I.

Contract of insurance: (sec 2) - is an agreement whereby one undertakes for a

consideration to indemnify another against loss, damage or liability arising from
an unknown or contingent event.
Elements:
1. The insured has an insurable interest;
2. The insured is subject to a risk of loss arising from an unknown or
contingent event;
3. The insurer assumes such risk;
4. The insured pays a premium, in consideration of the insurers promise;
5. Risk distributing device such assumption of risk is part of a general
scheme to distribute actual losses among a large group of persons being a
similar risk.
Characteristics:
1. Consensual The contract of insurance is perfected by the agreement of both
parties. However, payment of premium is mandatory;
2. Aleatory The obligation of the parties exists upon the happening of the
unknown or contingent event;
3. Personal
The contract is dependent by the parties. The insured is to pay the
premium; while the insurer is to pay indemnity;
4. Conditional
The obligation of the insurer is suspensive, it will only exists upon
the happening of the unknown or contingent event;
Executory
The insured already fulfilled his obligation upon payment of the
premium;
5. Indemnification
In non-life insurance, the insured can only insure his property up to
its estimated value;
Investment
In life insurance, the insured can insure his life in any amount he
likes;
6. Adhesion
It is a contract of take-it or leave-it. It means that only the insurer
drafted the contract.
7. Utmost good faith
Both parties should disclose all the necessary information in good
faith.
Parties:
Insurer

The one who will indemnify the insured or the beneficiary upon
the happening of the unknown or contingent event.

Insured
- The one who pays the premium to avail the insurance.
Beneficiary
- A person designated by the insured to receive proceeds of the
policy of insurance when risk attaches.

Insurable interest:
In life insurance:
Life/health/accident a person can insure himself based on life, health,
accident;
Pecuniary interest is enough, as long as the person has an insurable
interest over the insured;
You can insure yourself in any amount because it is in the nature of
investment;
Insurable interest must exist only at the time the policy takes effect &
need not exist at the time of loss.
In non-life insurance:
The insurable interest can be based on inchoate interest, expectancy
coupled w/ existing interest, contract or by law;
Mere pecuniary interest is not enough, the insured must have existing
interest over the property;
The insured can only insured his property up to the value of the property
only;
The insurable interest must exist at the time of the effectivity of policy and
at the time of the loss, although it need not exist in the meantime.
Other
Sec 12 (new)
Any crime who willful, intentionally, voluntarily as principal, accomplice or
accessories, the beneficiary will be forfeited and it will go to another beneficiary.

If no beneficiary
1. In the absence of beneficiary - the proceed will go to the co-beneficiary;
2. In the absence of co-beneficiary - will go according to the policy of the
insurance;
3. In the absence of policy the proceeds will go to the estate of the insured.
Exception for insurable interest (sec 22-24)
1. Insuring 2 different properties in one policy
If in the meantime, the insured sells one of the properties and the other
remaining unsold property is loss, insured can still recover damage on the
property loss.
2. Succession

Heirs of insured may recover on the policy although they do not have
insurable interest at the time of the perfection of the contract.
3. Co-owner of insured property
If one acquired the whole property from other co-owners and later the
property is lost, the buyer full owner may recover the whole amount lost.
This is applicable only where one co-owner sells to another co-owner, if
sell is to a third person, exception does not apply.
-------------------------------------------------------------------------------------------------------------------------------------II.
Concealment: (sec 26) is a neglect to communicate that which a party knows
and ought to communicate.
Elements:
A party knows a fact within his knowledge and neglect to communicate the
same to other party;
Such party concealing is duty bound to disclose a material fact to the
other party;
Such party concealing makes no warranty to the fact concealed;
The other party has no means of ascertaining the fact concealed.
Representation is a collateral statement in writing, not inserted in the policy,
which are necessary to be communicated to the underwriters to enable them to
form a just estimate of the risk.
Misrepresentation is a statement of something as a fact which is untrue and
material to the risk, and which the insured states, knowing it to be untrue in an
attempt to deceive, or which he states positively as true w/o knowing it to be
true, and which has a tendency to deceive.
Warranty: a risk described in the policy which makes part in the contract. There
can be no warranty by any collateral representation, only misstatement of fact
concerning a warranty can render a policy void.
1. Express warranty is one which is specifically set out in the policy. It
must be a statement relating to the person, thing or risk, which must be a
fact and not a mere opinion.
2. Implied warranty is one which is not specifically stated within the
policy.
3. Affirmative warranty is a statement regarding a fact at the time the
contract was made
4. Promissory warranty is a statement about future facts or about facts
that will continue to be true throughout the term of the policy.

