June 23, 2014 2014 What is a contract of insurance? An agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event •
What are the Functions of insurance? To distribute the the expected losses among among the policy To indemnify insured against loss, damage or liability arising from an unknown or contingent event. As regard to contract of surety? An agreement whereby a party called the surety guarantees the performance by another called the principal or obligor of an obligation or undertaking in favor of a third party called the oblige. It shall be deemed to be an insurance contract if made by a surety who or which, as such, is doing an insurance business •
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What is meant by doing an insurance business? Making or proposing to make as insurer, any insurance contract; Making or proposing to make as surety, any contract of suretyship as a vocation, not as a mere incident to any other legitimate business of a surety; oing any insurance business, including reinsurance business; oing or proposing to do any business in substance e!uivalent to any of the foregoing. • •
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What are the characteristics of an insurance contract? a" #onsensual $ it is perfected by the meeting meeting of the minds of the parties b" Aleatory Aleatory $ depends depends upon some some conting contingent ent event event c" #ontract of adhesion or %ne print print rule $ terms does not necessarily necessarily mean that there is mutual agreement because the terms have already been provided by the insurer &do not result from the mutual consent of the parties" d" #onditional $ it is sub'ect to a condition, the principal principal one of which is the happening of the event insured against e" (ersonal (ersonal $ insurance insurance cannot cannot be delegated. delegated. )ach party having having in view the character, credit and conduct of the other. f" #omp #ompen ensa sato tory ry $ g" *isk distributing distributing device device $ by by paying a pre+determin pre+determined ed amount h" #ontract of indemnity $ except except in life life and accident accident insurance, insurance, an insurance insurance contract is a contract of indemnity whereby the insurer promises to make good only the loss of the insured. i" nilater nilateral al $ imposes imposes the the legal legal duties duties only on on the insur insurer er who promis promises es to indemnify in case of loss '" )xecuted )xecuted on the part of the insured insured by paying paying the premiums; premiums; while while )xecutory )xecutory on the part of the insurer &until the payment of the loss" k" -oluntary $ the the parties may may incorporate incorporate such terms terms and conditions conditions as they they may deem convenient.
What is Uberrima Fides? contract of insurance insurance is one of perfect perfect good faith not for the insured insured The contract alone, but e!ually so for the insurer. It re!uires the parties to the contract to
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disclose conditions a0ecting the risk of which he is aware, or material fact, which the applicant knows, and those, which he ought to know. What is the 2-fod !ur!ose"function? a" distribute1spread the expected losses among planholders upon the happening of an event. b" indemnify the insured from the happening of the loss1damage. #onstruction"inter!retation of theinsurance contract? if clear $ should be interpreted according to ordinary meaning. if ambiguous $ strictly against the insurer, liberally in favor of the insured What a" b" c" d" e"
are the eements"re$uisite of insurance contract? Insurable interest must exist *isk of loss Assumption of risk taken by the insurer (ayment of a premium 2cheme of distribution of losses
What may be insured? %de&nition 'ec(10) 3uture contingent resulting in loss or damage &example4 possible future %re" (ast unknown event resulting in loss or damage &example4 fact of past sinking of a vessel unknown to the parties" #ontingent liability &)xample4 reinsurance" What may not be insured? any person considered as an enemy of the state. any contract of lottery &2ec. 5" Mere contingent or expectant interest in anything &2ec. 6"
June 24, 2014 What is an insurabe interest? A person is deemed to have insurable interest in the sub'ect matter insured where he has a relation or in connection with or concern in it that he will derive pecuniary bene%t or advantage from its preservation and will su0er pecuniary loss or damage from its destruction, termination or in'ury by the happening of the event insured against. Who are the !arties to an insurance contract? a" Insurer $ The person who undertakes to indemnify another b" Insured $ The person with capacity to contract and having an insurable interest in the life or property of the insured; and c" 7ene%ciary $ (erson designated to receive proceeds of policy when risk attaches. Who can be an insurer? What is re$uired to be an insurer? A foreign or domestic insurance company may transact business in the (hilippines but must %rst obtain a certi%cate of authority for that purpose from the Insurance #ommissioner who has the discretion to refuse to issue such certi%cate if it will best promote the interests of the people of this country &2ec. 89"
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)very person, partnership, association or corporation duly authoried to transact business as provided in this code. Include all individuals, partnerships, associations or corporations including government+owned or controlled corporations and entities engaged as principals in the insurance business excepting mutual bene%t association.
