REVIEWER IN INSURANCE

1. CONTRACT OF INSURANCE ( Sec2 par.2 IC)

- An agreement whereby one undertakes for a consideration to indemnify
another against loss, damage or liability arising from an unknown or
contingent event

2. REQUISITES/ ELEMENTS

a. A subject matter which the insured has an insurable interest

b. A promise to pay or indemnify in a fixed or ascertainable amount.
c. A consideration known as the premium
d. Meeting of the minds among parties
e. Event or peril insured against maybe any future contingent or unknown event,
past or future and duration for the risk thereof

3. ESSENTIAL CHARACTERISTICS
a. Consensual – it is perfected by the meeting of the minds of the parties
b. Voluntary – the parties may incorporate such terms and conditions as they may
deemed convenient.
c. Aleatory - it depends upon some contingent event
d. Unilateral - imposes legal duties only on the insurer who promises to
indemnify in case of loss
e. Conditional - It is subject to conditions the principal one of which the
happening of the event insured against
f. Contract of indemnity - except life and accident insurance, a contract of
insurance is a contract of indemnity whereby the insurer promises to make
good only to the loss of the insured.

4. WHY IS INSURANCE A RISK DISTRIBUTING DEVICE AND NOT A RISK SHIFTING DEVICE?

Answer:

5. WHO ARE THE PARTIES?

 a. INSURER – person who undertakes to indemnify another
b. INSURED – the party to be indemnified upon the occurrence of the loss. He
must have capacity to contract, must possess insurable interest in the subject
of the insurance and must not be a public enemy.
c. BENEFICIARY - A person designated to receive proceeds if the policy when risk
attaches.

6. PUBLIC ENEMY - a person or citizen of a country of which the Philippines is at war..

7. BENEFICIARY RULES : (Sec 12 of the Insurance Code)

Sec. 12. The interest of a beneficiary in a life insurance policy shall be forfeited when
the beneficiary is the principal, accomplice, or accessory in willfully bringing about the
death of the insured; in which event, the nearest relative of the insured shall receive
the proceeds of said insurance if not otherwise disqualified.

Note : If the policy is silent, the proceeds shall go to the estate.

8. CONTRACT OF SURETY
- Sec. 175. A contract of suretyship is an agreement whereby a party called
the surety guarantees the performance by another party called the
principal or obligor of an obligation or undertaking in favor of a third party
called the obligee. It includes official recognizances, stipulations, bonds or
undertakings issued by any company by virtue of and under the provisions
of Act No. 536, as amended by Act No. 2206.

LIFE PROPERTY
Must exist only at the time o the policy Must exist at the time the policy takes
takes effect and need not exist at the effect AND when the loss occors
time of loss.
Unlimited, except in life insurance Limited to actual value of interest in the
effected by creditor on life of debltor property insured
Expectation of benefit to be derive from Expectation of benefit to be derive from
the continued existence of life need not the continued existence of the property
have any legal basis insured need to have any legal basis
The beneficiary need not have an The beneficiary must have an insurable
insurable interest over the life of the interest over the property insured
insured if the insured himself secured the
policy. However, if the life insurance was
obtained by the beneficiary, the latter
must have insurable interest over the life
of the insured
“ Mere negligence on the part of the insured will not prevent recovery under the insurance
policy. The law merely prevents recovery when the cause of the loss is the willful act of the
insured , alone or in connivance with others ( Section 87 of the IC)

V. TYPES OF INSURANCE CONTRACTS

1. Life insurance
a. Individual life (Secs. 179–183, 227)
b. Group life (Secs. 50, last par., 228)
c. Industrial life (Secs. 229–231)

2. Non-life insurance
a. Marine (Secs. 99–166)
b. Fire (Secs. 167–173)
c. Casualty (Sec. 174)

3. Contracts of bonding or suretyship (Secs. 175–178)

Note:
1. Health and accident insurance are either covered under life (Sec. 180) or casualty
insurance. (Sec. 174).
2. Marine, fire, and the property aspect of casualty insurance are also referred to as
property insurance.

