under US at that time.
The Germany and USA
INSURANCE
In general
Elements:
o 1. Insured possesses interest susceptible of
pecuniary estimation
o 2. Insured is subject to risk of loss
o 3. As consideration, the insured pays premium
Someone organized a jeepney association. They give
membership fees and if a driver gets into an accident, the
association pays indemnity. Sued by Insurance
Commission for not having license to do Insurance
Business.
o Held: Was conducting insurance business
without license. All requisites concurred.
o Contra Maxicare: Even if all elements are
present, but if primary purpose of contract is to
provide services, then it is not an insurance
contract. In Maxicare there is no insurance
contract because physicians pay for the first six
sessions of therapy after injury or loss, but the
main purpose is to give medical services. But
here, even if you did not get injured or sick, you
can avail of medical checkup.
What are the characteristics of an insurance contract?
o 1. Aleatory
If you dont lose what was insured, there
is no indemnity.
o 2. Personal
It does not adhere to the property
insured because the personality of both
parties is crucial and is the primary
consideration for the contract.
Ex. teenagers will be charged higher
insurance over cars.
The buyer of a car, for instance, will only
be insured if the insurance company
allows for an endorsement of the sellers
insurance contract.
o 3. Unilateral
It is only the insurer that has an
obligation to perform (the insured
already paid).
o 4. Conditional
Can you insure against losing the lottery?
o No, this is wagering.
Parties
Who can be the insurer?
o One authorized by the Insurance Commission
Who can be insured?
o Anyone except a public enemy (citizen of a
country with which the Philippines is at war with)
o Wenfeld: German company filed claim with
Insurance Company, and the Philippines was
were at war (WWII) so the company cannot
collect.
What is the standing of mortgagors to sue on an
insurance contract and what is the effect of his acts?
o 1. The mortgagor can sue the insurance
company if it does not pay.
o 2. If the mortgagor performs an act that
prejudices, the mortgagee cannot collect.
Ex. The Mortgagor brought fireworks to
the building and it exploded. The
mortgagee cannot collect.
o 3. The mortgagor can have the mortgagee
perform acts that benefit the contract
Insurable interest
When is there insurable interest over life?
o 1. Own life, spouse and children
Children even if emancipated
Spouse need valid and existing
marriage
o 2. Based on support or pecuniary interest
Ex. a key basketball player you signed
for your team; a concert impresario in an
opera you organized
o 3. Based on legal obligation, whose death might
delay or prevent performance
o 4. Any person upon whose life any estate or
interest vested in him depends
Ex. X is allowed to stay in the family
home of his parents as usufruct. They
have interest to continue the life of their
parents
o Note: for the first, mere relationship is enough.
For 2-4, there must be pecuniary interest. So the
interest of the creditor over the debtors life
ceases upon full payment.
So mere friendship does not fall under
any of the categories.
When is there insurable interest over property?
o 1. Existing interest
o 2. Inchoate interest on an existing interest
Ex. stocks, which is based on
subscription contract
o 3. Expectancy coupled with existing interest
o N.B. MAIN DIFFERENCE: there must be a valid
pecuniary interest
What is the value of insurable interest over property?
o The insurance cannot go beyond the value of the
property
o Whereas in life, you cannot put value over life of
a person
EXCEPT: if there is a way to place
pecuniary value in the life of the person.
Who can be the beneficiary in life insurance?
o 1. If over own life, he can designate anybody,
even if the latter has no insurable interest.
 But: you cannot name one to whom you
are prohibited to make donations to
Ex. co-guilty party of
adultery/concubinage
o 2. If you are the beneficiary, you need to have
insurable interest over the life of the insured
X took an insurance policy over his own life for 1M
and named his friend Y as beneficiary. X died, and his
debt to Y is worth 50k. The executor of Xs estate
claims only 50k must go to Y and the 950k must go to
Xs estate. Correct?
o No. Since the insured took a policy out of his
own life, he is free to name anyone as
beneficiary.
o The rule would be different if Y took an insurance
out of Xs life the insurable interest is only
P50k.
Can the insured change the beneficiary?
o Yes, unless it was made irrevocable in the policy.
o If the beneficiary is irrevocable, can it still be
changed?
Yes. But if irrevocable, can only change
beneficiary with the latters consent.
Ex. A father made his child an
irrevocable beneficiary of an insurance
contract. If the father wanted to revoke,
the child must consent.
What is the rule for beneficiaries in life insurance?
o 1. The beneficiary/assignee must have insurable
interest
o 2. If the policy is going to be assigned, the insurer
must consent
o Contra: Assignment of a life insurance policy
The assignee need not have insurable
interest
When does the beneficiary forfeit?
o If he causes the insureds death.
Except: When the killing is lawful (ex.
self-defense, the beneficiary is the
executioner in death penalty)
o What is the effect of unlawful killing?
Benefits go to the estate of the insured
Various situations re: insurable interest over
property:
o 1. Importer has insurable interest in goods he is
buying even if undelivered, because he can
compel delivery. The seller also has insurable
interest because he has legal title.
o 2. Contractor has insurable interest over the
building he is erecting because under the law, he
bears the risk of loss prior to completion.
o 3. Mortgagor and Mortgagee both have insurable
interest
o 4. Lessor and lessee both have insurable interest
o 5. Mere possessor.
Ex. X Colleges was allowed to use a
building by the owner, as a school. It
insured the building. It caught fire.
HELD: There was insurable interest.
o 6. Partners, over the property of a partnership
o 7. Carrier, over goods it is transporting since he
will be liable
o 8. WH man, over goods for safekeeping since he
will be liable
What is the nature of a mere contingent interest over
something?
o Not insurable.
o Ex. Creditor with no collateral over properties of
buyer
o Ex. Expectant heir
o Ex. Fictitious contract of sale (completely
simulated)
Can smuggled property be insured?
o No against public policy
When must insurable interest exist in life insurance?
o In life, need only exist when the policy takes
effect
o Ex. X insured his wifes life. They annulled their
marriage. But the wife failed to revoke the
insurance. X can collect.
When must interest exist in property insurance?
o When the policy takes effect and when loss
occurs
o Need not exist in the meantime
Ex. Owned a car, insured, then sold it.
Then repurchased, and then loss in fire.
o A person mortgaged his building. The property
had been sold in foreclosure. Then it was lost by
fire. He had no more right to redemption. HELD:
Lost insurable interest.
o What if he still possessed the right of
redemption?
