1
INSURANCE CODE OF 19781 GENERAL PROVISIONS Sec. 1. This Decree shall be known as “The Insurance Code of 1978.2” A.
Brief History
The business and contract of insurance in the Philippines are generally governed by the provisions of Presidential Decree No. 612 (PD 612), as amended, then known as the Insurance Code. The Insurance Code was ordained and instituted by Former President Ferdinand E. Marcos (President Marcos) on 18 December 1974. Prior to the enactment of PD 612, the applicable law was the Insurance Act which took effect on 1 July 1915. The Insurance Act was practically a verbatim copy of the California Insurance Act except for some provisions taken from the New York Insurance Law. The Insurance Code had undergone several amendments since its promulgation on 18 December 1974. A substantial number of provisions were rendered obsolete by subsequent issuances of amendatory laws, decrees and executive orders. It then became imperative to consolidate, codify and integrate such amendatory laws, decrees and executive orders to harmonize their provisions for the proper guidance of the public and efcient administration thereof. There likewise existed in the Insurance Code certain provisions which were impractical in application in the Philippines thereby necessitating revision in order to infuse exibility, keep pace with the changing needs and demands of industries in line with new risks and arising out of new international developments. Thus, on 11 June 1978, then President Marcos signed Presidential Decree No. 1460 (PD 1460) for the purpose of consolidating and codifying all insurance laws embodied in PD 612 and various
1 Presidential Decree No. 612 and related laws codied by Presidential Decree No. 1460. 2 Inserted by virtue of Presidential Decree No. 1460.
1
2
THE INSURANCE CODE OF THE PHILIPPINES
laws, presidential decrees and executive orders. It is now known as the Insurance Code of 1978. On 16 January 1981, Presidential Decree No. 1814 was signed into law amending certain sections of PD 1460 to: (i) ensure the due execution and performance of insurance contracts in the interests of the sound development of the national economy in view of the prevailing economic conditions during that time; and (ii) further assure reasonable insurance services for the protection of the interests of the policy holders and the public. On 12 June 1985, Batas Pambansa Blg. 874 amended Sections 27, 45, 384 and 416 and inserted Section 180-A. B.
How Insurance Works3
“Life is a risk.” — A time proven cliché. The world is surrounded by risks. There are risks everywhere. Some risks are minimal and can be lived with, but most are not. Thus, the need for insurance. But insurance does not work to protect one against the risks happening, instead, it covers the consequences of the happening. Thus, insurance is something one buys hoping he never has to use. It is purchased to protect oneself from unexpected losses he cannot afford — the accident he hopes he never gets into, the re he prays never destroys his home, the storm he knows sooner or later is bound to batter his roof, the lawsuit that threatens to wipe out all his savings. While it may seem complex, insurance is really quite simple: The payments (or premiums) of the many pay for the losses of a few. The premiums go into a large pool. The claims of the few are paid from that pool. Because there are more people contributing to the pool than there are making claims, there is always enough to pay the claims — even large single claims like when someone is permanently disabled as a result of a car collision, or many smaller claims like those resulting from a natural disaster. Even when the pool comes close to emptying, there is another pool from which insurance companies can draw to pay claims. Some of the premiums are used by the insurance company to buy reinsurance — insurance for insurance companies. Sometimes losses are
3
The Insurance Bureau of Canada, “How Insurance Works.”
INSURANCE CODE OF 1978 GENERAL PROVISIONS
3
so big — like those resulting from an earthquake — that there is no way that an insurance company can cover the costs. Reinsurance is an extra layer of protection against large losses. C.
Imbued with Public Interest
The business of insurance is imbued with public interest. It is subject to regulations by the State, with respect not only to the relations between the insurer and the insured, but also to the internal affairs of insurance companies.4 Sec. 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,” within 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, specically recognized as constituting the doing of an insurance business within the meaning of this Code;
4
Republic vs. Del Monte Motors, Inc., G.R. No. 156956, October 9, 2006.
PREFACE Upon reaching the age of thirty (30) and after five (5) academic years of teaching the subject, the author felt that it was time to collate his materials and sit down in writing his views and thoughts on the subject of insurance. This book, although it consists of almost a thousand pages, represents a simple discussion of the insurance law in the Philippines. A substantial proportion of the material is adapted from the legal provisions and jurisprudence, both here and abroad; opinions and annotations of authors, both local and foreign; and other published articles, both in the papers and in the internet. Some Supreme Court decided cases are reproduced herein in full for the readers to appreciate the correlation of insurance law principles with one another as well as with other laws, both substantive and remedial. The author wrote this book in the hope that his humble work would be of great help to the law students, bar candidates and law practitioners.
E.V.M.D. March 31, 2009
iii
iv
CONTENTS GENERAL PROVISIONS Section 1 .................................................................................................. A. B. C.
1
Brief History ............................................................................ How Insurance Works ............................................................. Imbued with Public Interest ...................................................
1 2 3
Section 2 ..................................................................................................
3
A. B. C. D. E. F. G. H. I. J. K. L.
Essential Elements of Insurance............................................ Characteristics of an Insurance Contract .............................. Requisite of an Insurance Contract ....................................... Parties ...................................................................................... Consent .................................................................................... Theory of Cognition ................................................................. Defects of Consent ................................................................... Object ....................................................................................... Cause/Consideration ............................................................... Governing Law ........................................................................ Construction of the Insurance Code ....................................... Policy Construction .................................................................
4 5 16 19 20 23 27 27 28 28 32 33
Case: QUA CHEE GAN vs. LA UNION AND ROCK INSURNACE CO. LTD. ................................. M. Principle of Subrogation ......................................................... N. The Business of Insurance ......................................................
38 43 50
Case: WHITE GOLD MARINE SERVICES INC. vs. PIONEER INSURANCE AND SURETY CORPORATION .......................................................... O. Types of Insurance .................................................................. P. Classification Under the Code ................................................ Q. Lending Investors vs. Insurance Companies .........................
