Insurance Reviewer

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 double insurance exists where the same person is insured by several insurers
separately in respect to the same subject and interest.
A contract of reinsurance is one by which an insurer procures a third person to insure
him against loss or liability by reason of such original insurance.
Where the insured is over-insured by double insurance.
2. double insurance vs. over-insurance
Over Insurance

Double Insurance

may be only one insurer

must be 2 or more insurers

insurance covers more than the value of

insurable interest

insurance may or may not exceed the

value of insurable interest

The insured can claim in case of loss only up to the agreed valuation or up to the full
insurable value from any, some or all insurers, without prejudice to the insurers ratably
apportioning the payments. Insured can also recover before or after the loss, from both insurers
the excess premium he has paid.
Double insurance vs. reinsurance
Double insurance (Sec. 93)
Involves same interest
Insurer remains in such capacity
Insured in the 1st contract is a party in interest
in the 2nd contract
Subject of insurance is property
Insured has to give his consent

Reinsurance (Sec. 95)

Insurance of different interests
Insurer becomes an insured in relation to
reinsurer
Original insured has no interest in reinsurance
contract
Subject of insurance is the original insurers
risk
Consent of original insured, not necessary

3. the Principle of Right of Subrogation is a normal incident of indemnity property

insurance as a legal effect of payment; It inures to the insurer without any formal assignment or
any express stipulation to that effect in the policy.
Said right is not dependent upon nor does it grow out of any privity of contract. Payment
to the insured makes the insurer an assignee in equity.
4. 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, 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.
5. 2 duties of insurance commissioner are: Power of the insurance commissioner.
ADMINISTRATIVE AND ADJUDICATORY POWERS

Sec. 414. The Insurance Commissioner shall have the duty to see that all laws relating to
insurance, insurance companies and other insurance matters, mutual benefit associations, and
trusts for charitable uses are faithfully executed and to perform the duties imposed upon him by
this Code, and shall, notwithstanding any existing laws to the contrary, have sole and exclusive
authority to regulate the issuance and sale of variable contracts as defined in section 232 and to
provide for the licensing of persons selling such contracts, and to issue such reasonable rules
and regulations governing the same.
Adjudicatory or Quasi-judicial powers
The insurance Commissioner shall have the power to adjudicate claims and complaints
involving any loss, damage or liability for which an insurer may be answerable under any kind
of policy or contract of insurance, or for which such insurer may be liable under a contract of
suretyship, or for which a reinsurer may be sued under any contact of reinsurance it may be
entered into, or for which a mutual benefit association may be held liable under the membership
certificates it has issued to its members, where the amount of any such loss, damage or liability,
excluding interests, cost and attorneys fees being claimed or sued upon any kind of insurance,
bond, reinsurance contract, or membership certificate does not exceed in any single claim
P100,000.00.
6. Who may be insured and who may be insured?
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.
The following may not be insured:
1. a public enemy;
2. pure expectancy;
3. for or against the drawing of any lottery; and
4. no insurable interest.
7. Parties to the contract of insurance are:
a. insurer - party who assumes the risk or undertakes to indemnify the insured or to
pay a certain sum on the happening of a specified contingency (AUP)
b. insured - 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
c. beneficiary - may or may not be the same as the insured. Person designated by the terms
of the policy as the one to receive the proceeds of insurance.
d. Assured person whose benefit the insurance is granted.
8. Rule in the designation of the beneficiary:
1. A person who insures his own life can designate any person as his beneficiary,
whether or not the beneficiary has insurable interest in the life of the insured subject to
limitations under Art. 739 and Art. 2011 of NCC.
2. A person who insures the life of another person and have himself as beneficiary
must have an insurable interest in such life.
3. The beneficiary of property insurance must have an insurable interest in such
property.
4. The designation is revocable unless the right to revoke is expressly waived in the
policy.
(i) Thus, although Sec. 181 of the ICP allows assignment of the life or health
insurance policies to any person whether he has insurable interest or not, the insured cannot
assign the policy if the designation of the beneficiary is irrevocable. The irrevocable beneficiary
has vested right.

