. It is a collateral
done or specified conditions shall exist during the
communication made to the other party in
currency of life of the insurance contract. One
writing / word of mouth.
party is bound by executory stipulation.
REMEDY: in case of misrepresentation or false
BREACH OF WARRANTY BY THE INSURED
representation, aggrieved party can rescind.
renders the contract defeasible. In order to avoid the
XPNS: (3)
policy, the insurer must prove such breach consistent
o When there is a waiver
o When an action has already been with the rule that any violation must be established by
the person who is making such allegation.
commenced on the contract
o When the incontestable clause applies
REMEDY: Rescission
o Insurer can still rescind the policy even if it
accepted the premium despite knowledge BREACH WITHOUT FRAUD merely exonerates an
of the ground for rescission provided that insurer from the time that it occurs, or where it is
other defenses are not available like the broken in its inception, prevents the policy from
incontestability clause.
attaching to the risk.
TIME OF REPRESENTATION made at the time
of, or before, issuance of the policy.
NATURE OF REPRESENTATION: (2)
1. Affirmative
2. Promissory

WARRANTY
Part of the contract

Written on the policy /

rider

KINDS OF REPRESENTATION: (2)

1. Written
2. Oral

Presumed to be material

REPRESENTATION
Not
part
of
the
contract
but
a
collateral inducement
Can be oral / in
writing
Must be established
to be material

There must be strict Must be substantially

REPRESENTATION AS TO AGE a misstatement compliance
true
of age of the insured does not avoid the policy.
The only result is that benefits that will be paid will
be equal to what the premium paid by the insured
would have purchased if the aged has been CONDITIONS in the nature of collateral terms. They
do not relate to the risk covered or statement of facts
correctly stated.
but are in the nature of collateral promises or
DISTINCTIONS & SIMILARITIES:
stipulations
CONCEALMENT
Involves omission
nondisclosure

REPRESENTATION

Involves
positive
assertion / affirmation

INCONTESTABLE CLAUSE Whenever a right to

rescind a contract of insurance is given to the insurer,
such right must be exercised previous to the
commencement of an action on the contract.

11 | I N S U R A N C E L A W ( A Q U I N O )
After a policy of life insurance made payable on the
death of the insured shall have been in force during
the lifetime of the insured for a period of 2 years from
the date of its issue or of its last reinstatement, the
insurer cannot prove that the policy is void ab initio or
is rescindable by reason of the fraudulent
concealment or misrepresentation of the insured or
his agent (fuck this shit. I dont understand.)
WHEN NOT APPLICABLE: (3)
1. Non-payment of premium

2. Violation of conditions of the policy relating to

military or naval service in times of war
3. Property insurance
DEFENSES OF INSURED AGAINST REVOCATION:
(4)
1. Guaranteed insurability clause
2. Failure to invoke before commencement of the
action
3. Waiver
4. estoppel