INSURANCE PART 1 5. P.D.

1460 (1978): Consolidated insurance laws into the

Insurance Code.
SEC. 1.This Decree shall be known as “The Insurance Code.” 6. R.A. 10607: Amended the Insurance Code significantly
MUTUAL INSURANCE AS OLD AS SOCIETY ITSELF LAWS GOVERNING INSURANCE
1. Principle of insurance: Aiding another from a loss caused 1. Insurance Code of 1978 governs the different types of
by an unfortunate event insurance contracts and regulates those involved in the
2. Existed in ancient civilizations such as Egyptians, insurance business in the Philippines
Romans, Greeks, and others as early as the 3rd century 2. Civil Code: Applies when the Insurance Code does not
BC specifically address issues
3. Modern-day insurance originated with Italian merchants a. Void Donations – Arts. 739 and 2012
who sought to distribute risks in maritime ventures (perils b. Applicability of the Civil Code –Art. 2011
of navigation) c. Life Annuity Contracts – Arts. 2021-2027
4. The practice spread to England and other European d. Compulsory M.V. Liability Insurance – Art. 2186
countries. e. Insurer’s right of subrogation – Art. 2207
5. Lombards established trading houses in London during 3. Special Laws
the 12th century. followed special merchant rules, and a. The Insurance Code
any insurance-related issues were settled based on these b. The Revised Government Insurance Act of 1977
rules in merchant courts c. The Social Security act of 1954
6. 18th Century: English common law courts started 4. Others – Insofar as the Civil Code is concerned, the Code
recognizing insurance cases of Commerce is a special law
7. Lord Mansfield is considered the "Father of English a. R.A. 656: The "Property Insurance Law" covers
Commercial Law" determine questions in insurance. government property insurance
DEVELOPMENT IN THE UNITED STATES b. R.A. 4898: Provides life, disability, and accident
- Most insurance laws and practices developed insurance for barangay officials
independently and were not strongly influenced by c. E.O. 250: Increases and integrates insurance benefits
English rules or decisions. The only exception is maritime for barangay officials and Sanggunians members
insurance, which is based on English traditions d. R.A. 3591: Established the Philippine Deposit Insurance
DEVELOPMENT IN THE PHILIPPINES Corporation (PDIC) to protect depositors
1. Insurance began in the 19th century INSURER’S RIGHT OF SUBROGATION
2. Early practices included giving abuloy (financial aid) to 1. Subrogation is when the insurer, after paying a claim to
the bereaved the insured, steps into the insured’s shoes and can
3. Mutual benefit societies and fraternal organizations were pursue the third party responsible for the loss.
established to offer aid/assistance
4. The fatalistic attitude (“bahala na”) hindered insurance
development.
o leads people to rely on luck or fate rather than planning
ahead or securing insurance for protection against risks
Birth of Insurance in the Philippines
1. 1829 Lloyd’s of London appointed Stracham, Murray & 2. Legal Responsibility: To make the person who caused the
Co., Inc. as its representative here. loss legally responsible
2. 1939 The Union Insurance Society of Canton appointed Prevent Double Recovery: To prevent the insured from
Russel & Sturgis as its agent in Manila. Both were limited receiving compensation from both the insurer and the
to non-life insurance wrongdoer for the same loss
3. 1898 Life insurance was introduced by Sun Life Assurance o The insurer can recover
of Canada a. Directly in a lawsuit against the wrongdoer, or
4. 1906: First domestic non-life insurance company was Yek b. As the real party in interest in a lawsuit brought by
Tong Lin Fire and Marine Insurance Co. the insured
5. 1910: First domestic life insurance company, the Insular o Note: Effect of Settlement with Insured: If the wrongdoer
Life Assurance Co. Ltd.,
settles with the insured without the insurer’s consent,
6. 1950 reinsurance was introduced with Reinsurance
but the insurer has already paid the insured, the
Company of The Orient for both life and non-life.
insurer’s right to subrogation is not defeated by the
7. First Workmen’s Compensation Pool was organized in
settlement
1951 as the Royal Group Inc.
3. Property Insurance: Subrogation applies only to property
8. 1949, a government agency was formed to handle
insurance because the value of human life is unlimited,
insurance affairs, The Insular Treasurer was appointed
making recovery from a third party inadequate for life
Commissioner ex-officio.
insurance claims.
9. Social insurance was established in 1936 through the
4. Privity of Contract:
GSIS.
No Privity Required: The insurer's right of subrogation
10. SSS followed suit in 1954.
arises as soon as the claim is paid. It does not depend on
Sources of Insurance Law in the Philippines:
privity of contract between the insurer and the third
1. Spanish Period: The Old Civil Code of 1889 and Code of
party.
Commerce.
Assignment: Payment by the insurer to the insured serves
2. The Insurance Code repealed insurance provisions in the
as an equitable assignment of the insured’s right to
Code of Commerce
recover damages from the third party
3. Civil Code of the Philippines
5. Subrogation applies only to risks covered by the policy
4. P.D. 612 (1974): Created the Insurance Code
 If the loss is not covered by the policy, subrogation rights
do not apply
6. Rights of the Insured:
The insured has the right to recover the balance if the
insurer’s payment does not fully cover the loss. The
insured cannot profit from the insurer’s recovery
The insured can recover from both the insurer and a third
party, but only up to the total loss amount (insurer’s
recovery doesn’t exceed what it paid out)
7. If the insured releases the third party from liability after
receiving the insurer’s payment, the insurer loses its right
of subrogation In this case, the insured must return the
amount paid by the insurer
8.