(ii) if there is no waiver of the right to revoke under Sec. 181, assignment of the
policy may be deemed as implied revocation.
(iii) if the insured refuses to pay the premiums, the designated irrevocable
beneficiary may continue the policy by paying premiums that are due.
5. If premiums are paid out of the conjugal funds, the proceeds are considered
conjugal. If the beneficiary is other that the insureds estate, the source of premiums would not
be relevant.
6. If the insured or beneficiary is a minor, and the amount involved does not exceed
P50,000, the father, in the absence of a judicial guardian, or in his absence or incapacity, the
mother may exercise the minors right under the policy, without the need of a court authority or a
bond.
9. Insurable interest of mortgagor and mortgagee over mortgaged property
Both the mortgagor and the mortgagee have an insurable interest in the property
mortgaged and this interest is separate and distinct from the other. They may take out
separate policies at the same or at separate times.
Sec. 8. Unless the policy otherwise provides, where a mortgagor of property effects
insurance in his own name providing that the 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
(OPEN OR LOSS-PAYABLE MORTGAGE CLAUSE), 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.
Sec. 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 obligation on the assignee, making a
new contract with him, the act of the mortgagor cannot affect the rights of said
assignee.(STANDARD OR UNION MORTGAGE CLAUSE)
10. Insurable interest in property vs. insurable interest in life
Insurable interest in life insurance
Insurable interest in property
insurance
As to extent
Unlimited (save in life insurance
Limited to the actual value of the
effected by a creditor on the life of interest thereon.
the debtor)
As to time when
In life insurance, it is enough that
In property insurance, it is
insurable interest
the insurable interest exists at the
necessary that the insurable
must exist
time the policy takes effect and
interest exists when the insurance
need not exist at the time of the
takes effect and when the loss,
loss.
occurs, but need not exist in the
meantime.
As to expectancy of
The expectation of the benefit to
There must be a legal basis
benefit derived
be derived need not have any legal
basis
As to beneficiarys
Need not have insurable interest
The beneficiary must have insurable
interest
over the life of the insured if the
interest over the thing insured in
insured himself secured the policy. property insurance.
(However, if the life insurance was
obtained by the beneficiary, the
latter must have insurable interest
over the life of the insured).

11. Devices that are used by the insurer for ascertaining and controlling risks and
loss?
a. concealment a neglect to communicate that which a party knows or ought to
communicate.
b. representations it is a factual statement made by the insured at the time of, or prior
to, the issuance of the policy, to give information to the insurer and otherwise induce him to
enter into the insurance contract.
c. warranties a statement or promise set forth in the policy or by reference
incorporated therein, the non-fulfillment of which in any respect and without reference to
whether the insurer was in fact prejudiced by such non-fulfillment, renders the policy voidable by
the insurer, wholly irrespective of the materiality of such statement or promise.
d. condition the insurer must also protect himself against fraudulent claims of loss and
this he attempts to do by inserting in the policy various conditions which take the form of either
conditions precedent or subsequent.
e. exceptions make more definite the coverage of indicated in the general description
of the risk by EXCLUDING certain specified risks that otherwise would be included under the
general language describing the risks assumed.
12. Effects of concealment: It vitiates the contract and entitles the insurer the right to rescind,
even if the loss or death is due to a cause not related with the concealment matter.
13. Test of materiality in concealment
Materially is to be determined not by events but solely upon the probable and reasonable
influence of the facts on the party to whom communication is due in forming his estimate of the
disadvantages of the proposed contract or in making his inquiries.
13 17, 19 (Problem solving principle of concealment, test of materiality and
incontestability clause)
18.
Incontestable clause - After a policy of life insurance made payable on the death of the
insured shall have been in force during the lifetime of the insured for a period of 2 years from
the date of its issue or of its last reinstatement, the insurer cannot prove that the policy is void
ab initio or is rescindable by reason of the fraudulent concealment or misrepresentation of the
insured or his agent.
Suicide clause the insurer in life insurance contract shall be liable in case of suicide by
the insured if:
a. suicide was committed AFTER the policy has been in force for a period of 2years
from date of its issuance or reinstatement, unless the policy provides a shorter period;
b. suicide committed in a state of insanity; it shall make the insurer liable regardless of
the date of the commission of the suicide.
Other Insurance clause condition in the policy requiring the insured to inform the
insurer of any other insurance coverage of the property insured.
A clause in the policy that provides that the policy shall be void if the insured procures
additional insurance without the consent of the insurer. The purpose is to prevent over-insurance
and thus avert the possibility of perpetration of fraud. It is warranty that entitles the insurer right
to rescind in case of breach.
20.
Binding Receipt merely an acknowledgement on behalf of the company that their
branch office had received from the applicant the insurance premium and had accepted the
application subject for processing by the head office.
Cover Notes written memorandum of the most important terms of a preliminary
contract of insurance, intended to give temporary protection pending the investigation of the risk
by the insurer, or until the issuance of a formal policy.
Rider additional provision in a policy not part of the body of the printed form.

