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ICAL LAW
INSURANCE LAW
APPLICABLE LAWS
1. Insurance Code of 1978 2. Making or proposing to make, as surety,
any contract of suretyship as a vocation
2. Civil Code, Art. 2011 and other related and not
articles as a mere incident to any other
3. Family Code (EO 209) legitimate business of a surety;
4. Other special laws. (Example: GSIS, 3. Doing any insurance business, including
SSS, Philhealth) a reinsurance business;
4. Doing or proposing to do any business
If the Insurance Code or a special law does in substance equivalent to any of the
not specifically provide for a particular matter foregoing.
in question, the provisions of the Civil Code
on contracts shall govern suppletorily. Elements of Insurance:
(Villanueva, Commercial Law Review, 2002ed.,
page 277) 1. Insurable Interest
The insured must possess an interest
susceptible of pecuniary estimation, known
as “insurable interest”;
CONTRACT OF INSURANCE 2. Risk of Loss
The insured is subject to a risk of loss
An agreement whereby one undertakes through the destruction or impairment of that
for a consideration to indemnify another interest by
against loss, damage or liability arising from the happening of designated perils;
an unknown or contingent event. (Sec. 2, par. 2, 3. Assumption of Risk
Insurance Code of the Philippines [ICP] ) The insurer assumes that risk of loss;
4. Scheme to Distribute Losses
The test to determine if a contract is an Such assumption is part of a general
insurance contract or not, depends on the scheme to distribute actual losses among a
nature of the promise, the act required to be large group of persons bearing somewhat
performed, and the exact nature of the
similar risks; and
agreement in the light of the occurrence,
contingency, or circumstances under which 5. Payment of Premium
the performance becomes requisite. It is not As consideration for the insurer’s promise,
by what it is called. (White Gold Marine Services the insured makes a ratable contribution
v. Pioneer Insurance, July 28, 2005) called premium, to a general insurance fund.
Characteristics of Insurance:
1. Consensual – because it is TYPES OF
perfected by the meeting of the minds.
2. Voluntary – the parties may
INSURANCE
incorporate such terms and conditions as
they may deem convenient. 1. Life
3. Aleatory – one of the parties or both Insurance
reciprocally bind themselves to give or to a. Individual Life (Sec. 179-183,
do something in consideration of what 227) – insurance on human lives and
the other shall give or do upon the insurance appertaining thereto or
happening of an event which is connected therewith.
uncertain, or which is occur at an b. Group Life (Sec. 50) – a
indeterminate time. (Art. 010, Civil Code) blanket policy covering a number of
4. Executory- it is executory on the individuals.
part of the insurer in the sense that it is c. Industrial Life (Secs. 229-231)
not executed until payment for a loss. It – a form of life insurance under
is executed as to the insured after which the premiums are payable
payment of the premium. either monthly or oftener, if the face
5. Unilateral – imposes legal duties on amount of insurance provided in any
the insurer who promises to indemnify in policy is not more than 500 times
case of loss. than that of the current statutory
6. Conditional – because recovery is minimum daily wage in the City of
commensurate with the amount of loss Manila and if the words ‘”industrial”
suffered. However, Life Insurance is not policy are printed upon the policy as
a contract of indemnity except if one is part of the descriptive matter.
procured by a creditor on the life of the 2. Non-Life
debtor. Insurance
7. Personal – each party having in a. Marine (Secs. 99-166)
view the character, credit and conduct of b. Fire (Secs. 167-173)
the other. c. Casualty (Secs. 174)
8. Formal – a policy in writing is required
to be issued, and the premium must be paid. 3. Contract of Suretyship (Secs. 175-178)
9. Contract of Indemnity – Except life and Health and accident insurance are
accident insurance where the result is death, either covered under life (Sec. 180); or
a contract of insurance is a contract of casualty insurance (Sec. 174);
indemnity whereby the insurer promises to Marine, fire and the property aspect
make good only the loss of the insured. of casualty insurance are also
referred to as property insurance.
enemy from first payment up to the time insurable interest in the life of the
of its becoming public enemy, should be insured.
returned. Exception: Any person who is forbidden
A member of the Moro Islamic from receiving any donation under Article
Liberation Front (MILF) or its breakaway 739 of the Civil Code cannot be named
group or the Abu Sayyaf may be insured
beneficiary of a life insurance policy by
with a company licensed to do business
under the ICP. The MILF or the Abu the person who cannot make any
Sayyaf is not a citizen or national of donation to him. (Art. 2012 NCC)
another country, but of the Philippines.