INSURABLE INTEREST
A. In General
 A person has an insurable interest in the subject matter if he is so connected, so
situated, so circumstanced, so related, that by the preservation of the same he shall
derive pecuniary benefit, and by its destruction he shall suffer pecuniary loss, damage
or prejudice.

B. Life

 Every person has an insurable interest in the life and health:

a. of himself, of his spouse and of his children;
b. of any person on whom he depends wholly or in part for education or support;
c. of any person under a legal obligation to him to pay money or respecting
property or services, of which death or illness might delay or prevent
performance; and
d. of any person upon whose life any estate or interest vested in him depends.
(Sec. 10)
 When it should exist: When the insurance takes effect; not thereafter or when the
loss occurs.

 Amount:

GENERAL RULE: There is no limit in the amount the insured can insure his life.

EXCEPTION: In a creditor-debtor relationship where the creditor insures the life of

his debtor, the limit of insurable interest is equal to the amount of the debt.

Note: If at the time of the death of the debtor the whole debt has already been paid,
the creditor can no longer recover on the policy because the principle of indemnity
applies.

C. Property

 Every interest in property whether real or personal, or any relation thereto, or

liability in respect thereof, of such nature that the contemplated peril might directly
damnify the insured (Sec. 13), which may consist in:
1. an existing interest;
2. any inchoate interest founded on an existing interest; or
3. an expectancy coupled with an existing interest in that out of which the
expectancy arises. (Sec. 14)

 When it should exist: When the insurance takes effect and when the loss occurs,
but need not exist in the meantime.

 Amount: The measure of insurable interest in property is the extent to which the
insured might be damnified by loss or injury thereof. (Sec. 17)

PREMIUM PAYMENTS
 Consideration paid an insurer for undertaking to indemnify the insured against a
specified peril.

 Basis of the right of the insurer to collect premiums: Assumption of risk.

GENERAL RULE: No policy issued by an insurance company is valid and binding until
actual payment of premium. Any agreement to the contrary is void. (Sec. 77)

EXCEPTIONS:
1. In case of life or industrial life insurance, when the grace periods applies; (Sec.
77)
2. When the insurer makes a written acknowledgment of the receipt premium; (Sec.
78)
3. Section 77 may not apply if the parties have agreed to the payment of the
premium in installments and partial payment has been made at the time of the
loss. (Makati Tuscany Condominium Corp. v. CA, 215 SCRA 462)
4. Where a credit term has been agreed upon. (UCPB vs. Masagana Telemart, 308
SCRA 259)
5. Where the parties are barred by estoppel. (UCPB vs. Maagana Telemart, 356 SCRA
307)

 Section 77 merely precludes the parties from stipulating that the policy is valid
even if the premiums are not paid. (Makati Tuscany Condominium Corp. v. CA, 215
SCRA 462)

Effect of Acknowledgment of Receipt of Premium in Policy: 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. (Sec. 78)

ENTITLEMENT OF INSURED TO RETURN OF PREMIUMS PAID

A. Whole:
1. If the thing insured was never exposed to the risks insured against; (Sec. 79)
2. If contract is voidable due to the fraud or misrepresentation of insurer or his
agents; (Sec. 81)
3. If contract is voidable because of the existence of facts of which the insured
was ignorant without his fault; (Sec. 81)
4. When by any default of the insured other than actual fraud, the insurer never
incurred liability; (Sec. 81)
5. When rescission is granted due to the insurer’s breach of contract. (Sec. 74)
B. Pro rata:
1. When the insurance is for a definite period and the insured surrenders his
policy before the termination thereof;
 Exceptions:
a. policy not made for a definite period of time
b. short period rate is agreed upon
c. life insurance policy
2. When there is over-insurance (Sec. 82);

Instances when premiums are not recoverable:

1. When the risk has already attached and the risk is entire and indivisible.
2. In life insurance.
3. When the contract is rescindable or rendered void ab initio by the fraud of the
insured.
 4. When the contract is illegal and the parties are in pari delicto.

