Title 2 - Parties to the contract (Insurance Laws)
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1. Section 6 -: ...
2. Section 6 . PCA/authorized/insurer: Every corporation,
partnership, or association duly authorized to transact
insurance business as elsewhere provided in this code may
be an insurer
3. 3 parties to the contract of insurance: Insurer
Insured
Beneficiary
4. Insurer: the party who assumes or accepts the risk of loss/and
undertakes for a consideration to indemnify the insured /' or
to pay him a certain sum on the happening of a specified
contingency or event
5. Can the state itself go into an insurance business?: Yes
6. Insured: the person in whose favor the contract is operative /
and who is indemnified against, or is to receive a certain sum
upon the happening of a specified contingency or event
7. Can the insured assign the proceeds of the insurance to
someone else?: Yes
8. what is the relation between the insurer and the insured?:
contingent debtor and creditor
9. Insured v. assured...
"insured": owner of the property insured
person whose life is the subject of the contract
10. assured: person for whose benefit the insurance is granted
11. Beneficiary: person designated by the terms of the policy as
the one to receive the proceeds of the insurance
12. Insurance contracts are usually obtained through an?: agent
broker
13. agent: ordinarily employed by the insurance company
agent of the applicant for insurance
14. broker: ordinarily an independent contractor
15. Who may be an insurer: (1) Foreign or domestic insurance
company or corporation
(2) Individual, partnership, or association
16. (1) Foreign or domestic insurance company or corporation: ...
17. Before a Foreign or domestic insurance company or
corporation may transact an insurance business it must first
obtain: a certificate of authority for that purpose from the
Insurance Commissioner
*Comish may refuse if it will best promote the interests of the
people of this country
18. (2) Individual, partnership, or association: ...
19. May an individual be an insurer?: YES
20. What is required for an individual to be an insurer?: He
holds a certificate of authority from the Insurance
Commissioner
21. A certificate of authority will be given if he is: possessed of
the capital assets required of an insurance corporation doing
the same kind of business in the Philippines and invested in
the same manner
22. Insurance corporation: formed or organized to save any
person or persons or other corporations harmless from loss,
damage, or liability arising from any unknown or future or
contingent event or to indemnify or to compensate any
person or persons or other corporations for any such loss,
damage or liability or to guarantee the performance of or
complaince with contractual obligations or the payment of
debts of others
23. insurer and insurance company include: all individuals,
partnerships associations, or corporations, including
government-owned or controlled corporations or entities,
engaged as principals in the insurance business
also includes professional reinsurers
excepting mutual benefit associations
24. Can a bank engage in insurance business: Sec. 54 of RA 8791
A bank shall not directly engage in insurance business as
insurer
25. bancassurance: marketing tool
branch network
combines the business of banking and insurance where an
insurer utilizes bank branches to distribute insurance policies
Presently, banks are allowed to
-sell insurance products at their branches
-engage in non-allied undertakings but only through
subsidiaries or affiliates
26. What banks are allowed to enter in a bancassurance tie-up
with insurers: Universal Banks
Commercial banks
27. To comply with the ownership rule: a major insurance
company can set up a subsidiary and sell five percent (5%) of
equity to a bank
28. Since business of insurance is affected with public interest it:
is subject to regulation and control by the state by virtue of
the exercise of its police power
29. Since business of insurance is affected with public interest,
an insurance company is: an instrumentality which gathers
funds upon the basis of equality of risk from a greater
number of persons, sufficiently large in number to arouse the
element of chance to step out and the law of averages to
step in as the controlling factor - and holds the numerous
amounts so collected as general fund to be paid out to those
who shall suffer losses
30. Is a law requiring insurance companies to file schedule of
rates and prohibiting discriminatory rates valid?: YES
31. Section 7. public enemy: Anyone except a public enemy may
be insured
32. ...: Natural person
juridical person
33. Two essential requisites for a natural person to be insured:
He must be competent to make a contract
He must posses an insurable interest in the subject of the
insurance
*The insured must not be a public enemy
(also applicable to a juridical person
34. Note that Section 3, specifically authorizes minors, 18 years
or more to take out insurance payable to a limited class of
beneficiaries: ...
35. public enemy: designates a nation with whom the Philippines
is at war and it includes every citizen or subject of such
nation
36. Is a mob or robbers or thieves considered public enemies:
NO, regardless of how numerous they are
37. Is a private corporation, during wartime, deemed an enemy
corporation when it is organized under Philippine laws but
controlled by enemy aliens: YES, control test
38. Control test: a corporation is deemed to have the same
citizenship as the controlling stockholders in times of war
39. Effect of war on existing insurance contracts: 1. all
intercourse between citizens of belligerent powers which is
inconsistent with a state of war is prohibited
40. Why is all intercourse between citizens of belligerent
powers which is inconsistent with a state of war is prohibited
?: It is inconsistent that the subjects of one country should
lend their assistance to protect by insurance , the commerce
or property of belligerent alien subjects or to do anything
detrimental to their country's interest
41. what is the Effect of war on existing insurance contracts with
respect to property insurance: an insurance policy ceases to
be valid and enforceable as soon as an insured becomes a
public enemy
42. what is the Effect of war on existing insurance contracts with
respect to life insurance: The contract is not merely
suspended but is ABROGATED by reason of nonpayment of
premiums, since the time of the payments is peculiarly of the
essence of the contract.