52 56 59 60
Chapter 1 THE CONTRACT OF INSURANCE Title 1 WHAT MAY BE INSURED Section 3 .................................................................................................. v
62
A. B. C.
What may be Insured .............................................................. Minors ...................................................................................... Married Woman ......................................................................
Section 4 .................................................................................................. A. B. C.
62 64 66 69
Drawing Lottery ...................................................................... Insurance is not Gambling ..................................................... Risk Management ...................................................................
69 70 71
Section 5 ..................................................................................................
73
Title 2 PARTIES TO THE CONTRACT Section 6 .................................................................................................. A. B. C. D.
Who may be an Insurer........................................................... Certificate Authority ............................................................... Entities Prohibited to Act as an Insurer ................................ Separate License from an Insurance Agent...........................
Section 7 ..................................................................................................
74 74 75 76 77 77
A. B. C. D. E.
Who is a Public Enemy ........................................................... Control Test on the Corporations ........................................... Effect of War Generally .......................................................... Dealing with Dual Citizenship ............................................... Effect of Termination of War ..................................................
F.
Case: FILIPINAS COMPAÑA DE SEGUROS vs. CHRISTERN, HUENEFELD AND CO., INC. .......... CONSTANTINO vs. LIFE INSURANCE COMPANY .................................................................. HIDALGO vs. MANUFACTURER’S LIFE INSURANCE COMPANY........................................... May a Public Enemy Be a Beneficiary ...................................
97 102
Section 8 ..................................................................................................
103
Section 9 .................................................................................................. A. B. C. D. E. F.
Mortgagor and Mortgagee’s Interest...................................... Mortgage Redemption Insurance ........................................... Types of Mortgage Clause....................................................... Simple vs. Standard ................................................................ Proper Party to Bring the Suit ............................................... Effect of Assent of the Insurer to the Transfer of Insurance ............................................................................. Case: GREAT PACIFIC LIFE ASSURANCE CORPORATION vs. COURT OF APPEALS .............
vi
78 78 81 81 86 86 89
103 103 105 106 107 111 113 113
Title 3 INSURABLE INTEREST Section 10 ................................................................................................. A. B. C.
120
Requirement of Insurable Interest......................................... Moral Hazard in Life Insurance ............................................. In whose Life or Health does a Person Have an Insurable Interest ................................................................... D. Consent of Person Whose Life is Being Insured is not Estate Necessary .....................................................................
120 122
Section 11 .................................................................................................
135
A. B. C. D. E. F. G.
Policy Owner, Insured and Beneficiary ................................. Types of Beneficiaries ............................................................. Revocable vs. Irrevocable ........................................................ Importance of Choosing a Beneficiary ................................... Disqualified to be Beneficiaries .............................................. What if Beneficiary Dies Before the Insured ......................... Paying Life Insurable Proceeds into a Trust .........................
Section 12 ................................................................................................. 1) 2) 3)
125 135 135 136 137 139 141 144 145 145
Rationale .................................................................................. Act Must be Felonious............................................................. Nearest Relative as Beneficiary .............................................
145 146 147
Section 13 .................................................................................................
149
Section 14 ................................................................................................. A. B. C. D. E. F.
150
Insurable Interest in Property ............................................... Title or Security Interest Not Required ................................. Exceptions to Insurable Interest ............................................ Stolen Property........................................................................ Effects of War to Insurable Interest....................................... Insurable Interest of Consignee, Factor or Agent .................
150 151 154 155 157 158
Section 15 .................................................................................................
158
Section 16 .................................................................................................
159
Section 17 .................................................................................................
160
Section 18 ................................................................................................. 1) 2)
161
Different Expressions ............................................................. Insurance not Invalid ..............................................................
161 163
Case: GARCIA vs. THE HONGKONG FIRE & MARINE INSURANCE CO., LTD. ............................
163
Section 19 .................................................................................................
167
A. Property and Liability Insurance ........................................... B. Life Insurance .........................................................................
168 169
Section 20 .................................................................................................
170
Section 21 .................................................................................................
170
vii
Section 22 .................................................................................................
170
Section 23 .................................................................................................
170
Section 24 .................................................................................................
170
A. B. C.
Life and Health Insurance ...................................................... Change After the Occurrence of the Loss .............................. Change of Interest in One or More Several Distinct Things Separately Insured by One Policy ............... D. Change by Will or Succession ................................................. E. Transfer by One of Several Partners Joint Owners or Owners in Common ..................................... F. Policy Inures to the Benefit of Whomsoever May Become the Owner .......................................................... Section 25 .................................................................................................
171 172 173 173 173 174 174
Title 4 CONCEALMENT Section 26 ................................................................................................. 1) 2)
176
Act of Withholding Information ............................................. Concealment Presupposes Knowledge ...................................
176 177
Section 27 .................................................................................................
177
A.
Grounds and Rationale for Rescission of Contract of Insurance ............................................................................. Intentional or Unintentional .................................................. Good Faith not a Defense .......................................................
177 179 179
Case: GREAT PACIFIC LIFE ASSURANCE COMPANY vs. HONORABLE COURT OF APPEALS .................
180
D. Waiver of Medical Examination .............................................
185
B. C.
Section 28 ................................................................................................. A. B.
187
Within the Knowledge ............................................................ Makes No Warranty ................................................................
187 188
Section 29 .................................................................................................
188
A. B.
Truth of Warranty ................................................................... Intent to Deceive a Question of Fact ......................................
188 188
Section 30 .................................................................................................
189
A. B. C. D. E.
What Need to be Disclosed ..................................................... Public Character and Notoriety ............................................. Insurer’s Duty to Inquire ........................................................ Obligation in Good Faith ........................................................ Knowledge of Agent ................................................................
189 189 191 191 192
Section 31 .................................................................................................
192
A. B.
Inducement to Enter Into a Contract .................................... Need Not be the Cause of the Loss......................................... viii
192 193
C.
Matters of Inquiries ................................................................
