insurance notes midterms 2013
TRANSCRIPT
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Aquino:chapter6ASCERTAININGANDCONTROLLINGRISKS
4primaryconcernsofinsuranceparties1. correctestimationoftherisk
a. enablestheinsurertodecidewhetherhewillassumeit2. precisedelimitationoftherisk
a. determinestheextentofthecontingentduty3. controloftheriskafteritisassumed
a.
fortheinsurertoguardagainsttheincreaseoftheriskonchangeofconditions4. determiningwhetherthelosshasoccurredandamountoftheloss
devicestoascertainandcontrolrisks
1. concealment2. representation3. warranty4. condition5. exception
thecorrectestimationoftherisko ifallmaterialinformationaredisclosedandtheinformationdisclosedcanbereliedupon
delimitationo byusingexceptionsthatareinsertedinthepolicyorstatedintherider
controloftherisko resortingtothepromissorywarrantiesandconditionsthatwillpreventtheoccurrenceoftherisksafterthe
policyhasbeenissued
CONCEALMENT(section26)
neglecttocommunicatethatapartyknowsandoughttocommunicateo mustcommunicateingoodfaithallfactswithinhisknowledgewhicharematerialtothecontracto theobligationofeachparty
thedutytodiscloseisrequiredbecauseinsurancecontractsareuberrimaefidaeo utmostgoodfaith
- insuranceisacontractuponspeculation
MATERIALITY onlymaterialfactsarerequiredtobedisclosed materialifitwillaffecttheinsurersactiononhisapplication
o approvingwithhigherpremiumorrejectingorfixingtermsandconditions materialiftheywillaffectthedecisionoftheinsuredtoenterintotheinsurancecontracts
section31
determinednotbytheevento solelyontheprobableo reasonableinfluenceofthefactsuponthepartywhomthecommunicationisdue
generallymaterialo relatestophysicalormoralhazard
thetestofmaterialityo istheeffectwhichtheknowledgeofthefactinquestionwouldhaveonthemakingofthecontract.
- ifnotinthepolicythatmakesitanobligationtodiscloseduringthelifeofthecontractthenthereisnodutytomakeadisclosureforthefactsoccurringaftertheinsurancetakeseffect
theprincipalquestiontherefore,mustbe:
- wastheinsurermisledordeceivedintoenteringacontractobligationorfixingthepremiumofinsurancebywithholdingofmaterialinformationoffacts
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CAUSATIONNOTNECESSARY
thematterconcealedneednotbethecauseoftheloss theinsuredneednotdieofthediseaseifhehadfailedtodisclosetotheinsurertheexistenceofthedisease.
o Itissufficientthathisnondisclosuremisledtheinsurerinforminghisestimates
Requisitesonthegroundofconcealment:
1. partyknowsthefactconcealed.Oratleastoughttoknow2. materialfacts3. nowarrantyisextendedbythepartyregardingthefactconcealed4. theotherpartydoesnothavethemeansofascertaining
KNOWLEDGEOFTHEAGENTOFTHEINSURED
knowledgeontheagentoftheinsuredcanbeimputedtotheinsuredhimselfo dutyoftheagenttoacquirethecommunicateinfoofthefactso possiblefortheagent(reasonablediligence)tomakethecommunicationbeforethemakingoftheinsurance
contract
theprincipal-insuredisboundwiththeknowledgeofhisagentwhosedutyistogiveinformation
WHENTHEREISNOCONCEALMENT
Section30
1. knownbytheotherparty2. exerciseofordinarycare,theotherpartyoughttoknowandthattheotherpartyhasnoreasontosupposehimignorant3. waivescommunication4. proveortendtoprove theexistenceofariskexcludedbyawarranty5. riskexceptedfromthepolicy
Section32
6. eachpartytothecontractisboundtoknowallthegeneralcauseswhichareopentohisinquirytoeachothera. whichmayaffectthepoliticalormaterialperilscontemplated
Section33
7. therighttoinformationofmaterialfactswaivedbythetermsoftheinsuranceorbyneglecttomakeinquiryastosuchfacts,impliedinotherfactsofwhichinformationiscommunicated
a. matterisincludedinthegeneralusageoftrade
Section34
8.
informationofthenatureoramountoftheinsuredproperty,isnotdisclosedunlessinanswertoaninquiry
Section35
9. informationofthepartysownjudgmentuponthemattersinquestion
FACTSTHATNEEDNOTBEDISCLOSED
heneednotbetoldgeneraltopicsofspeculation theinsurerisboundtoknoweverycause
o naturalperilso difficultyofthevoyageo kindofseasono probabilityoflightingo hurricaneso earthquakes
insurerisboundtoknoweverycausewhichmayoccasioninpoliticalperils
JUDGMENTOFOPINION
opinionodtheinsuredneednotbedisclosed theremustbegoodfaithandnointenttodeceive
althoughfalse,arepresentationoftheexpectationintentionbelief,opinionorjudgmentwillnotavoidthepolicyifthereisnoactualfraudininducingtheacceptanceofrisk
answersofanapplicantwhoisnotadoctorregardingthemedicalhistoryofhiswifelargelydependsonopinionratherthanfact.
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o SCsaidnoconcealmentsolongastheanswersaremadeingoodfaithandwithoutintenttodeceiveeveniftheanswerswhichareinthenatureofopinionsareuntrue.
KNOWLEDGEOFTHEINSURER
at the time of the issuance of the policy of insurance, has knowledge of existing facts which if insisted onwouldinvalidatethecontractfromitsveryinception
o suchknowledgeconstituteswaiverofconditionsinthecontractinconsistentwiththefactsandtheinsurerisestoppedfromassertingthebreachofconditions
reason:
toallowacompanytoacceptonesmoneyforpolicyofinsurancewhichitthenknowstobevoidandofnoeffect thattheinsuredbelieveittobevalidandbinding,issocontrarytothedictatesofhonestyandfairdealingandsoclosely
relatedtopositivefraud
itwouldallowthecompanytotreatthepolicyasvalidlongenoughtogetthepremiumonitandleaveitatlibertytorepudiateitthenextmoment.
executeabindingcontractratherthantohavedeceivedtheinsuredintothinkingheisinsuredwhenunfactheisnotandtohavetakenhismoneywithoutconsideration
INTENTIONALANDUNINTENTIONALCONCEALMENT
Section27
concealmententitlesthepartytorescindacontractofinsurance
- everyconcealmentwhetherarisingfromaccident,negligence,inadvertenceormistakeifmaterialwillbeequallyfataltothecontractasifitwereintentionalorfraudulent
goodfaithisnotadefenseinconcealment
generallyintentionalorunintentionalconcealmentissuperfluous
- except- section29
o intentionalorfraudulentomissiononthepartofoneinsured,tocommunicateinformationofmattersprovingortendingtoprovethefalsityofawarranty,entitlestheinsurertorescind
- theremaybematerialconcealmenteveniftheinsuredhasnoknowledgeoftheexistenceofadutytodisclose.- Amanmayhaveactedwithgoodfaithintheordinarytermofthephraseyetstillbeheldtohaveactedintheutmost
goodfaithinthelegalsense.
KNOWLEDGEOFTHEFACTCONCEALED actualknowledgeoftheinsuredisnotnecessarytogivetheinsurancecompanytherighttoavoidthepolicyonthe
groundofconcealment
majorityviewabsenceofknowledgeofthefactsconcealedwillnotdeprivetheinsureroftherighttoinvokeconcealment
o unintentionalconcealmentisstillconcealment hetookthepolicybutisnotawareofsuchfact
o concealmentisnotintentional thereisconcealmentevenifthepartydoesnotknowbutoughttoknowthematter presumedknowledge notawareofthenatureoftheillnessbyreasonofnegligenceorindifference
minority view-thecontractcannotbe rescindedon theground ofconcealment ifnon-disclosingpartydoesnotknowthefact
involved.
onecanconcealonlyifheknowswhattoconceal mistake,goodfaithandnegligencewillnotexcusetheinsuredformmaterialconcealment
exceptions
1. mattersallegedlyconcealedisamatterofopiniona. ex.Medicalconditionoftheinsuredisamatterofopinionwhichcannotbeinvokedso longastherewasno
intenttodeceive
2. whentheinsurerwaivedhisrighttotheinformationasinthecasewheretheinsuredgaveanimperfectanswerWAIVEROFINSURER
Aquestionwasnotansweredat allorimperfectly answered thebutinsured and theinsurerissuesa policywithoutfurtherinquiry,theywaivetheimperfectionoftheanswerandrendertheinformationimmaterial.
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Insurertooeagertoaccepttheapplicationandreceivetheinsuredspremium.Itwouldbeinequitablenowtoallowtheinsurertoavoidliabilityunderthecircumstances
REMEDY
- thepresenceofconcealmententitlestheinsurerorescindtheinsurancecontract- therighttorescindshouldbeexercisedprevioustothecommencementofanactiononthecontract
note: concealmentwhetherintentionalorunintentionalentitlestheinjuredpartytorescindthecontractofinsurance defenseisavailableeveniftheinsuredisunawareofherfatalillness factismaterialwhenitcouldcertainlyaffectthedecisionoftheinsurertoenterintotheinsurancecontract collusiononthepartoftheinsuredandtheinsuranceagentandthephysicianwhichvitiatesthepolicy.Itisadeliberateattempttodefraudtheinsurer false statement by the insurers agent hence it should be the insurer who should bear the effects of its agentsmisconduct.(nocollusion) materialityistobedeterminednotbytheeventbut
o solelybytheprobableandreasonableinfluenceoffactsuponthepartywhomthecommunicationisdue,informinghisestimateoftheproposedcontract,orinmakinghisinquiries theinsuredneednotdieofthediseasehehadfailed todisclosetothe insurer.It issufficientthathisnon-disclosure
misledtheinsurerinforminghisestimatedoftherisksoftheproposedinsurancepolicyorinmakinginquiries.
REPRESENTATION
statementsmadetogiveinformationtotheinsurertoinducehimtoenterintotheinsurancecontract collateralcommunicationmadetotheotherpartyinwritingorbywordofmouth
TIMEOFREPRESENTATION
Section37
atthetimeorbeforetheissuanceofthepolicyo statementsmadeafterthepolicytakeseffectwillnolongerhaveanybearingonthedecisionoftheinsuredto
enterintothecontract.
Exceptiontotherule
Section47
modificationofacontractofinsuranceastoitsoriginalformation.o Representationsmayalsobemadeatthetimeoforbeforetherenewalofthepolicy
DISTINCTIONSANDSIMILARITIES
CONCEALMENT REPRESENTATION
Anomission(nondisclosure) Positiveassertion
Cannotrefertofutureacts(meaningpastactsnisiya) Canpertaintothefuturebecauseitispromissory
Testofmaterialityapplies Testofmaterialityapplies
Partycanrescind Partycanrescind
KINDS
representationmaybeastoformo oralo written
representationmaybeastothenatureo affirmative
dealingwithfactsexistingatthetimethecontractismadeo promissory
statementsmadebytheinsuredconcerningwhatistohappenatthetimetheinsuranceisalreadyeffective
section39
astothefutureisdeemedapromiseo unlessitappearsthatiswasmerelyastatementofbelief
INTERPRETATION
ruleo construedliberallyinfavoroftheinsuredandrequiredtobeonlysubstantiallytrue
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section42
representationispresumedtorefertothedateonwhichthecontractgoesintoeffect
TESTOFMATERIALITY
Section46
materialmisrepresentationiftheknowledgeofonepartythereofwillaffecttheinsurersactiononhisapplication,eitherbuyapprovingitwiththecorrespondingadjustmentforahigherpremiumorrejectingthesameorinfixingtheterms
andconditionsofthepolicy
representationastoageinlifeinsurance
anyamountpayableorbenefitaccruingunderthepolicyshallbesuchastopremiumpaidwouldhavepurchasedatthecorrectage.
