Insurance Bar Review 2015

INSURANCE LAW REVIEW
2014
Ateneo de Davao
College of Law
Insurance Code of 2013

REPUBLIC ACT NO. 10607
AN ACT STRENGTHENING THE INSURANCE

INDUSTRY,
FURTHER
AMENDING
PRESIDENTIAL DECREE NO. 612, OTHERWISE
KNOWN AS "THE INSURANCE CODE", AS
AMENDED BY PRESIDENTIAL DECREE NOS.
1141, 1280, 1455, 1460, 1814 AND 1981,
AND BATAS PAMBANSA BLG. 874, AND FOR
OTHER PURPOSES
Framework
General
Concepts
Life Insurance
Non-Life
Insurance
Summary of
Amendments in
Insurance Code
Grounds for
Rescission
Payment of
Proceeds
PDIC Law
Insurance Code
General principles
Life Insurance
Non-Life Insurance
Payment of Proceeds
Rescission of insurance contracts
IMPORTANT CONCEPTS
Differences between life and
insurance
What is insurable interest
No-fault Indemnity Clause
Special rules in Industrial Life
Incontestability Clause
Unfair Settlement Practices Act
Illegal Acts in Collecting Claims
non-life
IMPORTANT CONCEPTS
Coverage under PDIC Law
Cash and Carry Rule
Effect of grace period
Cover notes Test of Materiality
Double Insurance
Rule in case of suicide
Ratable return of premiums
PART ONE:
GENERAL
PRINCIPLES
Concept
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 is deemed an
insurance contract only if made by a
surety who or which is doing an
insurance business as a vocation.
Elements
The
insured
has
insurable
interest or interest of some kind
susceptible
of
pecuniary
estimation
The insured is subject to a risk of
loss caused by the happening of
the designated perils;
Elements
The insurer assumes the risk of
loss;
Assumption is part of a general
scheme to distribute actual losses
among a large group of persons
bearing somewhat similar risks;
As consideration for the insurers
promise,
the
insured
pays
the
premium
Philippine HealthCare v.
CIR
ISSUE: Is a healthcare agreement in the nature of a
contract of insurance?
FACTS: Individuals enrolled in its health care
programs pay an annual membership fee.
They are entitled to various preventive, diagnostic
and curative medical services provided by its duly
licensed
physicians,
specialists
and
other
professional technical staff participating in the
group practice health delivery system at a hospital
or clinic owned, operated or accredited by it.
Philippine HealthCare v.
CIR
The DST under Section 185 of the 1997 Tax Code is
imposed on the privilege of making or renewing
any policy of insurance (except life, marine, inland
and fire insurance), bond or obligation in the
nature of indemnity for loss, damage, or liability.
RULING: The health care agreement is primarily a
contract of indemnity. A health care agreement is
in the nature of a non-life insurance policy.
Bar 2011
In return for the 20 years of faithful
service of X as a househelper to Y,
the latter promised to pay
Php100,000.00 to Xs heirs if he (X)
dies in an accident by fire. X
agreed. Is this an insurance
contract?
Bar 2011
A. Yes, since all the elements of an
insurance contract are present. B.
Yes, since X services may be
regarded as the consideration.
C. No, since Y actually made a
conditional donation in Xs favor.
D. No, since it is in fact an
innominate contract between X and
Y.
Answer
C. No, since Y actually made a

conditional donation in Xs
favor.
Principle of Subrogation
Process
substitution
of
legal
The insurer, after paying

the amount covered by the
policy, steps into the shoes
of the insured
Insurer avails of the rights

of the insured against the
wrongdoer
Insured
CANNOT
recover
from offender what was paid
by insured but can recover
any deficiency.
Applicable only in non-life

insurance (Philamgen v. CA)
Bar 2011
Where the insurer was made to
pay the insured for a loss covered
by the insurance contract, such
insurer can run after the third
person who caused the loss
through subrogation. What is the
basis for conferring the right of
subrogation to the insurer?
Bar 2011
A. Their express stipulation in the contract of insurance.
B. The equitable assignment that results from the insurers
payment
of
the
insured.
C. The insureds formal assignment of his right to
indemnification to the insurer.
D. The insureds endorsement of its claim to the insurer.
Answer
B. The equitable assignment that

results from the insurers payment
of
the
insured.
Bar 2014
ELP Insurance, Inc. issued Marine Policy No. 888 in
favor of FCL Corp. to insure the shipment of 132
bundles of electric copper cathodes against all
risks. Subsequently, the cargoes were shipped on
board the vessel "M/V Menchu" from Leyte to Pier
10, North Harbor, Manila.
Upon arrival, FCL Corp. engaged the services of
CGM, Inc. for the release and withdrawal of the
cargoes from the pier and the subsequent delivery
to its warehouses/plants in Valenzuela City. The
goods were loaded on board twelve (12) trucks
owned by CGM, Inc., driven by its employed drivers
and accompanied by its employed truck helpers. Of
the twelve (12) trucks en routeto Valenzuela City,
only eleven (11) reached the destination. One (1)
truck, loaded with eleven (11) bundles of copper
cathodes, failed to deliver its cargo.
Bar 2014
Because of this incident, FCL Corp. filed with ELP
Insurance, Inc. a claim for insurance indemnity in
the amount of P1,500,000.00. After the requisite
investigation and adjustment, ELP Insurance, Inc.
paid FCL Corp. the amount of P1,350,000.00 as
insurance indemnity.
ELP Insurance, Inc., thereafter, filed a complaint for
damages against CGM, Inc. before the Regional
Trial Court (RTC), seeking reimbursement of the
amount it had paid to FCL Corp. for the loss of the
subject cargo. CGM, Inc. denied the claim on the
basis that it is not privy to the contract entered
into by and between FCL Corp. and ELP Insurance,
Inc., and hence, it is not liable therefor. If you are
the judge, how will you decide the case? (4%)
Suggested Answer
If I were the judge, I will rule in favor
of ELP. While it is true that CGP is not
privy to the contract of ELP and FCL,
ELP has the right of subrogation.
In insurance law, an insurer, after
paying the claim of an insured, by
process of legal substitution, steps
into the shoes of the insured and can
proceed against an erring party or the
one who caused the loss.
Nature and
Characteristics
Aleatory
Contract of indemnity for non-life
and an investment for life
insurance
Personal
Executory and conditional on the
part of the insurer
Uberrimae fides
Adhesion
Bar 2012
An insurance contract is an aleatory contract, which
means:
A. The insurer will pay the insured equivalent to the
amount of premium paid
B. The obligation of the insurer is to pay depending
upon the happening of an uncertain future event
C. The insured pays a fixed premium for the duration
of the policy period and the amount of premiums paid
to the insurer is not necessarily the same amount that
the insured will get upon the happening of an
uncertain future event
D. The obligation of the insurer is to pay dependent
upon the happening of an event which is certain to
Answer
AleatoryA
contract
whose
performance by one party depends
on the occurrence of an uncertain
contingent event
ANSWER: B. The obligation of the
insurer is to pay depending upon
the happening of an uncertain
future event
Rule of Construction
Doubts are resolved in favor of the
insured
Since a contract of insurance is a

contract of adhesion, any obscure
word or stipulation in the insurance
policy shall be resolved against the
insurance company which drafted the
terms thereof (AMERICAN HOME V.
TANTUCO, OCTOBER 8, 2001)
Bar 2012
An insurance contract is a contract of adhesion, which
means in resolving ambiguities in the provision of the
insurance contract
A. The general rule is that, the insurance contract is to be
interpreted strictly in accordance with what is written
in the insurance contract
B. Are to be construed liberally in favor of the insured and
strictly against the insurer who drafted the insurance
policy
C. Are to be construed strictly against the insured and
liberally in favor of the insurer
D. If there is an ambiguity in the insurance contract, this
will invalidate the contract
ANSWER: B
Statute of Limitations
General Rule: 10 YEARS

from the time the cause of
action accrues.
Exception: Period may be
increased
or
decreased
BUT
Statute of Limitations
In industrial life: cannot be

shorter than SIX YEARS
in
all
other
kinds
insurance:
cannot
shorter than ONE YEAR.
of
be
Right of Action Accrues

Period is reckoned from the time
of the denial of the claim by the
insurer (Vda de Gabriel v. CA)
If there was no denial of the

claim, right of action does not
accrue
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 and
not merely
incidental to any other legitimate
business or activity of the surety.
Doing an Insurance
Business
doing any kind of business, including a
reinsurance
business,
specifically
recognized as doing insurance business
doing or proposing to do any business in
substance equivalent to any of the
foregoing
An entity can still be deemed engaged
even if he does not derive any profit
from the activity
NEW
MICROINSURANCE
Section 187. Microinsurance is a
financial product or service that
meets the risk protection needs of
the poor where:
(a) The amount of contributions,
premiums,
fees
or
charges,
computed on a daily basis, does not
exceed seven and a half percent
(7.5%) of the current daily minimum
wage rate for nonagricultural workers
in Metro Manila; and
NEW
MICROINSURANCE
(b) The maximum sum of guaranteed
benefits is not more than one thousand
(1,000) times of the current daily
minimum wage rate for nonagricultural
workers in Metro Manila.
Section 188. No insurance company or
mutual benefit association shall engage in
the business of microinsurance unless it
possesses all the requirements as may be
prescribed by the Commissioner. The
Commissioner shall issue such rules and
regulations governing microinsurance.
Regulation of the Insurance

Business
Insurance business is impressed
with public interest.
The public must be protected
against insolvency or unfair
treatment by insurers.
Regulation of the Insurance

Business
Insurance Commission is tasked to
regulate the conduct of insurance
business through licensing,
examination, investigation and
revocation
Regulation
of the Insurance
NEW
Business
The Commission is authorized to issue a
certificate of authority which shall expire on
the last day of December, 3 years following
its date of issuance,
This shall be renewable every 3 years
thereafter,
subject
to
the
companys
continuing compliance with the provisions of
this Code, circulars, instructions, rulings or
decisions of the Commission.
NEW
No LGU interference
"No insurance company issued with a valid certificate
of authority to transact insurance business anywhere
in the Philippines by the Insurance Commissioner,
shall be barred, prevented, or disenfranchised from
issuing any insurance policy or from transacting any
insurance business within the scope or coverage of
its certificate of authority, anywhere in the
Philippines,
by any local government unit or authority, for

whatever guise or reason whatsoever, including
under any kind of ordinance, accreditation system, or
scheme. Any local ordinance or local government unit
regulatory issuance imposing such restriction or
disenfranchisement on any insurance company shall
be deemed null and void ab initio.
FINANCIAL
REPORTING
NEW
FRAMEWORK
All companies regulated by the Commission, should
comply with the financial reporting frameworks
adopted by the Commission for purposes of creating
the statutory financial reports and the annual
statements to be submitted to the Commission.
Financial reporting framework means a set of
accounting and reporting principles, standards,
interpretations and pronouncements that must be
adopted in the preparation and submission of the
statutory financial statements and reports required
by the Commission.
Not the same as financial reporting framework used
to prepare the financial statements of SEC.
NEW
FINANCIAL
REPORTING
FRAMEWORK
Main purpose of the statutory statements: to present
important information about the level of risk and
solvency situation of insurers.
In prescribing the applicable statutory financial
reporting framework, the Commissioner shall take into
account international standards concerning solvency
and insurance company reporting as well as generally
accepted actuarial principles concerning financial
reporting promulgated by the Actuarial Society of the
Philippines.
The assets and investments discussed in Sections 204
to 215 shall be accounted for in accordance with this
section.
"The valuation of reserves shall be accounted for in
NEW
Regulation of Bancassurance
Section 375. The term bancassurance shall mean the
presentation and sale to bank customers by an
insurance company of its insurance products within the
premises of the head office of such bank duly licensed
by the Bangko Sentral ng Pilipinas or any of its branches
under
such rules and regulations
which
the
Commissioner and the Bangko Sentral ng Pilipinas may
promulgate.
To engage in bancassurance arrangement, a bank is not
required to have equity ownership of the insurance
company. No insurance company shall enter into a
bancassurance arrangement unless it possesses all the
requirements as may be prescribed by the Commissioner
and the Bangko Sentral ng Pilipinas.
NEW
Regulation of Bancinsurer
No insurance product under this section, whether life or
non-life, shall be issued or delivered unless in the form
previously approved by the Commissioner.
Section 376. Personnel tasked to present and sell
insurance products within the bank premises shall be duly
licensed by the Commissioner and shall be subject to the
rules and regulations of this Act.
"Section 377. The Commissioner and the Bangko Sentral
ng Pilipinas shall promulgate rules and regulations to
effectively supervise the business of bancassurance.
Regulation
NEW
of Insurance-Related
Entities
The Commissioner shall have the power to register as a selfregulatory organization, or otherwise grant licenses, and to
regulate, supervise, examine, suspend or otherwise discontinue,
as a condition for the operation of organizations whose
operations are related to or connected with the insurance
market such as, but not limited to, associations of insurance
companies, whether life or non-life, reinsurers, actuaries,
agents, brokers, dealers, mutual benefit associations, trusts,
rating agencies, and other persons regulated by the
Commissioner, which are engaged in the business regulated by
this Code.
Regulation
NEW
Entities
"The Commissioner may prescribe rules and
regulations which are necessary or
appropriate in the public interest or for the
protection of investors to govern selfregulatory organizations and other
organizations licensed or regulated pursuant
to the authority granted hereunder including,
but not limited to, the requirement of
cooperation within and among all participants
in the insurance market to ensure
transparency and facilitate exchange of
information.
Regulation
NEW
Entities
Section 431. An association cannot be registered as a self-regulatory organization
unless the Commissioner determines that:
(a) The association is so organized and has the capacity to be able to carry out the
purposes of this Code and to comply with, and to enforce compliance by its
members and persons associated with its members, with the provisions of this
Code, the rules and regulations thereunder, and the rules of the association.
(b) The rules of the association, notwithstanding anything in the Corporation Code
to the contrary, provide the following:
(1) Qualifications and the disqualifications on membership of the association;

(2) A fair representation of its members to serve on the board of directors of the
association and the administration of its affairs, and that any natural person
associated with a juridical entity that is a member shall also be deemed to be a
member for this purpose;
(3) Fair procedure for the disciplining of members and persons associated with
members; and
(4) The prohibition or limitation of access to services offered by the association or a
member thereof.
Regulation
NEW
Entities
(5) The president of the association and at least two (2)
independent directors as members of the board of directors
of the association;
(6) Equitable allocation of reasonable dues, fees, and other
charges among members and other persons using any
facility or system which the association operates or controls;
(7) The prevention of fraudulent and manipulative acts and
practices to protect the insuring public and the promotion of
just and equitable principles of business;
(8) Members and persons associated with its members
subject to discipline for violation of any provision of this
Code, the rules or regulations thereunder, or the rules of the
association;
Regulation
NEW
Entities
Section 432. A self-regulatory organization may
examine and verify the qualifications of an applicant
to become a member in accordance with procedures
established by the rules of the association.
A self-regulatory organization shall deny membership
or condition the membership of an entity, if it does
not meet the standards of financial responsibility,
operational capability, training, experience, or
competence that are prescribed by the rules of the
association; or has engaged, and there is a
reasonable likelihood it will again engage, in acts or
practices inconsistent with just and equitable
principles of fair trade.
Regulation
NEW
Entities
A self-regulatory organization may deny membership to an
entity not engaged in a type of business in which the rules
of the association require members to be engaged.
NEW
CAPITALIZATION
SECTION 194
PAID-UP CAPITAL FOR NEW domestic life or nonlife insurance company shall, in a stock corporation:
One
billion
pesos;
(P1,000,000,000.00):
Provided,
Domestic insurance company already doing business
in the Philippines;
net worth by June 30, 2013- P250 Million
by December 31, 2016- an P300 Million worth
By December 31, 2019- an additional P350 Million
worth
By December 31, 2022- an additional P400 Million
NEW
CAPITALIZATION
Pre-licensing requirement of a new
insurance company, in addition to the
paid-up capital stock, require the
stockholders to pay in cash to the
company
in
proportion
to
their
subscription interests a contributed
surplus fund of not less than P100
Million
May also require such company to
submit to him a business plan showing
the companys estimated receipts and
disbursements, as well as the basis
NEW
CAPITALIZATION
SECTION 197 Foreign Corporations
Unimpaired capital or assets and reserve: P1
Billion nor until it shall have deposited with the
Commissioner for the benefit and security of the
policyholders and creditors of such company in
the Philippines, securities satisfactory to the
Commissioner consisting of good securities of
the Philippines, including new issues of stock of
"registered enterprises as this term is defined in
E.O. 226 of 1987, as amended, to the actual
market value of not less than the amount herein
required
NEW
CAPITALIZATION
Section 289.
Any partnership, association, or corporation
authorized to transact solely reinsurance
business must have a capitalization of at least
Three billion pesos (P3,000,000,000.00)
paid in cash of which at least fifty percent
(50%) is paid-up and the remaining portion
thereof is contributed surplus, which in no
case shall be less than Four hundred
million pesos, (P400,000,000.00) or such
capitalization as may be determined by the
Secretary
of
Finance,
upon
the
recommendation of the Commissioner:
NEW
CAPITALIZATION
Provided, That (25%) of the paid-up capital must be
invested in securities satisfactory to the Commissioner, consisting of
bonds or other instruments of debt of the Government of the
Philippines or its political subdivisions or instrumentalities, or of
government-owned or -controlled corporations Provided, That
aforesaid
capital
requirement
is
without
prejudice to other requirements to be imposed
under any risk-based capital method that may
be adopted by the Commissioner: Provided, finally,
That the provisions of this chapter applicable to insurance
companies shall as far as practicable be likewise applicable to
professional reinsurers.
NEW
CAPITALIZATION
No mutual benefit association shall be
issued a license to operate as such
unless
it
has
constituted
and
established a Guaranty Fund by
depositing with the Commissioner an
initial minimum amount of Five million
pesos (P5,000,000.00) in cash, or in
government securities with a total value
equal to such amount, to answer for
any valid benefit claim of any of its
members.
Bar 2011
A group of Malaysians wanted to invest in the

Philippines
insurance
business.
After
negotiations, they agreed to organize "FIMA
Insurance Corp." with a group of Filipino
businessmen. FIMA would have a PhP50
Million paid up capital, PhP40 Million of which
would come from the Filipino group. All
corporate officers would be Filipinos and 8 out
of its 10-member Board of Directors would be
Filipinos. Can FIMA operate an insurance
business in the Philippines?
Bar 2011
A. No, since an insurance company must have at least
PhP75
Million
paid-up
capital.
B. Yes, since there is substantial compliance with our
nationalization laws respecting paid-up capital and Filipino
dominated Board of Directors.
C. Yes, since FIMAs paid up capital more than meets the
countrys nationalization laws.
D. No, since an insurance company should be 100% owned
by Filipinos.
Answer
A. No, since an insurance company
must have at least PhP75 Million
paid-up capital (based on DO 2706).
What may be insured against

DAMNIFY A
PERSON OR
CREATE LIABILITY
AGAINST HIM
CONTINGENT
EVENT
UNKNOWN EVENT
Contingent Event
An event which may or may not
happen
Example: Fire, accident, sinking of a
ship, theft
Unknown event
An event which is certain to happen
Aspect of being unknown is WHEN it will happen
Example: Death
Damnify v. Create a liability

Damnify - direct loss of a person
Create a liability - expose the
person to liability to third
persons. E.g. third party liability
insurance
NEW
Insurance by a married person
May take out an insurance on

his/her life or that of her children or
that of his/her spouse without the
consent of his/her spouse
Insurance by a minor
(Sec. 3)
Any minor may
contract for life, health and accident
insurance, with any insurance company
duly authorized to do business in the
Philippines
provided the insurance is taken on his
own life and
the beneficiary appointed is the minor's
estate or the minor's father, mother,
husband, wife, child, brother or sister.
NEW
Rights
of minor under life insurance
policies
When there is a contract of life, health, or accident insurance
involving a minor
The minors judicial guardian, father, or in the latters absence or
incapacity, the mother
In the absence of parents and grandparents, the eldest brother
or sister at least eighteen (18) years of age, or any relative who
has actual custody of the minor insured or beneficiary
May obtain a policy loan, surrendering the policy, receiving the
proceeds of the policy, and giving the minor's consent to any
transaction on the policy
If the amount does not exceed P500,000.00
Insurance by a minor
A property insurance taken by a
minor is voidable or valid until
annulled (1390)
If contract is not disaffirmed,
insurer cannot invoke minority to
escape liability.
Bar 2012
X, a minor, contracted an insurance on his own life.
Which statement is most accurate?
The life insurance policy is void ab initio.
The life insurance is valid provided it is with the
consent of the beneficiary.
The life insurance policy is valid provided the
beneficiary is his estate or his parents, or spouse or
child.
The life insurance is valid provided the disposition of
the proceeds will be subject to the approval of the
legal guardian of the minor.
ANSWER
The life insurance policy is valid
provided the beneficiary is his
estate or his parents, or spouse or
child.
dividual
Insurance
Life
Group
Non-Life
Industrial
Marine
Casualty
Fire
Suretyship
NEW
Life Insurance
Insurance
on
human
lives
and
insurance
appertaining thereto or connected therewith
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.
Classes
1. Individual protection is based on
individual
application.
2.
Group unit of selection is the group
rather than the
individual, blanket policy
covering a number of individuals
3.
Industrial premiums are payable
either monthly or oftener if the face amount
of insurance is not more than 500 times the
current statutory minimum wage in Metro
Manila.
Non-Life
Property insurance or
insurance whose object is
other than a persons life or
where the covered peril is
something other than death
Types: Fire
Includes insurance against loss by
fire, lightning, windstorm, tornado
or earthquake and other allied
risks, when such risks are covered
by extension to fire insurance
policies or under separate policies
Types: Casualty
Covers loss or liability arising from
accident or mishap, excluding
certain types of loss which by law
or custom are considered as falling
exclusively within the scope of
other types of insurance such as
fire, marine.
Types: Casualty
Includes but is not limited to
employers
liability
insurance,
workmens compensation insurance,
public
liability
insurance,
motor
vehicle liability insurance, plate
glass insurance, burglary and theft
insurance, personal accident and
health insurance written by non-life
companies.
Casualty: Compulsory
Motor Vehicle Liability OR
Third Party Liability
Insurance against passenger and third
party liability for death or bodily
injuries arising from motor vehicle
accidents
Required before an owner or operator
can use his vehicle
Required in registration or renewal of
registration
Bar 2014
As a rule, an insurance contract is consensual
and voluntary. The exception is in the case of:
(1%)
(A) Inland Marine Insurance
(B) Industrial Life Insurance
(C) Motor Vehicle Liability Insurance
(D) Life Insurance
Answer
(C) Motor Vehicle Liability Insurance
Compulsory Motor Vehicle Liability

OR Third Party Liability
Land transportation operator, the insurance guaranty in cash or surety
bond shall cover liability for death or bodily injuries of third-parties and/or
passengers arising out of the use of such vehicle in the amount not less
than Twelve thousand pesos (P12,000.00) per passenger or third -party
and an amount, for each of such categories, in any one accident of not
less than that set forth in the following scale:
(1) Motor vehicles with an authorized capacity of twenty-six (26) or
more passengers: Fifty thousand pesos; (P50,000.00);
(2) Motor vehicles with an authorized capacity of from twelve (12) to
twenty-five (25) passengers: Forty thousand pesos; (P40,000.00);
(3) Motor vehicles with an authorized capacity of from six (6) to eleven
(11) passengers: Thirty thousand pesos; (P30,000.00);
(4) Motor vehicles with an authorized capacity of five (5) or less
passengers: Five thousand pesos (P5,000.00) multiplied by the
authorized capacity.

