INSURANCE (Atty. Minda Gapuz) ELEMENTS: COC-II-ER-AR-S-P 1. 2. 3. 4. 5. 6.
Consent, object, consideration insurable interest exposure of risk insured against assumption of risk scheme of distributing loss premium
Insurance is – • • •
an agreement for a consideration to indemnify another against LOSS, DESTRUCTION, OR LIABILITY • arising from an unknown or contingent event A past event may be covered by MARINE INSURANCE, provided that the loss of vessel in the past could not be known by ordinary means of communication. Characteristics: R-I-A-U-C
1. Risk-distributing (contribution of all to a 2. 3. 4. 5.
certain fund will be used for the payment of insurance of one – insurance fund) Contract of indemnity (exchange of value for value – aleatory or uncertain) ** waging contract depends on chance Contract of adhesion (fine print rule, policy already approved by the commission; generally construed in favor of the insured) Uberrimae Fides contract (utmost good faith contract; disclose facts) Consensual contract (perfected from the time of meeting of minds with respect to object, cause, or consideration)
In insurance, the insurer is the OFFEROR because the insured is the one who applies. If there is no policy given, then there is no acceptance by the insurance company or the insured, there is no meeting of the minds. INSURABLE INTEREST The relationship with a person or interest to benefit from the person or the thing insured. • protect the person or the thing because of the PECUNIARY BENEFIT and to prevent PECUNIARY LOSS • every interest in property, real or personal, of such nature that a contemplated peril might directly damnify the insured • Generally , mistress cannot be insured by a married man. However, if he derives pecuniary interest from such mistress (support), it is the designation
only as a spouse that is void. He can still insure the life of the mistress. • Illegitimate child can be insured because the law does not distinguish what kind of child should be insurable. (sec. 6)The insurer must be registered under the laws of the Philippines through the insurance commissioner. • for regulation purposes • for the fine print rule • WHO/WHAT MAY NOT BE INSURED: Public enemy Paramour Wager (any chance or ticket in a lottery drawing a prize) (sec. 10) INSURABLE INTEREST IN LIFE AND HEALTH: (Family, depend – E/S, debtor, other dependents) 1. Of himself, his spouse, and of his children 2. Of any person on whom he depends wholly or in part for education or support, or in whom he has a pecuniary interest 3. Or anyone who has legal obligations to him for the payment of money or respecting property or services of which death or illness might delay or prevent the performance; 4. Of any person whose life any estate or interest vested in him depends. (sec. 11)The insured shall have the right to change the beneficiary he designated in the policy, unless he has expressly waived this right: IRREVOCABLE BENEFICIARY A beneficiary in a life insurance policy or segregated fund contract whose compensation cannot be changed without his or her consent. The interest of the beneficiary in the insurance policy will be FORFEITED if he willfully brings about or causes the death of the insured, whether he is the principal, accomplice, or accessory to the crime. With this, the nearest relative of the insured shall receive the proceeds of the insurance as long as that person is not disqualified. (sec. 14) An insurable interest in property consist in: 1. An exiting interest; 2. An inchoate interest founded on an existing interest; 3. An expectancy coupled with an existing interest from which the expectancy arises. A carrier or depository has insurable interest to the thing he holds to the extent of his liability only. (sec. 19) The interest in the property insured must exist when the insurance takes effect (e.g. when claiming under the insurance) and when the loss occurred. It may not exist in the meantime (if the
insurance is not yet for claiming or when the risk insured against has not yet happened). The interest in the life or health of a person insured must exist when the insurance takes effect (when claiming) but need not exist thereafter or when the loss occurs. (sec. 20) In case of property insurance, a change in interest in any part of a thing insured, unaccompanied by a corresponding change in the insurance, suspends the insurance to an equivalent extent, until the interest in the thing and the interest in the insurance are vested in the same person. - if there is change in the interest in the thing without change in the interest in the insurance (policy), the insurance is deemed suspended. It will continue when the interest in the thing and interest in the insurance is vested in the same person.
