INSURANCE

1) What is a rider?
A rider is an attachment to an insurance policy that modifies the conditions of the policy expanding or
restricting its benefits or excluding certain conditions from the coverage
2) Oldest insurance in the phil
Fire and marine insurance
3) the ORIGINAL insured has no interest in a contract of reinsurance (sec 100)
4) 3 instances when breach of warranty does not avoid policy (p 235)
a. When loss occurs before time for performance
b. When performance becomes unlawful
c. When performance becomes impossible
(Sec. 75)
5) what are the 3 main classifications of insurance (p 43)
a. Life Insurance Contracts
- individual life
- group life
- industrial life
b. Non-Life Insurance Contract
- marine
- fire
- casualty
c. Contracts of Suretyship or Bonding
6) what is doing an insurance business include (sec 2)
The term doing an insurance business or transacting an insurance business, within the meaning of
this Code, shall include
a. Making or proposing to make, as insurer, any insurance contract;
b. 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;
c. Doing any kind of business, including a reinsurance business, specifically recognized as constituting
the doing of an insurance business within the meaning of this Code;
d. 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.
7) what may be insured (sec 3)
Any contingent or unknown event, whether past or future, which may damnify a person having an
insurable
interest,
or
create
a
liabity against
him,
maybe
insured
against.

8) insurable interest in property consist of (sec 14)

An insurable interest in property may consist in:
a. An existing interest;
b. An inchoate interest founded on an existing interest;
c. An expectancy, coupled with an existing interest in that out of which the expectancy arises.
9) Distinguish insurable interest in property from insurable interest in life (sec 19)
Insurable Interest in Property

Insurable Interest in Life

EXTENT

Insurable interest is limited to the actual value of

the interest thereon

Insurable interest in life is unlimited (save in life

insurance effected by a creditor on the life of a
debtor)

EXISTENCE OF INSURABLE INTEREST

It must exist when the insurance takes effect and It is must exist when the insurance takes effect but
when the loss occurs, but need not exist in the
need not exist thereafter or when the loss occurs
meantime
BASIS OF EXPECTATION
There must be legal basis

Expectation of the benefit derived need not have

legal basis

INSURABLE INTEREST
The beneficiary must have an insurable interest in If the insured secured the policy, the beneficiary
the thing insured
need not have an insurable interest over the life of
the insured; if secured by the beneficiar, the latter
must have an insurable interest in the life of the
insured

10) When the facts material to the insurance policy (sec 31)
Materiality is to be determined not by the event, but solely by the probable and reasonable influence of
the facts upon the party to whom the communication is due, in forming his estimate of the
disadvantages of the proposed contract, or in making his inquiries.
11) (sec 63)
A condition, stipulation, or agreement, in any policy of insurance, limiting the time for commencing an
action thereunder to a period less than one (1) year from the time when the cause of action accrues, is
void.
If a period fixed is less than one year from the time the cause of action accrues, the stipulation would
be void. (Sec. 63) In the case however, of a policy of industrial life insurance, the period cannot be less

than six (6) years after the cause of action accrues.

12) Meaning of perils of the sea (sec 101)
It includes only those casualties due to the:
a. Unusual violence; or
b. Extraordinary action of wind and wave; or
c. Other extraordinary causes connected with navigation.
13) Implied warranties in marine insurance
a. Against improper deviation
b. Against illegal venture
c. Warranty of Neutrality: the ship will carry the requisite documents of nationality or neutrality of the
ship or cargo where such nationality or neutrality is expressly warranted.
d. Seaworthiness of the ship at the time of the commencement of the risk
14) When is deviation in marine insurance proper (sec 124)
Deviation is proper:
a. When caused by circumstance over which neither the master nor the owner of the ship has any
control;
b. When necessary to comply with a warranty, or to avoid a peril, whether or not the peril is insured
against;
c. When made in good faith, and upon reasonable grounds of belief in its necessity to avoid a peril; or
d. When made in good faith, for the purpose of saving human life or relieving another vessel in
distress.
Every deviation not specified in the last section is improper.
15) Concept of insurance (page 16, section 2)
A contract of insurance is an agreement whereby one undertakes, for a consideration, to indemnify
another against loss, damage or liability, arising from an unknown or contingent event.
16) Elements of a Contract of Insurance (PARIS)
a. Payment of premium- as consideration for the insurer's promise to undertake a risk of loss, the
insured makes a ratable contribution called premium to the general insurance fund.
b. Assumption of risk- insurer assumes the risk of loss.
c. Risk of loss- insured is subject to risk of loss through the destruction or impairment of the insurable
interest by the happening of designated perils;
d. Insurable interest- interest of some kind susceptible of pecuniary estimation.
e. Scheme to distribute the losses- assumption of risk is part of a general scheme to distribute actual
losses among a large group or substantial number of persons bearing a similar risk.