21. Kinds of Policies:

a. An open policy is one in which the value of the thing insured is not agreed upon, but is
left to be ascertained in case of loss.
b. A valued policy is one which expresses on its face an agreement that the thing
insured shall be valued at a specific sum.
c. A running policy is one which contemplates successive insurances, and which
provides that the object of the policy may be from time to time defined, especially as to the
subjects of insurance, by additional statements or indorsements.
22. Grounds and requisites for cancellation of a NON-LIFE Policy:
1. Grounds (Sec. 64)
Sec. 64.
No policy of insurance other than life shall be cancelled by the insurer
except (1) upon prior notice thereof to the insured, and no notice of cancellation shall be
effective unless it is based on the occurrence, after the effective date of the policy, (2) of one or
more of the following:
(a) non-payment of premium;
(b) conviction of a crime arising out of acts increasing the hazard insured against;
(c) discovery of fraud or material misrepresentation;
(d) discovery of willful or reckless acts or omissions increasing the hazard insured against;
(e) physical changes in the property insured which result in the property becoming
uninsurable; or
(f) a determination by the Commissioner that the continuation of the policy would violate
or would place the insurer in violation of this Code.
2. Requisites for cancellation (Sec 65)
(i) prior notice of cancellation to insured;
(ii) notice must be based on the occurrence after effective date of the policy of 1 or more
of the grounds mentioned;
(iii) notice must be in writing, mailed or delivered to the insured at the address shown in
the policy; and
(iv) notice must state the grounds relied upon provided in Sec. 64 of the IC and upon
request of insured, to furnish facts on which cancellation is based.
23. TRANSFER OF POLICY
- May the policy be transferred without the consent of the insurer?
Yes in life insurance but NO in property insurance. Transfer of the life insurance policy even
without the consent of the insured is allowed in Sec. 181 of the IC.
On the other hand, property insurance cannot be transferred without the consent of the
insurer because the insurer approved the policy based on the personal qualification and the
insurable interest of the insured.
- What is the effect of the transfer of the property insurance policy without the consent of the
insurer?
The insurance policy is suspended and will not be avoided until the interest in the thing
and the interest in the insurance are vested in the same person.
24. An acknowledgment in a policy or contract of insurance or the receipt of premium
is CONCLUSIVE EVIDENCE OF ITS PAYMENT, so far as to make the policy binding,
notwithstanding any stipulation therein that it shall not be binding until the premium is actually
paid.
25. Effect of the payment of the premium by a post-dated check.
The payment of a premium by a post-dated check at a stated maturity subsequent to the
loss is insufficient to put the insurance into effect.

