THE
INSURANCE CODE OF 1976
(Presidential
Decree No. 1460)
GENERAL
PROVISIONS
Section 1. This decree shall be known as the “Insurance Code of
1978”
What is the principle behind insurance?
Insurance is based upon the principle of
aiding another from a loss caused by an unfortunate event.
How old is the concept of insurance?
Very
old. Benevolent societies organized for
the purpose of extending aid to their unfortunate members from a fund
contributed by all, have been in existence from the earliest times. They existed among the Egyptians, the Chinese,
the Hindus, the Romans, and are known to have been established among the Greeks
as early as, believe it or not, 3 B.C.
How did insurance develop in the Philippines
Pre-Spanish
Era - there was no insurance; every loss was borne by the person or the
family who suffered the misfortune.
Spanish
era –
Insurance, in its present concept, was introduced in the Philippines
1898
– Life insurance was introduced in this country with the entry of Sun Life
Assurance of Canada in the local insurance market.
1906
– First domestic non-life insurance company, the Yek Tong Lin Insurance
Company, was organized
1910
– First domestic life insurance company, the Insular Life Assurance Co.,
Ltd., was organized
1939
– Union Insurance Society of Canton appointed Russel & Surgis as its
agent in Manila Philippines
1936
– Social insurance was established with the enactment of Commonwealth Act
no. 186 which created the Government Service Insurance System (GSIS) which
started operations in 1937. The Act
covers gov’t employees.
1949
– Government agency was formed to handle insurance affairs, where the Insular
Treasurer was appointed commissioner ex-officio.
1950
– Reinsurance was introduced by the Reinsurance Company of the Orient when it
wrote treaties for both life and non life.
1951
– First workmen’s compensation pool was organized as the Royal Group
Incorporated.
1954
– RA 1161 was enacted which provided for the organization of the Social
Security System (SSS) covering employees of the private sector.
At present, there are 130 insurance
companies registered with the Office of the Insurance Commissioner. Of these, 2 are composite insurance companies
(engaged in both life and non-life insurance), 23 are life insurance companies,
101 are non-life insurance companies and 4 are reinsurance companies.
How did insurance laws develop in the Philippines
During the Spanish Period, the laws on insurance
were found in Title VII of Book II and Section III of Title III of Book III of
the Spanish Code of Commerce; and in Chapters II and IV of Tile XII of Book IV
of the Spanish Civil Code of 1889 (whew!)
During the American Regime, on Dec. 11, 1914, the Phil Legislature enacted the
Insurance Act (Act 2427). This Act which
took effect on July 1, 1915 repealed the provisions of the Spanish Code of
Commerce on Insurance.
When the Civil Code of the Philippines Philippines
On Dec. 18, 1974, PD 612 was
promulgated, ordaining and instituting the Insurance Code of the Philippines
What are the present laws that govern insurance (also known as the laws we have to know for
exams)?
The laws we have to know are, of course,
PD 1460, and Articles 2011-2012, 2021-2027 and 2166 of the New Civil Code.
What do these Civil Code Provisions say?
Art.
2011. The contract of insurance is
governed by special laws. Matters not
expressly provided for in such special laws shall be regulated by this Code.
Art.
2012. Any person who is forbidden
from receiving any donation under Art. 739 cannot be named beneficiary of a
life insurance policy by a person who cannot make any donation to him,
according to said article.
Art.
2021. The aleatory contract of life
annuity binds the debtor to pay an annual pension or income during the life of
one or more determinate persons in consideration of a capital consisting of
money or other property, whose ownership is transferred to him at once with the
burden of income.
Art.
2022. The annuity may be constituted
upon the life of the person who gives the capital, upon that of a third person,
or upon the lives of various persons, all of whom must be living at the time
the annuity is established.
It may also be constituted in favor of
the person or persons upon whose life or lives the contract is entered into, or
in favor of another or other persons.
Art.
2023. Life annuity shall be void if
constituted upon the life of a person who was already dead at the time the
contract was entered into, or who was at the that time suffering from an
illness which caused his death within twenty days following said date.
Art.
2024. The lack of payment of the
income due does not authorize the recipient of the life annuity to demand the
reimbursement of the capital or to retake possession of the property alienated,
unless there is a stipulation to the contrary; he shall have only a right
judicially to claim the payment of the income in arrears and to require a
security for the future income, unless there is a stipulation to the contrary.
Art.
2025. The income corresponding to
the year in which the person enjoying it dies shall be pain in proportion to
the days during which he lived; if the income should be paid by installments in
advance, the whole amount of the installment which began to run during his life
shall be paid.
Art.
2026. He who constitutes an annuity
by gratuitous title upon his property, may provide at the time the annuity is
established that the same shall not be subject to execution or attachment on
account of the obligations of the recipient of the annuity. If the annuity was constituted in fraud of
creditors, the latter may ask for execution or attachment of the property.
Art.
2027. No annuity shall be claimed
without first proving the existence of the person upon whose life the annuity
is constituted.
What is so important about the Civil Code
Provisions?
Atty. Quimson never fails to ask about Art. 2012.
Are there special laws that govern insurance?
Yes, but
Atty. Quimson did not tell us to look them up.
However, for reference they are:
1.
Revised
GSIS Act of 1977 (PD 1146, as amended)
2.
Social
Security Act of 1954 ( RA 1161, (as amended)
3.
The
Property Insurance Law ( RA 656, as amended by PD 245)
4.
Republic
Act No. 4898
5.
EO
250; and
6.
RA
3591
How do we construe the provisions of the
Insurance Code (IC)?
Since our present IC is based mainly on
the Insurance Act, which in turn was taken verbatim from the law of California
(except for Chap V, which was taken from the law of NY), the courts should
follow in fundamental points, at least, the construction placed by California
Courts on California law (and the construction placed by the NY Courts on NY
law).
This is in accordance with the well
settled rule in statutory construction that when a statute has been adopted
from some other state or country, and said statute has previously been
construed by the courts of such state or country, the statute is usually deemed
to have been adopted with the construction so given.
Section 2. Whenever used in this Code, the following
terms shall have the respective meanings hereinafter set forth or indicated,
unless the context otherwise requires:
(1) A “Contract
of Insurance” is an agreement whereby one undertakes for a consideration to
indemnify another against loss, damage or liability arising from an unknown or
contingent event.
A contract of
suretyship shall be deemed to be an insurance contract, within the meaning of
this Code, only if made by a surety who or which, as such, is doing an
insurance business as hereinafter provided.
(2) The term
“doing an insurance business” or “transacting an insurance business” withing
the meaning of this Code, shall include:
(a) Making or proposing to make, as
insurer, any insurance contract;
(b) Making, or proposing to make, as
surety, any contract of suretyship as a vocation and not as merely incidental
to any other legitimate business or activity of the surety;
(c) Doing any kind of business including
a reinsurance business, specifically recognized as constituting the doing of an
insurance business within the meaning of this Code;
(d) Doing or proposing to do any
business in substance equivalent to any of the foregoing in a manner designed
to evade the provisions of this code.