When is there insurabe interest in ife? 2ec. <. )very person has an insurable interest in the life and health4 a" =f himself, of his spouse and of his children; b" =f any person on whom he depends wholly or in part for education and support, or in whom he has pecuniary interest; c" =f any person under legal obligation to him for the payment of money, or respecting property or services of which death or illness might delay or prevent the performance; d" =f any person upon whose life any estate or interest vested in him depends. When is there insurabe interest in !ro!erty? 2ec. 5. An insurable interest in property may consist in4 a. An existing interest; b. An inchoate interest founded on an existing interest; or c. An expectancy, coupled with an existing interest in that out of which the expectancy arises.
)xamples + )xisting interest &legal or e!uitable title on the property" + Inchoate interest &interest which has not yet ripened, such as interest of stockholder in the property of the corporation which he owns stocks" + )xpectancy couple with existing interest &a farmer insuring future crops or a workman insuring the building which he was contracted to repair. #an a creditor and a debtor mortgage the !ro!erty at the same time? >es. 7oth the mortgagor and mortgagee have a separate and distinct insurable interest in the mortgaged property and that they may take separate policies with the same or di0erent insurance company. Thus, both can insure the property at the same time or with concurrence. What are the e*tent of insurabe interest of mortgagor and mortgagee? Mortgagor may insure the mortgaged property to its full value Mortgagee can only insure it to the extent of the debt secured )xception4 in marine Insurance
(roblem4 -ilma obtained a loan of ?<<,<<< from @inda, and as a security she mortgaged her house worth 9?<,<<<. ora insured her house against %re with A7# insurance for 9?<,<<< with the policy stating4 Any other insurer should be declared otherwise all bene%ts in the policy will be forfeited. @inda also insured the house against %re with B>C insurance company for ?<<,<<<. 7oth -ilma and @inda did not advise their respective insurance companies of the existence of the other insurance. Dhen both were enforced, the house was burned. a." #an both -ilma and @inda insure the property at the same time for how muchE b." -ilma refused to pay ?<<,<<< when the house is already burned, what will happenE F/(age
Ans4 a" -ilma can insure because it is her own property and she has an insurable Interest over the house in the amount of 9?<,<<< which is the full extent of the value of the property. Dhile @inda, her insurable Interest only to the extent of the debt of ora in the amount of ?<<,<<< which is the full value of the credit. b" B>C takes the place of @inda. 2ubrogated to the interest of @inda. @inda will not collect from -ilma. ote4 If mortgagee insures the property mortgaged and pays the premium in case of loss, mortgagor will pay the insurance company debit. If mortgagor insures the property and pays the premium and assigns the insurance to mortgagee, the debt is considered paid. If mortgagor insures the property and pays the premium but did not assign the insurance to the mortgagee, the mortgagor still has a debt to pay the mortgagee. What is a bene&ciary? A person whether natural or 'uridical for whose bene%t the policy is issued and is the recipient of the proceeds of the insurance. Who can be designated as a bene&ciary in a ife insurance? Any person can be a bene%ciary not otherwise dis!uali%ed. Who are those !ersons +ho are dis$uai&ed to be bene&ciaries? a" Those made between persons who were guilty of adultery or concubinage &conviction not being a condition precedent"; b" Those made between persons found guilty of the same criminal o0ense, in consideration thereof; c" Those made to a public oGcer or his wife, descendants or ascendants by reason of his oGce ues in designation of bene&ciary @I3) a" A person who insures his own life can designate any person as his bene%ciary whether or not the bene%ciary has insurable interest in the life of the insured. b" If a person who insures the