Insurance Notes MIdterms

7/24/2019 Insurance Notes MIdterms

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June 23, 2014

What is a contract of insurance?

An agreement whereby one undertakes for a consideration to indemnifyanother against loss, damage or liability arising from an unknown orcontingent event

What are the Functions of insurance?

To distribute the expected losses among the policy indemnify insured against loss, damage or liability arising from an unknownor contingent event.

As regard to contract of surety?

An agreement whereby a party called the surety guarantees the performanceby another called the principal or obligor of an obligation or undertaking infavor of a third party called the oblige.

It shall be deemed to be an insurance contract if made by a surety who orwhich, as such, is doing an insurance business

What is meant by doing an insurance business?

Making or proposing to make as insurer, any insurance contract; Making or proposing to make as surety, any contract of suretyship as a

vocation, not as a mere incident to any other legitimate business of a surety; oing any insurance business, including reinsurance business;

oing or proposing to do any business in substance e!uivalent to any of theforegoing.

What are the characteristics of an insurance contract?a" #onsensual $ it is perfected by the meeting of the minds of the partiesb" Aleatory $ depends upon some contingent eventc" #ontract of adhesion or %ne print rule $ terms does not necessarily mean

that there is mutual agreement because the terms have already beenprovided by the insurer &do not result from the mutual consent of the parties"

d" #onditional $ it is sub'ect to a condition, the principal one of which is thehappening of the event insured against

e" (ersonal $ insurance cannot be delegated. )ach party having in view thecharacter, credit and conduct of the other.

f" #ompensatory $g" *isk distributing device $ by paying a pre+determined amounth" #ontract of indemnity $ except in life and accident insurance, an insurance

contract is a contract of indemnity whereby the insurer promises to makegood only the loss of the insured.

i" nilateral $ imposes the legal duties only on the insurer who promises to

indemnify in case of loss'" )xecuted on the part of the insured by paying the premiums; while )xecutoryon the part of the insurer &until the payment of the loss"

k" -oluntary $ the parties may incorporate such terms and conditions as theymay deem convenient.

What is Uberrima Fides? The contract of insurance is one of perfect good faith not for the insured

alone, but e!ually so for the insurer. It re!uires the parties to the contract to

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disclose conditions a0ecting the risk of which he is aware, or material fact,which the applicant knows, and those, which he ought to know.

What is the 2-fod !ur!ose"function?a" distribute1spread the expected losses among planholders upon thehappening of an event.b" indemnify the insured from the happening of the loss1damage.

#onstruction"inter!retation of theinsurance contract? if clear $ should be interpreted according to ordinary meaning. if ambiguous $ strictly against the insurer, liberally in favor of the insured

What are the eements"re$uisite of insurance contract?a" Insurable interest must existb" *isk of lossc" Assumption of risk taken by the insurerd" (ayment of a premiume" 2cheme of distribution of losses

What may be insured? %de&nition 'ec(10) 3uture contingent resulting in loss or damage &example4 possible future %re" (ast unknown event resulting in loss or damage &example4 fact of past sinking

of a vessel unknown to the parties" #ontingent liability &)xample4 reinsurance"

What may not be insured? any person considered as an enemy of the state. any contract of lottery &2ec. 5" Mere contingent or expectant interest in anything &2ec. 6"

June 24, 2014

What is an insurabe interest? A person is deemed to have insurable interest in the sub'ect matter insured

where he has a relation or in connection with or concern in it that he willderive pecuniary bene%t or advantage from its preservation and will su0erpecuniary loss or damage from its destruction, termination or in'ury by thehappening of the event insured against.

Who are the !arties to an insurance contract?a" Insurer $ The person who undertakes to indemnify anotherb" Insured $ The person with capacity to contract and having an insurable

interest in the life or property of the insured; andc" 7ene%ciary $ (erson designated to receive proceeds of policy when risk

attaches.

Who can be an insurer? What is re$uired to be an insurer? A foreign or domestic insurance company may transact business in the

(hilippines but must %rst obtain a certi%cate of authority for that purposefrom the Insurance #ommissioner who has the discretion to refuse to issuesuch certi%cate if it will best promote the interests of the people of thiscountry &2ec. 89"

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)very person, partnership, association or corporation duly authoried totransact business as provided in this code.