- misstatementastotheagedoesnotavoidthepolicyo resultwillbethatsuchpremiumpaidwouldhavebeenpurchasedatthecorrectageo thebenefitsthatwillbepaidbytheinsuredwouldhavepurchasediftheagehadbeencorrectlystates.
Nopersoncantestifyinhisownageexceptfromhearsay- Soifmisstatedtheamountoftheinsurancewillbeadjusted
theageoftheinsuredisthechiefcorner-stoneofthelifeinsurancestructure.o Birthcert
If wala gi require then the insurer merely relied on the representation of the insured, and onlyrecourseistomakeanadjustmentonthepremiumifthereismisstatement
Misstatementshouldbedoneingoodfaithforitnottobeagroundtorescindiftheintentistodeceive
ERRONEOUSDESCRIPTIONOFBUILDINGINFIREINSURANCE
withoutthefaulttotheinsuredcannotbeconsideredmaterialrepresentation. Themistakeoftheagentsoremployeesoftheinsurancecompanycannotprejudicetheinsured.
REMEDYSection44
If therepresentation is false ina material point,whetheraffirmative orpromissory, theinjuredparty isentitled torescindthecontractfromthetimewhentherepresentationbecomesfalse
Therighttorescindtotheinsureriswaivedbytheacceptanceofpremiumpaymentsdespiteknowledgeofthegroundforrescission
RESCISSIONISUNAVAILABLE1. whenthereisestoppel
a. insureracceptedthepremiumpaymentsdespiteknowledgeofthegroundforrescission2. whenthereiswaiver3. actionhasalreadycommencedonthecontract4. incontestableclauseapplies
WARRANTIES
anaffirmationoffactorpromisethatformspartofthetermsandconditionsofthepolicy a warranty is a statement or promise set forth in the policy or by reference incorporated therein, the untruth or
nonfulfillmentrendersthepolicyvoidablebytheinsurer
section68
awarrantymayrelatetothepartthepresentandfutureo safety-valvebywhichinsurercanensurethataninsuranceisactuallyorthecharacterattributedtoit.
KINDSOFWARRANTIES
1. expressa. statedinthepolicyorattachments
2. implieda. naturalelementofthecontractimposedbylawandarepartofthepolicywithoutneedthatitbestated
i. ex.Impliedwarrantyofseaworthinessinmarineinsurance3. affirmativewarranty
a. existatthetimetheyaremadeb. undertakingthatsomepositiveallegationoffactistrue
4. promissorywarranty
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a. stipulatesthatcertainthingsaretobedoneoraspecifiedconditionshallexistduringthecurrencyoflifeoftheinsurancecontract
b. onepartyisboundbytheexecutorstipulation
RULESONPROMISSORYWARRANTIES
Section72
astatementinapolicywhichimpartsthatitisintendedtodoornottodoathingwhichmateriallyaffectstherisk,isawarrantywhatsuchactoromissionshalltakeplace.
Section73
whenbeforethetimearrivesfortheperformanceofawarrantyrelatingtothefuturealossinsuredagainsthappens,orperformancebecomesunlawfulattheplaceofthecontractorimpossible,theomissiontofulfillthewarrantydoesnot
avoidthepolicy.
promissorywarrantymayeitherbeo positiveacto omission
FORMALITIESOFEXPRESSWARRANTY
Section69
noparticularformofwordsisnecessarytocreateawarranty
section70
everyexpresswarrantymadeatorbeforetheexecutionofapolicy,mustbecontainedinthepolicyitself,orinanotherinstrumentsignedbytheinsuredandreferredtointhepolicyasmakingpartofit
2waysofmakinganexpresswarranty
1. containedinthepolicyitself2. expressedinanotherinstrumentprovidedthattheseparateinstrumentissignedbytheinsuredandreferredtointhe
policy
EXAMPLESOFEXPRESSWARRANTY
Section71
statementinapolicyofamatterrelatingtothepersonofthinginsuredortotheriskasafactisanexpresswarranty. Example: Astatementinthelifeinsurancepolicythattheinsuredhasnotbeeninvolvedinanyvehicularaccidentforthepast10
yearsorhasneverbeenchargedwithanycrimeinvolvingmoralturpitudeisanexpresswarranty. Astatementthatthereisnogasolineintheinsuredbuildingisawarrantybecauseitrelatestotheriskinsuredagainst
BREACHOFWARRANTYBYTHEINSURED
- rendersthecontractdefeasibleo inordertoavoidthepolicytheinsurermustprovesuchbreachconsistentwiththerulethatanyviolationmust
beestablishedbythepersonwhoismakingsuchallegation
- theinsurermaywaivehisrighttoavoidthepolicyincaseofbreachbytheinsured.o Expressorimplied
REMEDY
Apartymayrescindthepolicyifthereisabreachofwarrantyinthepartoftheotherparty.
Section74
violationofamaterialwarrantyentitlestheothertorescindSection75
apolicymaydeclarethataviolationofspecifiedprovisionsthereofshallavoidit,otherwisethebreachofanimmaterialprovisiondoesnotavoidthepolicy
allowedtorescindoravoidonlyinmaterialbreach breachofanimmaterialprovisiondoesnotavoidthepolicy
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DISTINCTIONS
WARRANTY REPRESENTATION
Partofthecontract Notpartofthecontract
(butacollateralinducement)
Writtenonthepolicyoritsarider Oralorinwriting
Presumedtobematerial Mustbeestablishedthatitismaterial
TheremustbeStrictcompliance Itmustbesubstantiallytrue.
riskcanalsobelimitedorcontrolledusing
o exceptionso exclusionsando conditions
CONDITIONS
- collateralterms- natureofcollateralpromisesorstipulations1. promisesorobligationsregardingclaimsprocedurethatarenotfundamentaltothevalidityofthecontract2. conditionsconferringmorerightstotheinsurerenlargingorrepeatingtheminimumrightsprovidedbylaw.
Termsandconditionsconstitutethemeasureoftheinsurersliabilityandcompliancetherewithisaconditionprecedenttotheinsuredsrighttorecoveryfromtheinsurer
Theburdeninontheinsurertoprovethattheinsuredbreachedtheconditionthatisimposedsincebreachofconditionisa
defensethatwillrelievehiminhisliabilityunderthepolicytheonusofproofisontheinsurerwhowillinvokesuchdefense
EXCEPTIONS,EXCLUSIONOREXEMPTION
Thepolicyshouldexpresssuchlimitationinclearandunmistakablelanguage.
- iftheinsurerwantstoincludetheriskofarrestoccasionedbyordinaryjudicialprocess,itmustbeexpresslysoprovideinthepolicywithoutambiguity.
o If thetermsaredoubtfulorobscurethe samemust beofnecessity be interpreted or resolved againsttheinsuredwhocausestheambiguity.
Exceptionstothegeneralcoverageareconstruedmoststronglyagainstthecompany.- 2interpretations-theonemostfavorabletotheinsuredisadopted.- Theobligationtoprovethatthelossiscoveredbytheexceptionrestsupontheinsurer.- Personal accident insurance policy specifically enumerated10where there is no liability attaches to the insurance
companyforanyinjury,disabilityorlosso Theprinciple of expressiounius est exclusionalterius themention of one thing implies the exclusion of
anotherthing
Contractsoinsuranceshouldbeconstruedliberallyinfavoroftheinsuredandstrictlyagainsttheinsurer.Ambiguityinthewords
oftheinsurancecontractshouldbeinterpretedinfavorofitsbeneficiary
INCONTESTABLECLAUSE
Section48
wheneverarighttorescindacontractofinsuranceisgiventotheinsurer suchrightmustbeexercisedprevioustothecommencementofanactiononthecontract.
o Afterapolicyoflifeinsurancemadepayableon thedeathoftheinsuredshallhavebeenin forceduringthelifetimeoftheinsuredforaperiodof2yearsfromthedateofitsissueorofitslastreinstatement.
oThe insurer cannot prove that the policy is void ab initio or rescindable by reason of the fraudulentconcealmentormisrepresentationoftheinsuredorhisagent
MANDATORYINCONTESTABLECLAUSE
Lifeorendowmentpolicy:
incontestableafteritshallhavebeeninforceduringthelifetimeiftheinsuredforaperiodof2yearsfromitsdateofissueasshowninthepolicy
o exceptfornon-paymentofpremiumando exceptforviolationoftheconditionsofthepolicyrelatingtomilitaryornavalserviceintimeofwar
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grouplifeinsurance
validityofthepolicyshallnotbecontestedo exceptfornonpaymentofpremiumsafterithasbeeninforcefor2yearsfromitsdateofissue,
industriallifeinsurancepolicy
incontestableafterithasbeeninforceduringthelifetimeoftheinsuredforaspecifiedperiodnormorethan2yearsfromitsdateofissue
o exceptnon-paymentofpremiumo exceptforviolationofconditionsofpolicyrelationtonavalormilitaryserviceo exceptprovisionsrelatingtobenefitsintheeventofdisability
RATIONALE
Incontestable clause is upheld in lawnot for thepurposeof upholding fraud but for thepurposeof shutting offharvesting
defenses.
Theclauseisdesignedtoinducetheinsurertoinvestigateandactwithreasonablepromptnessifitwishestoavoidthepolicy.
- itisunfairfortheinsurertowaitforthedeathoftheinsuredwhoobviouslycannolongerdefendhisclaim.
after2yearsthedefensesofconcealmentormisrepresentation,nomatterhowpatentorwellfoundednolongerlieo congress felt thiswasa sufficientanswerto thevarious tacticsemployedby insurance companiesto avoid
liability
theinsureddiesbeforetheexpirationofthe2yearperiod,thebeneficiariescontendedthattheinsurancecompanynolongerhad
therighttorescindthecontractofinsuranceasrescissionmustallegedlydoneduringthelifetimeoftheinsuredwithin2yearsandpriortocommencementofaction.
- theSCrejectedthecontentionbecausepetitionersinterpretationwouldgiverisetotheincongruoussituationwherethebeneficiariesofaninsuredwhodiesaftertakingoutandpayingforalifeinsurancepolicywouldbeallowedtocollecton
thepolicyeveniftheinsuredfraudulentlyconcealedmaterialfacts
theincontestableclausecannotbeinvokedintheffcases:
1. non-paymentofpremiums2. violationoftheconditionofthepolicyrelatingtomilitaryornavalserviceintimesofwar3. propertyinsurance
WARLIMITATIONRIDERORWARCLAUSE
- notintheinsurancecodeo but themomentthe partiesinclude awarclause in thepolicy, thebeneficiaries canno longerinvokethe
incontestableclauseifthewarclauseisviolated.
- Thewarriderclauselimitstheliabilityoftheinsurerintheeventthattheinsuredlooseshislineasaresultofwar.