In the
application of the provisions of this Code, the fact that no profit is derived
from the making of insurance contracts, agreements or transactions or that no
separate or distinct consideration is received therefor, shall not be deemed
conclusive to show that the making thereof does not constitute the doing or
transacting of an insurance business.
(3) As used
in this Code, the term “Commissioner” means the “Insurance Commissioner.”
Is the definition of a contract of insurance
under Sec. 2 sufficient?
De Leon
A better definition he thinks, is that
of Vance who said that a “contract of
insurance is an agreement by which one party, for a consideration, promises to
pay money or its equivalent, or to do some act valuable to the insured or his
nominee, upon the happening of a loss, damage, liability or disability arising
from an unknown or contingent event.”
What are the characteristics of an insurance
contract?
A contract of insurance has the
following characteristics:
1.
Consensual – perfected
by the meeting of the minds of the parties
2.
Voluntary – it is not
compulsory and the parties may incorporate such terms and conditions as they
may deem convenient which will be binding provided they are not against the law
or public policy
3.
Aleatory – depends
upon some contingent event
4.
Executed – as to the
insured after the payment of the premium
5.
Executory – as to the
insurer as it is not executed until payment for a loss
6.
Conditional – subject to
conditions the principal one of which is the happening of the event insured
against
7.
Personal – each party
in the contract have in view the character, credit and conduct of the other
What are the elements of an insurance contract?
Like any
other contract, an insurance contract must have consent of the parties, object
and cause or consideration. The parties who give their consent in this contract
are the insurer and insured. The object
of the contract is the transferring or distributing of the risk of loss,
damage, liability or disability from the insured to the insurer. The cause or consideration of the contract is
the premium which the insured pays the insurer.
What is an additional element of an insurance
contract?
Insurable Interest. This means that the insured possesses an
interest of some kind susceptible of pecuniary estimation.
How are insurance contracts classified?
Insurance contracts are classified as
follows?
1)
Life
insurance contracts
a)
Individual
(Sections 179-183, 227)
b)
Group
Life (Sections 50 and 228)
c)
Industrial
Life (Sections 229-231)
2)
Non-Life
Insurance Contracts
a)
Marine
(Sections 99-166)
b)
Fire
(Sections 167-173)
c)
Casualty
(Section 174)
3)
Contracts
of Suretyship and bonding (Sections 175-178)
How are insurance contracts construed?
Ambiguities or obscurities must be
strictly interpreted against the party that caused them. As the insurance policy is prepared solely by
the insurer, the ambiguities shall be construed against it and in favor of the
insured. (Qua Chee Gan)
What does the term “doing insurance business”
include?
The term “doing an insurance business or
“transacting an insurance business” includes:
a)
Making
or proposing to make, as insurer, any insurance contract;
b)
Making,
or proposing to make, as surety, any contract of suretyship as a vocation and
not as merely incidental to any other legitimate business or activity of the
surety;
c)
Doing
any kind of business including a reinsurance business, specifically recognized
as constituting the doing of an insurance business within the meaning of this
Code;
d)
Doing
or proposing to do any business in substance equivalent to any of the foregoing
in a manner designed to evade the provisions of this code.
Does the fact that no profit was derived from
the transaction nor a separate consideration received therefore mean that no
insurance business was transacted?
No.
Fact that no profit is derived from the contract or transaction or that
no separate or direct consideration is received for such contract or
transaction is NOT deemed conclusive to show that no insurance business was
transacted.
Will any suretyship agreement amount to an
insurance contract?
No.
In order for a suretyship agreement to come under the purview of the
Insurance Code, the Surety undertaking to ensure the performance of the
obligations must be registered with the Insurance Commissioner and must have
been issued by the latter with a certificate of authority. Furthermore, the person acting as a surety is
habitually engaged as such for a livelihood.
CHAPTER 1
CONTRACT OF INSURANCE
TITLE I – WHAT MAY BE INSURED
Section 3. Any contingent or unknown event, whether
past or future, which may damnify a person having an insurable interest, or
create a liability against him, may be insured against, subject to the
provisions of this chapter.
The consent
of the husband is not necessary for the validity of an insurance policy taken
out by the married woman on her life or that of her children.
Any minor of
the age of eighteen years or more, may notwithstanding such minority, contract
for life, health and accident insurance, with any insurance company duly
authorized to do business in the Philippines, provided the insurance is taken
on his own life and the beneficiary appointed is the minor’s estate or the
minor’s father, mother, husband, wife, child, brother or sister.
The married
woman or the minor herein allowed to take out an insurance policy may exercise
all the rights and privileges of an owner under a policy.
All rights, title and interest in the
policy of insurance taken out by an original owner on the life or health of a
minor shall automatically vest in the minor upon the death of the original
owner, unless otherwise provided in the policy.
What perils or risk may be insured?
The following risks may be insured:
1.
Any
contingent or unknown event whether past or future which may cause damage to a
person having an insurable interest; or
2.
Any
contingent or unknown event, whether past or future, which may create liability
against the person insured.
May a married woman take out an insurance? If so, on what?
Yes.
A married woman may take out an insurance on her life or that of her
children even without the consent of her husband. She may likewise take out an insurance on the
life of her husband, her paraphernal property, or on property given to her by
her husband.
May a minor take out an insurance?
Third par of Sec. 3 is no longer
applicable, since the age of majority is now 18 years old (RA 8809, Dec. 13,
1989).
Atty Quimson asked us to look at a few
provisions of law with respect to this section.
What are they?
Art. 1174 (NCC). Except in cases expressly specified by the
law, or when it is otherwise declared by stipulation, or when the nature of the
obligation requires the assumption of risk, no person shall be responsible for
those events which, could not be foreseen, or which, though foreseen, were
inevitable.
Art. 110 (FC). The spouses retain the ownership, possession,
administration and enjoyment of their exclusive properties.
Either spouse may during the marriage,
transfer the administration of his or her exclusive property to the other by
means of a public instrument, which shall be recorded in the registry of
property of the place where the property is located.
Art.
1327 (NCC). The following cannot
give consent to a contract:
(1) Unemancipated minors;
(2) Insane or demented persons, and
deaf-mutes who do not know how to write.
Art.
1390 (NCC). The following contracts
are voidable or annullable, even though there may have been no damage to the
contracting parties:
(1) Those where one of the parties is
incapable of giving consent to a contract;
(2) Those where the consent is vitiated
by mistake, violence, intimidation, undue influence or fraud.
These contracts are binding, unless they
are annulled by a proper action in court.
They are susceptible of ratification.