5. Those which relate to a risk exempted from the policy and which are not material. Generally, if there is concealment or misrepresentation, the contract (policy) is VOID. - Because there is deceit or fraud in obtaining the consent of the insurer with the conditions of the policy. - The insurer is entitled to rescind the contract. CANCELLATION VS. RESCISSION Cancellation
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A change in interest in the thing insured after the loss does not affect the right of the insured to indemnity for the loss. If the insured dies, such death does not avoid insurance and his interest in the insurance passes to the person taking his interest in the thing insured. DEVICES TO CONTROL THE RISKS used by the insurer: 1. Concealment (a neglect to communicate that which a party knows or ought to communicate) 2. Warranties (additional contracts: riders; a promise not to do something after the execution of the contract) 3. Misrepresentation ( when all the facts fail to correspond with the represented assertions or stipulations) 4. Exceptions (placed in the policy itself) 5. Those which are not placed in the policy as the risk insured against. (if a particular risk is not the one insured against, e.g. fire, it cannot be covered by the insurance policy) CONCEALMENT and MISREPRESENTATION • (sec. 27) The fact that there is concealment, whether intentional or not, the insurer can RESCIND the contract. Exceptions: (sec. 30) 1. Those which the other knows; 2. Those which the other ought to know in the exercise of ordinary care, and of which the former has no reason to suppose him ignorant; 3. Those of which the other waives communication; 4. Those which prove or tend to prove the existence of a risk excluded by a warranty and which are not material;
• Rescission
insurance for a certain period, the premium paid within the unexpired period where the property is insured for more than its value the interest was not exposed to the peril insured against void ab initio – no insurable interest contract is voidable (fraud or misrepresentation of insurer) premium should be returned
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there is fraud, concealment, misrepresentation in obtaining the insurance policy • no return of premium • right to rescind should be exercised prior to the commencement of an action in the contract (before any claim is made) The right to rescind granted by law to the insurer is waived by the acceptance of premium payments despite the knowledge of the ground for rescission. THE FACT CONCEALED NEED NOT BE THE CAUSE OF THE LOSS OR DEATH. INCONTESTABILITY CLAUSE If the concealment or misrepresentation has been discovered after 2 years from the time the policy was enforced (executed), insurer INSURER CANNOT RESCIND the policy. The 2-year period is enough for him to investigate. The incontestability clause is applicable only in life or industrial life insurance, except when EXPRESSLY applied in non-life insurance. In life and industrial life insurance – the computation for incontestability clause will be from the date of reinstatement which starts on the date of payment. (example: 6-months grace period, and the insured paid premium on the 4th months, the computation starts from the 4th month)
In non-life insurance (health or casualty or medical insurance), if there is no clear stipulation in the contract regarding concealment, the rule on concealment from the code should be followed; if there are stipulations against concealment as exception, the insurer is NOT liable. Concealment is only an affirmative defense in not paying the insured if there is no express stipulation against it. The contract cannot be rescinded automatically by the insurer. The non-payment of premium does not affect the incontestability rule, if the policy has been issued and payment has already been acknowledged. Incontestability clause cannot be invoked when: 1. failure to pay premium – no premium no pay 2. material concealment found within 2 years from the enforcement of the policy 3. there is no insurable interest (void ab initio) 4. no proof of death 5. willful act (to expose the subject to the risk insured against) 6. exempted risk MATERIALITY OF CONCEALED FACT - Determined by the probable and reasonable influence of the facts upon the insurer in forming his estimate of the disadvantages of the proposed contract or in making his inquiries. Each party in the contract is bound to know all the general causes which are open to his inquiry which may affect the material perils contemplated. The right to information of material facts may be waived, either by the terms of the insurance of by neglect of the other party to make inquiry as to such facts. POLICY – the contract of insurance Cover notes – temporary insurance issued pending the issuance of insurance policy which usually lasts for 60 days. It may be extended with the written approval of the commissioner if he determines that such extension is not contrary to any provision of the insurance code. (sec. 58) The mere transfer of a thing insured does not transfer the policy, but suspends it until the same person becomes the owner of both the policy and the thing insured. OPEN POLICY – a policy in which the value of the thing insured is not agreed upon, but is left to be ascertained in case of loss. (the value of the thing at the time of the loss)
VALUED POLICY – a policy which expresses on its face an agreement that the thing insured shall be valued at a specific sum. (the value of the thing stated in the policy) RUNNING POLICY – a policy which contemplates successive insurances, and which provides that the object of the policy may be from time to time defined by additional statements or indorsements. (insured shall make inventory of the properties every now and then to the insurer) (sec 64) The commencement of an action under the insurance should not be less that one year from the time when the cause of action accrues (refusal of the insurer to pay the insured), otherwise, the agreement as to the time is void. Grounds for RESCISSION of Policy: 1. non-payment of premium 2. conviction of a crime arising out of acts increasing then hazard insured against 3. discovery of fraud or material misrepresentation 4. discovery of willful or reckless acts or omissions increasing the hazard insured against 5. physical changes (material alteration) to the property insured which result in the property becoming uninsurable 6. determination by the commissioner that the continuation of the policy would violate the code or would place the insurer in violation of the code 7. Breach of warranty. ** As long as the activity does not change the risk, the insurer is still liable. CASH AND CARRY PROVISION - no premium, no insurance - except: 1. In life or in industrial life insurance – because there is a grace period in which the insured has already been entitled to the insurance without having paid the premiums for the agreed period. 2. In case of temporary receipt or acknowledgment of premium by the insurer (even if there is actually no payment yet) through the principle of ESTOPPEL. However, the insured is not exempt from payment of the proceeds of insurance. - if there is credit: for as long as the insured paid within the period stipulated, and the insured paid even after the loss, the insurer is liable. - If the insurer willingly accepted the payment even after loss, the insurer is lable. 3. If the payment was given to the agent of the insurer, the act of the agent is the act of the principal. The insurer is still liable. 4. The insurer is liable as long as the check has sufficient funds.