DEFENSESOFINSUREDAGAISNTREVOCATION
1. guaranteedinsurabilityclausea. statementthattendtoshowthattheinsuredisuninsurablecannotbeusedagainsthimintheffcase:
i. insurancehasbeeninforcepriortothecontestforaperiodof2yearsduringthepersonslifetimeii. ifthestatementisnotinwritingandornotsignedbytheinsured
2. failuretoinvokebeforecommencementoftheaction3. waiver4. estoppel
TIMELINESSOFTHERESCISSION
Previoustothecommencementofanactiononthecontract
WAIVERIntentionalrelinquishmentofaknownright
- express- implied
.therighttoinformationofmaterialfactsmaybewaivedwitherbythetermsoftheinsuranceorneglecttomakeinquiry.
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ESTOPPEL
Admissionorrepresentationisrenderedconclusiveuponthepersonmakingitandcannotbedeniedordisprovedastheperson
relyingthereon.
- estoppelinpais- estoppelbydeed
noelementofconsent
one can no longer rescind the policy if he accepted the payment of premium although he is already awareof theexistenceofthegroundtorescindthesaidpolicy.
DeLeon:TITLE4CONCEALMENT
Section26
neglecttocommunicatethatwhichapartyknowsandoughttocommunicate calledconcealment
4primaryconcernsofparties
1. correctestimationoftheriska. insurertodecidewhetherheiswillingtoassume
2. precisedelimitationoftheriska. determinestheextentofcontingentduty
3. controloftheriskafteritisassumeda. insurertoguardagainsttheincreaseoftheriskinchangeofconditions
4. determiningwhetheralossoccurredandamountoftheloss
devisesforascertainingandcontrollingrisk
1. concealment2. representation3. warranty4. condition5. exceptions
concealmentandrepresentationtosecurethesameinformationwiththeapplicant
warrantiesandconditions-dealingwithconditionsexistingattheinceptionofthecontract
exceptions-forthepurposeifmakingmoredefiniteandcertainthegeneralwordsusedtodescribetherisktheinsurerundertook
tobear.
- makingmoredefinitethecoverageindicatedbythegeneraldescriptionoftheriskbyexcludingcertainspecifiedrisks.
Generaldescriptionoftheriskconcernedhas2parts:
1. specificproperty2. specificationofsuchperilstowhichthatpropertyinterestwouldbeexposed
REQUISITESOFCONCEALMENT
1. partyknowsthefactwhichheneglectstocommunicate2. suchpartyconcealingisdutyboundtodisclosesuchfact3. partyconcealingmakesnowarranty4. theotherpartydoesnothavethemeansofascertainingthefactconcealed
warrantyismadeofthefactconcealed,thenon-disclosureofsuchfactisnotconcealmentbutconstitutesaviolationofthewarranty
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section27
intentionalorunintentionalconcealmententitlestheinjuredpartytorescindthecontractofinsurance
EFFECTOFCONCEALMENT
makesthecontractvoidableattheinsurersoptiono contractsareuberrimaefidaecontractofutmostgoodfaith
notonlythematerialfactswhichtheapplicantknowsbutextendstothosewhichheoughttoknowbeingnecessaryfortheinsurertoevaluatetherisk,eithertochargeahigherpremiumorrefuseto
issueapolicyaltogether.
Itisnodefensetopleadmistakeorforgetfulness
PROOFOFFRAUDINCONCEALMENT
- theinsurerneednotprovefraudinordertorescindacontractonthegroundofconcealment.
Existence of fraud isnotrequired0 theduty of communication is independent of theintentionand isviolated by thefact of
concealment
thelegaleffectofconcealmentwhetherintentionalorunintentionalisthesameo itentitlestheinsurertorescindthecontractofinsuranceo concealmentdefinedasnegligencetocommunicatethatwhichapartyknowsandoughttocommunicate.
REASON
- impossiblefortheinsurertoprotectitselfanditshonestpolicyholdersagainstfraudulentandimproperclaimsSECTION27 SECTION29
Aconcealmentwitherintentionalorunintentionalentitledthe
injuredpartytorescindacontractofinsurance
an intentional and fraudulent omission on the part of one
insured, to communicate information of matters proving or
tendingtoprovethefalsityofawarranty,entitlestheinsurer
torescind.
Basisoftheprovision
misleadsordeceivestheinsurerintoacceptingtheriskoracceptingitattherateofpremiumagreedupon.o Theprincipalquestion
Wasthe insurermisled tordeceived into entering a contract obligationor fixing thepremiumofinsurance by a withholding of material information or facts within the assureds knowledge or
presumedknowledge?
awareoftheailmentbuthonestlybelievedthatitwasnotmaterial o theconcealmentisnotfraudulentorintentional
awareoftheailmento thereisfraudulentconcealmentwheretheailmentwasmaterialtothecontractanddkneworbelievedthatis
wasmaterial
RULESINMARINEINSURANCE
fraudisnotessentialinorderthattheinsuredmaybeguiltyofconcealment. Thepresenceorabsenceofintentisimmaterial
SECTION28
eachpartytoacontractofinsurancemustcommunicatetotheotheringoodfaith,allfactswithinhisknowledge whicharematerialtothecontractandwhichtheotherhasnotthemeansofascertainingandastowhichhemakesno
warranty.
Mattersthatmustbecommunicatedevenintheabsenceofinquiry:
1. materialtothecontract2. theotherhasnomeansofascertainingthefacts3. thepartyhasthedutytocommunicate4. makesnowarranty
thetestis:
iftheapplicantisawareoftheexistenceofsomecircumstanceswhichheknowswouldinfluencetheinsurerinactinguponhisapplication,
goodfaithrequireshimtodisclosethatcircumstances,thoughunasked.
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Effectoffailureofinsurertoverify
- theinsurancecompanyhastherighttorelyonthestatementsoftheinsuredastomaterialfactssuchastohisprevioussickness
- theeffectofmaterialconcealmentcannotbeavoidedbytheallegationthattheinsurercouldhaveknownanddiscoveredtheillnessordiseasewhichtheinsuredhadconcealed.
Section29concealmentmustbeintentionalandfarudulent
intentionaloffraudulentomissiononthepartoftheinsured,tocommunicateinformationofmattersprovingortendingtoprovethefalsityofawarranty,entitlestheinsurertorescind.
dapatdawintentionalandfraudulentangconcealmentparamaapplyangsection29o kaiifwalasiyakabalogyudnoknowledgethengoodfaithmaybeadefensewhenthereisnointenttodeceive
theinsurer
section31testofmateriality
testofmateriality
- testistheeffectwhichtheknowledgeofthefactinquestionwouldhaveonthemakingofthecontract.- Knowledgewouldinfluencethepartiesinmakingthecontract.
Fromthestandpointoftheinsurer
- probableandreasonableinfluenceupontheinsurerinassessingtheriskinvolvedandinmakingoromittingfurtherinquiries.
- Itissufficientthatthenon-disclosuremisledtheinsurerinforminghisestimatesoftherisksoftheproposedinsurancepolicyorinmakinginquiries.
Thepolicyisavoidedalthoughthecauseofdeathbetotallyunconnectedwiththematerialfactconcealedormisrepresented.
- itissufficientthathisnon-disclosuremisledtheinsurerinforminghisestimatesoftherisksoftheproposedinsurancepolicyorinmakinginquiries.
Whenconcealmentisregardedasintentional
- thenatureofthefactsnotconveyedtotheinsurermaybesuchthatthefailureoftheinsuredtocommunicatemusthavebeenintentionalratherthaninadvertent
whenfactsconcealednotmaterial
- normalrasiyasaiyangecgnyagiasksiyaognakapaecgnabasiyaingunsiyawalasiyamagpatest.(failureoftheinsuredtorevealthefactdidnotamounttoconcealmentaswouldvitiatethecontract)
o kainegativemanangangtestitwouldnotaffectthedecisionoftheinsured
timewheninformationacquired
- theconcealmentmusttakeplaceatthetimethecontractisentersintoinorderthatthepolicymaybeavoidedandnotafterwards.
- Thedutyofdisclosureendswiththecompletionandeffectivityofthecontract
Itshouldbemadebeforethecontractbecomeseffective.
Section32.no concealment ingeneral usagesof trade and boundto know allgeneral causeswhich areopento his
inquiry
section33therighttoinformationofmaterialfactsmaybewaived.(termsoftheinsuranceorneglectorimpliedly)
- waiverisatypeofestoppel-
Notes:
theinsurerhadeverymeanstoascertainthetruthofthematterallegedintheapplication.Thefailureoftheinsurerto
makeinquiryconstitutedawaiverofitsrightstoinformationofthefacts
Intheabsenceofevidencethattheinsuredhadsufficientmedicalknowledgeastoenablehimtodistinguishbetween
pepticulcerand a tumorhis statement that said tumorwasassociated with peptic ulcerof the stomach should be
construedasanexpressionmadeingoodfaithofhisbeliefastothenatureofhisailmentandoperation.
Suchstatementmustbepresumedtohavebeenmadebyhimwithoutknowledgeofitsincorrectnessandwithoutany
deliberateintentonhisparttomisleadtheinsurer.
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Theinformationcommunicatedwasimperfectthe insurershouldhavemade furtherinquiriesaboutthe ailmentand
operationoftheinsured.
Imperfectly answered and the insurer issuesa policywithoutany further inquiry, itwaives the imperfection ofthe
answerandrenderstheomissiontoanswermorefullyimmaterial
Section34-informationonthenatureandamountneednotbecommunicatedunlessananswertoaninquiry.
disclosureofnatureandextentofinterestofinsured.
o Specifytheinterestifheisnottheowner
amortgageemustdisclosetheinterestevenifnoinquiryismadebytheinsurero sothattheinsurermaydeterminetheextentoftheinsuredsinsurableinterest
BUTTHEREISNONEEDTODISCLOSETHEINTERESTINTHEPROPERTYINSUREDIFITISABSOLUTE.
Section35neitherpartyisboundtocommunicate,evenuponinquiryinformationofhisownjudgment
thereisnodutytodisclosemereopinion,speculation,intentionorexpectations eveniftheinsuredisasked.
WHENTHEREISNOCONCEALMENT(nodutytomakecommunication)
Section30
1. knownbytheotherparty2. exerciseofordinarycare,theotherpartyoughttoknowandthattheotherpartyhasnoreasontosupposehim
ignorant
3. waivescommunication4. proveortendtoprovetheexistenceofariskexcludedbyawarranty5. riskexceptedfromthepolicy
Section32
6. eachpartytothecontractisboundtoknowallthegeneralcauseswhichareopentohisinquirytoeachothera. whichmayaffectthepoliticalormaterialperilscontemplated
Section33
7. therighttoinformationofmaterialfactswaivedbythetermsoftheinsuranceorbyneglecttomakeinquiryastosuchfacts,impliedinotherfactsofwhichinformationiscommunicated
a. matterisincludedinthegeneralusageoftradeSection34
8. informationofthenatureoramountoftheinsuredproperty,isnotdisclosedunlessinanswertoaninquiry
Section35
9. informationofthepartysownjudgmentuponthemattersinquestion
DELEON;TITLE5REPRESENTATION
Section36representationmaybeoralorwritten
statementmadebytheinsuredatthetimeoforpriortotheissuanceofthepolicy.o Past,futureorpresent
Toinducetheinsurertoenterintotheinsurancecontract.