life of another person and name himself as bene%ciary must have an insurable interest in such life &2ec. <" c" If the policy is taken by a Frd party, not the insured, on the life of the insured the Frd party designates himself as the bene%ciary, is it necessary that the Frd party must have an insurable interest on the life insured. &life and health of the insured" F rd person must have an insurable interest at the time of the taking of the policy. (*=()*T> The bene%ciary of the property insurance must have an insurable interest in such property which must exist only at time the policy takes e0ect but also when the loss occurs. =T)4 Heneral *ule4 The designation of bene%ciary is revocable )xception4 Dhen the insured did not expressly reserved his right to revoke the designation of the bene%ciary, such designation is irrevocable and he cannot
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change the bene%ciary without the consent of the latter. &A signature of the bene%ciary must be obtain" Case of Hilario Gercio v. Sunlife Insurance f bene&ciary is re.ocabe, can the o+ner e*ercise a rights and !ri.ieges of the !oicy? >)2. The insured can exercise all the rights and privileges of the policy. /o+ about if irre.ocabe bene&ciary, can he e*ercise "change any right in the !oicy( What are the eects? =. The e0ect would be that the insured #A=T4 a. Assign the policy; b. Take the #ash 2urrender -alue of the policy; c. Allow his creditors to attach or execute on the policy; d. Add new bene%ciary; or e. #hange the irrevocable designation to revocable, even though the change is 'ust and reasonable. istinguish insurabe interest in ife from !ro!erty( ife
ro!erty
when should it exist
At the time the insurance takes e0ect
as to bene%ciary
no need to have insurable interest on his life. unlimited
as to limit of the amount
At the time the insurance takes e0ect and at the time of loss although it need not exist in the meantime must have insurable interest over the property insured only to the extent of the amount insured
s it !ossibe #om!usory /eir has an insurabe nterest on the !ro!erty of the testator during the ifetime of said testator o, compulsory heir has no existing interest over the property of the testator while he is still alive. What is a genera #reditor? loans money without any collateral •
oes a genera creditor ha.e an insurabe nterest o.er the !ro!erty of his debtor? =, he is not the owner. As to the debt, he has an insurable interest but not to the property. ebtor, insurabe nterest o.er the !ro!erty of the creditor ? /o+ about the heath of the creditor? one to both of them. Dhen creditor dies, debt is extinguished. istinguish 'tandard or Union ortgage #ause from 5!en or oss ayabe #ause? 'tandard or Union ortgage #ause
5!en or oss ayabe #ause
2ubse!uent act of the mortgagor cannot a0ect the right of the assignee
Acts of the mortgagor a0ect the mortgagee. *eason4 mortgagor does not ?/(age
Mortgagee perform the acts of mortgagor #lause included wherein the insurance interest of the mortgagee shall not be invalidated by any act of the mortgagor or owner of the property at the time (rotects mortgageeKs interest from invalidation due to mortgagorKs acts.
cease to be a party to the contract &sec. J" Mortgage that can be paid+o0 to maturity without penalty Mortgagee is the bene%ciary for insurance taken by the mortgagor Acts of mortgagor invalidates the insurance
What is a standard" union mortgage #ause 2tandard or union mortgage clause $ incorporation in an insurance (olicy, leads to the creation of a separate contract between the insurer and the mortgagee empowers the mortgagee to collect payment from the insurer even if the policy is void or voidable with regard to the mortgagor.
5!en"oss !ayabe mortgage cause? There is only one contract and the act of the mortgagor, It refers to an insurance (olicy is a provision that authorie payment of proceeds to the mortgagee. @oss1payable clause designates the person as a bene%ciary of the proceeds or assigns to the person a claim against the insurer but the clause does not treat the person as an additional insured. Acts of the mortgagor a0ects the mortgagee.
