Kwin Transcripts - Insurance

7/28/2019 Kwin Transcripts - Insurance

1/84

Insurance

Kw

KwinKwinKwinKwin

K w i n T r a n s c r i p t s Page 1

June 25, 2010

Lets start with the brief history of insurance.

Authors of different books vary on their accounts on how

insurance started.

But they are common in saying that insurance is based on

the principle of giving aid to another who suffers loss by

reason of unfortunate event.

In the ancient times,(Hindus, Chinese, Egyptians), there were

already societies which were organized for the purpose of

extending aid to any of its members.

And aid comes from the fund attributed by all of its

members.

But with respect to the modern day insurance that we have,

its origin started from the maritime law or maritime

transaction. Where merchants engaged in shipping ventures

particularly Italian cities. They mutually agree among

themselves to distribute the loss caused by the perils ofnavigation.

And from that concept if insurance spread rapidly the states

of Europe.

In England in particular, you must have heard of the famous

Lloyds of London. Its a big insurance company. Actually,

that started in an inn where merchants would gather. And

gathering would be an occasion for them to discuss mutual

agreements on how they could possibly protect themselves

from the loss arising from the perils of navigation.

From there, insurance evolved and developed to what wehave now. And the rest is history.

But for the Philippines, how did insurance develop?

In the Philippines, it was rather late in development. We

have low per capita income so were more concerned on the

basic needs than our insurance. And also because of the

attitude bahala na, so we leave everything to fate.

But even the, the principles on which insurance is based is

still the same.

It started with the basic political units in the family and in

the barangay wherein if a member of the family dies, weextend assistance, limos.

And from there, there were organizations that were formed.

But for modern day insurance in the Philippines, this was

introduces by the representatives of Lloyds of London. They

started with nonlife insurance.

The life insurance was introduced by another company.

With respect to development of insurance laws in the

Philippines, during Spanish times, what governed insurance

transactions?

Provisions of the code of commerce.

After that, during American regime, we have the insurance

act or act no. 247.

After that, we still have the civil code.

So even before, there were already provisions od civil code

governing insurance.

But I think as insurance progressed and evolved, the

provisions of the civil code were not sufficient.

So they enacted a specific law regulating insurance

transaction. That is why PD 612 during the martial law came

about.

But there were several amendments made.And finally we have PD 1460 or the insurance code of 1978

which consolidated all the insurance law and that is the

governing law of insurance transactions.

Take now: our insurance code of 1997 was patterned after

the civil code of California.

And you have the rule in statutory construction that if the law

is adopted from another country, interpretations and

constructions made on that law shall be given weight.

Laws governing insurance of the Philippines:

What are these laws?

Primarily, the contract of insurance will be governed by the

insurance code of 1978.

Subsidiarily, it shall be governed by the provisions of NCC.

What is the basis of the saying that it shall be governed by

NCC?

There is a specific provision of NCC that says NCC will apply

art 2011. It provides that the contract of insurance will begoverned by special laws.

special laws refers to insurance code of the phil and other

special laws.

And for matters not specifically provided in the special law,

then the provision oc NCC shall apply/govern.

So thats your legal basis in saying that NCC will apply

subsidiarily.

PDF Created with deskPDF TS PDF Writer - DEMO :: http://www.docudesk.com
http://www.docudesk.com/http://www.docudesk.com/


2/84

Insurance

Kw

KwinKwinKwinKwin


Because you have a rule in statutory construction if theres

a conflict between general laws and special laws, apply the

special laws.

Another provision of NCC that relates to insurance contract is

the perfection of the contract.Ex. If Mr A files an application for insurance coverage w/ B

company and its officers in manila.

If A mailed to B in June 1 its application; B sent the letter of

acceptance for insurance coverage in June 3. But on June 2,

A died.

The heirs of A sought to recover from B company. Can the

heirs recover?

NO. the contract of insurance was not perfected.

Art 7319 of NCC obligcon perfection of the contract

entered into through correspondence acceptance made

through letter or correspondence shall bind the offerer fromthe time the acceptance came to his knowledge.

Here, the contract was not perfected. Because the

acceptance by B of As application never came to the

knowledge of A. A died.

Therefore the heirs of A cannot recover from B.

You cannot find this in the insurance code bt you can find

this in NCC.

Another provision of NCC relating to insurance is art 739 and

art 2010.Art 739 talks about void donations.

Example of void donations:

Those donations made by persons guilty of adultery or

concubinage,

Those persons guilty of criminal offense in consideration

thereof,

Those given to public officer, ascendant or descendant by

reason of public office.

These are examples of void donations under art 739.

The basis is art 2012 a person prohibited from receiving

donation under art 739 cannot be named beneficiary from a

life insurance policy of a person who cannot make a

donation to him.

Why? Is there a similarity on making a donation and

designating someone as beneficiary?

Yes. It is of similar nature because botha acts are acts of

liberality.

Ex. A, a married man obtained a life insurance policy with

himself as the insured.

He designates B, his common law wife as his beneficiary.

In civil code, common law relationship is that of living

together without benefit of marriage but without legal

impediment to be married.

A died. Can B recover from the insurance policy?

No. Art 738 in relation to Art 2012; both of them are guilty

of adultery and concubinage.

Designating B as a beneficiary is equivalent to giving a

donation to B

Since A is prohibited from giving a donation to B, he cannot

make B beneficiary.

So in this case, B cannot recover the insurance.

What happened to the policy? Is the policy void?

Only the designation of the policy is void.

So the proceeds of the insurance policy will go the estate ofthe insured.

But it would be a different story if A insured B and designated

B as the beneficiary.

Remember that for purposes of insurance law and donation,

the law does not require conviction but mere

preponderance of evidence.

Another provision is in art 2207.

In essence, this talks about right of subrogation.

The right of subrogation is the right to step into the shoes.

In relation to insurance law, the insurer steps into the shoes

of the insured, after paying the insured and acquires all the

rights of the insured against the wrongdoer who has caused

the damage.

What is the reason for subrogation?

To promote justice and equity in the sense that

Without the right of subrogation, the wrongdoer would be

free from liability.

So to make the person who has caused the loss liable.

Because without the right of subrogation, what would

happen is that, if Im the insured, I would already receive

compensation from the insurer.

So the tendency is, I wont already go after the wrongdoer.

But with the right of subrogation, the insurer can go after

the third party and make him liable.

So to prevent double recovery from the insurance company

and from the wrongdoer.



3/84

Insurance

Kw

KwinKwinKwinKwin


When does the right of subrogation accrue?

Must it be provided in the contract?

Must the insured make the assignment of his claim to the

insurer to go after the wrongdoer?

No.

It accrues the moment the insurer pays the insured.

The law does not provide that it be stipulated in the contract

or there be assignment of his claim.The moment he pays, it operates as an EQUITTABLE

ASSIGNMENT.

Is the right applicable to both life and property insurance?

As expressly provided in 2207, it states there that its the

plaintiffs property.

Whats the reason why its applicable only to property

insurance and not to life insurance?

Because you cannot say that you have been compensatedenough.

Property insurance is a contract of indemnity.

A CONTRACT OF INDEMNITY means that you can only

recover to the extent of the damage that you have suffered

or to the extent of your insurable interest.

But in life insurance as a general rule, its not a contract of

indemnity. Because the value of life is unlimited. No amount

of recovery can compensate you for loss of life.

So you cannot say to the insurer not to recover from the

wrongdoer because we have recovered enough.

SUBROGATION DOES NOT EXIST IN LIFE INSURANCE.

To what extent can the insurer recover from the wrongdoer?

Ex. Insurer insured the property of A.

The value of the property is 2m.

The value of the policy is also 2m.

B, 3rd

party, burned the house of A. He is responsible for the

loss.

Under the policy XYZ has to pay A 2m, the value of the

policy.

In the case between A and B, B was adjudged to be liable for

1.5m.

XYZ company, after paying A, he go after B?

Yes. He stepped into the shoes of A, acquired all the rights of

A.