Section 32 ................................................................................................. A. B. C.
194 195
General Causes Open to Inquiry ............................................ Full Conversant in the Usual Course of Trade ..................... Rule on Judicial Notice ...........................................................
195 196 197
Section 33 .................................................................................................
198
A. Right to Rely on the Truthfulness of Answers ...................... B. Imperfect Answers ..................................................................
198 199
Cases: NG GAN ZEE vs. ASIAN CRUSADER LIFE ASSURANCE CORPORATION .......................
199
No Waiver in Non-Medical Insurance ....................................
203
Section 34 .................................................................................................
C.
203
Section 35 .................................................................................................
203
Title 5 REPRESENTATION Section 36 ................................................................................................. A. B. C. D. E.
207
Representation vs. Misrepresentation ................................... Representation vs. Warranty ................................................. Misrepresentation vs. Concealment ....................................... Orally or in Writing ................................................................ Representation in the Application Process ............................
207 208 208 208 209
Section 37 .................................................................................................
210
A. B. C.
Time in Which Representation is Made ................................. Effect of Provisions.................................................................. Must be Made by the Insured .................................................
210 211 211
Section 38 .................................................................................................
211
A. Construction ............................................................................ B. Applicability of Rules on Interpretation of Contracts ........... C. Applicability of the Rules of Court .........................................
211 212 213
Section 39 .................................................................................................
214
A. B.
Affirmative vs. Promissory ..................................................... Statement of Belief or Expectation vs. Promissory Representation ........................................................................
Section 40 ................................................................................................. A. B. C.
214 215 215
Representation vs. Warranty ................................................. Qualifying an Implied Warranty ............................................ Express Warranty Supersedes Representation .....................
216 216 216
Section 41 .................................................................................................
216
Section 42 .................................................................................................
217
Section 43 .................................................................................................
217
ix
A.
No Personal Knowledge .........................................................
217
B.
Case: HARDING vs. COMMERCIAL UNION ASSURANCE COMPANY ............................ Knowledge of Agent ................................................................
218 226
Cases: THE INSULAR LIFE ASSURANCE CO., LTD. vs. FELICIANO ......................................... THE INSULAR LIFE ASSURANCE CO., LTD. vs. FELICIANO ......................................... C.
Knowledge of Insured Corporation ........................................
Section 44 ................................................................................................. A. B. C. D. E. F.
228 231 235 235
False Representation .............................................................. No Misrepresentation if Substantially True.......................... Need not be Intended .............................................................. Facts of Loss Not Material...................................................... Mistake of Forgetfulness ........................................................ Misstatement of Age ...............................................................
235 236 236 236 237 237
Section 45 .................................................................................................
237
A.
B. C. D. E.
Contract of Speculation...........................................................
237
Case: SATURNINO vs. THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY ...........
238
Kinds of Misrepresentation .................................................... No Misrepresentation ............................................................. Affirmative Defense ................................................................ Waiver by Acceptance of Premiums .......................................
241 242 242 243
Case: EDILLON vs. MANILA BANKERS LIFE INSURANCE CORPORATION ..................................
243
Section 46 ................................................................................................. A. B.
247
Determination of Materiality ................................................. Falsity of Answers ...................................................................
247 248
Section 47 .................................................................................................
248
Section 48 .................................................................................................
249
A. B.
Previous to the Commencement of Action ............................. Presupposes Existence of Contract ........................................ Cases: TAN CHAY HENG vs. WEST COAST LIFE INSURANCE COMPANY ................... ARGENTE vs. WEST COAST LIFE INSURANCE COMPANY .................................
249 250 250 258
C. Incontestability Clause ...........................................................
265
Cases: PHILAMCARE HEALTH SYSTEMS, INC. vs. COURT OF APPEALS ................................................ TAN vs. COURT OF APPEALS .................................
266 272
D. Not a License to Commit a Fraud ..........................................
278
x
E. F. G. H.
Mutual Advantage of Insurer and Insured ............................ Applicability of Reinstated Policies ........................................ Exceptions to Incontestability Clause .................................... Rationale of Imposter Defense ...............................................
279 279 279 280
Title 6 THE POLICY Section 49 .................................................................................................
281
Section 50 .................................................................................................
281
A. B. C. D. E.
Forms of Insurance Contract .................................................. Rider, Clause, Warranty and Endorsement .......................... Counter-Signature of the Insured .......................................... Group Insurance...................................................................... Group Annuity.........................................................................
282 292 293 294 295
Case: COMMISSIONER OF INTERNAL REVENUE vs. LINCOLN PHILIPPINES LIFE INSURANCE COMPANY, INC. ........................................................
295
Section 51 ................................................................................................. A. B. C. D. E. F. G.
Parties ...................................................................................... Amount of Insurance............................................................... Premium .................................................................................. Property, Life or Liability Insured ......................................... Interest of the Insured in Property ........................................ Risk Insured Against .............................................................. Period During Which the Insured is to Continue ..................
Section 52 ................................................................................................. A. B. C. D.
309
Cover Notes ............................................................................. Preliminary Contract of Insurance ........................................ Binding Receipt ....................................................................... Separate Premiums Not Required .........................................
309 311 311 313
Case: PACIFIC TIMBER EXPORT CORPORATION vs. COURT OF APPEALS ................................................
313
Section 53 ................................................................................................. A.
300 300 305 306 307 308 309 309
318
Person Designated in the Policy .............................................
318
Case: SUNLIFE ASSURANCE COMPANY OF CANADA vs. TORIBIO ...............................................
318
B. Third Party’s Right to Insurer................................................ C. Not Solidary .............................................................................
328 328
Cases: LAMPANO vs. JOSE .................................................. BONIFACIO BROS. INC. vs. MORA ......................... COQUIA vs. FIELDMEN’S INSURANCE CO., INC. .................................................................... GUINGON vs. DEL MONTE......................................
329 333
xi
338 343
Section 54 .................................................................................................
347
Case: LOPEZ vs. DEL ROSARIO .........................................