He still has insurable interest
What happens when there is change of interest?
o If you sold your car, if the buyer wants insurance,
you have to endorse the policy.
o Change in interest after the loss does not change
indemnity. It is already an accrued liability at this
time. It is a chose in action.
o Change in interest in one or more listed
things:
A taxi company insured 20 units. Sold 4
of them. The insurance over 16 is still
valid.
o Change of interest in will or succession does
not avoid insurance.
X insured Family Home against fire. X
died and children inherited. The house
burned. The children can collect.
What if the children bought the
house from the father when he was
still alive?
 Insurance does not transfer.
o For co-owners, partners, etc:
X Y and Z co-owned a house. X bought
Y and Zs shares and became sole
owner. The house burned. Insurance
company must pay because X was part
of the original insured.
But if there is a new person brought into
the group, the insurance is avoided.
Can one stipulate against insurable interest?
o No. Stipulation that there need not be an
insurance interest for an insurance contract
NULL AND VOID.
What is the interest of a mortgagor over property he
mortgaged?
o The extent of the value of the property
o How can the mortgagee be made the
beneficial payee in the mortgagors policy?
1. Assign (with insurers consent) or
pledge (no need for insurers consent)
the insurance K
2. The original policy may have a
mortgage clause or there is a rider
making the policy payable to the
mortgagee as long as he has interest
(loss payable clause)
3. Independent contract between
mortgagor and mortgagee
4. Acquired by the mortgagor under a
contract duty to insure the mortgagees
benefit (in which case the mortgagee
acquires an equitable lien on proceeds
collected by the mortgagor)
What is the extent of the mortgagees interest on the
property mortgaged to him?
o To the extent of the debt secured
o The interest exists until the debt is extinguished
o N.B. the mortgagee may procure the policy and
have the mortgagor pay for the premiums
Distinguish:
o Standard/union mortgage clause subsequent
acts of mortgagor cannot affect the rights of the
mortgagee
o Open/loss payable mortgage clause acts of the
mortgagor can affect the mortgagees rights,
because the former is a party to the contract
D had a loan of 3M from C. To secure it, D mortgaged
his house worth 5M in favor of C.
o Who has insurable interest over the house?
D 5M (value of house)
C 3M (extent of loan)
o Will insurance procured by D in his own name
and for his own benefit inure to benefit of C?
No. Insurance is a personal contract
and just like any other contract, it just
involves the parties unless there is a
stipulation pour autrui (see examples
above)
But under Art. 2127 of the NCC, the
mortagee has an equitable lien on the
proceeds of the policy.
o C procured insurance. D fully paid C. The
house burned down. Can C recover? Can D
recover?
No and no. C has no more insurable
interest. D is not a party to the
insurance contract.
Concealment
What is the nature of concealment?
o Failure to communicate what a party knows and
ought to communicate
o Need not be intentional
What is the consequence?
o Insurer can rescind
Requisites:
o 1. Party must have known the fact concealed
Ex. he did not know he had cancer
o 2. Must be material to the policy
Test:
Insurer would not have entered
into the contract had he known
of the fact concealed or the
conditions in the K would have
been different
Concealment in life insurance:
Failure to disclose serious
ailments
Need not disclose very minor
sickness/injury
A Couple got an insurance policy for
their mongoloid baby, but they did not
say he was a mongoloid.
HELD: concealment
There is a law prohibiting insurance
companies from refusing to issue
insurance to someone with AIDS, as
long as he discloses that he has AIDS
Is good faith a defense in
concealment?
No. Whether it is intentional or
unintentional, the injured party
can rescind.
So if X, a laundrywoman, did
not disclose that she had
stomach cancer because she
did not know, there is still
concealment.
o 3. Party must make no warranty of the fact
concealed
In this case, if there was a warranty, the
violation is not a concealment but a
breach of contract
 o 4. Other party has no means to ascertain the fact
concealed
If a party discloses that he has been
hospitalized and gave the contact # of
the hospital, the insurers failure to look
into his records there were means to
ascertain the fact
If the agent commits a concealment, the applicant will be
bound by that, the insured made the agent his own agent
for the purpose of filling up the application form
There are matters the party need not indicate:
o 1. Insurer could have known
The inspectors went to the place and
found that it was near a squatters area.
But the company issued a fire insurance
policy anyway. A fire broke out. The
insurance company cannot use the
defense that it was near a squatters
area, because it sent inspectors.
o 2. Matters of public knowledge/insurer should
have known
Insured an oil tanker. Cannot use the
defense, why did you not disclose that
there was a war in Afghanistan. They
should have known.
o 3. Information of ones own judgment.
o 4. Matters which pertain to excluded or exempted
risks.
Ex. need not disclose that members of
NPA are burning houses in their
neighborhood if the fire insurance policy
exempts rebellion/coup/etc.-related
destruction
What if the insured dies from another reason apart
from the fact concealed?
o Insurer still not liable because it wouldnt have
issued a policy.
Can there be waiver?
o Yes. Either express (in the terms of insurance) or
implied (as when there is failure to make follow
up inquiries as to facts already communicated).
Is there need to disclose nature or amount of ones
interest?
o No. EXCEPT if one is not the absolute owner of
the insured property.
Representations
What is a representation in general?
o Statements made to induce the other party to
enter into the contract
What is a misrepresentation?
o 1. Untrue statement
o 2. With knowledge and intent to deceive; or
stated as true without knowing it to be true and
which tends to mislead
o 3. Fact is material
What is the consequence?
o Voidable at option of insurer
o But waived for acceptance of premium payments
despite knowledge of ground for rescission
What are the kinds of representations?
o PROMISSORY: Representation as to the future
o AFFIRMATIVE: Representation as to a present
fact
What is the nature of a representation?
o Can be written or oral
o Representation is not part of the contract. It is a
collateral inducement.
o But it may qualify as an implied warranty
As a rule, parole evidence is not allowed to vary the terms
and conditions of the contract. It may qualify an implied
warranty. It is imposed by law.
When is a representation presumed to refer to?
o A representation is presumed to refer to the date
on which the policy goes into effect.
o If somebody applied to insure his vessel. Ex.
voyage from Manila to Cebu. Where is the
vessel? It is anchored in Manila Yacht Club.
But it is actually in Curimao. However, when the
policy takes effect and the vessel is in Manila
already, there is no misrepresentation.
