INSURANCE LAW

Course Outline
Any. Mary Ann L. Reyes

In trod ucl ion

A History of insurance
B. Laws governing insurance

1. A rticle 739, 2011, 2012-2017, 2186, 2207, New Civil Code

9. Insurance Code, RA 10607 (amending PD 612 as amended)
Thmily Code
SFction 185, Corporation Code
gas Act, SSS Ad
R!A 5756
IICH 250 (July 25, 1987)
RA 3591 (PD1C Law)
NA 9829 (Pre-Need Code)
10 EQ 192 (HMOs) •

Read: Enriquez vs. Sunlife Assurance, 41 Phil 269 (1920)

Insular Life vs. Ebrado, 80 SCRA 181 (1977)
Filipinas-Compmlia de Seguros de Nava, 17 SCRA 210 (1966)

C. General concept of insurance

1. Sect-ion 2; RA 10607
7. Test of insurance

Read: White Gold &Wine Services vs. Pioneer Insurance, GR No. 15-1514, 28
July 2005; Philamcare Health Services Inc. vs. CA, 379 SCRA 356

3. Suretyship (Sec. 2, RA 10607)

4. Pre-need plans (See Securities Regulation Code)
5. Variable contracts (Sec. 238, RA 10607)
6. Doing an insurance business (Sec. 2, RA 10607)

Read: Philippine Health Care Providers vs. Commissioner of Intern-it

Revenue, 600 SCRA 413

. 7. Mutual insurance companies (See White Gold vs. Pioneer) - See

mutual benefit associations under Sec. 403, RA 10607

Characteristics

risk distributing deviee-Y-

contract of adhesion (fine print rule)

Read: Riza I Surety and Insurance Co. vs CA, 336 SCRA 12

Blue Cross vs. Olivares (Feb. 12, 2008)
Fortune Insurance and Surety Co. vs. CA, 244 SCRA 308
 Gulf Resorts vs Philippine Charter Insurance Corp., GR No. 155167,
May 16, 2005
Eternal Gardens Memorial vs. Philantlife insurance, GR No. 166245,
April 9, 2008
Manila Bankers Life Insurance vs. Aban, GR 175666, July 29, 2013

aleatory (Art. 2010, Civil Code)

contract of indemnity (Sec. 4, RA 10607)

Read Verendia vs. CA, 217 SCRA 417

1.1 Exceptions to the principle of indemnity

uberr mae fides contract

E Elements of insurance

1. Insurable interest (Sec. 10-14, RA 10607)

2.1Zisk of loss [Sec. 3 (1), Sec. 51 par 1, RA 106071
Assumption of risk (Sec. 2, RA 10607)
Distribution of losses
Premium (Sec. 77, RA 10607)

Read: Gulf Resorts vs. PCIC

Philamlife Health Systems vs. CA, GR 125678, March 18, 2002

F. Subject matter of a contract of insurance

G Event or peril insured against [Sec. 3(1), Sec. 86, RA 10607]
H Risk, defined; pure vs. speculative risk; past event; distinguished from
fortuitous event and condition, loss, peril, hazard
I.' Right of subrogation (Art. 2207, Civil Code)
4
1. Exceptions to"the subrogation rule

Read: Manila Mahogany Manufacturing Corp vs. CA, GR 1.-52756 Cur 12,
1987
Federal Express Corp. vs. American Home Assurance, GR 15009,i,
August 18, 2004
Keppel Cebu Shipyard vs. Pioneer insurance, Sept. 25, 2009
Malayan insurance vs. Alberto, GR 194320, Feb. 1, 2012
Asian Terminals v. First Lepanto, GR 185964, June 16, 2014
J• klIVIC/S car Inst.,Acc
11. Contract of Insurance

Requisites of a contract of insurance (Art. 1318; New Civil Code)

Perfection (Art. 1319, NCC)

1. Cognition theory

Read: Development Bank of the Philippines vs. CA, GR. 100937, March 21,
1994
Enriquez vs. Sun Life Insurance of Canada, GR. 15895, Nov. 29, 1920
 Great Pacific Life Assurance vs. CA, GR Nos. 31845 & 31873, April
30, 1979

C. Parties to -a contract of insurance (Sec. 6 & 7, RA 10607)

the insurer, the insured, the beneficiary
See Art. 38, NCC;
rule on married women (Sec. 3, RA 10607)
1. rule on minors (Sec. 3, RA 10607)
public eneiny
capacity of party insured (natural, juridical persons)
the insurer (Sec. 190s-193, RA 10607 ; Sec. 288 on professional
1 reinsurers; Sec. 403-405 on mutual benefit associations)
)3. the beneficiary [Art. 739, 2012, NCC; Read: Insular Life vs.
Ebrado; Sec. 11, RA 10607); Sec. 182, RA 10607); Art 225, Family
Code; Sec. 53, RA 10607)] Art .69, fawn au Cock