(1) Private Cars
(i)
Bantam:
(P20,000.00);
Twenty
thousand
pesos
(ii)
Light:
Twenty
(P20,000.00); and
thousand
pesos
(iii)
Heavy:
(P30,000.00).
thousand
pesos
Thirty

(2) Other Private Vehicles
(i) Tricycles, motorcycles and scooters:
Twelve thousand pesos (P12,000.00);
(ii) Vehicles with an unladen weight of
2,600 kilos or less: Twenty thousand pesos
(P20,000.00);
(iii) Vehicles with an unladen weight of
between 2,601 kilos and 3,930 kilos: Thirty
thousand pesos (P30,000.00); and
(iv) Vehicles with an unladen weight over
3,930
kilos:
Fifty
thousand
pesos
(P50,000.00).
Types: Marine
vessels, craft, aircraft, vehicles, goods, freights,
cargoes,
merchandise,
effects,
bottomry,
respondentia interests
person or property in connection with or appertaining
to marine, inland marine, transit or transportation
insurance but excludes life insurance or surety bonds
or insurance against loss by reason of bodily injury to
any person who arising out of ownership,
maintenance or use of automobiles
Types: Marine
precious stones, jewels, jewelry, precious
metals,
whether
in
the
course
of
transportation OR otherwise
bridges, tunnels and other instrumentalities
of
transportation
and
communication
(excluding
buildings,
furniture
and
furnishings fixed contents and supplies held
in storage), piers, wharves, docks and slips
other aids of navigation, dry docks, marine
Types: Suretyship
An agreement whereby a party called
the surety guarantees the performance
of another party called the principal or
obligor of an obligation or undertaking
in favor of a third party called the
obligee.
Includes
official
recognizances,
stipulations, bonds or undertakings
issued by any company
At a glance
In an insurance contract, a person
indemnifies another person for his loss,
damage or liability
Any contingent or unknown event which
may damnify a person or create a liability
against him may be insured
The two main kinds of insurance are life
and non-life insurance
At a glance
A person can sue based on an insurance contract
within 10 years from the time the right of action
accrues
10-year period may be longer or shorter but
generally, cannot be shorter than one year and in
industrial life, cannot be shorter than 6 years
Doubts in interpreting insurance
resolved in favor of the insured
contracts
are
Framework
General
Concepts
Life Insurance
Non-Life
Insurance
Summary of
Amendments in
Insurance Code
Grounds for
Rescission
Payment of
Proceeds
PDIC Law
PART TWO:
LIFE INSURANCE
Agent
Procedure
offers a
person a
The person
life
files an
insurance
application
policy
for a policy.
He is
required
to
Insurance
pay the first
company
approves
the
premium
application and
when
issues a he
policy in
favor
of the
applies
person. In case
of disapproval,
Procedure
In case
the
contingen
cy
The
happens,
either
claimthe
is
policyhold
either
er or his
granted
designate
d
If
ordenied,
the claimant
beneficiari
denied
may
file a
es claim
case either
by
fromthe
the
in the
policy
insurance
insuran
commission
or the
regular
courts
depending
ce
compan
y
Topics in Stages 1 and 2

Rule in case of death by
suicide
Insurable Interest
Parties
Kinds of life insurance
Kinds of life insurance policies
Concept
Life Insurance - insurance

on human lives and
insurance appertaining
thereto or connected
therewith
NEW
Concept
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.
Classes
1. Individual protection is based on
individual
application.
2.
Group unit of selection is the group
rather than the
individual, blanket policy
covering a number of individuals
3.
Industrial premiums are payable
either monthly or oftener if the face amount
of insurance is not more than 500 times the
current statutory minimum wage in Metro
Manila.
Contingencies
death
survival for a specific period
continuance or cessation of life
What may be insured against?

Actual death
Living death
Retirement death
Actual Death
Cessation of life
Best proof of death: death
certificate
Policy matures upon the death

of the insured
Living Death
When the insured suffers from
disability due to disease or
accident which prevents him
from engaging in any lawful
occupation
Partakes the nature of health
and disability benefits
Living Death:
Accident and Health
accident
and
Health,
disability
insurance
are
deemed as both life and nonlife insurance and such may
be issued by either life or
non-life insurance companies
(Sec. 193, 9th par).
Living Death:
Accident and Health
Deemed life insurance

when death is one of the
risks
insured
against
(Gallardo v. Morales)
Accident
An event which happens without any
human agency or, if happening through
human agency, an event which under
the circumstances, is unusual and not
expected by the person to whom it
happens by reason of some violence or
casualty to the insured without his
design,
consent
or
voluntary
cooperation (Sun Insurance v. CA)
Death by suicide: compensable?
General Rule: NO.

BASIS:
Sec. 89 which provides that an insurer is
not liable if loss is caused by willful act or
connivance of the insured; and
the Rules of Court which provides that a
person is presumed to intend the
consequences of his voluntary acts
When is suicide compensable?

Section 183
If insured was not in his right mind/insane
at the time of suicide
If insured committed suicide after the policy
has been effective for at least 2 years from
issuance or last reinstatement
Note: The 2-year period can be shortened
but not lengthened
Bar 2012
X, on January 30, 2009, or two years before reaching the
age of 65, insured his life for P20 Million. For reasons
unknown to his family, he took his life 2 days after he
reached 65. The policy contains no excepted risk. Which
statement is most accurate?
A. The insurer will be liable
B. The insurer will not be liable
C. The state of sanity of the insured is relevant in order
to hold the insurer liable
D. The state of sanity of the insured is irrelevant in
order to hold the insurer liable
ANSWER
The insurer will be liable. The
suicide was committed after the
two-year period from the time the
policy was obtained. Further, there
is no excepted risk provision in the
policy. Hence, the beneficiaries are
entitled to the proceeds.
Retirement Death
Life Annuity debtor binds himself to

pay annual pension or income during
the life of one or more determinate
persons in consideration of a capital
consisting of money or other property,
whose ownership is transferred to him
at once with the burden of income
(Art. 2021, Civil Code)
Dynamics in Life Annuity
Annuitan
t
Annuit
ant
gives
money
to
insurer
Insurer
Insurer
becom
es the
debtor
Insurer
must
give
pensio
n to
annuit
End of
obligatio
n
Death
of
annuit
ant or
appoin
ted
person
s
Retirement Death
Annuitant gives money or property to the insurer
Insurer now becomes the debtor, and has the
obligation to give annual pension or income to
either the annuitant or another person
The obligation of insurer to give pension stops
upon the death of the annuitant
INSURABLE INTEREST
Insurable Interest in Life

A person cannot insure just anyone he wants
One has to establish that he stands to suffer
some loss because of the death of a person
Insurable interest ensures that a

person can only get a policy on the life
of someone whose death will produce
loss
Concept
Relation between the insured and a
particular event such that the happening
of the event will damnify or cause loss to
the person
PURPOSE FOR THE CONCEPT:
To avoid wagering
To avoid temptation of bringing about
the event
On whose life does a person

have
insurable interest?
himself, spouse, children
person on whom he depends
wholly or in part for education or
support or in whom he has a
pecuniary interest
On whose life does a person

have insurable interest?
any person who is under legal
obligation to him for payment of
money or respecting property or
services of which illness or death
might delay or prevent performance
any person upon whose life any
estate or interest vested in him
depends
Section 10(a)
Every person has unlimited

insurable interest in his own life
One also had insurable interest
in the life of his spouse and
children on the basis of love
and affection
Section 10(b)
Obligation to give support
Article 195, Family Code
Spouses, legitimate ascendants and
descendants
parents and their legitimate children and
legitimate or illegitimate children of the
latter
parents and their illegitimate children and
legitimate or illegitimate children of the
latter
legitimate brothers and sisters whether of
the full or half blood
Section 10(b)
Obligation to give support:
Article 196, Family Code
Brothers and sisters not legitimately
related,whether of the full or half
blood, are likewise bound to support
each other EXCEPT only when the
need for support of the brother or
sister, being of age, is due to a cause
imputable to the claimants fault or
negligence.
Blood relationship, affinity:

enough?
In cases not falling under 195
and 196, mere blood relationship
or affinity does not create
insurable interest
Examples: uncle, aunt, nephew,
niece,
cousins,
son-in-law,
brother-in-law, stepchildren
Section 10
Pecuniary Interest
Debtor-Creditor
Employer-Employee
Oriente v. Posadas
Business partners
El
Section
10(d)
Person in whose estate an
interest is dependent
Person is given the right to use a
house
Right ceases when the owner dies

and another person becomes the
owner
Bar 2011
X has been a long-time household
helper of Z. X's husband, Y, has
also been Z's long-time driver. May
Z insure the lives of both X and Y
with Z as beneficiary?
Bar 2011
A. Yes, since X and Y render services to Z.
B. No, since X and Y have no pecuniary
interest on the life of Z arising from their
employment
with
him.
C. No, since Z has no pecuniary interest in
the lives of X and Y arising from their
employment
with
him.
D. Yes, since X and Y are Zs employees.
Answer
C. No, since Z has no pecuniary

interest in the lives of X and Y
arising from their employment
with
him.
Bar 2011
X, Co., a partnership, is composed of A
(capitalist partner), B (capitalist
partner) and C (industrial partner). If
you were partner A, who between B and
C would you have an insurable interest
on, such that you may then insure him?
Bar 2011
A. No one, as there is merely a partnership
contract among A, B and C.
B. Both B and C, as they are your partners.
C. Only C, as he is an industrial partner.
D. Only B, as he is a capitalist partner.
Answer
B. Both B and C, as they are your
partners.
Bar 2014
Carlo and Bianca met in the La Boracay
festivities. Immediately, they fell in love with
each other and got married soon after. They
have been cohabiting blissfully as husband
and wife, but they did not have any offspring.
As the years passed by, Carlo decided to take
out an insurance on Biancas life for
P1,000,000.00 with him (Carlo) as sole
beneficiary, given that he did not have a
steady source of income and he always
depended on Bianca both emotionally and
financially.
Bar 2014
During the term of the insurance, Bianca died
of what appeared to be a mysterious cause so
that Carlo immediately requested for an
autopsy to be conducted. It was established
that Bianca died of a natural cause. More than
that, it was also established that Bianca was a
transgender all along a fact unknown to
Carlo. Can Carlo claim the insurance benefit?
(5%)
Suggested Answer
Carlo cannot recover from the insurance policy.
Insurable interest is necessary before a person can
obtain a life insurance policy on the life of another
person. Without insurable interest, there is no valid life
insurance policy.
Section 10 of the Insurance Code enumerates the
people on whom we have an insurable interest on, one
of which is ones legitimate spouse.
In the instant case, the marriage between Bianca and
Carlo is void ab initio since marriage must be between a
man and a woman. Since Bianca was a transgender,
there was never a valid marriage between Bianca and
Carlo. Carlo never had any insurable interest on the life
of Bianca and hence, cannot recover from the policy.
Bar 2014
On July 3, 1993, Delia Sotero (Sotero) took out a life insurance
policy from Ilocos Bankers Life Insurance Corporation (Ilocos Life)
designating Crescencia Aban(Aban), her niece, as her beneficiary.
Ilocos Life issued Policy No. 747, with a face value of P100,000.00,
in Soteros favor on August 30, 1993, after the requisite medical
examination and payment of the premium.
On April 10, 1996, Sotero died. Aban filed a claim for the insurance
proceeds on July 9, 1996. Ilocos Life conducted an investigation into
the claim and came out with the following findings:
1. Sotero did not personally apply for insurance coverage, as she
was illiterate.
2. Sotero was sickly since 1990.
3. Sotero did not have the financial capability to pay the premium
on the policy.
4. Sotero did not sign the application for insurance.
5. Aban was the one who filed the insurance application and
designated herself as the beneficiary.
Bar 2014
For the above reasons and claiming fraud,
Ilocos Life denied Abans claim on April 16,
1997, but refunded the premium paid on the
policy. (6%)
(A) May Sotero validly designate her niece as
beneficiary?
(B) May the incontestability period set in even
in cases of fraud as alleged in this case?
(C) Is Aban entitled to claim the proceeds
under the policy?
Suggested Answer
beneficiary?
Yes, Sotero has insurable interest on her own life and
can validly designate any beneficiary as long as it is
not against the law, public policy and morals. A
beneficiary is not required to have insurable interest
in life insurance.
Suggested Answer
(C) Is Aban entitled to claim the proceeds under the
policy?
No Aban is not entitled to the proceeds. She was the
one who obtained the policy on the life of her aunt on
whose life she did not have insurable interest. Since
she did not insurable interest, the policy is void.
Measure of Recovery of
Proceeds
GENERAL RULE: Face value of the
policy
Except: pecuniary estimation is

possible [10]
Special
Rule
on
Insurable
Interest in Industrial Life
Usual rules regarding insurable
interest are generally not made
applicable in industrial life because:
Proceeds are small, little danger to
induce a person to kill
Special Rule on Insurable Interest

in Industrial Life
Investigation
of
presence
of
insurable interest will nullify speedy
payment of proceeds under the
facility of payment clause
The costs to prove insurable
interest will destroy the purpose for
this type of insurance
PARTIES
Insured
Insurer
Cestui Que
Vie
Beneficiary
NEW
Insurer: Section 6
Every corporation, partnership, or
association, duly authorized to
transact insurance business as
elsewhere provided in this Code,
may be an insurer
Insurer
Insurance corporationscorporations formed or organized
to save any person or persons or
other corporations harmless from
any loss, damage or liability arising
from any unknown or contingent
event, or to indemnify or
compensate for such loss, damage
or liability or to guarantee
performance with contractual
obligations or payment of debts
Mutualization and Demutualization
Mutualization
A
shareholder-owned
company is converted into a mutual
organization, typically through takeover by an
existing mutual organization. A mutual
organization is customer-owned.
Demutualization -customer-owned mutual
organization or cooperative changes form to a
joint, stock company, sometimes called
stocking for privatization.
NEW
Demutualization
Section 280. A domestic mutual life
insurance company doing business in the
Philippines may convert itself into an
incorporated stock life insurance company by
demutualization. To that end, it may provide
and carry out a plan for the conversion by
complying with the requirements of this title.
"The conversion of a domestic mutual life
insurance company to an incorporated stock life
insurance company shall be carried out
pursuant to a conversion plan duly approved by
the Commissioner.
NEW
Demutualization
"The Commissioner shall promulgate such rules and
regulations as he or she may deem necessary to
carry out the provisions of this title, after due
consultation with representatives of the insurance
industry.
"All converted insurers under the provisions of this

title shall be subject to all other applicable provisions
of this Code. The provisions of the Corporation Code
shall apply in a suppletory manner.
Insured: Section 7
Anyone except a public enemy
may be insured.
Public enemy - citizen or
national of any country with
which the Philippines is at war
Bar 2000
May a member of the Moro

Islamic Liberation Front or its
breakaway group Abu Sayyaf
be insured with a company
licensed to do business under
the Insurance Code of the
Philippines? Explain (3%)
ANSWER
Yes, a member of the MILF or

the Abu Sayyaf may be
insured. Only a public enemy
cannot be insured. A public
enemy is a citizen or national
of a country with which the
Philippines is at war.
Insured
The person who must have insurable
interest
The person who pays the premiums
Commonly referred to as the
policyholder
Not necessarily whose life is used to
constitute the insurance policy
Insured: Rights
Right to borrow on the policy

227(g)
Right
to
participating
230(e)
dividends
if
policy 227(e);
Insured: Rights
Right to reinstatement 227(j);
230(j)
3 years from date of default in
individual
2 years from date of default in
industrial
payment of overdue premiums
evidence of insurability
Insured: Rights
Right to transfer/bequeathpass by transfer, will or
succession to any person
whether he has insurable
interest or not; notice to
insurer not required
Cestui Que Vie
Person on whose life the

insurance contract is
constituted
Can be any of those
enumerated under Section 10
NEW
Beneficiary
One who receives benefits

GENERAL
RULE:
Designation
of
beneficiary may be changed by insured
EXCEPTION: insured has expressly
waived his right to change
BUT, if there was no change of
beneficiary,
designation
is
IRREVOCABLE
Bar 2005
What are the effects of an irrevocable
designation of a beneficiary under the
Insurance Code? Explain (2%)
Jacob obtained a life insurance policy for
P1 M designating irrevocably Diwata, a
friend, as his beneficiary. Jacob changed
his mind and wants to include two other
friends as beneficiaries. Can Jacob still
add the two friends? (2%)
ANSWER
The irrevocable beneficiary has a vested
interest in the policy, including its incidents
such as the policy loan and cash surrender
value
Jacob cannot include the two friends as

additional beneficiaries as this would
diminish the interest of Diwata who is
irrevocably designated as beneficiary.
Diwata has to consent first to the inclusion.
Disqualified Beneficiaries
Article 2012 in relation to Article 739 of the
Civil Code
those made between persons who were
guilty of concubinage at the time of
donation
those made between persons found guilty
of
the
same
criminal
offense
in
consideration thereof
those made to a public officer or his
spouse, descendants and ascendants by
reason of his office
Beneficiary
Insular Life v. Ebrado, 80
SCRA 181 - The designation of a
common law wife is void. This
need only be proved by
preponderance of evidence, no
previous conviction is required
Beneficiary
Common-law spouses are, definitely, barred from receiving
donations from each other. Article 739 of the new Civil
Code provides:
The following donations shall be void:
1. Those made between persons who were guilty of
adultery or concubinage at the time of donation;
2. Those made between persons found guilty of the same
criminal offense, in consideration thereof;
3. Those made to a public officer or his wife, descendants
or ascendants by reason of his office.
In the case referred to in No. 1, the action for declaration
of nullity may be brought by the spouse of the donor or
donee; and the guilt of the donee may be proved by
preponderance of evidence in the same action.
If the beneficiary is disqualified
The estate of the insured

will be entitled to the
proceeds of the life
insurance policy.
Bar 1998
A was issued a policy on whole life
plan for P20,000. A is married to B
with whom he has 3 legitimate
children. However, A designated his
common-law wife C as the
beneficiary in his policy and referred
to C as his legal wife. When A died,
both B and C claimed the proceeds
of the insurance. Who is entitled to
ANSWER
The estate of A is entitled to the
proceeds. C is a disqualified
beneficiary because of the illicit
relation she had with A.
Bar 2012
X is the common law wife of Y. Y loves X so much that
he took out a life insurance on his own life making X as
the sole beneficiary. Y did this to ensure that X will be
financially comfortable when he is gone. Upon the
death of Y--A. X as the sole beneficiary in the policy of Y will be
entitled to the entire proceeds
B. Despite the designation of X, the proceeds will go to
the estate of Y
C. The proceeds will go the compulsory heirs of Y
D. The proceeds will be divided equally amongst X and
the compulsory heirs of Y
ANSWER
Common law spouses are barred from
donating to each other. Those who are
barred from being donees cannot be
beneficiaries in a life insurance policy.
Hence, X is a disqualified beneficiary
and the proceeds will go to the estate of
Y.
NEW
If beneficiary willfully causes

death of insured
If beneficiary WILLFULLY causes the death of the
insured/cestui:
The share forfeited shall pass on to the other
beneficiaries, unless otherwise disqualified.
In the absence of other beneficiaries, the
proceeds shall be paid in accordance with the
policy contract.
If the policy contract is silent, the proceeds
shall be paid to the estate of the insured.
If beneficiary dies before

insured
If beneficiary dies ahead of

the insured/cestui, the
estate of the insured will get
the proceeds
If no beneficiary
If beneficiary is not
designated, insureds estate
will get the proceeds
NOTE!!!
Only the insured or policyholder in life
insurance is required to have insurable
interest on the life of the cestui.
The beneficiary may or may not have

insurable interest on the life of the cestui.
What is vital is that the beneficiary is not
disqualified under the law to get the
proceeds.
Bar 2000
A is an elderly bachelor who took
out an individual life insurance
policy on his life. The designated
beneficiary is B a companion-friend.
A died in a fire which also
destroyed his home. The insurer
refused payment to B due to
absence of insurable interest on the
life of A. Is the insurer correct?
ANSWER
The insurer is wrong. B as the
beneficiary is entitled to collect
the proceeds. As a beneficiary in
a life insurance policy, B is not
required to have insurable
interest on the life of A. A had
insurable interest on his own life
and the policy was taken on his
LIFE INSURANCE POLICY
NEW
Form
GENERAL RULE: printed form

EXCEPTIONS: The policy may be in
electronic
form
subject
to
the
pertinent provisions of Republic Act
No. 8792, otherwise known as the
Electronic Commerce Act and to
such rules and regulations as may be
prescribed by the Commissioner.
Contains blanks where word, phrase,
clause, mark, sign necessary to complete
the policy are placed
Contents
Parties
amount to be insured
premium
life insured
risks
Required Provisions
Grace period provision provision which gives
the insured additional time to pay his premiums
from the due date
Clarifies the right to collect if death happens
within the grace period
Individual life 30 days/1 month
Group life 30 days/1 month
Industrial life 4 weeks or if payable monthly
30 days/1 month
Required Provisions
Entire contract provision
The policy shall constitute the
entire contract between the
parties
Required Provisions
Misstatement
of
age
provision if the age of the
insured is misstated, the amount
payable shall be as such
premium would have purchased
at the correct age
Required Provisions
Reinstatement
provision
clarifies
the
requirements
for
restoring a policy to premium-paying
status after it has lapsed.
Individual life within 3 years from
default
Group no reinstatement
Industrial life within 2 years from
default
Special Features
Loan privilege based on the
cash surrender value, the insured
may obtain a loan by pledging the
policy
Policy dividend options if the
policy
is
participating?,
the
policyholder is entitled to a share
of the surplus.
Special Features
Exemption from claims of creditors
protection against execution
Income tax treatment proceeds of life
insurance policies are generally tax exempt.
However, endowment proceeds and cash
surrender values are treated as income and
are taxable.
Special Features
Surrender
options/NONDEFAULT OPTIONS if the
policyholder cannot continue
paying the premiums, he has
some options which will not put
to waste what he has paid.
However, these options are
available only upon payment of
at least 3 annual premiums
Non-Default/Surrender
Options
Cash Surrender Value 227(f);
230(f) and (g)
payment of at least 3 annual
premiums
not less than the reserve on the
policy
Extended Insurance
At least three annual premiums
limited time, same face value
Non-Default/Surrender
Options
Paid-Up Insurance
At least three annual premiums
same period, lower proceeds
Automatic Premium Loan
Parties agree that in case of default
insurer advances the premium not
subject to repayment
Kinds of Policies
. Ordinary Life payment

of premiums is annually or at
more
frequent
intervals
throughout
life and the
beneficiary is entitled to
receive payment only after
the death of the insured.
1
Kinds of Policies
Limited Payment Life

premiums are payable only
during a limited period of years
(10,15,20 years).
After the
period,
the
insurance
is
deemed fully paid. Proceeds
are payable upon death of
insured.
Kinds of Policies
3. Term Insurance provides
coverage only if the insured dies

during a limited period.
If the insured dies within the
period, the beneficiary gets the
proceeds. If the insured survives
the period, the contract is
terminated.
Kinds of Policies
4. Endowment Policy
insured gets a sum of money
if he survives a specified
period. If insured dies within
the period, the beneficiary
gets the proceeds.
Kinds of Policies
5.
Life Annuity debtor binds
himself to pay an annual pension

or income during the life of one
or more determinate persons in
consideration of a capital
consisting of money or other
property, whose ownership is
transferred to him at once with
the burden of income.
Kinds of Policies
6.
Accident Insurance may

be classified as life or non-life
insurance.
* If death is one of the risks
insured against, it is classified as
life insurance.
WHEN IS AN
INSURANCE
CONTRACT
PERFECTED?
Agent offers
Procedure
a person a
life
insurance
The person
policy
files an
application for
a policy. He is
required to
pay the first
premium
Insurance company
approves
the
when he
application
and
applies
issues a policy in
favor of the person.
In
case
of
When is the insurance contract

perfected?
At the time the insured-applicant
has knowledge of the approval of
his application.
Even if the application has been
approved if the applicant-insured
does not know about approval,
there is NO perfected contract

perfected?
Since the insured is the one
making
the
offer,
the
submission of the application
WITHOUT the approval of the
policy does not result in a
perfected contract of insurance
(Grepalife v. CA)
When is the insurance

contract perfected?
De Lim v. Sun Life the applicant
paid the premium upon filing of
application but he dies before the
approval
HOLDING: NO
of insurance
perfected contract
Bar 2011
On June 1, 2011, X mailed to Y Insurance, Co. his
application for life insurance, with payment for 5
years of premium enclosed in it. On July 21, 2011, the
insurance company accepted the application and
mailed, on the same day, its acceptance plus the
cover note. It reached X's residence on August 11,
2011.
But, as it happened, on August 4, 2011, X figured in a

car accident. He died a day later. May X's heirs
recover on the insurance policy?
Bar 2011
A. Yes, since under the Cognition Theory, the insurance
contract was perfected upon acceptance by the insurer of
X's
application.
B. No, since there is no privity of contract between the
insurer
and
Xs
heirs.
C. No, since X had no knowledge of the insurer's
acceptance of his application before he died.
D. Yes, since under the Manifestation Theory, the insurance
contract was perfected upon acceptance of the insurer of
X's application.
Answer
C. No, since X had no knowledge of
the insurer's acceptance of his
application before he died.(no
meeting of the minds of the offer
and acceptance)
When is the insurance

contract perfected?
If insured died during the period
of provisional policy which is
conditioned upon approval of
application, beneficiary is NOT
entitled to proceeds.