What if the insured has no personal knowledge of a
fact?
o He may repeat the information he has on the
subject which he believes to be true
o Ex. There is a question in life insurance about
medical history of the family. If one thinks his
father died as a soldier, in action, when he
actually died of AIDS, and he says the former.
o But if the info came from the insureds agent, and
exercise of due diligence was possible, he is
liable for the truth of the statement
o Ex. There is no misrepresentation because he
relied on what the physician told him.
Representation is false if facts do not coincide with what
was asserted
o Test for defense: substantially true in every
particular material to the risk
o EXCEPT: Marine insurance where what is
required is the exact and whole truth
o Ex. Have you ever applied for a life insurance
policy and the application was rejected? He said
no. But before, he had an application denied, but
then accepted on reconsideration.
HELD: No misrepresentation.
o Do you take alcoholic beverages? Applicant
said no. But he has been drinking since he was
16. He died of liver failure.
HELD: Misrepresentation. But if he only
drank small amounts on cocktail parties,
it is not material. There is no
misrepresentation.
o Insured filled up the application form. The
insurance company said that they will only accept
 if the applicant is not more than 60 years old. He
was more than 60 years old.
HELD: he wrote on the application form
his date of birth, but the company still
issued a policy. There was no
misrepresentation.
Test of materiality?
o SAME AS CONCEALMENT.
o If the other party would not have entered into the
contract, or under different conditions
Warranties
Express or implied:
o Express found in terms and conditions
o Implied imposed by law
Only exists in Marine insurance
Usually embodied in a rider
o These riders, issued with the policy, need not be
signed
What is the difference of warranties from
representations?
o Warranties are express and placed in the
contract
o Representations are not written and are but
collateral inducements
May relate to:
o Past ex. warranty that insured was never
confined
o Present ex. warranty that insured is in good
health
o Future ex. warranty in fire insurance that owner
of property will not store flammable materials
When does non-compliance with a future warranty not
avoid the policy?
o 1. Loss occurs prior to the warranty taking effect
o 2. Performance becomes unlawful
o 3. Performance becomes impossible
Give an example:
o Somebody tried to insure his house for fire.
Inspectors said his neighborhood is not nice.
Insurer said that it will insure, but insured must
put up a firewall within 30 days. A fire razed his
house in 10 days.
o HELD: the insurer is liable. Same if there is no
cement available (impossible) or if it becomes
unlawful.
What is the effect of violation of warranty?
o Allows the other party to rescind.
o Even if not rescinded, it can be launched as
defense by the insurer.
o Can the insured argue that it is not material?
No. The fact that it is in the policy
entitles the insurer to rescind. The basis
is not materiality but breach of contract.
When there is breach of warranty, it is
presumed to be material.
If there is a breach of warranty, and loss occurs EVEN IF
not related to the breach of warranty, the insurer is not
liable.
o Ex. cannot bring explosive materials into his
house. He brought fireworks inside. His kitchen
caught fire without relation to the fireworks.
Insurer not liable.
o Because the risk increased regardless.
o What is the exception?
When it is merely incidental to the
business. For instance, placing alcohol
to retouch the varnish of ones insured
furniture store does not breach the
warranty against placing inflammable
materials.
Ex. where there was gasoline in the
warehouse for consumption of the
owners car within 2 days. Or mothballs
in a drug store.
Double insurance not just to those he acquired before
but also the future. Failure to give information is a breach
of warranty.
o X obtained fire insurance over his house with
Insurer A. He warranted against past and
future double insurance. Then he obtained
fire insurance over his house with Insurer B.
The same clause is included. The house
burns down. Is Insurer A liable? Is insurer B
liable?
Both are not liable. There was breach of
future double insurance warranty for
contract A and breach of past double
insurance for contract B.
o X insured his stocks in trade. Mortgaged them,
and insured them again, where there is loss
proceeds go to mortgagee. Fire destroyed the
things. Insurer said X did not disclose second
insurance.
HELD: No need to disclose. Different
interests involved. First goes to the
mortgagor. Second goes to the
mortgagee. It is not double insurance.
When is there a waiver by the insurer?
o Despite knowledge of the breach, it accepts the
renewal premium
X was issued an ordinary drivers license. Can only drive
4 wheeled vehicles. He drove a 10 wheeler. Vehicle
involved in accident.
o HELD: Insurer not liable because X is not
authorized to drive the 10-wheeled vehicle.
How is the authorized driver clause interpreted?
o Usually it means that its just the owner of the
policy and an authorized third party with a license
that must drive the vehicle.
o Is the expiration of ones license a violation of
the authorized driver clause?
 No. While it may be a violation of the BARRED from questioning it or alleging misrepresentation
law, it does not violate the authorized or concealment, or deceit/fraud
driver clause that would breach the o N.B. Really, what you are barring are defenses
warranties in an insurance policy. against fraudulent misrepresentation or
The requirement for a license applies for concealment, but not anything else
a third party not the insured himself. Requisites for incontestability clause:
o When the car is stolen or misused by a o 1. Life insurance
repairman, is it a violation of the ADC? o 2. Payable proceeds upon death
No. It is considered theft under the o 3. In force for 2 years since issuance or
policy. reinstatement
What does under influence of liquor clause mean? Can the 2 year period be shortened
o No need to actually be drunk, as long as he is by agreement?
under the influence Yes, but it cannot be
When there is breach of warranty without fraud, what lengthened by stipulation.
is the rule? o What if the policy lapsed but was reinstated?
o It only exempts the insurer from the time the The 2 year period will run again.
breach occurred. BUT there are still defenses that can be invoked even
o Give an example. after this period:
X obtained fire insurance over his o 1. Claimant has no insurable interest
house. Warranted against storage of o 2. Uncovered risks (ex. insured engaged in car
inflammable materials. On Sept 31, a racing)
fire broke out. On December 31 he o 3. Policy lapsed and insured did not pay
stored inflammable materials (fireworks) o 4. Policy was entered into pursuant to scheme to
then a fire broke out. The insurer is not kill insured (vicious fraud)
liable for the Dec 31 fire, but is liable for o 5. Someone substituted for the insured during
the Sept fire. medical test
o What if there was fraud, i.e. there were This fraud is not barred by the clause
inflammable materials inside the house? there is NO perfected contract with the
The policy doesnt attach in the first insured because it was another person
place. o 6. If insured is riding in a plane and it is not a
Compare a warranty from a representation: commercial flight (ex. 8-seater plane)
o 7. Entered into military without consent
Warranty Representation o 8. Failure to furnish proof of death
o 9. Action not filed on time
Part of the contract Collateral inducement What defenses are barred?
o 1. Misrepresentation
Written in policy/rider Need not be written
o 2. Concealment
Conclusively presumed to be Must be established to be o 3. Fraud
material material When must the two year period lapse?
o It must have lapsed while the insured was alive.