How much can XYZ exercising the right of compensation

recover from B?

XYZ can only recover 1.5m because as we said, the extent of

the insurers right of subrogation is only to the extent of As

right also.

As right against B is only 1.5m.

So XYZ can still go after B for 1.5m

Assuming the court adjudged B to be liable for 2.5m, how

much can XYZ recover from B?

XYZ, the extent of his right to subrogation is to the extent of

As right against B, but in no case shall it exceed the amount

that XYZ paid to A.

So what about the .5m? who can recover?

Only A.

2207 if the amount paid by the insured is not sufficient torecover the loss or injury, the insured has the right to claim

the deficiencwy against or from the wrongdoer.

So the right to recover the deficiency is on the insured. Not

the insurer.

What about if between A and B, B already paid 2m, the value

of the damage. Can XYZ still go after B?

No.

The right of subrogation is still applicable, but A no longer

has rights against B, because he already received

compensation.

Whats the remedy of XYZ?

Go after A.

Ka diba, right of subrogation prevents double recovery.

Since XYZ can no longer be subrogated of the rights of A

against B. it has the right to recover whatever he has paid to

A.

So the rightof insurance company is only to the extent of the

right of A.

But in no case more than the amount he has paid.

And if there is deficiency, the one who is entitiled to recover

the deficiency is the insured.



4/84

Insurance

Kw

KwinKwinKwinKwin


Whats the effect if A, thru his own act or negligence releases

B from liability?

He signs a waiver or quitclaim.

The insurance co paid A 2m.

Can XYZ still go after B?

Is the right of subrogation still available?

No.

A no longer has the right to which XYZ would be subrogatedto.

So what is the remedy of XYZ?

So after A.

Because if the insured through his own fault or act caused

the loss of right of subrogation on the insurance company,

he has the obligation to reimburse whatever amount he has

received from the insurer.

Take note that when the insurance company is subrogated to

the right of the insured, it is as if siya ang insured.

He takes the personality of the insured, not that of theinsurance company.

Ex. A co, insurer, insured the cargoes of B, shipper.

B entered into a contract of carriage with C, the carrier.

Between A co and B, we have a contract of insurance.

Between B and C, we have a contract of carriage.

A insured the goods of B.

The goods were damaged thru the fault of C.

A co after paying B is subrogated to the rights of B.

As a subrogee, A co has the right to go after C.This time he acts as the insured.

Therefore, A co as the insured now can raise defenses

available against the carrier, as the shipper, not as the

insurer.

At the same time, the carrier cannot raise the defense na

defective ang insurance contract, because he is not a party

to the insurance contract.

Ang ilang relationship is not between a carrier and insurer.

Because in the first place, C is not a part of the insurance

contract.

And when A co stepped into the shoes of B, he stepped into

the shoes of the insured, not as the insurer.

The insurer cannot tell the insured to go after the wrongdoer.

It is the right of the insured to go after the insurance

company or the third person.

So insurance company cannot wait for 3rd

p to pay.

The insured can immediately go after the insurer.

In fact, thats the reason why he obtained the insurance.

But if the carrier has already piad the insured, the insurance

co can refuse payment.

He can say that since he has already received payment from

the carrier, that is tantamount to losing my right to

subrogation.

But you cannot compel the insured to go after the carrier

first.

If C knew that insurer already paid, B should return back to A.

If the designation of the beneficiary is invalid, that alone is

void. But the policy remains valid.

But it will be void if you took the insurance policy of the life of

the common law wife and at the same time designated

himself as the beneficiary.

Donations made between husband and wife during marriage

is void.If I insured my own life and I designate my husband as

beneficiary, is the designation valid? Does it come in the

prohibition on void donation?

No. Both have insurable interest.

But because what is prohibited in the family code on

donations between husband and wife are donation inter

vivos, and designation as beneficiary is donation mortis

causa.

SEC 2.

A "contract of insurance"--is an agreement whereby

one undertakesfor a considerationto indemnify anotheragainst loss, damage or liabilityarising from an unknown or contingent event.

A contract of suretyship--shall be deemed to be an insurance contract,

within the meaning of this Code,only if made by a surety who or which,as such, is doing an insurance business as hereinafter provided.

What is contract of insurance?

It is a contract whereby one party (insurer)

undertakes for a consideration (premium)

to indemnify the insured

against loss, damage and indemnity arising from unknown

contingency.

This talks about indemnification which limits the definition to

non life insurance or property insurance.

Life insurance as we discussed earlier is not a contract of

indemnity.



5/84

Insurance

Kw

KwinKwinKwinKwin


But anyway, thats the definition.

Based on the definition, we have the elements of an

insurance contract.

The basic elements of an insurance contract as in any other

contract consent, object, cause.

Consent of the contracting parties.Object is to provide protection.

Subject matter is the life in life insurance, property if property

insurance and risk of loss if casualty insurance.

What are the distinguishing elements of an insurance

contract?

1. the insured must possess an INSURABLE INTEREST on

the subject matter of the insurance.

2. the insurable interest must be SUBJECT TO RISK of loss,

damage, or impairment arising from an UNKNOWN OR

CONTINGENT EVENT.

3. there is ASSUMPTION OF RISK by the insurer

4. part of GENERAL SCHEME who are exposed tosomewhat similar risk.

5. insured must make some RATABLE CONTRIBUTION to

the general fund called PREMIUM.

All must be present.

If only the first three are present, then thats only a RISK

SHIFTING DIVICE. You merely transfer the risk.

Because the contract of insurance is a RISK DISTRIBUTING

DEVICE (all 5 are present).

Ex. A borrowed money from B. So A is the debtor.

To protect B from the death or insolvency of A, B enteredinto a contract with C whereby C guarantees payment of Cs

obligation to B.

Is the contract between B and C a contract of insurance?

NO.

/ 1. B has insurable interest:the loan

/ 2. Risk: insolvency or death

/ 3. Assumption of risk: insurance

X 4. General Scheme: the contract was only bet B and C

X 5. Rateble contribution: payment made only to C

This is only a risk shifting device, not a risk distributing device.

This is a contract of guaranty.

In suretyship, the surety pays if the debtor does not pay;

primarily liable.

In guaranty, the guarantor pays if the debtor cannot pay;

subsidiarily liable.

In guaranty, there is benefit of exhaustion of assets.

In suretyship, there is none.

But as a rule, they are not a contract of insurance but merely

a risk shifting device.

But a contract of suretyship can become a contract of

insurance.

When does it become one?

When it forms part of the general scheme.

The last 2 requirements are present.

It becomes an insurance contract if they are doing an

insurance business,

It is considered an insurance business if it is occasioned and

not just incidental to the legitimate business.

So again the contract of suretyship can become a contract of

insurance if the surety is doing an insurance business.

So again, in risk shifting device, only 3 elements are present.

Risk distributing device, all 5 elements are present.

So to determine whether its an insurance contract or not,

look at the designation of the contract.

In this case, can B insure the life of A?

Yes.

For now, this is an exception to the rule that a contract of

life insurance is not a contract of indemnity.

Exception: if you insure the life of the debtor.

-it becomes a contract of indemnity because you

can only recover to the extent of you loan or

insurable interest

CHARACTERISTICS OF INSURANCE CONTACTS:

1. Is a contract of insurance a consensual contract or a real

contract?

CONSENSUAL contract.

Its because it is perfected the moment there is meeting of

the minds.

As opposed to real contracts, the perfection os upon the

delivery of the thing.

2. As a rule, it is VOLUNTARY.

EXPT: compulsory motor vehicle insurance

3. EXECUTED AS TO INSURED, EXECUTORY AS TO INSURER.

The liability of the insurer arises only upon the happening of

the contingent event. Thats why it is subject to regulation

because it is an aleatory contract.

The premium is already paid.

Naghuat ra siya sa insurer to indemnify him which may or

may not happen.

In effect, that becomes a UNILATERAL CONTRACT



6/84

Insurance

Kw

KwinKwinKwinKwin


4. It is ALEARTORY because it id dependent upon the

happening of a contingent event. But it is not a contract of

chance compared to a wagering contract.