perfected?
Even if the insurer has approved
the application via a letter, there
is no perfected contract if there
is no evidence that the applicant
knew of the approval (Enriquez
v. SunLife, 41 Phil 629)

perfected?
The insured is presumed to have
understood the application and
the contract of insurance (Tang
v. CA, 90 SCRA 236)
Cover Notes v. Binding Receipt
COVER NOTE: Temporary insurance

policies intended to cover the insured
while application is being evaluated
Cover Note v. Binding receipt

BINDING RECEIPT: acknowledgment
of
receipt
of
premium
and
application subject to evaluation.
NOT the same as cover note (Great
Pacific v. CA, 89 SCRA 543)
Cover note is a valid insurance K

IF:
Issued and renewed with prior approval
of IC
Valid and binding for not more than 60
days, unless the insurance commission
has approved an extension based on
valid grounds
No separate premium is required for the
cover note (Pacific Timber v. CA)

IF:
7-day notice to the other party is
required to cancel the cover note
Policy must be issued within 60
days from issuance of cover
notes

IF:
60-day period may be extended upon
written approval of IC
Written approval is dispensed when
president, VP or general manager
aver that the renewal is not to
circumvent the insurance code (Ins.
Memo Circular 3-75)
PREMIUM
Concept of Premium
Agreed price for assuming the risk
The right to premium arises the moment the
property/object is exposed to risk
Cash and carry basis - based on section 77
which provides that the moment the thing
insured is exposed to the peril, the insurer
has the right to payment of premium.
When is non-payment excused?

insolvent insured
insurers negligence or
fault
insurer waives the right
to payment
When is non-payment excused?

war does not suspend the policy
and does not excuse nonpayment of premiums
Constantino vs. Asia Life, 87
Phil 248
Premium
If insured fails to pay 1st premium,
insurer cannot ask for specific
performance but can only rescind
the contract since there is no
creditor-debtor relationship
Special Rule in Industrial Life if

premiums are not paid
In industrial life, if insured failed

to pay because the insurance
agent did not collect in the
address provided in the policy
policy will NOT lapse
Special Rule in Industrial Life

if premiums are not paid
Except: if 12 weeks or 3 months
have lapsed from end of grace
period
At a glance
Only the insured must have insurable
interest on the life if the cestui
Suicide is generally not compensable
unless: mentally ill or committed after the
policy has existed for more than two years
from issuance
At a glance
If the beneficiary is disqualified
because he participated in the death of
the cestui, the other beneficiaries will
get his share. If there are no other
beneficiaries or also disqualified, the
terms of the policy will be followed.
Otherwise, the estate will recover.
In all other cases, it is the estate of the
insured which can recover
At a glance
If the cestui dies during the grace period,
there can be recovery
If the cestui dies during the duration of
the cover notes, there can be recovery
The measure of recovery in life insurance
is the face value of the policy. Except
when insurable interest is capable of
pecuniary estimation
Framework
General
Concepts
Life Insurance
Non-Life
Insurance
Summary of
Amendments in
Insurance Code
Grounds for
Rescission
Payment of
Proceeds
PDIC Law
PART THREE
NON-LIFE INSURANCE
Topics
What may be insured

against
Insurable interest
Non-life insurance policy
Topics
Premiums
Parties
Double insurance v reinsurance
Different kinds of non-life insurance
WHAT MAY BE
INSURED AGAINST
Which will damnify a person

OR
create a liability against him
Contingent
Event- may
or may not
happen
Unknown
Event- time
of occurrence
is unknown
Requirement for recovery

Peril insured against must be the PROXIMATE
CAUSE of the loss or damage (sec. 86)
NO liability if insured risk is only a remote cause
or if proximate cause is an excepted peril
Concept of loss - injury, damage, liability, loss of
income or profits sustained by the insured in
consequence of the happening of one or more
perils insured against (Bonifacio Bros. V. Mora, 20
SCRA 261)
Proximate Cause
That which in the natural and continuous
sequence,
unbroken
by
any
NEW
INDEPENDENT cause, produces an event
without which the event would not have
occurred.
Also called the EFFICIENT CAUSE, or one that
sets the others in motion
NOT equivalent to IMMEDIATE CAUSE
Proximate Cause: Examples

Fire causes an explosion which
results in loss. Fire is the proximate
cause of the loss. If fire is a covered
peril, the insurer is liable.
A house is insured against fire. The
house is destroyed due to the falling
of a wall. The wall fell due to fire.
The insurer is liable
Immediate Cause v. Proximate

Cause
Immediate cause cause or peril
which appears closest in time to the
loss
Immediate cause is NOT necessarily

the proximate cause and vice versa
Bar 2007
Alfredo took out a policy to insure

his commercial building against fire.
A fire broke out and destroyed the
building. It was found that the
proximate cause of the fire was
explosion but fire was the
immediate cause of the loss. There
is no excepted peril in the policy.
Can there be recovery under the
ANSWER
Alfredo cannot recover from the
policy. Section 84 of the Insurance
Code provides that before there can
be recovery under property
insurance, the proximate cause of
the loss must be the covered peril.
In the instant case, the proximate
cause of the loss was not the peril
insured against. Hence, there can be
Hostile v. Friendly Fire

Friendly - fire burns in a place where it is
intended to burn
Hostile - occurs outside the confines or
begins as a friendly fire and becomes
hostile by escaping from the place where
it ought to be
Hostile fire is the one covered by fire
insurance
Section 87:
Loss in the course of rescue
Insurer is liable if the thing is
rescued from peril insured
against if in the course of
rescue, the thing is exposed to a
peril not insured against
Illustration
An owner gets fire insurance for his house
and all furniture inside.
In the course of rescuing the furniture from
fire, the furniture is damaged due to water.
The insurer is liable to the owner although
the damage is not due to fire since it was
in the course of rescuing the furniture from
fire that it suffered some damage.
If loss due to willful act or

connivance of insured
Section 89 - insurer is not liable

if insured, through his willful act
or connivance caused the loss
Ex. Arson, owner hiring other
people to rob his property
If loss due to willful act or

connivance of insured
Section 89 - if loss is through SIMPLE
negligence of insured or his agents,
insurer is STILL LIABLE
Insurer is NOT liable if loss is caused by

GROSS negligence of insured
Bar 2007
If the fire was found to have been
caused by Alfredos own
negligence, can he still recover
from the policy?
ANSWER
I qualify. If the negligence was
simple in nature then Alfredo can
still recover under the policy.
However, if there was gross
negligence on the part of Alfredo
then he is barred from recovering
under the policy.
Bar 2014
On February 21, 2013, Barrack entered into a contract
of insurance with Matino Insurance Company (Matino)
involving a motor vehicle. The policy obligates Matino
to pay Barrack the amount of Six Hundred Thousand
Pesos (P600,000.00) in case of loss or damage to said
vehicle during the period covered, which is from
February 26, 2013 to February 26, 2014.
On April 16, 2013, at about 9:00 a.m., Barrack
instructed his driver, JJ, to bring the motor vehicle to a
near by auto shop for tune-up. However, JJno longer
returned and despite diligent efforts to locate the said
vehicle, the efforts proved futile. Resultantly, Barrack
promptly notified Matino of the said loss and demanded
payment of the insurance proceeds of P600,000.00.
Bar 2014
In a letter dated July 5, 2013. Matino
denied the claim, reasoning as stated in
the contract that "the company shall
not be liable for any malicious damage
caused by the insured, any member of
his family or by a person in the
insureds service. Is Matino correct in
denying the claim? (4%)
Suggested Answer
No, Matino is wrong in denying the claim.
Under the Insurance Code, an insurance policy
is intended to cover losses due to acts of
simple negligence. It is only when the insured
is guilty of willfull connivance in bringing about
the risk insured against or gross negligence
that an insurer can deny compensation.
In this case, the act of Barrack of allowing his
driver to bring the car for tune up is simple
negligence, which should be covered by an
insurance policy.
Suggested Answer
Further, the act of JJ, Barracks driver in
running away with the vehicle, cannot
be considered as malicious damage. It
is a crime, which is an act covered by
an insurance policy. Hence, Matino
cannot use this exlusionary clause to
defeat payment of proceeds.
INSURABLE INTEREST
Concept, Section 13
Every interest in property, whether
real or personal (owner)
Any relation thereto (lessee, agent)
Liability in respect
(carrier, depositary)
of
property
Which will directly damnify the

insured when a contemplated peril
Forms, Sec. 14
Existing interest (owner)
Inchoate interest founded on

existing interest (shareholder)
an
Expectancy coupled with an existing

interest (usufructuary, expected profit)
Factual Expectation
Mere factual expectation of loss not arising
from any legal right or duty in connection
with the SM does NOT constitute an
insurable interest.
NOTE: Factual expectation is enough basis
in life insurance.
Beneficiary is required to have

insurable interest
Insurable interest is
required before a person
can benefit from a property
insurance (Sec. 18)
Bar 2000
A is an elderly bachelor. He
insured his house against fire. He
named his companion-friend as
beneficiary. A died in a fire which
also destroyed his home. The
insurer refused payment to B due
to absence of insurable interest
on the life of A. Is the insurer
ANSWER
The insurer is correct. The

beneficiary in property insurance
must have insurable interest on
the property. The companionfriend of A does not have
insurable interest on the house of
A. Hence, he cannot recover from
the fire insurance policy.
Bar 2001
JQ, the owner of a condominium

insured the same against fire
with XYZ Company and made
the loss payable to his brother
MLQ. In case of loss by fire, who
can recover from the policy.
State the reason for your answer
(5%)
ANSWER
JQ can recover since he has

insurable interest over his own
condominium unit. MLQ cannot
recover since it is required that a
beneficiary must have insurable
interest over the property.
Bar 2014
A person is said to have an insurable interest in
the subject matter insured where he has a
relation or connection with, or concern in it
that he will derive pecuniary benefit or
advantage from its preservation. Which among
the following subject matters is not considered
insurable? (1%)
(A) A partner in a firm on its future profits
(B) A general creditor on debtors property
(C) A judgment creditor on debtors property
(D) A mortgage creditor on debtors mortgaged
property
Suggested answer
(B) A general creditor on

debtors property
Insurable
interest
in
mortgaged property (Sec. 8)
Both the mortgagor and the mortgagee have

insurable interest on the mortgaged property
The II of the mortgagor is to the full value of
the SM
The II of the mortgagee is only up to the
extent of the indebtedness
Bar 2012
A house and lot is covered by a real estate mortgage (REM) in favor
of ZZZ Bank. The bank required that the house be insured. The
owner of the policy failed to endorse nor assign the policy to the
bank. However, the Deed of Real Estate Mortgage has an express
provision which says that the insurance policy is also endorsed with
the signing of the REM. Will this be sufficient?
A. No, insurance policy must be expressly endorsed to the bank so
that the bank will have a right in the proceeds of such insurance in
the event of loss.
B. The express provision contained in the Deed of Real Estate
Mortgage to the effect that the policy is also endorsed is sufficient.
C. Endorsement of Insurance Policy in any form is not legally
allowed.
D. Endorsement of the Insurance Policy must be in a formal
document to be valid.
Bar 1999
A businessman obtained a fire insurance
policy on his stocks for P5 M. Three months
later, a fire broke out and destroyed the
grocery and stocks. The insurer denied the
claim since the stocks were mortgaged to
another person who also insured the same
stocks for P5 M. May the businessman and
the creditor obtain different insurance
policies on the same stocks?
ANSWER
Yes. The businessman, as

the owner and the creditor,
as the mortgagee have
insurable interest over the
stocks. Hence, they may
obtain separate policies on
the same stocks.
Measure
Measure of insurable interest is the
extent
the
insured
might
be
damnified by loss or injury (Sec. 17)
Section 25: Void stipulations

payment of loss whether insured has
insurable interest or not or that
policy shall be proof of interest
INSURABLE INTEREST:
jurisprudence
Fire insurance taken on a property
belonging to another is VOID, although the
insurer had full knowledge of fact of
ownership
and
even
if
insured
subsequently acquired insurable interest
(Cha v. CA, 277 SCRA 690)
INSURABLE INTEREST:
jurisprudence
Where the real intention of insured
was to insure his goods for P15,000
but insurer mistakenly insured the
building where the goods were
contained and not owned by insured,
in case of loss of goods insured was
allowed to recover (Garcia v.
Hongkong, 45 Phil 122)
When insurable interest must exist

in
property insurance
Time the insurance takes

effect and when the loss
occurs, but NEED NOT
exist in the meantime
Bar 2002
Distinguish insurable
interest in property
insurance from insurable
interest in life insurance
(5%)
ANSWER
In property insurance, the expectation of benefit must

have a legal basis.
In life insurance, insurable
interest can be based on mere factual expectation.
In property insurance, the actual value of the

interest is the limit of the insurance. There is no
such limit in life insurance except if insurable
interest is capable of pecuniary estimation.
In property insurance, insurable interest must exist

when the insurance takes effect and at the time of
the loss but not in the meantime. In life insurance,
insurable interest must exist only at the time the
Bar 2012
For both the Life Insurance and Property Insurance, the
insurable interest is required to be A. existing at the time of perfection of the contract and at
the time of loss.
B. existing at the time of perfection and at the time of loss
for property insurance but only at the time of perfection for
life insurance.
C. existing at the time of perfection for property insurance
but for life insurance both at the time of perfection and at
the time of loss.
D. existing at the time of perfection only.
ANSWER
B. existing at the time of perfection and
at the time of loss for property
insurance but only at the time of
perfection for life insurance.
Change of ownership of
property
Section 20 and 58: A change of
interest in any part of a thing
insured
unaccompanied
by
a
corresponding change of interest
suspends the insurance until the
interest in the thing and interest in
the insurance are vested on the
same person
Illustration
A owns a car which is insured against theft
A sells the car to B. The policy was not included in the sale.
If the car is carnapped, neither A nor B can recover under the policy.
A cannot recover because he does not own the car at the time of the theft.
B cannot recover because he does not own the policy
Transfer of property
by succession
When the insured dies, and the
subject matter is transferred by
succession, the new owner of the
thing will also own the insurance.
(Sec. 23)
Illustration
A owns a car which has theft
insurance
A bequeath the car to B under his
will
A dies
B now owns the car, together
with the insurance policy
POLICY
NEW
KINDS
Open Value of thing is not
agreed upon but is to be
ascertained at time of loss. The
amount of the insurance
merely
represents
the
insurers maximum liability.
KINDS
Valued expresses on its face an
agreement that the thing shall be
valued at a specific sum
Running successive insurances
TWO KINDS OF VALUES

Face value maximum amount
which may be recovered under the
policy
Valuation- value of the subject

matter agreed on by the parties
Open v. Valued
Open - has a face value but

has NO valuation of the
thing. Valuation is done after
the loss
Valued - has both face value
and valuation of the thing
Illustration: Open
Value of the building: to be determined at

time of loss
Face Value: P10 Million
If the valuation is more than the face
value, recovery is limited to the face value
Illustration: Valued
Valuation of the car : P15
Million
Face Value
: P 10 Million
GENERAL RULE: Recovery will be

based on valuation
EXCEPTION: If valuation
obtained through fraud
misrepresentation. Recovery
limited to the face value
insurer may deny the claim
is
or
is
or
Illustration: Running
As of June 1, 2014 value of goods P1 Million

As of June 10, 2014 - value of goods P500,000
PREMIUM
PREMIUM
Cash and carry basis rule is followed
Section 77 - insurer is entitled to
premium as soon as the thing
insured is exposed to the peril
insured against
Premium - is the agreed price for
assuming and carrying the risk
PREMIUM
General Rule: Cash and carry basis
nonpayment of the first premium
prevents the contract from becoming
binding
Premium must be paid in cash as a

condition
precedent
for
non-life
insurance policy to be valid and
binding
PREMIUM
In Suretyship, payment of premium
is also necessary for the contract to
be binding
EXCEPT: if obligee has accepted the

bond, suretyship is binding even if
premium has not been paid, subject
to the right of the insurer to recover
NEW
Exceptions to Cash and Carry Basis,

Sec. 77
Life/industrial life when the grace

period applies
whenever under the broker and
agency agreements with duly
licensed intermediaries, a ninety
(90)-day credit extension is
given. No credit extension to a
duly
licensed
intermediary
should exceed ninety (90) days
from date of issuance of the
policy.

Sec. 77
An acknowledgment in a policy or contract of
insurance or the receipt of premium is 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.
When the parties have agreed on installment
payment (Makati Tuscany case)
When the insurer has renewed the insurance over
the years under a clear credit term arrangement
(UCPB case)

Sec. 77
In Suretyship where the obligee

accepts the bond even if
premium has not been paid (Sec.
177)
When there is a credit scheme
UCPB v. Masagana April 4, 2001 insured is entitled to proceeds even if he

has not fully paid premiums when:
for years, insurer has been issuing fire
insurance policies to insured and the
policies were renewed
insurer has been granting 60-90 day
When there is a credit scheme

no valid notice of non-renewal
premium was paid by insured
within credit extension period
Bar 2007
Alfredo took out a policy to insure his

commercial building. The broker
agreed to give a 15-day credit to
Alfredo within which to pay the
premium. Upon delivery of the policy on
May 15, 2006, Alfredo issued a
postdated check dated May 30, 2006.
On May 28, 2006, fire destroyed the
building. May Alfredo recover from the
policy?
ANSWER
Alfredo can recover from the policy. In
a decided case by the Supreme
Court, it was held that parties may
agree on a credit extension in paying
the premium. The happening of the
peril during the credit extension will
entitle the insured to proceeds, less
the unpaid premiums.
Premium by installment:
Makati Tuscany v. CA
Makati and American Assurance

agreed that premiums will be
paid via three installments
Makati paid premiums for 3
consecutive
years
in
three
installments
On the 4th year, Makati paid only
the 1st 2 installments.
American
collected
installment
the
3rd
Makatis defense:
Section 77
provides that no policy will be
effective unless the premium has
been paid. Since premiums were
paid on installments, there was
no valid policy.
Makati and American Assurance agreed that
premiums will be paid on three installments
After paying premiums for 3 consecutive
years, Makati refused to pay the third
installment on the 4th year
American sought to collect the balance from
Makati
SC: Section 77 merely precludes the parties
from stipulating that the policy is valid even
if premiums are not paid, but does not
expressly prohibit an agreement granting
credit extension, and such an agreement is
not contrary to morals, good customs,
public order or public policy (De Leon, the
Insurance Code, at p. 175). So is an
understanding to allow insured to pay
premiums in installments not so proscribed.
At the very least, both parties should be
deemed in estoppel to question the
Bar 2006
A Insurance Company issued an policy on
the new car of B. The premium of P60,000
was to be paid in 6 months. B paid only the
1st two months installments. Despite
demands, B failed to pay the rest of the
installments.
Five months after the
issuance of the policy, the vehicle was
carnapped. A denied the claim of B since B
did not pay the premium resulting to
cancellation of the policy. Can B recover
from A?
ANSWER
B can recover from A the proceeds of the
policy less the unpaid premiums. In a
decided case by the Supreme Court, it was
held that when the parties agreed on
payment of premiums by installment, the
policy becomes effective upon payment of
first installment. Absent any provision that
non-payment of subsequent installments
will cause cancellation, the policy between
A and B continue to exist.
Bar 2010
Enrique obtained from Seguro Insurance
Company a comprehensive motor vehicle
insurance to cover his top of the line Aston
Martin. The policy was issued on March 31,
2010 and, on even date, Enrique paid the
premium with a personal check postdated
April 6, 2010.
On April 5, 2010, the car was involved in an
accident that resulted in its total loss.
Bar 2010
On April 10, 2010, the drawee bank
returned Enriques check with the
notation
"Insufficient
Funds."
Upon
notification,
Enrique
immediately
deposited additional funds with the bank
and asked the insurer to redeposit the
check.
Enrique thereupon claimed indemnity
from the insurer. Is the insurer liable
under the insurance coverage? Why or
Suggested Answer
Enrique cannot recover. In a decided case, the Supreme
Court said that an insurer and the insured may agree on
a credit scheme for payment of premiums, which will
give rise to a perfected contract of insurance. However,
the insurer must make payment within the period
agreed on (UCPB v. Masagana).
In this case, Enriques check bounced on April 6. He
only funded the check on April 10 or 4 days late than
the date of the check. Thus, there was no perfected
contract of insurance which can cover the April 5
accident. Enrique cannot recover under the policy.
Bar 2014
On September 25, 2013, Danny Marcial
(Danny) procured an insurance on his
life with a face value of P5,000,000.00
from RN Insurance Company (RN), with
his wife Tina Marcial(Tina) as sole
beneficiary. On the same day, Danny
issued an undated check to RN for the
full amount of the premium.
Bar 2014
On October 5, 2013, Danny met a tragic
accident and died. Tina claimed the
insurance benefit, but RN was quick to
deny the claim because at the time of
Dannys death, the check was not yet
encashed and therefore the premium
remained unpaid.
Is RN correct? Will your answer be the
same if the check is dated October 15,
2013? (4%)
Suggested Answer
RN is correct in denying the claim.
Based on jurisprudence, an insurer can be held
liable for loss if the insurer and the insured
agreed on a credit scheme where is a definite
period when premium should be fully paid.
In this case, there was no clear credit extension
period or scheme since the check issue by
Danny was undated. Since there was no
payment of premiums or even a definite time
when payment should be made, there was no
valid insurance policy at the time of Dannys
death. Hence, there can be no recovery of
proceeds.
Suggested Answer
My answer will not be the same if the
check was dated October 15, 2014.
If the check was properly dated, this
means that there was a valid credit
extension scheme or period between
the parties. Hence, there was a valid
policy and there should be payment of
proceeds, less the amount of premiums.
When is insured
entitled to return of premium?
Whole premium if object was never
exposed to peril, unless it is an
indivisible policy
E.g. insured pays in advance the
annual premium, loss occurs before
date of effectivity.
Insured is
entitled to reimbursement of whole
premium
When is insured
Pro- rated premium
policy before period is up
surrender
E.g. A insures his house for 1 year

but returns the policy after 3 months.
A is entitled to of the premiums.
NEW
When is insured
If the contract is voidable and
subsequently annulled under the
provisions of the Civil Code or on
account of fraud / misrepresentation
of insure/agent, facts insured was
ignorant of, default of insured other
than fraud
E.g. Agent represents that A can be
insured even if his age disqualifies
him. Insured is entitled to return of
premium.
NEW
When is insured
Over insurance by several

insurers, other than life
ratable return of premium
NEW
ADDITIONAL PREMIUMS
Section 84. An insurer may contract and
accept payments, in addition to regular
premium, for the purpose of paying
future premiums on the policy or to
increase the benefits thereof.
NEW
NOTE!
A person insured is not entitled to a
return of premium if the policy is
annulled, rescinded or if a claim is
denied by reason of fraud.
RATABLE RETURN OF PREMIUM