TRANSFER OF POLICY

1. Life Insurance

 It can be transferred even without the consent of the insurer except when there is
a stipulation requiring the consent of the insurer before transfer. (Sec. 181)

 Reason: The policy does not represent a personal agreement between the insured
and the insurer.

2. Property insurance

 It cannot be transferred without the consent of the insurer.

 Reason: The insurer approved the policy based on the personal qualification and
the insurable interest of the insured.
3. Casualty insurance
 It cannot be transferred without the consent of the insurer. (Paterson cited in de
Leon p. 82)
 Reason: The moral hazards are as great as those of property insurance.

Devices used for ascertaining and controlling risk and loss:

1. Concealment – A neglect to communicate that which a party knows and ought to

communicate (Sec. 26)

 Requisites:

a. A party knows a fact which he neglects to communicate or disclose to the

other.

b. Such party concealing is duty bound to disclose such fact to the other.

c. Such party concealing makes no warranty as to the fact concealed.

d. The other party has not the means of ascertaining the fact concealed.

Representations – 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 the insurance contract. They are considered an active form of concealment.

 Requisites of a false representation (misrepresentation):

a. The insured stated a fact which is untrue.

 b. Such fact was stated with knowledge that it is untrue and with intent to
deceive or which he states positively as true without knowing it to be true and
which has a tendency to mislead.

c. Such fact in either case is material to the risk.

Warranties – Statement or promise by the insured set forth in the policy or by

reference incorporated therein, the untruth or non-fulfillment of which in any
respect, and without reference to whether insurer was in fact prejudiced by such
untruth or non-fulfillment, renders the policy voidable by the insurer.

 Purpose: To eliminate potentially increasing hazards which may either be due to

the acts of the insured or to the change to the condition of the property.

 Kinds:

a. EXPRESS – an agreement expressed in a policy whereby the insured stipulates that

certain facts relating to the risk are or shall be true, or certain acts relating to the
same subject have been or shall be done.

b. IMPLIED - it is deemed included in the contract although not expressly mentioned.

Example: In marine insurance, seaworthiness of the vessel.

 Effects of breach of warranty:

a. Material

GENERAL RULE: Violation of material warranty or of a material provision of a policy

will entitle the other party to rescind the contract. (Sec. 74)

EXCEPTIONS:
a. Loss occurs before the time of performance of the warranty.
b. The performances becomes unlawful at the place of the contract.
c. Performance becomes impossible. (Sec. 73)

. INCONTESTABILITY CLAUSE

 Clause in life insurance policy that stipulates that the policy shall be incontestable
after a stated period.

 Requisites:
1. Life insurance policy
2. Payable on the death of the insured
3. It has been in force during the lifetime of the insured for a period of at least two
years from the date of its issue or of its last reinstatement

Note: The period of 2 years may be shortened but it cannot be extended by

stipulation.
Incontestability only deprives the insurer of those defenses which arise in connection
with the formation and operation of the policy prior to loss. (Prof. De Leon, p. 173
citing Wyatt and Wyatt, p. 878)

RESCISSION

 Grounds:

A. Concealment

B. Misrepresentation

C. Breach of material warranty

D. Breach of a condition subsequent

 Waiver of the right to rescind: Acceptance of premium payments despite the

knowledge of the ground for rescission. (Sec. 45)

 Limitations on the right of the insurer to rescind:

1. Non-life – such right must be exercised prior to the commencement of an action on

the contract;

2. Life – such right must be availed of during the first two years from the date of
issue of policy or its last reinstatement; prior to “incontestability.” (Sec. 48)

CANCELLATION OF NON-LIFE INSURANCE POLICY

 Right of the insurer to abandon the contract on the occurrence of certain grounds
after the effectivity date of a non-life policy.