Fact must be strictly Fact can be merely If the insured dies within two years, the heirs
complied with substantially true cannot wait for the 2 years to lapse and claim
incontestability.

The Policy
Rescission of insurance contracts
What is a preliminary policy/cover note?
Sec48(a) action to rescind o Has terms and conditions of policy that will be
issued. Insurance company cannot collect
If insurer has right to rescind, insurer must rescind prior to separate premium on preliminary policy and
commencement of action on the contract actual policy.
Tender of premiums and notice that the policy is cancelled o Common in car insurance and marine insurance
before suit is deemed a rescission Because there is still some delay or
information to be determined (ex.
Sec 48(b) incontestability clause looking for third-party liability in car
insurance first [give to LTO the cover
If a life insurance policy has been in force for at least 2
note] or looking for adequate carrier for
years since first effect or last reinstatement insurer is
 goods for marine goods since the
policy depends on the state of the boat
What must be the form of policies?
o Must be in printed form. It cant be handwritten
anymore. Before you issue a new policy, the
terms and conditions have to be approved by
insurance commission.
What is the rule on riders and additional attached
clauses?
o Does not bind insured UNLESS the descriptive
name/title of the rider or clause is mentioned and
written on the blank spaces in the policy
What is the rule on additional riders or clauses issued
after the original?
o Must be countersigned by the insured or owner
o N.B. No need for signature of insured for earlier
riders and additional clauses
When must a policy be issued upon issue of cover
note?
o Within 60 days, the policy must be issued.
If the cover note extends beyond 60
days, written agreement of insured must
be obtained.
But now: there is a circular that allows
cover notes to extend beyond 60 days.
Who receives insurance proceeds?
o Applied exclusively to person in whose name or
for whose benefit the policy is made
o If description is so general that it may
comprehend any class or persons, only he who
can show it was intended to include him can
claim the benefit.
When does insurance taken by one partner or part-
owner apply to the interest of his co-partners or co-
owners?
o The terms of the policy must be applicable to the
joint or common interest
Rules on interpretation:
o If the provision is clear, there is no room to
interpret
o Tantoco Terminal: had two mills. Old mill was
insured. When the new mill was finished it was
insured. The policy however mentioned the old
mill. Burned. Insurer refused.
HELD: Clearly they intended the new
mill to be insured, not the old one even if
the policy says otherwise.
o Fortune: Security guard and driver of armored
van had possession of the money. They stole
money. Insurance company refused to pay
because it claimed they were not employees of
the company, but the agency.
HELD: The insurance company pays.
The very purpose of the insurance is to
insure against acts of those holding the
money, which in this case are the two.
What is an Open policy?
o There must be a maximum amount mentioned. It
is a maximum liability of the insurer.
o So there can be an amount mentioned, but you
still have to quantify the value within this amount.
What is a Valued policy?
o One expressing a policy that the thing be valued
at a specified sum
Ex. Marine policies are usually this
What is a Running policy?
o Successive insurances
Ex. Goodyear, instead of getting
insurance whenever it ships tires to
distributors, it gets a running policy that
covers all of these
o In any case, it would have to notify the insurance
company which would issue an indorsement, for
it to be covered
What is the rule on validity of agreements limiting
times for commencing action?
o In general, a clause in an insurance policy that
action upon the policy must be brought upon by
the insured within a certain period is valid
o But if the period fixed is less than one year from
the time cause of action accrues, the stipulation
is void (the period becomes the default 10 years,
from a written contract)
In industrial life insurance period
cannot be less than 6 months from
accrual of cause of action
o When does cause of action accrue?
From rejection of the claim by the
insurer, because prior to this, there is no
necessity to bring suit yet
o What if the clause says that action must be
brought one year from loss?
Its void, because you have to submit
your claim to the insurer first, and this
takes time. The insurer might decide
beyond one year sometimes. In this
case, the action given to the insured will
be less than 1 year from the time cause
of action accrues.
o N.B. One year period to file a case is not like
period for appeal. Asking for reconsideration
from the company does not suspend running of
the period.
When can non-life policies be cancelled?
o 1. Only with prior notice AND
o 2. On the following grounds:
1. Non-payment of premium
2. Conviction of crime from acts
increasing hazard insured against
3. Discovery of fraud/material
misrepresentation
4. Discovery of willful or reckless acts
increasing hazard insured against
 Ex. a bus company that always
gets into accidents every week
5. Physical changes in property that
makes it uninsurable
6. Determination by Commissioner that
continuation of policy will place the
insurer in violation of the code
Ex. Maximum risk it can insure
is 20% of its net worth (Ex.
100M net worth, so they can
issue up to 20M). It can issue
policies beyond that but it must
be reinsured.
Notice of cancellation:
o 1. Must be in writing
o 2. State ground for cancellation
o 3. State that if the insured asks for the facts as
basis, the insurer will disclose
When can there be automatic renewal in a non-life
policy?
o Insured can automatically renew the policy as
long as he is willing to pay the premium
o Except: 45 days before expiration of policy, the
insurer informs him that it will not renew
If insurer does not do this, insured can
renew as a matter of right
Policy written for term longer than 1 year, it will be treated
as written for successive terms of 1 year
o Ex. construction contract requires policy covering
the building as it is completed. There were 2
fires, and 3 years. It will be treated as if it is
expiring at every anniversary of the policy.
Premiums
When is the insurer entitled to the payment of the
premium?
o As soon as the thing insured is exposed to the
peril insured against
What is the effect of payment of premium to the
liability of the insurer?
o Notwithstanding any agreement to the contrary,
no policy is binding until the premium has been
paid.
What are the exceptions?
o 1. An acknowledgement under the policy that the
premium has been paid is conclusive evidence,
even if there is no actual payment yet
But this does not estop the insurer from
recovering the payments afterwards
o 2. Payment in installments
Makati Tuscany: In fact, if only a few
installments were paid, the insurer can
sue to collect the rest
Tibay: The policy provided that it will not
be binding until all installments have
been paid. Thus, here, Makati Tuscany
does not apply.
o 3. Grace period in life and industrial life policies
by default, there is a 30 day grace period. But it
can be increased
o 4. Grant of credit by the insurer to the insured
Masagana added this. There was a
market insuring its premises with UCPB
since 1988, and every year there is
usually a 60-90 credit period to pay
renewal. The market burned within the
period and UCPB paid the premiums a
day after. The insurer was held liable.
o 5. Estoppel
As in Masagana where UCPB always
granted Masagana a credit period.