Payment by means of a check or note, accepted by the insurer, bearing the date prior to
the loss, assuming an availability of the funds thereof, would be sufficient even if it remains
unencashed at the time of the loss.
The subsequent effects of encashment would retroact to the date of the instrument and its
acceptance by the creditor.
26. Exception to the rule of non-payment of premiums
Sec. 177. The surety is entitled to payment of the premium as soon as the contract of
suretyship or bond is perfected and delivered to the obligor.
No contract of suretyship or bonding shall be valid and binding unless and until the
premium therefor has been paid, EXCEPT where the obligee has accepted the bond, in
which case the bond becomes valid and enforceable irrespective of whether or not the
premium has been paid by the obligor to the surety;
Provided, That if the contract of suretyship or bond is not accepted by, or filed with the
obligee, the surety shall collect only reasonable amount, not exceeding 50% of the premium due
thereon as service fee plus the cost of stamps or other taxes imposed for the issuance of the
contract or bond;
Provided, however, That if the non-acceptance of the bond be due to the fault or
negligence of the surety, no such service fee, stamps or taxes shall be collected.
27. 2 kinds of adjusters:
1. Public and 2. Independent adjusters
28. The policy obtained by mortgagee does not cover mortgagor interest. It is separate and
distinct.
29. Marine Insurance is an insurance that cover risks connected with the navigation to which
a ship, cargo, freightage, profit or other insurable interest in movable property, may be exposed
during the voyage or at fixed period of time.
30.
Perils of the sea or perils of navigation
- includes only those casualties due to
UNUSUAL VIOLENCE or EXTRAORDINARY
CAUSES connected with navigation.
Include only such losses as are of
EXTRAORDINARY NATURE or ARISE from
OVERWHELMING POWER which cannot be
guarded against by ordinary exertion of human
skill or prudence.

Perils of the ship

- is a loss which in the ordinary course of
events, results:
1. from ORDINARY, NATURAL and INEVITABLE
action of the sea;
2. from ORDINARY WEAR and TEAR of the ship;
and
3. from the NEGLIGENT FAILURE of the ships
owner to provide the vessel with the PROPER
EQUIPMENT to convey the cargo under the
ORDINARY CONDITIONS.

c) Seaworthiness when the ship is reasonable fit to perform the service, and to
encounter the ordinary perils of the voyage, contemplated by the parties to the policy.
31. Implied warranties in Marine Insurance are:
a. that the ship is seaworthy at the inception of the insurance
b. that the vessel shall not engage in illegal venture
c. that the vessel shall not deviate from agreed course of the voyage insured unless
deviation is proper

d. warranty of possession of documents of neutrality: that the ship will carry the
requisites documents of nationality or neutrality of the ship or cargo where such
nationality is expressly warranted;
e. presence of insurable interest.
32.
a) Deviation Departure of vessel from course of voyage, or an Unreasonable delay in
pursuing voyage, or the Commencement of an entirely different voyage. (DUC)
b) 4 cases of deviation:
1. Departure of vessel from course of voyage,
2. Unreasonable delay in pursuing voyage,
3. Commencement of an entirely different voyage, and
4. Proper deviation.
c. Deviation is proper:
1. If due to circumstances outside the control of the ship captain or ship owner;
2. If done to comply with warranty
3. when made in good faith for the purpose of saving human life or relieving another
vessel in distress
4. when made in good faith to avoid a peril
d. Sec. 126. An insurer is not liable for any loss happening to the thing insured subsequent
to an improper deviation.
33. NO, the insurer cannot deny the claim. There was proper deviation in this case so long as the
master acted in good faith in relying on the information of PAG-ASA.
34.
Yes. He can claim actual total loss, although the rice was rescued but the damage
rendered the thing valueless and cannot be anymore use for its intended purpose: consumption
for humans.
Kinds of Loss:
A. ACTUAL TOTAL LOSS
1. total destruction;
2. loss by sinking;
3. damage rendering the thing valueless; or
4. total deprivation of owner of possession of thing insured.
B. CONSTRUCTIVE TOTAL LOSS
1. actual loss of more than of the value of the object;
2. damage reducing value by more than of the value of the vessel and of cargo; and
3. expenses of shipment exceed of value of cargo.
In case of constructive total loss, insured may abandon the goods or vessel to the insurer
and claim for whole insured value, or he may, without abandoning vessel, claim for actual loss.
35.
a) Average - any extraordinary or additional expense incurred during the voyage for the
preservation of the vessel, cargo, or both and all damages to the vessel and cargo from the time
it is loaded and the voyage commenced until it ends and the cargo unloaded
b) Kinds of average:
1. General average loss includes damages and expenses which are deliberately caused by
the master of the vessel or upon his authority, inorder to save the vessel, her cargo, or both at
the same time from real or known risk.
It must be borne equally by all of the interests concerned in the venture.
Requisites:

