INSURANCE LAW

Course Outline
Atty. Mary Ann L. Reyes

I. Introduction

A. History of insurance
B. Laws governing insurance

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

2. Insurance Code, RA 10607 (amending PD 612 as amended)
3. Family Code
4. Section 185, Corporation Code
5. GSIS Act, SSS Act
6. RA 5756
7. EO 250 (July 25, 1987)
8. RA 3591 (PDIC Law)
9. RA 9829 (Pre-Need Code)

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

Insular Life vs. Ebrado, 80 SCRA 181 (1977)
Filipinas-Compania de Seguros de Nava vs Mandanas, 17 SCRA 210
(1966)
Great Pacific Life vs CA (1979)

C. General concept of insurance

1. Section 2, RA 10607
2. Test of insurance

Read: White Gold Marine Services vs. Pioneer Insurance, GR No. 154514, 28 July
2005; Steamship Mutual Underwriting vs Suplicio Lines (2017)

3. Suretyship (Sec. 2, RA 10607)

4. Pre-need plans (See Securities Regulation Code)
5. Variable contracts (Sec. 238)
6. Doing an insurance business (Sec. 2)
7. Mutual insurance companies vs mutual benefit associations (Sec. 190 and
403, RA 10607)

D. Characteristics

1. risk distributing device

2. contract of adhesion (fine print rule)

Read: Rizal 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. Philamlife Insurance, GR No. 166245, April
9, 2008
Manila Bankers Life Insurance vs Aban, GR 175666, July 29, 2013
Villa Crista Monte Realty v. Equitable PCI Bank (when contracts of
adhesion become void)

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 3. aleatory (Art. 2010, Civil Code)
4. contract of indemnity (Sec. 4, RA 10607)

Read: Verendia vs. CA, 217 SCRA 417

4.1. Exceptions to the principle of indemnity

5. uberrimae fides contract

E. Elements of insurance

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

2. Risk of loss [Sec. 3 (1), Sec. 51 par 9]
3. Assumption of risk (Sec. 2)
4. Distribution of losses
5. Premium (Sec. 77)

Read: Gulf Resorts vs. PCIC

Philamlife Health Systems vs. CA

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)

1. Exceptions to the subrogation rule

Read: Manila Mahogany Manufacturing Corp. vs. CA

Federal Express Corp. vs. American Home Assurance, Aug. 18, 2004
Keppel Cebu Shipyard vs Pioneer Insurance, Sept. 25, 2009
Malayan Insurance vs Alberto, GR 194320, Feb. 1, 2012
Asian Terminals vs Lepanto, GR 185964, June 16, 2014

2. Prescription of Action

Read: Filcon Ready Mixed Inc. vs Vergara, July 15, 2020 (four years)
Vector Shipping Corp. vs American Home Assurance Co., July 3, 2013 (10
years)

2100 Customs Brokers vs Philam Insurance, June 10, 2o2o (presentation

of insurance policy in subrogation suits)

J. Kinds of insurance

II. Contract of Insurance

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

B. Perfection (Art. 1319, NCC)

a. 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)

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 1. the insurer, the insured, the beneficiary
2. See Art. 38, NCC;
3. rule on married women (Sec. 3, RA 10607 as superseded by Family
Code)
4. rule on minors (Sec. 3)
5. public enemy (Sec. 7)

Read: Filipinas Compania de Seguros vs Christern, May 25, 1951

6. capacity of party insured (natural, juridical persons)

7. the insurer (Sec. 190-193, Sec. 288, Sec. 403-405)
8. prohibited acts of insurers (Sec. 193)
9. the beneficiary (Art. 739, 2012, NCC; Read: Insular Life vs. Ebrado;
Sec. 11, Sec. 182, Sec. 53, RA 10607; Art. 64 and 225, Family Code)

D. Subject matter of insurance (Sec. 3 )

E. Insurance not a wagering contract (Sec. 4)

III. 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)

1. Kinds of insurable interest in property

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

GR No. 147839, June 8, 2006)

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

a. standard or union mortgage clause
b. open mortgage or loss payable clause

Read: Geagonia vs. CA, February 6, 1995

RCBC vs. CA, 289 SCRA 292, April 20, 1998

3. Separate insurable interest of mortgagor and mortgagee (Sec. 53

and 93)

Read: Great Pacific Life vs CA, 316 SCRA 677, Oct. 13, 1999

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

Read: Lalican vs Insular Life Assurance, Aug. 25, 2009

5. Insurable interest of beneficiary in property, life insurance

6. Effect of change of interest in the thing insured (Sec. 20, 21, 22, 23,
24, 57 & 58, RA 10607; Art. 1306, NCC)

7. Assignee in life, property insurance (Sec 184-185, Sec. 18)

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 of North America, G.R. No. 147839 (June 8, 2006).