IN CASE OF OVERINSURANCE
Sec. 82 premiums to be returned
when there is over insurance by
several insurers shall be
proportioned to the amount by
which the aggregate sum insured
in all policies exceeds the
insurable value of the thing at risk
Illustration: P1.5M house

Insurer
Amount of
insurance
Premiums Paid
A company
P1,200,000.00
P24,000.00
B company
P600,000.00
P12,000.00
TOTAL
P1,800,000.00
P36,000.00
How to compute:
STEP 1: Determine amount overinsured
Amount overinsured =
Amount of insurance value of property
P1.8 P1.5M = P300,000
How to compute
Get the ratio of overinsurance with the
total amount of insurance
P300,000/P1,800,000.00
= 1/6
Ratable Return
STEP 3: Multiply the ratio to the
amount of premium paid to
every insurer
A= 1/6 of P24,000 = P4,000 from A Company
B= 1/6 of P12,000 = P2,000 from B Company
Bar 2000
Name at least three instances when an
insured is entitled to a return of the
premium paid.
PARTIES
Insur
er
Insur Bene
ed
ficiary
The beneficiary
Section 18 - no contract or policy
on property shall be enforceable
except for the benefit of some
person having an insurable
interest in the property insured
Compare with Life Insurance

Where the beneficiary is not required
to have insurable interest over the
cestui que vie
It is only the insured who must have
insurable interest over the cestui que
vie
NEW
Insurer
Before issuing such certificate of
authority, the Commissioner must be
satisfied that the name of the company
is not that of any other known company
transacting a similar business in the
Philippines, or a name so similar as to
be calculated to mislead the public. The
Commissioner may issue rules and
regulations on the use of names of
insurance companies and other
supervised persons or entities.
NEW
Insurer- Bancassurance
Section 375. The term bancassurance shall mean the
presentation and sale to bank customers by an insurance
company of its insurance products within the premises of
the head office of such bank duly licensed by the Bangko
Sentral ng Pilipinas or any of its branches under such rules
and regulations which the Commissioner and the Bangko
Sentral ng Pilipinas may promulgate.
To engage in bancassurance arrangement, a bank is not

required to have equity ownership of the insurance
company. No insurance company shall enter into a
bancassurance arrangement unless it possesses all the
requirements as may be prescribed by the Commissioner
and the Bangko Sentral ng Pilipinas.
NEW
Insurer
No insurance product under this section, whether life or
non-life, shall be issued or delivered unless in the form
previously approved by the Commissioner.
Section 376. Personnel tasked to present and sell
insurance products within the bank premises shall be duly
licensed by the Commissioner and shall be subject to the
rules and regulations of this Act.
"Section 377. The Commissioner and the Bangko Sentral
ng Pilipinas shall promulgate rules and regulations to
effectively supervise the business of bancassurance.
NEW
Insurer-Mutual Benefit Association and Trusts for
Charitable Uses
Section 403. Any society, association or corporation, without
capital stock, formed or organized not for profit but mainly for
the purpose of paying sick benefits to members, or of furnishing
financial support to members while out of employment, or of
paying to relatives of deceased members of fixed or any sum of
money, irrespective of whether such aim or purpose is carried
out by means of fixed dues or assessments collected regularly
from the members, or of providing, by the issuance of
certificates of insurance, payment of its members of accident or
life insurance benefits out of such fixed and regular dues or
assessments, but in no case shall include any society,
association, or corporation with such mutual benefit features
and which shall be carried out purely from voluntary
contributions collected not regularly and /or no fixed amount
from whomsoever may contribute, shall be known as a mutual
benefit association within the intent of this Code.
Mutualization and Demutualization

Mutualization A a shareholder-owned
company is converted into a mutual
organization, typically through takeover by an
existing mutual organization. A mutual
organization is customer-owned.
Demutualization -customer-owned mutual
organization or cooperative changes form to a
joint, stock company, sometimes called
stocking for privatization.
NEW
Mutualization
Section 280. A domestic mutual life insurance company doing
business in the Philippines may convert itself into an
incorporated stock life insurance company by demutualization.
To that end, it may provide and carry out a plan for the
conversion by complying with the requirements of this title.
"The conversion of a domestic mutual life insurance company to
an incorporated stock life insurance company shall be carried
out pursuant to a conversion plan duly approved by the
Commissioner.
"The Commissioner shall promulgate such rules and regulations
as he or she may deem necessary to carry out the provisions of
this title, after due consultation with representatives of the
insurance industry.
"All converted insurers under the provisions of this title shall be
subject to all other applicable provisions of this Code. The
provisions of the Corporation Code shall apply in a suppletory
manner.
NEW
Mutual Benefit Association

Section 408. "A mutual benefit association shall only
maintain free and unassigned surplus of not more than
twenty percent (20%) of its total liabilities as verified by
the Commissioner. Any amount in excess shall be returned
to the members by way of dividends, enhancing the equity
value or providing benefits in kind and other relevant
services. In addition, subject to the approval of the
Commissioner, a mutual benefit association may allocate a
portion for capacity building and research and
development such as developing new products and
services, upgrading and improving operating systems and
equipment and continuing member education.
NEW
Trust Business
TRUST BUSINESS IN GENERAL
"Section 429. An insurance company may engage in
limited trust business, consisting of managing funds
pertaining only to retirement and pre-need plans, provided
it has secured a license to do so from the Bangko Sentral
ng Pilipinas. This trust business shall be separate and
distinct from the general business of the insurance
company and shall be subject to rules and regulations as
may be promulgated by the Bangko Sentral ng Pilipinas in
consultation with the Commissioner.
NEW
Self-Regulatory Organizations
CHAPTER IX REGISTRATION, RESPONSIBILITIES
AND
OVERSIGHT
OF
SELF-REGULATORY
ORGANIZATIONS
Section 430. The Commissioner shall have the
power to register as a self-regulatory
organization, or otherwise grant licenses,
and to regulate, supervise, examine,
suspend or otherwise discontinue, as a
condition for the operation of organizations whose
operations are related to or connected with the
insurance market such as, but not limited to,
associations of insurance companies, whether life
or non-life, reinsurers, actuaries, agents, brokers,
dealers, mutual benefit associations, trusts, rating
NEW
Self-Regulatory Organizations
The Commissioner may prescribe rules and
regulations which are necessary or
appropriate in the public interest or for the
protection of investors to govern selfregulatory organizations and other
organizations licensed or regulated
pursuant to the authority granted
hereunder including, but not limited to, the
requirement of cooperation within and
among all participants in the insurance
market to ensure transparency and
facilitate exchange of information.
Double Insurance v. Overinsurance
Double Insurance
Same person is insured by
several insurers in respect
of the same subject and
interest (Sec. 95)
Double Insurance
Requisites:
1.
insured is the same
2. two or more insurers insuring

separately
3.
same subject matter
4.
interest insured is the same
5. risk or peril insured against is the

same
Bar 2005
When does double insurance

exist? (2%)
Bar 1999
A businessman obtained a fire
insurance policy on his stocks for P5 M.
Three months later, a fire broke out and
destroyed the grocery and stocks. The
insurer refused to pay claiming that
double insurance is contrary to law. Is
this contention tenable?
ANSWER
The contention of the insurer is
untenable. First, there is no law
prohibiting double insurance.
Second, there was no double
insurance here because the insured
in the two policies are different.
The two insured also have different
interests on the property.
Bar 2012
X borrowed from CCC Bank. She mortgaged her house and
lot in favor of the bank. X insured her house. Tt1e bank
also got the house insured.
A. Is this double insurance? Explain your answer. (3%)
B. Is this legally valid? Explain your answer. (3%)
C. In case of damage, can X and CCC Bank separately claim
for the insurance proceeds? (4%)
Answer
No, this is not double insurance.
Double insurance exists when the same
person is insured by several insurers in
respect of the same subject and interest
The insured in the two policies are
different and they have different
interests. Xs interest is as the owner of
the house and lot while CCCs interest is
as the mortgagee and is limited to the
amount of the debt.
1.
Answer
2. Yes, this is legally valid. Both the
mortgagee and the owner have insurable
interests over the property. Either party
may obtain a property insurance policy
on the same property because both
stand to suffer loss in case the house and
lot is destroyed or damaged.
Answer
3.Yes, both X and CCC can claim
under their insurance policies. X can
claim to the extent of the value of
the property. CCC can claim to the
extent of the unpaid debt in favor of
X, that is secured by the property.
Over-insurance
OVER- INSURANCE
amount of insurance is
beyond the value of
insureds insurable
interest
How to collect in case of overinsurance by double insurance,

Sec. 96
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;
How to collect in case of overinsurance by double insurance,

Sec. 96
Valued Policy- any sum received by him
under any other policy shall be deducted
from the value of the policy without
regard to the actual value of the subject
matter insured;
Unvalued Policy- any sum received by
him under any policy shall be deducted
against the full insurable value, for any
sum received by him under any policy;
How to collect in case of overinsurance by double insurance, Sec. 96

Policy is unvalued, determine actual loss
and collect from insurance in such order
as he may select
If insured receives amount more than
loss, hold sum in trust according to the
right of contribution
Each insurer must contribute ratably to
the loss in proportion to the amount for
which he is liable
Bar 2005
What is the nature of liability

of several insurers in double
insurance (2%)
ANSWER
In double insurance, the

insurers are considered as
co-insurers. Each one is
bound to contribute ratably
to the loss in proportion to
the amount for which he is
liable under his contract
(Sec. 96e)
Bar 2012
X insured the building she owns with two (2) insurance
companies for the same amount. In case of damage, A. X can not claim from any of the two (2) insurers because
with the double insurance, the insurance coverage becomes
automatically void.
B. the two (2) insurers will be solidarily liable to the extent
of the loss.
C. the two (2) insurers will be proportionately liable.
D. X can choose who he wants to claim against.
ANSWER: D
Reinsurance
Contract by which an insurer
procures a third person to
insure him against loss or
liability by reason of an
original insurance
Illustration
A gets B to insure his building against fire
for P10 Million.
B (insurer) can get C (reinsurer) to reinsure
him for P5 Million out of the P10 Million
insurance in favor of A. Thus, Bs liability
shall be limited to P5 Million. While C, the
reinsurer has to give the insurer the other
P5 M.
Reinsurance
Insurance
insurer becomes the
insured
v.
Double
Insurer remains the

insurer
subject of insurance is subject of insurance is

the original insurers
property
risk
Reinsurance
Insurance
v.
Double
insurance of a different insurance of the same

interest
interest
original insured is not a insured is the party in

party
interest in all contracts
Reinsurance
Insurance
consent of original
insured is not
necessary
v.
Double
Insured has to give his

consent
Kinds of Non-Life Insurance
MARINE
Marine
Sections 99 and 100 concept
Peril covered perils of the sea or perils of navigation
casualties due to unusual violence or extraordinary
action of wind and wave or other extraordinary causes
connected with navigation must be the PROXIMATE
CAUSE
Peril of the ship is NOT covered
Peril of the Ship v. Peril of the Sea

Roque v. IAC sinking of barge
extra-ordinary circumstances (SHIP)
without
Go Tiaco v. Union loss results from natural

and inevitable action of the sea, from the
ordinary wear and tear of the ship or from
negligence of owner to provide with proper
equipment (SHIP)
Cathay v. CA rusting of steel pipes in the
course of the voyage in view of the toll on
cargo of wind, water and salt conditions (SEA)
Bar 2011
Perils of the ship, under marine insurance law, refer to loss
which in the ordinary course of events results from
A. natural and inevitable actions of the sea.
B. natural and ordinary actions of the sea.
C. unnatural and inevitable actions of the sea.
D. unnatural and ordinary actions of the sea.
Answer
A.
natural
and
actions of the sea.
inevitable
Is ship owners insurer liable in case

of loss if:
vessel is chartered (Sec. 102)
YES. liable only for part of the loss which insured
cannot recover from charterer
Insurance of owner full value of property but
recovery shall be limited to amount not paid by
charterer
Insurance of charterer extent of his liability in
case of loss
Illustration
A and B enter into a charter agreement.
A's vessel is valued at P1 Million.
Per agreement, Bs insurer shall be liable
up to P500,000 in case of loss. A has an
insurance of P1 M.
In case of loss:
As insurer = P500,000
Bs insurer = P500,000
Can ship owner get insurance for:

Expected freightage (Sec. 105)
Expected freightage which in the ordinary and

probably course of things he would have earned
but for the intervention of the peril insured
against
Important that insured must have an inchoate
right to freightage which cannot be defeated
Expected profits (Sec. 107) YES.
Fire
Fire Insurance
insurance against loss by fire, lightning,

windstorm, tornado or earthquake and
other allied risks, when such risks are
covered by extension to fire insurance
policies or under separate policies
Fire must be the proximate cause, and

must be hostile in nature
Measure of Indemnity
If there is a valuation shall be
conclusive as between parties in
adjusting partial or total loss in the
absence of FRAUD
If there is NO valuation - the expense
it would be to the insured to
REPLACE the thing lost or injured in
the condition in which it was at the
time of injury
Loss and its amount may be
determined on the basis of such
proof as may be offered by insured
which need not be of such
persuasiveness as is required in
judicial proceedings (Malayan v. Cruz
Arnaldo)
How valuation is made

Sec.
174
independent
appraiser examines the property
and fixes the value
Valuation shall be inserted in the

policy

GENERAL RULE: Valuation shall be
the basis for indemnity in case of
total loss
EXCEPT: If there is a change
increasing the risk without the
consent of insurer or if there's fraud
on the part of insured.

Partial loss full amount of the
partial loss
Parties may agree that instead of

payment, insurer may repair, rebuild
or replace property
Illustration
Subject matter is a
house
Independent
appraiser values it at
P10 Million
The
valuation
is
attached to the policy
Illustration
If house is totally destroyed by
fire, the valuation of P10 M will
be given
If the house is half-destroyed,
the indemnity will be half of P10
Million or P5 M.
Illustration
If the valuation is based on some
fraud on the part of the insured, e.g.
adding fixtures which are not part of
the house OR there is an alteration
increasing the hazard such as
converting in to an ammunition
factory, the valuation is not used.
Illustration
Parties may agree that instead of
paying the amount, insurer will
rebuild the house.
When alteration can exonerate

insurer
The use or condition of a thing is
altered
Policy prohibits or limits the alteration
Made without the consent of the
insurer, by means within the control of
the insured
increasing
the
risks
Insurer
can
When alteration does not affect

policy
The use or condition of a thing insured
is altered
Policy prohibits it or limits it
It does not increase the risk
Act which does not violate the

policy
any act of the insured subsequent to the
execution of the policy
Act does not violate its provisions, even
though it increases the risk and is the cause
of the loss
No effect on policy
Bar 2014
On May 13, 1996, PAM, Inc. obtained a
P15,000,000.00 fire insurance policy from Ilocano
Insurance covering its machineries and equipment
effective for one (1) yearor until May 14, 1997. The
policy expressly stated that the insured properties
were located at "Sanyo Precision Phils. Building,
Phase III, Lots 4 and 6, Block 15, PEZA, Rosario,
Cavite." Before its expiration, the policy was renewed
on "as is" basis for another year or until May 13,
1998. The subject properties were later transferred to
Pace Factory also in PEZA. On October 12, 1997,
during the effectivity of the renewed policy, a fire
broke out at the Pace Factory which totally burned the
insured properties.
Bar 2014
The policy forbade the removal of the insured
properties unless sanctioned by Ilocano. Condition
9(c) of the policy provides that "the insurance
ceases to attach as regards the property affected
unless the insured, before the occurrence of any
loss or damage, obtains the sanction of the
company signified by endorsement upon the policy
x x x (c) if the property insured is removed to any
building or place other than in that which is herein
stated to be insured." PAM claims that it has
substantially complied with notifying Ilocano
through its sister company, the RBC, which, in fact,
referred PAM to Ilocano for the insurance coverage.
Is Ilocano liable under the policy? (4%)
Suggested Answer
Ilocano is liable under the policy.
Under the Insurance Code, any alteration in the
use or condition of a thing insured which is

limited by the policy, but does not increase the
risk will not affect the validity of the policy.
In this case, although the policy forbade the
transfer of the goods without the consent of
the insurer, the transfer of the goods did not
increase the risk of fire. Hence, the transfer
will not exonerate Ilocano.
Suggested Answer
Further, PAM should be deemed to have
substantially complied with the consent
requirement when it notified the agent of Ilocano.
Hence, Ilocano was wrong in denying the claim.
Casualty Insurance
Casualty Insurance
Sec. 176 insurance covering
loss or liability arising from
accident or mishap excluding
certain types of loss which fall
exclusively within the scope of
other types of insurance such as
fire or marine
Casualty Insurance
Employers liability
Motor Vehicle Liability
Plate glass insurance
Burglary and theft insurance
Personal accident and health insurance
(when death is NOT one of the risks
insured against)

Insurance
Motor vehicle any vehicle
propelled by any power other
than muscular power using the
public highways, with certain
exceptions

Insurance
Section 387 unlawful for any

land transportation owner or
operator to operate the same in
public highways unless there is a
policy of insurance or guaranty
in cash or bond to indemnify the
death or bodily injury of a third
party or passenger
At a glance
Insurable interest is property insurance must
exist at the time of the issuance and at the
time of the loss although it need not exist in
between these times
A beneficiary in property insurance must

have insurable interest over the property
At a glance
It is possible that two or more persons may
have insurable interest over the same
object. As in the case of owner and lessee,
mortgagor and mortgagee.
In such cases, two or more separate

insurance policies may be obtained. This
is not double insurance since they dont
have the same insured and they have
different interests.
At a glance
The covered peril must be the
proximate cause before there can be
recovery under the policy.
Instances when there can be return of
premiums.
At a glance
Payment of premiums must be on cash
and carry basis.
Important exceptions to cash and carry:
credit extension and installment
payment
At a glance
Marine insurance covers only perils of
the sea and NOT perils of the ship.
In marine, the following persons can get
insurance policies: owner, charterer,
for freightage, for expected profits.
At a glance
Fire insurance covers hostile fire
Failure to give written notice of loss in
fire with unreasonable delay will
exonerate the insurer.
Indemnity in fire may either be based
on valuation OR payment of cost to
restore the object at the time of loss
Framework
General
Concepts
Life Insurance
Non-Life
Insurance
Summary of
Amendments in
Insurance Code
Grounds for
Rescission
Payment of
Proceeds
PDIC Law
PART FOUR:
PAYMENT OF PROCEEDS
AND FILING OF CLAIMS
Basic Rule in Recovery
Sec. 89. An insurer is not liable

for a loss caused by the willful
act or through the connivance
of the insured; but he is not
exonerated by the negligence
of the insured, or of the
insurance agents or others.
Bar 2010
To secure
mortgaged
accordance
Mario had
Insurance
designating
a loan of P10 million, Mario

his building to Armando. In
with the loan arrangements,
the building insured with First
Company
for
P10
million,
Armando as the beneficiary.
Armando also took an insurance on the

building upon his own interest with Second
Insurance Company for P5 million.
Bar 2010
The building was totally destroyed by fire, a peril
insured against under both insurance policies. It
was subsequently determined that the fire had
been intentionally started by Mario and that in
violation of the loan agreement, he had been
storing inflammable materials in the building.
How much, if any, can Armando recover from either
or both insurance companies? (2%)
What happens to the P10 million debt of Mario to
Armando? Explain. (3%)
Suggested Answer
Armando cannot recover from
either policy. Under Section 89 of
the Insurance Code, an insurer is
exonerated when the loss is caused
by the willful act of the insured.
The loan will remain, but it will be
considered as unsecured.
In Life Insurance
WHEN
General Rule: Paid immediately upon
maturity of the policy (death, survival,
cessation or continuance of life)
Exceptions:
proceeds are payable in installments
annuity
If maturity is due to death

Proceeds are paid within 60
days from presentation of the
claim and proof of death
Delay = interest unless due

to fraudulent claim
Proof of death v. Notice of Death
Notice of death is not

enough, there must be
proof of death
Proof of death
certificate
death
TO WHOM
General
rule:
paid
designated beneficiaries
to
Exception:
Facility
of
payment clause in group life
and industrial life
Facility of Payment :
Group Life
There
is
beneficiary
no
designated
pay not exceeding P500.00

to
any
person
equitably
entitled for incurring funeral
or other expenses incident to
the last illness or death of the
Facility of Payment: Industrial

If beneficiary:
does not surrender policy with
proof of death during period
stated in the policy OR
is the estate of insured OR
is a minor OR
dies before the insured OR
is legally incompetent to give
valid release
Facility of Payment: Industrial

proceeds may be given to:
the executor or administrator of
insured OR
any of insureds relative by
blood as legal adoption or by
marriage OR
any
person
who
incurred
expenses
for
maintenance,
medical attention or burial
NON-LIFE INSURANCE
WHEN
within 30 days after proof of
loss is received by insurer and
ascertainment of loss is made
Ascertainment of loss
made either by agreement
between parties or by
arbitration
WHEN
If no ascertainment is made or can
be had within 60 days from
receipt of proof of loss, insurer
must pay within 90 days after
receipt of proof
Refusal to pay within period
unless due to a fraudulent claim =
interest
ILLUSTRATION
A presents proof of loss of car by
theft and insurer ascertains
amount of loss on January 1,
2000
Proceeds must be paid 30 days
after
January
1,
2000.
Otherwise, interest must be
ILLUSTRATION
A presents proof of theft on
January 1, 2000 but parties
cannot agree on amount of loss
by March 1, 2000 (within 60 days
from Jan.1).
Proceeds must be paid within 90
days from January 1, 2000.
Otherwise, interest will accrue.
MOTOR VEHICLE LIABILITY
Procedure for filing claims

Accident
Within six months, file written notice of claim.
Filed after six months = waived claim
Notice must contain nature, extent, duration of injuries certified by a licensed
physician
Insurer gets notice
Ascertain nature and truth of claim

If parties agree, pay claim within 5 calendar days
If no agreement is reached
Insurer must pay under no-fault indemnity clause
No fault Indemnity Clause:

Section 391
death or injury of 3rd

party
without
necessity
of
proving
fault
or
negligence of any kind
if total indemnity of one
person shall not exceed
No fault Indemnity Clause
Proofs of loss are submitted

under oath.
police report of accident ;
and
Death
certificate
and
evidence to establish payee
OR
medical
report
and
evidence of medical and
hospital disbursement.
No fault Indemnity Clause
Claim against one motor

vehicle only
if occupant of a vehicle, claim
against insurance of vehicle
otherwise,
claim
against
offending vehicle
Bar 2012
X is a passenger of a jeepney for hire being driven by Y.
The jeepney collided with another passenger jeepney
being driven by Z who was driving recklessly. As a result
of the collision, X suffered injuries. Both passenger
jeepneys are covered by Comprehensive Motor Vehicular
Insurance Coverage. If X wants to claim under the "no
fault indemnity clause", his claim will lie A. against the insurer of the jeepney being driven by Z
who was the one at fault.
B. the claim shall lie against the insurer of the
passenger jeepney driven by Y because X was his
passenger.
C. X has a choice against whom he wants to make his
claim.
D. None of the above.
Bar 2014
On May 26, 2014, Jess insured with Jack
Insurance (Jack) his 2014 Toyota Corolla sedan
under a comprehensive motor vehicle insurance
policy for one year. On July 1, 2014, Jess car
was unlawfully taken. Hence, he immediately
reported the theft to the Traffic Management
Command (TMC) of the Philippine National
Police (PNP), which made Jess accomplish a
complaint sheet as part of its procedure. In the
complaint sheet, Jess alleged that a certain Ric
Silat(Silat) took possession of the subject
vehicle to add accessories and improvements
thereon.
Bar 2014
However, Silat failed to return the subject
vehicle within the agreed 3-day period. As a
result, Jess notified Jack of his claim for
reimbursement of the value of the lost vehicle
under the insurance policy. Jack refused to
pay claiming that there is no theft as Jess
gave Silat lawful possession of the car. Is Jack
correct? (4%)
Suggested answer
Jack is wrong.
Jeff obtained a comprehensive motor vehicle
insurance policy, which should cover all kinds
of losses for whatever reason, except gross
negligence.
The policy should cover the loss of the car,
although it was not really unlawfully taken by
Silat. The fact remains that there was loss of
vehicle and the proceeds for the loss should
be paid to Jeff.
Delay, Proof, Subrogation
Reasonable Delay
in Payment
delay due to investigation to
ascertain
the
truth
of
information it received that
insured was not insurable at
time of application (Chuy v.
Philamlife)
delay caused by determination
of actual beneficiary and claims
Preliminary Proof of Loss

best evidence which insured has
not evidence in ordinary courts

purpose : Apprise insurer of loss
and
make proper investigation
while evidence is still fresh and
to prevent further loss
NOTICE OF LOSS IN FIRE

Must be written
Must be given without unnecessary delay
Otherwise, the insurer is exonerated
NEW
NOTICE
IN OTHER NON-LIFE
POLICIES
The Commissioner may

specify the period for the
submission of the notice of
loss.
Subrogation
when insurer pays for the loss
payment to insured operates as an
equitable assignment to the insurer of all
remedies which insured may have for the
recovery
subrogation is limited to the amount
recoverable by the insured
Marine

Only covers loss due to perils of the
sea and not perils of the ship
In case there is a bottomry, insurable
interest of the ship owner is limited to
excess of its value over the amount
secured by bottomry.
Bar 2010
Paolo, the owner of an ocean-going vessel, offered to
transport the logs of Constantino from Manila to
Nagoya. Constantino accepted the offer, not knowing
that the vessel was manned by an irresponsible crew
with deep-seated resentments against Paolo, their
employer.
Constantino insured the cargo of logs against both

perils of the sea and barratry. The logs were
improperly loaded on one side, thereby causing the
vessel to tilt on one side. On the way to Nagoya, the
crew unbolted the sea valves of the vessel causing
water to flood the ship hold. The vessel sank.
Bar 2010
Constantino tried to collect from the insurance
company
which
denied
liability,
given
the
unworthiness of both the vessel and its crew.
Constantino countered that he was not the owner of
the vessel and he could therefore not be responsible
for conditions about which he was innocent.
Is the insurance company liable? Why or why not?
(3%)
What is "barratry" in marine insurance? (2%)
Suggested Answer
The insurer is not liable because the vessel
violated
the
implied
warranty
of
seaworthiness. The loss was also caused by a
peril of the ship and not peril of the sea.
Barratry
includes
every
wrongful
act
committed by a vessel master or crew, to the
prejudice of the owner or the charterer.
Bar 2011
T Shipping, Co. insured all of its vessels with R
Insurance, Co. The insurance policies stated
that the insurer shall answer for all damages
due to perils of the sea. One of the insured's
ship, the MV Dona Priscilla, ran aground in the
Panama Canal when its engine pipes leaked
and the oil seeped into the cargo
compartment. The leakage was caused by the
extensive mileage that the ship had
accumulated. May the insurer be made to
answer for the damage to the cargo and the
ship?
Bar 2011
A. Yes, because the insurance policy covered
any or all damage arising from perils of the
sea.
B. Yes, since there appears to have been no
fault on the part of the shipowner and
shipcaptain.
C. No, since the proximate cause of the
damage was the breach of warranty of
seaworthiness of the ship.
D. No, since the proximate cause of the
Answer
D. No, since the proximate cause of
the damage was due to ordinary
usage of the ship, and thus not due
to a peril of the sea.
Who can insure?