Like when you ensure the loss if you did not win the lotto.

Is that insurable?

No.

Just to begin, theres no insurable interest.Thats a wagering contract.

5. PERSONAL

It is based on the character, conductor credit of the person

insured

He may not be willing to insure the same property owned by

another person.

Thats why if the property is insured and subsequently yousell it, its not automatic that the insurance is likewise

transferred.

In effect the policy is suspended.

Now lets go to INTERPRETATION OF INSURANCE CONTRACTS

How is insurance contract interpreted?

As in the rule of statutory contruction, if the provisions of

the contract are clear, they should be given its plain,

ordinary, popular meaning.

Only when there is doubt that you apply the rule onstatutory construction: CONSTRUE STRICTLY AGAINST

INSURER AND LIBERALLY IN FAVOR OF INSURED

Basis?

Because the contract of insurance is a contract of adhesion.

What is a CONTRACT OF ADHESION?

Most if not all of the terms of the (insurance) contract are

not a result of mutual negotiations of the parties.

But if it is prescribed to the insured in its final printed form.

The language was chosen carefully with deliberate care and

with aid of legal experts acting for the sole interest of the

insurer.

The participation of the insured is either to adhere to or

reject the stipulations.

If you chose to adhere, you can no longer change. Thats

why it is called contract of adhesion.

Case: Del Rosario v Equitable Insurance

He obtained a personal accident insurance from equitable

The coverage was for 1k to 3k.

There was a summary for specific amounts depending on the

extent of the injury.

The policy did mot include death arising from drowning, but

later on, this was changed. (rider)

But they failed to modify the table.It did not state how much he will receive.

Later he died because of drowning

The issue is in the amount. How much will he recover?

3k.

Because in the contract, there is an ambiguity. It is not clear

how much he can recover. Then it will be interpreted

liberally in favor of the insured.

Case: Feildmans Insurance v Vda de Sonco

Insured, a man of scant education insured his privatejeepney.

They met an accident and somebody died.

Insurer denied payment alleging that the coverage was for a

common carrier insurance and the vehicle was a private

jeepney.

So the issue was WON the private jeepney of Sonco will be

covered by the insurance policy.

Applying the doctrine of estoppel, Sonco can recover.

In doctrine of estoppel, through your acts, representation or

omission, you have led someone to believe that a particularact exists and then later on denied or changed your stand.

In this case, Sonco will qualify to recover the policy.

In fact, he renewed the policy twice.

So the insurance company is estopped from saying that they

are not covered.

In fact there was a statement by the agent, who cares about

the government, sue the government.

Case: Landichu v GSIS

Landichu was an employee of the bureau of public works and

highways.

There was an agreement bet BPWH and GSIS because

government employees are covered by GSIS.

So in their policy, they stated that they authorize their

collecting officer of the bureau to deduct the premiums

from the policy. So there was authority to the collecting

officer to make salary deductions.

And if there are failure to deduct the premium, the policy

remains. Instead the premiums will be considered



7/84

Insurance

Kw

KwinKwinKwinKwin


indebtedness to GSIS.

There was a provision in the policy that it shall take effect on

the first day of the month following the first payment of

premium.

Unfortunately for Landichu, the premiums were not paid

because GSIS failed to advice the collecting officer of the

bureau to deduct premiums.

So when the heirs sought recovery from GSIS, GSIS said thatthe premiums were not paid. So the policy according to

them did not take effect.

This was not correct.

In fact SC said the there were lapses on the part of GSIS on

their failure top advice the collecting officer.

Second, it was the contention of GSIS that Landichu should

have known that the premiums were not deducted because

he received salary in full. This will warn him that the policy

did not take effect.

But there is no reason to think that way.

Because it is stipulated that even if the premiums were not

deducted , the policy would not lapse. But instead, unpaidpremiums would be considered as debts.

And also, GSIS gave out premiums. So all the more reason

why Landichu would not doubt his policy was effected.

Therefore, landichu was entitles to insurance

Case: De la Cruz v Capitol Insurance

The insurance policy was on accident insurance.

During a boxing contest, he was hit at the back of the head,

fell and died.

Insurance company said that the death was not an accident

because he entered purposely into the boxing contest.Applying the rules on statutory contract, the provision on the

contract was clear as to what accident means.

accident did not acquire technical meaning. So it shall be

given its plain and ordinary meaning.

Accident happens by chance, fortuitous, without sign, means

unforeseen, unexpected, unusual, without intention or

design.

The court said, the death arising from the boxing was an

accident.

So that when you enter into a boxing contest, it is with risk,

but its not your intention to die. There are risks but as for

death, that is an accident.

Case: Ty v First National Security

The coverage was for a partial disability resulting to loss of

hand.

Loss of hand here was defined by the policy to mean

amputation from the wrist.

What happened here was that he fractured only some

fingers.

In fact, there was only temporary disability.

Therefore, there was no loss of hand.

Theres another case that I didnt assign. It involves loss of

legs.It was a coverage for an accidental insurance the coverage

was for loss of legs.

Loss of legs was defined as amputation of legs.

The insured met an accident which resulted to a total

permanent paralysis of both of his legs, but there was no

amputation.

The insurance company refused to pay saying that there was

no amputation of legs.

SC said there was no ambiguity. But the insured is still

entitled to recover. Because total permanent paralysis of

legs is equivalent to amputation of legs.

If you would rule otherwise, you would force a desperateman to have his legs amputated to be covered by the policy.



8/84

Insurance

Kw

KwinKwinKwinKwin


July 2, 2010

SEC 3Any contingent or unknown event,

whether past or future,which may damnify a person having an insurable interest, or

create a liability against him,--may be insured against,

subject to the provisions of this chapter.

The consent of the husband--is not necessary for the validity of an insurance policy

taken out by a married womanon her life or that of her children.

Any minor of the age of eighteen years or more,--may, notwithstanding such minority,

contract for life, health and accident insurance,with any insurance companyduly authorized to do business in the Philippines,

providedthe insurance is taken on his own life andthe beneficiary appointed is

the minor's estate orthe minor's father, mother, husband, wife, child, brother or sister.

The married woman or the minorherein allowed to take out an insurance policy--may exercise all the rights and privileges of an owner under a policy.

All rights, title and interest in the policy of insurancetaken 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.

What may be insured?

Why do we obtain insurance policy?

What for?

Arising from contingent or unknown event, either past or

future.

Insurable risk are those risk s that would cause damage or

loss to the person having insurable interest.

If not causing damage to you, it would create a liability to

other person.

In short, insurable risks are:

1. insurance against damage

2. insurance against liability

Give an example of insurance against damage.

Insurance against fire.

What risk will there be?

It will result to loss or damage.

Give an example of insurance against liability.

Insuring car against damage.

How will this create liability?

What would you insure?

This will become insurance against liability that may be

created when you make adamage on another car or if you

hit someone.

You have to take note of the policy.

If the policy states that the insurer will INDEMNIFY YOU for

any loss you may suffer, like foe example, makabayad kay

nakabangga kag sakyanan, or makabayad ka because you

injured someone, its not necessarily an insurance against

liability, if the insurer will indemnify you for the actual loss

that you will suffer.

But it becomes as insurance against liability if the insurer will

pay the third person.

Normally, in insurance against liability, the 3rd

party can

directly go after the insurance company. Because under thepolicy, the benefits or proceeds of the policy is payable to

the 3rd

p.

So those two risks:

1. insurance against damage

-anything that would create damage or cause damage to

you, having insurable interest or

2. insurance against liability

*remember that insurance company, exercising its right to

subrogation does not go after the insured. It goes after the

wrongdoer

And then you insure these risks from what kind of events?

Any contingent events and unknown events.

Contingent events are events that may or may not happen.

Unknown events are events that could either be past or

present.

So past events can also be insured.

But in order for past events to be insured, the law requires

that the past event must be unknown to the parties.