347
Section 55 .................................................................................................
352
Section 56 .................................................................................................
353
Section 57 .................................................................................................
353
Section 58 .................................................................................................
353
Section 59 .................................................................................................
354
Section 60 .................................................................................................
354
Section 61 .................................................................................................
354
Section 62 .................................................................................................
354
A. Open and Valued Policies ....................................................... B. Running Policy ........................................................................
354 356
Section 63 .................................................................................................
356
1) 2)
Prescription Under the Civil Code ......................................... Prescription by Agreement .....................................................
356 357
Cases: ANG vs. FULTON ....................................................... FILIPINO MERCHANT INSURANCE COMPANY, INC. vs. ALEJANDRO........................... MAYER STEEL PIPE CORPORATION vs. COURT OF APPEALS ................................................
357 361
Oral Contract of Insurance ..................................................... Cause of Action ........................................................................ Denial of Reconsideration .......................................................
370 370 371
Section 64 .................................................................................................
372
Section 65 .................................................................................................
373
Case: MALAYAN INSURANCE CO. vs. ARNALDO ..........
373
Section 66 .................................................................................................
382
3) 4) 5)
367
Title 7 WARRANTIES Section 67 .................................................................................................
383
A. Primary Concerns ................................................................... B. Devices to Ascertain and Control Risk and Loss ................... C. Construction of Warranty .......................................................
383 383 385
Case: AMERICAN HOME ASSURANCE COMPANY vs. TANTUCO ENTERPRISE, INC.................................
385
Section 68 ................................................................................................. A. B.
392
Past, Present of Future ........................................................... Affirmative or Promissory ......................................................
392 393
Section 69 .................................................................................................
393
xii
Section 70 .................................................................................................
394
Case: ANG GIOK CHIP vs. SPRINGFIELD FIRE & MARINE INSURANCE ..........................................
394
Section 71 .................................................................................................
402
1) 2) 3) 4)
Express and Implied Warranty .............................................. Implied Warranty and Representation .................................. Express Warranty and Representation ................................. Forms of Express Warranty ...................................................
403 403 403 404
Section 72 .................................................................................................
405
Section 73 ................................................................................................. A. B.
Effect of Non-Compliance ....................................................... When Compliance Dispense With ..........................................
405 405 406
Section 74 .................................................................................................
406
A. Effect of Breach ....................................................................... B. Expressly Included .................................................................. Case: YOUNG vs. THE MIDLAND TEXTILE INSURANCE COMPANY...........................................
406 407 407
Section 75 .................................................................................................
411
Case: GEAGONIA vs. COURT OF APPEALS .....................
412
Section 76 .................................................................................................
420
Title 8 PREMIUM Section 77 ................................................................................................. Cases: ARCE vs. THE CAPITAL INSURANCE & SURETY CO., INC. ..................................................... ACME SHOE RUBBER & PLASTIC CORPORATION vs. THE COURT OF APPEALS .... THE MANUFACTURERS LIFE INSURANCE CO. vs. MEER.............................................................. Section 78 ................................................................................................. A. B. C.
422 423 425 429 434
Exceptions to Cash and Carry Basis ...................................... Payment by Installments........................................................ Credit Agreement ...................................................................
434 437 438
Case: UCPB GENERAL INSURANCE CO., INC. vs. MASAGANA TELEMART, INC. ................................
439
D. Payment by Promissory Notes or Bill of Exchange ............... E. Acknowledgement of Receipt if Premium ..............................
456 456
Section 79 .................................................................................................
456
Section 80 .................................................................................................
457
Section 81 .................................................................................................
457
xiii
Section 82 ................................................................................................. A. B. C.
457
Return of Entire Premium ...................................................... Return of Portion of Premium ................................................ No Return of Premium ............................................................
457 460 461
Case: GREAT PACIFIC LIFE INSURANCE CORPORATION vs. COURT OF APPEALS .............
461
Title 9 LOSS Section 83 ................................................................................................. A.
Loss Under the Civil Code .....................................................
466 466
Section 84 .................................................................................................
469
A. Proximate Cause ..................................................................... B. Burden of Proof .......................................................................
470 471
Case: COUNTRY BANKERS INSURANCE CORPORATION vs. LIANGA BAY AND COMMUNITY MULTI-PURPOSE ............................
471
Section 85 .................................................................................................
479
Section 86 .................................................................................................
479
Section 87 ................................................................................................. A. B. C.
Willful Act and Negligence ..................................................... Negligence or Misconduct ....................................................... Agreement to Indemnity ......................................................... Cases: FGU INSURANCE CORPORATION vs. THE COURT OF APPEALS ....................................... SUNRISE INSURANCE OFFICE, LTD. vs. COURT OF APPEALS ................................................
480 480 480 481 481 494
Title 10 NOTICE OF LOSS Section 88 .................................................................................................
499
A. Condition ................................................................................. B. Requisite for Recovery ............................................................ C. Notice in Fire Insurance .........................................................
499 499 500
Section 89 .................................................................................................
500
Section 90 .................................................................................................
500
Section 91 .................................................................................................
500
Case: PACIFIC TIMBER EXPORT CORPORATION vs. COURT OF APPEALS ................................................
501
Section 92 .................................................................................................
506
xiv
Title 11 DOUBLE INSURANCE Section 93 ................................................................................................. A. B. C.
507
When Double Insurance Exists .............................................. Same Subject Matter, Same Interest, and Same Risk ..........
507 508
Case: GEAGONIA vs. COURT OF APPEALS .....................
508
Prohibition Against Double Insurance...................................
516
Cases: SANTA ANA vs. COMMERCIAL UNION ASSURANCE COMPANY, LTD. ............................... GENRERAL INSURANCE & SURETY CORPORATION vs. NG HUA ....................................
517 522
D. Waiver of Annulment ..............................................................
524
Section 94 .................................................................................................
