INSURANCE LAW

Course Outline
Atty. Mary Ann L. Reyes
I.

Introduction
A. History of insurance
B. Laws governing insurance
1. Article 739, 2011, 2012-2017, 2186, 2207, New Civil
Code
2. Insurance Code, RA 10607 (amending PD 612 as
amended)
3. Family Code
4. Section 185, Corporation Code
5. GSIS Act, SSS Act
6. RA 5756
7. EO 250 (July 25, 1987)
8. RA 3591 (PDIC Law)
9. RA 9829 (Pre-Need Code)
10.EO 192 (HMOs)
Read:

Enriquez vs. Sunlife Assurance, 41 Phil 269 (1920)

Insular Life vs. Ebrado, 80 SCRA 181 (1977)
Filipinas-Compania de Seguros de Nava, 17 SCRA 210
(1966)
C.

General concept of insurance

1. Section 2, RA 10607
2. Test of insurance

Read: White Gold Marine Services vs. Pioneer Insurance, GR

No. 154514, 28 July 2005; Philamcare Health Services Inc. vs.
CA, 379 SCRA 356
3.
4.
5.
6.

Suretyship (Sec. 2, RA 10607)

Pre-need plans (See Securities Regulation Code)
Variable contracts (Sec. 238, RA 10607)
Doing an insurance business (Sec. 2, RA 10607)

Read: Philippine Health Care Providers vs. Commissioner of

Internal Revenue, 600 SCRA 413
7. Mutual insurance companies (See White Gold vs.
Pioneer) See mutual benefit associations under Sec.
403, RA 10607
D.

Characteristics

1.
2.
Read:

risk distributing device

contract of adhesion (fine print rule)

Rizal Surety and Insurance Co. vs CA, 336 SCRA 12

Blue Cross vs. Olivares (Feb. 12, 2008)
Fortune Insurance and Surety Co. vs. CA, 244 SCRA

308
Gulf Resorts vs Philippine Charter Insurance Corp., GR
No. 155167, May 16, 2005
Eternal Gardens Memorial vs. Philamlife Insurance, GR
No. 166245, April 9, 2008
Manila Bankers Life Insurance vs. Aban, GR 175666,
July 29, 2013
3.
4.

aleatory (Art. 2010, Civil Code)

contract of indemnity (Sec. 4, RA 10607)

Read: Verendia vs. CA, 217 SCRA 417

4.1. Exceptions to the principle of indemnity
5.

uberrimae fides contract

E. Elements of insurance
1.
2.
3.
4.
5.

Insurable interest (Sec. 10-14, RA 10607)

Risk of loss [Sec. 3 (1), Sec. 51 par f, RA 10607]
Assumption of risk (Sec. 2, RA 10607)
Distribution of losses
Premium (Sec. 77, ICP; Sec. 77, RA 10607)

Read: Gulf Resorts vs. PCIC

Philamlife Health Systems vs. CA
F. Subject matter of a contract of insurance
G. Event or peril insured against [Sec. 3(1), Sec. 86, RA
10607]
H. Risk, defined; pure vs. speculative risk; past event;
distinguished from fortuitous event and condition, loss,
peril, hazard
I. Right of subrogation (Art. 2207, Civil Code)
1. Exceptions to the subrogation rule
Read: Manila Mahogany Manufacturing Corp. vs. CA
Federal Express Corp. vs. American Home Assurance
J.
II.

Kinds of Insurance

Contract of Insurance

A.
Civil Code)
B.

Requisites of a contract of insurance (Art. 1318, New

Perfection (Art. 1319, NCC)
1. Cognition theory

Read:
Development Bank of the Philippines vs. CA, GR.
100937, March 21, 1994
Enriquez vs. Sun Life Insurance of Canada, GR. 15895,
Nov. 29, 1920
Great Pacific Life Assurance vs. CA, GR Nos. 31845 &
31873, April 30, 1979
C.
10607)

Parties to a contract of insurance (Sec. 6 & 7, RA

1.
2.
3.
4.
5.
6.
7.

the insurer, the insured, the beneficiary

See Art. 38, NCC;
rule on married women (Sec. 3, RA 10607)
rule on minors (Sec. 3, RA 10607)
public enemy
capacity of party insured (natural, juridical persons)
the insurer (Sec. 190-193, RA 10607; Sec. 288, ICP
on professional reinsurers; Sec. 403-405, RA 10607,
on mutual benefit associations)
8. the beneficiary [Art. 739, 2012, NCC; Read: Insular
Life vs. Ebrado; Sec. 11, RA 10607; Sec. 182, RA
10607; Art. 225, Family Code; Sec. 53, RA 10607;
Art. 64, Family Code
D.
E.
III.