Insurance by installment – If the insured paid a part of the insurance, and the property has been damaged or lost before the completion of premium, the insurer should pay the insured, but the insured is still liable to pay the proceeds of the insurance. CAN A POLICY BE TRANSFERRED? LIFE insurance – can always be transferred even without the consent of the insurer. PROPERTY insurance – could only be transferred with the consent of the insurer. - insurable interest must exist at the time of execution and risk, but may not exist in the mean time; suspended until the insurable interest and the policy is vested in the same person. PROXIMATE CAUSE – cause which was uninterrupted by any event, without which, the injury would not have occurred. ** With FIRE INSURANCE – as ling as fire is the proximate cause, whatever the immediate cause is, the insurer is still liable. WARRANTIES - These are promises written in the insurance, wherein the insured and the insurer signed, and appended the same in the policy. - If there is breach, the insurer may rescind the policy. - If there is insurer’s knowledge of breach of contract by the insured, and he did not take action, and the insured still received insurance money, the insurer is ESTOPPED from the return of such money. FIRE INSURANCE - Proximate cause of loss should be fire - May include fire caused by natural disaster. - Property must be consumed by fire, or when the reason for loss or damage is caused by trying to save the property (water damages or theft), or when the wall of the house collapsed to another infrastructure because of the fire… there is a right to claim from the insurer. - If the proximate cause is excepted from the liabilities stipulated in the policy, the insurer is not liable for the loss (example: explosion) - FRIENDLY FIRE: the fire is on that place where it is supposed to burn. If the fire escapes from where it is supposed to burn, it becomes HOSTILE fire. THE INSURERE IS STILL LIABLE EVEN IF THE IMMEDIATE CAUSE OF THE LOSS IS NOT THE PERIL INSURED, AS LONG AS THE PROXIMATE CAUSE IS THAT PERIL INSURED.
MARINE INSURANCE - Covers all risks in the shipment or navigation of a vessel, including the goods shipped, profits, and the ship itself. - CHARTERER (lessee) has insurable interest with the freightage of the goods. - Owner of the VESSEL has insurable interest with the vessel itself and the goods - Owner of the GOODS has insurable interest with the goods themselves. - INSURABLE: o Any peril during the voyage o Any peril for a certain period o Ay peril for a certain voyage - PERILS OF THE SHIP : ordinary wear and tear of the ship, ordinary occurrences in the voyage - PERILS OF THE SEA: unexpected and inevitable circumstances and casualties due to the violence of the sea (INCH MARIE CLAUSE) Implied warranty of sea worthiness – ship is reasonably fit to perform service and must be able to encounter the ordinary perils of the voyage. It is not limited to the physical structure of the vessel, but must be laden with the proper equipment, machinery, crew members, and food for passengers. Implied warranties of the ship: 1. W. of seaworthiness 2. W. that the vessel will not deviate from the route 3. W. that the vessel will not engage in illegal papers 4. W. that the vessel has the proper documents IN THE ABSENCE OF ANY STIPULATION, ONLY THE PERILS OF THE SEA IS INSURED, UNLESS “ALL-RISK POLICY” IS STIPULATED. ALL-RISK POLICY – exempting clauses arte important; concealment will not vitiate the contract except when such concealment is the cause of damage or loss. BAREBOAT or DEMISE charter - charterer: ship becomes common carrier - the real owner: becomes private carrier, tasked to observe diligence of a good father of a family VOYAGE OR TIME CHARTER- AFREIGHTMENT - the owner of the vessel is the common carrier (extraordinary diligence) - shipper is a private carrier INSURABLE INTEREST IN MARINE INSURANCE:
Shipper – cargo, expected profits Charterer – the ship and the goods Ship-owner – the ship itself
No fault indemnity clause – right to claim without proving fault or negligence; made on the vehicle within which the injured is riding at the time of the accident; indemnity not exceeding PhP 5,000; proof for claim – medical cert, or death cert, or police report of the accident.