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IV. Devices for ascertaining and controlling risk and loss

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

B. Representation

1. Concept (Sec. 36, RA 10607)

2. Kinds of representation (Sec. 36, 37, 39, 42)
3. Test of materiality (Sec. 46)
4. Effect of alteration or withdrawal (Sec. 41)
5. Time to which representation refers (Sec. 42)
6. Effect when representation is obtained from third persons
(Sec. 43)
7. When presumed false; effect of falsity (Sec. 44 & 45)
8. Effect of misrepresentation as to age (Sec. 233)

C. Remedies available in case of concealment or false representation

1. When rescission by the insurer may be exercised (Sec. 48)

2. When life insurance policy becomes incontestable (Sec. 48)
a. requisites for incontestability
b. theory and object of incontestability
c. defenses not barred by incontestability

Read: The Insular Life Assurance Co. vs Heirs of Alvarez, October 3, 2018

D. Warranties

1. Concept; distinguished from representation

2. Kinds of warranties (express, implied, affirmative, promissory)
3. Time to which warranty refers (Sec. 68, RA 10607)
4. Effect of breach (Sec. 74, 75, & 76)

Cases: Great Pacific Life Assurance vs. CA (316 SCRA 678); Sun Life Assurance Co. of
Canada vs. CA (G.R. No. 105135, June 22, 1995); Philamcare Health Systems Inc. vs. CA
(379 SCRA 356); Vda de Canilang vs. CA (G.R. No. 92492, June 17, 1993); Tan vs. CA
(June 29, 1989); Prudential Guarantee vs. Trans-Asia Shipping Lines, Inc. G.R. No.
151890, 20 June 2006; Manulife vs Ybanez, Nov. 28, 2016; Malayan Insurance vs PAP,
Aug. 7, 2013; Manila Bankers vs Aban, GR 175666, July 29, 2013; Florendo vs Philam
Plans, GR 186983, Feb. 22, 2012; Sun Life of Canada vs Sibya, June 8, 2016

Addl Cases:

The Insular Life Co. vs Heirs of Alvarez, GR 207526, Oct. 3, 2018 (concealment)

V. The Policy of Insurance

A. Definition and form (Sec. 49-50, RA 10607; E-Commerce Act)

B. Fine print rule
C. Contents of the policy (Sec. 51)

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 D. Papers attached to the policy and their binding effect (rider, warranties,
clause, endorsement)
E. Kinds of policy
1. open (Sec. 60)
2. valued (Sec. 61)
3. running (Sec. 62)
F. Cover notes (Sec. 52)
G. Cancellation of policy (Sec. 65-66)
H. Time to commence action on the policy; effect of stipulation (Sec. 63)

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

A. Concept
B. Effect of non-payment of premium; Exceptions (Sec. 77, 79, RA 10607;
Art. 1306, NCC)
C. When insured entitled to return of premiums (Sec. 80-84)
D. Payment through salary deduction (Sec. 78)
E. Future premiums (Sec. 84)

Cases: Makati Tuscany Condominium Corp. vs. CA (215 SCRA 462); UCPB General
Insurance vs. Masagana Telamart (June 15, 1999); UCPB General Insurance vs.
Masagana Telamart (356 SCRA 307); American Home Insurance vs. Chua (G.R. No.
130421, June 28, 1999); Tibay vs. CA (257 SCRA 126); Phil. Phoenix Surety & Ins., Co. vs.
Woodworks, Inc., (92 SCRA 419); Marques vs Far East Bank, GR 171379, Jan. 10, 2011

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

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

B. Limitations on the appointment of beneficiary (Art 2012 & 739, NCC)
C. Rule where insurance is made by an agent or trustee (Sec. 54)
D. Rule where insurance if made by partner or part owner (Sec. 55)