And aside form being unknown, theres a second

requirement.

The policy must expressly provide or expressly stipulate that

it will cover a prior loss or it will cover the past event.

Normally, it is expressed in the policy by words lost or not

lost.

Otherwise, if it is not provided in the policy, normally the

insurance company will not cover prior loss.



9/84

Insurance

Kw

KwinKwinKwinKwin


It has to be specified.

Or the policy will include it as an excepted peril or not part

of the coverage.

So for a past event to be insured:

1. it must be unknown to the parties

2. it must be stipulated by the parties

Give an example of past, unknown event.

You are the owner of a vessel that is currently going to China.

The policy took effect today.

But unknown to you, it already sunk in the pacific ocean.

Can you go after the insurer?

Yes. If the event was unknown and

If the policy covers prior loss

But past, unknown events are peculiar only to marine

insurance.

In fire insurance, the event must relate something in the

future.

And also in the property insurance, you cannot apply the

past, unknown event.

Because before the policy will take effect, normally they

would take a look at the property whther it is insurable or it

exists. So its not possible that theres a past unknown

event.

But even in marine insurance right now, in the modern means

of communication, do you think this is still applicable?

Well it depends if the insurer is willing to insure prior loss.

Maybe years ago where its difficult to determine where you

vessel is.

But right now, its very easy to confirm whether the vessel

still exists or not.

Now we said that you insure your interest against a

contingency.

Contingency, you can relate this to a fortuitous event.

Something which may or may not happen and is unforeseen.

Can the insurer raise the defense that he will not be l iable

because the loss was due to a fortuitous event?

Although we have the principle in obligations and contracts

that no person should be liable for fortuitous events, there is

still an exception.

One exception is when the nature of the obligation requires

assumption of risk.

And in this case, the nature of the obligation requires

assumption of risk. Its the reason, in the first place why you

took out the insurance policy: to secure yourself against

fortuitous event

PAR 2 SEC 3The consent of the husband

--is not necessary for the validity of an insurance policytaken out by a married womanon her life or that of her children.

So basically, you relate that in your family code.

A married woman can obtain a policy insuring her own life,

that of her children, her husband or even her separate

paraphernal property without the consent of her husband.

PAR 3Any minor of the age of eighteen years or more,

--may, notwithstanding such minority,contract for life, health and accident insurance,with any insurance companyduly authorized to do business in the Philippines,

providedthe insurance is taken on his own life and

the beneficiary appointed isthe minor's estate orthe minor's father, mother, husband, wife, child, brother or sister

This talks about a minor. But this is no longer a threat

because the age of majority has already been reduced from

21 to 18. So minor here should refer to someone who is

below 18 years old.

In that paragraph, it provides an instance wherein an

insurance policy was taken out by the minor is valid.

When will it be valid?

If the insurance is taken out on accident or health.

And theres another requirement; not only will the insurance

policy be on the life of the minor, but the designated

beneficiary must be his estate, father, mother, spouse,

children or siblings.

Otherwise, if it is other type of insurance, it if not on life,

accident or health; it is not on his own life or the designated

beneficiary are not those enumerated in law, then the policy

will be voidable.

But who can raise the defense of minority or incapacity?

Only the minor himself.

Such that if the minor obtained an insurance policy and they

suffered a loss, the insurer cannot, in denying the claim,

raise the defense that the contract is voidable because the

insured is minor.

In NCC it says that only the minor can raise the defense of

incapacity, those who are capable cannot raise the

incapacity of those whom they contracted with.

Remember that the contract is voidable. Valid until annulled



10/84

Insurance

Kw

KwinKwinKwinKwin


The last paragraphThe married woman or the minorherein allowed to take out an insurance policy--may exercise all the rights and privileges of an owner under a policy.

All rights, title and interest in the policy of insurancetaken 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.

He insures the life of the minor and designates himself as the

beneficiary.

Ex. A, Father obtains a life insurance policy insuring the life of

his son B. he designates himself as the beneficiary.

Assuming A predeceased B.

To whom will the proceeds of the policy go?

B. The law states that it will automatically vest to the minor.

But assuming A, father obtained a life insurance policy of his

son, B, a minor, but designates C, his wife as the beneficiary.

A predeceased B.

To whom will the proceeds of the insurance policy go?

To the wife, the designated beneficiary. unless the policy

otherwise provides.

The policy designates C as the beneficiary.

Kadtong automatically vests to the minor kadto ning the

owner of the policy himself is the designated beneficiary.

SEC 4The preceding section

--does not authorize an insurancefor or against the drawing of any lottery, or

for or against any chance or ticket in a lottery drawing a prize.

So obtaining an insurance policy on something which is based

on chance like gambling or lottery or ticket in a lottery

drawing a price is prohibited.

Why? Whats the reason?

Theres a distinction between gambling and insurance.

Because insurance is a contract of indemnity.

Whereas a gambling is based on chance.

In gambling, there is no insurable interest, but you create

risk.

In insurance, you have an insurable interest and thatinsurable interest is exposed to risk.

So when can you say that its a wagering contract or its a

contract of chance or gambling?

Lets say you are an operator of bingo. Can you insure

yourself or business on the possible risk of loss if someone

wins?

Or if you bought lotto tickets worth 1k, can you obtain an

insurance policy for the risk of loss?

No. because that is not insurable.

That is based on chance.

And to start, you have no insurable interest which is exposed

to a risk of loss.

What about if you are into car racing, and you are composed

of funding members. You make monthly contribution of 2k.

and because of that, all of the funds will be given to

someone who wins in the race.Is that insurance?

No. its a wagering contract.

But if the contribution will be used to someone who is used in

the race. Is that an insurance contract?

Yes. You have the five elements of an insurance contract.

So under sec 4, insuring a wagering contract is prohibited. It is

contrary to public policy.

To begin with you have no insurable interest.

SEC 5All kinds of insurance

--are subject to the provisions of this chapterso far as the provisions can apply.

Sec 5 merely provides that the provision of this chapter

This is referring to chapter 1 that pertains to sec 1 to 98.

It applies to all kinds of insurance, life, marine, fire,

suretyship, or casualty insurance.

Sec 1 to 98, we will discuss that as we go along. It refers to

insurable interest, principle of concealment, representation,

premium, etc.

Lets go now to the parties of the insurance contract.

Who are the parties of an insurance contract?

Insurer, insured and beneficiary.

The beneficiary is the one designated to receive the proceeds

of the insurance.

SEC 6Every person, partnership, association, or corporationduly authorized to transact insurance businessas elsewhere provided in this code,

--may be an insurer.

Insurer. Who can be an insurer?

They are those who are authorized to engage in insurance

business.

Our thinking before was that only corporations can engage

into insurance business. But actually the law allows

individuals and natural persons to engage into insurance

business as long as they have CERTIFICATE OF AUTHORITY

FROM THE INSURANCE COMMISSIONER.



11/84

Insurance

Kw

KwinKwinKwinKwin


They must be duly authorized.

Why?

Because insurance business is regulated.

Why is it regulated?

Because it is imbued with public interest.

Because the nature of the contract of insurance is that it isaleatory and is a contract of adhesion.

But normally right now, most insurance companies are

juridical entities.

Why?

Because of the capitalization requirement.

SEC 7Anyoneexcept a public enemy--may be insured.

Insured.

Who may be insured?

Anyone who is not a public enemy.

That anyone

must be capacitated to enter inter into an contract

must have insurable interest

must not be a public enemy.

Who is a public enemy?

Public enemy is a nation who is at was with the Philippines,

including the citizens and subjects of that nation.

What about abusayaf? MILF? Gangs? Are they public enemy?

No. they are not considered public enemy.

Whats the effect in if you become a public enemy?

Case: Filipinas cia de seguros v Christern Hueneferld and Co

A german national obtained an insurance policy from a

Philippine company.

Theres a war against the Japanese and the gremans were

allies with them. So germany and its citizens are considered

public enemy.

The building insured got burned.

They will not be entitled to the insurance.