What is Cash Surrender Value?
o Amount of cash the insurer receives upon
surrender of the life insurance policy prior to
maturity
What is Paid-up Insurance?
o When the insured defaults, he gets the cash
surrender value. The insurer then applies the
cash surrender value to check how much
insurance it can buy until the end of the policy.
o Can the insured apply for reinstatement at the
end of the policy?
Yes, but he has to undergo medical
examination again to show he is
insurable, and pay the premium in
arrears
What are the rules on refund of premium?
o Insured entitled to a refund of the premium if no
part of the interest was exposed to the peril
Ex. Insured shipment of rice was never
shipped
o What if the insurance is for a particular period
and there was surrender prior to the end of
the period?
Entitled to refund corresponding to
unexpired time
Deducting any previous payment of the
insurer due to losses
o What the exception to partial refund rule?
In life insurance, because the insurance
on human life is not divisible. So no
matter how short, the insured is not
entitled to a return of the premium.
o X insured a shipment of goods from Manila to
Cebu. Can he can cancel it halfway, i.e. when
it is in Romblon, and ask for refund of
premium?
No. The insurer was already exposed to
the risk; he cannot ask or the return of
the premium. It is not divisible.
o What if the contract is avoided due to fault of
the insurer?
Insured gets the premium returned.
 o Avoided due to fault of the insured, but not
actual fraud?
Insured gets return of premium, if the
insurer did not incur any liability.
Ex. Pre-condition for fire insurance over
house is to build a firewall. Insured
didnt get to build it, so the policy never
attached.
o Avoided due to fault of insured, with actual
fraud?
No return.
Ex. Insured claimed he had a firewall,
but he really did not.
Can there be return of the premium due to over
insurance?
o Yes. The insured gets a ratable return of the
premium.
o Ex. a house worth 10M is insured for 10M with X,
5M with Y, 5M with Z. Paid premiums: 10K to X,
5K to Y, 5K to Z. He is entitled to return of
premium: 5K from X, 2.5K from Y, 2.5K from Z.
Agreement not to transfer the policy after loss has
occurred is void, because at that time, the liability has
accrued. It is a chose in action.
Loss, claims settlement, subrogation
When will the occurrence of the peril insured against
make the insurer liable?
o 1. If it is the immediate cause.
Ex. Insured against fire. Faulty wiring
exploded (proximate cause) and led to
fire.
o 2. If it is the proximate cause of the immediate
cause
Ex. Insured against fire. Fire broke out
and burned down a tree, which fell and
destroyed a house.
o 3. If it is damaged in the process of rescuing the
insured against the peril insured against.
Ex. Saving insured furniture from a
house fire. When they were brought out,
they were stolen. Insurer is liable.
Ex. Fire broke out in neighbors house.
To prevent the fire from spreading to the
other house contained insured furniture,
the firemen pointed their hoses. The
furniture was soaked and damaged
insurer is liable.
When is the insurer not liable even if there is loss?
o 1. The insurer is not liable for loss caused by
connivance of insured
Ex. told someone to steal his car, sell
parts, and claim insurance
o 2. Loss from unlawful act not liable
Ex. committed arson
o 3. Loss in which peril insured against is only a
remote cause
Ex. fire insurance policy covers store
and stocks in trade. The house across
the street caught fire. Everyone
congregated. While distracted, robbers
broke into the store and stole the stocks
in trade. Fire is just a remote cause.
o 4. Loss, the proximate cause of which is an
excepted risk
Fire insurance policies say that they do
not cover loss due to coup detat,
rebellion, riots, etc.
o 5. Loss where the insured is guilty of gross
negligence
SMC hired a shipping company to
transport thousand cases of beer. The
SMC rep met the captain and told the
latter that the boat should be moved to a
safer place since there is a typhoon
brewing. The captain ignored it and tied
the barge to the wharf. During the
typhoon the rope broke, the barge was
cut loose.
Burden is on the insurer to prove that it is an excepted risk
o But for fire insurance, the burden is on the
insured to prove that it is not under an exempted
risk
o Ratio: because the thing is in possession of the
insured, so he can best give an explanation for
the loss
How must notice to the insurer of loss be given?
o 1. Notice must be given without unnecessary
delay
If reported an unreasonable time later
ex. 6 months opportunity is gone
Usually policies have a provision that
claims must be filed within a certain
time. Beyond that, barred.
Delay in presentation of a claim/proof of
loss is waived if the insurance company
did not invoke that as a reason to deny
the claim
o 2. When proof is required, insured is not required
to give proof that stands in court
Noda: police report should be sufficient
Defects in the notice or substantiation
thereof which the insurer didnt specify
are waived, because the insured is
usually a layman
o 3. If the policy requires a certificate, and the
insured cannot produce it, it is enough to say that
he cannot produce it not because the document
is prejudicial but because he could not procure it
I cannot submit the report not because
the contents of the report are prejudicial,
but because the investigator is abroad
and cannot be found
 What is the rule on subrogation and release of
liability?
o General rule: when the insurer pays the insured,
the insurer becomes subrogated to the rights of
the insured and can run after the wrongdoer
o But the insurer will be discharged from its liability
to the insured if the insured committed any act
that would prevent the insurer from recovering
from the wrongdoer
In motor vehicle insurance, the insured
settled with the wrongdoer for P2500.
The insured still claimed from the
insurer, which paid. The insurer ran
after the wrongdoer, which raised the
defense that there was a settlement.
The insurer thus can recover from the
insured because it paid by mistake.
o What are the grounds when there is no
subrogation?