Misrepresentationininsuranceisastatement
1. somethingwhichisuntrue2. which the insured stated with knowledge that it is untrue and with an intent to deceive or which he states
positivelyastruewithoutknowingittobetrueandwhichhasa tendencytomislead
3. wheresuchfactiseithercaseismaterialtotherisk
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misrepresentationbytheinsuredrenderstheinsurancecontractvoidableattheoptionoftheinsurer(eventhoughinnocently
madeandwithoutwrongfulintent)
misrepresentationistheactiveformofconcealment.
Materialrepresentationsreliedonbytheinsurerwillavoidthecontract,(whetherinnocentorfraudulent)
Representationsintendedascollateralinducements-madetoinfluencetheinsurertoaccepttherisk
Section37representationmaybemadeatthetimeoforbefore,issuanceofthepolicy.
- precedetheexecutionofthecontract- atthetimeorbefore
section38interpretedinfavoroftheinsured(onlysubstantiallytrue)
warrantiesmustbetrueotherwisethecontractwillfail.
Section39Representationastofutureisdeemedapromiseunlessitismerelyastatementofbelieforexpectation
Kindofrepresentation1. oral2. written3. affirmativea. existenceornon-existenceofafactwhenthecontractbegins.4. Promissory
a. Promisetobefulfilledafterthecontracthascomeintoexistence
Promissoryrepresentationusedin2senses:
1. oralpromisenotincorporatedinthepolicya. fraudulentintentwilldefeattheinsuranceb. perononperformancecannotbeshownbytheinsurerindefensetoanactiononthepolicy
2. insertedinthepolicybutnotmadeawarrantya. promissoryrepresentation
i. merelyanexecutortermofcontract
promissoryrepresentationisthereforesubstantiallyaconditionorwarranty.
Effectofpolicyofexpressionsofopinionorexpectation
1. goodfaithorbadfaithoftheinsured.a. Willnotavoidapolicyofinsuranceifthereisnoactualfraudininducingtheacceptanceoftherisk.b. Althoughthestatementismaterialtotherisk,theinsurerisnotjustifiedinrelyinguponsuchstatementbutis
obligedtomakefurtherinquiry
2. Liabilityoftheinsurera. Falseonlywhentheintention,opinionorbeliefasstatedisnothonestlyentertained.b. Toavoidliabilitytheinsurermustprovematerialityoftheinsuredsopinionandthelattersintenttodeceive
i. Ifangrepresentationisoneoffacttheinsurerneedtoproveisitsfalsityandmateriality.Theintenttodeceiveispresumed.
Whenrepresentationisdeemedamereexpressionofopinion.
- anoralrepresentationastoafutureeventorcondition,overwhichtheinsuredhasnocontrolo propertyorlifeinsured
- deemedamereexpressionofopinionwhichwillavoidacontractonlywhenmadeinbadfaith.Section40representationcannotqualifyanexpressprovisionofacontractofinsurancebutmayqualifyasan implied
warranty
representationisnotpartofthecontractbutonlyacollateralinducementtoito mayqualifyanimpliedwarranty
Section41representationmaybealteredorwithdrawnbeforetheinsuranceiseffected
butnotafter
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Section42presumedtothedateonwhichthecontractgoesineffect
statements promissory of conditions to exist subsequent to the completion of the contract may be conditions orwarranties
o cannotberepresentation representationthatareuntruemaybewithdrawnpriortothecompletionofthecontractbutnotafterwards nofalserepresentationifitistrueatthetimethecontracttakeseffectalthoughfalseatthetimeitwasmade
o thereisfalserepresentationifitistrueatthetimeitwasmadebutfalseatthetimethecontracttakeseffect
section 43person insuredhas nopersonalknowledge ofthe fact,andbelieves tobe true,and inthe informationof
others,theinsuredisnotresponsible..
- unlessinformationcamefromtheagentoftheinsured
effectwheninformationobtainedfromthirdperson
- insuredisnotresponsibleeffectwhereinformationwasobtainedfromagentofinsured/insurer
- agentoftheinsuredo exerciseofduediligencetohavemadesuchcommunicationbeforethemakingofthecontracto iftheagentfailedtocommunicatethetruthtotheinsured.o theinsuredwillbeliableforthetruth
- agentoftheinsurero sameprincipleappliestotheinsurer
section44representationisdeemedfalsewhenthefactsfailtocorrespondwithitsassertionsorstipulations
representationsarenotrequiredtobeliterallytrue;theyneedonlybesubstantiallytrue.o representationpartlyfailsbutistrueoriscompliedwithsofarasisessentialtotheriskinsuredagainst,the
policyremainsinforce
inmarineinsuranceo substantialtruthofarepresentationisnotsufficiento theinsuredisrequiredtostatetheexactandwholetruthinrelationtoallmattersthatherepresentsorupon
inquirydisclosesorassumestodisclose
itshallbeconstruedwhenpossible,asanaffirmativerepresentationofapresentfactinordertosavethepolicyfromavoidance.
Section45ifrepresentationisfalseinamaterialpointtheinjuredpartyisentitledtorescindthecontractfromthetime
whentherepresentationbecomesfalse. the rightto rescind iswaivedby the acceptanceofpremiumpaymentsdespiteknowledge ofthegroundfor
rescission
fraudorintenttomisrepresentfactsisnotessentialtoentitletheinjuredpartytorescindacontractofinsuranceinthegroundoffalserepresentation
deemedfalsewhenitfailstocorrespondtothefactsinamaterialpoint.
Effectofcollusionorfraudofagentoftheinsurer
collusionwiththeinsuredo vitiatethepolicyeventhoughtheagentisactingwithintheapparentscopeofhisauthorityo whenthereiscollusion,theagentceasestorepresenthisprincipalandrepresentshimself;sotheinsurerisnot
estoppedfromavoidingthepolicy
principalofagento insuredmerelysignedtheapplicationformandmadetheagenttheinsurerfillthesameforhim,theinsured
madetheagentoftheinsurerhisownagent
o when the insurer required itsmedicalexaminer toput the questions and fill out the answers inhis ownhandwriting,thewriteroftheapplicationisnottheagentoftheinsured.
Theinsurerisliablewhenitsagentwritesafalseanswerintotheapplicationwithouttheknowledgeoftheinsured.
Section46materialityofarepresentationsamerulesasthematerialityofaconcealment
determinednotbytheevento butbythereasonableandprobableinfluenceoffactsuponthepartytowhomtherepresentationismade.
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Whodeterminesthematerialityoftherepresentation?o Ajudicialquestiono Thedeterminationcannotbeleftsolelytothecompany.o Themattermisrepresentedmust beof that characterwhich thecourtcan saywouldreasonably affect the
insurersjudgment.
CONCEALMENT REPRESENTATION
Insuredwithholdsinformationofmaterialfact Makes erroneous statements of facts with the intent of
inducingtheinsurertoenterintotheinsurancecontract
Testofmaterialfact(reasonableandprobableinfluenceof
facts)
Test of material fact (reasonable and probable influence of
facts)
Givestheinsurerarighttorescindthecontract Givestheinsurerarighttorescindthecontract
Whetherintentionalornottheinjuredpartyisentitledto
rescind
Whether intentional or not the injured party is entitled to
rescind
Rulesalsoapplytotheinsurer Rulesalsoapplytotheinsurer
Section47modificationofacontractofinsuranceastoitsoriginalformation
wheretheinsureris inducedtomodifytheinsurancepolicyastotherateofpremiumby amisrepresentationonthepartoftheinsuredinamaterialpoint,theinsurerisentitledtorescindsuchmodification.
Section48therighttorescindisgiventotheinsurer
suchrightmustbeexercisedprevioustothecommencementofanactiononthecontracto policyoflifeinsurancemadepayableonthedeathoftheinsuredshallhavebeeninforceduringthe
lifetimeoftheinsuredforaperiodof2yearsfromthedateofitsissueorofitslastreinstatement,
the insurer cannot prove the policy to be void ab initio or rescindable by reason ofconcealmentormisrepresentation
- generalruleo acontractofinsurancemayberescindedonthegroundofconcealmentorfalserepresentationorbreachof
warranty
o thereisnotimelimitininterposingadefense- innon-lifepolicy
o therightmustbeexercisedpriortothecommencementofanactiononthecontracto theinsurerisnotlongerentitletorescindacontractofinsuranceaftertheinsuredhasfiledanactiontocollect
theamountoftheinsurance.
However,whereanyofthematerialrepresentationisfalse,theinsurerstenderofthepremiumsandnoticethatthepolicyiscancelledbeforethecommencementofthesuitthereon,operatestorescinda
contractofinsurance
- Inlifepolicyo Thedefensesareavailableonlyduringthefirsttwoyearsofalifeinsurancepolicy.
clauseinlifeinsurancepoliciesknownasincontestableclausestipulatingthatthepolicyshallbeincontestableafterastatedperiodareingeneraluse.
Incontestabilitymeansthataftertherequisitesareshowntoexist,theinsurershallbeestoppedfromcontestingthepolicyorsettingupanydefense,
o Exceptonthegroundofpublicpolicy
Theoryandobjectoftheincontestableclause
- astotheinsurero insurer shouldhave a reasonableopportunity to investigate the statementswhich the applicantmakes in
procuringhispolicyandthatafteradefiniteperiodtheinsurershouldnotbepermittedtoquestionthevalidity
ofthepolicy
- astotheinsured
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o theassurancethathisbeneficiarieswouldreceivepaymentwithoutquestionastothevalidityofthepolicyortheexistenceofthecoverageoncetheperiodofcontestabilitypasses.
o Toprotect thepolicyholderand thebeneficiary from a lawsuitcontesting thevalidityof thepolicy after aconsiderabletimehaspassedandevidenceofthefactssurroundingthepurchasemaybeunavailable
Requisitesofincontestability
1. lifeinsurancepolicy2. payableonthedeathoftheinsured3. ithasbeeninforceduringthelifetimeoftheinsuredforatleast2yearsfromthedateofissueorlastreinstatement.
a. The2yearsmaybeshortenedbutitcannotbeextendedbystipulationb. Duringthelifetimesimplymeansthatthepolicyisnolongerconsideredinforceaftertheinsuredhasdied
Effectwhenthepolicybecomesincontestable(theinsurermaynotrefusetopaybyclaiming)
1. thepolicyisvoidadinitio2. rescindablebyreasonofthefraudulentconcealment,nomatterhowpatentorwell-founded3. byreasonoffraudulentmisrepresentationoftheinsuredorhisagent
apolicyofinsurance,afterithaslapsedorbecomeforfeited,asfornonpaymentorpremiumsorbreachofawarrantyorcondition,mayberevivedorreinstatedpursuanttoaprovisioncontainedinthepolicyortheagreementoftheparties.