. D. ,Dubject matter of insurance (Sec. 3, RA 10607)

E. Insurance not a wagering contract (Sec. 4, RA 10607)

Insurable Interest

A. Concept of insurable interest in general

B. Reason for the requirement of insurable interest
C. Insurable interest in life insurance (Sec. 10, 11, 12, RA 10607)
D. Insurable interest in property insurance (Sec. 13-18, RA 10607)

1. Kinds of insurable interest in property

Read: Gaisano Cagayan Inc. vs. Insurance Company of North

America, GR No. 47839, June 8, 2006)

2. Insurable interest in case of mortgaged property (Sec. 8-9, RA

10607)
standard or union mortgage clause
open mortgage or loss payable clause

Read: Geagonia vs. CA, February 6, 1995

RCBC vs. CA, 289 SCRA 292

3. Separate insurable interest of mortgagor and mortgagee (Sec.

53 and 95, RA 10607)

4. When must insurable interest in property exist (Sec. 19, RA

10607)

5. Insurable interest of beneficiary in-property, life insurance

6. Effect of change of interest in the thing insured (Sec. 20-24,

57&58, RA 10607; Art. 1306, NCC)

7. Assignee in life, property insurance [Sec. 184, Sec. 18, RA

10607)]
 Read: Spouses Cha vs. CA, August 18, 1997

Cases under this topic: Spouses Cha vs. CA, (August 18, 1997); Geagonia vs. CA,
. February 6, 1995); RCBC vs. CA (289 SCRA 292); Gaisano•Cagayan, Inc. vs. insurance
Company ofNorth America, G.R. No. 147839 (June 8, 2006).

IV. Devices tor alcertaining and controlling risk and loss

A Concealment
Concept (Sec. 26, RA 10607)
Duty to communicate (Sec. 28, RA 10607)
Test of materiality (Sec. 31, RA 10607)
Effect of concealment (Sec. 27 &z 29,1CP)
Matters which need not be communicated (Sec. 30, 32, 34, &
35, RA 10607)
Waiver of information (Sec. 33, RA 10607)

B. Representation

1. Concept (Sec. 36, RA 10607)

Kinds of representation (Sec. 36, 37, 39, 42, RA 10607)
Test of materiality (Sec. 46, RA 10607)
Effect of alteration or withdrawal (Sec. 41, RA 10607)
Time to which representation refers (Sec. 42, RA 10607)
Effect when representation is obtained from third persons
(Sec. 43, PA 10607)
When presumed false; effect of falsity (Sec. 44 & 45, RA 10607)

C. Remedies available in case of concealment or false representation

When rescission by the insurer may be exercised (Sec. 48, RA

106(U)
When life insurance policy becomes incontestable (Sec. 48,
RA 10607)
requisites for incontestability
theory and object of incontestability
defenses not barred by incontestability

D. Warranties

Concept; distinguished from representation

Kinds of warranties (express, implied, affirmative,
promissory)
Time to which warranty refers (Sec. 68, RA 1.0607)
Effect of breach (Sec. 74, 75, & 76, RA 1.0607)

. Cases: Great Pacific Life Assurance vs. CA (316 SCRA 678); Sun Life Assurance Co. ol
Canada vs. CA (G.R. No. 105135, lime 22 1995); Philamcare Health Systems Inc. vs.
CA (379 SCRA 356); Vda de Canilang vs. CA (G.R. No. 92492, Tune 17, 1993); Tan vs.
. CA (June. 29, 1989); Prudential Guarantee vs Trans-Asia Shipping Lines,, Inc. G.R.
No. 151890, 20 June 2006

The.Policy of Insurance

A. Definition and farm (Sec. 49-50, RA 10607) - see new provision re

electronic form
B. Fine print rule
C. Contents of the policy (Sec. 51, RA 10607)
D. Papers attached to the policy and their binding effect (rider,
warranties, clause, endorsement)
E. Kinds of policy
open (Sec. 60, RA 10607)
valued (Sec. 61, RA 10607)
running (Sec. 62, RA 10607)
F. Cover notes (Sec. 52, RA 10607)
G. Cancellation of policy (Sec. 65-66, EA 10607)
H. I Time to commence action 011 the policy; effect of stipulation (Sec 63,
RA 10607)

Cases Pacific Timber Export Corporation vs. CA (112 SCRA 199); Great Pacific Life
Assurance Corporation vs. CA, 89 SCRA 543); PhilAm Life and General Insurance
Co. vs. Judge Valencia-Bagalacsa,(GR No. 139776; August 1, 2002)