17) Nature of insurance (page 19)

a. Risk Distributing Device
b. Aleatory
c. Personal
d. Executory
e. Contract of Adhesion
f. Conditional
g. Uberrimae Fidae
h. Consensual
I. Unilateral
18) Define marine insurance
Marine insurance is an insurance against risks connected with navigation, to which a ship, cargo,
freightage, profits, or other insurable interest in movable property, may be exposed during a certain
voyage or a fixed period of time.
19) Define fire insurance (sec 169)
Fire insurance is a contract by which the insurer for a consideration agrees to indemnify the insured
against loss of, or damage to, property by hostile fire, including loss by lightning, windstorm, tornado
or earthquake and other allied risks, when such risks are covered by extention to fire insurance policies
or under separate policies.
20) Casualty insurance (sec 176)
Casualty insurance includes all forms of insurance against loss or liability arising from accident or
mishap excluding certain types of loss or liability which are not within the scope of other types of
insurance, namely: marine, fire, suretyship, and life.
21) Suretyship (sec 177)
A contract of suretyship is an agreement whereby one (usually an insurance company) undertakes to
answer, under specified terms and conditions, for the debt, default or miscarriage of another (principal
or obligor), such as failure to perform a contract or certain duties, or for breach of trust, negligence, and
the like, in favor of a third party (obligee).
22) Life insurance (sec 181)
Life insurance is insurance on human lives and insurance appertaining thereto or connected therewith
which includes every contract or pledge for the payment of endowments or annuities.

POSSIBLE QUESTIONS:
1. What are the functions of the Insurance Commissioner?
I. Adjudicatory/Quasi-judicial
a. Exclusive jurisdiction
Any dispute in the enforcement of any policy
b. Concurrent original jurisdiction (with the RTC)
Where the maximum amount involved in any single claim is P5,000,000.00 Five Million Pesos
except in case of maritime insurance which is within the jurisdiction of the MTC or the RTC depending
on the value involved
Where the amount exceeds P5,000,000.00 the RTC has jurisdiction
II. Administrative/Regulatory
a. Enforcement of insurance laws
b. Issuance, suspension or revocation of certificate of authority
c. Power to examine books and records, etc.
d. Rule-making authority; and
e. Punitive
2. Explain the concept of subrogation
3. Who are parties to an insurance contract
Insurer
Sec. 6. Every corporation, partnership or association duly authorized to transact insurance business may
be an insurer
Insured
Sec. 7. Anyone except a public enemy may be insured.
4. What is a public enemy?
A public enemy designates a nation with whom the Philippines is at war and it includes every citizen or
subject of such nation.
5. What is insurable interest in life insurance?
Sec. 10. Every person has an insurable interest in the life and health:
a. Of himself, his spouse, or his children;
b. Of any person whom he depends wholly or in part for his education or support, or in whom he has a
pecuniary interest;