1. Insured by his own act releases the
wrongdoer from liability
2. Insurer mistakenly paid for an
excepted risk
3. Life insurance
4. Recovery of loss in excess of
insurance coverage
Double insurance
Requisites:
o 1. Insured must be the same
Ex. mortgagor mortgagee not the
same
o 2. Several insurers
If someone takes an insurance from
Insurer X, then takes another after 6
months, no double insurance
o 3. Same subject matter
Ex. factory and stocks in trade not the
same
o 4. Same interest
Ex. Insured property with proceeds
payable to him, then mortgaged same
property with proceeds payable to the
mortgagee for his interest no double
insurance
o 5. Risk is the same
Ex. against fire, and then against
earthquake not the same
What is the consequence of double insurance?
o Usually there is a clause in insurance policies
that will release insurers from liability if there is
double insurance
What is the consequence of over-insurance?
o The insurers can ask for reimbursement based
on proportionate liability
o Ex. A house worth 10M is insured for 10M with X,
5 M with Y, 5M with Z:
Owner cannot recover more than 10M,
the value of the house
If owner recovered 10M from X, X can
ask for 2.5M from Y and 2.5M from Z.
In the same way, depending on who the
owner collects from, they have to
reimburse each other in the said
proportions.
o In car insurance policies, there is a usual clause
that for over-insurance you can just collect
proportionately. So two insurers covering a car
worth P500K can only be liable for P250K each,
and nothing more.
Reinsurance
What is reinsurance?
o Insurer obtains another insurance to cover for
loss for liability due to the original insurance
o The reinsurer is a liability insurer
o What is retrocession?
Subsequent layers after the first
reinsurance
Two types:
o Treaty
o Facultative case by case
Can a reinsurer intervene in the original action?
o A reinsurer cannot intervene in the case of
insurer and insured because the reinsurer has his
own interest anyway. So he has to wait until the
original insurer sues the reinsurer to recover, if it
wants to raise defenses.
Insurance is covered by the rule of uberrimae fides
What is the nature of a contract of reinsurance?
o It is presumed to be against liability, not
damages. So even if the original insurer fails to
pay, the reinsurer will be liable to pay.
Most of the time, there is a clause that says that the
original reinsurance need not litigate with every reinsurer.
If the original insurer paid, the reinsurers will pay too.
They will rise and fall with the fortunes of the original
insurer.
Can the insured sue the reinsurer directly?
o No. There is no privity of contract between them.
What is the exception?
o The cut-through clause
Insured can go straight to the reinsurer
o Ok in California, invalid in England
Marine insurance
What is an all-risk policy?
o All the insured has to prove is that the property
was lost; no need to prove that it was due to
fortuitous events.
o The only defense the insurer can raise is that the
loss was due to misconduct of the insured.
What is its not an all-risk policy?
 o It only covers perils of the sea. Rule on concealment is stricter, because the ship is
Perils of the sea: usually in the high seas so the insurer is at a disadvantage
o 1. Connected with navigation harder to inspect.
o 2. Unusual movement of the sea/winds What is the different rule as to concealment in marine
There must be a fortuitous event. A insurance?
normal typhoon is not a fortuitous event. o Usually, the cause of the loss need not be due to
It does not cover perils of the ship. What are these? the fact concealed. But for the following matters,
o If the ship is not sea worthy, or that the cause is concealment does not avoid the policy EXCEPT if
due to the poor condition of the ship. these were also the cause of the loss:
o Ex. if it springs a leak. 1. National character of the insured
What is barratry? 2. Liability of the thing to
o Insuring against the willful misconduct of the capture/detention
master or crew, not mere wrong judgment. 3. Liability to seizure due to breach of
o A ship captain cuts loose a barge. Was this foreign laws
barratry? 4. Want of necessary documents
Just an error of judgment. There has to 5. Use of false/simulated papers
be willful misconduct by the master or o Ex. Insured conceal that certain important
crew of the ship. So the insured cannot documents are missing. The vessel encountered
claim from the barratry clause. a perfect storm and sank. The insurer is still
When is arrest of the ship recoverable from? liable even if there was concealment, because
o Covers arrest of the ship by administrative or the fact concealed was not the cause of the loss.
executive order as settled in English What is the different rule as to belief of a third person
jurisprudence. But in Malayan our SC included as to marine insurance?
arrest by court order. o Marine insurance belief of a third person as
What is the insurable interest of the owner of a vessel regards what is material
that has been chartered? o Ex. surveyor saying that the ship is not seaworthy
o Only the amount which the charterer did not MUST BE DISCLOSED it is material
agree to cover, in case of loss. What is the rule on misrepresentation as to
o Ex. the ship is worth 10M. The charterer agreed expectation?
to pay 5M in case of loss. The insurable interest o If there is no fraud, misrepresentation as to
is 5M. expectation does not avoid the policy.
What is freight? o Ex. The insurer asks the owner when the vessel
o It is the expected profits of the owner of a ship will go out to sea, and the latter said April. The
which has been chartered to ship goods. These vessel only went to sea on June. The
expected profits (freight) can be insured. misrepresentation was not tainted with fraud and
o What is the insurable interest of the does not avoid the policy.
charterer?
To the extent that can be indemnified for Subject Ordinary Marine insurance
his loss. insurance
o O is the owner of a boat. C chartered it,
Concealment Can rescind even Five exceptional
agreeing to pay P500K if the vessel arrives
if concealed fact grounds apply
safely and C was able to solicit goods paying
was not cause of
freight of P600K. The vessel sinks. What
happens? loss
C need not pay O, because the ship did
Belief of a third Need not be Must be disclosed;
not arrive safely.
person disclosed; material
C can only collect 100K because that is
immaterial
the profit which was lost.
Insurer answers for general average Misrepresentation as Can rescind If there is no fraud,
o Those who were saved will contribute to the to expectation cannot rescind
general average
o Insurance policy will cover share in general Implied warranties N/A Four implied
average warranties
o DOES NOT cover particular average automatically
Ex. fruits became rotten due to nature of apply
the fruits
 What is the presumption on knowledge of loss? Loss is either total or partial
o There is a presumption if the knowledge of the Total loss is either:
loss could have been received by the owner in o A. Actual total loss
usual rate of communication. Actual loss of the thing, renders it
What are the implied warranties? valueless
o 1. Sea worthy Examples of total loss:
May there be a waiver of warranty of 1. Total destruction
seaworthiness? o Ex. the ship burned
Yes. If there is a waiver, even 2. Loss by sinking or being
if the ship is not seaworthy, the broken up
insurer is still liable. o The ship sank or was
o 2. will not deviate broken up, making it
o 3. Will not engage in illegal ventures irretrievable
o 4. It will carry necessary papers if nationality was 3. Damage to thing rendering it
expressly warranted valueless for the purpose it was
When is a ship seaworthy? shipped
o If it can perform the services and encounter the o Ex. palay got wet and
peril of the voyage contemplated. became seedlings
o Warranty of seaworthiness extends from the hull o Ex. a race horse
also that it is properly laden, and the broke its legs, so it
complement of the vessel (master, etc.) is fit cannot race anymore
When must a ship be seaworthy? 4. Any other event depriving
o At the start of the voyage the owner of possession of the
o If there are different portions of the voyage, it thing at the port of destination
must be seaworthy in all such portions o Ex. Ship was ordered
o If it is an insurance of cargo taken by different seized
ships, all the ships must be seaworthy Is there need for abandonment for
o What if the ship becomes unseaworthy during actual total loss?