However, the insured is entitled to the cash or reserve value
of the policy, which is the excess of the premiums paid over
the actual risk carried during the years when the policy had
been in force
43. where loss occurs after end of war: The termination of the
war does not revive the contract
The insurer is NOT LIABLE even if the loss is suffered by the
insured after the end of the war
WHY? because the contract is abrogated
44. Section 8: Unless the policy otherwise provides, where a
mortgagor of property effects insurance in his own name,
providing that the loss shall be payable to the mortgagee, or
assigns a policy of insurance to a mortgagee, the insurance is
deemed to be upon the interest of the mortgagor, who does
not cease to be a party to the original contract, and any act
of his, prior to the loss which would otherwise avoid the
insurance, will have the same effect, although the property is
in the hands of the mortgagee, but any act which, under the
contract of insurance, is to be performed by the mortgagor,
may be performed by the mortgagee therein named, with the
same effect as if it had been performed by the mortgagor
45. Does the mortgagor and the mortgagee have separate
insurable interest: YES,
so insurance taken by one in his own name only and in his
favor alone, does not inure to the benefit of the other
There is NO double insurance if the same property is insured
by both of them
46. What is the extent of the insurable interest of the
mortgagor? and why?: the extent of the value of the
property, even though the mortgage debt equals such value
since the loss or destruction fo the property insured will not
extinguish his mortgage debt
47. What is the extent of the insurable interest of the
mortgagee? and why?: The extent of the debt secured ,
since the property is relied upon the security thereof, and in
insuring, he is not insuring the property itself but his interest
or lien therein
His insurable interest is prima facie the value mortgaged and
extends only to the amount of the debt, NOT exceeding the
value of the mortgaged property
48. What is the extent of amount of recovery of the mortgagor:
he cannot recover upon the insurance beyond the full
amount of his loss
49. What is the extent of amount of recovery of the mortgagee:
he cannot recover upon the insurance beyond the ? in
excess of the credit at the time of the loss nor the value of
the property mortgaged
50. What is the right of the mortgagee in case of loss?
applies for insurance in his name- mortgagee
for the benefit of - mortgagee: he is entitled to the proceeds
of the policy in case of loss BEFORE THE PAYMENT of the
mortgage
51. after payment of insurer: there will be subrogation of insurer
to the right of the mortgagee
there will be a change of creditor
52. Does the payment of the insurance to the mortgagee by
reason of the loss relive the mortgagor of his principal
obligation: NO, there is only a change of creditor
The mortgagee cannot collect both the insurance and the
mortgage debt
53. What happens if the thing is lost when
applies for insurance in his name- mortgagor
for the benefit of - mortgagor: the insurance proceeds do
not inure to the benefit of the mortgagee who has no greater
right than unsecured creditors in the same
54. What happens when
applies for insurance in his name- mortgagor
for the benefit of - mortgagee
(same effect if all in the name of the mortgagor but p[olicy
assigned to the mortgagee ): Mortgagor pays insurance
premium, making the loss payable to the mortgagee
55. What are the ways the mortgagee may be made the
beneficial payee: 1. He may become the assignee of the
policy with the consent of the insurer
2. He may be the mere pledgee without such consent
3. A rider making the policy payable to the mortgagee "as his
interest may appear" may be attached
4. A "standard mortgage clause"containing a collateral
independent contract between the mortgagee and the
insurer may be attached
5. The policy, though, by its terms payable absolutely to the
mortgagor; may have been procured by a mortgagor under
a contract duty to insure for the mortgagee's benefit, in
which case the mortgagee acquires an equitable lien upon
the proceeds
56. What are the legal effects
applies for insurance in his name- mortgagor
for the benefit of - mortgagee
(same effect if all in the name of the mortgagor but p[olicy
assigned to the mortgagee ): 1. The contract is deemed to be
upon the interest of the mortgagor; hence, HE DOES NOT
CEASE TO BE A PARTY TO THE CONTRACT
2. ANY ACT OF THE MORTGAGOR PRIOR TO THE LOSS,
which would otherwise avoid the insurance (like storing
inflammable materials in the insured house ) AFFECTS THE
MORTGAGEE even if the property is in the hands of the
mortgagee
3.Any act which under the contract of insurance is to be
performed by the mortgagor (like payment of the premium)
may be performed by the mortgagee with the same effect
4. In case of loss, the mortgagee, the MORTGAGEE IS
ENTITLED TO THE PROCEEDS to the extent of his credit
5. Upon recovery by the mortgagee to the extent of, his
credit, the debt is extinguished (No subrogation?)