Problem:
A, wanted to open a medicinal herb shop. He placed a long distance phone call to Taiwan Taiwan Co. Without the
knowledge of both parties, the ships had already sunk on Aug. 14. Is B Insurance Co. liable for the ships?
Yes.
This is an example of a past unknown event because the sinking of the
ship is a past event at the time that the policy took effect. The contract is valid and B Insurance Co. is
liable because he agreed to pay even though the ship be already lost. An insurance against an unknown past event is
peculiar only to marine insurance. However, Atty. Quimson said in class that
nowadays, most if not all insurance companies no longer insure a past event
since technology has progressed in such a manner that a ship’s current status
can easily be known while the application is being processed.
Section 4. The preceding section does not authorize an
insurance for or against the drawing of any lottery, or for against any chance
or ticket in a lottery drawing a prize.
Is a contract of insurance a wagering or
gambling contract?
NO.
A contract of insurance is a contract of indemnity and not a wagering or
gambling contract. Although it is true
that an insurance contract is also based on a contingency, it is not a contract
of chance.
What is the concept of a lottery?
The term “lottery” extends to all
schemes for the distribution of prizes by chance, such as policy playing, gift
exhibition, prize concerts, raffles at fairs, etc. and various forms of
gambling.
What are the three essential elements of
lottery?
Consideration,
prizes and chance.
There is consideration of price aid if
it appears that the prizes offered by whatever name they may be called came out
of the fund raised by the sale of chances among the participants in order to
win the prizes.
Are all prizes equivalent to a lottery?
If the prizes do not come out of the
fund or contributions by the participants, no consideration has been paid and
consequent, there is no lottery. Ex: A company, to promote the sale of certain
products, resorts to a scheme which envisions the giving away for free of
certain prizes for the purchase of said products, for the participants are not
required to pay more than the usual price o the products.
Can a sweepstakes holder insure himself against
the failure of his ticket to win?
NO. It cannot be said that he suffered a
“loss” of prize when he did not win. The
failure to win a prize would not damnify or create a liability against him.
What are the distinctions between an insurance
contract and a wagering contract?
A contract of insurance is a contract of
indemnity and not a wagering, or gambling contract.(Sec. 25) White it is based on a contingency, it is not
a contract of chance and is not used for profit. The distinctions are the following:
Insurance Contract
|
Gambling contract
|
Parties
seek to distribute loss by reason of mischance
|
Parties
contemplate gain through mere chance or the occurrence of a contingent event.
|
Insured
avoids misfortune.
|
Gambler
courts fortune
|
Tends to
equalize fortune.
|
Tends to
increase the inequality of fortune.
|
What one
insured gains is not at the expense of another insured. The entire group of insureds provides
through the premiums paid, the funds which make possible the payment of all
claims;
|
Essence is
whatever one person wins from a wager is lost by the other wagering party.
|
Purchase of
insurance does not create a new and non-existing risk of loss to the
purchaser. In purchasing insurance,
the insurer faces an already existing risk of economic loss.
|
As soon as
a party makes a wager, he creates a risk of loss to himself where no such
risk existed previously.
|
What are the similarities between an insurance
contract and a gambling contract?
They are similar in only one
respect. In both, one party promises to
pay a given sum to the other upon the occurrence of a given future event, the
promise being condition upon the payment of, or agreement to pay, a stipulated
amount by the other party to the contract.
In either case, one party may receive
more, much more, than he paid or agreed to pay.
Problems.
A, B, C and D decided to join a bungee jumping
competition. They contributed P1,000
each to a fund available for the use of any member who is injured in the
contest. Is this insurance or gambling?
This is an insurance contract. Each member contributes to a common fund, out
of which one is reimbursed for the losses that he may suffer.
Suppose A, B, C, and D agree that the whole
amount of 4T would be given to the one who swings nearest to the ground. Is this insurance or gambling?
This is now a gambling contract. The parties are now contemplating a gain
based upon uncertain events.
Section 5. All kinds of insurance are subject to the
provisions of this chapter so far as the provisions can apply.
What is the applicability of the provisions of
Chapter 1?
Provisions of Chap 1 on “The Contract of
Insurance” (Secs 1-98) are also applicable to marine Insurance (Secs. 99-166),
Fire insurance (Secs. 167-173), Casualty Insurance (Sec. 174), Suretyship
(Secs. 175-178), Life Insurance (Secs. 179-183), and to any other kind of
insurance (Sec. 2) so far as said provisions can apply. Matters not expressly provided for in the
Insurance Code and special laws are regulated by the CC.
So, an insurance contract under RA 1611
(Social Security Act of 1954) shall be governed primarily by the said law and
subsidiarily by Chap. 1 of the Insurance Code, and in the absence of the
applicable provisions in both laws, the pertinent provisions of the CC shall be
applied.
TITLE II – PARTIES TO THE CONTRACT
Section 6. Every person, partnership, association or
corporation duly authorized to transact insurance business as elsewhere
provided in this Code, may be an insurer.
Who are the parties to the contract of
insurance?
The Insurer
is 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.
The business of insurance may be carried on by individuals just as much
as by corporations and associations. The
state itself may go into insurance business.
The insured,
or the second party to the contract, is 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. He is the person whose loss is the occasion
for the payment of the insurance proceeds by the insurer.
Is the insured always the person to whom the
proceeds are paid?
No.
The person paid may be the beneficiary
designated in the policy. A common
example of this situation is a life insurance policy where the proceeds are not
given to the insured but to a third party designated by the insured.
What is the nature of the relationship between
the insurer and the insured?
It is that of a contingent debtor and
creditor, subject to the conditions of the policy and NOT that of trustee and
cestui que trust.
How are the terms assurer, insured and assured
used in insurance?
Accdg to
Black’s Law, Insurer is synonymous with the term “assurer” or “underwriter”.
The terms “insured” and “assured” are
generally used interchangeably; but strictly speaking, the term “insured” refers to the owner of the
property insured or the person whose life is the subject of the contract
of insurance, while “assured” refers to the person for whose
benefit the insurance is granted.
For ex:
A wife insures the life of her husband for her own benefit. The wife is the assured, and the husband the
insured. The wife is the owner of the
policy but she is not the insured.
In property insurance, like fire
insurance, the insure is also the assured where the proceeds are payable to
him.
Assured is also used sometimes as a
synonym of “beneficiary.” The beneficiary is the person designated by
the terms of the policy as the one to receive the proceeds of the
insurance. He is the third party in a
contract of life insurance, whose benefit the policy is issued and to whom the
loss is payable.
Who may be an insurer?
A foreign or domestic insurance company
may transact business in the Philippines
An individual may also be an insurer,
provided he holds a certificate of authority from the Insurance Commissioner,
and provided further that he is possessed of the capital assets required of an
insurance corporation doing the same kind of business in the Philippines
What is an insurance corporation?
IC defines it as one 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
compliance with contractual obligations or the payment of debts of others.