(*=7@)M4 (edro, a most valued employee of enith manufacturing #orporation for the past :< years. Le was insured by his employer with itself as the bene%ciary. Cenith has a house in Bavier )states and they let (edro use the house. The house was also insured by Cenith as the bene%ciary. 7oth of policies were up to ec. F, :<. ow on une ?, :<, (edro retired from the company. As part of his retirement package, the title of Bavier )states was transferred to his name. =n uly J, :<, the house was burned resulting to (edroKs death. a. Dho could recover the insurance taken from the life of (edroE b. Dho can recover on the insurance taken from the house at Bavier )statesE Ans4 a" = =) can recover b" Cenith corporation can recover the policy of (edroKs life because insurable interest of life may not exist at the time of death and being the bene%ciary thereof. Juy 16, 2014 #hange of interest General rule: &2ec. :<" #hange of interest in any part of the thing insured unaccompanied by a change in the interest in the insurance, suspends the insurance to an e!uivalent extent, until the interest in the thing and the interest in the insurance is vested in the same person. Exception: &sec.:< +:5" . in case of life, health and accident insurance &2ec. :<" :. Dhen a change in interest results after the occurrence of an in'ury which results in a loss &2ec. :"
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F. #hange in interest in one or more several distinct things separately insured by one policy &2ec. ::" 5. #hange in the interest by will or succession on the death of the insured &2ec. :F" ?. Transfer of interest by one of several partners, 'oint owners in common 'ointly insured to the others &sec.:5" 6. The policy is so framed that it will not inure to the bene%t of whom so ever during the continuance of the N become the owner of the thing &sec. :9" 9. It is an express condition against the alienation of policy in case of alienation of insurance contract is suspended but avoided &art. F<6 of #ivil #ode" )xample4 Change of interest after the occurrence of an injury B insured his house then the house burn. After the house was burn B assigned the policy to >. #an > collectE =. At the time the insurance was taken and at the time of the loss B has insurable interest not > despite the assignment of (=@I#> A3T)* TL) =##**)#) =3 @=22. Change of interest by one or more several distinct things B insured his two cars Toyota and Londa worth :<<,<<< and paid the premium of 6,<<< thereon. Le sold Toyota when the policy was still e0ect without the consent of the insurer. @ater Londa su0ered a total loss due to accident. #an he collect from the insurerE Ans4 a" =. 2ince the two cars are =T separately valued in the policy and the premium was meant to cover both vehicles. In this case, the sale of one thing a0ects the insurance of the others. Change of interest by will or succession (edro insured his house worth million. Dhile the policy is still in e0ect (edro died, can (ablo his only son collect on insurance even before the transfer of the policy in his nameE >)2. #hange of interest by will or succession on the death of the insured does not avoid the insurance and his interest in the insurance passes to the person taking his interest in the thing insured. Transfer of interest by one of several partners (edro, uan and (ablo are partners of C store. They insured the store against %re insurance for F<<,<<<. Dhile the policy is still in e0ect (ablo sold his interest to (edro. The store was burn, can uan and (edro collect the insuranceE Ans4 >)2. (ablo who sold his interest to a partner &(edro" thus a transfer of interest by one of several partners, 'oint owners in common, who are 'ointly insured to the others does not avoid the insurance even though it has been agreed that the insurance shall cease upon the alienation of thing insured. e.ices used of ascertaining the ris7 of oss . #oncealment :. *epresentation F. Darranties 5. #onditions ?. )xceptions What is conceament? A neglect to communicate that which a party knows and ought to communicate.