VI. Premium

Concept
Effect of non-payment of premium; Exceptions (Sec. 77, 79,
RA 10607, Art. 1306, WC)

When insured en- thiefi to return of premiums (Sec. 80-84, RA 0607)

, Payment through salary deduction (Sec. 78, RA 10607)
Future premiums (Sec. 84, RA 10607)

Cases. Makati Tuscany Condominium Corp. vs. CA (215 SCRA 462); LICI)13 General
Insurance vs. Masagana Telamart (June 15, 1999); UCPB General insurance vs.
Masagana Telamart (356 SCRA 307); American Home Ibsurance vs. Chua (CR. No.
130421, June 28, 1999); Tibay vs. CA (257 SCRA 126); Phil. Phoenix Surety & Ins., Co.
vs. Woodworks, Inc., (92 SCRA 419)

V11. Persons entitled to recover on the policy and conditions to recovery

Beneficiary (Sec. 11-12, 53, 56, 57, RA 10607)

Limitations on the appointment of beneficiary (Art 2012 & 739, NCC)
Rule where insurance is made by:an' agemr Or trustee (Sec. 54, RA
10607)
Rule where insurance if made by partner or part owner (Sec. 55, RA
10607)
 Loss (Sec 83-87, 1CP; Sec 85-89 RA 10607) Sec. 175, 184-185, RA
10607)
Notice and proof of loss (Sec. 90-94, RA 10607). See also Sec. 185, RA
10607

Cases: Bonifacio Bros. Inc. vs. Mora May 29, 1967); The Insular Life Assurance vs.
Ebrado, 80 SCRA 181); Vda. de Consuegra vs. GSIS (37 SCRA 315); Go vs. Redfern
(72 Phil 71); Country Bankers insurance Corporation vs. Lia.nga Bay (January 25,
2002)

VIII. Double linsurance

Definition and requisites (Sec. 95, RA 10607)

Distinguished front over-insurance
Stipulation against double insurance
Rules for payment where there is over-insurance by double
insurance (Sec 96, RA 10607)

IX. Reinsurance

Definition (Sec. 97, RA 10607)

Nature (Sec. 99 & 100, RA 10607)
Distinguished from double insurance
Duty of reinsured to disclose facts (Sec. 98, RA 10607)

X. Marine Insurance

A. Definition
B. Scope of marine insurance (Sec. 101, RA 10607)
C. Risks or losses covered in marine insurance
perils of the sea vs. perils of the ship
"all risks" marine insurance policy

D. Insurable interest in marine insurance

1. ship owner's insurable interest (Sec. 102, RA 10607)

rule where vessel is chartered (Sec. 102, RA 10607)
rule where vessel hypothecated by bottomry (Sec 103,
RA 10607)
insurable interest in freightage (Sec 104-106, RA
10607)

. 2. charterer's insurable Eirterest (Sec. 108, RA10607)

3. interest in the thing and in profits (Sec. 107, PA 10607)

E. Concealment
Meaning of concealment in marine insurance
• Duty 'to communicate (Sec. 109, RA 0607)
 Opinions Or expectations of third persons (Sec. 110, RA
10607)
When concealment does not vitiate the entire contract (Sec.
112, RA 10607)
Presumption as to knowledge (Sec. 111, RA 10607)

R ep resell t a tin ns
Effect of false representation by the insured (Sec. ifl RA
10607)
Effect of false representation as to expectation (Sec. 114, RA
I
10607)

G.. I Implied Warranties in Marine Insurance

1. Seaworthiness (Sec. 115, RA 10607)

a. what constitutes seaworthiness (Sec. 116, 118, 121,
RA 10607
b when complied with; Exceptions (Sec. 117, RA
10607)
c when voyage consists of different portions
(Sec. 119, RA 10607)
rule where ship becomes unseaworthy in the
course of the voyage (Sec. 120, RA 10607)
cargo seaworthiness (Sec. 121, RA 10607)

2, Warranty that necessary documents are carried (Sec. 122, RA

10607))

3. Warranty against improper deviation

a, meaning of deviation (Sec. 125, RA 10607)
b. what is voyage insured (Sec. 123, RA 10607)
CA if course of sailing not fixed (Sec. 124, RA 10607)
when proper (Sec. 126, RA 10607)
effect of improper deviation (Sec. 127, RA 10607)
t. loss subsequent to improper deviation (Sec. 128,
RA 10607)

Loss

Kinds of losses (total or partial, Sec. 129-130, RA 10607)