(Sec. 185) The last part of the
statement refers to suretyship. (Sec. 175)
What does the term “insurer” and “insurance
company” include?
It includes individuals, partnerships,
associations or corporations, including GOCC’s or entities, engaged as
principals in the insurance business, except
mutual benefit associations. It shall
also include professional reinsurers as defined in Sec. 280 (Sec. 184)
Is the Business of Insurance affected with
public interest?
Yes.
It is therefore, subject to regulation and control by the state by
virtue of the exercise of its police power or in the interest of public
convenience and the general good of the people.
Atty. Quimson asked us to look at Sec. 184-185
for the meaning of “insurer”, “insurance company”, and “Insurance corporation”;
and Sec. 187 for the certificate of authority required to transact insurance
business. What do these sections
provide?
Sec.
184. For the purposes of this Code,
the term “insurer” or “insurance company” shall include all
individuals, partnerships, associations, or corporations including
government-owned or controlled corporations or entities, engaged as principals
in the insurance business, excepting mutual benefit associations. Unless the context otherwise requires, the
term shall also include professional reinsurers defined in Sec. 280. “Domestic
Company” shall include companies formed, organized or existing under the
laws of the Philippines Philippines
Sec.
185. Corporations 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 compliance with contractual obligations or the payment of
debts of others shall be known as “insurance
corporations.”
The provisions of the Corporation Law
shall apply to all insurance corporations now or hereafter engaged in business
in the Philippines
Sec.
187. No insurance company shall
transact any insurance business in the Philippines
The Commissioner may refuse to issue a
certificate of authority to any insurance company if, in his judgment, such
refusal will best promote the interests of the people of this country. No such certificate of authority shall be
granted to any such company until the Commissioner shall have satisfied himself
by such examination as he may make and such evidence as he may require that
such company is qualified by the laws of the Philippines to transact business
therein, that the grant of such authority appears to be justified in the light
of local economic requirements, and that the direction and administration, as
well as the integrity and responsibility of the organizers and administrators,
the financial organization and the amount of capital, notwithstanding the
provisions of section 188, reasonably assure the safety of the interests of the
policyholders and the public.
In order to maintain the quality of the
management of insurance companies and afford better protection of policyholders
and the public in general, any person of good moral character, unquestioned
integrity and recognized competence may be elected or appointed director or
officer of insurance companies. The
Commissioner shall prescribe the qualifications of the executive officers and
other key officials of insurance companies for the purposes of this section.
No person shall concurrently be a
director and/or officer of an insurance company and an adjustment company.
Incumbent directors and/or officers
affected by the above provisions are hereby allowed to hold on to their
positions until the end of their terms or two years from the effectivity of the
Decree, whichever is shorter.
Before issuing such certificate of
authority, the Commissioner must be satisfied that the name of the company is
not that of any other known company transacting a similar business in the
Philippines, or a name so similar as to be calculated to mislead the public.
Such certificate of authority shall
expire on the last day of June of each year and shall be renewed annually if
the company is continuing to comply with the provisions of this Code or the
circulars, instructions, rulings or decisions of the Commissioner. Every company receiving any such certificate
of authority shall be subject to the provisions of this Code and other related
laws and to the jurisdiction and supervision of the Commissioner.
No insurance company may be authorized
to transact in the Philippines
No insurer company shall have any equity
in an adjustment company and neither shall an adjustment company have an equity
in an insurance company.
Insurance companies and adjustment
companies presently affected by the above provisions shall have two years from
the effectivity of the Decree within which to divest of their stockholdings.
Section 7. Anyone except a public enemy may be insured.
What are the requisites in order that a person
may be insured in a contact of insurance?
There are 3 requisites namely:
a)
He
must be competent to enter into a contract.
b)
He
must possess an insurable interest in the subject of insurance.
c)
He
must NOT be a public enemy.
What is a public enemy?
It is a nation with whom the Philippines
What is the effect of war on the existing
insurance contracts between the Philippines
With respect to property insurance, the
rule adopted in the Phil is that an insurance policy ceases to be valid and
enforceable as soon as the insured becomes a public enemy.
What is the effect of war on the existing
insurance contracts between the Philippines
Three
doctrines have arisen.
(1) Connecticut
a.
The
mere protection for the year; and
b.
The
privilege of renewing the contract for each succeeding year by paying the
premium for that year at the time agreed upon.
Accdg.
to this view, the payments of the premiums are a condition precedent, the
non-performance of which (as when the performance would be illegal) necessary
defeats the right to renew the contract.
(2) New York
(3) US Rule – declared the contract not merely
suspended but is abrogated by reason of non-payment of premiums, since the time
of the payment is peculiarly of the essence of the contract. However, the insured is entitled to the cash
or reserve value of the policy (if any) which is the excess of the premiums
paid over the actual risk carried during the years when the policy had been in
force.
We follow the US Rule.
Problem.
B is sideswiped by a balut vendor. Because he was previously indicted for many
other crimes including illegal possession of balisongs, he was declared Metro Manila
NO.
Sec. 7 speaks of a public enemy only in reference to a nation with whom
the Phil is at war and every citizen and or subject thereof.
Section 8. Unless the policy otherwise provides, where
a mortgagor of the property effects insurance in his own name providing that a
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.
Is it alright if both the mortgagor and the
mortgage insure the same property?
YES.
The mortgagor and the mortgagee have each an insurable interest in the
property mortgaged, and this interest is separate and distinct from the
other. Consequently, insurance taken by
one in his own name only and in his favor alone does not inure to the benefit
of the other. And in case both of them
take out separate insurance policies on the same property, or one policy
covering their respective interests, the same is not open to the objection that
there is double insurance.
What is the extent of the insurable interest of
the mortgagor?
The mortgagor of the property, as owner
has an insurable interest to the extent of the value of the property, even if
the mortgage debt is equal to such value.
The reason is that the loss or destruction of the property insured will
NOT extinguish the mortgage debt.
What is the extent of the insurable interest of
the mortgagee?
The mortgagee or his assignee has an
insurable interest in the mortgaged property to the extent of the debt secured,
such interest continues until the mortgage debt is extinguished.
Up to what extent can each recover?
The mortgagor cannot recover upon the
insurance beyond the full amount of the loss, and the mortgagee cannot recover
in excess of the credit at the time of the loss.
Under Sec. 8, what are the effects of insurance
when the mortgagor effects insurance in his own name and provides that the loss
be payable to the mortgagee?
The legal effects of this are:
(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 action of
the mortgage prior to the loss which would otherwise avoid the insurance
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, may be
performed by the mortgagee;
(4) In case of
loss, the mortgagee is entitled to the proceeds to the extent of his credit;
and
(5) Upon recovery
by the mortgagee to the extent of his credit, the debt is extinguished.
What is the effect if the mortgagee effects
insurance on behalf of the mortgagor?