Freightage all benefits derived by the
owner either from chartering the ship or its
employment for the carriage of his own
goods or those of others (102)
Charterer of the ship has insurable interest
on the ship to the extent that he is
damnified by the loss (106)
Average
General insurer is liable for
proportion of the loss assessed
(136)
Particular insurer is liable
unless there is a stipulation
exempting the insurer (136)
General Average
Goods of A valued at 1 M are
disposed
Disposition saves the goods of B
(1 M) and C (1 M)
The 1 M loss of A will be shared
by B and C in proportion to the
value of the goods belonging to
them which are saved. The 1 M
loss will be divided by three
Particular Average
If the goods of A are disposed
But disposition did not inure to the
common benefit of other owners of
goods
Only A and his insurer will suffer the
loss
Other owners and their insurers will
not contribute in As loss
Reshipment
Insured peril prevents a ship from

completing voyage at an
intermediate port, liability of the
marine insurer continues after
reshipment without prejudice to
insurer's right to collect more
premiums (133)
Reshipment
In case of reshipment, the

insurer of goods is liable for
damages, expenses of
discharging, storage,
reshipment and other
expenses (134)
Kinds of loss in marine

Loss in marine
Total
Actual
Partial
Constructive
Total v Partial Loss

Every loss which is not total is partial (128)
Total loss may either be actual or constructive
Actual loss may be presumed from the continued
absence of a ship without being heard of (132)
Actual Loss, 130

total destruction of the thing
irretrievable loss of thing by sinking or
being broken up
damage
which
renders
thing
valueless for the purpose it is held
other event which effectively deprives
owner of possession of the thing at
the port of destination
Constructive Total Loss, 133

Also called technical total loss
Loss which gives the person the

right to abandon under Section
141
When there can be abandonment

- SECTION 141
>3/4 of the value is actually

lost or would have to be spent
to recover it from peril
If the vessel is injured to such
an extent as to reduce its
value to >3/4
When there can be abandonment

- SECTION 141
If the thing is a ship, and the voyage cannot
be performed without incurring either
expense to the insured of >3/4 the value of
the thing abandoned or a risk which a
prudent man would not take under the
circumstances
If the thing is cargo or freightage, voyage
cannot be performed, nor another ship be
procured within a reasonable time and with
reasonable diligence to forward the cargo,
without incurring like expenses or risk >3/4
of the value of the vessel.
Abandonment
Neither partial nor conditional (140)
Must be made within a reasonable
time
after
receipt
of
reliable
information of loss (141)
If information on loss is incorrect or
thing is restored and there is no total
loss, abandonment is ineffectual (141)
Bar 2011
For a constructive total loss to exist in
marine insurance, it is required that the
person insured relinquish his interest in the
thing insured. This relinquishment must be
A.
actual.
B. constructive first and if it fails, then

actual.
C.
either
actual
or
constructive.
D. constructive.
Answer
A. actual.
Abandonment
It is made orally or in writing. If orally,
written notice shall be submitted
within 7 days from oral notice (143)
Has the effect of transferring by the
insured of his interest, to the insurer
with all chances of recovery and
indemnity (146)
Bar 2011
X Shipping, Co., insured its vessel MV Don Teodoro
for Php100 Million with ABC Insurance, Co. through
T, an agent of X Shipping. During a voyage, the
vessel accidentally caught fire and suffered
damages estimated at Php80 Million. T personally
informed ABC Insurance that X Shipping was
abandoning the ship.
Later, ABC insurance denied X Shippings claim for

loss on the ground that a notice of abandonment
through its agent was improper. Is ABC Insurance
right?
Bar 2011
A. Yes, since X Shipping should have ratified
its
agents
action.
B. No, since T, as agent of X Shipping who
procured the insurance, can also give notice
of
abandonment
for
his
principal.
C. Yes, since only the agent of X Shipping
relayed
the
fact
of
abandonment.
D. No, since in the first place, the damage
was more than 34 of the ship's value.
Answer
B. No, since T, as agent of X
Shipping
who
procured
the
insurance, can also give notice of
abandonment for his principal.
Abandonment
If insurer pays for loss as if there
was actual total loss, BUT there
was no formal
abandonment,Insurer is entitled
to whatever may remain of the
thing insured or its proceeds of
salvage (147)
Who is entitled to freightage in case

of abandonment?
freightage earned before the loss
belongs to the insurer of the
freightage
Freightage earned after the loss
belongs to the insurer of the ship
Insurer refuses valid

abandonment
the rights of the insured are not
prejudiced by refusal of insurer to
accept abandonment
Insurer is still liable for actual total loss
deducting any amount given to the
insured
Acceptance of abandonment may be
express or implied. Mere silence is
Insured refuses to abandon
If insured fails to abandon, he can recover

actual loss
Illustration
A insures a vessel with B for P1
Million
The vessel's value is reduced to
P200,000 due to a peril of the SEA
TWO CHOICES OF A: Abandon or
claim actual loss
If A abandons
A must immediately give a written
notice of abandonment to B
If B accepts the abandonment, it
must give A P1 Million
If A abandons
B now has all the right with respect
to the vessel
HOWEVER, freightage earned
before loss will belong to the
insurer of the goods
Freightage earned after the loss
will belong to the insurer of the
vessel
If A does not abandon BUT

B still gives A P1 Million
B will now have the right over the
vessel, what remains of it and
proceeds of salvage
If A does not abandon

A can recover ACTUAL loss or
P800,000 since the vessel is
reduced to 20% of its former value
of P1 Million
Total
Constructive
>3/4 rule
Insured must
abandon to get full
amount
Actual
Insured gets full

amount
Valuation is conclusive between
parties in determining total or partial
loss EXCEPT if there is fraud
Marine insurer is liable for partial loss
only for such proportion of the amount
insured by him as the loss bears to
the value of the whole interest.
How to estimate loss in open

policy (161)
Value of the ship value at

the beginning of risk including
articles which adds to its
value or to prepare it for the
voyage
How to estimate loss in open

policy(161)
Value of the cargo actual

cost to insured when laden
on board OR market value
at the time and place of
lading
How to estimate loss in case of

open policy (161)
Value of the freightage is the
gross freightage, exclusive of
primage
Cost of insurance shall be added
to the estimated value
Effect of an Other Insurance Policy

Clause
Generally allowed
Only subject to possible stipulation

that insurer must be informed or
must
consent
to
additional
insurance policies on the same
property
Bar 2011
If an insurance policy prohibits additional
insurance on the property insured without the
insurer's consent, such provision being valid
and reasonable, a violation by the insured
A. reduces the value of the policy.
B. avoids the policy.
C. offsets the value of the policy with the
additional insurancess value.
D. forfeits premiums already paid.
Answer
B. avoids the policy.
Litigation of Claims
Powers of the Commissioner
Adjudic
atory
Adminis
trative
NEW
Insurance Commissioner
Section 437. The Insurance

Commissioner shall be appointed by the
President of the Republic of the
Philippines for a term of six (6) years
without reappointment and who shall
serve as such until the successor shall
have been appointed and qualified. If
the Insurance Commissioner is removed
before the expiration of his term of
office, the reason for the removal must
be published.
NEW
Adjudicatory Powers
Single claims of P5 Million

or below (excluding cost,
attorneys
fees
and
interest)
This
jurisdiction
concurrent
with
regular courts
is
the
NEW
Adjudicatory Powers
does not cover the relationship
between the insurance company
and its agents/brokers but is
limited to adjudicating claims and
complaints filed by the insured
against the insurance company.
NEW
Administrative Powers
To see that all laws relating to
insurance, insurance companies and
other insurance matters, mutual
benefit associations, and trusts for
charitable uses are faithfully executed
and to perform the duties imposed
upon him by this Code
NEW
has sole and exclusive authority to
regulate the issuance and sale of
variable contracts as defined in
Section 238 hereof and to provide for
the licensing of persons selling such
contracts, and to issue such
reasonable rules and regulations
governing the same.
NEW
Issue such rulings, instructions,
circulars, orders and decisions as may
be deemed necessary to secure the
enforcement of the provisions of this
Code to ensure the efficient regulation
of the insurance industry in
accordance with global best practices
and to protect the insuring public.
Except as otherwise specified,
(a)
Formulate
policies
and
recommendations on issues concerning the
insurance industry, advise Congress and
other government agencies on all aspects
of the insurance industry and propose
legislation and amendments thereto;
(b) Approve, reject, suspend or revoke
licenses or certificates of registration
provided for by this Code;
(c)
Impose sanctions for the violation of laws

and the rules, regulations and orders issued
pursuant thereto;
(d) Prepare, approve, amend or repeal
rules, regulations and orders, and issue
opinions and provide guidance on and
supervise compliance with such rules,
regulations and orders;
(e) Enlist the aid and support of, and/or
deputize any and all enforcement agencies
of the government in the implementation of
(f) Issue cease and desist orders to prevent
fraud or injury to the insuring public;
(g)
Punish
for
contempt
of
the
Commissioner, both direct and indirect, in
accordance with the pertinent provisions of
and penalties prescribed by the Rules of
Court;
(h) Compel the officers of any registered
insurance corporation or association to call
meetings of stockholders or members
thereof under its supervision;
(i) Issue subpoena duces tecum and
summon witnesses to appear in any
proceeding of the Commission and, in
appropriate cases, order the examination,
search and seizure of all documents,
papers, files and records, tax returns, and
books of accounts of any entity or person
under investigation as may be necessary
for the proper disposition of the cases
before it, subject to the provisions of
existing laws;
(j) Suspend or revoke, after proper notice
and hearing, the license or certificate of
(k) Conduct an examination to determine
compliance with laws and regulations if the
circumstances so warrant as determined by
appropriate rules and regulations;
(l) Investigate not oftener than once a year
from the last date of examination to
determine whether an institution is
conducting its business on a safe and sound
basis:
Provided,
That,
the
deficiencies/irregularities
found
by
or
discovered by an audit shall be immediately
(m) Inquire into the solvency and liquidity of the
institutions under its supervision and enforce
prompt corrective action;
(n) To retain and utilize, in addition to its annual
budget, all fees, charges and other income derived
from the regulation of insurance companies and
other supervised persons or entities;
(o) To fix and assess fees, charges and penalties as
the Commissioner may find reasonable in the
exercise of regulation; and
(p) Exercise such other powers as may be provided
by law as well as those which may be implied from,
or which are necessary or incidental to the express
powers granted the Commission to achieve the
objectives and purposes of this Code.
To impose penalties on insurers:
Fines not less than Five thousand
pesos a (P5,000.00) and not more
than Two hundred thousand pesos
(P200,000.00); and
Suspension, or after due hearing,
removal of directors and/or officers
and/or agents.
At least once a year to examine the
affairs, financial condition and
method of business of insurers
To issue
licenses/registrations/authorit
y to the ff:
Domestic or foreign insurer
(247)
Reinsurance Broker (license)
(Sec. 310)
Insurance Agent and Broker
(license) (Sec. 299)
To issue
licenses/registrations/authorit
y to the ff:
Resident agent of a foreign
insurer
(certificate
of
registration)
Non-life company underwriter
(certificate of registration)
Adjusters Actuary
Grounds to revoke agents license

Has willfully violated any provision of
this Code; or
Has intentionally made a material
misstatement in the application to
qualify for such license; or
Has obtained or attempted to obtain a
license by fraud or misrepresentation;
or
Has been guilty of fraudulent or
dishonest practices; or

Has misappropriated or converted to his own
use or illegally withheld moneys required to
be held in a fiduciary capacity; or
Has not demonstrated trustworthiness and
competence to transact business as an
insurance agent or insurance broker in such
manner as to safeguard the public; or
Has materially misrepresented the terms and
conditions of policies or contracts of
insurance which he seeks to sell or has sold;
or

Has failed to pass the written examination
prescribed, if not otherwise exempt from
taking the same.
"In addition to the foregoing causes, no
license to act as insurance agent or insurance
broker shall be renewed if the holder thereof
has not been actively engaged as such agent
or broker in accordance with such rules as the
Commissioner may prescribe.
Suspension or Revocation of
certificate of authority on the ff
grounds:
Insurer is in an unsound condition
Insurer failed to comply with the
provisions of law or regulations
obligatory upon it
Insurer's condition or method of
business is hazardous to the public or
its policyholders
Insurer's paid up capital or available
assets or security deposits is impaired
or is deficient
Margin of solvency is deficient
Commission
of
any
of
unfair
settlement practices
Unfair Claims Settlement

Practices
Knowingly misrepresenting
claimants pertinent facts
policy provisions relating
coverage at issue
to
or
to
Failing to acknowledge with

reasonable promptness pertinent
communications with respect to
claims arising under its policies

Practices
Failing to adopt and implement
reasonable standards for the
prompt investigation of claims
arising under its policies

Practices
Not attempting in good faith to
effectuate prompt, fair and
equitable settlement of claims
submitted in which liability has
become reasonably clean; or

Practices
Compelling
policyholders
to
institute
suit to recover
amounts due under its policies
by offering without justifiable
reason substantially less than
the
amounts
ultimately
recovered in suits brought by
them
NEW
Unlawful Claims
SECTION 251. It is unlawful to:
(a) Present or cause to be presented any fraudulent
claim for the payment of a loss under a contract of
insurance; and
(b) Fraudulently prepare, make or subscribe any
writing with intent to present or use the same, or to
allow it to be presented in support of any such claim.
Any person who violates this section shall be punished
by a fine not exceeding twice the amount claimed or
imprisonment of two (2) years, or both, at the
discretion of the court.
Appeal of Insurance
Commission cases
If Administrative functions- File a
Memorandum of Appeal within 15 days
to the Secretary of Finance (Rule IX,
Section 1 of Insurance Memorandum
Circular 1-93)
If Adjudicatory functions- Court of
Appeals (depending on mode of appeal)
At a glance
Period to pay claims in life and

non-life (60 days; 30-60-90
rule)
Facility of payment clause
Notice of loss in fire insurance
At a glance
Actual loss
Constructive loss- > rule on
abandonment
At a glance
Jurisdiction
of
commissioner
the
insurance
Jurisdiction of regular courts
Unfair claims settlement practices
Framework
General
Concepts
Life Insurance
Non-Life
Insurance
Summary of
Amendments in
Insurance Code
Grounds for
Rescission
Payment of
Proceeds
PDIC Law
PART FIVE
GROUNDS FOR RESCISSION
PDIC LAW
GROUNDS
Concealment
Misrepresentation
Breach of warranty, express or
implied
Other grounds - Section 64-65
CONCEALMENT
NEW
CONCEALMENT
neglect to communicate that

which a party knows and
ought to communicate.
May
be
intentional
unintentional
or
Requisites of
Concealment
(a) party knows the fact which he
neglects to communicate or
disclose
(b) party concealing is duty
bound to
disclose such fact to
the other
Requisites of
Concealment
a) party concealing makes no
warranty as to concealed fact
b) other party has no means of
ascertaining
the
fact
concealed
WHAT MUST BE
COMMUNICATED
All
facts
within
his
knowledge
Material to the contract
Other party has no means
of ascertaining
He makes no warranty
Information which prove or
tend to prove falsity of
WHAT NEED NOT BE

COMMUNICATED
Those
knows
which
the
other
Those
which,
in
the
exercise of ordinary case,
the other ought to know
and which the other has no
reason to suppose him
ignorant
WHAT NEED NOT BE

COMMUNICATED
Those of which
communication
the
other
waives
Those which prove or tend to prove

the existence of a risk excluded by a
warranty, and which are not otherwise
material; and
Those which relate to a risk excepted
from the policy, and which are not
otherwise material
What need not be

communicated
General causes open to his
inquiry which may affect the
political or material perils
contemplated (32)
General usages of trade (32)
What need not be

communicated
Nature
or
amount
of
interest, except in answer
to an inquiry (34)
Information of
judgment (35)
his
own
TEST OF MATERIALITY
Determined not by event

Probable
and
reasonable
influence of facts upon the
party
to
whom
communication is due in
forming his estimate of the
disadvantages
of
the
proposed
contract
OR
in
TEST OF MATERIALITY
Assessment of risk, in
making/omitting further
inquiries, cause him to
reject the risk or accept it
at higher premium
rate/different terms
Materiality
Sunlife v. CA, 245 SCRA 268 where the applicant concealed
prior medical history and he died
in a plane crash, there was still
concealment notwithstanding the
apparent
lack
of
relation
between the fact concealed and
the cause of death
Bar 2001
A applied for non-medical life insurance.
He did not inform the insurer that he
was examined and confined at St.
Lukes Hospital where he was diagnosed
for lung cancer. A died in a plane crash.
Is the insurer liable considering that
the fact concealed had no bearing with
the cause of death of A?
Answer
The insurer is not liable. The
concealed fact is material to the
approval and issuance of the policy.
According to a decided case, the
insured need not die of the disease
he failed to disclose to the insurer. It
is sufficient that his non-disclosure
misled the insurer in forming his
estimate of the risks of the proposed
insurance policy or in making further
inquiries.
Bar 2011
An insured, who gains knowledge of a
material fact already after the
effectivity of the insurance policy, is not
obliged to divulge it. The reason for this
is that the test of concealment of
material fact is determined
Bar 2011
A. at the time of the issuance of the
policy.
B. at any time before the payment of
premium.
C. at the time of the payment of the
premium.
D. at any time before the policy
becomes effective.
Answer
D. at any time before the policy
becomes effective.
WAIVER OF RIGHT TO
INFORMATION
By terms of insurance OR
Neglect to make inquiries
concealment entitles the
unguilty party to rescind
CONCEALMENT
In Marine Insurance
in addition to Section 28
all information he possesses

material to the risk
except
those in Section 30
CONCEALMENT
In Marine Insurance
state exact and whole truth in
relation to all matters that he
represents
information
of
belief
or
expectation of a third person as
to a material fact is MATERIAL
insured is presumed to know
prior loss at time of insuring
Concealment in Marine
Insurance
General Rule: Concealment

entitles the innocent party
to rescind
Exception: Section 110
Section 110
Concealment as to following
does NOT vitiate the entire
contract but exonerates the
insurer from loss resulting
from risk concealed.
(a) national character of
insured
(b) liability of thing insured to
Section 110
c) liability to seizure from
breach of foreign laws of trade
(d) the want of necessary
document
(e) the use of false and
simulated papers
INCONTESTABILITY
LIFE INSURANCE
CLAUSE IN
Section 48, 2nd par if life insurance

has been in force during the lifetime of
the insured for a period of 2 years from
DATE
OF
ISSUE
or
LAST
REINSTATEMENT
the insurer cannot prove that the
policy is void ab initio or is rescindible
by reason of fraudulent concealment
or misrepresentation of the insured or
his agent.
Illustration
A is issued a life insurance policy on April 2,
2000
He conceals the fact that he has
tuberculosis
A dies on April 3, 2002.
Insurance company must pay. Although
there was concealment, the policy has been
in force during the lifetime of A for 2 years
from April 2, 2000.
When Incontestability
Clause DOES NOT apply
Person has no insurable interest
Cause of death is an excepted peril
Premiums have not been paid
Conditions of the policy relating to military or naval
service have been violated
When Incontestability Clause

DOES NOT apply
Fraud of a vicious type is present when policy was
taken out
Beneficiary failed to furnish proof of death or to
comply with any condition imposed by the policy
after the loss has happened
That the action was not brought within time specified
Bar 2012
The "incontestability clause" in a Life Insurance Policy
means --A. that life insurance proceeds cannot be claimed two (2)
years after the death of the insured.
B. that two (2) years after date of issuance or
reinstatement of the life insurance policy, the insurer
cannot anymore prove that the policy is void ab initio or
rescindable by reason of fraudulent concealment or
misrepresentation of the insured.
C. that the insured can still claim from the insurance policy
after two (2) years even though premium is not paid.
D. that the insured can only claim proceeds in a life
insurance policy two (2) years after death.
Bar 2014
On July 3, 1993, Delia Sotero (Sotero) took out a life insurance
policy from Ilocos Bankers Life Insurance Corporation (Ilocos Life)
designating Creencia Aban(Aban), her niece, as her beneficiary.
Ilocos Life issued Policy No. 747, with a face value of P100,000.00,
in Soteros favor on August 30, 1993, after the requisite medical
examination and payment of the premium.
On April 10, 1996, Sotero died. Aban filed a claim for the insurance
proceeds on July 9, 1996. Ilocos Life conducted an investigation into
the claim and came out withthe following findings:
1. Sotero did not personally apply for insurance coverage, as she
was illiterate.
2. Sotero was sickly since 1990.
3. Soterodid not have the financial capability to pay the premium on
the policy.
4. Sotero did not sign the application for insurance.
5. Aban was the one who filed the insurance application and
designated herself as the beneficiary.
Bar 2014
For the above reasons and claiming fraud,
Ilocos Life denied Abans claim on April 16,
1997, but refunded the premium paid on the
policy. (6%)
beneficiary?
(C) Is Aban entitled to claim the proceeds
under the policy?
Suggested Answer
The incontestability clause shall not apply
because the niece did not have insurable
interest on the life of her aunt. Hence, she
cannot use the clause to recover.
Suggested Answer
(c) Is Aban entitled to claim the proceeds
under the policy?
No Aban is not entitled to the proceeds
because she was the one who obtained the
policy on the life of her aunt and she does not
have insurable interest. Hence, the policy is
void.
MISREPRESENTATION
MISREPRESENTATION
Representations
factual statements made
by the insured at the
time of, or prior to the
issuance of the policy
MISREPRESENTATION
Statement
(a) as a fact of something which is
untrue
(b) which the insured stated with
knowledge that it is untrue and with an
intent to deceive, or which
he states
positively as true without knowing it to
be true and which has a tendency to
mislead, and
(c) where such fact in either case is
material to the risk
Test of Falsity &