RESPONSIBILITY OF THE SHIPPER - should look for a seaworthy ship - INSURER should investigate first the seaworthiness of the ship before paying the claimant.
3 party suit against insurer – depends on the policy (sometimes, the person at fault pays first, then the insurer pays afterwards)
CONCEALMENT IN MARINE INSURANCE - opinion of 3rd persons are material and must be disclosed (example: Pag-asa report, Engineer of the ship report on the machine of the ship) - if due to concealment, there was loss or damage, that us the only time that the insurer may rescind the contract - CANNOT RESCIND contract with the following grounds: o National character of the ship o Falsified or simulated documents o Illegal goods/contraband GENERAL AVERAGE LOSS – damages and expenses incurred for the salvation of the cargo or ship from a real or known risk everybody benefits! PARTICULAR AVERAGE LOSS – damages and expenses incurred not for the common benefit of all but only for particular or certain persons. CONSTRUCTIVE TOTAL LOSS – if the owner of the vessel would spend more than ¾ of the value of the vessel to save it, or if the injury reduced the value of the thing insured for more than ¾. – the owner should abandon everything to the insurer, so the insurer would look for something to salvage from it. The insurer will pay the value of the vessel. – Need to notify the insurer immediately, must be made within reasonable time after receipt of reliable information of the loss HOW ABANDONMENT IS MADE: 1. notice (generally in writing) to the insurer 2. notice should be made explicitly stating the cause of abandonment 3. if oral notice is made, there should be a written notice within 7 days from the oral notice VEHICLE INSURANCE Comprehensive insurance for vehicles – all risk insurance
Compulsory 3rd party liability - the purpose is to give financial assistance to victims of motor vehicle accidents or their dependents Compulsory motor vehicle liability insurance - contract of insurance against liability for death or bodily injuries of passengers or 3rd parties arising from motor vehicle accidents PROCESS UNDER COMPULSORY 3RD PARTY LIABILITY 1. File notice of claim within 6 months from date of accident. Include cert. of physician. 2. Prescriptive period- action should be filed in: a. Insurance commission – less than Php 100,000 claim b. RTC – more that Php 100,000 claim
3. 4.
Within 1 year from denial of claim (with stipulation) or 10 years (without stipulation) If there is agreement, the insurer should make payment within 5 days of Compulsory 3rd party liability; If there is no agreement, insurer shall pay “no fault indemnity” without prejudice to pursue claim further. The insurer has the right of subrogation to sue for recovery against the vehicle at fault.
Authorized drivers clause – driver should be duly licensed or with permission, even if the license is fake. - Expired license of the driver (not the insured himself) is not authorized driver. Theft Clause – if there is theft clause and the vehicle is unlawfully taken, insurer is liable under the clause and authorized driver clause DOES NOT APPLY. Insured can recover even if thief has no license. OVER INSURANCE – same property insured for greater value; insured is entitled to ratable return of premium proportioned to the amount by which the aggregate sum insured exceeds the insurable value of the thing at risk. DOUBLE INSURANCE – 2 or more insurance, same property, not exceeding value of property RE-INSURANCE – taken by the original insurer to insure his liability
SETTLEMENT OF CLAIMS: 1. Notice of loss given within reasonable time: so that the insurer will have ample time to investigate on the loss/ destruction/ death. 2. Notice of claim to the insurer should be given within 6 months after notice of loss. Submission of evidence of loss. 3. Insurer should pay a. NON-LIFE – 30 days after proof of loss is received by the insurer, and the loss/ damage has been ascertained through agreement or arbitration; b. NON-LIFE – 90 days after receipt of proof of loss, and the ascertainment had not been made within 60 days after such receipt; c. LIFE INSURANCE – immediately upon maturity of policy (except when payable in installments or as an annuity, they are payable as they become due); d. LIFE INSURANCE - within 60 days from filing of proof of death. DOUBLE INTEREST DOCTRINE – The insurer must pay immediately upon maturity, otherwise, the insurer pays: (12% interest per annum x 2) of the principal + other damages at 6% per annum WHEN DOES THE CAUSE OF ACTION ACCRUE? - upon final denial of the claim - MR filed in the insurance company does not affect the prescriptive period. ** When the insurer pays, there is the right of subrogation. The insurer steps into the shoes of the insured. Need not be stipulated. ** Subrogation does not apply in: - LIFE insurance - or when the insurer released the wrong doer - or when he pays for a risk which is not covered by the policy - or when he pays more than the value of the insurance.