Practically the same rules apply. Upon the destruction of the property, then
the mortgagee is entitled to receive the proceeds equal to the amount of the
mortgage credit. Such payment operates
to discharge the debt.
Atty. Quimson wants us to look at Art. 2127
CC. What does it say?
Art. 2127. The mortgage extends to the natural
accession, to the improvements, growing fruits, and the rents or income not yet
received when the obligation becomes due, and to the amount of the indemnity
granted or owing to the proprietor from the insurers of the property mortgaged,
or in virtue of expropriation for public use, with the declarations,
amplifications and limitations established by law, whether the estate remains
in the possession of the mortgagor, or it passes into the hands of a third
person.
Problems.
A is the owner of a house worth 10T which he
mortgaged to B to secure a loan of 5T.
What is the insurable interests of each?
Insurable interest of A, mortgagor is
P10T, while the insurable interest of B, mortgagee is P5T.
A insured for 1M her house with the policy
providing that the loss shall be payable to B.
The house was mortgaged to B as security for a loan of P750T. It was totally destroyed by accidental
fire. Who may recover on the policy?
B, the mortgagee may receive the 1M but
is entitled only to the extent of his credit of P750T, and he shall hold as
trustee for A, mortgagor, the excess of P250T.
Supposing before the fire occurred B had already
been paid, who, if at all, will receive the proceeds?
A will receive the proceeds. The reason is that A effected the insurance
in his own name and he did NOT cease to be a party to the contract although it
was provided that the indemnity be paid to B.
Suppose it was B, mortgagee who insured the
house for 1M. If the loss occurred
before B was paid who is entitled to receive the proceeds?
B.
But
B can only recover P750T, the amount of her credit.
What if the loss occurred after B was paid, can
he still receive the proceeds?
No. Upon payment of the debt, B lost his
insurable interest in the property.
Will A get the proceeds?
No. Because A was never a party to the
contract. It is important to note that
it was B, mortgagee who effected the insurance.
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.
What does this provision say?
Under this section, where an insurer
assents to the transfer of an insurance from a Mortgagor (Mor) to a Mortgage
(Mee), and at the time of his assent the insurer imposes further obligation on
the Mee, a new and distinct consideration passed from the Mee to the insurer,
and a new contract is created between them.
The acts of the Mor cannot anymore affect the rights of the Mee.
What is the significance of this provision?
Remember we said in Sec. 8 that all acts
of the mortgagor affects the mortgagee?
Well, this provision provides the exception to the rule.
TITLE III – INSURABLE INTEREST
Section 10. Every person has an insurable interest in the
life and health:
(a) Of
himself, of his spouse and of his children;
(b) Of any
person on whom he depends wholly in part for education or support, or in whom
he has a pecuniary interest;
(c) Of any
person under a legal obligation to him for the payment of money, or respecting
property or services, Of which death or illness might delay or prevent the
performance; and
(d) Of any
person upon whose life any estate or interest vested in him depends.
Why is this section important?
Other than it discusses the concept of keyman
insurance, Atty. Quimsons asked this in a past mid-term exam, asking
the students to Quote the provision.
What is insurable interest?
Insurable interest is one the most basic
of all requirements in insurance. In
general, a person is deemed to have insurable interest in the subject matter
insured where he ha a relation or connection with or concern in it that he will
derive pecuniary benefit or advantage from its preservation and will suffer
pecuniary loss or damage from its destruction, termination or injury by the
happening of the event insured against.
Why must there be an insurable interest?
It is essential for validity and
enforceability of the contract or policy.
A policy issued to a person without interest in the subject matter is a
mere wager policy or contract.
When is there insurable interest in life
insurance?
In life insurance, Insurable interest
exists where there is reasonable ground founded on the relations of the parties
whether pecuniary, contractual or by blood or affinity, and to expect some
benefit or advantage from the continuance of the life of the insured.
Problem.
A takes an insurance policy on his life and
names his friend X as beneficiary, and another insurance on the life of Y in
consideration of “love and affection” with A as a beneficiary. Which of the two insurances, if any, is valid
and which, if any, is void?
The Insurance taken on A on his life is
VALID, because the beneficiary need not have an insurable interest in the life
of the insured. It must be the one
insuring who has an insurable interest in the life of the person he is
insuring, and of course, it goes without saying that one has an insurable
interest in his own life and health.
ON the other hand, the insurance taken
by A on the life of Y is VOID because “love and affection for the insured” n
the part of the person insuring is NOT sufficient ground to qualify as
insurable interest.
Section 11. The insured shall have the right to change the
beneficiary he designated in the policy, unless he has expressly waived his
right in the said policy.
What is a beneficiary?
A beneficiary is a person whether
natural or juridical for whose benefit the policy is issued and is the
recipient of the proceeds in the insurance.
Who can be a beneficiary?
Any person in general can be a
beneficiary.
Are there any exceptions?
Yes.
The only persons disqualified from being a beneficiary are those not
qualified to receive donations under Art. 739.
They cannot be named beneficiaries of a life insurance policy by the
person who cannot make any donation to him.
In case of adultery, concubinage does the
disqualification extend to the illegitimate children?
NO.
The disqualification does not extend to the children, and as such, they
may be made beneficiaries.
What is the old rule regarding revocability of
designation of beneficiary as enunciated in the case of Gercio v. Sunlife?
The OLD rule is: When the insured did
NOT expressly reserve his right to revoke the designation of his beneficiary,
such designation is irrevocable and he cannot change his beneficiary without
the consent of the latter.
What is the current rule?
The rule now is: The insured has the
power to revoke the designation of the beneficiary even without the consent of
the latter, whether or not such power is reserved in the policy. Such right must be exercised specifically in
the manner set forth in the policy or contract.
It is of course, extinguished at his death and CANNOT be exercised by
his personal representatives or assignees.
Under the current rule, when does the insured
lose the right to change the beneficiary?
When the right to change the beneficiary
is expressly waived in the policy, the insured has no power to make such change
without the consent of the beneficiary.
What if the beneficiary dies before the insured
and the insured did not change the designation, who gets the proceeds?
There is a divergence of opinion, but
the general trend is to give it to the estate of the beneficiary.
What are the other provisions of law that Atty.
Quimson required us to read?
Art.
2012, CC. Any person who is
forbidden from receiving any donation under Art. 739 cannot be named a
beneficiary of a life insurance policy by the person who cannot make any
donation to him, according to said article.
Art.
739. The following donations shall
be void:
(1) Those made between persons who were
guilty of adultery or concubinage at the time of the donation;
(2) Those made between persons found
guilty of the same criminal offense, in consideration thereof;
(3) Those made to a public officer, or
his wife, descendants and ascendants by reason of his office.*
*Atty. Quimson said that the designation of the
public officer MUST be by reason of his office and NOT all public officers are
disqualified from being beneficiaries of a life insurance policy, as long as
the designation was not made in consideration of an act done by the public
officer by reason of his office in favor of the insured.