524
A. B. C. D.
Over Insurance by Double Insurance .................................... Recovery from Insurers ........................................................... Cannot Recover Doubly........................................................... Refund of Premiums ...............................................................
525 525 525 526
Title 12 REINSURANCE Section 95 ................................................................................................. A. B. C. D. E.
529
Protection if Insurer ................................................................ Functions of Reinsurance ....................................................... Types Reinsurance .................................................................. Contracts ................................................................................. Applicability of Rules on Representation and Concealment ............................................................................ F. Retrocession ............................................................................. G. Importance of Reinsurance ..................................................... H. Rules on Reinsurance Under the Insurance Code................. I. Reinsurance vs. Double Insurance ......................................... J. Policy vs. Treaty ......................................................................
533 533 534 535 538 538
Section 96 .................................................................................................
538
Section 97 .................................................................................................
539
Section 98 .................................................................................................
539
A. B.
Indemnity Against Liability ................................................... Defense of Reinsured Available to Reinsurer ........................
xv
529 530 531 533
539 540
Chapter II CLASSES OF INSURANCE Title I MARINE INSURANCE Sub-Title 1- A DEFINITION Section 99 ................................................................................................. A. B. C. D. E. F.
General Principles ................................................................... Coverage .................................................................................. Hull Insurance and Marine Cargo Policy .............................. Kinds of Marine Policies ......................................................... Assignment of Policy ............................................................... Perils of the Sea vs. Perils of the Ship ...................................
Cases: LA RAZON SOCIAL “GO TIAOCO Y HERMANOS” vs. UNION INSURANCE SOCIETY OF CANTON, LTD. ................................... MALAYAN INSURANCE CORPORATION vs. COURT OF APPEALS ................................................ G. Barratry ................................................................................... H. Inchmaree Clause ................................................................... I. All Risks Policy ........................................................................
J.
541 542 543 545 546 547 548
551 556 564 564 565
Case: FILIPINO MERCHANTS INSURANCE CO., INC. vs. COURT OF APPEALS .........................
566
Wages of Mariners and Property on Board ...........................
572
Sub-Title 1-B INSURABLE INTEREST Section 100 ............................................................................................... A. B. C. D. E. F.
573
Requirement of Insurable Interest......................................... Charter Party .......................................................................... Kinds of Charter ...................................................................... Charterer’s Liability ............................................................... Charterer’s Interest ................................................................ Charterer’s Loss of Hire ..........................................................
573 574 575 576 577 577
Section 101 ...............................................................................................
578
A. B. C. D. E. F.
Respondentia and Bottomry ................................................... Payment is Conditional........................................................... Insurable Interest of Lender .................................................. Insurable Interest of Borrower ............................................... Not Subject to Usury Law....................................................... Interest of Lender and Underwriter ......................................
578 578 578 579 580 580
Section 102 ...............................................................................................
580
xvi
Section 103 ............................................................................................... Section 104 ............................................................................................... A. B. C. D.
580 580
Existence of Interest in Freightage ........................................ Ship Owner’s Interest on Freight ........................................... Partial Lost on Freight ........................................................... Arrival in Bulk ........................................................................
580 581 582 582
Section 105 ...............................................................................................
582
Section 106 ...............................................................................................
583
Sub-Title 1-C CONCEALMENT Section 107 ...............................................................................................
583
Section 108 ...............................................................................................
584
Section 109 ...............................................................................................
584
A.
Stricter Application of Rules on Concealment and Representation ........................................................................ B. Required Disclosure ................................................................ C. Belief or Expectation of Third Person ....................................
584 584 585
Section 110 ...............................................................................................
585
Sub-Title 1-D REPRESENTATION Section 111 ...............................................................................................
586
Section 112 ...............................................................................................
586
A. B.
High Degree of Good Faith ..................................................... Matter of Fact or Expectation ................................................
586 587
Sub-Title 1-E IMPLIED WARRANTIES Section 113 ............................................................................................... A. B.
Implied Seaworthiness............................................................ Express and Implied Warranties ...........................................
Section 114 ............................................................................................... A. B. C. D.
587 587 588 588
General Term .......................................................................... When is a Ship Seaworthy ...................................................... Presumption of Seaworthiness ............................................... Must be in Navigation ............................................................
588 589 591 592
Section 115 ...............................................................................................
592
Section 116 ...............................................................................................
592
Section 117 ...............................................................................................
592
xvii
A. Relative Term .......................................................................... B. Seaworthy at the Time of Sailing ...........................................
593 593
Section 118 ...............................................................................................
594
Section 119 ...............................................................................................
595
Section 120 ...............................................................................................
597
A. Warranty Not a Representation ............................................. B. Neutrality ................................................................................ C. Documents of Nationality or Neutrality ................................
597 598 599
Sub-Title 1-F THE VOYAGE AND DEVIATION Section 121 ...............................................................................................
599
Section 122 ...............................................................................................
599
A. Covered Voyage ....................................................................... B. Common Usage........................................................................
599 599
Section 123 ...............................................................................................
600
A. B. C.
Concept of Deviation ............................................................... Distinguished from Breach of Warranty................................ Goods on Board........................................................................
600 601 601
Section 124 ...............................................................................................
602
Section 125 ...............................................................................................
602
Section 126 ............................................................................................... A. B. C.
Proper and Improper Deviation ............................................. Effect of Deviation ................................................................... What Constitute Deviation .....................................................
602 602 602 604
Sub-Title 1-G LOSS Section 127 ...............................................................................................
605
Section 128 ...............................................................................................
605
Section 129 ...............................................................................................
606
Section 130 ...............................................................................................
606
Section 131 ...............................................................................................
606
Section 132 ...............................................................................................
606
A. B. C.
Actual and Constructive Loss ................................................. Right to Abandon .................................................................... Loss of Vessel...........................................................................
606 607 608
Section 133 ...............................................................................................
609
Section 134 ...............................................................................................
609
A. Reshipment ..............................................................................
609
xviii
B. C.
Lien of Finder or Salvor .......................................................... Loss of Value ...........................................................................