Theincontestabilityofapolicyunderthelawisnotabsolute
- theinsurermaystillcontestthepolicyonlyontheffgroundso lackofinsurableinteresto causeofdeathoftheinsuredisanexceptedrisko premiumshavenotbeenpaido conditionsofthepolicyrelatingtomilitaryornavalservicehavebeenviolatedo thefraudisofaparticularlyavicioustype
aschemetomurdertheinsured insuredsubstitutesanotherpersonforthemedicalexamination thebeneficiaryfeloniouslykillstheinsured.
o Thebeneficiaryfailedtofurnishproofofdeathortocomplywithanyconditionimposedinthepolicyo Theactionwasbroughtwithinthetimespecified
DELEON;TITLE6THEPOLICY
Section49thewritteninstrumentofthecontractofinsurancecalledapolicyofinsurance
Section50thepolicyshallbeprintedfromwhichmaycontainblankspaces
- theblankspacesshallbefillednecessarytocompletethecontract- anyrider,clause,warrantyor endorsementpurporting tobe partofthe contractof insuranceandwhichis
pastedorattachedtosaidpolicyisnotbindingontheinsured.
o Unlessthedescriptive titleor name oftherider isalsomentioned andwritten ontheblankspacesprovidedinthepolicy
- Unlessapplied for by the insured orowner, anyrider, clauseor warrantyorendorsement issuedaftertheoriginalpolicyshallbecountersignedbytheinsuredorowner,whichcountersignedbytheinsuredorowner,
whichcountersignatureshallbetakenashisagreementtothecontentsoftherider
- Groupinsuranceandgroupannuitypolicieso Maybetypewrittenandneednotbeinaprintedform
Policy-a writtendocument embodying the terms and stipulations of thecontract of insurance between theinsured and the
insurer.
Thepolicyissignedonlybytheinsurerorhisdulyauthorized
neednotbesignedbytheinsuredo excepto whereexpresswarrantiesarecontainedinaseparateinstrumentformingpartofthepolicy
thenthepolicyshouldbesignedbytheinsured thestandardpracticeisthattheprospectiveinsuredwillfilloutandsignanapplicationpreparedbytheinsurer
thepolicycontrolsthetermsofinsurancecontract
- thetermsconstitutethemeasureoftheinsurersliability
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- tocreateanenforceableagreement,alltherequisitesnecessaryinorderthattherewillbeavalidcontractofinsurancemustbepresented
- insurancecompanieshavethesamerightsasindividualstolimittheirliabilityandtoimposewhateverconditionstheydeembestupontheirobligationsnotinconsistentwithpublicpolicy
policyacontractofadhesion
adhesioncontractisessentiallyadescriptionofthemannerbywhichthecontractisformedo onepartyhassuperiorbargainingpowerimposesitschoiceoftermsontheotherparty.o Althoughtheinsuredcanchoosefromavarietyofavailablecoverages,hecannotnegotiatethesubstanceof
thecontractwiththeinsurer.
Ambiguityresolvedagainstinsurer,liberallyinfavoroftheinsured.o Appliestosuretyshipagreements
Thecourtswillonlyruleoutblindadherencewherethefactsandcircumstanceswillshowthattheyarebasicallyone-sided.
o The fine print rule or the contract of adhesion ruled does not apply where the petitioner is an acutebusinessmanofexperiencewhoispresumedtohaveassentedtotheassailedprovisionsofthepolicywithfull
knowledgecannotclaimthathedidnotknowitsterms
ifthetermsof thecontractareclearandunambiguous,there isnoroomforconstructionandsuchtermcannotbeenlargedordiminishedbyjudicialconstruction
Policyofinsurance Contractofinsurance
Formal written instrument evidencing the contract of
insuranceenteredintobetweentheinsuredandinsurer.
itisthelawbetweenthem
Everyinsurancecontractmustbeevidencedbyapolicyandthatpolicymustbeintheformpreviouslyapprovedbytheinsurance
commissioner.
Incaseofconflictbetweenthewrittenandprintedportionsofapolicy,thewrittenpotionprevails.
Perfectionofinsurancecontracts
- assentismanifestedbythemeetingoftheofferandtheacceptanceuponthethingandthecausewhicharetoconstitutethecontract.
o Themeresigningofan applicationforlifeinsurance and thepaymentof thefirst premiumdonotbind theinsurertoissueapolicywherethereisnoevidenceofanycontractbetweenthepartiesthatsuchactsshould
constituteacontractofinsurance
Thecontracttobebindingmustbecomplete,nothingtobecompleted,nothingtobepasseduponordetermined,beforeitshalltakeeffect.o Contract is not perfected where the applicant for life insurance diesbefore the approval, or came to the
knowledgeoftheinsured.o Theacceptanceofthepolicymustbeunconditional,butitneednotbebyformalact.
Thereisnovalidandbindinginsurancecontractunlesspremiumispaid. If premium is previously paid the insurance contract will be binding upon the approval of the
applicationalthoughthepolicyhasnotyetbeenissued.
Inlifeinsurance,abindingsliporbindingreceiptdoesnotinsurebyitself.
Offerandacceptanceofinsurancecontracts
- theapplicantmakestheoffertotheinsurerthroughanapplicationforinsurancewhichisusuallyattachedtopolicyandmadeapartoftheinsurancecontract.
o Propertyorliabilityinsurance.Itistheinsuredwhoofferstotheinsurerwhoacceptstheoffero Lifeandhealthinsurance.
Dependsuponwhethertheinsuredpaysthepremiumatthetimeheappliesforinsurance Doesnotpaythepremium-applicationisconsideredaninvitationtotheinsurertomakean
offer
o Hemustacceptbeforethecontractgoesintoeffect Ifhepayspremiumwithhisapplication,hisapplicationwillbeconsideredanoffer
o iftheapplicationforinsuranceconstitutesanofferbytheinsured,apolicyissuedinaccordancewiththeofferisanacceptanceoftheofferthatperfectthecontract.
Ifthepolicyissueddoesnotconformtotheinsuredsapplication,itisanofferwhichhemayacceptorreject.
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Importanceofdeliveryorpolicy.(2ways)
1. evidenceofthemakingofacontractandofitsterms2. communicationoftheinsurersacceptanceoftheinsuredsoffer
absenceofdeliveryisnothoweveraprerequisitetoavalidcontractofinsurance.
- butdeliverystillhassignificanceasthedecisiveactthatordinarilymarkstheendoftheinsurersopportunitytodeclinecoverage.
Modesofdeliveryofpolicy
1. actual/constructivedeliverya. nocontractisnomeetingofthemindsb. actualvalidtransferisnotaprerequisitetoitsvalidityunlessthepartieshaveagreedinclearlanguage.c. Deliverymaybemadetotheinsuredorhisdulyconstitutedagentorsomepersonforthebenefitoftheinsuredd. Wherenofurtherconditionsaretobefulfilled,apolicyofinsurancemaybeconstructivelydeliveredwhenitis
depositedinthemaildirectedtotheinsuredorhisagent
2. Deliveryprimarilyamaterofintentiona. Whetherornotthepolicywasdeliveredafteritsissuance,dependsontheintentionofthepartieswhichmay
beshownbytheiractsorwords.
b. Iftheapplicationcontainsaprovisionthattheinsuranceshallnotbeeffectiveuntilthedeliveryofthepolicy,deliveryisessentialtotheconsummationofthecontract.
Deliveryoftheinsurersagentasdeliverytoinsured.
2conflictingview1. beneficiarycannotrecover
a. theinsuranceagentisnothisagent2. beneficiarycanrecover
a. thecontractistobedeemedcompletewhenthepolicyhasbeendeliveredtotheinsuranceagenti. insuredcompliedwitheverycondition,actualdeliveryisnotessentialtogivethepolicythebinding
effect
ii. theinsurercansimplyconsiderthecontractperfecteduponactualdeliveryofthepolicytotheagent.
Effectofdeliveryofpolicy
1. wheredeliveryisconditionala. non-performanceoftheconditionprecedentpreventsthecontractfromtakingeffect
i. astipulationthatthepolicyshallnotbecomeoperativeunlesstheapplicantisingoodhealthatthetimeofthedeliveryofthepolicyisvalid,bindingandenforceable.
1. Goodhealthdoesnotmeanperfecthealth2. Wheredeliveryisunconditional
a. Theterms oftheapplication ordinarilyconsummatesthe contract, andthepolicy asdeliveredbecomesthefinalcontractbetweentheparties.
3. Wherepremiumstillunpaidafterunconditionaldelivery.a. Insurercannotbepresumed toextend creditfromthemerefactof unconditionaldeliveryof theinsurance
withouttheprepaymentofthepremium.
b. Theremustbeaclearandexpressacceptancebytheinsuredoftheinsurersoffertoextendcredit.
Riderinacontractofinsurance
Riderisasmallprintedortypedstipulationcontainedonaslipofpapertothepolicyandforminganintegralpartofthepolicy.
usuallyattachedtothepolicybecausetheyconstituteadditionalstipulationsbetweentheparties.o Sameeffectasifactuallyembodiedinthepolicy
Ridersbecomenecessarytoaddanewprovisiontoapolicy,ortomodifyorwaiveanexistingprovision.Savesthetroubleandexpenseofmakinganentirelynewcontract
Conflict sariderandprintedstipulations inthepolicy, theriderprevails,as beinga moredeliberateexpressionof theagreement.
o Theriderbecomesapartofthepolicyandsupersedesanypartofthepolicyinconflict
Attachedpapersininsurancepolicy
Generalrule- arideror otherpaperbecomespart ofa contractofpolicyofinsuranceif properlyand sufficiently attached or
referredtothereininamannerastoleavenodoubtastotheintentionoftheparties
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Except
section226thatnoridershallbeattached,printedorstampeduponapolicyofinsuranceunlesstheformofsuchriderhasbeenapprovedbytheinsurancecommissioner
riderisnotbindingon theinsuredunlessthedescriptivetitleornameoftheriderisalsomentionedandwrittenintheblank
spacesprovidedinthepolicy
aclauseisanagreementbetweentheinsurerandtheinsuredincertainmatterrelatingtotheliabilityoftheinsurerincaseof
loss.
Anendorsementisanyprovisionaddedtoaninsurancecontractalteringitsscopeorapplication.
exampleo extendingtheperilcoveredo natureofapermitsuchasoneauthorizingtheremovaloftheinsuredpropertyandprovidingforcoveragein
anotherlocation
merelytypewrittenadditionstothecontractchangingtheamount,rateorterm. Errorsmaybecorrectedinthesamemanner
Iftheendorsementisattachedtothepolicyatthetimeofitsissue,itisnotanendorsement,strictlyspeaking.
Generalrule
whereariderisphysicallyattachedtoapolicyofinsurancecontemporaneouslywithitsexecutionanddeliveredtotheinsured
o evenwithoutsignatureoftheinsurerortheinsuredwillnotpreventitsinclusionandconstructionasapartoftheinsurancecontract
Effectoffailureofinsuredtoreadpolicy
Majorityrule
insured person to accept policies without reading is judicially recognized. It is not negligence per se because theinsuredsacceptanceandretentionofthepolicyunreadisnotmuchlachesaswilldefeathisrightofreformation.
TheyarecontractsofadhesionandnotofbargainingMinorityrule
onewhoacceptsa contractual instrumentis conclusivelypresumed,in theabsenceof fraudormistake toknowandassenttoitscontents
insuredhasthedutytoreadhispolicyandisboundbyhiscontractaswrittenwhetherhereadsitornot.o Exceptiontotheminorityrule Wheretheinsuredcouldnothavediscoveredtheerroneousstatementbysuchreading
Containingthefalsestatementwasnotattachedtothepolicyorwherethecopyattachedwasillegible Theinsuredcannotbechargedwithanydutytoreadtheapplication.
Inducedbyfraudoftheagentoftheinsurernottoreadthepolicy IftheinsuredisilliterateorunabletoreadEnglish Contractsarelongandcomplicated,difficulttounderstandevenifread
Insurersdutytoexplainthepolicy
Ifthetermsareclear,theinsurerhasnoaffirmativedutytoexplainthepolicyoritsexclusionstotheinsured.