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When is there conceament? *e!uisites4 There is concealment &sec.F8" a. when the party knows the fact and neglects to disclose it to the other party b. the fact that he conceals is material to the risk c. such part is duty bound to disclose such fact to the other d. such party makes no warranty the of the fact that he conceals e. the other party has not the means of ascertaining the fact that he conceals s the fact of fraud necessary to rescind an insurance contract on the ground of conceament? =. #oncealment whether intentional or unintentional entitles the in'ured party to rescind the contract. &2ec. :9" When is fraud aect insurance contract? Intentional or fraudulent concealment applies only to matters tending to prove falsity of warranty. &2ec. :J" Juy 21, 2014 8est of materiaity? When is a fact materia it needs to be discosed? A fact is material facts if it a0ects1inOuence the insurer Ps decision to 4 a. enter into the contract b. estimate the risk c. %x the premium When is the obigation to discose the materia fact be made so as not to a.oid the contract on the ground of conceament? 7efore e0ectivity of the contract s the insured obigated to communicate the fact ac$uired after the eecti.ity of the !oicy? = more Wi it cance the insurance if he +i not communicate? Wi there be conceament? =. Insured is not obligated to disclose and there is no concealment. f there +as aready an a!!ication but before the eecti.ity of the !oicy, is there a need for the insured to communicate the materia fact ac$uired after the a!!ication has been made? + If the material fact has been ac!uired after the e0ectivity of the policy he is =T oblige to communicate the same, thus there could be no concealment to negate the contract. Heneral rule4 If ac!uired after the application has been made but before the e0ectivity of the insurance, the insured is bound to make disclosure )B#)(TI=4 when the e0ectivity is made to retroact to the date of application. &sec.F+F?" What are the instances +hen there is no conceament e.en if the facts +ere not communicated %3 instances)? a. Dhen the insurer is expected to know the material fact b. Dhen the insurer is deemed to waive its disclosure c. Dhen the insurer issued the policy without further in!uiry with re to the perfectly answered Insurance application
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n +hat instance is an o!inion considered a materia fact that needs to be communicated? n +hat 7ind of insurance? When is it materia? In life insurance, it is =T material In marine insurance, opinion is material What is the eect or conse$uence of conceament? 9*em!tion? Heneral *ule4 concealment vitiates the contract and has the right of rescission. )xemption4 when the insurer waives and with regard to incontestability clause where A3T)* a life insurance policy is made payable on the death of the insured and shall have been in force during the lifetime of the insured for a period of atleast :years from the date of its issue or of its reinstatement, the insurer cannot prove that the (=@I#> I2 -=I A7 IITI= or rescindable by reason of fraudulent concealment or misrepresentation of the insured or his agent. + Marine insurance regarding concealment4 element that the other party has not the means of ascertaining the fact concealed. What is an ncontestabiity #ause? + *e!uisite4 . The policy is a life insurance policy :. It is payable on the death of the insured F. It has been in force during the lifetime of the insured for a period of :years from the date of its issue or of its last reinstatement. The period of :yrs can be shortened but it cannot be extended. When must an insurer e*ercise right of rescission? =+@I3) + Must be exercised prior to the commencement of an action on the contract @I3) + The defense is available only during the %rst two years of a life insurance policy or upon the %rst :yrs after reinstatement s the fact of fraud necessary to rescind the insurance contract on the ground of conceament? =. sec. :9. A concealment whether intentional or unintentional, entitles the in'ured party to rescind the contract of insurance. 2ec.:J4 An intentional and fraudulent omission, on the part of insured, to communicate information of matters proving or tending to prove the falsity of a warranty , entitles the insurer to rescind. When is it A:rmati.e? When is it romissory? AGrmative $ aGrmation of fact when the contract begins (romissory $ promise to be performed after the policy was issued.
Dhat is the e0ect1conse!uence of representationE Dhen can the party rescindE &2ec. 5?" Dhat are the exceptions that the misrepresentation entitles the insurer to rescind at the time the representation becomes falseE &Dhen insurer accepts payment of premium, and when incontestability clause applies in case of life insurance." #an the insurer still rescind based on misrepresentation after an action has been commencedE &2ec 58 $ prior to the commencement of an action"
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istinguish Darranties from *epresentation : Qinds of #ondition to an insurance contract4 #ondition (recedent and #ondition 2ubse!uent. Juy 22, 2014 What is re!resentation? A factual statements made by the insured at the time of, or prior to, the issuance of the policy to give information to the insurer and induce him to enter into an insurance contract. What . :. F.