The reason for that is because it in contrast with theprinciples of war where you want to cripple the resources of

you enemy.

What if the fire happened after the war. Can you recover?

No. even if the loss occurred after the war. The insured

would no longer be entitled to recover still.

Because the effect of the insured becoming a public enemy

does not merely suspend the insurance policy, but it

abrogates or terminates the policy.

35.42

SEC 8Unless the policy otherwise provides,

where a mortgagor of propertyeffects insurance in his own name

providing that the loss shall be payable to the mortgagee, orassigns a policy of insurance to a mortgagee,

the insurance--is deemed to be upon the interest of the mortgagor,

who does not cease to be a party to the original contract, and

any act of his,prior to the loss,which would otherwise avoid the insurance,--will have the same effect,

although the property is in the hands of the mortgagee,but any act which, under the contract of insurance,is to be performed by the m ortgagor,--may be performed by the mortgagee therein named,

with the same effect as if it had been performed by the mortgagor.

This talks about mortgage property.

We have the mortgagor and the mortgagee.

In this case, who may insure the property?Both mortgagor and mortgagee have insurable interest in

the property.

The mortgagor being the owner of the property, he may

suffer a loss.

The mortgagee also has an insurable interest on the

property because it serves as security on his lien. If

something happens to the property then his lien would be

unsecured.

So both of them have insurable interest. Both of them can

obtain insurance policy, either with the same or different

insurer.

What is the extent of their insurable interest?As to the mortgagor, the value of the property.

As to the mortgagee, the value of the debt.

If the house is 1m, and the credit is 500k,

If both of them insured the property, for how much can the

mortgagor and mortgagee recover?

Mortgagor can recover the value property, 1m, because that

is the extent of is loss.

Mortgagee can recover only 500k, because that is the extent

of his insurable interest.

SEC 8 talks about a situation where it is only the mortgagor

who obtains the insurance policy.

The mortgagor can either

obtain the insurance policy for his own benefit and at the

same time designate himself as the beneficiary, or

obtain the insurance policy for his own interest but

designates the mortgagee as the beneficiary.

So in those cases, what are the effect?



12/84

Insurance

Kw

KwinKwinKwinKwin


Let us first take the first situation where the mortgagor

insured the mortgaged property for his own interest and

designates himself also as the beneficiary.

In that case, if the property is lost or damaged, who can

recover from the insurance company?

Only the mortgagor.

Can the mortgagee recover?No.

For how much will the mortgagor recover?

1m, the value of the property.

Is the debt of the mortgagor to the mortgagee extinguished?

No. The debt still subsists.

Because in this case the policy is only for the interest of the

mortgagor.

Second situation.

This time, the mortgagor obtained an insurance policy for hisbenefit or interest but he designates the mortgegaee as the

beneficiary,

In that case, if the property is lost, who is entitled to recover?

This time it is the mortgagee who is entitled to recover.

For how much can he recover from insurer?

He can recover 1m being the designated beneficiary but he

holds the excess of 500k in trust for the mortgagor.

Is the debt extinguished?

Yes.



13/84

Insurance

Kw

KwinKwinKwinKwin


July 16, 2010

Last time we stopped at sec 8.

To recap, sec 8 talks about a property that has been

mortgaged.

If there is a property mortgaged, there are two insurable

interests. That of the mortgagor and that of the mortgagee.

Sec 8 talks about an insurance secured by the mortgagor but

the loss is made payable to the mortgagee.What is the effect?

We say that the mortgagor still remains a party to the

insurance contract. It is still considered as for his interest.

That is why any act of the mortgagor prior to the loss which

would avoid the policy will have the same effect on the part

of the mortgagee, although the property is in the house of

the mortgagee.

In the same manner, any act which under the contract of

insurance is to be performed by the mortgagor may be

performed by the mortgagee. It will have the same effect as

if it was performed by the mortgagor.

Going back to our example:

House: 2m

Credit: 1.5m

Policy: 2m

The policy was obtained by the mortgagor alone with the

benefit payable to himself.

Who is entitled to recover the proceeds of the policy?

Of course the mortgagor.

For how much?2m. Because that is the extent of his insurable interest.


NO. because there was no payment.

Is there a right of subrogation?

Yes. But as far as the third party is concerned.

What if it is the mortgagee himself who obtained the policy

for his own benefit?

Who is entitled to recover?

The mortgagee?

For how much?

1.5m. Because that is the extent of his insurable interest.

What happened to the excess of .5? Can the mortgagor claim

the .5?

No. because he is not a party to the insurance contract. the

2m only serves as the maximum limit of recovery. But it

does not mean that that is the amount the mortgagee is

entitled to recover.


No. Because after payment by the insured to the mortgagee

the insurer is subrogated. He can go after the mortgagor. Fo

For how much?

1.5m

If the insurance was obtained by the mortgagor for his own

interest but the loss is made payable to the mortgagee.

Whos entitled to recover in the policy?

Mortgagee. Because the loss is made payable to the

mortgagee.

For how much?

2m. But he keeps the .5M in trust for the mortgagor.


Yes. Because this time, the policy was obtained by the

mortgagor.

Is there right of subrogation? Can the insurer after paying the

policy go after the mortgagor?

No. Because in this case, the debt is extinguished. The policy

was obtained by the mortgagor himself. The loss was made

payable to the mortgagee. He does not cease to be a party

of the contract.

What if the debt is already paid. Who is entitled to recover? Is

the policy invalidated?The policy is not invalidated. The party entitled to recover is

the mortgagor because he still has insurable interest.

Going back to the previous example where the policy was

obtained by the mortgagee for his own benefit, at the time

of the loss, the debt was paid, can the mortgagee recover?

Am I going too fast?

There are three situations:

1. Mortgagor alone

2. Mortgagee alone

3. Mortgagor payable to mortgagee

For second type, at the time it was burned, the debt was

already paid, can the mortgagee still recover?

No more. Because he has no more insurable interest.

Can the mortgagor instead recover from insurer?

No. Because he is not a party to the insurance contract.



14/84

Insurance

Kw

KwinKwinKwinKwin


Third example

Policy is obtained by the mortgagor but the loss is payable to

the mortgagee. (sec 8)

Who is entitled to recover?

Mortgagee.

For how much?2m. But the .5m is held in trust for the mortgagor.

What if at the time of the loss the debt was already paid, who

can recover?

The mortgagor. Because remember, he does not cease to be

a party to the contract.

For how much?

2m

The debt is not paid. After the insurer pays the mortgagee, is

the insurer subrogated? Can he go after the mortgagor? Is

there right of subrogation?No. Because in this case, the debt is already extinguished.

The policy was obtained by the mortgagor.

You see the difference?

If the policy is obtained but the mortgagee the debt is not

extinguished because of the right of subrogation.

In the third example, if the policy contains a stipulation

prohibiting storing of flammable materials. The mortgagor

stored gasoline or kerosene in the insured premises. The

house was burned because of the flammable materials. Can

the mortgagee recover?

No.Sec 8.

Mark:relating to palileo

12k 13k 1107

The policy was obtained by the mortgagee.

1k should have been refunded to the mortgagor.

That would apply if the creditor

His insurable interest is equivalent to

So thats sec 8, last paragraph:any act of his,

prior to the loss,which would otherwise avoid the insurance,--will have the same effect,

although the property is in the hands of the mortgagee,

SEC 9.If an insurer assents to the transfer of an insurancefrom a mortgagor to a mortgagee, and,at the time of his assent, imposes further obligation on the assignee,making a new contract with him,the act of the mortgagorcannot affect the rights of said assignee.

Sec 9 talks about the transfer of the policy from themortgagor to the mortgagee wuth the consent of the

insurer.

When you go back to sec 8, the rule is that, although the

policy is assigned or the loss is made payable to the

motgagee, the mortgagor does not cease to be a party to

the contract.

But here comes sec 9. If in addition to the consenting to the

transfer or assignment, the insurer imposes new condition

or obligation, like additional payment of premium, what is

the effect of the imposition of the new condition?