the voyage? No, the insurer become liable
There must be no delay in the repairs; upon actual total loss
else, the insurer is discharged. o B. Constructive total loss
What must the voyage route follow? Unique in marine insurance
o Usual maritime usage Abandonment is act of insured after
o If none, then the most natural, direct, and constructive total loss. He relinquishes
advantageous his share to the insurer
If damage is more than of value of
Deviation property insured, insured can declare
constructive total loss
Three types of deviation?
What if the ship cannot continue but the cargo is
o 1. Departure from course of the voyage
transferred, what is the effect?
o 2. Unreasonable delay in pursuing the voyage
o The marine policy on the cargo remains
o 3. Commencement of an entirely different voyage
o The insurer is liable for expenses for transfer,
When it is proper to make deviations?
discharge, storage, reshipment, and all other
o 1. Caused by circumstances which neither the
expenses to save the cargo
master or owner has control
o What if loss occurs?
Ex. when there is a typhoon
The insurer is liable for the general
o 2. Necessary to comply with a warranty or avoid
average\
a peril (whether insured against or not)
What are the requisites of abandonment?
Ex. when the engine gets busted
o 1. Actual relinquishment by the person insured of
o 3. Made in GF, upon reasonable belief to avoid a
his interest over the thing insured
peril
o 2. Constructive total loss
Ex. received of reports waiting in
o 3. Unconditional and not partial abandonment
ambush, thus deviated
o 4. Made within reasonable time from receipt of
o 4. Made in GF, to save human life or another ship
information of loss
Once the vessel deviates, even if it returns to the original
o 5. Must be factual
route, the insurer is exonerated.
Ex. So in a case where the shipment of
oranges was reportedly lost, but they
Loss
 actually just ripened during the trip and
were sold by the captain, there is no
factual basis for abandonment
o 6. Give notice to insurer whether orally or in
writing
o 7. Notice of abandonment must specify the
particular cause
What is the effect of abandonment?
o The insurer gets all the interest of the insured
over the vessel (ex. salvage, proceeds of the
salvage, etc.)
This same effect will result if the insurer
paid as if there was actual total loss as
if there had been abandonment
o Acts done in good faith by the agents of the
insured after abandonment is for the risk/benefit
of the insurer (ex. effort to repair the ship is for
the risk/benefit of the insurer. So the insurer pays
for it, and if the ship gets repaired, benefits.)
Insurer is liable for those acts of insured in good faith
o Ex. salvors fee, repairs in GF
Acceptance:
o If abandonment is proper but insurer refuses
unjustly, it does not prejudice the insured
o Acceptance of the abandonment can be express
or implied
Mere silence of insurer after notice is not
an acceptance
o Acceptance is conclusive and cannot be revoked
[except if the ground is not factual, like the
oranges case]
o What if the insurer unjustly refuses to accept
the abandonment?
The insured can sell the vessel and earn
scrap value. The insurer is liable for the
balance.
Upon accepted abandonment, who is entitled to the
earned freightage?
o Freightage earned before the loss to the insurer
of the freightage
o Freightage earned after the loss to the insurer
of the ship
Measure of indemnity
What is the Co-insurance clause?
o It applies by default only to marine insurance. It
has to be stipulated in fire or other insurance.
o The prerequisites are:
1. Loss is partial
2. The property is insured for less than
its total value
o What is the effect?
The insurer is liable only for the
difference between the amount of
insurance and the value of the property.
o Huh? Give an example na lang.
Vessel X was worth 1M but was insured
for only 800K. It was damaged to the
extent of 200K. The insured can
recover 160,000 which is 1/5 of 800k
(since 200K is 1/5 of 1M)
What is the difference in what the insured can recover
if the profits are separately insured and if not?
o Profits separately insured: Sugar being shipped is
worth 100M and has expected profit of 120M.
50M worth of sugar was destroyed. Insured can
recover 60M as insurance for expected profit.
(Because for every 5 M of sugar it earns
6M sugar [100:120], so loss of 50M
worth of sugar is loss of 60M in profits)
o Not separately insured: Sugar being shipped is
worth 100M and has expected profit of 120M.
50M worth of sugar was destroyed. Insured can
recover of 20M, which is 10M for expected
profit.
Is a marine insurer liable for expenses attendant upon
damage and subsequent repairs?
o Yes, the insurance is liable pursuant to sue and
labor expenses, because the insurer is
presumed to be willing to incur these expenses to
avoid loss.
Is a marine insurer liable for contribution expenses
made by the insured for general average loss?
o Yes.
Fire insurance
What are the requisites of alteration?
o 1. Change in the use or condition of a thing
insured
o 2. Which is limited by the policy
o 3. Without consent of insurer
o 4. Through means within control of insured
o 5. Increasing the risk
What is the consequence of alteration?
o The insurer can rescind the contract
Give an example of alteration that increases the risk.
o Conversion of a bookstore to a restaurant
Give an example which does not.
o Conversion of a residential condominium into an
office condominium.
What is a hostile fire and friendly fire?
o Hostile fire fire that escapes and burns in a
place where it is not supposed to
o Friendly fire fire that burns in a place where it is
supposed to burn
Friendly fire can convert into hostile fire
o X is seeking to recover from the insurer for
soot marks caused on the wall by a gas stove
burner. Can X recover?
No. The marks were caused by friendly
fire.
Does co-insurance apply to fire insurance?
 o Not by law. But it is a standard clause placed by
companies.
What is the rule on valuation for fire insurance (if
there is none provided in the policy)?
o The valuation must reflect depreciation suffered
by the property before it was burned.
o SMC had a building worth 100M, which
burned. But instead of depreciating, the
value of construction materials that year
skyrocketed. So SMC is trying to recover
insurance based on those new prices. But
the insurer claimed SMC thus was
underinsured in this case. SMC said that it
was not, based on the old prices. What
happens?