Prohibited Donations (Art. 739 NCC)
Effect of war: It abrogates the contract of a. Between persons guilty of
insurance; even if war terminates. It does not adultery or concubinage;
revive the contract. b. Between persons guilty of the
same criminal offense;
Nationality of the corporation is determined by c. Made to a public officer or his
the place of incorporation or where it is registered wife, descendants and ascendants,
(Incorporation Test); by reason of his office.
Exception: During wartime where the Philippines The designation of common law wife
is involved, what is decisive is not its registration as beneficiary is void. This need
but is the nationality of the majority of its only be proved by preponderance of
stockholders (Control test). evidence; no previous conviction is
required. (Insular Life v. Ebrada, 80
Insured may be regarded as the real party in SCRA 181)
interest under an insurance policy, although The designation of adulterous
he has assigned the policy for the purpose of children by a married man is valid.
collection, or has assigned as collateral (Southern Luzon Emp. V. Golpeo, 96 Phil.
security any judgment he may obtain there 83)
from. (Great Pacific Life vs. CA, 316 SCRA 677) 2. A person who insures the life of
another person and names himself as
Insurance By A Married Woman the beneficiary must have an insurable
A married woman may take out an interest in such life. (Sec. 10, ICP)
insurance on her life or that of her
children without the consent of her 3. General Rule: designation of beneficiary
husband, or that of her husband, having is revocable (Sec. 11, ICP)
an insurable interest in the latter. Exception: When there is an express
However, while either spouse may stipulation in the policy that it shall be
exercise any legitimate profession, irrevocable (express waiver).
occupation, business or activity without Exception to the Exception: After the
the consent of the other, the latter may finality of the decree of legal separation,
object on valid, serious and moral the innocent spouse may revoke the
grounds. (Art.73, Family Code) donations made by him or by her in favor
of the offending spouse, as well as the
3. Beneficiary and Cestui Que Vie –
designation of the latter as beneficiary in
The beneficiary is the person designated
any insurance policy, even if such
to receive the proceeds of the policy
designation be stipulated as irrevocable.
when risk attaches while the cestui que (Art. 64, Family Code)
vie is the person on whose life the
insurance is written. Effects of Irrevocable Designation of
Beneficiary: The insured cannot:
1. Assign the policy;
RULES IN THE DESIGNATION OF THE 2. Take the cash
BENEFICIARY surrender value of the policy;
A. Life Insurance 3. Allow his creditors
1. Beneficiary of One Who Insures His to attach or execute on the policy;
4. Add new
Own Life beneficiary; or
General Rule: Any person may be a 5. Change the
beneficiary, whether or not he has an irrevocable designation to revocable,
even though the change is just and insured, he knowing and intending
reasonable. that his death shall be the result of
If the designation of the beneficiary is irrevocable, his act (Sec 180-A).
the designation cannot be made revocable c. Death by accident- death
without his consent, as he has vested right. If the which is purely accidental, even
beneficiary is a minor child of the insured, the though due to the insured’s own
latter cannot give his consent because of conflict carelessness or negligence is not
of interest. (Phil. American Life Insurance Co. v. excluded from the coverage by the
Pineda, 175 SCRA 416)[1989]
word “self-destruction,” “death by his
4. Change of Beneficiary: own hand”, and the like which are
General Rule: The insured shall have the generally considered synonymous
right to change the beneficiary he with suicide.
designated in the policy. d. Death by suicide while
a. The beneficiary acquires no insane- the insurer is still liable since
vested right only expectancy of the insurer must have known that the
receiving the proceeds under the insured was insane and the unwitting
insurance. act of self-destruction is as much the
b. The right may be expected consequence of that disease.
in the manner provided in the policy. e. Death caused by the
c. The right ceases upon the beneficiary-
insured’s death. It may not be General Rule: the beneficiary cannot
exercised by his representatives. receive benefits
Exceptions:
Exceptions: 1. The beneficiary acted in self-
a. If the right to change the defense;
beneficiary is expressly waived in the 2. The insured’s death was not
policy then the insured has no power intentionally caused.
to make such change without the Note: Sec 12 provides in
consent of the beneficiary; and “willfully” bringing about the
b. When the designation of death.
beneficiary is irrevocable. f. Death caused by violation of
law- the insurer is still liable. To
Note: If the insured refuses to pay the avoid liability, the insurer must
premiums, the designated irrevocable
further establish that the commission
beneficiary may continue the policy by
paying the premiums that are due. of the felony or the violation of law
was the cause or had a causal
Exception to exception: Under Articles 43 connection with the accident
(4), 50 and 64 of the Family Code, the resulting in the death of the insured.