57. If the loss occurred before the mortgage is paid
applies for insurance in his name- mortgagor
for the benefit of - mortgagee
(same effect if all in the name of the mortgagor but p[olicy
assigned to the mortgagee ): Mortgagee is entitled to
proceeds to the extent of his debt and the excess is held in
trust in favor of the mortgagor
58. If the loss occurred after the mortgage is paid
applies for insurance in his name- mortgagor
for the benefit of - mortgagee
(same effect if all in the name of the mortgagor but p[olicy
assigned to the mortgagee ): the proceeds is payable to the
mortgagor since he never ceased to be a party of the
original contract
59. What is the effect of the standard or union mortgage clause
in a fire insurance policy: The acts of the mortgagor do not
affect the mortgage
The purpose of the clause is to make a separate and distinct
contract of insurance on the interest of the mortgagee
60. Can the mortgagee procure a policy where the mortgagor is
to pay upon such insurance: YES
61. What is the effect of the open or loss-payable mortgage
clause in a fire insurance policy: It merely provides for the
payment of loss, if any, to the mortgagee as his interest may
appear
The acts of the mortgagor affect the mortgagee
The mortgagee is only a beneficiary under the contract and
recognized as such by the insurer but not made a party to
the contract itself
covers only such interest as the mortgagee has at the issuing
of the policy
"Loss, if any, shall be payable to mortgagee as its interest
may appear subject to the terms of this policy
62. What is the right of the mortgagee under mortgagor's
policy?-- It depends
if before loss: The mortgagee is a conditional appointee
He is entitled to receive so much of any sum that may
become due under the policy as does not exceed his interest
as mortgagee
The right becomes absolute upon the occurrence of the loss
63. What is the right of the mortgagee under mortgagor's
policy?-- It depends
if after loss: If loss happens when credit is not yet due...
The mortgagee is entitled receive the money to apply to the
extinguishment of the debt as fast as it becomes due
(kailangan intayin na maging due sya)
If loss happens after the credit has matured...
the mortgagee may apply the proceeds to the extent of his
credit
64. What is the effect of insurance by mortgagee on behalf of
mortgagor?
(mortgagee procures insurance policy where mortgagor is
to pay the premiums: 1. Discharge of debt
2. Right to subrogation
65. 1. Discharge of debt: Upon the destruction of the property,
the mortggagee is entitled to receive payment from the
insured but such payment discharges the debt if equal to it, if
there is excess mortgagee holds it in strust for the
mortgagor
66. If there is a stipulation that the insurer shall be subrogated
to the rights of the mortgagee
( insurance by mortgagee on behalf of mortgagor?): the
payment of the policy will NOT discharge the debt even
though the mortgagee may hav procured the policy by
arrangement with the mortgagor
67. If there is NO stipulation that the insurer shall be
subrogated to the rights of the mortgagee: The rule on
subrogation does not apply except where the mortgagee
insures only his interest
68. Section 9: If an insurer assents to the transfer of an insurance
from a mortgagor to a mortgagee, and at the time of his
assent, imposes further obligations on the assignee, making a
new contract with him, the acts of the mortgagor cannot
affect the rights of said assignee
69. What is the effect of an assignment or transfer: substitute
the assigne in place of the origial insured
-in the right to claim indemnity for loss
-the obligations to perform the conditions
70. SO the assignee, unless he makes a new contract with the
insurer acquires no greater right under the insurance than
the assignor had, subject to the insurer's defenses: ...
71. assignment or transfer of insurance "fire" policy: Before it
becomes a fixed liability is not subject to assignment, being
strictly a personal contract, in the absence of provision in the
contract or subsequent consent of the insurer
(Bonds, mortgages and loans that are payable over a term
exceeding one year would be fixed liabilities.)
assignment with consent does NOT CONVERT THE
CONTRACT INTO ONE OF THE INDEMNITY FO THE
MORTGAGEE
Contract remains with the mortgagor
The assignment operates merely as an equitable transfer of
the policy so as to enable the mortgagee to recover the
amount due in case of loss subject tot he conditions of the
policy
72. assignment or transfer of insurance "marine" policy: NOT
assignable even without the consent of the insurer unless
required by the terms of the policy
(The contrary rule was created when means of
communication between distant places were slow and
difficult and great inconvenience would have resulted if the
owner had to wait for the consent
73. assignment or transfer of insurance "casualty" policy: The
insurer's consent is required
This commonly involves moral hazard
74. assignment or transfer of insurance "life" policy
(only assignable one): the policy may feely be assigned
before or after the loss occurs, to any person whether he has
an insurable interest or not
except if done in bad faith `
75. Assignment of policy v. proceed: ...
76. assignment of the policy itself: transfers the rights to the
contract to another insured
77. assignment of the proceeds of the policy after the lost has happened: involves a money claim under or a right of action on the
policy
78. assignment of the subject matter of the insurance (such as a house insured under a fire plocy): suspends the insurance until the
same person becomes the owner of both the policy and the thing insured
79. No distinction as to the kind of insurance policy that is asignable: section 8 --> recognizes the right to transfer an insurance policy

Section 9 --> effects

80. What is the effect of a new contract between insurer and mortgagee-assignee: Novation of the original contract

the acts of the mortgagor does not affect the rights of the mortgagee