609 610
Section 135 ...............................................................................................
610
Section 136 ...............................................................................................
611
A. B. C.
Rules on Average ..................................................................... Particular and General ........................................................... Free From Particular Average Clause ...................................
611 614 615
Case: PHILIPPINE HOME ASSURANCE CORPORATION vs. COURT OF APPEALS .............
619
Section 137 ...............................................................................................
626
Sub-Title 1-H ABANDONMENT Section 138 ...............................................................................................
627
Section 139 ...............................................................................................
627
Section 140 ...............................................................................................
627
Section 141 ...............................................................................................
628
A. B.
Restrictions on Abandonment ................................................ The Three-Fourth Rule ...........................................................
628 628
Section 142 ...............................................................................................
629
Section 143 ...............................................................................................
629
Section 144 ...............................................................................................
629
Section 145 ...............................................................................................
629
Section 146 ...............................................................................................
630
Section 147 ...............................................................................................
630
Section 148 ...............................................................................................
630
Section 149 ...............................................................................................
630
Section 150 ...............................................................................................
630
Section 151 ...............................................................................................
631
Section 152 ...............................................................................................
631
Section 153 ...............................................................................................
631
Section 154 ...............................................................................................
631
Section 155 ...............................................................................................
631
1. 2. 3.
Effect of Non-Acceptance ........................................................ Annulment of Abandonment .................................................. Election of the Insured ............................................................
631 632 632
Sub-Title 1-I MEASURE OF INDEMNITY Section 156 ............................................................................................... xix
632
Section 157 ...............................................................................................
632
Section 158 ...............................................................................................
634
Section 159 ...............................................................................................
634
Section 160 ...............................................................................................
634
Section 161 ...............................................................................................
634
Section 162 ...............................................................................................
634
A. B.
Primage and Demurrage ........................................................ Partial Loss of the Cargo ........................................................
635 635
Section 163 ...............................................................................................
636
Section 164 ...............................................................................................
637
Section 165 ...............................................................................................
637
Section 166 ...............................................................................................
637
Title 2 FIRE INSURANCE Section 167 ............................................................................................... A. B. C. D. E. F. G.
639
Coverage .................................................................................. Extension or Under Separate Policies ................................... Fire Following Earthquake..................................................... Friendly Fire/Hostile Fire ....................................................... Direct and Indirect Losses ...................................................... Lightning ................................................................................. Double Insurance ....................................................................
639 640 640 641 641 642 642
Section 168 ...............................................................................................
643
Section 169 ...............................................................................................
643
Section 170 ...............................................................................................
643
Section 171 ...............................................................................................
643
Section 172 ............................................................................................... A. B.
644
Measure of Indemnity ............................................................. Repair, Rebuild and Replace ..................................................
644 645
Case: ONG GUA CAN vs. THE CENTURY INSURANCE CO., LTD. .............................................
645
Section 173 ...............................................................................................
647
Title 3 CASUALTY INSURANCE Section 174 ............................................................................................... A. B. C.
Direct Result of Accident ........................................................ Direct Suit Against the Insurer.............................................. Not Solidarily Liable ............................................................... xx
648 648 649 649
D. Accidental Means ....................................................................
650
Title 4 SURETYSHIP Section 175 ...............................................................................................
654
Section 176 ...............................................................................................
654
Section 177 ...............................................................................................
654
Section 178 ...............................................................................................
655
A. Three Party Contract .............................................................. B. Guaranty vs. Surety ................................................................ C. Credit Accommodation ............................................................ Case: PHILIPPINE PRYCE ASSURANCE CORPORATION vs. COURT OF APPEALS .............
655 655 656 656
Title 5 LIFE INSURANCE Section 179 ...............................................................................................
664
Section 180 ...............................................................................................
664
A. B. C.
Concept of Life Insurance ....................................................... Parties to the Contract............................................................ Types of Life Insurance...........................................................
664 665 666
Section 180-A............................................................................................
669
Section 181 ...............................................................................................
670
Section 182 ...............................................................................................
670
Section 183 ...............................................................................................
671
Chapter III THE BUSINESS OF INSURANCE Title 1 INSURANCE COMPANIES, ORGANIZATION, CAPITALIZATION AND AUTHORIZATION Section 184 ...............................................................................................
672
Section 185 ...............................................................................................
672
Section 186 ...............................................................................................
672
Section 187 ...............................................................................................
673
Section 188 ...............................................................................................
674
Section 189 ...............................................................................................
675
Section 190 ...............................................................................................
676
Section 191 ...............................................................................................
677
Section 192 ...............................................................................................
678
xxi
Section 193 ...............................................................................................
678
Title 2 MARGIN OF INSOLVENCY Section 194 ...............................................................................................
680
Section 195 ...............................................................................................
681
Title 3 ASSETS Section 196 ...............................................................................................
682
Section 197 ...............................................................................................
683
Title 4 INVESTMENTS Section 198 ...............................................................................................
685
Section 199 ...............................................................................................
686
Section 200 ...............................................................................................
686
Section 201 ...............................................................................................
689
Section 202 ...............................................................................................
689
Section 203 ...............................................................................................
690
Section 204 ...............................................................................................
690
Section 205 ...............................................................................................
691
Section 206 ...............................................................................................
691
Section 207 ...............................................................................................
692
Section 208 ...............................................................................................
692
Section 209 ...............................................................................................
694
Title 5 RESERVES Section 210 ...............................................................................................
695
Section 211 ...............................................................................................
695
Section 212 ...............................................................................................
696
Section 213 ...............................................................................................
696
Section 214 ...............................................................................................
696
Title 6 LIMIT OF SINGLE RISK Section 215 ...............................................................................................
xxii
697
Title 7 REINSURANCE TRANSACTIONS Section 216 ...............................................................................................
698
Section 217 ...............................................................................................
698
Section 218 ...............................................................................................
698
Section 219 ...............................................................................................
698
Section 220 ...............................................................................................