innocent spouse may revoke the
designation of the other spouse who 6. Effects when the
acted in bad faith as beneficiary in any beneficiary predeceased the insured:
insurance policy, even if such a. Where the beneficiary is
designation be stipulated as irrevocable. irrevocable, the legal representatives
of such beneficiary are entitled to the
5. Rules on liability of insurer proceeds of the insurance as assets
on death of insured: of his or her estate, unless the
a. Death at hands of law- the proceeds were made payable to the
insurer is liable. This is one of the beneficiary only “if living”.
risks assumed by the insurer in the b. Where the beneficiary is
absence of a valid policy exception. revocable, the estate or legal
b. Death by suicide/ Death by representatives of the former derive
“one’s own hand”- the insurer is not no interest from or through him, but
liable if suicide is intentional, with the proceeds passes to the estate of
whatever motive (from anger, pride, the insured.
jealousy) because death is still
Note: the reason for the different
caused by the voluntary act of the
effects between the irrevocable and
The Insurer has the duty to explain the Prescriptive Period (Sec. 63, ICP)
policy when the policy is ambiguous and The parties may expressly provide a
unclear. This, however, is subject to some stipulation as long as it is not less than 1 year
from the time the cause of action accrues. The
important caveats: reckoning period shall begin from the date the
1. Reasonable Expectations Doctrine- cause of action accrues. “Cause of action” is
insurer must explain to the insured what upon the denial of the claim not from the date of
is contained in the policy for the latter loss.
may have something in mind different
from what is contained in the policy. In the ABSENCE of a stipulation, the action
2. Insurer must explain the options shall prescribe in 10 years.
available to the insured.
3. Agents owe their customers a duty to In CMVLI, any person having any claim
exercise the skill and care that a upon the policy issued shall, without any
unnecessary delay, present to the insurance
reasonable agent would exercise in the
company concerned a written notice of claim
circumstances. setting for the nature, extent and duration of
4. Insurer must take affirmative steps to the injuries sustained as certified by a duly
make sure that the insured is informed of licensed physician. Notice of claim must be
his remedial rights. filed within six months from date of accident.
Action or suit for recovery of damage due to
Cancellation of Non –Life Policy lose or injury must be brought with the
1. Grounds: commissioner or the courts within one year
Cancellation by the insurer of an from denial of the claim. (Sec. 384, ICP, As
amended by 101814, BP 874, Vda., de Gabriel v.
insurance policy, other than life, requires CA, GR 103883, 14 November 1996)
prior notice to the insured and any of the
following grounds:
a. Non-payment of premium; TRANSFER OF
b. Conviction of a crime arising
out of acts increasing the hazard POLICY
insured against;
Life Property Casualty
c. Fraud or material
insurance insurance insurance
misrepresentation;
d. Willful or reckless acts or Can be Cannot be Cannot be
omissions increasing the risk insured transferred transferred transferred
against; even if without the without the
e. Physical changes in property without consent of consent of
making the property uninsurable; consent of the insurer. the insurer
insurer (Sec.
f. Determination by the 181, ICP)
Insurance Commissioner that the
policy would violate the Insurance Reason: The Reason: The Reason: The
Code. (Sec. 64, ICP) policy does insurer moral
not represent approved the hazards are
personal policy based as great as
2. Requisites for Cancellation agreement on the that of
a. Prior notice of cancellation to between the personal property
insured; insurer and qualification insurance.
b. Notice must be based on the the insured. and insurable
occurrence after effective date of the interest of the
policy or one or more of the grounds insured.
mentioned;
c. Notice must be in writing,
mailed or delivered to the insured at
had been performed by the mortgagor; owner of the interest insured (Sec. 57, ICP);
4.Upon occurrence of the loss, 7. When there
mortgagee is entitled to recover to the is an express prohibition against
extent of his credit and the balance, if alienation in the policy, in case of
any, is payable to the mortgagor; alienation, the contract of insurance is
5. Upon recovery by the mortgagee to the not merely suspended but AVOIDED (Art.
extent of his credit from the insurer, the 1306, Civil Code).
mortgagor is released from his
RISK
indebtedness. (Sec. 8, ICP)
What may be insured against:
1. Future contingent event resulting in
Effect of transfer of the Thing Insured:
loss or damage;
The mere absolute transfer of the thing
2. Past unknown event resulting in loss
insured does not transfer the policy but
or damage
suspends it until the same person becomes
3. Contingent liability
the owner of both the policy and the thing
insured (Sec. 58, ICP).