Materiality
Sec. 44 when the facts
fail to correspond with
its
assertion
or
stipulations
Sec. 45 materiality is
determined using the
same
test
in
Misrepresentation as a
ground to rescind
entitled to rescind from the
time the representation
becomes false
right to rescind by insurer is
waived by acceptance of
premiums despite knowledge
of ground to rescind
Misrepresentations as to Age
in Life Insurance
no rescission
proceeds shall be such
as the premium would
have purchased at the
correct age
Misrepresentation
in Marine Insurance
entitles the insurer to

rescind
eventual falsity of a
representation as to
expectation
without
fraud, does NOT avoid
a
marine
insurance
Bar 2011
Shipowner X, in applying for a marine
insurance policy from ABC, Co., stated
that his vessel usually sails middle of
August and with normally 100 tons of
cargo. It turned out later that the vessel
departed on the first week of
September and with only 10 tons of
cargo. Will this avoid the policy that was
issued?
Bar 2011
A. Yes, because there was breach of
implied
warranty.
B. No, because there was no intent to
breach an implied warranty. C. Yes,
because it relates to a material
representation.
D. No, because there was only
representation of intention.
Answer
D. No, because there was only
representation of intention.
Breach of Warranty
Warranty
Either express or implied
May relate to the past, present

or future
Implied Warranties in
Marine Insurance
Seaworthiness - 113
Nationality or neutrality
120
Improper deviation -121
Illegal ventures
Bar 2000
What warranties are implied in
marine insurance? (2%)
Seaworthiness
Section 114 - a ship is

seaworthy if reasonably
fit to perform the service,
and to encounter the
ordinary perils of the
voyage contemplated by
the parties to the policy
Seaworthiness
Section 116 - extends not only to
the seaworthiness of the ship itself
but requires that it be properly
laden, provided with competent
master, sufficient number of
competent officers and seamen,
requisite appurtenances and
equipment and other implements
for the voyage
Improper Deviation
Section 123 - deviation is a

departure from the course of
the voyage insured or
unreasonable delay in pursuing
the voyage or the
commencement of an entirely
different voyage
Proper Deviation, 124

caused
by
circumstances
outside the control of the
master or owner
when necessary to comply with

a warranty or to avoid peril
Proper Deviation, 124

when made in good faith upon
reasonable grounds to avoid a
peril
in good faith to save human life
or to relieve another vessel
Bar 2011
T, the captain of MV Don Alan, while
asleep in his cabin, dreamt of an
Intensity 8 earthquake along the path of
his ship. On waking up, he immediately
ordered the ship to return to port. True
enough, the earthquake and tsunami
struck three days later and his ship was
saved. Was the deviation proper?
Bar 2011
A. Yes, because the deviation was made in good faith and on
a reasonable ground for believing that it was necessary to
avoid
a
peril.
B. No, because no reasonable ground for avoiding a peril
existed
at
the
time
of
the
deviation.
C. No, because T relied merely on his supposed gift of
prophecy.
D. Yes, because the deviation took place based on a
reasonable belief of the captain.
Answer
B. No, because no reasonable
ground for avoiding a peril existed
at the time of the deviation.
Nationality
Section 120 - where the
nationality or neutrality of the
ship is expressly warranted, it is
impliedly warrantied that the
ship will carry the requisite
documents to show such
nationality or neutrality and it
will not carry any document
which will cast suspicion
Other Ground for Rescission in

non life insurance
non- payment of premium
conviction
of
a
crime
arising
out
of
acts
increasing
the
hazard
insured against
discovery
of
fraud
/
material misrepresentation
NEWOther
Ground for Rescission

in non life insurance
discovery of willful or reckless acts or omissions

increasing the hazard insured against
physical changes
uninsurable
in
the
property
becoming
Discovery of other insurance coverage that

makes the total insurance in excess of the value
of the property insured
determination by Insurance Commissioner that
continuation of the policy would violate or would
place the insurer in violation of the Insurance
Code
NEW
Notice of Cancellation
In writing
Mailed or delivered to
named insured at address
shown in the policy OR
or to his broker provided
the broker is authorized in
writing
by
the
policy
owner to receive the
notice of cancellation on
his behalf
Notice of Cancellation
Shall state
grounds relied on
upon
written
request,
insurer will furnish fact on
which cancellation is based
Rescission must be exercised

Before the commencement of any action on
the contract
In which motor vehicle liability insurance
notice of cancellation must be sent to the
land transportation owner/operator and the
LTO at least 15 days before date of effectivity
OLD AND NEW

INSURANCE
CODE
COMPARED
Summary of Amendments
OLD INSURANCE CODE
SECTION 3: CONSENT OF
HUSBAND
INSURANCE CODE OF 2013

SECTION
SPOUSE
3:
CONSENT
OF
SECTION 3: The married woman or the SECTION 3: DELETION OF MARRIED

minor herein allowed to take out an WOMAN/MINOR PROVISION TAKING
insurance policy may exercise all the OUT A POLICY.
rights and privileges of an owner under a
policy.
All rights, title and interest in the policy
of insurance taken out by an original
owner on the life or health of a minor
shall automatically vest in the minor
upon the death of the original owner,
unless otherwise provided for in the
policy.
All rights, title and interest in the

policy of insurance taken out by an
original owner on the life or health
of the person insured shall
automatically vest in the latter
upon the death of the original
owner, unless otherwise provided
for in the policy.
OLD INSURANCE CODE
SECTION
6:
Every
person,
partnership,
association,
or
corporation
duly
authorized to transact
insurance business as
elsewhere provided in
this code, may be an
insurer.
SECTION 6: DELETED
THE WORD PERSON
Section
6.
Every
corporation,
partnership,
or
association,
duly
authorized to transact
insurance business as
elsewhere provided in
this Code, may be an
insurer
OLD INSURANCE CODE
SECTION 11: The insured

shall have the right to
change the beneficiary he
designated in the policy,
unless he has expressly
waived this right in said
policy.
SECTION 11. The insured

shall have the right to
change the beneficiary he
designated in the policy,
unless he has expressly
waived this right in said
policy.
Notwithstanding
the foregoing, in the event
the
insured
does
not
change
the
beneficiary
during his lifetime, the
designation
shall
be
deemed irrevocable.
OLD INSURANCE CODE
SECTION 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.
Section 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 such a
case, the share forfeited shall
pass
on
to
the
other
beneficiaries, unless otherwise
disqualified. In the absence of
other
beneficiaries,
the
OLD INSURANCE CODE
SECTION
27.
A SECTION
27.
A
concealment entitles concealment
the injured party to whether intentional
rescind a contract of or
unintentional
insurance.
entitles the injured
party to rescind a
contract
of
insurance.
.
OLD INSURANCE CODE
SECTION 50, FOURTH PARAGRAPH.

Group insurance and group
annuity policies, however, may
be typewritten and need not be
in printed form.
SECTION
50,
FOURTH
PARAGRAPH:
Deleted
TYPEWRITTEN provision and
replaced it with:
Notwithstanding the foregoing,
the policy may be in electronic
form subject to the pertinent
provisions of Republic Act No.
8792, otherwise known as the
Electronic Commerce Act and
to such rules and regulations as
may be prescribed by the
OLD INSURANCE CODE
SECTION 60: An open policy is

one in which the value of the
thing insured is not agreed
upon,
but
is
left
to
be
ascertained in case of loss.
Section 60. An open policy is

one in which the value of the
thing insured is not agreed
upon, and the amount of the
insurance merely represents
the insurers maximum liability.
The value of such thing insured
shall be ascertained at the time
of the loss.
OLD INSURANCE CODE
SECTION 64: No policy of

insurance other than life shall
be cancelled by the insurer
except upon prior notice thereof
to the insured, and no notice of
cancellation shall be effective
unless it is based on the
occurrence, after the effective
date of the policy, of one or
more of the following:
Section
64.
No
policy
of
insurance other than life shall
be cancelled by the insurer
except upon prior notice thereof
to the insured, and no notice of
cancellation shall be effective
unless it is based on the
occurrence, after the effective
date of the policy, of one or
more
of
the
following:
ADDITIONAL GROUND
(f) Discovery of other insurance
OLD INSURANCE CODE
SECTION
65:All
notices
of
cancellation mentioned in the
preceding section shall be in
writing, mailed or delivered to
the named insured at the
address shown in the policy,
and shall state (a) which of the
grounds set forth in section
sixty-four is relied upon and (b)
that, upon written request of
the named insured, the insurer
will furnish the facts on which
the cancellation is based.
Section 65. All notices of

cancellation mentioned in the
preceding section shall be in
writing, mailed or delivered to
the named insured at the
address shown in the policy, or
to his broker provided the
broker is authorized in writing
by the policy owner to receive
the notice of cancellation on his
behalf, and shall state:
OLD INSURANCE CODE
SECTION
77:An
insurer
is
entitled to payment of the
premium as soon as the thing
insured is exposed to the peril
insured
against.
Notwithstanding any agreement
to the contrary, no policy or
contract of insurance issued by
an insurance company is valid
and binding unless and until the
premium thereof has been paid,
except in the case of a life or an
industrial life policy whenever
SECTION 77. An insurer is

entitled to payment of the
premium Notwithstanding any
agreement premium thereof
has been paid, except in the
case of a life or an industrial life
policy
whenever
the grace
period provision applies, or
whenever under the broker and
agency agreements with duly
licensed
intermediaries,
a
ninety (90)-day credit extension
is given. No credit extension to
OLD INSURANCE CODE
SECTION
78:
An
acknowledgment in a policy or
contract of insurance or the
receipt of premium is 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.
SECTION 78. Becomes Section

79 and in its place:
Section 78. Employees of the
Republic of the Philippines,
including
its
political
subdivisions
and
instrumentalities,
and
government-owned
or
-controlled corporations, may
pay their insurance premiums
and loan obligations through
salary deduction:
OLD INSURANCE CODE
SECTION 78:
Provided, That the treasurer,

cashier, paymaster or official of
the
entity
employing
the
government
employee
is
authorized, notwithstanding the
provisions of any existing law,
rules and regulations to the
contrary, to make deductions
from the salary, wage or income
of the latter pursuant to the
agreement between the insurer
and the government employee
and to remit such deductions to
OLD INSURANCE CODE
SECTION 81. A person insured is

entitled to return of the premium
when the contract is voidable, on
account
of
fraud
or
misrepresentation of the insurer, or
of his agent, or on account of facts,
the existence of which the insured
was ignorant without his fault; or
when by any default of the insured
other than actual fraud, the insurer
never incurred any liability under
the policy.
SECTION 82:A person insured is

entitled to a return of the premium
when the contract is voidable, and
subsequently annulled under the
provisions of the Civil Code; or on
account
of
the
fraud
or
misrepresentation of the insurer, or
of his agent, or on account of facts,
or the existence of which the
insured was ignorant of without his
fault; or when by any default of the
insured other than actual fraud, the
insurer never incurred any liability
under the policy.
"A person insured is not entitled to
a return of premium if the policy is
annulled, rescinded or if a claim is
denied by reason of fraud.
OLD INSURANCE CODE
SECTION 82. In case of

an over-insurance by
several insurers, the
insured is entitled to a
ratable return of the
premium, proportioned
to the amount by which
the
aggregate
sum
insured
in
all
the
SECTION 83: In case of

an over-insurance by
several insurers other
than life, the insured is
entitled to a ratable
return of the premium,
proportioned
to
the
amount by which the
aggregate sum insured
OLD INSURANCE CODE
NONE
SECTION 84: An insurer

may
contract
and
accept
payments,
in
addition
to
regular
premium,
for
the
purpose
of
paying
future premiums on the
policy or to increase the
benefits thereof.
OLD INSURANCE CODE
Section 88. In case of

loss upon an insurance
against fire, an insurer
is exonerated, if notice
thereof be not given to
him by an insured, or
some person entitled to
the
benefit
of
the
insurance,
without
unnecessary delay.
SECTION 90: In case of loss

upon an insurance against
fire,
an
insurer
is
exonerated, if written notice
thereof be not given to him
by an insured, or some
person
entitled
to
the
benefit of the insurance,
without unnecessary delay.
For other non-life insurance,
the
Commissioner
may
specify the period for the
OLD INSURANCE CODE
Section 94. Where the insured is SECTION 96: Where the insured in a
overinsured by double insurance :
policy other than life is over insured
by double insurance:
(b) Where the policy under which
the insured claims is a valued "(b) Where the policy under which
policy, the insured must give credit the insured claims is a valued
as against the valuation for any sum policy, any sum received by him
received by him under any other under any other policy shall be
policy without regard to the actual deducted from the value of the
value of the subject matter insured; policy without regard to the actual
value of the subject matter insured;
(c) Where the policy under which
the insured claims is an unvalued (c) Where the policy under which
policy he must give credit, as the insured claims is an unvalued
against the full insurable value, for policy, any sum received by him
any sum received by him under any under any policy shall be deducted
policy;
against the full insurable value, for
any sum received by him under any
policy;
OLD INSURANCE CODE
Section 179. Life insurance is

insurance on human lives and
insurance appertaining thereto
or connected therewith.
Section 181. Life insurance is

insurance on human lives and
insurance appertaining thereto
or connected therewith.
"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.
OLD INSURANCE CODE
Section 180. Third paragraph
In the absence of a judicial

guardianmay
exercise,
in
behalf of said minor, any right
under
the
policy,
without
necessity of court authority or
the giving of a bond, where the
interest of the minor in the
particular act involved does not
exceed twenty thousand pesos.
In the absence of a judicial

guardian may exercise, in
behalf of said minor, any right
under
the
policy,
without
necessity of court authority or
the giving of a bond, where the
interest of the minor in the
particular act involved does not
exceed Five hundred thousand
pesos (P500,000.00) or in such
reasonable amount as may be
determined
by
the
Commissioner.
OLD INSURANCE CODE

Section 182.
In the absence or in case of the
incapacity of the father or mother,
the grandparent, the eldest brother
or sister at least eighteen (18)
years of age, or any relative who
has actual custody of the minor
insured or beneficiary, shall act as a
guardian without need of a court
order or judicial appointment as
such guardian, as long as such
person is not otherwise disqualified
or incapacitated. Payment made by
the insurer pursuant to this section
shall relieve such insurer of any
liability under the contract.
OLD INSURANCE CODE
NONE

Section 187 handles provisions
on micro insurance
Similar to industrial insurance
concept
OLD INSURANCE CODE
SECTION 187, PAR 6
Before issuing such certificate
of authority, the Commissioner
must be satisfied that the name
of the company is not that of
any
other
known
company
transacting a similar business in
the Philippines, or a name so
similar as to be calculated to
mislead the public.

SECTION 193, PAR 6
Before issuing such certificate
of authority, the Commissioner
must be satisfied that the name
of the company is not that of
any
other
known
company
transacting a similar business in
the Philippines, or a name so
similar as to be calculated to
mislead
the
public.
The
Commissioner may issue rules
and regulations on the use of
names of insurance companies
and other supervised persons or
entities.
OLD INSURANCE CODE
SECTION 187, PAR 7
SECTION 193, PAR 7
Such certificate of authority

shall expire on the last day of
June of each year and shall be
renewed
annually
if
the
company is continuing to
comply with the provisions of
this Code or the circulars,
instructions,
rulings
or
decisions
of
the
Commissioner. Every company
receiving
any
such
certificates of authority shall
be subject to the provisions
of this Code and other related
laws and to the jurisdiction
and
supervision
of
the
Commissioner.
The certificate of authority issued

by the Commissioner shall expire
on the last day of December,
three (3) years following its
date of issuance, and shall be
renewable every three (3)
years thereafter, subject to the
companys continuing compliance
with the provisions of this Code,
circulars, instructions, rulings or
decisions of the Commission.
OLD INSURANCE CODE
NONE

SECTION 193, LAST PAR
"No insurance company issued
with a valid certificate of
authority to transact insurance
business
anywhere
in
the
Philippines by the Insurance
Commissioner, shall be barred,
prevented, or disenfranchised
from issuing any insurance
policy or from transacting any
insurance business within the
scope
or
coverage
of
its
certificate
of
authority,
anywhere in the Philippines, by
any local government unit or
authority, for whatever guise or
reason whatsoever,
OLD INSURANCE CODE
NONE

SECTION 193, LAST PAR
including under any kind of
ordinance,
accreditation
system, or scheme. Any local
ordinance or local government
unit
regulatory
issuance
imposing such restriction or
disenfranchisement
on
any
insurance company shall be
deemed null and void ab initio.
OLD INSURANCE CODE
SECTION 188:
SECTION 194
PAID-UP CAPITAL FOR

DOMESTIC CORPS: P5 Million
PAID-UP CAPITAL FOR NEW

domestic
life
or
non-life
insurance company shall, in a
stock corporation: One billion
pesos;
(P1,000,000,000.00):
Provided,
OLD INSURANCE CODE
SECTION 188:

SECTION 194
Dec. 31, 1978: additional P3M Domestic insurance company

Dec. 31, 1979: additional P4M already doing business in the
Dec. 31, 1980: additional P5M Philippines shall have a net
worth
By June 30, 2013: P250 M
By Dec. 31, 2016: P300 M
By Dec. 31, 2019: additional
P350 M
By
Dec.
31,
2022:
an
additional P480 M
OLD INSURANCE CODE
SECTION 188:
SECTION 194
Pre-licensing requirement of a
new
insurance
company,
in
addition to the paid-up capital
stock- require stockholders to pay
in cash to the company in
proportion to their subscription
interests a contributed surplus
fund of not less than P1M
Pre-licensing requirement of a
new
insurance
company,
in
addition to the paid-up capital
stock, require the stockholders to
pay in cash to the company in
proportion to their subscription
interests a contributed surplus
fund of not less than P100M
Life insurance company- not less May also require such company to
than P500,000
submit to him a business plan
showing the companys estimated
may also require such company to receipts and disbursements, as
submit to him a business plan well as the basis therefor, for the
showing the company's estimated next succeeding 3 years.
receipts and disbursements, as
well as the basis therefor, for the
next succeeding three years.
OLD INSURANCE CODE
SECTION 188:
SECTION 194
If organized as a mutual
company, in lieu of such
capital stock, it must have
available cash assets of at
least five million pesos above
all liabilities for losses
reported, expenses, taxes,
legal reserve, and
reinsurance of all outstanding
risks, and the contributed
surplus fund equal to the
amounts required of stock
corporations
If organized as a mutual
company, in lieu of such net
worth, it must have available
total members equity in an
amount to be determined by
the
Insurance Commission
above all liabilities for losses
reported,; expenses, taxes,
legal
reserve,
and
reinsurance of all outstanding
risks, and the contributed
surplus fund equal to the
amounts required of stock
corporations.
OLD INSURANCE CODE
SECTION 188:
SECTION 194
NONE
The Secretary of Finance may, upon

recommendation
of
the
Commissioner,
increase
such
minimum paid-up capital stock or
cash assets requirement under such
terms and conditions as he may
impose, to an amount which, in his
opinion, would reasonably assure the
safety of the interests of the
policyholders and the public.
The minimum paid-up capital and net
worth requirement must remain
unimpaired for the continuance of the
license. The Commissioner may
require the adoption of the risk-based
capital
approach
and
other
internationally accepted forms of
capital framework.
OLD INSURANCE CODE
SECTION 188:
SECTION 194
NONE
For the purpose of this

section, net worth shall
consist of:
"(a) Paid-up capital;
"(b) Retained earnings;
"(c) Unimpaired surplus; and
"(d) Revaluation of assets as
may be approved by the
Commissioner.
"The Commission may adopt
for purposes of compliance
with capital build up
requirement under this Code
the recognition as part of the
capital account, capital notes
or debentures which are
OLD INSURANCE CODE
SECTION 188:
SECTION 194
NONE
President
may
order
a
periodic review every 2 years
the capital structure set out
above
to
determine
the
capital adequacy of the local
insurance industry from and
after the integration and
liberalization of the financial
services, including insurance,
in the ASEAN Region.
A
review
committee
consisting of representatives
from DOF, IC, NEDA, SEC and
other agencies shall conduct
the
review
and
may
recommend to the President
to adopt for implementation
OLD INSURANCE CODE
SECTION 191: Foreign Corporations
Paid-up unimpaired capital or
assets and reserve not less than
that herein required of domestic
insurance companies, nor until it
shall have deposited with the
Commissioner for the benefit and
security of the policyholders and
creditors of such company in the
Philippines,
securities
satisfactory to the Commissioner
consisting of good securities of
the Philippines, including new
issues of stock of "registered
enterprises", as this term is
defined in Republic Act No. 5186,
to the actual market value of not
less than the minimum paid-up
capital required of domestic
insurance companies

SECTION
Corporations
197
Foreign
Unimpaired capital or assets and

reserve: P1 Billion nor until it
shall have deposited with the
Commissioner for the benefit and
security of the policyholders and
creditors of such company in the
Philippines,
securities
satisfactory to the Commissioner
consisting of good securities of
the Philippines, including new
issues of stock of "registered
enterprises as this term is
defined in E.O. 226 of 1987, as
amended, to the actual market
value of not less than the amount
herein required
OLD INSURANCE CODE
SECTION 191: NONE

SECTION
Corporations
197
Foreign
The Commissioner may, as a

pre-licensing requirement of
a new branch office of a
foreign insurance company, in
addition to the required asset
or net worth, require the
company
to
have
an
additional surplus fund in an
amount to be determined by
the Insurance Commission.
OLD INSURANCE CODE
SECTION 192
SECTION 198
In the event of any company

ceasing to do business in the
Philippines
the
securities
deposited as aforesaid shall
be
returned
upon
the
company's making application
therefor and proving to the
satisfaction
of
the
Commissioner that it has no
further liability under any of
its policies in the Philippines.
The securities deposited as

aforesaid shall be returned to
the
company
upon
the
Commissioners
written
approval and only after the
company has duly proven in
its application therefor that it
has
no
further
liability
whatsoever under any of its
policies nor to any of its
creditors in the Philippines.
OLD INSURANCE CODE
SECTION 194
SECTION 200
An insurance company doing

business in the Philippines
shall at all times maintain a
margin of solvency which
shall be an excess of the
value of its admitted assets
exclusive of its paid-up
capital, in the case of a
domestic company, or an
excess of the value of its
admitted assets in the
Philippines
An insurance company doing

shall at all times maintain the
minimum paid-up capital, and
net worth requirements as
prescribed
by
the
Commissioner. Such solvency
requirements shall be based
on internationally accepted
solvency
frameworks
and
adopted
only
after
due
consultation
with
the
insurance
industry
associations.
OLD INSURANCE CODE
SECTION 195
SECTION 201
No
domestic
insurance
corporation shall declare or
distribute any dividend on its
outstanding stocks except
from profits attested in a
sworn
statement
to
the
Commissioner
by
the
president or treasurer of the
corporation to be remaining
on
hand
after
retaining
unimpaired:
No
domestic
insurance
corporation shall declare or
distribute any dividend on its
outstanding stocks unless it
has met the minimum paid-up
capital
and
net
worth
requirements under Section
194 and except from profits
attested in a sworn statement
to the Commissioner by the
president or treasurer of the
corporation to be remaining
on
hand
after
retaining
unimpaired:
OLD INSURANCE CODE
SECTION 195
SECTION 201
(a) The entire paid-up capital stock;