Subject matter of insurance (Sec. 3, RA 10607)

Insurance not a wagering contract (Sec. 4, RA 10607)

Insurable Interest
A.
B.
C.
D.

Concept of insurable interest in general

Reason for the requirement of insurable interest
Insurable interest in life insurance (Sec. 10, 11, 12, RA
10607)
Insurable interest in property insurance (Sec. 13-18,
RA 10607)
1.

Kinds of insurable interest in property

Read: Gaisano Cagayan Inc. vs. Insurance Company of

North America, GR No. 147839, June 8, 2006)
2.

Insurable interest in case of mortgaged property

(Sec. 8-9, RA 10607)
a.
standard or union mortgage clause
b.
open mortgage or loss payable clause

Read:

Geagonia vs. CA, February 6, 1995

RCBC vs. CA, 289 SCRA 292

3.
4.
5.
6.
7.

Separate insurable interest of mortgagor and

mortgagee (Sec. 53 and 95, RA 10607)
When must insurable interest in property exist
(Sec. 19, RA 10607)
Insurable interest of beneficiary in property, life
insurance
Effect of change of interest in the thing insured
(Sec. 20-24, 57&58, RA 10607; Art. 1306, NCC)
Assignee in life, property insurance (Sec. 184,
Sec. 18, RA 10607)]

Read: Spouses Cha vs. CA, August 18, 1997

Cases under this topic: Spouses Cha vs. CA, (August 18, 1997);
Geagonia vs. CA, February 6, 1995); RCBC vs. CA (289 SCRA 292);
Gaisano Cagayan, Inc. vs. Insurance Company of North America,
G.R. No. 147839 (June 8, 2006).
IV. Devices for ascertaining and controlling risk and loss
A.

Concealment
1.
Concept (Sec. 26, RA 10607)
2.
Duty to communicate (Sec. 28, RA 10607)
3.
Test of materiality (Sec. 31, RA 10607)
4.
Effect of concealment (Sec. 27 & 29, RA 10607)
5.
Matters which need not be communicated (Sec.
30, 32, 34, & 35, RA 10607)
6.
Waiver of information (Sec. 33, RA 10607)

B.

Representation
1.
2.
3.
4.
5.
6.

Concept (Sec. 36)

Kinds of representation (Sec. 36, 37, 39, 42)
Test of materiality (Sec. 46)
Effect of alteration or withdrawal (Sec. 41)
Time to which representation refers (Sec. 42)
Effect when representation is obtained from
third persons
(Sec. 43)
7.
When presumed false; effect of falsity (Sec. 44 &
45, RA 10607)
C.

Remedies available in case of concealment or false

representation
1.
2.

When rescission by the insurer may be

exercised (Sec. 48)
When
life
insurance
policy
becomes
incontestable (Sec. 48)
a.
requisites for incontestability
b.
theory and object of incontestability

c.
D.

defenses not barred by incontestability

Warranties
1.
2.

Concept; distinguished from representation

Kinds
of
warranties
(express,
implied,
affirmative, promissory)
3.
Time to which warranty refers (Sec. 68, RA
10607)
4.
Effect of breach (Sec. 74, 75, & 76)
Cases: Great Pacific Life Assurance vs. CA (316 SCRA 678); Sun Life
Assurance Co. of Canada vs. CA (G.R. No. 105135, June 22, 1995);
Philamcare Health Systems Inc. vs. CA (379 SCRA 356); Vda de
Canilang vs. CA (G.R. No. 92492, June 17, 1993); Tan vs. CA (June
29, 1989); Prudential Guarantee vs. Trans-Asia Shipping Lines, Inc.
G.R. No. 151890, 20 June 2006
V.

The Policy of Insurance

A.
Definition and form (Sec. 49-50, RA 10607) see new
provision re electronic form
B.
Fine print rule
C.
Contents of the policy (Sec. 51, RA 10607)
D.
Papers attached to the policy and their binding effect
(rider, warranties, clause, endorsement)
E.
Kinds of policy
1.
open (Sec. 60, RA 10607)
2.
valued (Sec. 61, RA 10607)
3.
running (Sec. 62, RA 10607)
F.
Cover notes (Sec. 52, RA 10607)
G.
Cancellation of policy (Sec. 65-66, EA 10607)
H.
Time to commence action on the policy; effect of
stipulation (Sec. 63, RA 10607)
Cases: Pacific Timber Export Corporation vs. CA (112 SCRA 199);
Great Pacific Life Assurance Corporation vs. CA, 89 SCRA 543);
PhilAm Life and General Insurance Co. vs. Judge Valencia-Bagalacsa
(GR No. 139776; August 1, 2002)
VI.