PREMIUM
Effect of Change of Interest in Thing
Insured Unaccompanied by a Change of
Interest in Insurance The consideration paid to an insurer for
undertaking to indemnify the insured against
General Rule: It SUSPENDS the insurance to a specified peril.
an equivalent extent, until the thing and the Ratio for the Full Payment of Premium
interest in the insurance are vested in the To safeguard the interest of the insured, it
same person. (Sec 20, ICP) must not be ignored that the contract of
insurance is primarily a risk-distributing device, a
Exceptions: mechanism by which all members of a group
1. In life, exposed to a particular risk contribute premiums
health, and accident insurance (Sec. 20, to an insurer. From these contributory funds are
ICP); paid whatever losses occur due to exposure to
2. Change in the peril insured against. (Tibay v. CA, 257 SCRA
126)
interest in the thing insured after the
occurrence of an injury which results in a General Rule: Cash and Carry Rule- No
loss (Sec. 21, ICP); insurance policy issued or renewed is valid
3. Change in and binding until actual payment of the
interest in one or more several distinct premium. Any agreement to the contrary is
things separately insured by one policy void. However, there is no express
(Sec. 22, ICP); prohibition by Sec. 77 against an agreement
4. Change in granting credit extension of the premium due.
interest by will or succession on death of (Gabriel vs. Mateo, 91 Phil 497, 1941) (Sec. 77, ICP).
the insured does not avoid an insurance,
and his interest in the insurance passes Unless the premium is paid, the
to the person taking his interest in the policy is not binding. (Arce v. Capital
thing insured (Sec. 23, ICP); Insurance, 117 SCRA 63)
5. Transfer of Liability for premium on a bond ceases if
it is not renewed even if there is a
interest by one of several partners, joint
lawsuit to enforce liability. (Capital
owners, or owners in common, who are Insurance & Surety Co. v. Ronquillo Trading,
jointly insured, to the others, does not 123 SCRA 526)
avoid an insurance even though it has Exceptions:
been agreed that the insurance shall 1. In case of Life and Industrial Life
cease upon an alienation of the thing whenever the grace period provision
insured (Sec. 24, ICP); applies (Sec. 77).
6. When a 2. Where there is an Acknowledgement
policy is so framed that it will inure to the in the contract or policy of insurance
benefit of whomsoever, during the that the premium had already been
continuance of the risk, may become the paid (Sec 78).
3. If the parties agreed to the payment authorized said agent to receive the premium
of the premium in Installments and in its behalf. The insurer is bound by its
partial payments have been made at agent’s acknowledgment of the receipt of
the time of the loss (Makati Tuscany v. payment of premium.
CA, 215 SCRA 462).
4. Where the Credit term was agreed Effect of Payment of Post-Dated Check:
upon. (UCPB General Insurance v. The payment of premium by a post-dated
Masagana Telamart, 308 SCRA 251). check at a stated maturity subsequent to the
5. Paries are barred by estoppel. loss is insufficient to put the insurance into
effect. Payment however, by means of a
Sec. 77 merely percludes the parties check or note, accepted by the insurer,
from stipulating that the policy is valid
even if the premiums are not paid
bearing a date prior to the loss, assuming an
(Makati Tuscany Condominium v. CA, 215 availability of the funds thereof, would be
SCRA 462). sufficient even if it remains unencashed at
the time of the loss. The subsequent
Premium is different from assessment encashment would retroact to the date of the
wherein premium is levied and paid to instrument and its acceptance by the creditor.
meet anticipated losses, while
assessment is collected to meet actual Effects of Non-Payment of Premium
losses. Also, while premium is not a 1. First premium – nonpayment of the 1st
debt, as assessment properly levied, premium unless waived, prevents the
unless otherwise expressly agreed, is a
contract from becoming binding
debt.
notwithstanding the acceptance of the
application nor the issuance of the policy.
Effect of Acknowledgment of Receipt of
But nonpayment of the balance of the
Premium in Policy:
premium due does not produce the
cancellation of the contract. (Phil. Phoenix
Conclusive evidence of its payment, in so Surety & Insurance Co v. Woodworks Inc, 20
far as to make the policy binding, SCRA 1270)
notwithstanding any stipulation therein that it 2. Subsequent premiums – Nonpayment
shall not be binding until the premium is of subsequent premiums does not affect
actually paid (Sec. 78). the validity of the contracts unless, by
Reason: When the policy contains such express stipulation, it is provided that the
written acknowledgment, it is presumed that policy shall in that event be suspended or
the insurer has waived the condition of shall lapse.
prepayment.