E. Loss (Sec. 85-89) See also Sec.175, 184-185, RA 10607

F. Notice and proof of loss (Sec. 90-94) See also Sec. 185

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. Lianga Bay (January 25, 2002);
Heirs of Maramag vs Maramag, GR 181132, June 5, 2009

VIII. Double Insurance

A. Definition and requisites (Sec. 95, RA 10607)

B. Distinguished from over-insurance
C. Stipulation against double insurance
D. Rules for payment where there is over-insurance by double insurance
(Sec. 96)

Case: Malayan Insurance vs Philippine First Insurance, July 11, 2012

IX. Reinsurance

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 A. Definition (Sec. 97)
B. Nature (Sec. 99 & 100)
C. Distinguished from double insurance
D. Duty of reinsured to disclose facts (Sec. 98)

X. Marine Insurance

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

a. barratry
b. jettison
c. inchmaree clause

Read: Cebu Shipyard vs. William Lines, GR 132607, May 5, 1999

D. Insurable interest in marine insurance

1. ship owner’s insurable interest (Sec. 102)

a. rule where vessel is chartered (Sec. 102)

i. what is a charter party; kinds

ii. clauses that may be included in charter party (new
Jason clause, clause paramount)

b. rule where vessel hypothecated by bottomry (Sec.

103)
c. insurable interest in freightage (Sec. 104-106)

2. charterer’s insurable interest (Sec. 108)

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

E. Concealment

1. Meaning of concealment in marine insurance

2. Duty to communicate (Sec. 109)
3. Opinions or expectations of third persons (Sec. 110; relate to Sec.
28, 30)
4. When concealment does not vitiate the entire contract (Sec. 112)
5. Presumption as to knowledge (Sec. 111)

F. Representations
1. Effect of false representation by the insured (Sec. 113)
2. Effect of false representation as to expectation (Sec. 114)

G. Implied Warranties in Marine Insurance

1. Seaworthiness (Sec. 115)

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

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 e. cargo worthiness (Sec. 121)

2. Warranty that necessary documents are carried (Sec. 122)

3. Warranty against improper deviation

a. meaning of deviation (Sec. 125)
b. when proper (Sec. 126)
c. effect of improper deviation (Sec. 127)
d. loss subsequent to improper deviation (Sec. 128)

H. Loss
1. Kinds of losses (total or partial, Sec. 129-130)
2. Kinds of total loss (actual and constructive) (Sec. 131-134)
3. When ship prevented from completing voyage (Sec.135)
4. Liability for damages in case of reshipment of cargo (Sec. 136)
5. Right to payment upon an actual total loss (Sec. 137)
6. Scope of insurance against actual total loss (Sec. 139)
7. When constructive total loss exists (Sec. 141)
8. Concept of abandonment and its requisites (Sec. 140-157)
9. Average
1. Kinds of average (particular and general)
2. Requisites of general average
3. Insurer’s liability for general average (Sec. 166-167)
10. Measure of Indemnity (Sec. 158-168)
11. One-third for new for old rule in marine insurance (Sec. 168)

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)

XI. Fire Insurance

A. Definition and scope of fire insurance (Sec. 169, RA 10607)

B. Risks or losses covered
C. Effect of alteration in the thing insured (Sec. 170-171)

Read: Malayan Insurance vs PAP, Aug. 7, 2013

F. Read Sec. 172, RA 10607

G. Measure of indemnity (Sec. 173-174)
H. Co-insurance clause
I. Prohibitions (Sec. 175 in relation to Sec. 85)

XII. Casualty Insurance

A. Concept (Sec. 176, RA 10607)

B. Kinds of Casualty Insurance
C. Theft and Robbery Insurance
D. Personal Accident and Health Insurance

Read: Finman vs CA; Sun Insurance vs CA; Biagtan vs The Insular Life

E. Glass Insurance
F. Employers Liability Insurance
G. Motor Vehicle Liability Insurance (vis a vis comprehensive)
H. Compulsory Motor Vehicle Liability Insurance (Sec. 386-402, RA 10607)

1. TPL Insurance Requirement (Sec. 387, 389); limit of liability

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 2. Third Party Defined (Sec. 386c)
3. Amount of Indemnity (Sec. 390)
4. No Faulty Indemnity Clause (Sec. 391) – to who shall injured party
file the claim with
5. Change of Ownership (Sec. 395)
6. Notice of Claim/Prescription of Action (Sec. 397, 398)
7. Direct Liability of Insurer to Third Party