SMC cannot use new valuation for the
amount to be recovered, and old prices
to disclaim underinsurance.
What is the effect if the insurance gives the insurer
the option to rebuild the property instead of paying?
o This is valid. The contract is novated and it
becomes a contract for a piece of work.
o The insurer becomes liable for quality of the work
done.
Casualty insurance
If intentional injuries caused by the insured or a third
person are excepted, what does intentional mean?
o Exercise of reasoning faculties, consciousness,
and volition of the person.
o It is the intention of the person inflicting the injury
that controls.
o Usual accident policy doesnt cover death or
injury caused by assault or murder. You have to
pay extra to cover this.
What does accident or accidental mean?
o No technical meaning. Something that happens
by chance or fortuitously, without design or
intention.
o Is this the same as no fault?
No. It just distinguishes itself from
intentional.
What is the rule on third party liability?
o There can be a provision allowing a third party to
directly sue the insurer.
But the insurer is not solidarily liable;
just directly liable. The liability of the
insurer is contractual, not quasi-
delictual. The liability of the insurer is
limited by the policy.
o If there is no such provision, the contracts are
separate, so the third person cannot sue the
insurer.
o What if the indemnity is against actual loss or
payment?
The third party cannot sue the insurer,
because it has to wait for the insured to
pay him. The insured recovers from the
insurer.
o What if the indemnity is against liability?
The insured need not pay first before
proceeding against the insurer.
Is the insurer liable even if the insured commits
criminal negligence?
o Yes. This is still accidental. What is not covered
is intentional or deliberate criminal acts.
A guy was showing off his gun. A friend asked if it
was loaded, and he said no. To prove it, he pointed
the gun at himself and pulled the trigger. There was a
bullet. He died. Can the heirs collect?
o HELD: Yes, because it was accidental.
o JJs viewpoint: No, because he was stupid.
Sometimes, there is a clause where the insurer will defend
the case on behalf of the insured in court. In a case, the
insured sued the insurer not because of the liability clause
(because the insured was not yet made liable) but
because the insurer was negligent in defending the case.
Suretyship
What is suretyship?
o Agreement where surety guarantees the
performance by another of an undertaking or
obligation in favor of a third party.
Examples?
o Fidelity bond contract of insurance against loss
from misconduct
o Fidelity guaranty insurance for consideration,
one agrees to indemnify the assured against loss
arising from want of integrity, fidelity, or honesty
of persons holding positions of trust
What is the nature of a suretyship agreement?
o Solidary agreement, but only to the extent of the
contractual amount in the bond
o The court/obligee is not concerned w/n the
premium has been paid. It will go against the
surety when the obligation is not paid or the
insured absconds.
What if the bond is not accepted?
o The principal-applicant is entitled to return of the
premiums paid.
o But not entitled to return of taxes paid (ex. DST)
and other service fees, like what was spent to
review the application.
o What is the exception?
If there was fault of the insurance
company, leading to denial of the
application. Even the taxes paid shall
be returned.
What is a continuing bond?
o One that will last until the end of the case. The
company is entitled to charge premiums every
year.
Life insurance
 Kinds:
o 1. Ordinary life, general life, or old line policy
Insured pays a premium every year until
he dies. Surrender value after 3 years.
o 2. Limited payment policy
Insured pays premium for limited period.
If he outlives the period, he does not get
anything.
o 3. Endowment policy
Insured pays premium for specified
period. If he outlives the period, the face
value of the policy is paid to him. If not,
the beneficiaries receive the benefit.
o 4. Term insurance
Insured pays premium only once, and is
insured for a specified period. If he
outlives the period, no person benefits
from the insurance.
No cash surrender value.
N.B. kind of like life insurance policies
you take before flying commercial
o 5. Industrial life
Insured pays premiums weekly, or
monthly, or oftener
What is the effect of death of insured through
suicide?
o The insurer is only liable if the insured committed
suicide after the policy has been in force for a
period of two years from date of issue or last
reinstatement, unless shorter period is provided
o If the suicide was committed in a state of insanity,
the insurer is liable too, regardless of date of
suicide
The business of insurance
Certificate of authority from the Commissioner lasts one
year
What is the margin of solvency for insurance
companies?
o For a domestic firm, the excess of its admitted
assets excluding paid-up capital, over the amount
of liabilities, unearned premiums, and
reinsurance reserves
o For a foreign firm, the excess of its admitted
assets in the Philippines excluding security
deposits, over the amount of liabilities, unearned
premiums, and reinsurance reserves
Agents and brokers:
o Must be licensed
Soliciting for compensation without
license criminally liable
o Rebate of premiums is also prohibited.
o Can agreements regarding kickbacks be
enforced?
No, they are illegal.
Compulsory motor vehicle liability insurance
Third party excludes
o Driver, etc.
nd
o Relative by affinity/consanguinity within 2
degree
o Employee [see qualification]
What if a provision says that final judgment is needed
before liability attaches?
o Its a void provision. If you have to wait until final
judgment, it will take a really long time.
What is the no fault clause?
o The injured third party or passenger can claim for
death or injury without necessity of proving fault
or negligence, under the ff conditions:
o 1. Indemnity shall not exceed P15,000
N.B. this value can adjust please
check
o 2. Ff proof of loss is sufficient to substantiate the
claim:
If theres death, death certificate
If theres injury, medical certificate
In all cases, police report
o 3. Claim is against one motor vehicle only
From whom must the insured claim against?
o If a passenger, mounting, or dismounting the
vehicle, against the insurer of the vehicle he is
riding in
o Else, against the insurer of the directly offending
vehicle
What is the right of the insurer paying under the no-
fault clause?
o It can directly claim against the owner of the
offending vehicle
What if the claim exceeds the amount awarded under
the no fault clause?
o If the claim exceeds 15,000, then the insured can
still claim it from the insurer, but he has to prove
there was negligence or fault.
o The insurer cannot ask the insured to waive the
rest of the claim as a precondition to pay under
the no fault clause.
What are the important periods?
o Claim from the insurer within 6 months from
accident
o Go to court within 1 year from denial of claim
Importance of a license:
o If the one recovering is the driver himself, he can
recover damages even if his license is expired.
The authorized driver clause does not apply to
the owner.
o If it is someone else, who is authorized, he must
have a valid license
o What if the car is unlawfully taken and driven
by a person who is not authorized?
The theft clause applies, and not the
authorized driver clause
Ex. a repairman took the car out for a
joyride