Non-payment of BALANCE of
Note: The conclusive presumption premium does not cancel the policy.
extends only to the question on the binding
effect of the policy. As far as the payment of Instance when the insured is EXCUSED
the premium itself is concerned, the from paying premiums:
acknowledgment is only a prima facie 1. The insurer has become insolvent
evidence of the fact of such payment. The and has suspended business or has
insurer may still dispute its acknowledgment refused without justification a valid tender
but only for the purpose of receiving the of premiums.
premium due and unpaid (The Insurance Code of 2. Failure to pay was due to the
the Philippines Annotated, Hector de Leon, 2006 ed.).
wrongful conduct of the insurer.
3. The insurer has waived his right to
Effect of Acceptance of Premium: demand payment.
Acceptance of premium within the
stipulated period for payment thereof, INSTANCES WHEN INSURED IS
including the agreed period of grace, merely ENTITLED TO RETURN OF PREMIUMS
assures the continued effectivity of the A. WHOLE:
insurance policy in accordance with its terms. 1. If the thing insured was never
exposed to the risks insured against
Where an insurer authorizes an (Sec. 79); ICP
insurance agent or broker to deliver a policy 2. if the contract is voidable due to the
to the insured, it is deemed to have fraud or misrepresentation of the
insurer or his agents (Sec. 81); ICP insurance originally contracted for is
3. if contract is voidable because of the continued for such period as the amount
existence of facts of which the available therefore will pay when it will
insured was ignorant without his fault terminate. In such a case, the insurance
(Sec. 81) ICP; will be for the same amount as the original
4. when any default of the insured other policy but for a period shorter than the
than actual fraud, the insurer never period in the original contract.
incurred liability (Sec. 81); ICP 4. Paid Up Insurance- no more payments
5. when rescission is granted due to the are required, and consists of insurance for
insurer’s breach of the contract (Sec. life in such an amount as the sum
74) ICP available therefore, considered as a single
and final premium, will purchase. It results
B. PRO RATA: to a reduction of the original amount of
1. When the insurance is for a insurance but for the same period
definite period and the insured originally stipulated.
surrenders his policy before the 5. Automatic Loan Clause- a stipulation in
termination thereof; the policy providing that upon default in
Exceptions:
payment of premium, the same shall be
a. Policy not made for a definite period
paid from the loan value of the policy until
of time;
b. Short period rate is agreed upon; that value is consumed. In such a case,
the policy is continued in force as fully and
c. Life insurance policy.
effectively as though the premiums had
2. When there is
been paid by the insured from funds
over – insurance.
derived from other sources.
a. In case of over- insurance by
6. Reinstatement- provision that the holder
double insurance- the insurer is
of the policy shall be entitled to
not liable for the total amount of
reinstatement of the contract at any time
insurance taken, his liability
within three years from the date of default
being limited to the property
in the payment of premium, unless the
insured. Hence, the insurer is not
cash surrender value has been paid or the
entitled to that portion of the
extension period expires upon production
premium corresponding to the
of evidence of insurability satisfactory to
excess of the insurance over the
the company and the payment of all
insurable interest of the insured.
overdue premiums and any indebtedness
b. In case of over-insurance by
to the company upon said policy
several insurers- the insured is
(Reviewer on Insurance, Insolvency and
entitled to a ratable return of the
Code of Commerce, Perez H., 2000ed).
premium, proportioned to the
amount which the aggregate
sum insured in all the policies
exceeds the insurable value of
ASCERTAINMENT
the thing at risk (Sec. 82, ICP). AND CONTROL
OF RISK AND
DEVICES USED TO PREVENT THE LOSS
FORFEITURE OF A LIFE INSURANCE
AFTER THE PAYMENT OF THE FIRST Kinds of Insurable Risks:
PREMIUM: 1. Personal risks (death involving the
1. Grace period- after the payment of the person, life and health risks);
first premium, the insured is entitled to a 2. Property risks (loss or damage to
grace period of thirty days within which to property);
pay the succeeding premiums. 3. Liability risks (those involving liability
2. Cash Surrender Value- the amount the for the injury/damage caused to third
insurer agrees to pay to the holder of the persons).
policy if he surrenders is and releases his
claim upon it. Four Primary Concerns of Insurer:
3. Extended Insurance- where the 1. Correct estimation of risk which
without regard to the actual value of the loss or liability by reason of such original
subject matter insured; insurance.