Art.
43, FC. The termination of
subsequent marriage produces the following effects:
xxx.
(4) The innocent spouse may revoke the
designation of the other spouse who acted in bad faith as a beneficiary in any
insurance policy even if such designation be stipulated as irrevocable.
Art.
64, FC. After the finality of the
decree of legal separation, the innocent spouse may revoke the designation of
the offending spouse as beneficiary in any insurance policy. The revocation of or change in the designation
of the insurance beneficiary shall take effect upon written notification to the
insured.
Art.
50, FC. The effects provided for by
paragraph (4) of Art. 43 xxx shall also apply in the proper cases to marriages
which are declared void ab initio or annulled by final judgment under Art. 40
& 45.
Problems.
Pao and Jane are husband and wife. Jef and Jojo are also husband and wife
(yihee…). Jef and Jane engaged in
adulterous relations. Jef secured a life
insurance policy and named Jane as beneficiary.
When Jef dies, who will get the insurance proceeds?
Jojo. Jane cannot be named as a beneficiary in a
life insurance policy because she is forbidden by law to receive a donation
from Jef since they were both guilty of adultery.
Pao and Jane are husband and wife. Jef and Jojo are also husband and wife. Jane engaged in adulterous relaions with
Van. Jef secured a life insurance and
named Jane as beneficiary. When Jef
dies, who will get the insurance proceeds?
Jane. The law prohibits the situation wherein a
person who is forbidden from receiving a donation under Art. 739 is named a
beneficiary of a life insurance policy by the person who cannot make any
donation to him, according to said article.
In other words, notwithstanding the fact that Jane is guilty of
adultery, Jane can still be a beneficiary of Jef since the law provides that
Jane cannot be a beneficiary of a life insurance policy if the person who names
her as beneficiary is forbidden to give her a donation under Art. 739. Art. 739 is therefore not applicable in the
situation at bar.
Pao and Jane are husband and wife. Jef and Jojo are also husband and wife. Jef has a concubine named Maui Taylor
Jane.
The law only prohibits the situation wherein a person who is forbidden
from receiving a donation under Art. 739 is named a beneficiary of a life
insurance policy by the person who cannot make any donation to him, according
to said article. Notwithstanding that
Jef is guilty of concubinage, Jane can still be a beneficiary. Since Jane is not the concubine, Art. 739
will not apply and Jef is not forbidden from giving a donation to Jane.
Pao and Jane are husband and wife. Jef and Jojo are also husband and wife. Jane engages in adulterous relations with
Van. Jef has a concubine named Maui Taylor
Jane.
The law only prohibits the situation wherein a person who is forbidden
from receiving a donation under Art. 739 is named a beneficiary of a life
insurance policy by the person who cannot make any donation to him, according
to said article. Notwithstanding that
both parties are guilty of adultery and concubinage respectively, they are not
forbidden because Jef is not the one engaged in an adulterous relationship with
Jane, and she is not the concubine of Jef.
Art. 739 does not apply.
Pao and Jane are husband and wife. Jef and Jojo are also husband and wife. Jef and Pao become lovers. Jef thereafter secures a life insurance
policy and names Pao as his beneficiary.
When Jef dies who will get the insurance proceeds?
Pao.
Since there is no law prohibiting Jef from donating to Pao, because both
of them are neither guilty of adultery nor concubinage, then the only solution
to this problem is to consider the designation of the beneficiary as a contract
which is valid and binding between the insurer and the insured.
Disclaimer: Any resemblance to real and living
persons are purely coincidental.
Hahahaha.. right.
Section 12. The interest of a beneficiary in a life
insurance policy shall be forfeited when the beneficiary is the principal,
accomplice or accessory in willfully bringing about the death of the insured;
in which event, the nearest relative of the insured shall receive the proceeds
of said insurance if not otherwise qualified.
Who are the “nearest relatives” mentioned here?
Those related to the decedent in the
order mentioned under the rules of intestate succession such as: (the order of
the following relatives are as follows)
1.
The
legitimate children;
2.
The
father and mother, if living;
3.
The
grandfather and grandmother; or ascendants nearest in degree, if living;
4.
The
illegitimate children;
5.
The
surviving spouse; and
6.
The
collateral relatives, to wit:
a.
Brothers
and sisters of the full blood;
b.
Brothers
and sisters of the half-blood; and
c.
Nephews
and nieces
7.
In
default of the above, the STATE shall be entitled to receive the insurance
proceeds.
Problem:
1) Anakin, the legitimate child
2) Jor-el and Kyla, the legitimate father and
mother
3) Lolo and Lola, grandfather and grandmother (or
ascendants in the nearest degree)
4) Bastardo, the illegitimate child
5) Lois Lane
6) Collateral relatives to wit:
a) Kuya, brother of full blood
b) Alf, brother of half blood
c) Nep, nephew
What if all of the above are nowhere to be
found?
Then the State of Krypton
Suppose that Lois Lane Clark and Anakin carried it out. Anakin and Lois were convicted of
murder. However, they are also
instituted as beneficiaries in the insurance policy of Clark ,
and the proceeds are the only properties available for distribution to the
heirs. In case all three are convicted
who gets the proceeds?
Since Anakin, the legitimate child and
Lois, the surviving spouse are no longer entitled to the proceeds, then
following the rules on intestate succession, the proceeds must be divided
between the legitimate parents (Jor-el and Kyla) who get ½ of the proceeds and
the Illegitimate child (Bastardo) who gets the other half.
Same facts above, but it was only Lois Lane
At first glance the answer might be YES,
because according to Section 12, it is only the interest of the beneficiary
which is forfeited, and since Anakin was not instituted as beneficiaries, then
his interest is still intact. HOWEVER,
there is a proviso in Sec. 12, which states: ” the nearest relative of the insured shall received the proceeds of
said insurance if not otherwise qualified”. Meaning, in order to find out if Anakin is
qualified, reference must be made to laws of succession.
According to Art. 1024 of the CC, the
provisions relating to incapacity by will are equally applicable to intestate
succession; and according to Art. 1032 (2), any person who has been convicted
of an attempt against the life of the testator is incapable of succeeding by
reason of unworthiness. Hence, the
correct answer to this problem is NO.
Anakin is not entitled to the proceeds and subsequently the insurance
proceeds will be divided as provided for in the first answer.
In case Anakin and Lois are not convicted, but
both are instituted as beneficiaries of Clark ,
can they still collect the proceeds?
There is no law or jurisprudence that
treats of this situation. However, Atty.
Quimson said in class that there must be a conviction before Sec. 12 can
operate to disqualify or forfeit the interests of Anakin and Lois. Sec. 12 speaks of “principals, accomplice or
accessory”, and there must therefore be a conviction of the beneficiaries as
either of the three to the crime against the insured.