Incontestability clause: (sec 48)

Concealment and misrepresentation can only be raised for 2 years after 2yrs the
two grounds cannot be used to rescind (life insurance)
- 2yrs prescriptive period only applies to the 2 grounds;
- No prescriptive period for other grounds (ex. non-payment of
premium).
Others:
Concealment vs. Misrepresentation
Former:
A statement of a fact which turns out not to be true. By a material fact is
meant one that shows the nature and extent of the risk, and may induce
the other party to enter into a contract.
Latter:
Is the suppression of a material fact within the knowledge of either party,
which the other has not the means of knowing, or is not presumed to
know.
Concealment vs. Misrepresentation
Former:
Subject to rescission; passive form of receipt;
Not a defense in good faith, whether intentional or unintentional
Latter:
Rescind outright; intentional, asking by insurer (ex. Palito turn as Piolo)
Can avail the defense of good faith.
Representation vs. warranty:
Former:
Not part of the policy, it is merely a collateral inducement;
No presumption, it must be proved its materiality;
Effect, rescind the contract;
Insured and insurer can omit.
Latter:
Part of the contract;
Materiality of the fact is presumed;
Effect, breach of contract, if the warranty does not fulfilled the immediate
effect is breach of contract, but it can later be rescinded.
Only insured can omit.
-------------------------------------------------------------------------------------------------------------------------------------III.

Policy: (sec 49) the written instrument in which a contract of insurance is set
forth.
Open policy: (sec 60) is one in which the value of the thing insured is not
agreed upon, but is left to be ascertained in case of loss.
(ex. A insured his house for 5M, if A house destroy, he can recover up to the
amount the thing destroyed, but not to exceed 5M).
Valued policy: (sec 61) is one which expresses on its face an agreement that
the thing insured shall be valued at a specific sum.
(ex. Same example above, the only different is, A can recover 5M, even if the
value of the thing loss is only 3M).
Running policy: (sec 62) is one which contemplates successive insurances,
and which provides that the object of the policy may be from time to time
defined, especially as to the subjects of insurance, by additional statements or
endorsements.
(ex. A insured his warehouse, if A warehouse destroy, he can recover the amount
of the property
loss, but if there is no loss declared he cannot recover).
Others:
Cover notes: (sec 52) issued to bind insurance temporarily pending the
issuance of the policy. w/n 60days after the issue of the cover note, a policy shall
be issued in lieu thereof, subject to extension by the commissioner.
Prescriptive period: (sec 63) a condition, stipulation, or agreement in any
policy of insurance, limiting the time for commencing an action to a period of less
than 1 year from the time when the cause of action accrues, is void.
45days before the expiration of the contract: (sec 66)
GR: the insured may renew policy by merely paying premium, on the effective
date of renewal.
Except: unless 45days in advance before the expiration of the contract, the
insurer notify by letter the insured, that they had no intention to renew the policy,
due to broad risk, and the premium is very low, and they want to increase
warranties.
Binders a mere acknowledgement on behalf of the company that its branch
office had received premium.
Rider is an amendment to a contract or policy. It is a written form attached to
an insurance policys coverage, terms, or conditions.
(ex. After buying a diamond bracelet, a policyholder may want to add a rider to
her homeowners insurance policy to cover the jewelry.)