Premium

A.
B.
77, 79,

Concept
Effect of non-payment of premium; Exceptions (Sec.

RA 10607, Art. 1306, NCC)

C.
When insured entitled to return of premiums (Sec.
80-84, EA 10607)
D.
Payment through salary deduction (Sec. 78, RA
10607)
E.
Future premiums (Sec. 84, RA 10607)

Cases: Makati Tuscany Condominium Corp. vs. CA (215 SCRA 462);

UCPB General Insurance vs. Masagana Telamart (June 15, 1999);
UCPB General Insurance vs. Masagana Telamart (356 SCRA 307);
American Home Insurance vs. Chua (G.R. No. 130421, June 28,
1999); Tibay vs. CA (257 SCRA 126); Phil. Phoenix Surety & Ins., Co.
vs. Woodworks, Inc., (92 SCRA 419)
VII.

Persons entitled to recover

conditions to recovery

on

the

policy

and

A.
B.

Beneficiary (Sec. 11-12, 53, 56, 57, RA 10607)

Limitations on the appointment of beneficiary (Art
2012 & 739, NCC)
C.
Rule where insurance is made by an agent or trustee
(Sec. 54, RA 10607)
D.
Rule where insurance if made by partner or part owner
(Sec. 55, RA 10607)
E.
Loss (Sec. 85-89 RA 10607) See also Sec. 175, 184185, RA 10607)
F.
Notice and proof of loss (Sec. 90-94, RA 10607). See
also Sec. 185, RA 10607
Cases: Bonifacio Bros. Inc. vs. Mora (May 29, 1967); The Insular Life
Assurance vs. Ebrado, 80 SCRA 181); Vda. de Consuegra vs. GSIS
(37 SCRA 315); Go vs. Redfern (72 Phil 71); Country Bankers
Insurance Corporation vs. Lianga Bay (January 25, 2002)
VIII.

Double Insurance
A.
B.
C.
D.

IX.

Reinsurance
A.
B.
C.
D.

X.

Definition and requisites (Sec. 95, RA 10607)

Distinguished from over-insurance
Stipulation against double insurance
Rules for payment where there is over-insurance by
double insurance (Sec 96, RA 10607)

Definition (Sec. 97, RA 10607)

Nature (Sec. 99 & 100, RA 10607)
Distinguished from double insurance
Duty of reinsured to disclose facts (Sec. 98, RA 10607)

Marine Insurance
A.
B.
C.

Definition
Scope of marine insurance (Sec. 101, RA 10607)
Risks or losses covered in marine insurance
1.
perils of the sea vs. perils of the ship
2.
all risks marine insurance policy vs. named

perils policy
D.

Insurable interest in marine insurance

1.

ship owners insurable interest (Sec. 102, RA

10607)
a.
rule where vessel is chartered (Sec. 102)
b.
rule where vessel hypothecated by
bottomry (Sec 103, RA 10607)
c.
insurable interest in freightage (Sec. 104106, RA 10607)

2.

charterers insurable interest (Sec. 108, RA

10607)
interest in the thing and in profits (Sec. 107, RA
10607)

3.
E.

Concealment
1.
Meaning of concealment in marine insurance
2.
Duty to communicate (Sec. 109, RA 10607)
3.
Opinions or expectations of third persons (Sec.
110, RA 10607)
4.
When concealment does not vitiate the entire
contract (Sec. 112, RA 10607)
5.
Presumption as to knowledge (Sec. 111, RA
10607)

F.

Representations
1.
Effect of false representation by the insured
(Sec. 113, RA 10607)
2.
Effect of false representation as to expectation
(Sec. 114, RA 10607)

G.

Implied Warranties in Marine Insurance

1.

Seaworthiness (Sec. 115, RA 10607)

a.
what constitutes seaworthiness (Sec. 116,
118, 121, RA 10607
b. when
complied
with;
Exceptions (Sec. 117, RA
10607)
c. when voyage consists of
different portions (Sec. 119,
RA 10607)
d. rule where ship becomes
unseaworthy in the course of
the voyage (Sec. 120, RA
10607)
e. cargo
seaworthiness
(Sec.
121, RA 10607)

2.

Warranty that necessary documents are carried

(Sec. 122, RA 10607))
Warranty against improper deviation
a.
meaning of deviation (Sec. 125, RA
10607)

3.

b.
c.
d.
e.
f.
H.

what is voyage insured (Sec. 123, RA

10607)
if course of sailing not fixed (Sec. 124,
RA 10607)
when proper (Sec. 126, RA 10607)
effect of improper deviation (Sec. 127)
loss subsequent to improper deviation
(Sec. 128, RA 10607)

Loss
1.