3. Where the policy under which the insured It has also been referred to simply as “an
claims is an unvalued policy he must give
insurance of an insurance. (44
credit as against the full insurable value, for Am.Jur.2d.283)
any sum received by him under any policy;
4. Where the insured received any sum in
excess of the valuation in the case of valued Nature of Reinsurance
policies, or of the insurable value in the case 1. It is a contract of indemnity, not
of the unvalued policies, he must hold such merely against damage;
sum in trust for the insurers, according to 2. They are independent but related
their right of contribution among themselves; contracts; and
5. Each insurer is bound, as between himself 3. Contract is between insurer and
and the other insurers, to contribute ratably reinsurer.
to the loss in proportion to the amount for
which he is liable under his contract. (Sec. 94, Note: Reinsurance does not result to double
ICP)
Where a fire insurance policy required the
insurance because there are different
insured to disclose other fire insurance policies insurable interests.
before the occurrence of any loss, the failure of
the insured to comply with such requirement bars Where the reinsurer indemnified the insurer,
his claim for indemnity in case of loss, even if the the latter has no cause of action to sue for
insurance agent might have been aware of the reimbursement for a claim it paid. (Pioneer
other insurance policies. (New Life Enterprises v. Insurance & Surety Corporation v. Court of
Court of Appeals, 207 SCRA 669)[1992] Appeals, 175 SCRA 668) [1989]
c. Latent defect of
Risk or Losses Covered in Marine machinery or hull.
Insurance 4. Sue and Labor Clause – a clause
1. Perils of the sea vs. perils of the ship wherein the insurer may become liable to
2. “All risks” in marine insurance policy pay the insured, in addition to the loss
actually suffered, such expenses as the
Perils of the Sea Perils of the Ship property against a peril for which the
insurer would have been liable. ausl
Include only Loss which in the
those casualties ordinary course of
The insured has the initial burden of proving
due to the unusual events, results:
that the cargo was in good condition when
violence or From the the policy attached and the cargo was
extraordinary ordinary, natural damaged when unloaded from the vessel;
causes connected and inevitable thereafter, the burden then shifts to the
with navigation. action of the sea; insurer to show the exception to the
It includes From coverage (Choa Tiek Seng v. CA 183, SCRA 223)
only such losses ordinary wear and
as are of tear of the ship;
extraordinary and Insurable Interest in Marine Insurance:
nature or arise From the a. Shipowner has insurable interest on
from some negligent failure of the vessel though it is under a charter
overwhelming the ship’s owner party. (Sec.100, ICP)
power which to provide the
cannot be guarded b. There is insurable interest on
vessel with the freightage which begins when the vessel
against by the proper equipment
ordinary exertion of breaks ground for voyage. (Secs. 102-104
to convey the ICP)
human skill or cargo under
prudence. c. The charterer has insurable interest
ordinary (Sec. 106,ICP)
conditions.
d. Insurable interest in profits (Sec. 105,
ICP) In loans on bottomry and
SPECIAL MARINE INSURANCE respondentia, repayment of the loan is
CONTRACTS AND CLAUSES subject to condition that the vessels or
1. All Risks Policy goods, respectively, given as security
Insurance against all causes of shall arrive safely at the port of
conceivable loss or damage except: destination.
a. As otherwise excluded in the
policy; or
INSURABLE INTEREST in Marine
b. Due to fraud or intentional
misconduct on the part of the insured. Insurance:
Burden of proof insurance company has A. Shipowner:
the burden of proving that the loss is 1. Over the value of the vessel.
caused by risk excepted and for want of Exceptions:
proof, the company is liable. a. If chartered and the charterer
2. Barratry Clause – a clause which agreed to pay the shipowner the
provides that there can be no recovery value of the vessel in case of loss,
on the policy in case any willful the insurer’s liability is only up to the
misconduct on the part of the master or amount not recoverable from the
crew in the pursuance of some unlawful charterer (Sec. 100, ICP);
or fraudulent purpose without consent of b. If hypothecated by a bottomry
owners, and to the prejudice of the loan, the insurable interest is only up
owner’s interest. to the excess of the value of the
3. Inchamaree Clause – a clause which vessel over the loan (Sec. 101, ICP).
makes the insurer liable for loss or 2. Over expected freightage
damage to the hull or machinery arising
from the: B. Freightage or Cargo
a. Negligence of the
captain, engineer, etc. C. Charterer
b. Explosions, 1. Over the vessel up to the extent of
breakage of shafts; and
a voyage in different stages, the ship 4. To save human life or another distressed
must be seaworthy at the vessel. (Sec 124, ICP)
commencement of each stage of the
voyage. Effects of Proper Deviation: In case of loss,
the insurer is still liable.