Mortgagor ceases to be a party to the contract.

The imposition of the mew condition has the effect ofNOVATION OF CONTRACT.

As if there is a contract created between the mortgagee and

the insurer.

Such that the act of the mortgagor could no longer affect

the act of the mortgagee.

So sec 8 is normally referred to LOSS PAYABLE MORTGAGE

CLAUSE. the mortgagor is still a party to the insurance

contract.

Sec 9 is STANDARD UNION MORTGAGE CLAUSE the parties

to the insurance contract is now the mortgagee and the

insurer.

Case: Giogonia v CA

He obtained fire insurance policy with two separate insurers.

In those policies, there is a condition that there is another

insurance clause, that the insured must inform the insurer

the presence of other insurance policy.

What is the prohibition in the policy?

It prohibits double insurance and coverage exceeding 200k.

Here the property was mortgaged. It was insured by the

mortgagor and at the same time it was insured by the

mortgagee.

So the issue now in this case is WON there is double

insurance.

When we say double insurance, you have insured the same

risk, you have the same insurable interest and the same

subject matter.

In this case, we do not have the same insurable interest.

Because as discussed before, the mortgagor and mortgagee

have separate insurable interest. No double insurance.



15/84

Insurance

Kw

KwinKwinKwinKwin


And there was also ambiguity in the policy.

And if there is an ambiguity it will be construed in favor of the

insured.

The first policy was obtained by the mortgagor with the loss

payable to the mortgagee.

The other policy was mortgagee alone.Thats why there is no double insurance.

If the other policy was mortgagor alone, then there would

have been double insurance.

The last case

Case: PNB v CA

There was a property mortgaged to PNB by spouses. Spouses

obtained a loan. As a security for the loan there was a

mortgage with PNB. The property was insured by spouses

but the loss is payable to PNB. So we have a case of number3. The property was destroyed by fire.

Did PNB recover from the insurer? PNB allowed 7 years to

pass before it filed a claim from insurer.

Was it able to recover from the insurer?

No. as we will discuss later on, there is a perios in which you

have to file your claim. 1 year lang na.

Since it was not able to recover from the insurer, PNB went

back to the spouses.

The issue now is WON PNB can still go after the spouses?

No more.

Is the debt extinguished in this case?Yes. As a rule it is extinguished. As far as the spouses is

concerned, their debt to PNB is already extinguished

Its the fault of PNB why he let 7 years to pass before filing a

claim.

The effect of the policy obtained by the mortgagor with the

loss payable to the mortgagee is that it will extinguish the

debt.

Lets go to a more interesting topic, INSURABLE INTEREST.

SEC10Every person has an insurable interest in the life and health:(a) Of himself,

of his spouse andof his children;

(b) Of any person on whom he depends wholly or in partfor education or support, or

in whom he has a pecuniary interest;

(c) Of any person under a legal obligation to him for the payment of money,or respecting property or services,

of which death or illness might delay or prevent the performance; and

(d) Of any person upon whose lifeany estate or interest vested in him depends.

Sec 10 talks about insurable interest.

What is insurable interest?

When can you say that you have an insurable interest?

You have an insurable interest when you stand to gain some

benefit or advantage from its preservation (if you preserve

his life) and you stand to suffer a loss or a damage from itsdestruction.

You have that relation or connection with that person or

thing that you stand to benefit from its preservation or you

stand to suffer a loss from its destruction.

Although it mentions pecuniary, take note, in life insurance

the benefit need not be pecuniary.

The law requires that in all insurance policies, the person

obtaining the policy or insuring the life must have insurable

interest.

Whats the reason for obtaining an insurable interest?

For reasons of public policy.

Without insurable interest, it gives temptation or

inducement for a person who has nothing to lose and

everything to gain; pray for the happening of the event that

would make the insurer liable.

Without insurable interest, it would amount to a wagering

contract, a gambling contract.

So deterrence on the part of the insured.

If you have no insurable interest, you will have no interest

on the preservation of the thing or person insured. You aremore interested in its destruction

And also insurable interest serves as a limit of recovery.

Because as a general rule insurance contract is a contract of

indemnity. You can only recover top the extent of insurable

interest. so it prevents the insured from obtaining profit.

So those are the reasons why the law requires insurable

interest.



16/84

Insurance

Kw

KwinKwinKwinKwin


Sec 10 talks about insurable interest in life and health.

Who are those persons whom you have insurable interest?

Himself

Spouse

Children

To person he is dependent for support

To person whom he has pecuniary interest

To person who has an obligation whose death or i llnessmight delay or prevent the performance of the legal

obligation

To person upon whose life any estate or interest vested in

him depends.

Lets discuss this one by one

There are two kinds of insurable interest on life:

Insurable interest on you own life

Insurable interest on life of another

On insurable interest on your life, theres no question aboutit. We all have insurable interest in our own lives.

If the insurance or the owner of the policy insures his own

life,

The general rule is that he can designate anyone as the

beneficiary.

That beneficiary need not have insurable interest on the life

of the insured.

Why?

Because, first the requirement of insurable interest is

satisfied.

Second, according to law, contrary to human experience, a

person would bring about the death or harm to himself.The fact that he insured himself is already evidence of good

faith.

Although there are instances where it is the beneficiary who

brings about the happening of the event, but the insurance

code provides for sefeguards for that

Now going back, if A the owner of the policy insured himself

and designates B, a neighbor as his beneficiary, is the policy

valid?

Yes.

Why?

Because the requirement of insurable interest is already

satisfied.

So general rule if the owner of the policy is the one who is

insured, or the subject of the insurance is his own life,

anybody could be designated as a beneficiary.

But there are instances where the law or court will consider

the policy void even if the insured is the owner of the policy

himself if there are circumstances like:

the proposal to take out the policy was at the

instance of the beneficiary.

The premiums were paid by the beneficiary.

The beneficiary has no insurable interest.

In those cases, the court may consider the policy as a

wagering contract.

But as a general rule, this is valid.

The second type is insurance on the life of another

The subject of insurance is another person. It could be for his

own benefit or the benefit of another person.

In that case, what is the requirement of the law?

This time the law requires that the owner of the policy must

have insurable interest on the life of the insured.

Ex.

A the owner of the policy insured the life of a friend B, and Ais the beneficiary.

Is this valid?

No. Because the law requires that if you insure another

person, the owner of the policy must have insurable

interest.

What if A insured B friend and this time designates C as the

beneficiary, who is also a friend of B. Is this valid.?

No. Because again, we go back to the requirement of

insurable interest. A does not have insurable interest on the

life of B.

In this case if the person designated as the beneficiary is athird person, the law requires that A and C must have

insurable interest on the life of B.

OW the policy is not valid.

39.47

Who are those persons on whom you have insurable interest

aside from yourself? We are talking about the life of another

person

You have sec 10, a to d

Spouse

Children

Persons on whom you depend for support or education

Persons on whom you have pecuniary interest

Who are those persons whom you are dependent for

education and support? Are they enumerated in insurance

code?

No. So we refer to the provisions of the family code.



17/84

Insurance

Kw

KwinKwinKwinKwin


Who are those persons obliged to support each other?

Spouses, descendants, ascendants, brothers and sisters

whether full blood or half blood.(Find in FC)

What about illegitimate brothers or sisters?

Yes

So please take note of these persons so that you will knowWON you have insurable interest.

Examples:

A grandfather insuring grandson: has insurable interest

A brother insuring his half sister: has insurable interest

A sister insuring her cousin: no insurable interest

An uncle insuring his nephew: no insurable interest

Unless there is an

expectation of

pecuniary advantage

For ascendants, descendants and siblings, the insurable

interest is based on blood relationship.

But for lesser degree of kinship not among those enumerated

in family code like uncles, aunts, nephews, nieces, in laws

(except wife), for you to have insurable interest in these

person, the bases of the relationship must be pecuniary.

Either They have a legal obligation to you or

Theres a contractual relation between the two of you

Theres an expectation of pecuniary benefit.