Thedoctrineofreasonable expectationscanoperateto imposede factoadutyonthe insurertoexplain thepolicyscoveragetotheinsured.
Optionsavailabletotheinsured Informationavailabletoinsured Informationexpectedbyinsuredfrominsurersagent Contractualrightsofinsuredafterdenialofcoverage
Groupinsurance
isthecoverageof anumberofindividualsbymeansof asingleorblanketpolicy,therebyeffectingeconomieswhichfrequentlyenabletheinsurertosellitsservicesatlowerpremiumratesthanareordinarilyobtainableforthesametype
ofinsuranceprotectiononlifepoliciessoldtoindividuals.
Formandnature
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o Essentiallyasingleinsurancecontractthatprovidescoverageformanyindividuals Groupinsuranceaffects4parties
o Insurero Employero Insurero Beneficiary
Group insurance is contributory, eachmember pays all or some part of the premium and non-contributory if therepresentativepaysallofthepremiums.
o Theemployer,asrepresentativeofgrouporadministratoroftheinsuranceprogram,actsasafunctionaryinthe collection and payment of premiums and in performing related duties such as the disbursement of
insurancepaymentoftheemployees
When groupinsuranceis effected,a groupor masterpolicy iscustomarily issuedby theinsurer tothe employeroranalogouspolicyholderandcertificatesofparticipationareissuedtotheindividualemployeesorparticipants.
o Theindividualcertificatebeingnopartofsuchcontractbutonlyonaninstrumentrecitingtheemployeesrighttoprotectionunderthetermsofthegrouppolicy.
Boththemasterpolicyandthecertificatearetobeconsideredtogetheraspartofthesamecontract. Employeractasagentoftheinsurer Employeesarerealpartiesininterest
o Theprimaryaimisprotectionforhisemployeesandtheirfamiliesatthelowestpossiblecost,andinsodoing,theemployercreatesgoodwillwithhisemployees,enabletheemployeestocarryalargeamountofinsurance
thentheycouldotherwise,andhelpstoattractandholdapermanentclassofemployees.
Section51apolicyofinsurancemustspecify(mustcontain)
a. partiesbetweenwhomthecontractismadeb. amounttobeinsuredexceptopenorrunningpoliciesc. thepremium,astatementofthebasisandratesuponwhichthefinalpremiumistobedetermined.d. Thepropertyoflifeinsurede. Theinterestoftheinsuredinpropertyinsured(ifheisnottheabsoluteowner)f. Theriskinsuredagainstg. Theperiodduringwhichtheinsuranceistocontinue
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Contentsofapolicy
1. nameofparties
nameincorrectlyspelledoutisimmaterial
2. amountofinsurance
a. in order to easily exactly determine theamountofindemnitytobepaidtheinsuredincase of lossor damage especially if itis
onlypartialandnottotalb. the amount of insurance is the maximumlimit on the insurers liability for loss or
damagesufferedbytheinsured.
c. I lifehealthor accident insurancethe fixedsumispayable
d. Workmenscompensationinsurancei. Theamountisnotspecifiedinthe
policybythelawimposingliability
upontheemployer
e. Theamount insured is theamount fixedinthepolicy
f. The deductible is the state amount to bedeductedfromanylosswhichisshouldered
by the insured making the insurer liable
onlyfortheexcessofsaidamount
3. Premium
Premiumrepresentstheconsiderationofthecontract
4. propertyorlifeinsured
thesubjectmatterofthecontract
5. interestofinsuredinproperty
todeterminetheactualdamagesufferedbytheinsuredincase
of loss ofthepropertycovered bythepolicyif heis not the
absoluteowner
6. riskinsuredagainst
anycontingentorunknownevent,whetherpastorfuturemay
beinsuredagainst
7. termordurationofinsurance
theperiodduringwhichtheinsuranceistocontinue
thelifeofthepolicy
12monthsareannualpolicy
shorterperiodisshortperiodpolicy
Kindsofinsurablerisk
1.personalrisk Chieflyconcernedwiththetimeofdeathordisability
Riskofincapacitythroughaccidentalinjuryorillnessoroldage
- oftendividedintolifeandhealthrisks
2.propertyrisks Lossordamagetoproperty.Arisesfromthedestructionofproperty
- directlossorindirectloss
3.liabilityrisks Involvingliabilityfor theinjury to theperson orproperty of
others
- the liability risks includes both bodily injury andpropertydamagerisks
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Peril Risk Hazard
- contingentorunknowneventwhichmaycausealoss
- itisthecontingencythatoneinsuresagainst
- theexistencecreatestheriskand itsoccurrenceresults in
loss.
- Thechanceofloss- Possibilityoftheoccurrenceof
a loss based on known or
unknownfactors
- conditionor factor,tangibleorintangible,whichmaycreateor
increasethechanceoflossfrom
agivenperil.
- The sum total of the hazardsconstitute the perils which
causestherisk
-
2majorclassificationofhazard- physical hazard- everythingrelating t location, structure
occupancyexposure
- moral hazard- dishonesty,insanity, carelessness,
indifference
Requirementsforrisktobeinsurable
1. importance2. calculability3. definitenessoftheloss4. nocatastrophicloss5. accidentalinnature
therequirementsarenotabsolute
- insurabilityisbestdescribedasarelativematter.
Insurers dealwith theproblem,tryingto improve theinsurabilityof a perilbysuchmethodas limitationson theamount of
coverageandlocations,specificcontract
- insurablevariesamonginsurersandmaychangeovertime
section52covernotesmaybeissuedtobindinsurancetemporarilypendingtheissuanceofthepolicywithin60days
afterissueofacovernotes
cover notes may be extended or renewed beyond such sixty days within the written approval of thecommissioner
the commissioner may promulgate rules and regulations governing such extensions for the purpose ofpreventingviolations
o requirementsfortheissuanceandextensionorrenewalofcovernotes
2kindsofpreliminarycontractofinsurance
preliminarycontractofpresentinsurance preliminarycontractofexecutorinsurance
preliminarycontractofpresentinsurance
insurerinsuresthesubjectmatterusuallybywhatisknownasthebindingslip,binderorcovernote,thecontracttobeeffectiveuntiltheformalpolicyisissuedorriskisrejected
binder-actuallyatemporarycontractofinsuranceandisusuallyissuedaftertheapplicantpaysthefirstpremium inlifeinsurance,abindingsliporbindingreceiptdoesnotinsurebyitself bindersor cover notes serve theneedsof commercialconvenience andyet aremoredefinite and reliable than oralagreement.
o conclusiveevidenceofthemakingofacontract
preliminaryexecutorcontractofinsurance
therightacquiredbytheinsuredismerelytodemandthedeliveryofapolicyinaccordancewiththetermsagreeduponandtheobligationassumedbytheinsureristodeliversuchpolicy
covernotes(alsocalledabinder)maybeissuedtoaffordimmediateprovisionalprotectiontotheinsureduntiltheinsurercan
inspectorevaluatetheriskinquestionandissuetheproperpolicy,oruntiltheriskisdeclinedandnoticethereofgiven
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temporarynature,sufficientthatthecovernotesshowsbynecessaryimplicationanagreementtopaywhateverratemaybefixed.
Noseparate premiumpaidon thecovernotebefore theloss insuredagainst occurred, does not militate against itsbindingeffectasaninsurancecontract.
o Doesnotcontainparticularsthatwouldserveasbasisforthecomputationofthepremiums
Rulesoncovernotes
1. insurance companies doing business here in the Philippines may issue cover notes to bind insurancetemporarilypendingtheissuanceofthepolicy
2. shallbedeemedtobeacontractofinsurance3. nocovernoteshallbeissuedorrenewedunlessintheformpreviouslyapprovedbytheinsurancecommission4. covernoteshallbevalidandbindingforaperiodof60daysfromthedateofissuance
a. whetherornotpremiumhasbeenpaid
b. butthecovernotemaybecancelledbyeitherpartyuponatleast7daysnoticetotheotherparty5. ifthecovernoteisnotcancelled,apolicyshallbeissuedwithin60days6. acovernotemaybeextendedorrenewedbeyondthe60dayperiodwiththewrittenapprovaloftheinsurance
commission,
a. providedthatsuchwrittenapprovalmaybedispensedwithuponthecertificationofthepres,v-pres,genmanager ofthe insurance company concerned that the risk involvedor valuehas not yetbeen
determined orestablishedand that suchextensionor renewal isnot contraryto and isnot for the
purposeofviolatinganyprovisionsoftheinsurancecode
7. insurancecompaniesmayimposeonacovernoteadepositpremiumof25%oftheestimatedpremiumoftheintendedinsurancecoveragebutisnocaselessthan500
section53theinsuranceproceedsshallbeappliedexclusivelytotheproperinterestofthepersoninwhosenameorfor
whosebenefititismade
unlessotherwiseprovided
personsentitledtorecoverunderthepolicy
thirdpersonshavenorighteitherinacourtofequityorinacourtoflawtotheproceedsofthepolicyunlesstherebesomecontractoftrust,expressorimplied,betweentheinsuredandthirdpersons
athirdpersonintheabsenceofanyprovisioninthepolicyhasalsonorighttotheproceedsthereofo apolicyofinsuranceisadistinctandindependentcontractbetweentheinsured,andtheinsurer
only theinsured,ifstillalive, orthebeneficiary, ifthe insured isalreadydeceased,is entitled toclaimtheinsuranceproceedsuponthematurationofthepolicy.
o Ex.Therepairmanisnotentitledtocollectthecostofrepairoutoftheinsuranceproceedswhowasauthorizedbytheinsuredtomaketherepairsclauseintheinsurancepolicyauthorizingtheownerofthedamagedvehicle
to contractfor its repair doesnotmeanthatthe repair isentitled tocollect the costof repair out of the
proceedsoftheinsurance.
o Ex.Wifebeingthepersoninwhosenameandforwhosebenefittheinsurancepolicyinquestionwasinsured,hasintheabsenceofprooftothecontrary.
Section54whenaninsurancecontractisexecutedwithanagentortrusteeastheinsured,thefactthathisprincipalor
beneficiary is the real party ininterestmaybe indicated bedescribing the insured asagent ortrustee orby other
generalwordinthepolicy
Aninsurancemaybetakenbyapersonpersonallyorthroughhisagentortrustee
Agentortrusteewhenmakinganinsurancecontractfororonbehalfofhisprincipalshouldindicatethatheismerelyactingina
representativecapacitybysigningasagentortrustee
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Section55torenderaninsuranceeffectedbyonepartnerofpartowner,applicabletotheinterestofhisco-partners,itis
necessarythatthetermsofthepolicyshouldbesuchasareapplicabletothejointorcommoninterest
butapartnerwhoinsurespartnershippropertyinhisownnamelimitsthecontracttohisindividualshareunlessthetermsofthepolicyclearlyshowthattheinsurancewasmeanttocoveralsothesharesofotherpartners.
Section63-aconditionlimitingthetimeforcommencinganactionthereundertoaperiodoflessthanoneyearfromthe
timewhenthecauseofactionaccruesisvoid
Generalrule-aclauseinaninsurancepolicytotheeffectthatanactionuponthepolicybytheinsuredmustbebroughtwithina
certainperiodisvalidandwillprevailoverthegenerallawonlimitationsofactionsasprescribedbythecivilcode(whichis10
years)
aperiodfixedwhichislessthan1yearfromthetimethecauseofactionaccrues,wouldbevoid. Theperiodcannotbelessthan6yearsinanindustriallifeinsuranceafterthecauseofactionaccrues.