Rule Where the Ship Becomes Effects of Improper Deviation:
Unseaworthy on the Course of the Voyage The insurer is not liable for any loss
Unreasonable delay in repairing the defect happening to the thing insured subsequent to
exonerates the insurer on ship or shipowner’s an improper deviation. (Sec. 126, ICP)
interest from liability from any loss arising Just as a surety is discharged, if the creditor
therefrom. materially changes the contract with the
principal debtor, irrespective of actual injury to
Applicability of Implied Warranty of the surety, so as the marine underwriter is
Seaworthiness to Cargo Owners entitled to be discharged if the risk assumed
The fact that the seaworthiness of the is changed by a deviation from the voyage
insured. And the fact that the deviation did not
ship was unknown to insured is immaterial in
increase the risk, or in any wise contribute to
ordinary marine insurance and may not be the loss suffered, is wholly immaterial. (De
used by him as a defense in order to recover Leon, Insurance Code of the Philippines, Annotated,
on the marine insurance policy. 2002 Edition, page 353)
common danger to
the vessel or cargo; There is co-insurance if the value of the
2. Part of the vessel insured’s interest exceeds the amount of
or cargo was
sacrificed
insurance; he is considered the co-insurer for
deliberately; an amount determined by the difference
3. The sacrifice between the insurance taken out and the
must be for the value of the property.
common safety or for Requisites of co-insurance:
the benefit of all;
1. The amount of insurance is less than the
4. It must be made
by the master or
insured’s insurable interest;
upon his authority; 2. The loss is partial.
5. It must not be
caused by any fault Formula to determine the amount
of the party asking recoverable:
the contribution;
6. It must be
successful, i.e., Partial loss
resulted in the saving --------------------- x Amount of = Amount of
of the vessel or
cargo; and Value of thing Insurance Recovery
insured
7. It must be
necessary.
Illustration:
Right of Insured in Case of General
If a vessel valued at P1M is insured for only
Average
P800, 000 and is damaged to the extent of
General Rule: The insured may either hold
P400, 000, the insurer will be required to pay
the insurer directly liable for the whole of the
only 80% of the loss suffered, or P320, 000;
insured value of the property sacrificed for
the other 20% or P80, 000 being borne by
the general benefit subrogating him to his
the insured himself.
own right of contribution or demand
contribution from the other interested parties
P400, 000 or 2/5 x P800, 000 = P320, 0000
as soon as the vessel arrives at her
P1M
destination. (Sec. 164, ICP)
Exceptions:
1. After the separation of interests liable The insured is considered a co-insurer as to
to contribution; the uninsured portion of P200, 000.
2. When the insured has neglected or
Note: If the loss is total, the insurer is liable
waived his right to contribution. (Sec. 164,
ICP) for the full amount if P800, 000. On the other
hand, if the property is insured to its full
FPA CLAUSE (Free from Particular Average) value, the insured is entitled to recover the
A clause agreed upon in a policy of full amount of the partial loss of P400, 000.
marine insurance in which it is stated that the
insurer shall not be liable for a particular A marine insurer is liable upon a partial loss,
average, such insurer shall be free therefrom, only for such proportion of the amount insured
by him as the loss bears to the value of the
but he shall continue to be liable for his
whole interest of the insured in the property
proportion of all general average loss insured (Sec.157, ICP).
assessed upon the thing insured (Sec. 136,
ICP).
The insured bears part of the loss when
property is insured for less than the value it
CO-INSURANCE really has. When there is partial loss on
A clause requiring the insured to marine insurance, there will always be co-
maintain insurance to an amount equal to the insurance even if there is full coverage.
value or specified percentage of the value of When there is partial loss, under Standard
the insured property under the penalty of Policy Stipulation, and there is
becoming co-insurer to the extent of such underinsurance, there will be co-insurance.
deficiency.