(b) The margin of solvency required by
section one hundred ninety-four;
(c) In the case of life insurance corporation,
the legal reserve fund required by section
two hundred eleven;
(d) In the case of corporations other than
life, the legal reserve fund required by
section two hundred thirteen;
(e) A sum sufficient to pay all net losses
reported, or in the course of settlement, and
all liabilities for expenses and taxes.
(a) The entire paid-up capital stock

(b) The solvency requirements defined by
Section 200;
(c) In the case of life insurance
corporations, the legal reserve fund
required by Section 217;
(d) In the case of corporations other than
life, the legal reserve fund required by
Section 219; and
(e) A sum sufficient to pay all net losses
reported, or in the course of settlement, and
all liabilities for expenses and taxes.
The Commissioner shall prescribe solvency
requirements for branches of foreign
insurance companies operating in the
Philippines.
OLD INSURANCE CODE
SECTION 196
SECTION 202
In any determination of the

financial condition of any
insurance
company
doing
business in the Philippines,
there shall be allowed and
admitted as assets only such
assets
owned
by
the
insurance company concerned
and which consist of:
In any determination of the

financial condition of any
insurance
company
doing
business in the Philippines,
there shall be allowed and
admitted as assets only such
assets legally or beneficially
owned
by
the
insurance
company
concerned
as
determined
by
the
Commissioner which consist
of:
OLD INSURANCE CODE
SECTION 196
SECTION 202
Cash in the possession of the

insurance company or in
transit under its control, and
the true and duly verified
balance of any deposit of
such company in a financially
sound commercial bank or
trust company.
(a) Cash in the possession of

the insurance company or in
transit under its control, and
the true and duly verified
balance of any deposit of
such company in a financially
sound bank or trust company
duly
authorized
by
the
Bangko Sentral ng Pilipinas.
OLD INSURANCE CODE
SECTION 198
SECTION 204
Section 198. No insurance

company shall loan any of its
money or deposits to any
person,
corporation
or
association, except upon first
mortgage or deeds of trust of
unencumbered, improved or
unimproved real estate
A life insurance company may

lend
to
any
of
its
policyholders
upon
the
security of the value of its
policy such sum as may be
determined pursuant to the
provisions of the policy.
No insurance company shall
loan any of its money or
deposits
to
any
person,
corporation or association,
except upon the security of
any of the following:
OLD INSURANCE CODE
SECTION 198
SECTION 204

person,
corporation
or
(a) First mortgage or deeds of

trust
of
registered,
unencumbered,
improved,
unimproved
real
estate,
including condominiums;
(b) First mortgages or deeds
of trust of actually cultivated,
improved and unencumbered
agricultural
lands
in
the
Philippines;
(c) Purchase money
mortgages, lease purchase
agreements or similar
securities executed or
received by it on account of
the sale or exchange of real
property acquired pursuant to
Sections 206 and 208;
OLD INSURANCE CODE
SECTION 198
SECTION 204

person,
corporation
or
(d)
Bonds
or
other
instruments of indebtedness
issued or guaranteed by the
Government
of
the
Philippines or its political
subdivisions authorized by
law to incur such obligations
or issue such guarantees or of
government-owned
or
-controlled corporations and
instrumentalities
including
the
Bangko
Sentral
ng
Pilipinas; or
OLD INSURANCE CODE
SECTION 198
SECTION 204

person,
corporation
or
(e)
Obligations
issued
or
guaranteed by universal banks,
commercial
banks,
offshore
banking units, investment houses
or other financial intermediaries
duly registered with the Bangko
Sentral ng Pilipinas; or
(f)
Obligations
issued
or
guaranteed by foreign banks or
corporations, each of which shall
have total net worth of at least
One hundred fifty million US
dollars ($US150,000,000.00) or
such other higher net worth as
may
be
prescribed
by
the
Insurance Commission, as shown
in their financial statements as of
the immediately preceding fiscal
year; or
OLD INSURANCE CODE
SECTION 198

person,
corporation
or

SECTION 204
(g) Assignments of monetary
instruments
such
as
cash
deposits, deposit certificates or
other similar instruments of
universal
banks,
commercial
banks, investment houses or
other
financial
intermediaries
duly registered with the Bangko
Sentral ng Pilipinas; or
(h) Pledges of shares of stock,
bonds or other instruments of
indebtedness specified in Section
209; or
(i)
Chattel
mortgages
over
equipment not more than three
(3) years old; and
(j) Such other security as may be
approved by the Commissioner.
OLD INSURANCE CODE
SECTION 198
SECTION 204

person,
corporation
or
"The loans provided in the preceding

subsection shall be subject to the
following conditions:
(1) The amount of loan secured by real
estate
mortgage
over
a
nonagricultural land shall not exceed
seventy percent (70%) of its appraised
value, and in the case of a loan
secured by a real estate mortgage
over an agricultural land, the amount
of loan shall not exceed forty percent
(40%) of its market value: Provided,
That, in no case shall such loan have a
maturity period in excess of twentyfive (25) years;
(2)
Unless
approved
by
the
Commissioner, no loan may be granted
upon the security of a mortgage on
improved
real
estate
if
the
improvements thereon do not belong
to the owner of the land, and the
owner of the improvements does not
OLD INSURANCE CODE
SECTION 198
SECTION 204

person,
corporation
or
any of its political subdivisions, and a long-term lease

has been executed in favor of the owner of the
improvements, the owner of the land need not be a
party to the deed of mortgage. The expiration date of
the lease shall not, however, precede the maturity of the
loan. The phrase improved real estate as used herein
shall mean land with permanent building or buildings
erected thereon;
(3) Lease-agreements or similar securities received on
the sale of real estate property shall not exceed one
hundred percent (100%) of the selling price of said
property, or one hundred percent (100%) of its market
value at the time of its disposition, whichever amount is
lower. However, in no case shall such agreement have a
maturity period not exceeding thirty (30) years;
OLD INSURANCE CODE
SECTION 198
SECTION 204

person,
corporation
or
(4) Loans secured by shares of stock of solvent

corporations or institutions shall not exceed fifty
percent (50%) of:
(i) The weighted average market price for the one
hundred eighty (180) days preceding the approval of the
loan for shares listed in the stock exchange; and
(ii) For unlisted shares, the adjusted book value of such
shares.
(5) Loans secured by the chattel mortgages over
equipment shall not exceed seventy percent (70%) of
the market value of said equipment.
OLD INSURANCE CODE
SECTION 199
SECTION 205
No loan by any insurance

company on the security of
real estate shall be made
unless the title to such real
estate shall have first been
registered in accordance with
the existing Land Registration
Act, or shall be a titulo real
duly registered, or have been
previously registered under
the provisions of the existing
Mortgage Law.
No loan by any insurance

company on the security of
real estate shall be made
unless the title to such real
estate shall have first been
registered in accordance with
the existing Land Registration
Act, or shall have been
previously registered under
the provisions of the existing
Mortgage Law and the lien or
interest of the insurance
company as mortgagee has
been registered.
OLD INSURANCE CODE
SECTION 200
SECTION 206
(1) An insurance company

may purchase, hold, own and
convey such property, real
and personal, as may have
been mortgaged, pledged, or
conveyed to it in good faith in
trust for its benefit by reason
of money loaned by it in
pursuance of the regular
business of the company, and
such real or personal property
as may have been purchased
by it at sales under pledges,
mortgages or
(b) An insurance company

may purchase, hold, and own
the following:
(1) Real properties which
serve as its main place of
business
and/or
branch
offices: Provided, That such
investment shall not in the
overall
exceed
twenty
percent (20%) of its net worth
as
shown
by
its
latest
financial statement approved
by the Commissioner.
OLD INSURANCE CODE
SECTION 200
SECTION 206
(1) An insurance company

may purchase, hold, own and
convey such property, real
and personal, as may have
been mortgaged, pledged, or
conveyed to it in good faith in
trust for its benefit by reason
of money loaned by it in
pursuance of the regular
business of the company, and
such real or personal property
as may have been purchased
by it at sales under pledges,
mortgages or
(2)
Bonds
or
other
instruments of indebtedness
of the Government of the
Philippines or its political
subdivisions authorized by
law to issue bonds at the
reasonable
market
value
thereof.
(3)
Bonds
or
other
instruments
of
debt
of
government-owned
or
-controlled corporations and
entities, including the Bangko
Sentral ng Pilipinas.
(4) Bonds, debentures
other
instruments
or
of
OLD INSURANCE CODE
NE W INSURANCE CODE OF 2013
SECTION 200
NONE
SECTION 206
Securities
issued
by
a
registered enterprise, as this
term is defined in Executive
Order No. 226, otherwise known
as the Omnibus Investments
Code of 1987, as amended:
Provided,
That
the
total
investment of a domestic nonlife insurance company in any
registered enterprise shall not
exceed twenty percent (20%) of
OLD INSURANCE CODE
SECTION 201
SECTION 207
An insurance company may (1)

invest in equities of other
financial institutions, and (2)
engage in the buying and
selling
of
short-term
debt
instruments; Provided, That any
or all of such investments shall
be with the prior approval of
the Commissioner.
An insurance company may:

(1)Invest in equities of other
financial institutions; and
(2) Engage in the buying and
selling
of
long-term
debt
instruments; Provided, That any
or all of such investments shall
be with the prior approval of
the Commissioner. Insurance
companies may, however, invest
OLD INSURANCE CODE
SECTION 201
SECTION 208
Acquire or construct housing

projects and, in connection with
any such project, may acquire
land or any interest therein by
purchase, lease or otherwise, or
use
land
acquiredThe
aggregate book value of the
investments
of
any
such
company in all such projects
shall not exceed at the time of
Any life insurance company

may:
a) Acquire or construct housing
projects and, in connection with
any such project, may acquire
land or any interest therein by
purchase, lease or otherwise, or
use land acquired pursuant to
any other provision of this
Code. Provided, That the
OLD INSURANCE CODE
SECTION 220
SECTION 226
Every
insurance
company
authorized to do business in the
Philippines shall report to the
Commissioner
on
forms
prescribed
by
him
the
particulars
of
reinsurance
treaties as of the first day of
January of the year following
the approval of this Code and
shall thereafter similarly report
Every
insurance
company
authorized to do business in the
Philippines shall report to the
Commissioner
on
forms
prescribed
by
him
the
particulars
of
reinsurance
treaties or any new treaties or
changes in existing treaties
within three (3) months from
their effectivity.
OLD INSURANCE CODE
SECTION 223
SECTION 229, SECOND PAR
NONE
The annual statement shall be

prepared in accordance with the
financial reporting framework
as
determined
by
the
Commissioner. In addition, the
Commissioner
may
require
other relevant information. The
form and details of such other
relevant information shall be
prescribed by the Commissioner
and shall form part of the
OLD INSURANCE CODE
SECTION 225
SECTION 231
Within thirty days after receipt

of
the
annual
statement
approved by the Commissioner,
every insurance company doing
business in the Philippines shall
publish in two newspapers of
general circulation in the City of
Manila, one published in English
and one in Pilipino, a full
sypnosis of its annual financial
Within thirty (30) days after

receipt of the annual statement
approved by the Commissioner,
every insurance company doing
business in the Philippines shall
publish in a newspaper of
general
circulation
a
full
synopsis of its annual financial
statement showing fully the
conditions of its business, and
OLD INSURANCE CODE
SECTION 225
SECTION 231
NONE
The Commissioner shall have the authority

to make, amend, and rescind such
accounting rules and regulations as may
be necessary to carry out the provisions of
this Code, and define accounting, technical
and trade terms used in this Code:
Provided, That such shall be in accordance
with internationally accepted accounting
standards.
OLD INSURANCE CODE
SECTION 225
SECTION 231
NONE
The Commissioner may prescribe the form or forms

in which required information shall be set forth, the
items or details to be shown in the balance sheet
and income statement, and the methods to be
followed in the preparation of accounts, appraisal or
valuation of assets and liabilities, determination of
recurring and nonrecurring income, differentiation of
investment and operating income, and in the
preparation, where the Commissioner deems it
necessary or desirable, of consolidated balance
sheets or income accounts of any person directly or
indirectly controlling or controlled by the insurance
company.
OLD INSURANCE CODE
NE W INSURANCE CODE OF
2013
NONE
SECTION 251
It is unlawful to:
(a) Present or cause to be
presented
any
fraudulent
claim for the payment of a
loss under a contract of
insurance; and
(b)
Fraudulently
prepare,
make or subscribe any writing
with intent to present or use
the same, or to allow it to be
presented in support of any
such claim. Any person who
violates this section shall be
punished by a fine not
exceeding twice the amount
OLD INSURANCE CODE
2013
SECTION 247
SECTION 254
If the Commissioner is of the

opinion upon examination of
other
evidence
that
any
domestic or foreign insurance
company is in an unsound
condition, or that it has failed
to comply with the provisions
of
law
or
regulations
obligatory upon it, or that its
condition
or
method
of
business is such as to render
its proceedings hazardous to
the
public
or
to
its
policyholders, or that its paidup capital stock,
If the Commissioner is of the

opinion upon examination of
other
evidence
that
any
domestic or foreign insurance
company is in an unsound
condition, or that it has failed
to comply with the provisions
of
law
or
regulations
obligatory upon it, or that its
condition
or
method
of
business is such as to render
its proceedings hazardous to
the
public
or
to
its
policyholders, or that its net
worth requirement, in the
case of a domestic stock
OLD INSURANCE CODE
2013
SECTION 248
SECTION 255, 5th PAR
NONE
No insurance company, life or
non-life, or any professional
reinsurer,
ordered
to
be
liquidated
by
the
Commissioner
under
the
provisions hereunder may be
rehabilitated or authorized to
transact anew, insurance or
reinsurance business, as the
case may be.
OLD INSURANCE CODE
2013
SECTION
DEMUTUALIZATION
280-
NONE
A
domestic
mutual
life
insurance
company
doing
may convert itself into an
incorporated
stock
life
insurance
company
by
demutualization. To that end,
it may provide and carry out a
plan for the conversion by
complying
with
the
requirements of this title.
"The conversion of a domestic
mutual
life
insurance
company to an incorporated
stock life insurance company
OLD INSURANCE CODE
2013
SECTION 280
NONE
"The
Commissioner
shall
promulgate such rules and
regulations as he or she may
deem necessary to carry out
the provisions of this title,
after due consultation with
representatives
of
the
insurance industry.
"All converted insurers under
the provisions of this title
shall be subject to all other
applicable provisions of this
Code. The provisions of the
Corporation Code shall apply
in a suppletory manner.
OLD INSURANCE CODE
2013
SECTION 274- requirement for Section 282.

withdrawal in business of a
foreign corporation
The
Commissioner
shall
publish the application for
The
Commissioner
shall withdrawal once a for three
publish the application for (3) consecutive weeks in a
withdrawal daily for a period newspaper
of
general
of
one
week
in
two circulation in the Philippines.
newspapers
of
general The
expenses
of
such
circulation in the City of publication shall be paid by
Manila, one in English and the the insurance company filing
other
in
Pilipino.
The such application.
expenses of such publication
shall be paid by the insurance
company
filing
such
application.
OLD INSURANCE CODE
2013
SECTION 276
Section 284.
The Commissioner shall cause an
examination of the books and records of
the withdrawing company, and if, upon such
examination, the Commissioner finds that
the insurer has no outstanding liabilities to
policyholders and creditors in the
Philippines, and no policies uncancelled; or
its primary liabilities have been reinsured or
assumed by another insurance company
authorized to transact business in the
Philippines, as required in the preceding
section, it shall cancel the withdrawing
companys certificate of authority, if
unexpired, and shall permit the insurer to
withdraw. The cost and expenses of all
such examination shall be paid as
prescribed in Section 440.
The Commissioner shall make

an examination of the books
and
records
of
the
withdrawing company, and if,
upon such examination, the
Commissioner finds that the
insurer has no outstanding
liabilities to residents of the
Philippines, it shall cancel the
withdrawing
company's
certificate of authority, if
unexpired, and shall permit
the insurer to withdraw. The
cost and expenses of all such
examination shall be paid as
OLD INSURANCE CODE
2013
SECTION 281
Section 289.
Any partnership, association,
or corporation authorized to
transact solely reinsurance
business
must
have
a
capitalization
of
at
least
Three
billion
pesos
(P3,000,000,000.00) paid in
cash of which at least fifty
percent (50%) is paid-up and
the remaining portion thereof
is contributed surplus, which
in no case shall be less than
Four hundred million pesos,
(P400,000,000.00) or such
capitalization
as
may
be
determined by the Secretary
Any
person,
partnership,
association, or corporation
authorized to transact solely
reinsurance business must
have a paid-up capital stock
of at least ten million pesos,
twenty-five per centum of
which must be invested in
securities satisfactory to the
Commissioner, consisting of
bonds or other evidences of
debt of the Government of
the Philippines or
OLD INSURANCE CODE
2013
SECTION 281
Section 289.
Provided, That (25%) of the paid-up capital
must be invested in securities satisfactory
to the Commissioner, consisting of bonds
or other instruments of debt of the
Government of the Philippines or its
political subdivisions or instrumentalities,
or of government-owned or -controlled
corporations Provided, That aforesaid
capital requirement is without prejudice to
other requirements to be imposed under
any risk-based capital method that may be
adopted by the Commissioner: Provided,
finally, That the provisions of this chapter
applicable to insurance companies shall as
far as practicable be likewise applicable to
professional reinsurers.
OLD INSURANCE CODE
2013
SECTION 294
Section 302
NONE
No person, other than an authorized

insurer, shall acquire control of any
domestic insurer, whether by purchase of
its securities or otherwise, except:
1. After twenty (20) days written
notice to its insurer or such
shorter
period
as
the
Commissioner may permit, of
its intention to acquire control
and
2. (2) With the prior written
approval of the
Commissioner.
OLD INSURANCE CODE
2013
SECTION 294
Section 302
NONE
(b) The Commissioner shall disapprove the

acquisition of control of a domestic insurer
if he determines, after notice and an
opportunity to be heard, that such action is
reasonably necessary to protect the interest
of the people of this country. The following
shall be the only factors to be considered
by him in reaching the foregoing
determination:
7) Whether the acquisition is likely to be
hazardous or prejudicial to the insurers
policyholders or stockholders.
OLD INSURANCE CODE
2013
SECTION 299
Section 307,308,
337, 345
326,
331,
Renewal of licenses of agents

Renewal of licenses of agents, resident
shall be annually
agents, reinsurance agents, non-life
company underwriters, brokers, adjusters,
NONE
actuaries shall be every 3 years
Licenses may be renewed in
the case of the company
represented by such agents,
and in the case of insurance
brokers, upon the application
of
the
said
brokers,
themselves.
Section 308. The provisions of
Sections 307 and 309 shall
OLD INSURANCE CODE
2013
SECTION 300
Section 309, PARS 2 and 3
NONE
An insurance agent is an
independent contractor and
not an employee of the
company
represented.
Insurance agent includes an
agency
leader,
agency
manager, or their equivalent.
Since the insurance industry
is
imbued
with
public
interest,
the
insurance
companies upon approval of
the
Commissioner
may
exercise wide latitude in
supervising the activities of
their insurance agents to
OLD INSURANCE CODE
2013
SECTION 302 and 310
Sections 311 and 320
Bonding
P100,000
Bonding requirement of Every

requirement: applicant for an insurance
brokers license or reinsurers
license= P500,000
OLD INSURANCE CODE
2013
SECTION 303
Section 312
The Commissioner shall, in

order
to
determine
the
competence
of
every
applicant to have the kind of
license applied for, require
such applicant to submit to a
written examination and to
pass
the
same
to
the
satisfaction
of
the
Commissioner.
Such
examination shall be held at
such times and places as the
Commissioner shall from time
to time determine.
The Commissioner shall, in

order
to
determine
the
competence
of
every
applicant to have the kind of
license applied for, require
such applicant to submit to a
written examination and to
pass
the
same
to
the
satisfaction
of
the
Commissioner.
The
Commissioner may delegate
or
authorize
the
administration
of
the
examination
to
an
independent
organization,
subject to such conditions
OLD INSURANCE CODE
2013
SECTION 309
Section 318
Old penalty is P10,000.00
Penalty to procure, receive or forward

applications of insurance in, or to issue or
to deliver or accept policies or contracts of
insurance of or for, any insurance company
or companies not authorized to transact
business in the Philippines, covering risks,
life or non-life, situated in the Philippines;
and any such person, partnership,
association or corporation violating the
provisions of this section shall be deemed
guilty of a penal offense, and upon
conviction thereof, shall for each such
offense be punished by a fine of
P250,000.00, or imprisonment of six (6)
months, or both, at the discretion of the
court;: Provided, That the provisions of this
OLD INSURANCE CODE
2013
SECTION 334
Section 343
Any violation of any provision

of this title shall be punished
by a fine of not more than ten
thousand
pesos,
or
by
imprisonment
in
the
discretion
of
the
court;
Provided, That, in case of a
partnership, association or
corporation, the said penalty
shall be imposed upon the
partner, president, manager,
managing director, director or
person in charge of its
business or responsible for
the violation.
Any violation of any provision

of this title shall be punished
by a fine of not less than Ten
thousand
pesos,
(P10,000.00),
or
by
imprisonment
at
the
discretion
of
the
court;:
Provided, That, in case of a
partnership, association or
corporation, the said penalty
shall be imposed upon the
partner, president, manager,
managing director, director or
person in charge of its
business or responsible for
the violation
OLD INSURANCE CODE
2013
SECTION 335
Section 344
No life insurance company shall be licensed

to do business in the Philippines nor shall
any life insurance company doing business
in the Philippines be allowed to continue
doing such business unless they shall
engage the services of an actuary duly
accredited with the Commissioner who
shall, during his tenure of office, be directly
responsible for the direction and
supervision of all actuarial work connected
with or that may be involved in the business
of the insurance company.
No life insurance company shall be licensed

to do business in the Philippines nor shall
any life insurance company doing business
in the Philippines be allowed to continue
doing such business unless they shall
engage the services of an actuary duly
accredited with the Commissioner who
shall, during his tenure of office, be directly
responsible for the direction and
supervision of all actuarial work connected
with or that may be involved in the business
of
the
insurance
company.
The
Commissioner may also require non-life
insurance companies to engage the
services of an accredited actuary, in
accordance with the rules and regulations
that the Commissioner will formulate.
OLD INSURANCE CODE
2013
SECTION 335
NONE
Section 345
The registration of the actuary shall be
suspended
or
revoked
by
the
Commissioner on the following grounds:
(1) Failure to adequately perform required
functions and duties under this Code;
(2) Failure to disclose conflict of interest;
(3) Failure to comply with the Code of
Conduct of the Actuarial Society of the
Philippines; or
(4) Such other grounds that may be
determined by the Commissioner.
No actuary engaged by a life insurance
company shall be at the same time a
stockholder or a director of the board, chief
executive officer or chief financial officer of
the company or hold any position that the
Commissioner may determine to have an
inherent conflict of interest to the position
OLD INSURANCE CODE
2013
SECTION 338, 2nd PAR
Section 347, 2nd PAR
NONE
No external auditor shall be engaged by

supervised persons or entities unless it has
been issued an accreditation certificate by
the Commissioner. The accreditation
certificate shall be valid until December 31
of the third year from issuance unless it is
revoked or suspended. The Commissioner
shall issue rules and regulations to govern
the accreditation of the external auditor and
the revocation or suspension of the
accreditation.
OLD INSURANCE CODE
Section 363
If the Commissioner, after
notice and hearing, finds that
any
insurance
company,
rating organization, agent,
broker or other person has
violated any of the provisions
of this title, it shall order the
payment of a fine not to
exceed five hundred pesos for
each such offense, and shall
immediately
revoke
the
license
issued
to
such
insurance company, rating
organization,
agent,
or
broker.
The
issuance,
2013
Section 372
If the Commissioner, after
notice and hearing, finds that
any
insurance
company,
rating organization, agent,
broker or other person has
violated any of the provisions
of this title, it shall order the
payment of a fine not to
exceed Twenty-five thousand
pesos (P25,000.00) for each
such
offense,
and
shall
immediately
suspend
or
revoke the license issued to
such
insurance
company,
rating organization, agent, or
broker.
The
issuance,
procurement or negotiation of
OLD INSURANCE CODE
2013
Section 374
NONE
The
Commissioner,
in
consultation with the duly
accredited
associations
representing the insurance
industry, shall adopt and
promulgate a code of conduct
to promote integrity, honesty
and ethical business practices
among
insurance
agents,
distributors
and
other
intermediaries.
OLD INSURANCE CODE
2013
Section 375-377
NONE
TITLE 9
"BANCASSURANCE
The term bancassurance shall
mean the presentation and
sale to bank customers by an
insurance company of its
insurance products within the
premises of the head office of
such bank duly licensed by
the
Bangko
Sentral
ng
Pilipinas
or
any
of
its
branches under such rules
and regulations which the
Commissioner and the Bangko
Sentral
ng
Pilipinas
may
OLD INSURANCE CODE
2013
Section 375-377
NONE
To engage in bancassurance
arrangement, a bank is not
required
to
have
equity
ownership of the insurance
company.
No
insurance
company shall enter into a
bancassurance arrangement
unless it possesses all the
requirements
as
may
be
prescribed
by
the
Sentral ng Pilipinas.
"
OLD INSURANCE CODE
2013
Section 375-377
NONE
No insurance product under
this section, whether life or
non-life, shall be issued or
delivered unless in the form
previously approved by the
Commissioner.
Section 376. Personnel tasked
to present and sell insurance
products within the bank
premises
shall
be
duly
licensed by the Commissioner
and shall be subject to the
rules and regulations of this
Act.
OLD INSURANCE CODE
2013
Section 375-377
NONE
Section
377.
The
Sentral ng Pilipinas shall
promulgate
rules
and
regulations
to
effectively
supervise the business of
bancassurance.
OLD INSURANCE CODE
2013
Section 377
Section 390
In the case of a land
transportation operator, the
insurance guaranty in cash or
surety
bond
shall
cover
liability for death or bodily
injuries of third-parties and/or
passengers arising out of the
use of such vehicle in the
amount not less than Twelve
thousand pesos (P12,000.00)
per passenger or third -party
and an amount, for each of
such categories, in any one
OLD INSURANCE CODE
2013
Section 390
Section 377
(1) Motor vehicles with an authorized
capacity of twenty-six (26) or more
passengers: Fifty thousand pesos;
(P50,000.00);
capacity of from twelve (12) to twenty-five
(25) passengers: Forty thousand pesos;
(P40,000.00);
capacity of from six (6) to eleven (11)
passengers: Thirty thousand pesos;
(P30,000.00);
OLD INSURANCE CODE
2013
Section 390
Section 377
Private Cars
(i) Bantam: Twenty
pesos (P20,000.00);
(ii) Light: Twenty
pesos (P20,000.00);
(iii) Heavy: Thirty
pesos (P30,000.00).
thousand
thousand
and
thousand
OLD INSURANCE CODE
2013
Section 390
Section 377
2) Other Private Vehicles