c. Of any person under a legal obligation to him for the payment of money, or respecting property or
services, of which death or illness might delay or prevent the performance.
d. Of any person upon whose life any estate or interest vested in him depends.
6. When should insurable interest exist?
Sec. 19. An interest in property must exist when the insurance takes effect, and when the loss occurs,
but need not exist in the meantime; and interest in the life or health of a person insured must exist when
the insurance takes effect, but need not exist thereafter or when the loss occurs.
7. What is the general rule on change of interest and the exceptions
GEN RULE (Sec 20): 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 interests in the thing and the interest in the insurance are vested in the same person.
EXCEPTIONS:
1. In life, health, and accident insurance (Sec. 20)
2. A change of interest in the thing insured after the occurrence of an injury which results in a loss (Sec.
21)
3. A change of interest in one or more several things, separately insured by one policy (Sec. 22)
4. A change of interest by will or succession on the death of the insured
5. A transfer of interest by one of several partners, joint owners, or owners in common, who are jointly
insured, to the others (Sec. 24)
6. When a policy is so framed that it will enure to the benefit of whomsoever, during the continuance of
the risk, may become the owner of the interest insured (Sec. 57); and
7. When there is an express prohibition against alienation in the policy, in case of alienation, the
contract of insurance is not merely suspended but is avoided. (Art. 1306, Civil Code; Sec. 24)
8. Meaning of concealment; and matters that must be communicated
Sec. 26. A neglect to communicate that which a party knows and ought to communicate, is called a
concealment.
Matters that must be communicated even in the absence of inquiry:
This section makes it the duty of each party to a contract of insurance to communicate in good faith all
facts within his knowledge only when:
a. they are material to the contract
b. the other has not the means of ascertaining the said facts; and
c. as to which the party with the duty to communicate makes no warranty
9. Compare concealment and misrepresentation
a. In concealment, the insured withholds information of material facts from the insurer, whereas in
misrepresentation, the insured makes erroneous statements of facts with the intent of inducing the
insurer to enter into the insurance contract

b. The materiality of a concealment is determined by the same rules as applied in cases of

misrepresentation.
c. A concealment on the part of the insured has the same effect as misrepresentation and gives the
insurer a right to rescind the contract.
d. Whether intentional or not, the injured party is entitled to rescind a contract of insurance on ground
of concealment or false representation.
e) Since the contract of insurance is said to be one of utmost good faith on the part of both parties to the
agreement, the rules on concealment and representation apply likewise.
10. Diff. between warranty and representation

Warranty

Representation
NATURE

Part of the contract

Mere collateral inducement

FORM

Written on the policy, actually or by reference

May be written in the policy or may be oral

MATERIALITY
Presumed material

Must be proved to be material

COMPLIANCE

Must be literally true and must be strictly

complied with

Requires only substantial truth and compliance

EFFECT OF FALSITY/NON-FULFILLMENT
Falsity or non-fulfillment operates as a breach of
contract

Falsity renders the policy void on the ground of

fraud

Representations are construed liberally in favor of the insured and are required to be only substantially
true. Warranties, by contrast must be literally true, or the contract will fail
11. Diff. Between Condition and Warranty

Condition

Warranty
EFFECTS

Limitation to the attachment of the risk

Not a limitation to the attachment of the risk

Non-performance of which, although in form

executed by the parties and delivered, does not
spring the contract into life

Does not suspend or defeat the operation of the

contract

The occurrence of breach temporarily renders the entire contract voidable

12. Sec. 39 including kinds of representation, Sec. 40
Sec. 39. A representation as to the future is to be deemed a promise, unless it appears that it was merely
a statement of belief or expectation,
Kinds of representation
A representation may be: (1) oral or written; (2) made at the time of issuing the policy or before; (3)
affirmative or promissory
a) Affirmative representation is any allegation as to the existence or non-existence of a fact when the
contract begins
b) Promisory representation is any promise to be fulfilled after the contract has come into existence or
any statement concerning what is to happen during the existence of the insurance
Sec. 40. A representation cannot qualify as an express provision in a contract of insurance, but it may
qualify an implied warranty.
13. Requisites of incontestability and effect when policy become incontestable
Inorder that the insurance shall be incontestable the following requisites must be present:
a) The policy is a life insurance policy;
b) It is payable on the death of the insured;
c) It has been in force during the lifetime of the insured for at least two (2) years from its date of issue
or its last reinstatement.
The period of two (2) years for contesting a life insurance policy by the insurer may be shortened but it
cannot be extended by stipulation.
15. Effect when the policy becomes incontestable
When a policy of life insurance becomes incontestable, the insurer may not refuse to pay the same by
claiming that:
a) the policy is void ab initio; or
b) it is rescissible by reason of the fraudulent concealment of the insured or his agen, no matter how
patent or well-founded; or
c) it is rescissible by reason of the fraudulent misrepresentation of the insured or his agent.
16. DEFENSES NOT BARRED BY INCONTESTABLE CLAUSE
The insurer may still contest the policy by way of defense to a suit brought upon the policy or by action
to rescind the same, on any of the following grounds:

