Legal basis and policy intent
- Presidential Decree No. 1814 is issued under the President’s constitutional powers.
- Presidential Decree No. 1460 (Insurance Code) is the principal law amended.
- The decree’s policy objectives are to promote and develop a strong national insurance industry, ensure due execution and performance of insurance contracts, and further assure reasonable insurance services for protection of policyholders and the public.
- The decree targets amendments to support sound development of the national economy and protection of policyholders and the public.
Amended licensing: insurance agents/brokers
- Section 1 amends Section 305 of the Insurance Code.
- Section 305 authorizes refusal of an application for an insurance agent or insurance broker license, or suspension/revocation of an existing license, when the Commissioner finds that the applicant or holder:
- willfully violated any provision of the Insurance Code;
- intentionally made a material misstatement in the application to qualify for the license;
- obtained or attempted to obtain the license by fraud or misrepresentation;
- was guilty of fraudulent or dishonest practices;
- misappropriated or converted to his own use or illegally withheld moneys required to be held in a fiduciary capacity;
- has not demonstrated trustworthiness and competence to transact business as an insurance agent or insurance broker in a manner that safeguards the public;
- materially misrepresented the terms and conditions of insurance policies or contracts he seeks to sell or has sold; or
- failed to pass the written examination prescribed, if not otherwise exempt.
- Section 305 also bars renewal of an agent/broker license when the holder has not been actively engaged as such agent or broker in accordance with rules the Commissioner may prescribe.
Motor vehicle liability definitions updated
- Section 2 amends Paragraph (c) of Section 373 of the Insurance Code.
- Paragraph (c) of Section 373 defines “Third Party” as any person other than a passenger, and it also excludes:
- a member of the household; or
- a member of the family within the second degree of consanguinity or affinity of a motor vehicle owner or land transportation operator, or his employee,
in respect of death or bodily injury arising out of and in the course of employment.
- Section 3 amends Paragraph (f) of Section 373.
- Paragraph (f) of Section 373 defines “Insurance Policy” or “Policy” as a contract of insurance against passenger and third-party liability for death of bodily injuries arising from motor vehicle accidents.
- These definitions apply within the motor vehicle insurance/guaranty framework in the chapter amended by this decree.
Compulsory insurance/guaranty to operate on highways
- Section 4 amends Section 374 of the Insurance Code.
- Section 374 makes it unlawful for any land transportation operator or the owner of a motor vehicle to operate the vehicle in public highways unless there is in force:
- a policy of insurance, or
- a guaranty in cash or surety bond,
issued in accordance with the chapter’s provisions.
- The required coverage must indemnify death or bodily injury of a third party or passenger, as the case may be, arising from use of the vehicle.
- The obligation under Section 374 is tied to operation in public highways and requires an in-force instrument at the time of operation.
Registration prerequisite and minimum liability limits
- Section 5 amends Section 377 of the Insurance Code.
- Section 377 requires that every land transportation operator and every owner of a motor vehicle must, before applying for registration or renewal of registration, at his option:
- secure an insurance policy or surety bond issued by an insurance company authorized by the Commissioner; or
- make a cash deposit in the amount required as the limit of liability for purposes specified in Section 374.
- Section 377(1) (for land transportation operators) requires that the insurance/guaranty (or cash deposit or surety bond) cover liability for death or bodily injuries of third parties and/or passengers arising out of the use of the vehicle in:
- an amount not less than PHP 12,000 per passenger or third-party, and
- an amount for each of such categories in any one accident of not less than the scale:
- (a) Motor vehicles with an authorized capacity of 26 or more passengers: PHP 50,000;
- (b) Motor vehicles with an authorized capacity of from 12 to 25 passengers: PHP 40,000;
- (c) Motor vehicles with an authorized capacity of from 6 to 11 passengers: PHP 30,000;
- (d) Motor vehicles with an authorized capacity of 5 or less passengers: PHP 5,000 multiplied by the authorized capacity.
- Section 377 provides a cash-deposit/surety-bond recourse and replenishment rule:
- The Commissioner shall resort to the cash deposit or surety bond in cases of accidents where indemnities to third parties and/or passengers are not settled accordingly by the land transportation operator.
- The cash deposit must be replenished or the surety bond must be restored within 60 days after impairment or expiry; otherwise, the land transportation operator must secure the insurance policy required by the chapter.
- The cash deposit may be invested by the Commissioner in readily marketable government bonds and/or securities.
- Section 377(2) (for owners of motor vehicles) requires that the insurance/guaranty cover liability for death or injury to third parties in minimum amounts in any one accident:
- I. Private Cars
- (a) Bantam: PHP 20,000
- (b) Light: PHP 20,000
- (c) Heavy: PHP 30,000
- II. Other Private Vehicles
- (a) Tricycles, motorcycles, and scooters: PHP 12,000
- (b) Vehicles with an unladen weight of 2,600 kilos or less: PHP 20,000
- (c) Vehicles with an unladen weight of between 2,601 kilos and 3,930 kilos: PHP 30,000
- (d) Vehicles with an unladen weight of over 3,930 kilos: PHP 50,000
- I. Private Cars
- Section 377 empowers the Commissioner to, if warranted, set a schedule of indemnities for payment of claims for death or bodily injuries aligned with the coverages set forth.
Insurer issuance limits; denial remedy
- Section 6 amends Section 379 of the Insurance Code.
- Section 379 provides that no land transportation operator or owner of a motor vehicle shall be unreasonably denied the required policy of insurance or surety bond by the insurance companies authorized to issue them.
- When denial occurs, the Land Transportation Commission shall require the operator/owner, in lieu of a policy or surety bond, to present a certificate that a cash deposit has been made with the Commissioner in the amount required as limits of indemnity under Section 377 for passenger and/or third-party liability.
- Section 379 also provides that no insurance company may issue the policy of insurance or surety bond required under the chapter unless authorized under existing laws.
- Section 379 requires immediate withdrawal of authority: the authority to engage in casualty and/or surety lines of business of an insurance company that refuses to issue or renew the required insurance policy or surety bond without just cause shall be withdrawn immediately.
Claims notice and prescriptive period
- Section 7 amends Section 384 of the Insurance Code.
- Section 384 allows any person having any claim upon a policy issued under the chapter to present to the concerned insurance company a written notice of claim setting forth:
- the nature,
- the extent, and
- the duration
of the injuries sustained, as certified by a duly licensed physician.
- Section 384 requires filing the notice of claim within six months from the date of the accident; failure results in the claim being deemed waived.
- Section 384 provides that an action or suit for recovery of damage due to injury must be brought with the Commissioner or the Courts within one year from the date of accident.
- Section 384 states that failure to sue within one year makes the claimant’s right of action prescribe.
Repeal, separability, and operative effect
- Section 8 repeals or modifies all laws, decrees, rules, and regulations that are inconsistent with the decree.
- Section 9 makes the decree effective immediately.