Claimsmustbepresentedwithinacertainperiodafterrejectionisnotmerelyaproceduralrequirement.Itisimportantmatter
essentialtopromptsettlementofclaimsagainstinsurancecompanies.
Causeofactionaccrues
fromthehappeningofthelosso however, thecauseofaction isan insurancecontract does not accruesuntil ethe insureds claim is finally
rejectedbytheinsurer
o thecauseofactiondoesnotaccrueuntilthepartyobligatedrefuses,expresslyorimpliedlyo computednotfromthetimewhenthelossactuallyoccursbutfromthetimewhentheinsuredhasarightto
bringanactionagainsttheinsurer
1. stipulatedprescriptiveperiodbeginsfromhappeningoftheloss2. stipulatedprescriptiveperiodbeginsfromrejectionofclaim3. stipulatedprescriptiveperiodbeginsfromfilingofclaim
priornoticeofcancellationtoinsured
1. noticegiventoinsuredhimself2. noticedeliveredpersonallyorsentbymail
AQUINO;CHAPTER5;POLICY
Aclearlyreadableandunderstandableinsurancepolicyisimportantfortheprotectionofthegeneralpublic.
Consensual
perfectedbymereconsentofthepartiesandnoformalityisrequiredforitsperfection. Absenceofapolicydoesnotbarthecontractfromcomingintoexistence
Statueoffraudsinapplicable
argumento insurancecontract(withatermof1year)cannotbeperformedwithinoneyearbecausethelossmayoccur
afteroneyear.
Howeverinsurancecontractsmybeperformedwithinoneyearalthoughit iscontingentuponthehappeningofanevent.
Lifeinsurancecontractsmayremaininforcefordecades,theobligationoftheinsurancecompanytopaytheproceedsmaylikewisebeperformedwithinoneyearbecausethefurtherevent(deathofthe
insured)mayoccurwithinoneyear.Hence,theinsurancecontractsarenotcoveredwiththestatute
offrauds.
Policy
althoughformalitiesarenotrequired itismandatedbylawthatwrittenpoliciesshouldbeissuedbytheinsurer. Section49thatapolicyofinsuranceisthewritteninstrumentinwhichacontractofinsuranceissetforth
o Printedform
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Section50 shallbe inprintedformwhichmaycontainblankspacesandanyword,phrase, clause,mark,sign,symbolorwordnecessarytocompletethecontractofinsuranceshallbewrittenonthe
blankspacesprovidedtherein.
Excepto Groupinsuranceo Group annuity policies (whichmay be typewritten and need not be in printed
form)
o Approvalofinsurancecommission Allpoliciesissuedbytheinsurancecompaniedareapprovedbytheinsurancecommission
Section51apolicyofinsurancemustspecify(mustcontain)
a. partiesbetweenwhomthecontractismadeb. amounttobeinsuredexceptopenorrunningpoliciesc. thepremium,astatementofthebasisandratesuponwhichthefinalpremiumistobedetermined.d. Thepropertyoflifeinsurede. Theinterestoftheinsuredinpropertyinsured(ifheisnottheabsoluteowner)f. Theriskinsuredagainstg. Theperiodduringwhichtheinsuranceistocontinue
Marinerisknotes
is an acknowledgement or declaration confirming the specific shipment covered by its marine open policy, theevaluationofthecargoandthechargeablepremium.
Suchnoteisnotthepolicyitself.
Riders
Section50thepolicyshallbeprintedfromwhichmaycontainblankspaces
theblankspacesshallbefillednecessarytocompletethecontract anyrider,clause,warrantyorendorsementpurportingtobepartofthecontractofinsuranceandwhichispastedor
attachedtosaidpolicyisnotbindingontheinsured.
o Unlessthedescriptivetitleornameoftheriderisalsomentionedandwrittenontheblankspacesprovidedinthepolicy
Unlessappliedforbytheinsuredorowner,anyrider,clauseorwarrantyorendorsementissuedaftertheoriginalpolicyshallbecountersignedbytheinsuredorowner,whichcountersignedbytheinsuredorowner,whichcountersignature
shallbetakenashisagreementtothecontentsoftherider Groupinsuranceandgroupannuitypolicies
o Maybetypewrittenandneednotbeinaprintedform
REQUISITES
Arider,clausewarrantyorendorsementthatarenotpartoftheoriginalprintedformarebindingprovidedthat:
1. theriderisattachedtothepolicy2. thedescriptivetitle ornameofthe riderismentionedorwrittenontheblankspacesprovidedin theoriginalpolicy
form.
3. Ifnotappliedforbytheinsuredorowner,theridershallbecountersignedbytheinsured.
Anendorsementisawrittenagreementattachedtoapolicytoaddorsubtractinsurancecoverages.A rider is an endorsement to an insurance policy that modifies clauses and provisionsof thepolicy including or excluding
coverage.
iftherequirementsifsection50arecompliedwiththeytakeprecedenceovertheoriginalpolicyprovisions.o Theyaredeemedintegralpartoftheoriginalpolicyo Incaserepugnanceexistbetweenthewrittenandprintedportionsofapolicy,thewrittenportionprevails.
Theriderprevailsovertheprintedclauseitcovers. Insurancepartlyofwrittenwordsandpartlyofaprintedformandthe2areinconsistent,thewrittenwordscontrolsthe
latter.
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Contractofadhesion
insurancepolicesarecontractsofadhesionbecauseonlyoneparty(insurer)preparesthewrittencontractwhiletheotherparty(insured)merelyadherestothecontract.
Usuallytheinsuredcannotchangethewrittenpolicyimposedbytheinsurero Itisstillequallybindingasanyothercontract.o Apartyisnotrelievedofthedutytoexercisetheordinarycareandprudencebyadherence.Theconformityof
theinsuredtothetermsofthepolicyisimpliedfromhisfailuretoexpressanydisagreementwithwhatis
providedtherein
o Withoutreadingthepolicyisnotnegligenceperse. Itisincumbentupontheinsuredtoreadtheinsurancecontractisthiscanbereasonablyexpectedof
himconsideringthathehasbeenabusinessmanforalongperiodoftimeandthecontractconcerns
indemnityincaseoflossinhismoney-makingtradeofwhichimportantconsiderationhecouldnot
havebeenunawareasitwaspreciselythereasonforhisprocuringthesame.
Interpretationandproof
whenindoubtshouldberesolvedagainsttheinsurer(sincecontractofadhesionman)o againstheinsurerwhoselawyerormanagersdraftedtheinsurancepolicycontract.
Art1377.Theinterpretationofobscurewordsofstipulationsinacontractshallnotfavorthepartywhocausedtheobscurity.
Theinsuredhasnovoiceintheselectionorarrangementofthewordsemployedandthatthelanguageofthecontractisselected with great care and deliberation by experts and legal advisers employed by and acting exclusively in the
interestoftheinsurancecompany.
Suchcontractsobviouslycallforgreaterstrictnessandvigilanceonthepartofcourtsofjusticewithaviewtoprotectingtheweakerpartyfromabusesandimpositionandpreventtheirbecomingtrapsfortheunwary.
Cardinal principle ininsurancelaw that apolicyor contract ofinsuranceis tobe construed liberally infavorof theinsuredandstrictlyagainst theinsurercompany,yetcontracts ofinsurancelikeother contractsare tobe construed
accordingtothesenseandmeaningofthetermswhichthepartiesthemselveshaveused.Ifsuchtermsareclearand
unambiguous,theymustbetakenandunderstoodintheirplain,ordinaryandpopularsense.
Proof
Thepartywhoseekstoprovesuchtermsandconditionsmustpresentthepolicyduringtrialandformallyofferitasevidence.
anypersonwhoreliesonthepolicyasthebasisofhiscauseofactionmustalsoattachthesametothecomplaintasanactionabledocument
theobligationtoattachthepolicytothecomplaintasanactionabledocumentandtopresentandofferthesameapplieseveniftheplaintiffisaninsurancecompanythatistryingtorecoveronitsrightofsubrogation
no legal impedimentto theproduction of theinsuranceapplication and theinsurancepolicypursuant to subpoenaissuedbythecourt
Thepolicycannotbeconstruedpiecemeal
Aninsurancepremiumis theconsiderationpaidby theinsuredtothe insurerforundertakingto indemnifythe former
againstaspecifiedperil
Covernotes
areinterimorpreparatorycontractsofinsuranceo interim coveragemaybenecessarybecausethe insurermayneedmore time toprocessthe insurancemay
needmoretimetoprocesstheinsuranceapplication
Sec.52.Covernotesmaybeissuedtobindinsurancetemporarilypendingtheissuanceofthepolicy.Withinsixtydaysafter
theissueofthecovernote,apolicyshallbeissuedinlieuthereof,includingwithinitstermstheidenticalinsurancebound
underthecovernoteandthepremiumtherefore. CovernotesmaybeextendedorrenewedbeyondsuchsixtydayswiththewrittenapprovaloftheCommissionerifhedetermines
thatsuchextensionisnotcontrarytoandisnotforthepurposeofviolatinganyprovisionsofthisCode.TheCommissionermay
promulgaterulesandregulationsgoverningsuchextensionsforthepurposeofpreventingsuchviolationsandmaybysuchrules
andregulationsdispensewiththerequirementofwrittenapprovalbyhiminthecaseofextensionincompliancewithsuchrules
andregulations.
rulesoncovernotes(supra)
noseparatepremiumisrequiredforthecovernote
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kindsofpropertyinsurancepolicy
open valued running
open
novaluationofthepropertyisstipulatedinanopenpolicy.
Theinsurerisonlyentitledtorecovertheamountoftheactuallosssustainedbyhimashemaybeabletoestablish. Judgmentmaybeenteredagainsttheinsurerforlackofsatisfactoryproofoftheamountofhisloss. Anopenpolicyissometimescalledanunvaluedpolicybecauseitisonewhichthevalueisnotfixed,butislefttobe
definitelydeterminedoncaseofloss.
o Theactuallossasdeterminedwillrepresentthetotalindemnityduetheinsuredfromtheinsurerexceptonlythatthetotalindemnityshallnotexceedthefacevalueofthepolicy
Valuedpolicy
expressestheagreedvaluationofthethinginsuredonthefaceofthepolicy thispolicyisbindingontheparties;nopartycanestablishdifferentvaluationincaseofloss
o themeasureofindemnityistheagreedvaluationandnottheactualloss.o Thevaluedpolicyistheexceptiontotheprincipleofindemnity
Alifeinsuranceisalwaysavaluedpolicybecausetheamountfixedinthepolicyisalwaysnotrelatedtotheactualloss.o Agreeonthevaluationwhichisnotequivalenttothevalueofthelifelost
Runningpolicy
afireinsurancepolicymaybeenteredintothatcoversstockofriceandpalay,thepropertyassuredorheldbyhimintrust,oncommissionoronjointaccountwithothersand/orforwhichheisresponsibleincaseofloss,whilecontained
duringthecurrencyifthepoliciesinthebuilding.
Wheretheextentofthepropertywillbedefinedfromtimetotimebecauseofthenatureofthebusinessbeinginsured.