a) That the person taking the insurance lacked insurabe interest as required by law;
b) That the cause of death of the insured is an excepted risk;
c) That the premiums have not been paid;
d) That the conditions of the policy relating to military or naval service have been violated
e) That the fraud is of a particularly vicious type, as where the policy was taken out in furtherance of a
scheme to murder the insured, or where the insured substitutes another person for the medical
examination, or when the beneficiary feloniously kills the insured;
f) That the beneficiary failed to furnish proof of death or to comply with any condition imposed by the
policy after the loss has happened;
g) That the action was not brought within the time specified.
14. What is a policy and what are the contents of a policy of insurance?
Sec. 49. The written instrument in which a contract of insurance is set forth, is called a policy of
insurance.
Sec. 51. A policy of insurance must specify: (PPPP4IRA)
a. Parties;
b. Amount to be insured except in cases of open or running policies;
c. Premium
d. Property or life insured;
e) Interest of the insured in property insured, if he is not the absolute owner thereof;
f) Risks insured against; and
g) Period during which the insurance is to continue
Kinds of policies (Secs. 59, 60, 61, 62)
OPEN POLICY- is one in which the value of the thing insured is not agreed upon and the amount of
insurance merely represents the insurer's maximum liability. The value of such thing insured shall be
ascertained at the time of the loss.
VALUED POLICY- is one which expresses on its face an agreement that the thing insured shall be
valued at a specified sum.
RUNNING POLICY- is one which contemplates successive insurances, and which provides that the
object of the policy may be from time to time defined, especially as to the subjects of insurance, by
additional statements or indorsements.
15. GROUNDS FOR RESCISSION (BF-BAC)
a. Breach of material warranty;
b. False representation;
c. Breach of a condition subsequent;
d. Alteration of the thing insured;
e. Concealment
16. Sec. 71, Sec. 74, Sec. 75, Sec. 76, Effect of Breach of Warranty

Sec. 71. A statement in a policy, of a matter relating to the person or thing insured, or to the risk, as a
fact, is an express warranty thereof.
Sec. 74. The violation of a material warranty, or other material provision of a policy, on the part of
either party thereto, entitles the other to rescind.
Sec. 75. A policy may declare that a violation of specified provisions thereof shall avoid it, otherwise
the breach of an immaterial provision does not avoid the policy (unless expressly stipulated).
Sec. 76. A breach of warranty without fraud merely exonerates an insurer from the time that it occurs,
or where it is broken in its inception; prevents the policy from attaching to the risk.
Effect of Breach of Warranty
1) Fraud is not essential for breach; falsity not fraud is the basis of liability on a warranty.
2) Effect without fraud:
- policy is avoided only from the time of breach
-and the insured is entitled to the return of premium paid at pro rata rate from the time of breach if it
occurs after the inception of the contract; or to all premiums if it is broken during the inception of the
contract. In the latter case, the contract is void ab initio and never becomes binding.
3) Effect with fraud
-policy is avoided ab initio, and the insurer is not entitled to the return of premium paid.
17. When an insurer is entitled to the payment of a premium, note exceptions (READ AND
STUDY ABOUT PREMIUMS; see examples and cases)
Sec. 77. An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the
peril insured against.
GEN RULE: Notwithstanding any agreement to the contrary, no policy or contract of insurance issued
by an insurance company is valid and binding unless and until premium thereof has been paid
EXCEPTIONS: (page 258 of book)
a. In case of a life or an industrial life policy whenever the grace period provision applies (sec. 77)
b. Whenever under the broker and agency agreements with duly licensed intermediaries, a ninety-day
credit extension is given (sec. 77)
c. When there is acknowledgment in a policy or contract of insurance of receipt of premium even if
there is a stipulation therein that it shall not be binding until the premium is actually paid (Sec. 79)
d. No contract of suretyship or bonding shall be valid and binding unless and until the premium
therefore has been paid, EXCEPT where the obligee has accepted the bond, in which case the bond
becomes valid and enforceable irrespective of whether or not the premium has been paid by the obligor
to the surety.
e. When there is an agreement allowing the insured to pay the premium in installments and partial
payment has been made at the time of loss (case)
f. When there is an agreement to grant the insured credit extention for the payment of the premium, and
loss occurs before the expiration of the credit term;
g. When estoppel bars the insurer from invoking Section 77 to avoid recovery on a policy providing a
credit term for the payment of the premiums, as against the insured who relied in good faith on such