Clauses clauses are sentences and paragraphs describing various coverages,

exclusions, duties of the insured, locations covers, and conditions that suspend or
terminate coverage.
Warranty is a promise by the insured party that statements affecting the
validity of the contract are true.
Endorsement is a written document attached to an insurance policy that
modifies the policy by changing the coverage afforded under the policy. An
endorsement can add coverage for acts or things that are not covered as a part of
the original policy and can be added at the inception of the policy or later during
the term of the policy.
(ex. The owner sells his car, the insurance policy can be transferred to the buyer
w/o canceling the policy through an endorsement of the same.
Counter signature of the insured:
Not necessary
when the rider, endorsement, or warranty is attached with the policy.
If the same is issued after the issuance of the policy and the insured is not
the one who requested the issuance of the same.
Necessary
If the same is issued after the issuance of the policy and the insures is the
one who requested the issuance of the same.
Prescriptive period: (sec 63) a condition, stipulation, or agreement in any
policy of insurance, limiting the time for commencing an action thereunder to a
period of less than 1 year from the time when the cause of action accrues, in
void.
If no agreement civil code apply: (art 1144)
10years based on written contract.
-------------------------------------------------------------------------------------------------------------------------------------IV.
Premium: amount paid to the insurer for the consideration for his assurance to
the assumed risk.
Effect of non-payment:
When entitled for return of premium: (sec 79-82)
Exceptions: (sec 77
1. In case of a life or an industrial life policy whenever the grace period
provision applies.

(ex. 1 mon grade period was granted by the insurer. If you died before 1
mon even if not yet pay premium, still can recover. But if you died after 1
mon cannot claim).
2. An acknowledgment in a policy or contract of insurance or the receipt of
premium is conclusive evidence of its payment, so far as the policy
binding, notwithstanding any stipulation therein that it shall be binding
until the premium is actually paid.
3. If the oblige accepted the bond
(ex. A purchased goods to B w/ C as a surety. If B received from the
insurance (surety) a bond, B can recover even if A not yet pays the
premium.
4. Extension agreement ?
-------------------------------------------------------------------------------------------------------------------------------------V.
Notice of loss: purpose to duly notify the insurer of the happening of the
proximate cause, if denied cause of action accrues.
When to notify within a reasonable period w/o delay if non-life, if life,
depending on the judgment of the commissioner.
- Unreasonable delay, 60 days based on SC decision.
Proximate cause:
Remote cause:
-------------------------------------------------------------------------------------------------------------------------------------VI.
Double insurance: (sec 93) a double insurance exists where the same person
is insured by several insurers separately in respect to the same subject and
interest.
Elements:
Same person;
Same subject matter;
Same insurable interest;
Same risk insured;
With several insurer.
GR: not contrary to law

Except: the policy prohibits

Reinsurance: (sec 95) a contract of reinsurance is one by which an insurer
procures a third person to insure him against loss or liability by reason of such
original insurance.
Over insurance: -------------------GR: not prohibited by law
Effect: valid only up to the value of the property, invalid the excess.
Otherwise unjust enrichment.
Effect: it will nullifies the excess amount, because the purpose of
insurance is to indemnify.
Other
Double insurance vs. Re-insurance
Former:
The insurer remain as such, meaning he remain as the insurer;
The subject matter is insured against loss;
It was insured for the same interest and risk.
Latter:
The insurer became the re-insured;
The subject matter is insured against his liability arising from the original
insurance;
It is insured for different interest and risk.
Double insurance vs. Over Insurance
Former:
There are two or more insurer;
Not necessarily result to over insurance.
Latter:
There is only one insurer;
There could be an over insurance but w/o double insurance.
-------------------------------------------------------------------------------------------------------------------------------------VII.
Maritime insurance:
Perils of the sea embrace all kinds of marine casualties of the ship or of cargo
cause by violent action of the winds or sea, one that could not been foreseen.
Perils of the ship those loss or damage of the goods or of the ship resulting
from natural and inevitable action of the sea negligence of the owner, ordinary
wear and tear of the ship to provide with equipment.