Include all individuals, partnerships, associations or corporations includinggovernment+owned or controlled corporations and entities engaged asprincipals in the insurance business excepting mutual bene%t association.

When is there insurabe interest in ife? 2ec. es. 7oth the mortgagor and mortgagee have a separate and distinct

insurable interest in the mortgaged property and that they may take separatepolicies with the same or di0erent insurance company. Thus, both can insurethe property at the same time or with concurrence.

What are the e*tent of insurabe interest of mortgagor and mortgagee? Mortgagor may insure the mortgaged property to its full value Mortgagee can only insure it to the extent of the debt secured

)xception4 in marine Insurance

(roblem4

-ilma obtained a loan of ?


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Ans4a" -ilma can insure because it is her own property and she has an insurable

Interest over the house in the amount of 9?

The bene%ciary of the property insurance must have an insurable interest insuch property which must exist only at time the policy takes e0ect but alsowhen the loss occurs.

=T)4Heneral *ule4 The designation of bene%ciary is revocable)xception4 Dhen the insured did not expressly reserved his right to revoke thedesignation of the bene%ciary, such designation is irrevocable and he cannot

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change the bene%ciary without the consent of the latter. &A signature of thebene%ciary must be obtain"Case of Hilario Gercio v. Sunlife Insurance

f bene&ciary is re.ocabe, can the o+ner e*ercise a rights and !ri.iegesof the !oicy?>)2. The insured can exercise all the rights and privileges of the policy.

/o+ about if irre.ocabe bene&ciary, can he e*ercise "change any right inthe !oicy( What are the eects?=. The e0ect would be that the insured #A=T4

a. Assign the policy;b. Take the #ash 2urrender -alue of the policy;c. Allow his creditors to attach or execute on the policy;d. Add new bene%ciary; ore. #hange the irrevocable designation to revocable, even though the change is

'ust and reasonable.

istinguish insurabe interest in ife from !ro!erty(

ife ro!erty

when should it exist At the time the insurancetakes e0ect

At the time the insurance takese0ect and at the time of lossalthough it need not exist in themeantime

as to bene%ciary no need to have insurableinterest on his life.

must have insurable interestover the property insured

as to limit of theamount

unlimited only to the extent of the amountinsured

s it !ossibe #om!usory /eir has an insurabe nterest on the !ro!erty of

the testator during the ifetime of said testatoro, compulsory heir has no existing interest over the property of the testator whilehe is still alive.

What is a genera #reditor? loans money without any collateral

oes a genera creditor ha.e an insurabe nterest o.er the !ro!erty of hisdebtor?=, he is not the owner. As to the debt, he has an insurable interest but not to theproperty.

ebtor, insurabe nterest o.er the !ro!erty of the creditor ? /o+ aboutthe heath of the creditor?one to both of them. Dhen creditor dies, debt is extinguished.

istinguish 'tandard or Union ortgage #ause from 5!en or oss ayabe#ause?

'tandard or Union ortgage #ause 5!en or oss ayabe #ause

2ubse!uent act of the mortgagor cannota0ect the right of the assignee

Acts of the mortgagor a0ect themortgagee. *eason4 mortgagor does not

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cease to be a party to the contract &sec. J"

Mortgagee perform the acts ofmortgagor

Mortgage that can be paid+o0 tomaturity without penalty

#lause included wherein the insuranceinterest of the mortgagee shall not beinvalidated by any act of the mortgagoror owner of the property at the time

Mortgagee is the bene%ciary forinsurance taken by the mortgagor

(rotects mortgageeKs interest frominvalidation due tomortgagorKs acts. Acts of mortgagor invalidates theinsuranceWhat is a standard" union mortgage #ause2tandard or union mortgage clause $ incorporation in an insurance (olicy, leads tothe creation of a separate contract between the insurer and the mortgageeempowers the mortgagee to collect payment from the insurer even if the policy isvoid or voidable with regard to the mortgagor.