extension.
EXCUSES FOR NON-PAYMENT OF PREMIUMS
h. Fortuitous events
I. Condition, conduct, or default of insurer (see page 255)
18. What is double insurance? Sec. 95; requisites thereof (ReAD EFFECT OF DOUBLE
INSURANCE; note formula for ratable contribution of each insurer and examples)
Sec. 95. Double insurance exists where the same person is insured by several insurers separately in
respect to the same subject and interest.
REQUISITES:
There is no double insurance unless the following requisites exist:
a. The person insured is the same;
b. Two (2) or more insurers insuring separately;
c. There is identity of subject matter,
d. There is identity of interest insured; and
e. There is identity of risk or peril insured against.
19. Distinguish double insurance from overinsurance

Over-insurance

Double Insurance
AMOUNT OF INSURANCE

When the amount of the insurance is beyond the There may be no over-insurance as when the sum
value of the insured's interest
total of the amounts of the policies issued does not
exceed the insurable interest of the insured
NUMBER OF INSURERS
There may be one or more insurers involved

There are always more than one insurers

FORMULA OF RATABLE CONTRIBUTION

Amount of policy x Loss = Liability of Insurer (per insurer)
Total Insurance taken
20. What is reinsurance? Sec. 97, 99; distinguish from double insurance
Sec. 97. A contract of reinsurane is one by which an insurer procures a third person to insure him
against loss or liability by reason of such original insurance.
Sec. 99. A reinsurane is presumed to be a contract of indemnity against liability, and not merely against
damage

Double Insurance

Reinsurance

INTEREST
Involves the same interest

Involves different interest

SUBJECT

Subject of insurance is property

Subject or reinsurane is the original reinsurer's

risk
INSURER

Insurer remains in such capacity

Insurer becomes the insured in relation to the

reinsurer
INSURED

Insured is the party in interest in the two insurance Original insured has no interest in the reinsurance
contracts
contract
INSURED'S CONSENT
Insured has to give his consent

Insured's consent is not necessary

21. What is perils of the ship?

A loss which in the ordinary course of events results from the:
a. Natural and inevitable action of the sea;
b. Ordinary wear and tear of the ship;
c. Negligent failure of the ship's owner to provide the vessel with proper equipment to convey the cargo
under ordinary conditions.
22. What is an all risk marine insurance policy?
An ALL RISKS marine insurance policy insures against all causes of conceivable loss or damage,
except as otherwise excluded in the policy or due to fraud or intentional misconduct on the part of the
insured.
23. What is barratry/barratry clause?
A clause which provides that there can be no recovery on the policy in case of any willful misconduct
on the part of the master or crew in pursuance of some unlawful or fraudulent purpose without consent
of owners, and to the prejudice of the owner's interest
23. Differentiate concealmennt in marine insurance
Marine Insurance

Other Property Insurance

Information of 3rd persons

The information or the belief or expectation of 3rd

The information or belief of a 3rd party is not
persons in reference to a material fact is material material and need not be communicated, unless it
and must be communicated
proceeds from an agent of the insured whose duty

is to give information
Effect of Concealment
The concealment of any fact in relation to any of
the matters stated in Sec. 112 does not vitiate the
entire contract but merely exonerates the insurer
from a risk resulting from the fact concealed