 Grounds:
1. Non-payment of premium;
2. Conviction of a crime out of acts increasing the hazard insured against;
3. Discovery of fraud or material misrepresentation;
4. Discovery of willful or reckless acts of omissions increasing the hazard insured
against;
5. Physical changes in property making the property uninsurable; and
6. Determination by the Insurance Commissioner that the continuation of the policy
would violate the Insurance Code. (Sec. 64)

DOUBLE INSURANCE – exists where same person is insured by several insurers

separately in respect to same subject and interest. (Sec. 93)
 Requisites:
1. Person insured is the same;
2. Two or more insurers insuring separately;
3. Subject matter is the same;
4. Interest insured is also the same;
5. Risk or peril insured against is likewise the same.

 Effects: Where double insurance is allowed, but over insurance results: (Sec. 94)
1. The insured, unless the policy otherwise provides, may claim payment from the
insurers in such order as he may select, up to the amount for which the insurers
are severally liable under their respective contracts;
2. Where the policy under which the insured claims is a valued policy, the insured
must give credit as against the valuation for any sum received by him under any
other policy without regard to the actual value of the subject matter insured;
3. Where the policy under which the insured claims is an unvalued policy he must
give credit, as against the full insurable value, for any sum received by him under
any policy;
4. Where the insured receives any sum in excess of the valuation in the case of
valued policies, or of the insurable value in the case of unvalued policies, he must
hold such sum in trust for the insurers, according to their right of contribution
among themselves;
5. Each insurer is bound, as between himself and the other insurers, to contribute
ratably to the loss in proportion to the amount for which he is liable under his
contract.

OVER-INSURANCE – results when the insured insures the same property for an amount
greater than the value of the property with the same insurance company.

 Effect in case of loss:

1. The insurer is bound only to pay to the extent of the real value of the property
lost;
2. The insured is entitled to recover the amount of premium corresponding to the
excess in value of the property;

REINSURANCE – a contract by which the insurer procures a third person to insure

him against loss or liability by reason of an original insurance (also known as
“Reinsurance Cession”). (Sec. 95)

 In every reinsurance, the original contract of insurance and the contract of

reinsurance are covered by separate policies.

LOSS, IN INSURANCE
 Injury or damage sustained by the insured in consequence of the happening of one
or more of the accidents or misfortune against which the insurer, in consideration of
the premium, has undertaken to indemnify the insured. (Bonifacio Bros. Inc. vs. Mora,
20 SCRA 261)

Loss for which insurer is liable

1. Loss the proximate cause of which is the peril insured against (Sec. 84);
2. Loss the immediate cause of which is the peril insured against except where
proximate cause is an excepted peril;
3. Loss through negligence of insured except where there was gross negligence
amounting to willful acts; and
4. Loss caused by efforts to rescue the thing from peril insured against;
5. If during the course of rescue, the thing is exposed

Loss for which insurer is not liable

1. Loss by insured’s willful act;

2. Loss due to connivance of the insured (Sec. 87); and
3. Loss where the excepted peril is the proximate cause.

Proximate Cause – An event that sets all other events in motion without any
intervening or independent case, without which the injury or loss would not have
occurred.

REQUISITES FOR RECOVERY UPON INSURANCE

1. The insured must have insurable interest in the subject matter;
2. That interest is covered by the policy;
3. There must be a loss; and
4. The loss must be proximately caused by the peril insured against.

PARTICULAR KINDS OF INSURANCE CONTRACT

XVI. MARINE INSURANCE

 Insurance against risks connected with navigation, to which a ship, cargo,

freightage, profits or other insurable interest in movable property, may be exposed
during a certain voyage or a fixed period of time. (Sec. 99)

 Coverage:
A.
1. Vessels, goods, freight, cargo, merchandise, profits, money, valuable papers,
bottomry and respondentia, and interest in respect to all risks or perils of
navigation;
2. Persons or property in connection with marine insurance;
3. Precious stones, jewels, jewelry and precious metals whether in the course of
transportation or otherwise; and
4. Bridges, tunnels, piers, docks and other aids to navigation and transportation.
(Sec. 99)
 Cargo can be the subject of marine insurance, and once it is entered into,
the implied warranty of seaworthiness immediately attaches to whoever is
insuring the cargo, whether he be the shipowner or not. (Roque v. IAC, 139
SCRA 596)