Cancellation
Sec.64.Nopolicyofinsuranceotherthanlifeshallbecancelledbytheinsurerexceptuponpriornoticethereoftothe
insured,andnonoticeofcancellationshallbeeffectiveunlessitisbasedontheoccurrence,aftertheeffectivedateofthe
policy,ofoneormoreofthefollowing:
(a)non-paymentofpremium;
(b)convictionofacrimearisingoutofactsincreasingthehazardinsuredagainst;
(c)discoveryoffraudormaterialmisrepresentation;
(d)discoveryofwillfulorrecklessactsoromissionsincreasingthehazardinsuredagainst;
(e)physicalchangesinthepropertyinsuredwhichresultinthepropertybecominguninsurable;or
(f)adeterminationbytheCommissionerthatthecontinuationofthepolicywouldviolateorwouldplacethe
insurerinviolationofthisCode.
Sec.65.Allnoticesofcancellationmentionedintheprecedingsectionshallbeinwriting,mailedordeliveredtothenamed
insuredattheaddressshowninthepolicy,andshallstate(a)whichofthegroundssetforthinsectionsixty-fourisrelied
uponand(b)that,uponwrittenrequestofthenamedinsured,theinsurerwillfurnishthefactsonwhichthecancellationis
based.
Requisitesofcancellation
1. priornoticeofcancellationtotheinsured2. thenotice of cancellationmust bebased on theoccurrenceafter effective date of thepolicyofoneor more of the
groundsinsection64
3. noticemustbeinwriting,mailedordelivered,totheinsuredattheaddressshowninthepolicy4. thenoticemuststatethegroundsreliedupon,andfactswhichthecancellationisbased
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section64appliesonlytopropertyinsurance
itdoesnotapplytolifeinsuranceo butalifeinsurancemayalsobecancelledfor:
non-paymentofpremium fraud materialmisrepresentation
reasonfornoticerequirement
thepurposeofprovisionsorstipulationsfornoticetotheinsuredistopreventthecancellationofthepolicywithoutallowingtheinsuredampleopportunitytonegotiateforotherinsuranceinitsstead
contentsofnotice
statethegroundsreliedupon neednotbeinaparticularforminordertoformthebasisforthecancellationofapolicy
o sufficient so long as it positively an unequivocally indicates to the insured, that it is the intention of thecompanythatthepolicyshallceasetobebinding.
actualreceiptisnecessary
essentialtothecancellationundertheprovisionforcancellationbynotice. Actual receipt by the insured of a notice of cancellation is universally recognized as a condition precedent to a
cancellationofthepolicybytheinsurer.
o MailedbytheinsurerbutnotreceivedbytheinsuredisineffectiveascancellationReceiptofnoticebybroker
notbindingontheinsured. Theauthorityofthebrokertorepresenttheinsuredendswiththecompletionofthecontract,andanynoticethereafter
giventothebrokerwillnotaffecttherightsoftheinsured.
Cancellationbytheinsured
thisrightisimplicitinsection79oftheinsurancecodewhichprovidesthattheinsuredisentitledtothereturnofthepremium
o noholderofaninsurancepolicymayavailhimselfoftheprivilegesofthisparagraphwithoutsufficientcause.
Renewalofthepolicy
theinsuredhastherighttorenewanon-lifeinsurancepolicyo bypayingthepremiumdueontheeffectivedateoftherenewal
theinsurednorighttorenewifthenoticeofintentionnottorenewisgivenbytheinsureratleast45dayspriortotheexpirationofthepolicy
Sec.66.Incaseofinsuranceotherthanlife,unlesstheinsureratleastforty-fivedaysinadvanceoftheendofthepolicy
periodmailsordeliverstothenamedinsuredattheaddressshowninthepolicynoticeofitsintentionnottorenewthe
policyortoconditionitsrenewaluponreductionoflimitsoreliminationofcoverages,thenamedinsuredshallbeentitledto
renewthepolicyuponpaymentofthepremiumdueontheeffectivedateoftherenewal.Anypolicywrittenforatermof
lessthanoneyearshallbeconsideredasifwrittenforatermofoneyear.Anypolicywrittenforatermlongerthanoneyear
oranypolicywithnofixedexpirationdateshallbeconsideredasifwrittenforsuccessivepolicyperiodsortermsofone
year.
Reformationofthepolicy
agreeduponwasdifferentfromwhatwaswritteninthepolicyo
thecourthasthe power to reformthecontracts and give effect to them in thesense inwhich thepartiesintendedtobebound.
Tojustifythereformation,theproofmustbeof themostsatisfactorycharacterand itmustclearlyappearthatthecontractfailedtoexpresstherealagreementbetweentheparties
Mistake
itisalsopossiblefortheinsuredtorecoverevenoftherewasamistake.o Notnecessarythattherebeareformationofthepolicy
Designationofthebeneficiary
shouldbemadeinunequivocalterms.
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Sec.53.Theinsuranceproceedsshallbeappliedexclusivelytotheproperinterestofthepersoninwhosenameorforwhose
benefititismadeunlessotherwisespecifiedinthepolicy.
Sec.54.Whenaninsurancecontractisexecutedwithanagentortrusteeastheinsured,thefactthathisprincipalor
beneficiaryistherealpartyininterestmaybeindicatedbydescribingtheinsuredasagentortrustee,orbyothergeneral
wordsinthepolicy.
Sec.55.Torenderaninsuranceeffectedbyonepartnerorpart-owner,applicabletotheinterestofhisco-partnersorother
part-owners,itisnecessarythatthetermsofthepolicyshouldbesuchasareapplicabletothejointorcommoninterest.
Sec.56.Whenthedescriptionoftheinsuredinapolicyissogeneralthatitmaycomprehendanypersonoranyclassof
persons,onlyhewhocanshowthatitwasintendedtoincludehimcanclaimthebenefitofthepolicy.
Policyform
theinsurerisgenerallyfreetoprovideforthetermsandconditionsofthepoliciesthatitwillissuesolongasthesameprovisionsarenotcontrarytolaw,moralcustomsandpublicpolicy.
Thelawprescribesmandatoryprovisionsfortheffpolicies:
1. individuallife2. endowmentpolicies3. grouplife4. industriallife
DELEON;TITLE7WARRANTIES
Warranty isa statementor promiseby theinsuredset forth inthepolicyitselforincorporatedin itbyproperreference, the
untruthornonfulfillmentofwhichinanyrespectandwithoutreferencetowhethertheinsurerwasinfactprejudiced
rendersthepolicyvoidablebytheinsurer
warrantyingeneralinthecaseofapromissorywarranty,thesamemayreferonlytofutureevents
warranty used inaninsurancecontract doesnotnecessarily constitutea warranty nor is theuse of suchword necessary to
constituteawarranty.
A statement will be construed as a representation rather than a warranty especially if such statement is contained in any
instrumentotherthanthepolicylikeanapplication,whichinitselfcollateralmerelytothecontractofinsurance.
Answerswrittenintheapplication,answersnotresponsivetoanyquestionsaskedarenotwarranties.
WARRANTIES REPRESENTATION
Partofthecontract Collateralinducement
Warrantiesarealwayswrittenonthefaceofthepolicy Maybewritteninatotallydisconnectedpaperormaybeoral
Strictlycompliedwith Substantialtruthonlyisrequired
Thefalsityofawarrantyoperatesasabreachofcontract Rendersthepolicyvoidonthegroundoffraud
Presumedmaterial Theinsurermust show thematerialityofa representationin
ordertodefeatanactiononthepolicy
Beforea representationbe consideredas awarranty, itmustbeexpresslyincluded orincorporatedby clear reference inthe
policyandthecontractmustclearlyshowthatthepartiesintendedthattherightsoftheinsuredwoulddependonthetruthor
fulfillmentofthewarranty.
Inorderthatastipulationmaybeconsideredawarranty,itmustnotonlybeclearlyshownthatthepartiesintendeditassuchbut
itmustalsoformpartofthecontractitself,orifcontainedinanotherinstrumentitmustbesignedbytheinsuredandreferredto
inthepolicyasmakingapartofit
merereferencealoneisnotsufficienttogivethiseffect
itmustbeafacttoconstituteanexpresswarranty
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ifthestatementis anatureofan opinion,is notstrictlyspeaking,a warrantyofitstruthfulness.Sucha statement,ifdeemedawarrantyatallismerelyalimitedwarrantyastothehonestyandgoodfaithoftheinsured
section72referstoapromissorywarranty
breachofpromisesoragreementsastofutureactswillnotavoidapolicyunlessthepromisesarematerialtotherisk.o Theactoromissionismaterialtotheriskifitincreasestheriskandunderthelawonlysubstantialincreaseof
riskworksaforfeitureofthepolicywhichisavoidedincreasesthehazard
Generalrule-aviolationofawarrantyavoidsacontractofinsurance(section73referstofuturewarranties)
Except:
1. whenlossoccursbeforethetimeoftheperformance2. whenperformancebecomesunlawful3. whenperformancebecomesimpossible.
Violationofamaterialwarranty,orothermaterialprovisionofapolicy,onthepartofeitherpartythereto,entitlestheotherto
rescind.
Apolicymaydeclarethataviolationofspecifiedprovisionsthereofshallavoidit,otherwisethebreachofanimmaterialprovision
doesnotavoidthepolicy.
Effectsofbreachofwarrantybyinsured
1. withoutfrauda. thepolicyisavoidedonlyfromthetimeofbreachandb. theinsuredisentitledtothereturnofthepremiumpaidataprorataratefromthetimeofbreachifitoccurs
aftertheinceptionofthecontract
i. entitledtoallthepremiumsifitisbrokenduringtheinceptionofthecontract(voidabinitio)2. withfraud
a. thepolicyisavoidedabinitiob. theinsuredisnotentitledtothereturnofthepremiumpaid.
Conditionsinaninsurancepolicy
1. conditionprecedenta. callsforthehappeningofsomeeventortheperformanceofsomeactafterthetermsofthecontracthavebeen
agreedupon,beforethecontractshallbebinding
2. conditionsubsequenta. contract of insurance after the risk has attached and during the existence thereof, such as the condition
requiringnoticeandproofoflossincaseoflossuponaninsuranceagainstfire.
WARRANTIES CONDITION
Effect
Doesnotsuspendordefeattheoperationofthecontract Without the performance of which the contract although in
form executed by theparties and delivered, does not spring
intolife.
Alimitationtotheattachmentoftherisk,whereasawarranty
doesnotnecessarilyhavethateffect
Nature
Nottruethenthepolicyshallbenullandvoid
Not condition precedent but rather of the nature of a
defeasance
Promissory warranties are usually regarded as conditions
subsequenttobeperformedafterthepolicyhasbecomevalid
contract,non-performanceofwhichwillworkadefeasance
Exceptionsininsurancepolicy
insertedinacontractofinsuranceforthepurposeofwithdrawingfromthecoverageofthepolicy,asdelimitedbythegeneral language describing the risk assumed, some specific risks which the insurer declares himself unwilling to
undertake
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EXCEPTIONS WARRANTIES CONDITIONS
Examples
This company shall not be liable for
anylosswhiletheinsuredbuildingis
vacantorunoccupied
if the policy contains warranted
statement that the insured building is
occupied,wehaveundoubtedwarranty.
The entire policy shall be void if the
insuredbuildingbeorbecomesvacantor
unoccupied and so remained for more
than10days