Two Powers of Insurance Commissioner

1. Administrative 6. Risk insured against

- Issue ruling, instructions, order and 7. Period during which the
decisions deem necessary for insurance is to be continued
enforcement of the code
- Impose fines up to What is a cover note?
- Remove directors - Sec 52
- - It is not a policy, but a substitute of
2. Adjudicatory a policy before its issuance.
- Adjudicate claims, complaints, and ? - It binds the insurance temporary 60
damage and liability for which an days before the issuance of policy
insurer may be answerable xxx - Somewhat considered as an
- Limited only to claims up to 5 advance policy
million EXCLUDING interests, costs, - It has the same force and effect as
attorney’s fees the insurance policy
- Decisions appealable to CA
What is a rider?
Requirements in order for a corporation to be - Printed type of stipulation contained
engaged in Insurance business in a slip of paper attached to the
- Must secure a certificate of authority policy and forming an integral part
coming from the office of Insurance of the policy
Commissioner in addition to the - Constitute additional stipulations
paid-apt capital between the parties with like effect
as in actually attached to the policy
What is a contract of insurance? - Inconsistency between rider vs
- Sec 2 policy – rider prevails being more
- Surety xxx deliberate expression of the
agreement. Same principle applies
What is doing of insurance business means? to clauses, warranties, and
endorsements attached to policies.
Elements of Insurance contract?
- Aside from the essential elements of What are those that may be insured?
ordinary contract (consent subject - Sec 3: any contingent or unknown
matter, consideration). event, whether past or future, which
- In Insurance contract, u must have may damnify a person having an
the ff additional elements: insurable interest or create a liability
1. Must have insurable interest against him will be insured against
2. Insurer is subject to a risk of subject to the xxx
loss of damage to designated - Consent of the spouse is not
perils necessary taking about by a married
3. Insurer assumes that risk of loss woman, person
or damage - All rights, title, interest of the policy
4. Xxx of insurance taken of by an original
owner xxx shall automatically vests
What are the items that must be specified in the
policy? How about those that may not be insured?
- Sec 51 - Sec 4: drawing of lottery for or
1. Parties against any chance (e.g.
2. Amount to be insured lotto/sweepstakes)
3. Agreement of the premium - Public enemy
4. Property or life insured - Sec 16: pure expectancy. a mere
5. Interest of the insured if he is contingent or expectant interest in
not the owner any thing, not founded on an actual
 right to the thing nor upon any Character of Insurance contract
valid contract on it 1. A contract of indemnity and not for
- Sec 18: no contract or policy of profit. You can only be indemnified u to
insurance on property shall be the extent of your insurable interest.
enforce except for the benefit of 2. A contract of adhesion. Any doubt as to
some person having an insurable the insurance contract is resolved
interest on the property against the insurer.
- Sec 25: gambling or wagering 3. Aleatory
4. Perfect good faith. It will not tolerate
Insurance contract is a consensual concealments, misrepresentation,
1. Property and liability insurance material alteration, no violation of
2. Life and health – if insured does not warranty
pay the premium, his application is XPN:
just an invitation to the insurer. If i. When the policy becomes
accompanied with a premium, incontestable
considered as an offer to insurer ii. Even if the policy is more than 2
and the Insurer who issues receipts yrs already and the IC could no
is a binding receipt until medical longer inter force the grounds of
examination. concealment and
misrepresentation, the IC may
In offer and counter offer, there must be still refuse to pay the proceeds
delivery of the policy. Otherwise, no of the policy
consummated contract yet. iii.