Classes of inland marine insurance: (Prof. De Leon, p. 325)

1. Property in transit – provides protection to property frequently exposed to loss
while it is transportation form one location to another.
2. Bailee liability - insurance for those who have temporary custody of the goods.
3. Fixed transportation property – they are so insured because they are held to be
an essential part of the transportation system such as bridges, tunnels, etc.
4. Floater – provides insurance to follow the insured property wherever it may be
located, subject always to the territorial limits of the contract.
 Insurable interest:
A.
1. Shipowner
a. Over the vessel to the extent of its value, except that if chartered, the
insurance is only up to the amount not recoverable from the charterer.
(Sec. 100).
b. He also has an insurable interest on expected freightage. (Sec. 103).
c. No insurable interest if he will be compensated by charterer for the value
of the vessel, in case of loss.
2. Cargo owner
 Over the cargo and expected profits (Sec. 105).
3. Charterer
 Over the amount he is liable to the shipowner, if the ship is lost or damaged
during the voyage (Sec. 106).

B.
In loans on bottomry and respondentia
 Repayment of the loan is subject to the condition that the vessel or goods,
respectively, given as a security, shall arrive safely at the port of destination.
1. Owner/Debtor
 Difference between the value of vessel or goods and the amount of loan.
(Sec. 101)
 2. Creditor/lender
 Amount of the loan

Note: If a vessel is hypothecated by bottomry, only the excess is insurable, since a

loan on bottomry partakes of the nature of an insurance coverage to the extent of the
loan accommodation. The same rule would apply to the hypothecation of the cargo
by respondentia. (Pandect of Commercial Law and Jurisprudence, Justice Jose Vitug,
1997 ed.)

IMPLIED WARRANTIES
1. Seaworthiness of the ship at the inception of the insurance (Sec. 113);
2. Against improper deviation (Sec. 123, 124, 125);
3. Against illegal venture;
4. Warranty of neutrality: the ship will carry the requisite documents of nationality
or neutrality of the ship or cargo where such nationality or neutrality is expressly
warranted; (Sec. 120)
5. Presence of insurable interest.

Seaworthiness
 A relative term depending upon the nature of the ship, voyage, service and goods,
denoting in general a ship’s fitness to perform the service and to encounter the
ordinary perils of the voyage, contemplated by the parties to the policy (Sec. 114).
GENERAL RULE: The warranty of seaworthiness is complied with if the ship be
seaworthy at the time of the commencement of the risk. Prior or subsequent
unseaworthiness is not a breach of the warranty nor is it material that the vessel
arrives in safety at the end of her voyage.
EXCEPTIONS:
1. In the case of a time policy, the ship must be seaworthy at the commencement of
every voyage she may undertake
2. In the case of cargo policy, each vessel upon which the cargo is shipped or
transshipped, must be seaworthy at the commencement of each particular voyage
3. In the case of a voyage policy contemplating a voyage in different stages, the ship
must be seaworthy at the commencement of each portion

Deviation
 A departure from the course of the voyage insured, or an unreasonable delay in
pursuing the voyage or the commencement of an entirely different voyage. (Sec.123)
 Instances:
1. Departure of vessel from the course of the sailing fixed by mercantile usage
2. Departure of vessel from the most natural, direct and advantageous route if
not fixed by mercantile usage
3. Unreasonable delay in pursuing voyage
4. Commencement of an entirely different voyage (Secs. 121-123)
 Proper -
a. When caused by circumstances outside the control of the ship captain or ship owner;
b. When necessary to comply with a warranty or to avoid a peril;
c. When made in good faith to avoid a peril;
d. When made in good faith to save human life or to relieve another vessel in distress
(Sec. 124)
 Effect: In case of loss, the insurer is still liable.
Improper - Every deviation not specified in Sec. 124 (Sec. 125).
 Effect: In case of loss or damage, the insurer is not liable. (Sec. 126)