699
Section 221 ...............................................................................................
699
Section 222 ...............................................................................................
700
Title 8 ANNUAL STATEMENT Section 223 ...............................................................................................
701
Section 224 ...............................................................................................
701
Section 225 ...............................................................................................
701
Title 9 POLICY FORMS Section 226 ...............................................................................................
702
Section 227 ...............................................................................................
702
Section 228 ...............................................................................................
704
Section 229 ...............................................................................................
708
Section 230 ...............................................................................................
708
Section 231 ...............................................................................................
711
Title 10 VARIABLE CONTRACTS Section 232 ...............................................................................................
714
Section 233 ...............................................................................................
715
Section 234 ...............................................................................................
715
Section 235 ...............................................................................................
715
Section 236 ...............................................................................................
715
Section 237 ...............................................................................................
716
Section 238 ...............................................................................................
717
Section 239 ...............................................................................................
717
Section 240 ...............................................................................................
717
xxiii
Title 11 CLAIMS SETTLEMENT Section 241 ...............................................................................................
719
Section 242 ...............................................................................................
720
Section 243 ...............................................................................................
720
Section 244 ...............................................................................................
721
Title 12 EXAMINATION OF COMPANIES Section 245 ...............................................................................................
725
Section 246 ...............................................................................................
725
Title 13 SUSPENSION OR REVOCATION OF AUTHORITY Section 247 ...............................................................................................
726
Title 14 APPOINTMENT OF CONSERVATOR Section 248 ...............................................................................................
727
Title 15 PROCEEDINGS UPON INSOLVENCY Section 249 ...............................................................................................
729
Section 250 ...............................................................................................
731
Section 251 ...............................................................................................
731
Title 16 CONSOLIDATION AND MERGER OF INSURANCE COMPANIES Section 252 ...............................................................................................
732
Section 253 ...............................................................................................
732
Section 254 ...............................................................................................
732
Section 255 ...............................................................................................
733
Section 256 ...............................................................................................
733
Section 257 ...............................................................................................
733
Section 258 ...............................................................................................
734
Section 259 ...............................................................................................
734
Section 260 ...............................................................................................
734
Section 261 ...............................................................................................
734
xxiv
Title 17 MUTUALIZATION OF STOCK LIFE INSURANCE COMPANIES Section 262 ...............................................................................................
735
Section 263 ...............................................................................................
735
Section 264 ...............................................................................................
736
Section 265 ...............................................................................................
737
Section 266 ...............................................................................................
738
Section 267 ...............................................................................................
739
Section 268 ...............................................................................................
740
Section 269 ...............................................................................................
740
Section 269-A............................................................................................
740
Section 270 ...............................................................................................
743
Section 271 ...............................................................................................
743
Section 272 ...............................................................................................
745
Title 18 WITHDRAWAL OF FOREIGN INSURANCE COMPANIES Section 273 ...............................................................................................
747
Section 274 ...............................................................................................
747
Section 275 ...............................................................................................
747
Section 276 ...............................................................................................
747
Section 277 ...............................................................................................
748
Section 278 ...............................................................................................
748
Section 279 ...............................................................................................
748
Title 19 PROFESSIONAL REINSURERS Section 280 ...............................................................................................
749
Section 281 ...............................................................................................
750
Title 20 HOLDING COMPANIES Section 282 ...............................................................................................
751
Section 283 ...............................................................................................
752
Section 284 ...............................................................................................
752
Section 285 ...............................................................................................
752
Section 286 ...............................................................................................
752
Section 287 ...............................................................................................
753
xxv
Section 288 ...............................................................................................
753
Section 289 ...............................................................................................
753
Section 290 ...............................................................................................
754
Section 291 ...............................................................................................
754
Section 292 ...............................................................................................
754
Section 293 ...............................................................................................
755
Section 294 ...............................................................................................
755
Section 295 ...............................................................................................
757
Section 296 ...............................................................................................
757
Section 297 ...............................................................................................
757
Section 298 ...............................................................................................
757
Chapter IV SALES AGENCIES AND TECHNICAL SERVICES Title 1 INSURANCE AGENTS AND INSURANCE BROKERS Section 299 ...............................................................................................
759
Section 300 ...............................................................................................
760
Section 301 ...............................................................................................
760
Section 302 ...............................................................................................
760
Section 303 ...............................................................................................
761
Section 304 ...............................................................................................
761
Section 305 ...............................................................................................
761
Section 306 ...............................................................................................
762
Section 307 ...............................................................................................
763
Section 308 ...............................................................................................
763
Section 309 ...............................................................................................
763
Title 2 REINSURANCE BROKERS Section 310 ...............................................................................................
765
Section 311 ...............................................................................................
765
Section 312 ...............................................................................................
766
Title 3 RESIDENT AGENTS Section 313 ...............................................................................................
767
Section 314 ...............................................................................................
767
xxvi
Section 315 ...............................................................................................
767
Section 316 ...............................................................................................
767
Section 317 ...............................................................................................
767
Title 4 NON-LIFE COMPANY UNDERWRITER Section 318 ...............................................................................................
769
Section 319 ...............................................................................................
769
Section 320 ...............................................................................................
769
Section 321 ...............................................................................................
770
Section 322 ...............................................................................................
770
Title 5 ADJUSTERS Section 323 ...............................................................................................
771
Section 324 ...............................................................................................
771
Section 325 ...............................................................................................
771
Section 326 ...............................................................................................
772
Section 327 ...............................................................................................
772
Section 328 ...............................................................................................
772
Section 329 ...............................................................................................
772
Section 330 ...............................................................................................
772
Section 331 ...............................................................................................
773
Section 332 ...............................................................................................
773
Section 333 ...............................................................................................
773
Section 334 ...............................................................................................
773
Title 6 ACTUARIES Section 335 ...............................................................................................
774
Section 336 ...............................................................................................
774
Section 337 ...............................................................................................
774
Section 338 ...............................................................................................