GR: Insurance contract is a consensual Concealment -

XPN Representation – deemed to be false when the
i. motor liability insurance facts fails to correspond to its
ii. Compulsory motor liability insurance assertion/stipulations
i. Oral or written
What are the modes of delivery? Warranty –
- May be actual or constructive, or
both
- delivery is important Waiver
Estoppel
What are needed for Insurance Policy to be Violation is immaterial to the risk
effective and enforceable
- Sec 77 Before the time arrives for the performance of
- The IC is entitled to a premium, as the xxx
long as the thing exposed to the
peril insured against Insurable interest in life and health
notwithstanding to the contrary.
Exception: 7 Suicide – IC is liable only when it is committed
1. Grace period after the policy is enforced for a period of two
2. Issued under broker/agency years from its last issue or reinstatement.
agreements
3. Acknowledgement of a receipt of Insurable interest in property insurance
premium - May consist in existing interest
4. Payment in installments and partial - An inchoate interest founded on an
payment has been paid in the time existing interest
of loss - An expectancy coupled with an
5. Credit extension existing interest in that out of which
6. expectancy arises (e.g. future crops)
6 classes of insurance
i. Life “(c) When made in good faith, and upon
ii. Fire reasonable grounds of belief in its necessity to
iii. Casualty avoid a peril; or
iv. Surety
v. Compulsory motor vehicle liability “(d) When made in good faith, for the purpose
vi. Marine of saving human life or relieving another vessel
in distress.
Marine Insurance - widest coverage among all
the 6 kinds of insurance. It doesnt only cover Unreasonable delay in commencement of
the vessel, cargo but also crop, jewelry,valuable voyage.
papers, bottomry, res podentia, liability of loss
due to repair, maintenance, operation, subject
matter of such insurance. Perils of the ship
- it aslo includes bridges, tunnels xxx - not covered by marine insurance, because the
- inland waters, inland marine latter only covers perils of the sea. It is a loss
Liability of insured of personal injury which, in the ordinary course of events, results
- illness/death xxx from:
1. The natural and inevitable action of the sea
Seaworthiness? 2. 2. The ordinary wear and tear of the ship
3. 3. The negligent failure of the ship’s owner to
- A ship is seaworthy when reasonably fit to provide the vessel with proper equipment to
perform the service and to encounter the convey the cargo under ordinary conditions.
ordinary perils of the voyage contemplated by - peril of navigation are losses of extraordinary
the parties to the policy. A warranty of nature or arise from overwhelming power which
seaworthiness extends not only to the condition cannot be guarded by ordinary exertion of
of the structure of the ship itself, but requires human skill and prudence as distinguish from
that it be properly laden, and provided with a ordinary wear and tear of the voyage xxx
competent master, a sufficient number of - page 332-333, de leon
competent officers and seamen, and the - examples: storms, superwaves, other cause of
requisite appurtenances and equipment, such as action cause by rain and water.
ballasts, cables and anchors, cordage and sails, - Monsoon - not included.
food, water, fuel and lights, and other necessary
or proper stores and implements for the voyage. All-risk coverage
(Art 116 and 118). NOTE:Honest error of judgment or negligence of
master/ crew is considered perils of the sea.
- Titanic (unsinkable ship) negligence of the Barratry in marine law is commission of act by
crew. the master/marineers of a vessel for an unlawful
or fraudulent purpose that is contrary to duly
owned duty to the owners by which act of the
- SEC. 115. In every marine insurance upon a
owners sustained injury. It is part of the perils of
ship or freight, or freightage, or upon any thing
the sea.
which is the subject of marine insurance, a
warranty is implied that the ship is seaworthy.
Actual loss - SEC. 132. An actual total loss is
caused by:
SEC. 126. A deviation is proper:
“(a) A total destruction of the thing insured;
“(a) When caused by circumstances over which
neither the master nor the owner of the ship has
“(b) The irretrievable loss of the thing by
any control;
sinking, or by being broken up;
“(b) When necessary to comply with a warranty,
or to avoid a peril, whether or not the peril is
insured against;
“(c) Any damage to the thing which renders it 1/3 new for old - SEC. 168. In the case of a
valueless to the owner for the purpose for which partial loss of ship or its equipment, the old
he held it; or materials are to be applied towards payment for
the new. Unless otherwise stipulated in the
“(d) Any other event which effectively deprives policy, a marine insurer is liable for only two-
the owner of the possession, at the port of thirds (2/3) of the remaining cost of repairs after
destination, of the thing insured. such deduction, except that anchors must be
paid in full.
SEC. 141. A person insured by a contract of
marine insurance may abandon the thing Doctrine of inscrutible fault - in the absence of
insured, or any particular portion thereof xxx both are presumed to be at fault.
separately valued by the policy, or otherwise
separately insured, and recover for a total loss Respondentia - a loan of money or marine
thereof, when the cause of the loss is a peril interest on goods laiden, on board of the ship,
insured against: which in the course of the voyage must,, from
their nature, dissolve/exchanged upon the
“(a) If more than three-fourths (¾) thereof condition that I the good will be lost of by the
in value is actually lost, or would have to be course of the voyage xxx
expended to recover it from the peril; - if lend you money and the ship will sunk, you
have no more obligation to repay me.
“(b) If it is injured to such an extent as to
reduce its value more than three-fourths Bottomry loan - nature of a mortgage of a ship
(¾); in which the owner borrows money to alienable
lien to perform xxx of a ship, purchase a cargo
“(c) If the thing insured is a ship, and the xxx
contemplated voyage cannot be lawfully - the interest is higher than the commercial rate.
performed without incurring either an expense There is no comparison to their rate.
to the insured of more than three-fourths
(¾) the value of the thing abandoned or a risk Can you measure somebody’s insurable interest?
which a prudent man would not take under the Or up to what extent can you insured a property
circumstances; or or life? How about marine?