Kinds of total loss (actual and constructive) (Sec. 131134, RA
10607)
When ship prevented from completing voyage (Sec. 135,
RA10607)
4, Liability for damages in case of reshipment of cargo (Sec.
136, RA 10607)
Right to payment upon an actual total loss (Sec. 137, RA
10607)
Scope of insurance against actual total loss (Sec. 139,
RA10607)
When constructive total loss exists (Sec. 141, RA10607)
Concept of abandonment and its requisites (Sec. 140,-157,
RA 10607)
Average
 Kinds of average (particular and general)
Requisites of general average
Insurer's liability for general average (Sec.
166-167, RA10607)
4. New Jason Clause
10. Measure of Indemnity (Sec. 158,-168, kA 10607)

Cases: Roque vs. IAC (139 SCRA 596); Go Tiaco vs. Union ins. Society of Canton (40
Phil 401); Cathay Insurance vs. CA (151 SCRA 710); Filipino Merchants Insurance Co.
vs. CA (179 SCRA 638); Oriental Assurance Corporation vs. CA (200 SCRA 459)

XL Fire Inaurance

Definition and scope of fire insurance (Sec. 169, RA10607)

Risks or losses covered.
Effect of alteration in the thing insured (Sec. 1.70-171. RA10607)
Read Sec. 172, RA 10607
Measure of indemnity (Sec. 173-174, RA 10607)
Co-insurance clause
G. Prohibitions (Sec. 175, RA 10607)

Cases Malayan Insurance Co. vs. PAP Co., GR 200784, August 7, 2013

XII. Casualty Insurance

Concept (Sec. 176, RA 10607)

Kinds of Casualty Insurance
Theft and Robbery Insurance
Personal Accident and Health Insurance

Read: Sun Insurance Office Ltd. vs CA, July 17, 1992

Elliman General Assurance vs CA, Sept. 2, 1992
Biagtan vs Insular Life Assurance, 44 SCRA 58

Glass insurance
Employers Liability Insurance
Motor Vehicle Liability Insurance
Compulsory Motor Vehicle Liability Insurance (Sec. 386-402, RA
10607)

Third Party Liability Insurance Requirement (Sec. 387 and

389, RA 10607)
Third Party Defined (Sec. 386c, RA 1.0607)
Amount of Indemnity (Sec. 390, RA 10607)
No Fault Indeknity cjaurse (Sec. 391, RA 10607)
Change or Ownership (Sec. 395, RA 10607)
Notice of Claim/Prescription of Action (Sec 397, RA 1.0607)
Direct Liability of Insurer to Third Party
Authorized Driver Clause (whether voluntary or
compulsory motor vehicle insurance)
 9. Theft Clause - Read: Paramount Insurance vs. Sps.
Remonduelaz, GR 173773, Nov. 28, 2012

Insurable Interest in Liability Insurance

Meaning of "Accident" and "Accidental" in Casualty Instil' nce
Basis and extent of insurer's liability

XIII. Suretyship

Definition (Sec. 177, RA 10607)

Nature of liability of surety (Sec 178, RA 10607)
Distinctions between suretyship arid properly insurance (Sec. 179,
RA 10607)

Life Insurance

Definition (Sec. 181 and 182, RA 10607)

Kinds of life insurance
Liability of insurer in case of suicide (Sec. 183, RA 10607)
Right to assign life insurance policy (Sec. 184&185, RA 10(07)
Measure of indemnity (Sec. 186, RA 10607)

XV. Microinsurance

.Definition (Set. 187, RA 10607)

XVI. Claims Settlement

Unfair claim settlement practices (Sec. 247, RA 10607)

Claims for life inturance policies (Sec. 248, RA 10607)
Claims for non-life insurance policies (Sec. 249, RA 10607)
D., Delay in payment of claims (Sec. 250, RA 10607)

Cases: Tio Khe Chin vs. CA (September 30, 1991); Fimuan General Assurance
Corporation (tidy 12, 2001); see again: Prudential Guarantee vs. Trans-Asia Shqianig
Lines, Inc. G.R. No. 151890, 20 Tune 2006

- XVI. The Lnsurance Commissioner

A. Administrative and Adjudicatory Powers (Sec. 437-439, RA 10607)

XVII. Pre-Need Code (RA 9829)

What are Pre-Need Plans

What is a Pre-Need Companyt',
Jurisdiction of the Insurance Commission over Pre-Need Companies
Unfair Claims Settlement Practices (Sec. 25, Pre-Need Code)
Consequences of Delay or Default (Sec. 28, Pre-Need Code)
XVIII. 1-11\40s (EO 192)

What are Health Maintenance Organizations (Sec. 2, E0 192)

Authority Insurance Commission over HMOs (Sec. 1, 4 &-.5 Et] 192)
Purpose forpansfer of Regulation and Supervision. over IIMOs from DOH
to IC