LOSS
1. Total:
a. Actual -
i. Total destruction;
ii. Irretrievable loss by sinking;
iii. Damage rendering the thing valueless; or
iv. Total deprivation of owner of possession of thing insured. (Sec. 130)
b. Constructive -
i. Actual loss of more than ¾ of the value of the object;
ii. Damage reducing value by more than ¾ of the value of the vessel and of
cargo; and
iii. Expense of transshipment exceed ¾ of value of cargo. (Sec. 131, in relation
to Sec. 139)
 In case of constructive total loss, insured may:
1. Abandon goods or vessel to the insurer and claim for whole insured
value (Sec. 139), or
2. Without abandoning vessel, claim for partial actual loss. (Sec. 155)
2. Partial: That every loss which is not considered as a total loss (Sec. 128).

ABANDONMENT

 The act of the insured by which, after a constructive total loss, he declared the
relinquishment to the insurer of his interest in the thing insured. (Sec. 138)

 Requisites for validity:

1. There must be an actual relinquishment by the person insured of his interest in the
thing insured (Sec. 138);
2. There must be a constructive total loss (Sec. 139);
3. The abandonment be neither partial nor conditional (Sec. 140);
4. It must be made within a reasonable time after receipt of reliable information of
the loss (Sec. 141);
5. It must be factual (Sec. 142);
6. It must be made by giving notice thereof to the insurer which may be done orally
or in writing (Sec. 143); and
7. The notice of abandonment must be explicit and must specify the particular cause
of the abandonment (Sec. 144).

 Effects:
1. It is equivalent to a transfer by the insured of his interest to the insurer with all
the chances of recovery and indemnity (Transfer of Interest)(Sec.146)
2. Acts done in good faith by those who were agents of the insured in respect to the
thing insured, subsequent to the loss, are at the risk of the insurer and for his
benefit. (Transfer Of Agency)(Sec.148)

 If an insurer refuses to accept a valid abandonment, he is liable upon an actual

total loss, deducting form the amount any proceeds of the thing insured which may
have come to the hands of the insured. (Sec.154)

FIRE INSURANCE

 A contract by which the insurer for a consideration agrees to indemnify the insured
against loss of, or damage to, property by hostile fire, including loss by lightning,
windstorm, tornado or earthquake and other allied risks, when such risks are covered
by extension to fire insurance policies or under separate policies. (Sec. 167)

ALTERATION AS A SPECIAL GROUND FOR RESCISSION BY INSURER

 Requisites:
1. The use or condition of the thing is specifically limited or stipulated in the
policy;
2. Such use or condition as limited by the policy is altered;
3. The alteration is made without the consent of the insurer;
4. The alteration is made by means within the control of the insured;
5. The alteration increases the risk; (Sec. 168) and

CASUALTY OR ACCIDENT INSURANCE

 Insurance covering loss or liability arising from accident or mishap, excluding
those falling under other types of insurance such as fire or marine. (Sec. 174)

 Classifications:
1. Insurance against specified perils which may affect the person and/or property
of the insured. (accident or health insurance)
Examples: personal accident, robbery/theft insurance
 2. Insurance against specified perils which may give rise to liability on the part of
the insured for claims for injuries to or damage to property of others. (third party
liability insurance)
 Insurable interest is based on the interest of the insured in the safety of
persons, and their property, who may maintain an action against him in case of
their injury or destruction, respectively.
 Examples: workmen’s compensation, motor vehicle liability
 In a third party liability (TPL) insurance contract, the insurer assumes the
obligation by paying the injured third party to whom the insured is liable. Prior
payment by the insured to the third person is not necessary in order that the
obligation may arise. The moment the insured becomes liable to third persons,

SURETYSHIP
 An agreement whereby a surety guarantees the performance by the principal or
obligor of an obligation or undertaking in favor of an obligee. (Sec. 175)
 It is essentially a credit accommodation.
 It is considered an insurance contract if it is executed by the surety as a vocation,
and not incidentally. (Sec. 20
 When the contract is primarily drawn up by 1 party, the benefit of doubt goes to
the other party (insured/obligee) in case of an ambiguity following the rule in
contracts of adhesion. Suretyship, especially in fidelity bonding, is thus treated like
non-life insurance in some respects.