Kinds of losses (total or partial, Sec. 129-130, RA

10607)
2.
Kinds of total loss (actual and constructive)
(Sec. 131-134, RA 10607)
3.
When ship prevented from completing voyage
(Sec. 135, RA10607)
4.
Liability for damages in case of reshipment of
cargo (Sec. 136, RA 10607)
5.
Right to payment upon an actual total loss (Sec.
137, RA 10607)
6.
Scope of insurance against actual total loss
(Sec. 139, RA10607)
7.
When constructive total loss exists (Sec. 141,
RA10607)
8.
Concept of abandonment and its requisites (Sec.
140,-157, RA 10607)
9.
Average
1.
Kinds of average (particular and
general)
2.
Requisites of general average
3.
Insurers
liability
for
general
average (Sec. 166-167, RA10607)
10.
Measure of Indemnity (Sec. 158,-168, RA
10607)
Cases: Roque vs. IAC (139 SCRA 596); Go Tiaco vs. Union Ins.
Society of Canton (40 Phil 401); Cathay Insurance vs. CA (151 SCRA
710); Filipino Merchants Insurance Co. vs. CA (179 SCRA 638);
Oriental Assurance Corporation vs. CA (200 SCRA 459)
XI.

Fire Insurance

A.
RA10607)
B.
C.
D.
E.
F.
G.
XII.

Definition and scope of fire insurance (Sec. 169,

Risks or losses covered
Effect of alteration in the thing insured (Sec. 170-171.
RA10607)
Read Sec. 172, RA 10607
Measure of indemnity (Sec. 173-174, RA 10607)
Co-insurance clause
Prohibitions (Sec. 175, RA 10607)

Casualty Insurance

A.
B.
C.
D.

Concept (Sec. 176, RA 19607)

Kinds of Casualty Insurance
Theft and Robbery Insurance
Personal Accident and Health Insurance

Read: Sun Insurance Office Ltd. vs CA, July 17, 1992

Finman General Assurance vs CA, Sept. 2, 1992
Biagtan vs Insular Life Assurance, 44 SCRA 58
E.
F.
G.
H.

Glass Insurance
Employers Liability Insurance
Motor Vehicle Liability Insurance
Compulsory Motor Vehicle Liability Insurance (Sec.
386-402, RA 10607)
1.
2.
3.
4.
5.
6.
7.
8.

I.
J.
K.
XIII.

Definition (Sec. 177, RA 10607)

Nature of liability of surety (Sec 178)
Distinctions
between
suretyship
insurance (Sec. 179)

and

property

Life Insurance
A.
B.
C.
D.
E.

Insurable Interest in Liability Insurance

Meaning of Accident and Accidental in Casualty
Insurance
Basis and extent of insurers liability

Suretyship
A.
B.
C.

Third Paty Liability Insurance Requirement (Sec.

387 and 389)
Third Party Defined (Sec. 386c, RA 10607)
Amount of Indemnity (Sec. 390, RA 10607)
No Fault Indemnity Clause (Sec. 391)
Change or Ownership (Sec. 395)
Notice of Claim/Prescription of Action (Sec. 397,
RA 10607)
Direct Liability of Insurer to Third Party
Authorized Driver Clause (whether voluntary or
compulsory motor vehicle insurance)

Definition (Sec. 181 and 182, RA 10607)

Kinds of life insurance
Liability of insurer in case of suicide (Sec. 183)
Right to assign life insurance policy (Sec. 184&185)
Measure of indemnity (Sec. 186, RA 10607)

Microinsurance
A.

Definition (Sec. 187, RA 10607)

XVI.

Claims Settlement
A.
B.
C.
D.

Unfair claim settlement practices (Sec. 247, RA 10607)

Claims for life insurance policies (Sec. 248)
Claims for non-life insurance policies (Sec. 249)
Delay in payment of claims (Sec. 250)

Cases: Tio Khe Chio vs. CA (September 30, 1991); Finman General
Assurance Corporation (July 12, 2001); see again: Prudential
Guarantee vs. Trans-Asia Shipping Lines, Inc. G.R. No. 151890, 20
June 2006
-

The Insurance Commissioner

Administrative and Adjudicatory Powers (Sec. 437-439, RA 10607)

Pre-Need Code (RA 9829)

A. What are Pre-Need Plans
B. What is a Pre-Need Company
C. Jurisdiction of the Insurance Commission over Pre-Need
Companies
D. Unfair Claims Settlement Practices (Sec. 25, Pre-Need Code)
E. Consequences of Delay or Default (Sec. 28, Pre-Need Code)

HMOs (EO 192)

A. What are HMOs
B. Authority of Insurance Commission over HMOs
-

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