Read: Heirs of George Poe, April 7, 2009

8. Authorized Driver Clause

9. Theft Clause

Read: Paramount Insurance vs Sps Remonduelaz, GR 173773, Nov. 28, 2012

Tiu vs Arriesgado, GR 138060, Sept. 1, 2004; Villacorta vs Insurance
Commission; Malayan Insurance vs Alberto

I. Insurable Interest in Liability Insurance

J. Meaning of “accident” and “accidental” in casualty insurance
K. Basis and extent of insurer’s liability
L. No action clause, cooperation clause

Cases: Finman General Assurance Co. vs. CA (September 2, 1992); Sun Insurance Office
Ltd. vs. CA (July 17, 1992); Biagtan vs. The Insular Life Assurance Co., Ltd., (44 SCRA
58); Tiu vs Arriesgado, Sept. 1, 2004; Malayan Insurance vs Philippine First Insurance,
July 11, 2012 (TPL); Villacorta vs IC, Oct. 28, 1980; Malayan Insurance vs Alberto, Feb.
1, 2012; Vda. de Gabriel vs. CA (November 14, 1996); Vda. de Maglana vs. Hon.
Consolacion (August 6, 1992);

XIII. Suretyship

A. Definition (Sec. 177, RA 10607); two relationships in suretyship

B. Nature of liability of surety (Sec. 178)

Read: Cellpage Intl Corp vs The Solid Guaranty Inc., GR 226731, June 17, 2020

C. Distinctions between suretyship and property insurance (Sec. 179)

Read: American Home Insurance vs FF Cruz, GR 174926, Aug. 10, 2011

D. Classification of surety bonds

XIV. Life Insurance

A. Definition (Sec. 181, 182, RA 10607)

B. Kinds of life insurance
C. Liability of insurer in case of suicide (Sec. 183)
D. Right to assign life insurance policy (Sec. 184, 185)
E. Measure of indemnity (Sec. 186)
F. Contents of individual or endowment life insurance; (grace period
provision, incontestable clause, misstatement as to age provision,
provision on default, reinstatement clause
G. Non-default options in life insurance; reinstatement of lapsed life
insurance policy

XV. Microinsurance

A. Definition (Sec. 187, RA 10607)

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XVI. Claims Settlement

A. Unfair claim settlement practices (Sec. 247, RA 10607; additional practices in

IRR)
B. Claims for life insurance policies (Sec. 248)
C. Claims for non-life insurance policies (Sec. 249)
D. Delay in payment of claims (Sec. 250, ICP)
E. Prescription of action

Cases: Tio Khe Chio vs. CA (September 30, 1991); Finman General Assurance
Corporation (July 12, 2001); see again: Prudential Guarantee vs. Trans-Asia Shipping
Lines, Inc. G.R. No. 151890, 20 June 2006

XVII. The Insurance Commission

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

B. Conservatorship

Read: Icon Development Corp. vs. National Life Insurance, March 9, 2020

C. Regulation of Insurance Business

D. Prohibited Acts of Insurers
E. Financial Regulation (capitalization requirement, margin of solvency,
dividend policy, legal reserves, limit of single risk, security deposit)
F. Requirements for foreign insurance companies (resident agent,
capitalization)
G. What are adjusters; requirements
H. Other prohibited acts (twisting, rebate, hidden agreement, additional
inducement, discrimination)
I. Insurance companies under AMLA

XVIII. Pre-Need Code (RA 9829)

A. Definition of pre-need plans, pre-need companies; kinds of pre-need plans

B. Registration of pre-need plans
C. Licensing of sales counselor and general agent
D. Default and termination
E. Claims settlement, unfair claims settlement practices

XIX. HMOs (EO 192)

A. Definition of HMO
B. Registration of HMOs
C. Are HMOs engaged in the insurance business

XV. Compulsory insurance for agency-hired oversease Filipino workers (RA 10022
amending RA 8042; insurance guidelines on Rule XVI of Omnibus Rules implementing
RA 8042 as amended by RA 10022)

A. Who are entitled

B. Minimum insurance benefits
C. Qualification/disqualification of participating insurers
D. Policy duration
E. Non-applicability of incontestable and suicide clauses
F. Who pays the premium/return of premium