1. Common danger to the vessel or cargo;

2. Part of the vessel or cargo was sacrificed deliberately;
3. Sacrifice must be for all the common safety or for the benefit of all;
4. Must be made by the master or upon his authority;
5. Must be successful; and
6. Must be necessary.
2. Particular average loss all damages and expenses caused to the vessel or to her cargo
which have NOT INURE TO THE COMMON BENEFIT and PROFIT of all persons interested in the
vessel or her cargo.
The losses which occur under such circumstances as do not entitle the unfortunate owners
to receive contribution from other owners concerned in the venture as where a vessel
accidentally runs aground and goes to pieces after the cargo is saved.
c) Jettison - Intentional casting overboard of any part of a venture exposed to a peril,
whether it be of the cargo, or the ships furniture or tackle, in the hope of saving the rest of the
venture.

d) Abandonment - act of the insured by which, after a constructive total loss, he declares
the relinquishment to the insured of his interest in the thing insured (where the cause of loss is a
peril insured against).
Requisites for valid abandonment:
1. there must be an actual relinquishment by the person insured of his interest in the thing
insured;
2. there must be a constructive total loss;
3. the abandonment be neither partial nor conditional;
4. it must be made within a reasonable time after receipt of reliable information of the
loss;
5. it must be factual;
6. it must be made by giving notice thereof to the insurer which may done orally or in
writing; and
7. the notice of abandonment must be explicit and must specify the particular cause of the
abandonment.
36. YES, X can recover from RR and SS. The case involves a general average, hence, those who
benefited from the loss incurred by X are liable for general average contribution. The facts show
that A, Y and Z are liable for contribution because their properties were saved when the cargoes
of X were jettisoned. Consequently, the insurers of A and Z are also liable.
37. Doctrine of inscrutable fault both vessels bear their respective damage in case of
collision where it can not be determined which between them was at fault. However, both should
be solidarily liable for damage of cargo of both vessels.
38. Compulsory Motor Vehicle Liability Insurance the insurance code makes it unlawful
for any land transportation operator or owner of a motor vehicle to operate the same in the
public highways UNLESS there is an insurance or guaranty to indemnify the death or bodily injury
of a 3rd party or passenger arising from the use thereof.

39. Passenger - is any fare paying person being transported and conveyed in and by a motor
vehicle for transportation of passengers for compensation, including persons expressly
authorized by law or by the vehicle's operator or his agents to ride without fare.
40. NO FAULT CLAUSE the injured 3rd party or passenger is given the option to file a claim for
death or injury without the necessity of proving fault or negligence of any kind, under
the following conditions:
a) the total indemnity in respect of any person shall not exceed 5,000;
b) the following proofs of loss, when submitted under oath, shall be sufficient evidence to
substantiate the claim:
i. Police report of accident; and
ii. Death certificate and evidence sufficient to establish the proper payee; or
c) Claim may be made against one motor vehicle only.