Suppose Anakin and Lois are not convicted and
they are not instituted as beneficiaries of Clark ,
can they now collect the proceeds?
In this case, Sec. 12 is no longer the
relevant provision, but Art. 1032 (2) of the CC. However, it is submitted (by JohnBee Sioson)
that there must be a final conviction in order for Art. 1032 to apply, i.e., to
bar Anakin and Lois from collecting on the ground of unworthiness. Furthermore, Art. 1034 says: In order to
judge the capacity of the heir, devisee or legatee, his qualifications at the
time of the death of the decedent shall be the criterion. In cases falling under Nos. 2, 3 & 5 of
Art. 1032, it shall be necessary to wait until final judgment is rendered.
Elle Driver, Beatrix Kiddo & O-Ren Ishi are
all creditors of Bill. All three are
instituted as beneficiaries of Bill. Elle
fails to qualify since she is Bill’s concubine.
Beatrix on the other hand, eager to claim the insurance proceeds, used
the “5 point exploding heart technique” she learned from Pai Mei, killing Bill.
O-Ren now claims the proceeds of the insurance.
However, her claim is opposed by BB, Bill’s legitimate daughter who
contends that according to Sec. 12, it is the nearest relative who should get
the proceeds, meaning her. Between BB
and O-Ren, who is entitled to get the proceeds?
O-Ren Ishi gets the proceeds because it
was stipulated in the contract of insurance
(I think she’ll use it to surgically graft her scalp back since it was sliced
by Beatrix using a Hatori Hanzo Sword).
Remember that the insurance contract is the law between the parties and
hence it must be followed by the insurance company. Sec. 12 ONLY applies if there is NO
stipulation in the contract of insurance as to who are the other beneficiaries
of the proceeds.(Cue Kill Bill soundtrack…)
Section 13. Every interest in property, whether real or
personal, or any relation thereto, or liability in respect thereof, of such
nature that a contemplated peril might directly damnify the insured, is an
insurable interest.
What is the importance of this provision?
It defines insurable interest in
PROPERTY.
Cases:
(30) Harvardian
Colleges v. Country Bankers Insurance Corp.
1
CARA 2
Facts:
ü Harvardian is
a family corporation, the stockholders of which are Ildefonso
Yap , Virginia King Yap and their children.
ü Prior to Aug.
9, 1979, an agent of Country Bankers proposed to Harvardian to insure its
school building. Although at first
reluctant, Harvardian agreed.
ü Country Banks
sent an inspector to inspect the school building and agreed to insure the same
for P500,000 for which Harvardian paid an annual premium of P2,500.
ü On Aug. 9,
1979, Country Bankers issued to Harvardian a fire insurance policy. On March 12, 1980, (39 days before I was born… hehehehe )during the effectivity of
said insurance policy, the insured property was totally burned rendering it a
total loss.
ü A claim was
made by plaintiff upon defendant but defendant denied it contending that
plaintiff had no insurable interest over the building constructed on the piece
of land in the name of the late Ildefonso Yap as owner.
ü It was
contended that both the lot and the building were owned by Ildefonso Yap and
NOT by the Harvardian Colleges.
Issue: WON Harvardian colleges has a right
to the proceeds.
Held: Harvardian has a right to the proceeds.
Regardless of the nature of the title of
the insured or even if he did not have title to the property insured, the
contract of fire insurance should still be upheld if his interest in or his
relation to the property is such that he will be benefited in its continued
existence or suffer a direct pecuniary loss from its destruction or
injury. The test in determining
insurable interest in property is whether one will derive pecuniary benefit or
advantage from its preservation, or will suffer pecuniary loss or damage from
its destruction, termination or injury by the happening of the event insured
against.
Here Harvardian was not only in
possession of the building but was in fact using the same for several years
with the knowledge and consent of Ildefonso Yap. It is reasonably fair to assume that had the
building not been burned, Harvardian would have been allowed the continued use
of the same as the site of its operation as an educational institution. Harvardian therefore would have been directly
benefited by the preservation of the property, and certainly suffered a
pecuniary loss by its being burned.
Section 14. An insurable ineters in property may consist
in:
(a) An
existing interest;
(b) An
inchoate interest founded on an existing interest; or
(c) An
expectancy, coupled with an existing interest in that out of which the
expectancy arises.
What is
existing interest?
Existing interest in property is the
legal or equitable title on the property.
What is an inchoate interest?
It is an
interest which has not yet ripened, such as the interest of a stockholder in
the property of the corporation which he owns stocks.
In what kind of expectancy may insurable
interest consist?
The expectancy MUST be coupled with an
existing interest in that, out of which such expectancy arises. Examples would be: a farmer insuring future
crops that he will grow on his land, or a workman insuring the building which
he was contracted to repair.
Section 15. A carrier or depository of any kind has an
insurable interest in a thing held by him as such, to the extent of his
liability but not to exceed the value thereof.
What is the reason for this provision?
The loss of the thing may make the
carrier or depositary liable to the owner of the goods, to the extent of the
value of the goods, and the law therefore allows such a carrier or depositary
to insure his possible liability therefor.
Problem.
M/V Mary Jane, a common carrier, insured Peter
Parker’s goods, valued at 1M with A.MAY Insurance Company for 2M. The vessel was hit by lightning, caught fire,
and sank. Mary Jane is now claiming 2M
from A.MAY because the policy stated that the loss due to lightning is
compensable. A.MAY denies liability on
the ground that: (1) Mary Jane is not the owner of the goods and therefore has
no insurable interest; and (2) Mary Jane cannot claim more than the value of
the goods lost. Decide.
According to Sec. 15, a carrier has
insurable interest in a thing held by him as such. Hence, Mary Jane has insurable interest over
the goods of Peter Parker. However, the
same provision also states that such insurable interest is only up to the
extent of his liability and not to exceed the value of the thing. Since the value of the goods is only 1M, then
Mary Jane can only collect 1M.
Section 19. An interest in property insured must exist
when the insurance takes effect, and when the loss occurs, but need not exist
in the meantime; and interest in the life or health of a person insured must
exist when the insurance takes effect, but need not exist thereafter or when
the loss occurs.
When must insurable interest exist?
In case of life insurance at the time the insurance takes effect.
In case of property insurance, at the time the insurance takes effect AND at
the time of the loss, but it need not exist in the meantime.
Problem.
Beatrix insured her house for 1T. At that time, she was the owner of the
house. During the effectivity of the
policy, she sold the house to Bill for 2T, but did not transfer the
policy. Because of the effects of Sec.
20, the insurance was suspended. A week
later, Beatrix realized how much she missed the house and bought it from Bill
for 3T. The next day, the house burned
down. Is the Insurer liable
notwithstanding the transfer of interest from Beatrix to Bill during the
effectivity of the policy?
Yes.
