Insurance – transferring and distributing risks

A contract

• Insurer
• Insured
• Indemnify a thing from risk

Contract of insurance

(a) A contract of insurance is an agreement

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

A contract of suretyship
shall be deemed to be an insurance contract, within the meaning of this Code,
only if made by a surety who or which, as such,
is doing an insurance business as hereinafter provided.

(b) The term doing an insurance business or transacting an insurance business, within the meaning of
this Code, shall include:

(1) Making or proposing to make,

as insurer,
any insurance contract;

(2) Making or proposing to make,

as surety,
any contract of suretyship as a vocation
and not as merely incidental
to any other legitimate business or activity of the surety;

(3) Doing any kind of business, including a reinsurance business,

specifically recognized
as constituting the doing of an insurance business within the meaning of this Code;

(4) Doing or proposing to do any business in

substance equivalent to any of the foregoing in a manner designed to evade the provisions of this Code.

In the application of the provisions of this Code,

the fact that no profit is derived
from the making of insurance contracts, agreements or transactions or that no separate or direct
consideration is received therefor,
shall not be deemed conclusive to show that the making thereof does not constitute the doing or
transacting of an insurance business.

Elements of doing an insurance contract

1. Insurable interest
2. Risk of loss or damage
3. Designated peril as a cause
4. Consideration/premium
5. Risk distributing scheme

Characterstics

Aleatory – parties bind themselves

to give or to do something
of what the other
shall give or do
upon
the happening of the event

Not a contract of chance. Distribution of loss

Executory and conditional – after payment

insured has wholly executed his part
still executory
to the insurer
upon happening of event

Contract of adhesion

Personal contract – does not follow property

Uberrimae fides – good faith

Voluntary and consensual – autonomy to contract

Synallagmatic – dual obligations. Insured pays. Insurer is obligated to protect even when event does not
arise

Other similar agreements

1. Nature of agreement is important to know the ff

a. Governing law
b. Authority of officers
c. Liability of parties
2. Warranty – if beyond warranties of seller, insurer
3. Pre-need
a. Before law amendment, it was ultimately not considered as insurer. Pre-need corps do
not pay out. They distribute
 b. Now, pre-need code puts it under the IC anyway
4. P&I club - a P&I Club is a mutual insurance association engaged in the marine insurance
business. Thus, it needs a license from the Insurance Commissioner.

Pre-need plans

1. Education
2. Pension
3. Life memorial

Kind of insurance in the code

1. Life - Every contract or undertaking for the payment of annuities including contracts for the
payment of lump sums under a retirement program where a life insurance company manages or
acts as a trustee for such retirement program shall be considered a life insurance contract for
purposes of this Code
a. Includes annuities
b. Problematic because annuities are payouts when one dies. No life insurade
c. Industrial life – employer pays. Empoyer is agent of insurer
d. Kinds
i. Whole life – pay regularly
ii. Limited payment plan – pay in specific period
iii. Term plan – plan is for specific period subject to renewal
iv. Pure endowment plan – face value paid at survival. If insured dies before expiry,
no liability
v. Endowment plan – payment if insured lives or dies at period
2. Marine –
a. Vessels, craft, vehicles, good
b. Person or prop in connection with marine
c. Precious stones
d. Bridges, tunnels piers instrumentalities to transpo
e. tpl
3. Fire – fire, lightning, windstorm, tornado or earthquake and other allied risks when covered
4. Casualty - tpl
5. Suretyship – guarantee performance of obligation

Other modes

1. Private – contractual v Public – compulsory by law

2. First party v tpl
3. risks

Construction – strict against insurer. Liberal against insured