(i) Tricycles, motorcycles and
scooters: Twelve thousand
pesos (P12,000.00);
(ii) Vehicles with an unladen
weight of 2,600 kilos or less:
Twenty
thousand
pesos
(P20,000.00);
(iii) Vehicles with an unladen
weight of between 2,601 kilos
and
3,930
kilos:
Thirty
thousand pesos (P30,000.00);
and
(iv) Vehicles with an unladen
weight over 3,930 kilos: Fifty
OLD INSURANCE CODE
2013
Section 392
Capitalization
P10,000
used
to
Section 405
No mutual benefit association
shall be issued a license to
be operate as such unless it has
constituted and established a
Guaranty Fund by depositing
with the Commissioner an
initial minimum amount of
Five
million
pesos
(P5,000,000.00) in cash, or in
government securities with a
total value equal to such
amount, to answer for any
valid benefit claim of any of
its members.
OLD INSURANCE CODE
2013
Section 408
Section 395
NONE
"A mutual benefit association shall only

maintain free and unassigned surplus of
not more than twenty percent (20%) of its
total liabilities as verified by the
Commissioner. Any amount in excess shall
be returned to the members by way of
dividends, enhancing the equity value or
providing benefits in kind and other
relevant services. In addition, subject to the
approval of the Commissioner, a mutual
benefit association may allocate a portion
for capacity building and research and
development such as developing new
products and services, upgrading and
OLD INSURANCE CODE
2013
Section 423
NONE
All provisions of this Code

governing
life
insurance
companies and such other
provisions
whenever
practicable and necessary,
shall be applicable to mutual
benefit associations.
OLD INSURANCE CODE
2013
Section 428
NONE
The treasurer of a charitable

trust shall file a fidelity bond
in the amount commensurate
with the value of the trust
property in his custody, as
may be determined by the
Commissioner.
OLD INSURANCE CODE
2013
Section 429
NONE
CHAPTER VIII
"TRUST BUSINESS IN
GENERAL
"Section 429. An insurance
company
may
engage
in
limited
trust
business,
consisting of managing funds
pertaining only to retirement
and pre-need plans, provided
it has secured a license to do
so from the Bangko Sentral
ng
Pilipinas.
This
trust
business shall be separate
and distinct from the general
business of the insurance
OLD INSURANCE CODE
2013
Section 430
NONE
"CHAPTER IX
"REGISTRATION, RESPONSIBILITIES AND
OVERSIGHT OF SELF-REGULATORY
ORGANIZATIONS
The Commissioner shall have the power to
register as a self-regulatory organization, or
otherwise grant licenses, and to regulate,
supervise, examine, suspend or otherwise
discontinue, as a condition for the operation of
organizations whose operations are related to or
connected with the insurance market such as,
but not limited to, associations of insurance
companies, whether life or non-life, reinsurers,
actuaries, agents, brokers, dealers, mutual
benefit associations, trusts, rating agencies, and
other persons regulated by the Commissioner,
which are engaged in the business regulated by
this Code.
OLD INSURANCE CODE
2013
Section 437
NONE
The Insurance Commissioner

shall be appointed by the
President of the Republic of
the Philippines for a term of
six
(6)
years
without
reappointment and who shall
serve as such until the
successor shall have been
appointed and qualified. If
the Insurance Commissioner
is
removed
before
the
expiration of his term of
office, the reason for the
removal must be published.
OLD INSURANCE CODE
2013
Section 437
NONE
In addition to the foregoing,

the Commissioner shall have
the following powers and
functions:
(a) Formulate policies and
recommendations on issues
concerning
the
insurance
industry, advise Congress and
other government agencies
on
all
aspects
of
the
insurance
industry
and
propose
legislation
and
amendments thereto;
(b) Approve, reject, suspend
or
revoke
licenses
or
certificates of registration
OLD INSURANCE CODE
2013
Section 437
NONE
(c) Impose sanctions for the violation of laws and

the rules, regulations and orders issued pursuant
thereto;
"(d) Prepare, approve, amend or repeal rules,
regulations and orders, and issue opinions and
provide guidance on and supervise compliance
with such rules, regulations and orders;
(e) Enlist the aid and support of, and/or deputize
any and all enforcement agencies of the
government in the implementation of its powers
and functions under this Code;
(f) Issue cease and desist orders to prevent fraud
or injury to the insuring public;
(g) Punish for contempt of the Commissioner,
both direct and indirect, in accordance with the
pertinent provisions of and penalties prescribed
OLD INSURANCE CODE
2013
Section 437
NONE
(h) Compel the officers of any

registered insurance corporation
or association to call meetings of
stockholders or members thereof
under its supervision;
(i) Issue subpoena duces tecum
and summon witnesses to appear
in
any
proceeding
of
the
Commission and, in appropriate
cases, order the examination,
search
and
seizure
of
all
documents, papers, files and
records, tax returns, and books of
accounts of any entity or person
under investigation as may be
necessary
for
the
proper
OLD INSURANCE CODE
NONE
2013
Section 437
(j) Suspend or revoke, after proper notice and
hearing, the license or certificate of authority of
any entity or person under its regulation, upon
any of the grounds provided by law;
(k) Conduct an examination to determine
compliance with laws and regulations if the
circumstances so warrant as determined by
appropriate rules and regulations;
(l) Investigate not oftener than once a year from
the last date of examination to determine whether
an institution is conducting its business on a
safe and sound basis: Provided, That, the
deficiencies/irregularities found by or discovered
by an audit shall be immediately addressed;
(m) Inquire into the solvency and liquidity of the
OLD INSURANCE CODE
NONE
2013
Section 437
(n) To retain and utilize, in
addition to its annual budget, all
fees, charges and other income
derived from the regulation of
insurance companies and other
supervised persons or entities;
(o) To fix and assess fees,
charges and penalties as the
Commissioner
may
find
reasonable in the exercise of
regulation; and
(p) Exercise such other powers as
may be provided by law as well as
those which may be implied from,
or
which
are
necessary
or
incidental to the express powers
OLD INSURANCE CODE
2013
Section 437
NONE
The Commission shall indemnify

the
Commissioner,
Deputy
Commissioner, and other officials
of the Commission, including
personnel performing supervision
and examination functions, for all
costs and expenses reasonably
incurred by such persons in
connection with any civil or
criminal
actions,
suits
or
proceedings to which they may be
made a party to by the reason of
the performance of their duties
and functions, unless they are
finally adjudged in such actions,
suits or proceedings to be liable
for negligence or misconduct.
OLD INSURANCE CODE
2013
Section 437
NONE
In the event of settlement or

compromise,
indemnification
shall
be
provided
only
in
connection with such matters
covered by the settlement as to
which the Commission is advised
by external counsel that the
persons to be indemnified did not
commit
any
negligence
or
misconduct:
"The costs and expenses incurred
in defending the aforementioned
action, suit or proceeding may be
paid by the Commission in
advance of the final disposition of
such action, suit or proceeding
upon receipt of an undertaking by
OLD INSURANCE CODE
2013
Section 438.
NONE
In addition to the
administrative sanctions
provided elsewhere in this
Code, the Insurance
Commissioner is hereby
authorized, at his discretion,
to impose upon the insurance
companies, their directors
and/or officers and/or agents,
for any willful failure or
refusal to comply with, or
violation of any provision of
this Code, or any order,
instruction, regulation, or
ruling of the Insurance
OLD INSURANCE CODE
2013
Section 438.
NONE
(a)Fines not less than Five

thousand pesos (P5,000.00)
and
not
more
than
Two
hundred
thousand
pesos
(P200,000.00); and
(b) Suspension, or after due
hearing, removal of directors
and/or officers and/or agents.
Section 439. The Commissioner
shall
have
the
power
to
adjudicate claims and complaints
involving any loss, damage or
liability for which inan insurer
may be answerable under any
kind of policy or contract of
OLD INSURANCE CODE
2013
SECTION 416
Section 439.
The insurer or surety may, in the same The

power
of
the
action file a counterclaim against the Commissioner, does not cover
insured or the obligee.
the relationship between the
insurance company and its
The insurer or surety may also file a cross- agents/brokers but is limited
claim against a party for any claim arising to adjudicating claims and
out of the transaction or occurrence that is complaints
filed
by
the
the subject matter of the original action or insured against the insurance
of a counterclaim therein.
company.
With leave of the Commissioner, an insurer
or surety may file a third-party complaint
against its reinsurers for indemnification,
contribution, subrogation or any other
relief, in respect of the transaction that is
The
Commissioner
may
authorize any officer or group
of officers under him to
conduct investigation, inquiry
and/or hearing and decide
OLD INSURANCE CODE
2013
SECTION 416
Section 439, last PAR
NONE
In order to promote party

autonomy in the resolution of
cases, the Commissioner shall
establish
a
system
for
resolving cases through the
use of alternative dispute
resolution.
OLD INSURANCE CODE
2013
SECTION 417
Section 442
Used to be P10,000
Any
person,
company
or
corporation subject to the
supervision and control of the
Commissioner who violates
any provision of this Code, for
which no penalty is provided,
shall be deemed guilty of a
penal
offense,
and
upon
conviction be punished by a
fine
not
exceeding
Two
hundred
thousand
pesos
(P200,000.00)
or
imprisonment
of
six
(6)
months, or both, at the
OLD INSURANCE CODE
2013
SECTION 417
Section 442
Used to be P10,000
If the offense is committed by

a company or corporation, the
officers, directors, or other
persons responsible for its
operation, management, or
administration, unless it can
be proved that they have
taken
no
part
in
the
commission of the offense,
shall likewise be guilty of a
penal
offense,
and
upon
conviction be punished by a
fine
not
exceeding
Two
hundred
thousand
pesos
(P200,000.00)
or
Framework
General
Concepts
Life Insurance
Non-Life
Insurance
Summary of
Amendments in
Insurance Code
Grounds for
Rescission
Payment of
Proceeds
PDIC Law
REPUBLIC ACT NO. 9576

April 29, 2009
An Act increasing the maximum deposit
insurance coverage, Amending RA 3591,
Insured Deposit, Concept
deposit" means the unpaid

balance of money or its
equivalent received by a bank in
the usual course of business and
for which it has given or is
obliged to give credit to a
commercial, checking, savings,
time or thrift account, or issued in
accordance with Bangko Sentral
EXCLUDED IN THE CONCEPT

any obligation of a bank which is
payable at the office of the bank
located outside of the Philippines shall
not be a deposit for any of the purposes
of this Act or included as part of the
total deposits or of insured deposits:
Subject to the approval of the Board of
Directors, any insured bank which is
incorporated under the laws of the
Philippines which maintains a branch
outside the Philippines may elect
to include for insurance its deposit
obligations payable only at such
branch.

The corporation shall not pay deposit
insurance for the following accounts or
transactions,
whether
denominated,
documented, recorded or booked as
deposit by the bank:
(1) Investment products such as bonds and
securities, trust accounts, and other similar
instruments;
(2) Deposit accounts or transactions which
are unfunded, or that are fictitious or
fraudulent;

(3)
Deposits
accounts
or
transactions
constituting, and/or emanating from, unsafe
and
unsound
banking
practice/s,
as
determined
by
the
Corporation,
in
consultation with the BSP, after due notice
and hearing, and publication of a cease and
desist order issued by the Corporation against
such deposit accounts or transactions; and

(4) Deposits that are determined to be
the proceeds of an unlawful activity as
defined under RA 9160, as amended.
RA 9160- Anti Money Laundering Act
What to do with PDIC

Exclusions?
Exclusions of transactions from coverage is final and
executory
may not be restrained or set aside by the court
except on appropriate petition for certiorari
What to do with PDIC

Exclusions?
Grounds for Petition for Certiorari: excess of jurisdiction or
with such grave abuse of discretion as to amount to a lack
or excess of jurisdiction.
petition for certiorari may only be filed within thirty (30)
days from notice of denial of claim for deposit insurance.
INSURED DEPOSITS
amount due to any bona fide
depositor for legitimate deposits
in an insured bank net of any
obligation of the depositor to the
insured bank as of date of closure,
but not to exceed Five hundred
thousand pesos (P500,000.00).
INSURED DEPOSIT
add together all deposits in the

bank maintained in the same
right and capacity for his
benefits either in his own name
or in the name of others.
INSURED DEPOSIT
A joint account regardless of whether the
conjunction 'and,' 'or,' 'and/or' is used, shall
be insured separately from any individuallyowned deposit account:
Provided, That (1) If the account is held jointly by
two or more natural persons, or by two or more
juridical persons or entities, the maximum
insured deposit shall be divided into as many
equal shares as there are individuals, juridical
persons or entities, unless a different sharing is
stipulated in the document of deposit, and
Joint Account
Account #
Account Holder
Balance
#1
Pedro & Maria
P800,000
#2
Juan &/or Pedro
P900,000
Joint Account
Account Number
Insured Share
Uninsured
Pedro - #1
P250,000
P150,000
Pedro - #2
P250,000
P200,000
Total deposits
P500,000
Total: P350,000
Insured deposits
P500,000
Maria - #2
P250,000
P150,000
Juan - #2
P250,000
P200,000
INSURED DEPOSIT
If the account is held by a juridical
person or entity jointly with one or more
natural persons, the maximum insured
deposits shall be presumed to belong
entirely to such juridical person or
entity
Institutional Account
Account No.
Account Holder
Balance
#1
ABC Co.
P600,000
#2
ABC Co.
ABC Co. &/or Pedro P800,000

Cruz
#1
P600,000
ABC Co.
#2
P800,00
Pedro Cruz
NONE
NONE
Total balance:
P1.4 Million
Insured: P500,000
for both accounts
already
Total for ABC
Institutional Account
Joint accounts held by a juridical
person with natural person will be
presumed to belong to the juridical
person. Thus, Accounts #1 and #2
will be consolidated in the name of
ABC Co. Total amount of insured
deposits will be P500,000.
Who will pay P500,000

1st 3 years of RA 9576, P250,000 shall be paid
by
PDIC,
P250,000
by
the
national
government
Congress shall annually appropriate the
necessary
funding
to
reimburse
the
Corporation for any payment to insured
depositors paid in excess of P250,000.00.
After 3 years, solely by PDIC
Right to examine PDIC members
PDIC may examine banks with

prior approval of the Monetary
Board
No
examination
can
be
conducted
within
twelve
months
from
the
last
examination date
In case of threatened or impending

closure of bank
PDIC, in coordination with the

Bangko Sentral, may conduct a
special examination as the
Board of Directors, by an
affirmative vote of a majority of
all of its members
In case of unsafe or unsound

banking practice
PDIC and/or Bangko Sentral

may inquire into or examine
deposit
accounts
and
all
information related thereto
committed or are
Sanctions against
unsafe
and
committing
or
unsound bank
practices
about
to commit
unsafe practices
in conducting
the business of
the bank, or
have violated or
about to violate
Board
of Directors of
of
the provisions
PDIC shall submit the
any law to which
report to the
the
bankboard
if for
monetary
subject
purposes of
corrective action
Sanctions against unsafe and

If no corrective
unsound bankaction
practices
by
monetary board
within 45 days
from submission
of report, PDIC
board shall take
corrective
PDIC Boardaction
may
issue cease and
desist order and
correct practices
within 45 days,
may impose fine
If practice will
cause insolvency
or dissipate
assets, period to
correct is 15
days
Role of PDIC in closed banks

Shall act as receiver
Shall
control,
manage
and
administer the affairs of the closed
bank.

Effective immediately upon takeover as receiver of such
bank, the powers, functions and duties, as well as all
allowances, remunerations and perquisites of the directors,
officers, and stockholders of such bank are suspended, and
the relevant provisions of the Articles of Incorporation and
By-laws of the closed bank are likewise deemed suspended

The assets of the closed bank under receivership shall be
deemed in custodia legis in the hands of the receiver.
Assets shall not be subject to attachment, garnishment,
execution, levy or any other court processes

A judge, officer of the court or any person who shall issue,
order, process or cause the issuance or implementation of
the writ of garnishment, levy, attachment or execution
shall be liable under Section 21 hereof.
PDIC directors and officers have NO

liability
PDIC, its directors, officers, employees and
agents are held free and harmless to the
fullest extent permitted by law from any
liability
They shall be indemnified for any and all
liabilities, losses, claims, demands, damages,
deficiencies,
costs
and
expenses
of
whatsoever kind and nature that may arise in
connection with the performance of their
functions, without prejudice to any criminal
liability under existing laws.
PDIC directors and officers have NO

liability
EXCEPTION: If the actions of

PDIC or any of its officers and
employees are found to be in
willful violation of this Act,
performed in bad faith, with
malice and/or gross negligence,
Tax obligations of PDIC

All tax obligations of PDIC for a period of five (5) years
reckoned from the date of effectivity of this Act shall be
chargeable to the Tax Expenditure Fund (TEF) in the annual
General Appropriation Act
On the 6th year and thereafter - exempted from income tax,
final withholding tax, value-added tax on assessments
collected from member banks and local taxes
Splitting of Deposits
A deposit account with an outstanding balance of more
that the statutory maximum amount of insured deposit
maintained under the name of natural or juridical persons
is broken down and transferred into two (2) or more
accounts in the name/s of natural or juridical persons or
entities who have no beneficial ownership on transferred
deposits in their names
Splitting of Deposits
Transfer is made within 120 days immediately preceding or
during a bank-declared bank holiday, or immediately
preceding a closure order issued by the Monetary Board of
the Bangko Sentral ng Pilipinas for the purpose of availing
of the maximum deposit insurance coverage.
Bar 2000
BD has a bank deposit of half a
million pesos. Since the PDIC limit
is P250,000, BD would like some
protection for the excess by taking
out an insurance against all risks
arising from unsound bank
practices. Does BD have insurable
interest under the Insurance Code?
ANSWER
Yes, BD has insurable interest in his
bank deposit. In case of loss to the
extent of the amount not covered
by PDIC, BD will be damnified. He
will suffer pecuniary loss of
P250,000 since PDIC Law only
covers accounts up to P250,000.
Bar 2010
When OCCIDENTAL Bank folded up due
to insolvency, Manuel had the following
separate deposits in his name:
P200,000 in savings deposit; P250,000
in time deposit; P50,000 in a current
account; P1 million in a trust account;
and P3 million in money market
placement. Under the Philippine Deposit
Insurance Corporation Act, how much
could Manuel recover? Explain. (2%)
Suggested Answer
Manuel can only recover up to a total of
P500,000 for his savings deposit, time
deposit and current account. Under the
PDIC Law, a single depositor can only
recover a maximum of P500,000 for
these kinds of accounts. The trust
account and money market placement
are excluded from the coverage of the
PDIC Law.
MAY GOD BLESS YOU ALL!!!

Insurance Bar Review 2015

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INSURANCE LAW REVIEW

Insurance Code of 2013

AN ACT STRENGTHENING THE INSURANCE

C. No, since Y actually made a

The insurer, after paying

Insurer avails of the rights

Applicable only in non-life

B. The equitable assignment that

Since a contract of insurance is a

General Rule: 10 YEARS

In industrial life: cannot be

Right of Action Accrues

If there was no denial of the

Regulation of the Insurance

Regulation of the Insurance

by any local government unit or authority, for

(1) Qualifications and the disqualifications on membership of the association;

A group of Malaysians wanted to invest in the

What may be insured against

Aspect of being unknown is WHEN it will happen

Damnify v. Create a liability

Insurance by a married person

May take out an insurance on

Compulsory Motor Vehicle Liability

Compulsory Motor Vehicle Liability

Compulsory Motor Vehicle Liability

Topics in Stages 1 and 2

What may be insured against

Life Insurance - insurance

What may be insured against?

Policy matures upon the death

Deemed life insurance

Death by suicide: compensable?

General Rule: NO.

When is suicide compensable?

Life Annuity debtor binds himself to

Dynamics in Life Annuity

Insurable Interest in Life

Insurable interest ensures that a

On whose life does a person

On whose life does a person

Every person has unlimited

Blood relationship, affinity:

Right ceases when the owner dies

C. No, since Z has no pecuniary

Except: pecuniary estimation is

Special Rule on Insurable Interest

Mutualization and Demutualization

"All converted insurers under the provisions of this

May a member of the Moro

Yes, a member of the MILF or

Right to borrow on the policy

Cestui Que Vie

Person on whose life the

One who receives benefits

Jacob cannot include the two friends as

If the beneficiary is disqualified

The estate of the insured

If beneficiary willfully causes

If beneficiary dies before

If beneficiary dies ahead of

The beneficiary may or may not have