Beatrix had insurable interest on the house as she was the owner at the
time the insurance took effect. She also
had insurable interest on the house at the time of the loss since she had
already reacquired it from Bill. The law
says Beatrix need not have insurable interest in the meantime, or during the
intervening period between the time of effectivity of the insurance, and the
time of the loss. Therefore,
notwithstanding the ownership of Bill during the intervening period, as Beatrix
had insurable interest at the two points in time required by law, then the
insurer is liable.
Section 20. Except in the cases specified in the next four
sections, and in the cases of life, accident and health insurance, a change of
interest in any part of a thing insured, unaccompanied by a corresponding
change of interest in the insurance, suspends the insurance to an equivalent
extent, until the interests in the thing and the interest in the insurance are
vested in the same person.
What is the general rule embodied in this
section?
The General Rule is that the mere
transfer of the thing insured does not transfer the policy but suspends it
until the same person becomes the owner of both the policy and the thing
insured. The term “change of interest” in this section means absolute transfer of the
property insured such as the conveyance of the property insured by means of an
absolute deed of sale.
What are the exceptions to the general rule?
The exceptions, where a change of
interest does NOT suspend the insurance are:
1.
Life,
health and accident insurance (Sec. 20)
2.
Change
of interest in the thing insured occurs after
the injury which results in a loss (Sec. 21)
3.
Change
of interest in one or more of several things separately insured by one policy
(Sec. 22)
4.
Change
of interest by will or succession on the death of the insured (Sec. 23)
5.
Transfer
of interest by one of several partners, joint owners or owners in common who
are jointly insured, to the other (Sec. 24)
What is the reason for this provision suspending
the insurance in case of change of interest?
The object of the provision is to
provide against changes which might supply a motive to destroy the property, or
might lessen the interest of the insurer in protecting and guarding it.
Section 21. A change of interest in a thing insured, after
the occurrence of an injury which results in a loss, does not affect the right
of the insured to indemnity for the loss.
Problem:
A insured his house for 10T. On Aug. 10, 2004, the house was partially
damaged by fire. On Aug. 15, 2004, he
sold the same house so partially damaged to C. Can A collect on the insurance
after selling the house?
Yes.
The change of interest was made after
the occurrence of the injury which resulted in a partial loss. Upon the occurrence of the risk insured
against, the liability of the insurer became fixed and from that day onward, he
became duty bound to indemnify A for his loss.
Section 22. A change in interest in one or more of several
distinct things, separately insured by one policy, does not avoid the insurance
as to the others.
Problem.
A is the owner of a Feroza and a Civic. He insures the Feroza for 200T and the Civic
for 150T under a single policy for which he paid a total premium of
20T. If he sells the Feroza without the
insurer’s consent, is the insurer liable in case the Civic is lost?
Yes.
Since the vehicles are separately insured. Under Sec. 22, the sale of one distinct thing
does NOT avoid the insurance as to the others.
A is the owner of a Feroza and a Civic. He insured the Feroza and the Civic for 350T
under a single policy for which he paid a premium of 20T. In case he sells the Feroza without the
insurer’s consent, is the insurer liable in case the Civic is lost?
NO.
Since the two cars are not separately valued in the policy and the
premium was meant to cover both vehicles.
In this case, the sale of one thing affects the insurance of the others.
Section 23. A change of interest, by will or succession on
the death of the insured, does not avoid the insurance; and his interest in the
insurance passes to the person taking his interest in the thing insured.
Problem.
A insures his nipa hut, his only property. He has no compulsory heirs. He institutes B as his universal heir. Thereafter, A dies and B inherits the
hut. If the hut burns down can B
collect?
Yes.
Sec. 23 says so.
Section 24. A transfer of interest by one of several
partners, joint owners, or owners in common, who are jointly insured, to the
others, does not avoid the insurance, even though it has been agreed that the
insurance shall cease upon the alienation of the thing insured.
What does this section provide?
It provides that a transfer of interest
in the insured property by a partner, joint owner, or owner in common to the
others who are jointly insured, will NOT avoid the insurance. The rule is the same even if there is a
stipulation that the insurance will cease upon the alienation of th thing insured.
What is the reason for the rule?
The underlying principle is that each
partner, or owner or owner in common is interested in the whole property and
hazard is NOT increased because the purchasing partner has acquired a greater
interest in the property by a transfer of his co-partner’s chare. In other words, the transfer does not affect
the risk because NO NEW PARTY is brought into the contractual relationship with
the insurer.
Is there an exception to the rule?
Yes.
If the policy contains the stipulation that “in case of ANY sale or transfer
or change of title of any property insured by this company, or of any undivided
interest therein, such insurance will be void and cease.”
What is the effect if the sale was made to a
stranger?
All the more, the contract will be
avoided because the risk is already affected since a new party is brought into
the contract of insurance. However, such
sale to a stranger ends the contract of insurance only as to the interest of the transferor and does NOT affect the
insurance of the other partners, joint owners or owners in common.
Problems.
A fire insurance policy was issued by Spiderman
Insurance Co. to Peter, MJ, and Harry, who are partners. Harry sold his interest to Doc Ock. In case of fire is the insurer liable to Doc
Ock?
NO, since Doc Ock is a stranger.(Furthermore arch-enemy siya ni
spiderman…hehehe) However, the
insurer is liable to Peter and MJ whose insurance was not affected by the sale
of Harry.
If using the same facts, Harry sells to
Peter. Is the insurer liable to Peter?
Yes.
Peter is a partner.
What must the insurer do to avoid the policy?
Spiderman
Insurance Co. must stipulate in the policy that “any sale of the property or
any interest therein avoids the policy.”
This is the only way the insurer cannot be held liable.
Section 25. Every stipulation in a policy of insurance for
the payment of loss whether the person insured has or the payment of loss
whether the person insured has or has not any interest in the property insured,
or that the policy shall be received as proof of such interest, and every
policy executed by way of gaming or wagering, is void.
This section avoids two types of stipulations in
an insurance policy. What are they?
1.
Stipulation
for the payment of loss WON the person insured has any interest in the subject
matter of the insurance (exception: life insurance)
2.
Stipulation
that the policy will be received as proof of insurable interest
What is the reason for voiding such
stipulations?
As to the 1st stipulation, we
must remember that insurable interest is a requisite of a valid contract of
insurance. Lack of this requisite avoids
the contract.
As to the 2nd stipulation,
the law permits the insurer to show lack of insurable interest on the part of
the insured, even after the issuance of a policy of insurance to avoid
liability. (Sec. 83)
Fun88 Casino Review 2021 - Online Casino with $10 Bonus
ReplyDeleteFun88 Casino Review 2021 - Find out what you need to know 카지노사이트 to play games fun88 vin at Fun88 Casino fun88 soikeotot and get up to $10 free bonus.
Thank you very much for this!
ReplyDeleteHi thank you.
ReplyDelete