Rules:
SPECIAL CLAUSES:
A. “No-Fault” Clause
The injured third party or passenger is Time To File & Process Claim Under
given the option to file a claim for death Third Party Liability
or injury without the necessity of proving a. Period to File Notice- within six
fault or negligence of any kind under the (6) months from the date of the
following conditions: accident otherwise the claim is
1. The total indemnity in respect of any deemed waived (Sec. 384, ICP).
person shall be P15,000.00 per claim b. Prescriptive Period- within one
for all motor vehicle. As amended (1) year from the denial of the claim
IMC No. 4-2006, July 26, 2006 with the commissioner on the Courts
2. Proof of loss (Sec. 384, ICP)
Police report of accident; c. If There is an Agreement- The
Death certificate and insurance company concerned shall
evidence sufficient to establish forthwith ascertain the truth and
the proper payee; and extent of the claim and make
payment within 5 working days after
Medical report and evidence
reaching an agreement (Sec 385, ICP).
of medical or hospital
d. If no agreement is reached, the
disbursement.
insurance company shall pay only
3. Claim may be made against 1 motor
the “no fault” indemnity without
vehicle only.
prejudice to the claimant from
pursuing his claim further, in which
From Whom Should the Injured
case, he shall not be required or
Recover:
compelled by the insurance company
1. In the case of an occupant of a
to execute any quit claim or
vehicle, claim shall lie against the
document releasing it from liability
insurer of the vehicle in which the
under the policy of insurance or
occupant is riding, mounting, or
surety bond issued (Sec. 385, ICP)
dismounting from.
2. If not an occupant, claim shall lie If the policy provides for indemnity
against the insurer of the directly against liability, the insurer can be sued
offending vehicle. directly by a third person. However, if
3. In all cases, the right of the party the policy provides for reimbursement
paying the claim to recover against after actual payment by the insured
the owner of the vehicle responsible or for the indemnity against loss, a third
for the accident shall be maintained. person has no cause of action against
the insurer (Sec 53, ICP; Bonifacio Bros v.
Mora, 20 SCRA 26].
This no-fault claim does NOT While the insurer’s liability may be
apply to property damage. If the direct, it does not mean that the insurer
total indemnity exceeds can be held solidarily liable with the
P15,000.00 and there is insured. The insurer’s liability is based
controversy in respect thereto, the on contract; that of the insured is based
finding of fault may be availed of on torts. Furthermore, the insurer’s
by the insurer only as to the liability is limited to the amount of the
excess. The first P15, 000.00 shall insurance coverage (Pan Malayan v. CA
184 SCRA 54).
be paid without regard to fault.
In third party liability insurance, the
The essence of the no-fault insurer assumes the obligation of paying
indemnity insurance is to provide the injured party to whom the insured is
victims of vehicular accidents or liable. The insurer becomes liable as
their heirs’ immediate soon as the liability of the insured
compensation although in limited attaches. From the moment the insurer
amount, pending final becomes liable to the third person, the
determination of who is insured acquired interest in the
responsible for the accident and insurance contract, which interest may
be garnished just like any other credit.
liable for the victim’s injuries or (Perla Compania de Seguros, Inc. v. CA, GR
death. No. L-76884 May 28, 1990).
a. Suicide was committed after Must distinguish when the policy does not
the policy has been in force expressly state whether suicide is
for a period of two years excepted from the policy:
from the date of its issue or 1. If committed while insane – Insurer is
its last reinstatement, unless liable
the policy provides a shorter 2. If committed while sane – Insurer not
period. (Sec. 180-A, ICP) liable in the absence of an express
b. Suicide committed in a state stipulation, it is an implied exception and
of insanity regardless of the is against public policy.
date of the commission of
the suicide, unless suicide is Cash Surrender Value - As applied to a life
an excepted risk (Sec. 180-A, insurance policy, it is the amount the insured
ICP). in case of default, after the payment of at
c. If committed after a shorter least 3 full annual premiums, is entitled to
period provided in the policy. receive if he surrenders the policy and
Any stipulation extending the 2-year releases upon it.
period is null and void.
withheld; and in the affirmative case, the accrues. The cause of action accrues from
insurance company shall be adjudged to pay the final rejection of the claim of the insured
damages which shall consist of attorney’s and not from the time of loss. (Sec 63, ICP)
fees an other expenses incurred by the
insured person by reason of such
It shall commence from the denial of the
unreasonable denial or withholding of
claim, not from the resolution of the motion
payment plus interest of twice the ceiling
for reconsideration, otherwise it can be used
prescribed by the Monetary Board of the
by the insured as a scheme or device to
amount of the claim due the insured, from the
waste time until the evidence which may be
date following the time prescribed in Sec.242
used against him is destroyed (Sun Insurance
or Sec. 243 of the ICP.(Commonwealth Office Ltd v. CA, 195 SCRA 193).[1991]
Insurance Corp v. CA, G.R. No. 133194-95, January
29, 2004)
PERIOD OF PRESCRIPTION
Administrative/Regulatory powers
1. Enforcement of Insurance Laws
2. Issuance, suspension, revocation of
certificate of authority
3. Power to examine books and records,
etc.
4. Rule-making authority
5. Punitive