Nature of liability of surety

1. Solidary;
2. Limited to the amount of the bond;
3. It is determined strictly by the terms of the contract of suretyship in relation to
the principal contract between the obligor and the obligee. (Sec. 176)

INSURANCE COMMISSIONER

 Main agency charged with the enforcement of the Insurance Code and other
related laws.

 Functions:

1. ADJUDICATORY/QUASI-JUDICIAL

a. Exclusive original jurisdiction – Any dispute in the enforcement of any policy

issued pursuant to Chapter VI (CMVLI). (Sec. 385, par. 2)
 b. Concurrent original jurisdiction (with the RTC) – Where the maximum amount
involved in any single claim is P100,000 (Sec. 416), except in case of maritime
insurance which is within the exclusive jurisdiction of the RTC. (BP 129; admiralty &
maritime jurisdiction)

 Where the amount exceeds P100,000, the RTC has jurisdiction.

The Insurance Commissioner has no jurisdiction to decide the legality of a contract of

agency entered into between an insurance company and its agent. The same is not
covered by the term “doing or transacting insurance business” under Sec 2, ICP,
neither is it covered by Sec. 416 of the same Code which grants the Commissioner
adjudicatory powers (Philippine American Life Insurance Co. v. Ansaldo, 234 SCRA
509).

2. ADMINISTRATIVE/REGULATORY

a. Enforcement of insurance laws

b. Issuance, suspension or revocation of certificate of authority

c. Power to examine books and records, etc.

d. Rule-making authority

e. Punitive

LIABILITY OF INSURER IN CERTAIN CAUSES OF DEATH OF INSURED

1. Suicide
 Insurer is liable in the following cases:
1. If committed after two years from the date of the policy’s issue or its last
reinstatement;
2. If committed in a state of insanity regardless of the date of the commission
unless suicide is an excepted peril. (Sec. 180-A)
3. If committed after a shorter period provided in the policy
 Any stipulation extending the 2-year period is null and void.
2. At the hands of the law (E.g. by legal execution)
 It is one of the risks assumed by the insurer under a life insurance policy in the
absence of a valid policy exception. (Vance,p.572 cited in de Leon, p. 107)
Note: Justice Vitug believes that death by suicide (if the insured is sane) or at the
hands of the law obviates against recovery as being more in consonance with public
policy and as being implicit under Section 87, ICP. (Pandect of Commercial Law and
Jurisprudence, 1997 ed. P. 191)
3. Killing by the beneficiary
GENERAL RULE: The interest of a beneficiary in a life insurance policy shall be
forfeited when the beneficiary is the principal accomplice or accessory in willfully
bringing about the death of the insured, in which event, the nearest relative of the
insured shall receive the proceeds of said insurance if not otherwise disqualified.
(Sec. 12)

EXCEPTIONS:
1. Accidental killing
2. Self-defense
3. Insanity of the beneficiary at the time he killed the insured

 If the premiums paid came from conjugal funds, the proceeds are considered
conjugal. If the beneficiary is other than the insured’s estate, the source of premiums
would not be relevant. (Del Val v. Del Val, 29 Phil 534)

The measure of indemnity in life or health insurance policy is the sum fixed in the policy except when a
creditor insures the life of his debtor. (Sec. 183)
IS THE CONSENT OF THE BENEFICIARY NECESSARY TO THE ASSIGNMENT OF A LIFE INSURANCE
POLICY?
 It depends. If the designation of the beneficiary is irrevocable, the beneficiary’s consent is essential
because of his vested right. If the designation is revocable, the policy may be assigned without such
consent because the beneficiary only has a mere expectancy to the proceeds. (The Insurance Code of
the Philippines Annotated, Hector de Leon, 2002 ed.)