Example of expectation of pecuniary benefit:

Boy friend insuring the life of his fianc?It depends if the GF provides the needs of her BF.

Theres expectation of pecuniary benefit.

Like in the book,

Woman takes a child from the orphanage and takes care of

her and provides her with basic needs.

The woman who takes care of the girl has an insurable

interest of the girl even though they are not related.

Because during her old age, the girl would take care of her.

In the same way the girl has pecuniary interest on the woman

since the woman sends her to school.

You must establish that there is the expectation of pesuniary

benefit.

Take note:

In life insurance, mere expectation of pecuniary benefit is

sufficient.

Unlike in property insurance, mere expectation of pecuniary

benefit is not sufficient if it is not founded on existing right.

Another example of existence of pecuniary benefit:

A corporation insuring the life of its employee.

But take note that the employee must be a key employee.

Because if you are an ordinary rank and file employee, you

can be replaced anytime.

Letter C

(c) Of any person under a legal obligation to him for the payment of money,or respecting property or services,

of which death or illness might delay or prevent the performance; and

Ex. A creditor insuring the life of the debtor. C has insurable

interest because D has the obligation to him. And the death

or illness of D might prevent or delay the performance of the

legal obligation.

So C may insure the life of D, the debtor with C himself as the

beneficiary. This is valid.

But the extent of the insurable interest if the creditor is only

up to the extent of the debt.

This is an exception to the rule of life insurance policy that itis unlimited; where the insurable interest is limited to the

amount of death.

In this case, if it is C who insures the life of D, the life insurane

policy becomes a contract of indemnity.

As a rule, life insurance contract is not a contract of

indemnity.

But this is an exception.

Assuming C insured the life of D to the extent of the debt of

500k with himself as the beneficiary. At the time of the

happening of the peril the debt was already paid.

Can C still recover?

No because he has no more insurable interest. it is a

contract of indemnity

Can the Ds estate still recover?

No.

It is the debtor who insures his own life but the beneficiary is

the creditor. Is this policy valid?

Yes. Because D has insurable interest in his own life.

If the debt at the time of his death is already paid, would

there still be recovery of the policy?Yes. It does not affect the policy.

The proceeds will go to the heirs or estate of D.

If the debtor insures the life of the creditor and the creditor is

the beneficiary. Is that policy valid?

No. because D has no insurable interest on the life of C



18/84

Insurance

Kw

KwinKwinKwinKwin


Going back, must the creditor have insurable interest on the

life of D if D insures his own life?

No.

If the subject of the policy is the life of the insured himself,

he can designate anybody as the beneficiary, even if the

beneficiary has no insurable interest.

But it does not invalidate the policy even if the debt isalready paid

The point there is that the payment of the debt does not

invalidate the policy because the subject of the insurance is

the life of D.

If the policy is silent and simply designates C as the

beneficiary, but we know that the intention of D why he

made C as a beneficiary was for the payment of the debt.

But at the time off his death the debt was already paid. And

in the policy there was mention made that the proceeds willgo to C so long as the debt still subsists.

So in this case, the proceeds will go to C.

But if theres a mention in the policy that it shall be paid only

to C so long as the debt subsists, and at the time of death,

the debt is paid, then it should go to the estate of D.

In that case, if Im D and debt was already paid, I should

change the designation of the beneficiary.

Because if you do not change it, it becomes a vested right at

the time of the death of the insured. In fact at the time it

becomes a vested right, it cannot be changed without his

consent, absent any condition in the policy.

What if at the time of death, the right to collect has already

prescribed? Can C still recover?

No.

The basis for C in insuring Ds life is insurable interest, which

is the payment of the debt.

If it has prescribed, theres no more debt, then theres no

more insurable interest.

In short wala nay obligation si D kang C.

Remember that this is a contract of indemnity. So the

requirement of insurable interest at the time the policy

exists and at the time of the death is important.

You have insurable interest on the person under legal

obligation.

C insured the life of D at the time the debt still subsists with

E, a friend as the beneficiary?

Can C change the beneficiary to E? Is that valid?

No.

For a life insurance policy taken out by another person, the

both owner of the policy and the beneficiary must have

insurable interest.

Here, E does not have insurable interest.

The only time when the beneficiary need not have insurable

interest, is if the subject of the life insurance is the life of the

owner of the policy himself. an insurance on your own life.

**Statute of limitation refers to prescription. Written

contract prescribes in 10 years.

**the doctrine of waiver and estoppel is not applied. The fact

that there is no insurable interest, the policy is void. You

cannot raise against the insurer that he is estopped. There

will still be return of premiums unless the insured is in pari

delicto.

And the last on, letter d.(d) Of any person upon whose life

any estate or interest vested in him depends.

A gives right of usufruct to B subject to the requirement that

B will enjoy the right as long as A survives.

So in this case B has insurable interest in the life of A

because B has an interest in insuring the life of A. OW if A

dies, the usufructuary rights will also be extinguished.

Ex.

In his last will and restatement A bequeathed/devised to B a

property. Can B insure the life of A? (they are not related)

No. B has no insurable interest on the life of A.

It does not fall on the enumeration. The devisee or legatee

does not depend on the life A.

B would not be interested in the preservation of the life of A

But since it is in the last will and testament, it will take effect

only upon his death.

Is the consent of the person necessary if you insure the life of

another person?

There are different views.Its necessary because obtaining consent is evidence of good

faith.

But if you look at sec 10, it does not mention that it needs

the consent of the insured

Because the law considers that so long as you have insurable

interest, thats already evidence of good faith.



19/84

Insurance

Kw

KwinKwinKwinKwin


Case el orient

El Oriente is engaged in the manufacture of cigars.

There was a policy obtained the company insuring the life of

their manager. The beneficiary was El Oriente.

Is the policy valid?

Yes. There is insurable interest.

What is the basis for insurable interest?The basis is on expectation of pecuniary benefit.

He is a key employee, manager, and has been in 35 the

company for 35 years.

You can even say that the manager has a legal obligation

whose death will delay or prevent the performance.

The issue was WON the proceeds of the insurance is taxable.

Is it taxable?

No. There is no income. But it is to compensate/indemnify a

loss

SEC 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.

Under the new provision, the designation of the beneficiary is

presumed to be revocable.

Under the old law, the designation is presumed to be the

irrevocable.

The beneficiary is the person entitled to receive the proceeds.

Who could be a beneficiary?

If the insured person is not the owner of the policy, then the

beneficiary must have insurable interest on the life of the

insured.

But if it is the insured himself is the owner of the policy, the

beneficiary can be anyone so long as that beneficiary is not

disallowed by law. (provision on void donations: guilty of

adultery, concubinage because theres a similarity between

a cicl obligation and designating someone as a beneficiary.

Theyre both acts of liberality)

What about persons living together without the benefit of

marriage?

A insures Himself and designates B as beneficiary. They livetogether as husband and wife without benefit of marriage. Is

the policy valid?

Is B disqualified from being a beneficiary?

Yes. Since A insured his own life, the designation is valid. He

can designate anybody as beneficiary. B is not disqualified

because they are not guilty of adulterous relationship.

What if A insured the life of B and designates himself as

beneficiary?

So it boils now if there is insurable interest on the life of B.

Here there is common law relationship. There is insurable

interest pecuniary benefit.

What is the effect if the designation of beneficiary isrevocable? (remember that presumption is:revocable)

So if the designation of the beneficiary is revocable, the

beneficiary does not acquire vested right, because it can be

changed by the owner of the policy without his consent.

But if it is irrevocable, then the effect is that, there will be a

vested right.

Since its a vested right can the designation be changed?

No, without his consent.

Can I add another beneficiary?No, without his consent.

Can I stop paying the premiums?

Yes. Not the beneficiary can continue because he already

has vested rights.

What is the effect if the beneficiary predeceased the insured?

To whom will the proceeds of the policy go?

It depends on the designation of the beneficiary.

If revocable the proceeds if the policy will go to the estate

of the insured.