775
Title 7 RATING ORGANIZATION AND RATE MAKING Section 339 ...............................................................................................
776
Section 340 ...............................................................................................
776
xxvii
Section 341 ...............................................................................................
776
Section 342 ...............................................................................................
777
Section 343 ...............................................................................................
777
Section 344 ...............................................................................................
778
Section 345 ...............................................................................................
778
Section 346 ...............................................................................................
778
Section 347 ...............................................................................................
778
Section 348 ...............................................................................................
778
Section 349 ...............................................................................................
779
Section 350 ...............................................................................................
779
Section 351 ...............................................................................................
780
Section 352 ...............................................................................................
780
Section 353 ...............................................................................................
780
Section 354 ...............................................................................................
780
Section 355 ...............................................................................................
781
Section 356 ...............................................................................................
781
Section 357 ...............................................................................................
781
Section 358 ...............................................................................................
781
Section 359 ...............................................................................................
782
Section 360 ...............................................................................................
782
Section 361 ...............................................................................................
782
Section 362 ...............................................................................................
782
Section 363 ...............................................................................................
783
Title 8 PROVISION COMMON TO AGENTS, BROKERS, AND ADJUSTERS Section 364 ..............................................................................................
784
Chapter V SECURITY FUND Section 365 ...............................................................................................
785
Section 366 ...............................................................................................
785
Section 367 ...............................................................................................
785
Section 368 ...............................................................................................
786
Section 369 ...............................................................................................
787
Section 370 ...............................................................................................
787
Section 371 ...............................................................................................
787
xxviii
Section 372 ...............................................................................................
788
Chapter VI COMPULSORY MOTOR VEHICLE LIABILITYINSURANCE Section 373 ...............................................................................................
789
Section 374 ...............................................................................................
790
Section 375 ...............................................................................................
790
Section 376 ...............................................................................................
790
Section 377 ...............................................................................................
790
Section 378 ...............................................................................................
792
Section 379 ...............................................................................................
792
Section 380 ...............................................................................................
793
Section 381 ...............................................................................................
793
Section 382 ...............................................................................................
794
Section 383 ...............................................................................................
794
Section 384 ...............................................................................................
794
Section 385 ...............................................................................................
794
Section 386 ...............................................................................................
795
Section 387 ...............................................................................................
795
Section 388 ...............................................................................................
795
Section 389 ............................................................................................... A. B. C. D.
Compulsory Motor Vehicle Liability Insurance .................... Accrual of Liability .................................................................. Right to Sue Insurer Directly ................................................ The No-Fault Clause ............................................................... Cases: PERLA COMPANIA DE SEGUROS, INC. vs. ANCHETA ................................................................... VDA. DE MAGLANA vs. CONSOLACION ............... GOVERNMENT SERVICES INSURANCE SYSTEM vs.COURT OF APPEALS ...........................
E.
F.
Authorized Driver Clause .......................................................
795 795 796 796 797 798 801 806 813
Cases: VILLACORTA vs. THE INSURANCE OMMISSION ............................................................... PALERMO vs. PYRAMID INSURANCE, CO., INC. ..................................................................... TANCO vs. THE PHILIPPINE GUARANTY COMPANY .................................................................. GUTIERREZ vs. CAPITAL INSURANCE AND SURETY CO. ......................................................
824
Presumption of Regularity in Issuance of License ................
827
xxix
814 818 821
G. Joy Ride/Theft Clause .............................................................
827
Case: ASSOCIATION OF BAPTISTS FOR WORLD EVANGELISM, INC. vs. FIELDMAN’S INSURANCE CO., INC. .....................
828
H. Expired License ....................................................................... I. Period to File Claim ................................................................
830 831
Chapter VII MUTUAL BENEFIT ASSOCIATIONS AND TRUSTS FOR CHARITABLE USES Title 1 MUTUAL BENEFIT ASSOCIATIONS Section 390 ...............................................................................................
832
Section 391 ...............................................................................................
833
Section 392 ...............................................................................................
833
Section 393 ...............................................................................................
834
Section 394 ...............................................................................................
834
Section 395 ...............................................................................................
835
Section 396 ...............................................................................................
835
Section 397 ...............................................................................................
835
Section 398 ...............................................................................................
835
Section 399 ...............................................................................................
836
Section 400 ...............................................................................................
836
Section 401 ...............................................................................................
837
Section 402 ...............................................................................................
837
Section 403 ...............................................................................................
837
Section 404 ...............................................................................................
837
Section 405 ...............................................................................................
837
Section 406 ...............................................................................................
838
Section 407 ...............................................................................................
838
Section 408 ...............................................................................................
839
Section 409 ...............................................................................................
839
Title 2 TRUSTS FOR CHARITABLE USES Section 410 ...............................................................................................
840
Section 411 ...............................................................................................
840
Section 412 ...............................................................................................
840
Section 413 ...............................................................................................
840
xxx
Chapter VIII THE INSURANCE COMMISSIONER Title 1 ADMINISTRATIVE AND ADJUDICATORY POWERS Section 414 ...............................................................................................
841
Section 415 ............................................................................................... Section 416 ...............................................................................................
841 842
A. B. C. D. E. F.
Regulatory Powers .................................................................. Duty to Hold Security Deposits .............................................. Commissioner’s Interpretation to Great Respect .................. Contract Between the Insurer and Its Agents ...................... Quasi-Judicial Powers ............................................................ Jurisdiction ..............................................................................
844 844 845 846 847 848
Title 2 FEES AND OTHER SOURCES OF FUNDS Section 417 ...............................................................................................
849
Section 418 ...............................................................................................
851
MISCELLANEOUS PROVISIONS Section 419 ...............................................................................................
852
Section 420 ...............................................................................................
852
Section 421 ...............................................................................................
852
Section 422 ...............................................................................................
852
Section 423 ...............................................................................................
852
Section 424 ...............................................................................................
852
Subject Index ............................................................................................
853
Case Index ................................................................................................
873
xxxi