Barratry is any willful act or conduct of the master or the crew of some
unlawful purpose without the consent of the owners and prejudice of the 3 rd party.
(mutiny)
Implied warranties: (sec 113, 119, 120)
1. Sea worthiness;
2. Improper deviation;
3. Improper or illegal venture;
4. Ship will carry necessary documents to show nationality or neutrality.
Loan of bottomry - is a contract in the nature of a mortgage, by which the
owner of a ship borrows money for the use, equipment, or repair of the vessel,
and for a definite term, pledges the ship as a security for its repayment, with
maritime or extraordinary interest on account of the marine risks to be borne by
the lender;
It being stipulated that if the ship be lost in the course of specified voyage,
or during the limited time, by any of the perils enumerated in the contract,
the lender shall also lose his money.
Respondentia when the loan is not made upon the ship, but on the goods
laden on board, and which are to be sold, or exchanged in the course of the
voyage, the borrowers personal responsibility is deemed the principal security for
the performance of the contract;
The lender must be paid his principal and interest though the ship perish,
provided the goods are saved.
Concealment in maritime vs in property or life insurance
Mere belief or opinion of a 3rd person is material in maritime insurance; while
personal knowledge is requires in property or life insurance.
Concealment 5 ground: (sec 110)
1. The national character of the insured;
2. The liability of the thing insured to capture and detention;
3. The liability to seizure from breach of foreign laws of trade;
4. Want of necessary documents;
5. The use of false and simulated papers.
Deviation: (sec 123)
Deviation is a departure from the course of the voyage insured, or an
unreasonable delay in pursuing the voyage or the commencement of an entirely
different voyage.
When deviation proper: (sec 124)
1. When caused by circumstances over which neither the master nor the
owner of the ship has any control;

2. When necessary to comply with a warranty, or to avoid a peril, whether

the peril is insured against;
3. When made in good faith, and upon reasonable grounds of belief in its
necessity to avoid a peril;
4. When made in good faith, for the purpose of saving human life or relieving
another vessel in distress.
Loss: (how abandonment made, sec 140,41,43,44)
Actual loss: (sec 130) (no right of abandonment)
1. A total destruction of the thing insured;
2. The irretrievable loss of the thing by sinking, or by being broken up;
3. Any damage to the thing which renders it valueless to the owner for the
purpose for which he held it;
4. Any other event which effectively derives the owner of the possession, at
the port of destination, of the thing insured.
Constructive loss (with right of abandonment)
Right on abandonment: (sec 138) is the act of the insured by which, after a
constructive total loss, he declares the relinquishment to the insurer of his
interest in the thing insured.
When to abandon: (sec 139) a person insured by a contract of marine
insurance may abandon the thing insured, or any particular portion thereof
separately valued by the policy, or otherwise separately insured, and recover for
a total loss thereof, when the cause of the loss is a peril insured against:
1. If more than 3/4 thereof in value is actually lost, or would have to be
expanded to recover it from the peril;
2. If it is injured to such an extent as to reduce its value more than 3/4;
3. If the thing insured is a ship, and the contemplated voyage cannot be
lawfully performed w/o incurring either an expense to the insured of more
than 3/4 the value of the thing abandoned or a risk which a prudent man
would not take under the circumstances;
4. If the thing insured, being cargo or freightage, and the voyage cannot be
performed, nor another ship procured by the master, w/n a reasonable
time and w/ reasonable diligence, to forward the cargo, w/o incurring the
like expense or risk. But freightage cannot in any case be abandoned
unless the ship is also abandoned.
-------------------------------------------------------------------------------------------------------------------------------------VIII.
Mutual benefit association: (sec 403)
Any society, association or corporation, without capital stock, formed or organized
not for profit but mainly for the purpose of paying sick benefits to members, or of