If irrevocable the proceeds of the policy will go to the estate

of beneficiary. There is already a vested right.

What if there is no designation of beneficiary or the

designated beneficiary is not qualified, where will the

proceeds go?

It will go to the estate of the insured, if he was not able to

designate a new one.

Ex.

A is a married man.B is the woman he is co habiting. He

insured his own life and designated B as the beneficiary.

B is disqualified.

But is the policy invalidated?

No. Only the designation of the beneficiary is considered

void.

The proceeds will go to the estate of A.



20/84

Insurance

Kw

KwinKwinKwinKwin


Case: insular life v ibrado

Designation was revocable.

The designated beneficiary was the common law wife

although designated as wife. But she is actually not his

legal wife. They are guilty of concubinage.

He died. (hit by a branch of a tree)

Woman is not entitled to the proceeds.

But what if they are both single, can she recover?

Yes. There is insurable interest.

Case: southern Luzon

Roman Conception has insurance policy and designated

common law wife, Aquilina and their children.

He had 3 families. All sought recovery of the policy.

Who is entitled? The designated beneficiary? The legal wife?

Or the other woman?

The designated beneficiary.

But take note that this case was decided under the old civilcode when there was no provision yet on void donation.

Under the new law, can Aquilina still recover?

No. she is disqualified from becoming a beneficiary.

What about the children of Acquilina?

Not disqualified. They can recover.

Case: SSS v Davac

There were 2 marriages.

The designation of the second wife is not disqualified.

Her guilt is not proven. The guilt need not be conviction but

through preponderance of evidence.In this case, although she is not a legal wife because the fist

marriage still subsists, the guilt is not proven. It was not

established that she has knowledge of the existence of the

first marriage.

Case: maio

The policy failed to designate the beneficiary.

To whom will the proceeds go?

To the estate of the deceased.

SEC 12The interest of a beneficiary in a life insurance policy

--shall be forfeited when the beneficiary isthe principal, accomplice, or accessoryin willfully bringing about the death of the insured;

in which event,the nearest relative of the insuredshall receive the proceeds of said insuranceif not otherwise disqualified.

So this is now the safeguard provided by law in cases where is

you insure your own life, the beneficiary need not have

insurable interest. So theres a tendency that he would wish

something bad will happen to you.

Who are these nearest relatives?

So you refer to your rules in intestate succession.

(look this up)

The law mentions about willfully bringing about the death of

the insured.

What if the act on killing the insured is an act of self defense,

will the beneficiary still be disqualified?

What the law intended here when it said willfully, the act

must amount to felony

If the act is an act of self defense, then the beneficiary is still

entitled.

Sec10-12

Talks about insurable interest in life insurance policy.

SEC 19An interest in property insured

--must exist when the insurance takes ef fect, andwhen the loss occurs,but not exist in the meantime; and

interest in the life or health of a person insured--must exist when the insurance takes ef fect,

but need not exist thereafter or when the loss occurs.

When must insurable interest on life exist?

It needs to exist only at the time the policy takes effect. It

need not exist thereafter.

Why?

Because the rule in life insurance is that it is not a contract

of indemnity.

Exception is if you insure the life of your debtor.

Ex. If the husband insured the life of his wife. At the her

death, their marriage was declared null and void. Can the

husband still recover?

Yes. The only requirement is that he has insurable interest at

the time the policy takes effect.

The guilt of the spouse will not affect the insurance policy.

The basis may not be marriage but may be pecuniary

benefit.



21/84

Insurance

Kw

KwinKwinKwinKwin


July 23 2010

We are to start on insurable interest in property.

SEC 13Every interest in property, whether real or personal, orany relation thereto, orliability in respect thereof,

of such nature that a contemplated peril might directly damnify the insured,

--is an insurable interest.

When do you have insurable interest in property?

Same as insurable interest in l ife, you have insurable interest

in that property is you stand to benefit in its continued

existence or you stand to suffer from its destruction or

impairment from the happening of the event.

If you look at the definition of insurable interest in property,

ownership and possession is not a requirement for you to

have insurable interest.

The sources of insurable interest are 3:

1. you have insurable interest arising from the property itself

2. you have insurable interest because you have relation to

the property or,

3 you have insurable interest because you have a connection

to that property.

So ownership is not the only basis of the interest.

Example where ownership and possession of the goods is not

required:

You are the buyer of the goods and the goods are not yet

delivered to you.

In the contract of sale, you acquire ownership upon delivery.But the buyer already has insurable interest although

ownership and possession has not yet been transferred.

What is the basis of his insurable interest? is the buyers

interest on the goods already existing or still inchoate? Doe s

he have a relation that property that he will derive benefit

from its preservation?

Yes in fact its already an existing right on the basis of

perfected contract of sale.

If he has not yet paid the amount, do you think that the buyer

has insurable interest?

Yes. Because even there is no payment of amount, there is

already a perfected contract of sale.

If something happened to the property, can the seller compel

the buyer to pay? Even the goods have been destroyed?

What about perfected contract of sale, does he have rights

na?

Theres still insurable interest.

There are rights because the moment the sale is perfected

The obligations are reciprocally demandable.

If the thing is destroyed, I may not have a liability to the

seller but the fact that I am buying the goods, I am

interested in the goods, especially if its specific.

So what is the basis of the buyers insurable interest?

The perfected contract of sale.

Take note: unlike in life insurance, mere expectation of lossor mere expectation of benefit is not sufficient to constitute

insurable interest.

Example: you are the owner Bakak in front of law building.

Most of its customers are USC law students. He expects to

derive profit from them. You think that if you preserve the

building, you will have continued profit.

Can the owner of that restaurant insure the USC building?

No. because although you might have expectation of benefit

or loss, Its just a mere expectation. Its not founded on

existing right or legal right.

SEC 14An insurable interest in property may consist in:(a) An existing interest;(b) An inchoate interest

founded on an existing interest; or(c) An expectancy,

coupled with an existing interestin that out of which the expectancy arises.

EXITISNG INTEREST

You have existing interest because you have a legal title.

Example of insurable interest based legal title:

The lessor has an insurable interest based on a legal and

existing right or title.

The mortgagor because he is the owner of the property.

What about the lessee? Can he insure the property? Does he

have insurable interest?

Yes.

Trustee and assignee.

Can the administrator/executor insure the estate?

Yes. But the proceeds of the policy will not go the executoror administrator. But to the estate.

Still, he has existing interest.

An example of insurable interest based on equitable title: you

are the buyer. The goods have not yet been delivered to

you. No ownership yet. But you have insurable interest.

What about consignee of goods?

Yes. Its the same as buyer or purchaser.



22/84

Insurance

Kw

KwinKwinKwinKwin


What about builders or contractors?

Yes. Provided they have not received payment

INCHOATE INTEREST BASED ON AN EXISTING INTEREST

What do you mean by inchoate?

A stockholder has an interest on the property of thecorporation ion which he is a stockholder.

Why is the interest of the stockholder on the property of the

partnership inchoate?

Because the corporation owns the property of the

corporation, not the stockholders.

The stockholders have inchoate interest because upon the

dissolution of the corporation, the corporation will

distribute its assets and properties.

The inchoate right is based on the existing interest.

What is that existing interest?The existing interest is based on being the stockholder of the

corporation or the ownership on the shares of stock of the

corporation.

A partner in the partnership has insurable interest also on the

partnership assets. Same principle with the corporation.

Because the partnership has a separate personality from the

partners themselves.

What of I am a depositor in a bank and I have a huge deposit.

I expect that 5 months from now, I will earn interest from

that bank. Can I insure the bank? Because if somethinghappens to the bank, there goes my deposit. Even if there is

no interest, can I insure my deposit?

No. There is no existing right on the bank.

But what about my deposit?

Its just a mere expectation of loss not founded on the

existing interest. yes I have a time deposit but it doesnt

mean that I have an interest on the properties of the bank.

So its n

Kwin Transcripts - Insurance

Documents

Transcript of Kwin Transcripts - Insurance