Concealment of any material fact will vitiate the

entire contract, whether or not the loss results
from the risk concealed

24. Sec. 111. Presumptive knowledge by insured of prior loss

Sec. 111. A person insured by a contract of marine is presumed to have knowledge, at the time of
insuring, of a prior loss, if the information might possibly have reached him in the usual mode of
transmission and at the usual rate of communication.
25. Sec. 112 When concealment in marine insurance does not vitiate the contract
Sec. 112. A concealment in a marine insurance, in respect to any of the following matters, does not
vitiate the entire contract, but merely exonerates the insurer from a loss resulting from the risk
concealed:
a. The national character of the insured;
b. The liability of the thing insured to capture and detention;
c. The liability to seizure from breach of foreign laws of trade;
d. The want of necessary documents; and
e. The use of false and simulated papers.
26. What is seawothiness; or when is a vessel seawothy
Sec. 116. A ship is seaworthy, when reasonably fit to perform the service and to encounter the ordinary
perils of the voyage contemplated by the parties to the policy.
27. When is seaworthiness complied with and what are the exceptions
GENERAL RULE: The warranty of seawothiness is complied with if the ship be seaworthy at the
time of the commencement of the risk.
EXCEPTIONS:
a. In the case of time policy, the ship must be seaworthy at the commencement of every voyage she
may undertake
b. In the case of cargo policy, each vessel upon which the cargo shipped or transhipped, must be
seaworthy at the commencement of each particular voyage.
c. In the case of a voyage policy contemplating a voyage in different stages, the ship must be seaworthy
at the commencement of each portion.
28. Requisites for valid abandonment
The requisites for a valid abandonment in marine insurance are:

(1) There must be an actual relinquishment by the person insured of his interest in the thing insured;
(2) There must be a constructive total loss;
(3) The abandonment be neither partial nor conditional;
(4) It must be made within a reasonable time after receipt of reliable information of the loss
(5) It must be factual
(6) It must be made by giving notice thereof to the insurer which may be done orally or in writing; and
(7) The notice of abandonment must be explicit and must specify the particular cause of the
abandonment
29) Differentiate friendly fire from hostile fire

Hostile Fire

Friendly Fire
DEFINITION

One that escapes from the place where it was

intended to burn and ought to be. It can also be a
fire that started as friendly fire but escapes from
its original place or it becomes too strong as it
becomes out of control

One that burns in a place where it was intended to

burn and ought to be

LIABILITY OF INSURER
Insurer is liable

Insurer is not liable

EXAMPLE

Fire from a stove escaping to a nearby rug

Fire in a gas stove, fireplace

30) When alteration in the thing insured entitled the insurer to rescind
REQUISITES:
a. The use or condition of the thing is specifically limited or stipulated in the policy;
b. Such use or condition as limited by the policy is altered;
c. The alteration is made without the consent of the insurer;
d. Alteration is made by means within the control of the insured; and
e. The alteration increases the risk
GEN. RULE: Not all alterations rescind the policy
EXCEPTION:
a. When alteration increases the risk;
b. There is a violation of the provisions of the policy
31) What is contract of life annuity and distinguish it from life insurance
Contract of life annuity: the debtor binds himself to pay an annual pension or income during the life of
one or more determinate persons in consideration of a capital consisting of money or other property,

whose ownership is transferred to him at once with the burden of the income.
a. An annuity contract, unlike the life insurance contract, insures against economic problems resulting
from a long life, rather than an early death.
b. From the insurer's viewpoint, insurance looks to longevity, while annuity, to transiency
c. Under the ordinary life insurance policy, the insured pays to the insurer an annuity and his
beneficiary receives at the insured's death the lump sum payment. Under the usual form of annuity, the
lump sum is paid to the insurer immediately and the annuitant receives the annuity payments as long as
he lives.
d. An annuity appears more like an investment instead of an insurance, which may or may not turn out
to be profitable, while life insurance has a characteristic akin to indemnity, i.e., the insurer will
reimburse the insured's beneficiaries a large sum upon the insured's death.
32) What is compulsory motor vehicle liability insurance
Insurance covering loss or liability arising from accident or mishap, excluding those falling under other
types of insurance such as fire or marine.
NO FAULT CLAUSE: Clause that gives the victim (injured person ot heirs of the deceased) an option
to file a claim for death or injury without the necessity of proving fault or negligence of any kind.
STUDY LOSS particularly on FRIENDLY AND HOSTILE FIRE, PROXIMATE CAUSE, read
EXAMPLES. SEE ALSO REVIEWER page 68.