are the 7inds of e!resentation? =ral or written & sec. F6" Made before or at the time of the issuance of the insurance policy &2ec. F9" AGrmative&sec. FJ" and (romissory&2ec. 5:"
What is misre!resentation? There is misrepresentation when4 a. The insured stated the fact something which is untrue b. 2uch fact was stated with the knowledge that it is untrue and with intent to deceive or which he state positively as true knowing it to be true and which has a tendency to mislead c. 2uch fact is material to the risk. istinguish #onceament from isre!resentation In concealment the insured is silent when he is ought to speak while in misrepresentation the insured stated the fact which is not true. What is the eect of misre!resentation? Misrepresentation or false statement intentionally made by the insured entitles the insurer to rescind the contract from the time the representation becomes false. )xcept in life insurance when the policy had been in force orN e.ices used in ascertaining the ris7 of oss; " #oncealment, :" *epresentation F" Darranty 5" #onditions ?" )xception What is a Warranty? A statement or promise by the insured set forth in the policy or by reference incorporated therein, the untruth or non+ful%llment of which in any respect, and without reference to whether insurer was in fact pre'udiced by such untruth or non+ ful%llment, renders the policy -=IA7@) by the insurer. What are the 7inds of Warranties? )xpress, Implied, AGrmative, (romissory, What is the eect of a breach of +arranty? H))*A@ *@)4 in case of breach of warranty entitles to insurer to *)2#I the contract )B#)(TI=4
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. :. F. =ther
@oss occurs before the time of performance of the warranty (erformance become unlawful at the place of contract (erformance becomes impossible warranties includes N.
What a. b. c. d.
are the defenses <58 barred by ncontestabiity #ause; The person taking the insurance lacked insurable interest as re!uired by law The case of the death of the insured is an excepted risk (remiums have not been paid The conditions of the policy relating to military or naval services have been violated e. The fraud is particularly of vicious type f. 7ene%ciary failed to furnish proof of death or to comply with any conditions imposed g. Action was not brought within the time speci%ed.
What is a !oicy in insurance? &2ec. 5J" A written instrument in which a contract of insurance is set forth. What are the basic contents of a !oicy? &2ec. ?" It must specify4 a. The parties b. The amount of insurance except in open policy c. rate of premium d. property or life insured e. insurable interest in property insurance, if the insured is not the absolute owner f. risk insured against g. duration of insurance s !oicy necessary for the !erfection of contract? + In insurance contract, the insured is the one applying while the insurer accepts the o0er by approving the application. 7ut the mere submission does not perfect the contract but it is the approval of the policy and the corresponding payment of premium that perfected the contract. + If the insured sent the application and pays the premium to the insurer can recover the when the insured died after the approval of the contract. Lowever, cannot recover when the insured had perished before the application was approved.
s the !resentation of insurance !oicy necessary to reco.er from the insurance? Heneral *ule4 (resentation of policy is not necessary to recover from the insurance &Asian Terminal Inc. v. Malayan Insurance H*. R 95<6, April 5, :<" )B#)(TI=4 . If issue raised arose from the very existence of an Insurance #ontract &Malayan Insurance Inc. v. *egis 7rokerage, Inc. H*. R 9:?6, ov. :F, :<<9" :. In order to determine extent of coverage &Dallem (hil. 2hipping Inc. v. (rudential Huarantee Assurance Inc. H* R ?:?8, 3eb. 9, :<
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damage to the cargo occurred such that the insurer should be made liable for it &Lome Insurance #orporation v. #A, H* R
Is the insured re!uired to sign in all kinds of policiesE &o. #ountersigns only in *iders, Darranties, #lauses, and )ndorsements, except when made or applied for by the insured or owner for himself." Is a policy necessary for the perfection of the insurance contractE Dhat is re!uired for the perfection of the insurance contractE &Approval of application and payment of premiums prefects the contract of insurance." What are the 7inds of oicy? 9*!ain each( =pen -alued *unning What are the grounds for the canceation of the !oicy by the insurer? &2ec. 65" What are the re$uisites to be com!ied +ith by the insurer for the canceation of the contract? &otice re!uirement $ to the insured."
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