5!en"oss !ayabe mortgage cause?There is only one contract and the act of the mortgagor,

It refers to an insurance (olicy is a provision that authorie payment of proceeds tothe mortgagee.@oss1payable clause designates the person as a bene%ciary of the proceeds orassigns to the person a claim against the insurer but the clause does not treat theperson as an additional insured.Acts of the mortgagor a0ects the mortgagee.

(*=7@)M4(edro, a most valued employee of enith manufacturing #orporation for the past : I2 -=I A7 IITI= or rescindable by reason of fraudulentconcealment or misrepresentation of the insured or his agent.

+ Marine insurance regarding concealment4 element that the other party hasnot the means of ascertaining the fact concealed.

What is an ncontestabiity #ause?+ *e!uisite4

. The policy is a life insurance policy:. It is payable on the death of the insuredF. It has been in force during the lifetime of the insured for a period of

:years from the date of its issue or of its last reinstatement.The period of :yrs can be shortened but it cannot be extended.

When must an insurer e*ercise right of rescission?=+@I3)

+ Must be exercised prior to the commencement of an action on the contract@I3)

+ The defense is available only during the %rst two years of a life insurancepolicy or upon the %rst :yrs after reinstatement

s the fact of fraud necessary to rescind the insurance contract on theground of conceament?=. sec. :9. A concealment whether intentional or unintentional, entitles the in'uredparty to rescind the contract of insurance.2ec.:J4 An intentional and fraudulent omission, on the part of insured, tocommunicate information of matters proving or tending to prove thefalsity of awarranty, entitles the insurer to rescind.

When is it A:rmati.e? When is it romissory?AGrmative $ aGrmation of fact when the contract begins(romissory $ promise to be performed after the policy was issued.

Dhat is the e0ect1conse!uence of representationE Dhen can the party rescindE&2ec. 5?"

Dhat are the exceptions that the misrepresentation entitles the insurer to rescind atthe time the representation becomes falseE &Dhen insurer accepts payment ofpremium, and when incontestability clause applies in case of life insurance."#an the insurer still rescind based on misrepresentation after an action has beencommencedE&2ec 58 $ prior to the commencement of an action"

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istinguish Darranties from *epresentation

: Qinds of #ondition to an insurance contract4 #ondition (recedent and #ondition2ubse!uent.

Juy 22, 2014What is re!resentation?A factual statements made by the insured at the time of, or prior to, the issuance ofthe policy to give information to the insurer and induce him to enter into aninsurance contract.

What are the 7inds of e!resentation?. =ral or written & sec. F6":. Made before or at the time of the issuance of the insurance policy &2ec. F9"F. AGrmative&sec. FJ" and (romissory&2ec. 5:"

What is misre!resentation?There is misrepresentation when4

a. The insured stated the fact something which is untrueb. 2uch fact was stated with the knowledge that it is untrue and with intent to

deceive or which he state positively as true knowing it to be true and whichhas a tendency to mislead

c. 2uch fact is material to the risk.

istinguish #onceament from isre!resentationIn concealment the insured is silent when he is ought to speak while inmisrepresentation the insured stated the fact which is not true.

What is the eect of misre!resentation?Misrepresentation or false statement intentionally made by the insured entitles theinsurer to rescind the contract from the time the representation becomes false.)xcept in life insurance when the policy had been in force orN

e.ices used in ascertaining the ris7 of oss;" #oncealment,:" *epresentationF" Darranty5" #onditions?" )xception

What is a Warranty?A statement or promise by the insured set forth in the policy or by reference

incorporated therein, the untruth or non+ful%llment of which in any respect, andwithout reference to whether insurer was in fact pre'udiced by such untruth or non+ful%llment, renders the policy -=IA7@) by the insurer.

What are the 7inds of Warranties?)xpress, Implied, AGrmative, (romissory,

What is the eect of a breach of +arranty?H))*A@ *@)4 in case of breach of warranty entitles to insurer to *)2#I thecontract)B#)(TI=4

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. @oss occurs before the time of performance of the warranty:. (erformance become unlawful at the place of contractF. (erformance becomes impossible

=ther warranties includes N.

What are the defenses


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damage to the cargo occurred such that the insurer should be made liable forit&Lome Insurance #orporation v. #A, H* R

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Insurance Notes MIdterms