furnishing financial support to members while out of employment, or of paying to

relatives of deceased members of fixed or any sum of money
Purpose: benevolent, secondary in engaging insurance not intended for profit.
The purpose is to help its members
Mutual insurance commission:
Requirements: must obtain a certificate of authority by the insurance
commissioner; the requirements for the issuance of CA are the following:
1. The company is qualified under the Philippine law;
2. Justified to the of economic capable to run the company;
3. Must be reputable, not to defraud others.
Asset requirements no new domestic life or non-life insurance company
should be granted, unless they obtain an asset of more than 1 billion pesos. For
the first 3 years, the asset of the company must increase in the amount of 250K;
and another additional 50k or 300k for the next 3yrs; another 50k or 350k for the
next 3yrs and so on.
------------------------------------------------------------------------------------------------------------------------------------IX.
Suretyship (sec 175) a contract of suretyship is an agreement whereby a party
called the surety guarantees the performance by another party called the
principal or obligor of an obligation or undertaking in favor of a 3rd party called the
oblige.
Guaranty vs Suretyship
Former:
More of insurer of the insolvency of the debtor;
Liability of the guarantor is secondary only;
Guarantor has the right of exhaustion.
Latter:
More of insurer of the debt but not of the person;
Liability of the surety is primary and solidary;
Surety has no right of exhaustion.
Casualty insurance (sec 174) is an insurance covering loss or liability arising
from accident or mishap.
Included:
Employers liability insurance;
Motor vehicle liability insurance;
Plate glass insurance;
Burglary and theft insurance;

Personal accident and health insurance as written by non-life insurance

companies;
Substantially similar kinds of insurance.
Excluded:
Certain types of loss which by law or custom are considered as falling
exclusively w/n the scope of other types of insurance such as fire or
marine.
TPL
Comprehensive
-------------------------------------------------------------------------------------------------------------------------------------X.
Micro insurance (sec 187) is a financial product or service that meets the
risk protection needs of the poor where:
The amount of contributions, premiums, fees or charges, computed on
a daily basis, does not exceed7.5% of the current daily minimum wage
rate for non-agricultural workers in metro manila;
The maximum sum of guaranteed benefits is not more than 1,000
times of the current daily minimum wage rate for non-agricultural
workers in metro manila
Bank assurance the presentation and sale to bank customers by an insurance
company of its insurance products within the premises of the head office of such
bank duly licensed by the Bangko Sentral ng Pilipinas or any of its branches under
such rules and regulations which the commissioner and the Bangko Sentral ng
Pilipinas may promulgate.
To engage in bancassurance arrangement, a bank is not is not required to have
equity ownership of the insurance company. No insurance company shall enter
into a bancsassurance arrangement unless it possesses all the requirements as
may be prescribed by the commissioner and the bangko sentral ng pilipinas.
-------------------------------------------------------------------------------------------------------------------------------------XI.
Who is adjuster: (sec 323)
Public adjuster any person, partnership, association or corporation which, for
money, commission or any other thing of value, acts on behalf of an insured in
negotiating for, or effecting, the settlement of a claim of said insured arising
under insurance contracts or policies, or which advertises for or solicits
employment as an adjuster of such claim.

Independent adjuster any person, partnership, association or corporation

which, for money, commission or any other thing of value, acts for or on behalf of
an insurer in the adjusting of claims arising under insurance contracts or policies
issued by such insurer.
Term of commissioner: (sec 437) the commissioner shall be appointed by the
president for the term of 6 years, without re-appointment; not required for
commission on appointment.
What are their powers: the commissioner has the power to revoke, because he
has the power to approve. He also has the power to contempt.
Quasi-judicial function: (sec 439) power to adjudicate claims or loss, claim
not more than 5M concurrent w/ the regular court. Meaning you can file it either
in the commissioner or in RTC.

Commissioner can only accept cases based only in insurance contract and not in
other basis.

Administrative
Adjudicatory
The commissioner is authorized, at his discretion, to impose upon the
insurance companies, their director for any willful failure or refusal to
comply with, violation of any provision of this code, the following:
Fines not in excess of 5oo a day;
Suspension, or after due hearing, removal of director and
officers or agent.