“(d) If the thing insured, being cargo or Life insurance - no limit because the life of a
freightage, and the voyage cannot be man is incapable of pecuniary estimation.
performed, nor another ship procured by the - a person can only be insured 10x of your
master, within a reasonable time and with annual income.
reasonable diligence, to forward the cargo, - XPN: SEC. 10. Every person has an insurable
without incurring the like expense or risk interest in the life and health:
mentioned in the preceding subparagraph. But
freightage cannot in any case be abandoned “(a) Of himself, of his spouse and of his
unless the ship is also abandoned. children;

Average - extraordinary or accidental expenses “(b) Of any person on whom he depends wholly
incurred during the voyage for the preservation or in part for education or support, or in whom
of the vessel/cargo from the time it is loaded he has a pecuniary interest;
and the voyage commenced until xxx
“(c) Of any person under a legal obligation to
Kinds of average him for the payment of money, or respecting
Particular property or services, of which death or illness
General/Gross - part of the law of merchant. might delay or prevent the performance; and
(Midterm problem)
- “(d) Of any person upon whose life any estate
or interest vested in him depends.
 Test 1 - Fib 30pts
Property - the extent to which the insured Test 2 - MCQ 30 pts
might be damnified by loss or injury thereof. Test 3 - True/F, Matching type, or problem if
- measure your insurable interest. sentence, not more than 6 sentences.

Can you designate anybody as your beneficiary? Cancer, concealed. Insured wants to pay
- The interest of a beneficiary in a life insurance premium. May Insurance company deny?
policy shall be forfeited when the beneficiary is -
the principal, accomplice, or accessory in
willfully bringing about the death of the insured. Other than HIV, insurance company can deny
In such a case, the share forfeited shall pass on the application. RA 8501, Sec 39. Phil Aids
to the other beneficiaries, unless otherwise Prevention and Control
disqualified. In the absence of other All credit and loan services with HIV, they
beneficiaries, the proceeds shall be paid in cannot refuse loan to including health, accident,
accordance with the policy contract. If the policy and life insurance shall not deny to a person on
contract is silent, the proceeds shall be paid to the basis of his actual, perceive and suspected
the estate of the insured. HIV status provided that the person has not
concealed or misrepresented the fact on the
Loan on Bottomry . insurance company upon application. It shall
- The owner of a ship has in all cases an also be denied solely on the basis of same
insurable interest in it, even when it has been health condition.
chartered by one who covenants to pay him its Penalty: 6 months-4 years, and 10k fine.
value in case of loss: Provided, That in this case If denied base on other factors (e.g. attempt to
the insurer shall be liable for only that part of commit suicide several times), he can be denied.
the loss which the insured cannot recover from
the charterer.
- The insurable interest of the owner of the ship
hypothecated by bottomry is only the excess of
its value over the amount secured by bottomry.

Claims Settlement and Subrogation

- notice and proof of loss
- Guidelines on claim settlement
- unfair claim settlement (Sec 250)

Kinds of maturity Art 248

Proof of loss - non-life

Death certificate - life insurance

1 yr prescriptive period - insurance (reason: for

fresh evidence, because the debris is still
available in case of fire) NOT ALLOWED TO
SHORTEN. INSURANCE POLICY MAY STIPULATE
MORE THAN 1 YEAR.

SUBSTANTIAL POINTS
50% Problems answerable by MCQs
50% Fill in the blanks and MCQs